net.wars

There are journalists who make money, but not many and not often. Newspaper owners, however, have traditionally been in better shape, as the cynical, experienced reporter Richard Wagner observes in Tom Stoppard's 1978 play Night and Day, "We're working to keep richer men than us richer than us." (He is, of course, countered later in the play by the photographer George Guthrie, who marks his final exit with, "Information, in itself, about anything, is light.")

But we live in strange and disturbing times, and the question of how to stay richer than journalists has been exercising a lot of newspaper owners lately. With advertising revenues dropping, circulation dropping, classifieds vanishing online, and online readership proving less profitable, clearly something has to give. In October, the Evening Standard began giving away its print run, right around the same time that Rupert Murdoch announced he would begin charging online readers.

Well, today's the day: as of this morning The Times is behind a paywall. You can read the front page, but click on a story and you're asked to pay £1 for 24-hour access or pay £1 for a 30-day trial after which you pay £2 a week. The paper's articles have already been blocked from appearing on Google News for more than a month. The joint effect, as Search Engine Watch memorably says, is that Rupert Murdoch has turned The Times into a newsletter.

Based on the figures SEW cites from Hitwise and if the trend continues, that's about right.

Although paywalls - or, in Variety's case, a velvet rope - are the fashionable must-have for newspapers in 2010 that portals were to ISPs in 1995, they're not a new concept. People have been trying paywalls for years; they've been going up and down as often as the proverbial whore's knickers.

I think the first was either Slate (dropped after a year or few) or the New York Times, more than 15 years ago. The latter's paywall had a twist: the site was free to US residents but international readers had to pay - the justification was that advertisers weren't interested in paying to reach non-US readers. It came down with the rise of the search engines; a few years ago the paper tried charging for its star colunnists' output (thereby marginalizing them), and now plans a new paywall structure for next year, although people arriving at stories by following links from other sites will still have free access. Nieman Labs has an interesting game to let you try the effect on revenues of varying subscriber levels.

Long before Murdoch's acquisition, the Wall Street Journal was also an early paywall adopter - with some, unusual, success, although as time has gone on more and more of the paper has been freely accessible online.

Murdoch is likely to be about to discover that his newspapers are not exempt from what many other newspapers and weeklies have already found out: the subscriber numbers are, in general, awful to terrible.

The key contrast here is with the Guardian, which is willing - and able because of its ownership by a trust - to measure its success in influence as well as money. Editor Alan Rusbridger, outlined in January the extent to which the Internet has made the paper a global voice.

The answer to the question of what people will pay for seems to me straightforward: people will pay, even online, for publications that save them time, save them money, or provide information they have to have that they can't easily get elsewhere. People will not, particularly in this economic climate with so many other things clamoring for their limited financial resources, pay for things that are easily replaced with free content. It's unsurprising that the business and financial papers have had the longest and most successful paywall runs: their constituency had to read them (and could expense or tax-deduct them), and it took their subscribers a long time to recognize how much of their information had become directly available. In the 1980s, subscribing to Standard & Poor's quarterly reports on ten companies cost something like $250 a year; today, you can get more detailed information than that service provided daily for free.

In the US, what's happened to newspapers seems to me a direct consequence of chain ownership and Clear Channel thinking: dropping local news and commentary in favor of national wire service stories seems doomed to make your paper interchangeable with Google News. In the UK, the situation seems more simply one of changing business models, and in my view Rusbridger's entangle-yourself-in-the-Net approach is the preferable one, certainly so if you see journalism as a more than just a product.

But as much as I hate paywalls - and I think if they become widespread they will pose a serious problem for the economic viability of freelance writing - I have to hope that they succeed at least partially. Because if they don't, then the only sources of income for journalism will be advertising, sponsorship, and patronage (in which I'm including bloggers whose day jobs support their blogging habit). To get a full range of voices and stories you need a balance of financial and commercial pressures. And advertising support can be even more fragile than fickle consumers who abandon their newspapers for quick scans of Google News and their RSS feeds.

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series.

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It seems that the Glastonbury Festival, which I tend to sniffily dismiss as a Woodstock wannabe, is to get rid of cash. I can understand their thinking: cash is expensive for the festival to transport, store, and guard and creates security problems for individual festival-goers, too. Mr Cashless himself, James Allan, will be pleased. Although, given his squirming reaction to being offered cash at a conference a few months ago, it's hard to believe he'd regard an outdoor festival as sufficiently hygienic to attend.

But here is the key bit:

As well as convenience and security issues, Barclaycard's Mr Mathieson said that information gathered from transactions could be valuable for future marketing. "For example if the system knows what time you went and bought a beer and at which bar, it can make a guess which band you were about to see," he said. "Then the organizers could send you information about upcoming tours. The opportunities are exciting."

Talk about creepy! Your £5 notes do not climb out of your wallet to chirp eagerly about what they'd like to be spent on.

