Year: 2007

More Extortion by the Record Distributors

The Register has some insights into the conflict between Universal’s decision to go with an “At Will” arrangement with Apple’s iTunes.

Basically, it comes down to the record distributors wanting to demand royalties on the music Players.

Microsoft already does so with it’s abysmally received Zune player.

The article is right in some areas, and wrong in others though.

On why Apple is in the Driver’s seat:

Another underlying tension is that Apple has made a huge amount of money from sales of iPods – far more than the labels have made from iTunes. As of April 2007, the iPod had sold over 100 million units worldwide. This makes iPod the best-selling digital audio player series in history.

Analyst estimates for iPhone sales in its first weekend ran as high as 700,000 units, beating many investors’ expectations, and some expect the momentum to continue. The iTunes Store has sold over 2.5 billion songs since its inception four years ago, as well as 50 million TV shows and over 1.3 million movies, making it the world’s most popular online music, TV, and movie store. But the labels only make 70c off each track. This revenue pales in comparison to the amount of money Apple generates from sales of such devices whose purpose, in full (the iPod) or in part (the iPhone) is to store and play these tracks. The money is in the hardware.

No. That $0.70 is pretty significant, particularly since Apple, and the end user are paying ALL costs of distribution. $1.75 billion is not chump change.

It is very possible that Universal intends to use the new “at will” deal to exert pressure on Apple to either replace the 99c fixed price with variable pricing or to agree to pay Universal a royalty on iPods, or both. Or as just discussed, Universal may wish to extend the royalty to any new products that play music, such as the iPhone.

True. They want to get all the golden eggs from the goose.

iPod’s success does not depend on iTunes, but rather the elegance of iPod’s design and ease of use. For these reasons, if Universal retreated from iTunes, no one can reasonably anticipate that it would seriously hurt sales of iPods or iPhones.

Generally agree, but I would also note that there is a chic factor driving iPod sales too.

The Audio Home Recording Act already imposes a royalty on digital tape recorders, but not MP3 Players or computers. But when the AHRA was passed in 1992, the personal computer was only just making its debut in the US, and the MP3 player had yet to be imagined. So while the Act compensates copyright owners and artists for lost sales because of copying, the income generated by the levy has been negligible because AHRA does not apply to the new generations of technology, including personal computers and MP3 players.

This is where the author jumps the shark. Digital tape is a failure because of the AHRA. Between the excessive fees on tapes, and the anti-copying technology that reduced playback quality on home units (notching), the AHRA destroyed the digital tape player.

So why hasn’t the Act been extended to include this new generation of technology? The principal reason is that the major labels have not pushed for it. But wouldn’t the record labels want to collect royalties from the manufacturers who are raking in money from sales of electronic equipment which is being used to acquire and listen to music without compensation to the labels?

Perhaps the main reason is the way royalties are distributed under the AHRA. The first third of royalties go to music publishers and writers. Then four per cent goes to side artists. The balance is paid 60 per cent to the labels and 40 per cent to the artists.

Maybe the record companies are afraid to push the extension of this Act to MP3 players and computers because they don’t want to set another precedent of splitting proceeds on a 60:40 basis with the artists they represent. The standard artist royalty is only 10 to 15 per cent.

Moreover, under the AHRA the artists are paid directly. By targeting a successful individual manufacturer like Apple, Universal is aiming to recoup red balances (the amount it spends on production and marketing) on each artist’s account. Most artists never recoup production and marketing costs so when the record labels collect money from their music, they “allocate” royalties to the artists’ accounts but actually keep the money.

While cheating artists is a major profit stream for the studios, the blithe assertion that the act has not been extended to MP3 players and computers is, “major labels have not pushed for it” is again, wrong.

During the debate over the AHRA, it was clear, and it is more clear now, that Congress was unwilling to to apply it to computer makers, and the basis of the law in the first place, copying, does not apply to MP3 players, which play music, but do not copy music.

As much power as the labels have, the fact that they could not get computers covered in 1992 means that they cannot get this now.

The labels do not go for this because they know that they will lose.

