Stories from the week that was

That is, if you care about this stuff…

China goes big time

Not to get too political, but The Newshour with Jim Lehrer aired an interesting series recently about the rise of China’s economy. One part of the series included Wu-Mart, China’s home grown version of Wal-Mart. Wal-Mart offers American style shopping. Wu-Mart is more like the Chinese expect it, including people barking out the prices.

However, there’s one more big difference that separates the two. Wu-Mart contracts out their services locally, while Wal-Mart has tried to re-create their U.S. operations overseas. Chinese regulations require that stores use local suppliers for many goods, such as fresh produce, requiring Wal-Mart to learn some new tricks to operate in the Chinese economy. If Wal-Mart acted like Wu-Mart in this aspect, I wonder if people would be so angry at Wal-Mart.

A new global IP plan?

The Bush Administration recently announced a new initiative to curb IP infringment, infringement which costs an estimated $250bn and 750,000 jobs a year. Part of this would include sending US intellectual property experts around the world to "advocate improved intellectual property rights protection." Another is to train IP enforcers on the US way of dealing with IP infringement.

Where the hell did they get those monetary and job loss numbers from? My guess — the Business Software Association, who thinks that, much like the music industry, that every infringed intellectual property work is a lost sale. Let’s not forget there are plenty of people who will never pay for those things in the first place because it’s too expensive for them or because they don’t want to support some overpaid executive’s third cabin in Aspen and the H2 that will get him there.

The misconception here is that you can’t compete with piracy except by harsher punishments for IP protection. Thankfully, Warner got a clue and is now going to release DVDs at or near the price of pirated DVDs in China. I seriously hope it succeeds, but Warner is only doing this half-heartedly — they’re releasing just 125 titles this way.

As my former professor Yale Braunstein once said to me in class (or something like this), you can’t sell a textbook in India for $80 since many of them don’t even make that much in a year. Instead, publishers sell books in black and white for much less with big stickers on them that say "not for export" which still somehow make it into the US for dirt cheap. Same applies to any intellectual property protected stuffs like movies, music, drugs, and software — prices are different around the world because people have different abilities (and willingness) to pay.

Why do we pay tons for drug prescriptions, $80 for textbooks, $20 for DVD, and $15 for music albums? Because we can afford to. Why do IP holders go livid when they find out we want to import drugs from Canada, buy books from India, and DVDs and music from China? Because we’re supposed to buy the U.S. priced versions…

An iTunes war lurks

The big labels in the record industry, taking 70% of the gross from iTunes song sales, still aren’t satisfied with the money they’re getting. First, they are subtly suggesting that when their contract with iTunes is up, they’re going to demand that Apple charge more for songs (and send them an appropriate increase in per-song royalties). Next, they’re insisting that digital radio providers XM and Sirius pay royalties for producing players that can record broadcast music.

Meanwhile, Archos, Creative, and other manufacturers producing media players that can record FM radio are not being demanded to pay royalties. The RIAA is after anyone with a subscription model, because they think they deserve part of the subscription fee even though they’re not the company providing the subscription. Even worse, some music execs want a cut on anything that produces revenue, like from advertising that accompanies downloads. I don’t think I need to point out the hubris and greed that this exhibits.

I do want to point out this: The success of Apple’s iPod video will almost entirely be whether or not you can play movies on it, and Apple and the MPAA have not yet come to terms on fees and royalties. (If they had, I’m certain that Steve Jobs would have announced it at the grand unveiling of the iPod video last week.) In other words, the MPAA is listening to the RIAA’s complaints and will demand more from Apple. Apple can’t say ‘no’ because without the MPAA and feature length movies, the iPod video will be just some other video playing portable device. But if the MPAA’s demands are too extreme, then movies will cost too much for most people to pay.

If the RIAA gets their price increases, Apple will have several million pissed off customers because no other online stores provide big label downloads (read as: Apple’s DRM) that are compatible with iPods. In other words, Apple has a locked-in customer base which may see big price increases for buying tracks next year unless the RIAA has a big change of heart or Apple can stay profitable making less than $0.30 a track. And Real, who reverse engineered Apple’s DRM to allow iPod users to play Rhapsody DRM tracks on an iPod, is in court with Apple over DMCA violations. I smell potential for disaster, or maybe an opportunity for some upstart music service to figure all of this out and make a mint by solving this problem once and for all…

There can only be six

I was going to write a full, extended length rant on the iPod and rumored iPod video, but instead it got mashed up into this post. This is a paragraph that I cut from the longer version (emphasis added):

This is not the end of Apple’s video migration. Apple is not stupid, and I can’t imagine they’re going to start selling video and not develop a version of their operating system specifically for TVs. Think of an Apple PVR or media center, because what good is it if you can’t play all your paid for music videos on your TV? Complete with the $100 Apple remote control which will have only one button. (Yeah, that’s a mouse joke.) I bet this is what Intel had in mind when they signed a deal with Apple to supply CPUs and such, especially with Intel’s new Viiv marketing — an Intel hardware based, Apple software powered media center. If I’m right, you heard it here first. If I’m not, then I’ll deny I ever wrote this.

Imagine my chagrin when I saw this: Apple announced that they’re releaseing a media center application for OSX with a remote control. The remote control will have… six buttons. Is it me or does that look conspicuously like the iPod Shuffle?

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