One of the things we talked about in the history of cypherpunks session at CFP last week (the video recording is online) was what ever happened to digital cash, something often discussed in the early 1990s, when cryptography was the revolution. First proposed by David Chaum in an influential Scientific American article in 1992, it was meant to be genuinely the equivalent of anonymous cash.

Chaum's scheme was typically brilliant but typically facing a hard road to acceptance (he has since come up with a clever cryptographic scheme to secure electronic voting). Getting it widely deployed required two things: the cooperation of banks and the willingness of consumers to transfer what they see as "real money" into an unfamiliar currency with uncertain backing. Consumers have generally balked at this kind of thing; the early days of the Net saw a number of attempts at new forms of payment, and the only ones that have succeeded are those that, like Paypal, build on existing and familiar currencies and structures. You could argue that frequent flyer miles are currency and they are, but they generally come free with purchases; when people do buy them with what they perceive as "real" money it's to acquire a tangible near-term benefit such as a cheap ticket, elite status for their next flight, or a free upgrade.

Chaum understood correctly, however, that the future would hold some form of digital cash, and the anonymous version he was proposing was a deliberately chosen alternative to the future he saw unfolding as computerized transactions took hold.

"If the trend toward identifier-based smart cards continues, personal privacy will be increasingly eroded," he wrote in 1992. And so it has proved: credit cards, debit cards, mobile phone and online payments are all designed to make every transaction traceable.

"The banking industry has a vested interest in not providing anonymous payment mechanisms," said Lance Cottrell at CFP, "because they really like to know as much information as they can about you." Combine that with money-laundering laws and increased government surveillance, and anonymous digital cash seems pretty well dead. The one US bank that tried offering DigiCash, the St Louis, Missouri-based Mark Twain bank, dropped the offering in September 1998 because of low take-up; shortly afterwards DigiCash went into liquidation.

Before heading out to CFP, my bedtime reading was Dave Birch's Digital Money Reader 2010, a compilation of all his digital money blog postings, with attached comments, from the past year. Birch is seriously at war with physical cash, which he seems to perceive as the equivalent of an unfair tax on people like him, who would rather do everything electronically. Because the costs of cash aren't visible to consumers at point of use, he argues, people are taught to think of it as free, where electronic transactions have clearly delineated costs. If people were charged the true cost of paying with cash, surely the percentage of cash payments - still around 80 percent in Europe - would begin to drop precipitously.

But it seems clear that the hidden cost of electronic payments as they are presently constituted is handing over tracking data. A truly anonymous Oyster card costs nothing extra in financial terms, but you pay with convenience: you must put down a £5 deposit for a prepaid card at a tube station, and you must always remember to top it up with notes at station machines. Similarly, you can have an anonymous Paypal account in the sense that you can receive funds via a throwaway email address and use them only to buy digital goods that do not require a delivery address. But after the first $500 or so you'll have to set up another account or provide Paypal with verifiable banking information. Because we have so far not come up with a good way to estimate the value of such personal data, we have no way to calculate the true cost of trackable electronic payments.

Still, it occurs to me writing this that if cash ever does die under the ministrations of Birch and his friends, the event will open up new possibilities for struggling post offices everywhere. Stamps, permanently redeemable for at least their face value, could become the new cash.

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series.

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Everyone except James Allan scrabbled in the bag Joe DiVanna brought with him to the Digital Money Forum (my share: a well-rubbed 1908 copper penny). To be fair, Allan had already left by then. But even if he hadn't he'd have disdained the bag. I offered him my pocketful of medium-sized change and he looked as disgusted as if it were a handkerchief full of snot. That's what living without cash for two years will do to you.

Listen, buddy, like the great George Carlin said, your immune system needs practice.

People in developed countries talk a good game about doing away with cash in favor of credit cards, debit cards, and Oyster cards, but the reality, as Michael Salmony pointed out, is that 80 percent of payments in Europe are...cash. Cash seems free to consumers (where cards have clearer charges), but costs European banks €84 billion a year. Less visibly banks also benefit (when the shadow economy hoards high-value notes it's an interest-free loan), and governments profit from Seigniorage (when people buy but do not spend coins).

"Any survey about payment methods," Salmony said Wednesday, "reveals that in all categories cash is the preferred payment method." You can buy a carrot or a car; it costs you nothing directly; it's anonymous, fast, and efficient. "If you talk directly to supermarkets, they all agree that cash is brilliant - they have sorting machines, counting machines...It's optimized so well, much better than cards."

The "unbanked", of course, such as the London migrants Kavita Datta studies, have no other options. Talk about the digital divide, this is the digital money divide: the cashless society excludes people who can't show passports, can't prove their address, or are too poor to have anything to bank with.

"You can get a job without a visa, but not without a bank account," one migrant worker told her. Electronic payments, ain't they grand?