The Chinese Ecological Disaster That is the 3 Gorges Dam

Many of you have heard of the scramble in China to catch the millions of displaced rats from the 3 Gorges Dam to serve in Gourmet Chinese eateries.

The rising water below the structure evicted the rodents from the banks of Dongting Lake, “a series of wetlands and lakes”, into neighbouring farmland, where they quickly decimated 6,000 square miles of crops.

Desperate farmers at first deployed poison, but that simply killed the cats and dogs “traditionally use to combat the menace”, while doing nothing to reduce rat numbers.

However, they soon realised there was another, money-making solution to the crisis – a “major uptake in supply and demand for rat meat”, reported by live food traders in Changde at the western edge of the lake. One dealer told local media: “People there [Guangdong] are rich and like to eat exotic things, so business is very good.”

The economics are as follows: farmers pocket around six to ten yuan a kilogram (20 to 35 pence a pound in old money, the Telegraph helpfully adds), while Cantonese restaurants knock it out as delicious rat stew for up to four quid a pound.

But while the solution to the problem may lie in part in Guangdong’s saucepans, the reasons behind the rat plague are rather more complex than a simple rise in water level. Initially, the Three Gorges Dam held back enough water from Dongting Lake’s “marshy banks” to create an improved environment for the animals and provoke a sharp population rise.

Simultaneously, a “sudden fashion” for snake meat in Hunan – with residents of the capital Changsha working their way through ten tons of reptile flesh a day, according to local environmental groups – has done for the rats’ main predator.

The whole sorry state of affairs is, these groups claim, fulfillment of their dire predictions about the environmental effects of the Three Gorges Dam project.

While there is clearly a humorous aspect to this story, the underlying story is very troubling.

The rat infestation is simply the first of many troubling manifestations of this.

The Yellow River is so named because it is Yellow. With no lakes for sediment to settle in, the river flows quickly, carrying its nutrient laden cargo to the ocean.

The periodic floods serve to replenish the breadbasket of China. The estuary is fertile ground, and the where many fish in Asia spawn.

The dam will change all that, and other things too, in unanticipated ways, like the rats in this story.

iPhones Crash WiFi Network at Duke.

It appears that a small number of iPhones took down the routers at Duke University.

By a small number, it might have been as few as two.

The built-in 802.11b/g adapters on several iPhones periodically flood sections of the Durham, N.C. school’s pervasive wireless LAN with MAC address requests, temporarily knocking out anywhere from a dozen to 30 wireless access points at a time. The campus network staff is talking with Cisco, the main WLAN provider, and have opened a help desk ticket with Apple. But so far, the precise cause of the problem remains unknown.

That’s because the misbehaving iPhones flood the access points with up to 18,000 address requests per second, nearly 10Mbps of bandwidth, and monopolizing the AP’s airtime.

Does not play well with others.

Kudos to IBM

Words I never thought I’d say.

IBM has relinquished a significant portion of its patent portfolio to open source projects.

Not only that, they were smart about it:

There is an exception to the grant of access to the technology: it is closed to anyone taking legal action to block further interoperability. IBM will not extend the access to anyone who is suing someone else over patents necessary for interoperability in the standards to which this technology relates.

This is one serious $%#@ you to Microsoft.

My Spice Rub Has Been Upgraded to Dietary Supplement

I have a Curry Spice Rub. In addition to being great on Lamb, Veal, Chicken and Beef, it now turns out that it may combat Alzheimer’s:

“Dr Milan Fiala of the University of California Los Angeles and colleagues note in the Proceedings of the National Academy of Sciences that they’d already shown that curcumin ‘may affect the brain cells of Alzheimer’s patients’, but wanted to pinpoint the ‘precise factor’ responsible.”

I’m feeling so virtuous right now. If I try it on fish, with the Omega 3s, it may be the fountain of bloody youth.

Russia achieves low-energy ignition of pulse-detonation engine-16/07/2007-Flight International

It appears that the Russians have made a significant advance in pulse-detonation engines (PDE).

A PDE is similar in concept to the pulse jet that powered the V1.