But go to Africa, Asia, or South America, and everything turns upside down. There, too, cash is king - but there, unlike here with banks and ATMs on every corner and a fully functioning system of credit cards and other substitutes, cash is a terrible burden. Of the 2.6 billion people living on less than $2 a day, said Ignacio Mas, fewer than 10 percent have access to formal financial services. Poor people do save, he said, but their lack of good options means they save in bad ways.

They may not have banks, but most do have mobile phones, and therefore digital money means no long multi-bus rides to pay bills. It means being able to send money home at low cost. It means saving money that can't be easily stolen. In Ghana 80 percent of the population have no access to financial services - but 80 percent are covered by MTN, which is partnering with the banks to fill the gap. In Pakistan, Tameer Microfinance Bank partnered with Telenor to launch Easy-Peisa, which did 150,000 transactions its first month and expects a million by December. One million people produce milk in Pakistan; Nestle pays them all painfully by check every month. The opportunity in these countries to leapfrog traditional banking and head into digital payments is staggering, and our banks won't even care. The average account balance of customers for Kenya's M-Pesa customers is...$3.

When we're not destroying our financial system, we have more choices. If we're going to replace cash, what do we replace it with and what do we need? Really smart people to figure out how to do it right - like Isaac Newton, said Thomas Levenson. (Really. Who knew Isaac Newton had a whole other life chasing counterfeiters?) Law and partnership protocols and banks to become service providers for peer-to-peer finance, said Chris Cook. "An iTunes moment," said Andrew Curry. The democratization of money, suggested conference organizer David Birch.

"If money is electronic and cashless, what difference does it make what currency we use?" Why not...kilowatt hours? You're always going to need to heat your house. Global warming doesn't mean never having to say you're cold.

Personally, I always thought that if our society completely collapsed, it would be an excellent idea to have a stash of cigarettes, chocolate, booze, and toilet paper. But these guys seemed more interested in the notion of Facebook units. Well, why not? A currency can be anything. Second Life has Linden dollars, and people sell virtual game world gold for real money on eBay.

I'd say for the same reason that most people still walk around with notes in their wallet and coins in their pocket: we need to take our increasing abstraction step by step. Many have failed with digital cash, despite excellent technology, because they asked people to put "real" money into strange units with no social meaning and no stored trust. Birch is right: storing value in an Oyster card is no different than storing value in Beenz. But if you say that money is now so abstract that it's a collective hallucination, then the corroborative details that give artistic verisimilitude to an otherwise bald and unconvincing currency really matter.

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of the earlier columns in this series.

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It's not going out on much of a limb to predict that 2010 is, finally, the year of the ebook. A lot of electrons are going to be spilled trying to predict the winners on this frontier; the most likely, I think, are Apple (iPhone, iPad), Amazon (Kindle), Google (Books), and Ray Kurzweil (Blio). Note something about all those guys? Yes: none of them are publishers. Just like the music industry, publishers have left it to technology companies to invent their new medium for them.

Note something else about what those guys are not? Authors. Almost everything that's created in this world - books, newspapers, magazines, movies, games, advertising, music, even some industrially designed products - eventually goes back to one person sitting in a room with a blank sheet of paper trying to think up a compelling story.

Authors - and writers generally - used to have a hard but easy job: deliver a steady stream of publishable work, and remuneration will probably happen. Publishers sold books; authors just wrote them. One of my friends, a science fiction writer contractually bound to HarperCollins, used to refer to Rupert Murdoch as "the little man who publishes my books for me". That happy division of labor did not, of course, provide all, or even most writers with a full-time living. But the most important thing authors want is for their work to be noticed; publishers could make that happen.

Things have been changing for some time. It's fifteen years since authors of my acquaintance began talking about the need to hire your own publicist because unless you had a very large (six figures and up) advance most mainstream publishers would not consider your book worth spending money and effort to market it much beyond sending out a press release. Even copy-editing is falling by the wayside, as a manuscript submitted electronically can now feed straight into a typesetting system without the human intervention that gave pause for rethought.

"Everyone's been seeing their royalty statements shrink," a friend observed gloomily last week. He made, 20 years ago, what then seemed an intelligent career decision: to focus on writing reference books because they had a consistent market among people who really needed them, and they would have a continuing market in regular updates. And that worked great until along came Wikipedia online dictionaries and translation engines and government agency Web sites and blogs and picture galleries, and now, he says, "People don't buy reference books any more." I am no exception: all the reference books on the shelves behind my desk are at least 15 years old. About 10 percent are books I'd buy today if I didn't already have them.

So this is also the year in which the more far-seeing authors get to figure out what their future business models are going to be. An author with a business plan? Who ever heard of such a thing? The nearest thing to that in my acquaintance is the science fiction writer Charles Stross; he is smarter about the economic and legal workings of publisher than anyone I've ever met or heard speak at a conference. And even he is asking for suggestions.

First of all, there's the Google Books settlement, which is so complicated that I imagine hardly any of the authors whose works the settlement is a settlement of can stand to read the whole thing. The legal scholar and MacArthur award winner Pamela Samuelson has written a fine explanation of the problems; authors had until January 28 to opt out or object. This isn't over yet: the US Justice Department still doesn't like the terms.

We can also expect more demarcation disputes like this week's spat between Amazon and Macmillan, discussed intelligently by Stross here, here, and here, with an analysis of the scary economics of the Kindle here. The short version: Macmillan wants Amazon to pay more for the Kindle versions of its books, and Amazon threw Macmillan's books out of its .com pram. Caught in the middle are a bunch of very pissed-off authors, who are exercising their rights in the only way they can: by removing links to Amazon and substituting links to the competition: Barnes and Noble and independent booksellers including the wonderful Portland, Oregon stalwart, Powells.

To be fair, removing the "buy new" button from all of the Macmillan listings on Amazon.com (Amazon.co.uk seems to be unaffected) doesn't mean you can't buy the books. In general, you simply click on a different link and buy the book from a marketplace seller rather than Amazon itself. Amazon doesn't care: according to its SEC filings, the company makes roughly the same profit whoever sells the book via its site.

It's times like these when you want to remember the Nobel Laureate author Doris Lessing's advice to all writers: "And it does no harm to repeat, as often as you can, 'Without me, the literary industry would not exist: the publishers, the agents, the sub-agents, the sub-sub agents, the accountants, the libel lawyers, the departments of literature, the professors, the theses, the books of criticism, the reviewers, the book pages - all this vast and proliferating edifice is because of this small, patronized, put-down, and underpaid person.'"

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of the earlier columns in this series.

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Why can't computer games get any serious love? The maverick Labour MP Tom Watson convened a meeting this week to ask just that. (Watson is also pushing for the creation of an advocacy group, Gamers' Voice (Facebook).) From the dates, the meeting is not in response to claims that playing computer games causes rickets.

Pause to go, "Huh?"

We all know what causes rickets in the UK. Winter at these crazy high latitudes causes rickets in the UK. Given the amount of atmosphere and cloud it has to get through in the darker months, sunlight can't muster enough oomph to make Vitamin D on the skins of the pasty, blue-white people they mostly have here. The real point of the clinical review paper that kicked off this round of media nonsense, Watson rants, is that half of all UK adults are deficient in Vitamin D in the winter and spring. Well, duh. Wearing sunscreen has made it worse. So do clothes. And this: to my vast astonishment on arrival here they don't put Vitamin D in the milk. But, hey, let's blame computer games!

And yet: games are taking over. In December Chart-Track market researchfound that the UK games industry is now larger than its film industry. Yesterday's game-playing kids are today's game-playing parents. One day we'll all be gamers on this bus. Criminals pay more for stolen World of Warcraft accounts than for credit card accounts (according to Richard Bartle), and the real-money market for virtual game world props is worth billions (PDF). But the industry gets no government support. Hence Watson's meeting.

At this point, I must admit that net.wars, too, has been deficient: I hardly ever cover games. As a freelance, I can't afford to be hooked on them, so I don't play them, so I don't know enough to write about them. In the early-to-mid 1990s I did sink hours into Hitchhiker's Guide to the Galaxy, Minesweeper, Commander Keen, Lemmings, Wolfenstein 3D, Doom, Doom 2, and some of Duke Nukem. At some point, I decided it was a bad road. When I waste time unproductively I need to feel that I'm about to do something useful. I switched the mouse to the left hand, mostly for ergonomic reasons, and my slightly lower competence with it was sufficient to deter further exploration. The other factor: Quake made it obvious that I'd reached my theoretical limit.

I know games are different now. I've watched a 20-something friend play World of Warcraft and Grand Theft Auto; I've even traded deaths with him in one of those multiplayer games where your real-life best friends are your mortal enemies. Watching him play The Sims as a recalcitrant teenager (is there any other kind?) was the most fun. It seemed like Cosmic Justice to see him shriek in frustration at the computer because the adults in his co-op household were *refusing to wash the dishes*. Ha!

For people who have jobs, games are a (sometimes shameful) hobby; for people who are self-employed they are a dangerous menace. Games are amateur sports without the fresh air. And they are today's demon medium, replacing TV, comic books (my parents believed these rotted the brain), and printed multi-volume novels. All of that contributes to why games get relatively little coverage outside of specialist titles and writers such as Aleks Krotoski and are studied by rare academics like Douglas Thomas and Richard Bartle.

Except: it's arguable that the structure of games and the kind of thinking they require - logical, problem-solving, exploratory, experimental - does in fact inspire a kind of mental fitness that is a useful background skill for our computer-dominated world. There are, as Tom Chatfield, one of the evening's three panelists and an editor at Prospect, says in his new book Fun, Inc, many valuable things people can and do learn from games. (I once watched an inveterate game-playing teen extract himself from the maze at Hampton Court in 15 seconds flat.)