The differences are as follows:

  • No Moving Parts (pulse jets have shutters)
  • The flame front propogates through detonation as opposed to detonation (it’s a supersonic shock)
  • It promises higher efficiencies that existing propulsion.
  • It can operate from a stand still.

Here is the cycle for the engine:

Looks Like Murdoch Gets Dow Jones

Straignt from the horse’s mouth, the Wall Street Journal is reporting that the deal is done, complete with their “engraved style” picture of Rupert.

As I’ve said before, I have mixed emotions. The WSJ has VERY good news coverage, but that gives credibility to the worst editorial page this side of the New York Sun.

Murdoch will destroy it, and in so doing, he’ll make the Editorial page as irrelevant as that of the Moonie Washington Times.

And Then There is The Yen Carry Trade

While I have talked about currencies, it has primarily been about the fall of the dollar relative to the Euro. A more significant risk in the short term is a strengthening Yen.

Much of the current investment mania has been driven by the Yen carry trade.

Basically, Japan has the lowest interest rates in the industrialized world, so if one borrows money in Yen, and invests them in another country.

The Japanese interest rates are currently arounc 0.5% (no, I did not misplace a decimal point), so you could invest in the US at around 4-5%, and pocket the difference.

The rates are low because of the long Japanese recession, and deflation, starting in the early 1990s.

The carry trade is not risk free. If the Yen strengthens versus the Dollar, then you have to pay back more dollars, and you can end up losing money.

Japan appears to be finally over its 15 year downturn, it’s economy “grew at a 3.3 percent annual rate in the first quarter”, so it’s likely that the central bank will raise rates, which will bolster the Yen generally.

In any case a rate of 0.5% is simply not sustainable, so it has to go up, and the currency can be expected to go up then too.

So, in addition to the private equity binge, sub prime mortgage securities, exotic mortgages generally, and an IPO boom, we have another potential for a collapse with the Yen strengthening.

Net Radio Receives a Reprieve

This is about congress taking a good look at the US IP regime, and folks like the RIAA and Sounc Exchange not wanting that. This is whySound Exchange has compromised, and won’t collect the new rates for now.

Intellectual product (IP) is not property. It a temporary exclusive license for the public good.

There are more and more people, including the US Supreme Court, who are finding the US IP regime a hinderance, rather than a help to innovation and art in the US.

Indications of a PERMANENT Presence of US Troops in Iraq

This article makes it very clear that the United States plans to never leave Iraq.

The facilities involved are extensive, expensive, and permanent.

Inside spacious, air-conditioned “Kingpin,” a new air traffic control center at this huge Air Force hub 50 miles north of Baghdad……

“We’re the busiest aerial port in DoD,”…..

Early this year, with little fanfare, the Air Force sent a squadron of A-10 “Warthog” attack planes — a dozen or more aircraft — to be based at Al-Asad Air Base in western Iraq. At the same time it added a squadron of F-16C Fighting Falcons here at Balad……

Those big bombers were moved last year from distant Diego Garcia in the Indian Ocean to an undisclosed base in the Persian Gulf…..

The weaker of Balad’s two 11,000-foot runways was reinforced — for five to seven years’ more hard use. The engineers next will build concrete “overruns” at the runways’ ends. Balad’s strategic ramp, the concrete parking lot for its biggest planes, was expanded last fall. The air traffic control system is to be upgraded again with the latest technology.

This folly is going to kill a lot of US troops. It fuels the insurgency.

Once Again, The Japanese Bomb Pearl Harbor, and We Attack New Zealand

There is an interesting story in the Los Angeles Times.

It appears that the bulk, if not the outright majority of the foreign fighters in Iraq killing our boys are Saudi.

Not Syrian. Not Iranian. Saudi.

About 45% of all foreign militants targeting U.S. troops and Iraqi civilians and security forces are from Saudi Arabia; 15% are from Syria and Lebanon; and 10% are from North Africa, according to official U.S. military figures made available to The Times by the senior officer. Nearly half of the 135 foreigners in U.S. detention facilities in Iraq are Saudis, he said.

Impeach Dick Cheney today. Impeach George W. Bush Tomorrow.