And in fact, that's the thought with which the seminal game cum virtual world was started: in writing MUD, Bartle wanted to give people the means to explore their identities by creating different ones.

It's also fun. And an escape from drab reality. And a challenge. And active, rather than passive, entertainment. The critic Sam Leith (who has compared World of Warcraft to Chartres Cathedral) pointed out that the violent shoot-'em-up games that get the media attention are a small, stereotyped sector of the market that deliberately insert shocking violence recursively to get media attention and increase sales. Limiting the conversation to one stereotypical theme is the problem, not games themselves.

Philip Oliver, founder and CEO of the UK's large independent games developer, Blitz Games, listed some cases in point: in their first 12 weeks of release his company sold 500,000 copies of its The Biggest Loser TV and 3.8 million copies of its Burger King advertising game. And what about that wildly successful Wii Fit?

If you say, "That's different", there is the problem.

Still, if game players are all going to be stereotyped as violent players shooting things...I'm not sure who pointed out that the Houses of Parliament are a fabulous gothic castle in which to set a shoot-'em-up, but it's a great idea. Now, that would really be government support!

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, follow on , or send email to netwars@skeptic.demon.co.uk (but please turn off HTML).

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On the face of it, the unexpected renewal of the late-night TV wars is a pretty trivial matter. As The Tonight Show with Conan O'Brien itself points out, there is a lot of real news that's a lot more important - health care, Haiti, Google versus China, network neutrality, and discussions of the Digital Economy bill (my list, not theirs). O'Brien wrote in an open letter a couple of days ago that he has been "absurdly lucky". Even so.

But Conan-versus-Leno is personalization; at heart this story is about the future of broadcasting and its money. Given today's time-shifting choices, few things lure viewers to a particular TV channel at a precise time. Two are live sports and breaking news. A third is the run of talk-variety shows that start in most parts of the US at 11:35pm (10:35 Central) and run until around 2am.

The kingpin of all of these is The Tonight Show, broadcast on NBC every night following the 11 o'clock news for nearly 60 years. For 30 of those years it was presented by a single host, Johnny Carson, probably the biggest star television has ever had - and quite possibly the biggest television ever will have. They make talent like Carson's very infrequently; they don't make broadcasting like that any more. According to Bill Carter in his book The Late Shift: Letterman, Leno, and the Network Battle for the Night, many years Carson's apparently effortless comedy and guest interviews generated 15 to 20 percent of the network's profits.

Every one of today's late-night hosts grew up watching Carson, and probably all of them dreamed of one day having his job. Carson's job, on The Tonight Show on NBC, not a similar job on a similar show at the same time on another network.

The roots of today's mess go back to 1991, when Carson announced he would retire in May 1992. At the time, David Letterman was hosting NBC's 12:30 show, while Jay Leno was Carson's regular substitute host. In a move that seemed to surprise everyone, NBC appointed Leno Carson's successor, fatally assuming that Letterman wouldn't mind. He did mind. The net result was months of uncertainty, politics, and legal wrangling, not least because Leno's early months in the job were unpromising. By 1993, Letterman had begun a competing show at CBS and every other network had tried putting up an 11:30 talk-variety show, most of them dreadful and quickly canned. Since then, Leno has usually won the ratings - but Letterman the awards. Arguably the biggest beneficiary was O'Brien, who landed Letterman's old 12:30 job with barely any performing experience. After following Leno for 16 years, late last year, as per an agreement announced in 2005 and intended to avoid a repeat of 1992, O'Brien got The Tonight Show.

Now, NBC is doing to O'Brien almost exactly what it did to Letterman, apparently filled with panic over declining revenues and shrinking ratings and completely self-destructing (just as Comcast is trying to buy it from GE). As Kansas City critic Aaron Barnhart writes, late-night is about the long haul. In restoring Leno, NBC is hanging onto its past and at best a couple of years of present at the expense of its future. All hosts - almost all entertainers - eventually find their audience is aging along with them. Even Carson seemed old-fashioned to younger viewers by the time he retired at 66: my parents watched Carson; I watch Letterman and Conan; my 20-something friends watch Conan and Jon Stewart.

In his letter, O'Brien says holding The Tonight Show to 11:35 is vital. He is almost certainly right: people go to bed, watch the news and the opening monologue, and progressively drift off to sleep during the guests. By midnight, half of the Tonight Show's viewers are gone; the latest shows are seen by insomniacs and people without kids and early-morning commutes.

Most likely NBC will shortly find out there is no way back to Leno's ratings of 2008. Diehard Leno fans will stick with him but Conan fans will tune out in protest; if they watch anyone it will be Letterman or Stewart. The younger people the network needs for the future watch online.

You may think none of this matters very much outside the US. The shows themselves have never traveled very well, though the format has been widely copied throughout the world. But of all the businesses having to cope with the digital revolution, in television it may be the broadcast networks who are most under threat. Those who copy and share TV shows buy DVDs; they do not return to watch the broadcast versions or consume advertising. Shows have fans; networks don't. The focus on file-sharing ignores the wide variety of streams copied live from broadcasters all over the world that are readily accessible if you know where to look. It is far cheaper to subscribe directly to the tennis tours than to pay Sky Sports or Eurosport, for example - and often free to pick up a stream.

When the history of the digital revolution is written, historians may pinpoint the day Carson announced his retirement as the broadcasting equivalent of Peak Oil.

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, follow on Twitter, or send email to netwars@skeptic.demon.co.uk.

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This was supposed to be the week that the future of Google Books became clear or at least started to; instead, the court ordered everyone to go away and come up with a new settlement (registration required). The revised settlement is due by November 9; the judge will hear objections probably around the turn of the year.

Instead this turned into the Week of the Postcode, after the Royal Mail issued cease-and-desist letters to the postcode API service Ernest Marples (built by Richard Pope and Open Rights Group advisory council member Harry Metcalfe). Marples' sin: giving away postcode data without a license (PDF).

At heart, the Postcode spat and the Google Books suit are the same issue: information that used to be expensive can now be made available on the Internet for free, and people who make money from the data object.

We all expect books to be copyrighted; but postcodes? When I wrote about it, astonished, in 1993 for Personal Computer World, the spokesperson explained that as an invention of the Royal Mail of course they were the Royal Mail's property (they've now just turned 50). There are two licensed services, the Postcode Address File (automates filling in addresses) and PostZon, the geolocator database useful for Web mashups. The Royal Mail says it's currently reviewing its terms and licensing conditions for PostZon; based on the recent similar exercise for PAF (PDF) we'll guess that the biggest objections to giving it away will come from people who are already paying for it and want to lock out competitors.

There's just a faint hint that postcodes could become a separate business; the Royal Mail does not allow the postcode database and mail delivery to cross-subsidize (to mollify competitors who use the database). Still, Charles Arthur, in the Guardian, estimates that licensing the postcode database costs us more than it makes.

This is the other sense in which postcodes are like Google Books: it costs money to create and maintain the database. But where postcodes are an operational database for the Royal Mail, books may not be for Google Wired UK has shown what happens when Google loses economic interest in a database, in this case Google Groups (aka, the Usenet archive).

But in the analogy Google plays the parts of both the Royal Mail (investing in creating a database from which it hopes to profit) and the geeks seeking to liberate the data (locked-up, out-of-print books, now on the Web! Yeah!). The publishers are merely an intervening toll booth. This is one reason reactions to Google Books have been so mixed and so confusing: everyone's inner author says, "Google will make money. I want some," while their inner geek says, "Wow! That is so *cool*! I want that!".

The second reason everyone's so confused, of course, is that the settlement is 141 pages of dense legalese with 15 appendices, and nobody can stand to read it. (I'm reliably told that the entire basis for handling non-US authors' works is one single word: "If".) This situation is crying out for a wiki where intellectual property lawyers, when they have a moment, can annotate and explain. The American Library Association has bravely managed a two-page summary (PDF).

What's really at stake, as digital library expert Karen Coyle explained to me this week, is orphan works, which could have long ago been handled by legislation if everyone hadn't gotten all wrapped up in the Google Books settlement. Public domain works are public domain (and you will find many of those Google has scanned in quietly available at the Internet Archive, where someone has been diligently uploading them. Works whose authorship is known have authors and publishers to take charge. But orphan works...the settlement would give a Book Rights Registry two-thirds of the money Google pays out to distribute to authors of orphan works. This would be run by the publishers, who I'm sure would put as much effort into finding authors to pay as, as, as...the MPAA@@. It was on this basis that the Department of Justice objected to the settlement.

The current situation with postcodes shows us something very important: when the Royal Mail invented them, 50 years ago, no one had any idea what use they might have outside of more efficiently delivering the mail. In the intervening time, postcodes have enabled the Royal Mail to automate sorting and slim down its work force (while mysteriously always raising postage); but they have also become key data points on which to hang services that have nothing to do with mail but everything to do with location: job seeking, political protest, property search, and quick access to local maps.

Similarly: we do not know what the future might hold for a giant database of books. But the postcode situation reminds us what happens when one or two stakeholders are allowed to own something that has broader uses than they ever imagined. Meanwhile, if you'd like to demand a change in the postcode situation this petition is going like gangbusters.

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of the earlier columns in this series. Readers are welcome to post here, follow on Twitter, or send email to netwars@skeptic.demon.co.uk.

Posted by Wendy M. Grossman at 3:36 PM | Permalink | Comments (0) | TrackBacks (0)

What does a venture capitalist do in a recession?

"Panic." Hermann Hauser says, then laughs. It is, in fact, hard to imagine him panicking if you've heard the stories he tells about his days as co-founder of Acorn Computers. He's quickly on to his real, more measured, view.

"It's just the bottom of the cycle, and people my age have been through this a number of times before. Though many people are panicking, I know that normally we come out the other end. If you just look at the deals I'm seeing at the moment, they're better than any deals I've seen in my entire life." The really positive thing, he says, is that, "The speed and quality of innovation are speeding up and not slowing down. If you believe that quality of innovation is the key to a successful business, as I do, then this is a good era. We have got to go after the high end of innovation - advanced manufacturing and the knowledge-based economy. I think we are quite well placed to do that." Fortunately, Amadeus had just raised a fund when the recession began, so it still has money to invest; life is, he admits, less fun for "the poor buggers who have to raise funds."

Among the companies he is excited about is Plastic Logic, which is due to release its first product next year, a competitor to the Kindle that will have a much larger screen, be much lighter, and will also be a computing platform with 3g, Bluetooth, and Wi-fi all built in, all built on plastic transistors that will be green to produce, more responsive than silicon - and sealed against being dropped in the bath water. "We have the world beat," he says. "It's just the most fantastic thing."

Probably if you ask any British geek above the age of 39, an Acorn BBC Micro figured prominently in their earliest experiences with computing. Hauser was and is not primarily a technical guy - although his idea of exhilarating vacation reading is Thermal Physics, by Charles Kittel and Herbert Kroemer - but picking the right guys to keep supplied with tea and financing is a rare skill, too.

"As I go around the country, people still congratulate me on the BBC Micro and tell me how wonderful it was. Some are now professors in computer science and what they complain about is that as people switched over to PCs - on the BBC Micro everybody knew how to program. The main interface was a programming interface, and it was so easy to program in BASIC everybody did it. Kids have no clue what programming is about - they just surf the Net. Nobody really understands any more what a computer does from the transistor up. It's a dying breed of people who actually know that all this is built on CMOS gates and can build it up from there."

Hauser went on to found an early effort in pen computing - "the technology wasn't good enough" and "the basic premise that I believed in, that pen computing would be important because everybody knew how to wield a pen just wasn't true" - and then the venture capital fund Amadeus, through which he helped fund, among others, leading Bluetooth chip supplier CSR. Britain, he says, is a much more hospitable environment now than it was when he was trying to make his Cambridge bank manager understand Acorn's need for a £1 million overdraft. Although, he admits now, "I certainly wouldn't have invested in myself." And would have missed Acorn's success.

"I think I'm the only European who's done four billion-dollar companies," he says. "Of course I've failed a lot. I assume that more of my initiatives that I've founded finally failed than finally succeeded."

But times have changed since consultants studied Acorn's books and told them to stop trading immediately because they didn't understand how technology companies worked. "All the building blocks you need to have to have a successful technology cluster are now finally in place," he says. "We always that the technology, but we always lacked management, and we've grown our own entrepreneurs now in Britain." He calls Stan Boland, CEO of 3g USB stock manufacturer Icera and Acorn's last managing director a "rock star" and "one of the best CEOs I have come across in Europe or the US." In addition, he says, "There is also a chance of attracting the top US talent, for the first time." However, "The only thing I fear and that we have to be careful about is that the relative decline doesn't turn into an absolute decline."

One element of Britain's changing climate with respect to technology investment that Hauser is particularly proud of is helping create tax credits and taper relief for capital gains through his work on Leon Mandelson's advisory panel on new industry and new jobs. "The reason I have done it is that I don't believe in the post-industrial society. We have to have all parts of industry in our country."

Hauser's latest excitement is stem cells; he's become the fourth person in the world to have his entire genome mapped. "It's the beginning of personal medicine."

The one thing that really bemuses him is being given lifetime achievement awards. "I have lived in the future all my life, and I still do. It's difficult to accept that I've already created a past. I haven't done yet the things I want to do!"

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, follow on Twitter, or send email to netwars@skeptic.demon.co.uk.

Posted by Wendy M. Grossman at 4:15 PM | Permalink | Comments (0) | TrackBacks (0)

You probably aren't aware of this, but there's a consultation going on right now about what to do about illegal peer-to-peer file-sharing; send in comments by September 15. Tom Watson, the former minister for digital engagement, has made some sensible suggestions for how to respond in print and blog.

This topic has been covered pretty regularly in net.wars, but this is different and urgent: this means law.

Among the helpful background material provided with the consultation document are an impact assessment and a financial summary. The first of these explains that there were two policy options under consideration: 1) Do nothing. 2) (Preferred) legislate to reduce illegal downloading "by making it easier and cheaper for rightsholders to bring civil actions against suspected illegal file-sharers". Implementing that requires ISPs to cooperate by notifying their subscribers. There will be a code of practice (less harsh than this one, we trust) including options such as bandwidth capping and traffic shaping, which Ofcom will supervise, at least for now (there may yet be a digital rights agency).

The document is remarkably open about who it's meant to benefit - and it's not artists.

Government intervention is being proposed to address the rise in unlawful P2P file-sharing which can reduce the incentive for the creative industries to invest in the development, production and distribution of new content. Implementation of the proposed policy will allow right [sic] holders to better appropriate returns on their investment.

The included financial assessment, which in this case is the justification for the entire exercise (p 40), lays out the expected benefits: BERR expects rightsholders to pick up £1,700 million by "recovering displaced sales", at a cost to ISPs and mobile network operators of £250 to £500 million over ten years. Net benefit: £1.2 billion. Wha-hey!

My favorite justification for all this is the note that because that are an estimated 6.5 million file-sharers in the UK there are *too many* of us to take us all to court, rightsholders' preferred deterrence method up until now. Rightsholders have marketing experts working for them; shouldn't they be getting some message from these numbers?

There are some things that are legitimately classed as piracy and that definitely cost sales. Printing and selling counterfeit CDs and DVDs is one such. Another is posting unreleased material online without the artist's or rightsholder's permission; that is pre-empting their product launch, and whether you wind up having done them a favor or not, there's no question that it's simply wrong. The answer to the first of these is to shut down pirate pressing operations; the answer to the second is to get the industry to police its own personnel and raise the penalties for insider leaks. Neither can be solved by harassing file-sharers.

It's highly questionable whether file-sharing costs sales; the experience of most of us who have put our work online for free is that sales increase. However, there is no doubt in my mind that there are industries file-sharing hurts. Two good examples in film are the movie rental business and the pay TV broadcasters, especially the premium TV movie channels.

As against that, however, the consultation notes but dismisses the cost to consumers: it estimates that ISPs' costs, when passed on to consumers, will reduce the demand for broadband by 10,000 to 40,000 subscribers, representing lost revenue to ISPs of between £2 and £9 million a year (p50). The consultatation goes on to note that some consumers will cease consuming content altogether and that therefore the policy will exacerbate existing inequality since those on the lowest incomes will likely lose the most.

It is not possible to estimate such welfare loss with current data availability, but estimates for the US show that this welfare loss could be twice as large as the benefit derived from reducing the displacement effect to industry revenues.

Shouldn't this be incorporated into the financial analysis?

We must pause to admire the way the questions are phrased. Sir Bonar would be proud: ask if your proposals are implementing what you want to do in the right way. In other words, ask if three is the right number of warning letters to send infringers before taking stronger action (question 9), or whether it's a good idea to leave exactly how costs are to be shared between rightsholders and ISPs flexible rather than specifying (question 6). The question I'd ask, which has not figured in any of the consultations I've seen would be: is this the best way to help artists navigate the new business models of the digital age?

Like Watson, my answer would be no.

Worse, the figures do not take into account the cost to the public, analyzed last year in the Netherlands.

And the assumptions seem wrong. The consultation document claims that research shows that approximately 70 percent of infringers stop when they receive a warning letter, at least in the short term. But do they actually stop? Or do they move their file-sharing to different technologies? Does it just become invisible to their ISP?

So far, file-sharers have responded to threats by developing new technologies better at obfuscating users' activities. Napster...Gnutella...eDonkey...BitTorrent. Next: encrypted traffic that looks just like a VPN connection.

I remain convinced that if the industry really wants to deter file-sharing it should spend its time and effort on creating legal, reliable alternatives. Nothing less will save it. Oh, yeah, and it would be a really good idea for them to be nice to artists, too. Without artists, rightsholders are nothing.

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, follow on , or send email to netwars@skeptic.demon.co.uk.

Posted by Wendy M. Grossman at 5:04 PM | Permalink | Comments (1) | TrackBacks (0)

In all the discussions I've seen about the mass extinction of newspapers and worries about where people, particularly elderly people, will get their news, I've seen little about the impact of the death of newspapers on the ecology of industries that have traditionally depended on them. At Roger Ebert's film festival there was some discussion about this with regard to movies. Reading critics is an important way people decide whether they can afford two hours of scarce leisure time and $20 to $50 of hard-earned money (tickets, babysitters, travel costs) to see a particular movie. As newspapers shrink, die, and fire their movie critics, the result, a panel concluded, is death to the chances of arthouse and independent movies.

Away from the glamor event that is Wimbledon, which starts Monday, the same concerns can be applied to the future of the two professional tennis tours, run by the WTA (women) and the ATP (men). This week's Eastbourne tournament - this year known as the AEGON International - began the week with seven of the world's top ten female players, plus the 2006 Wimbledon champion (Amelie Mauresmo) and the 2007 Wimbledon finalist (Marion Bartoli). By the semifinals, all of those but Bartoli were gone (and she retired, limping, from her semi against Virginie Razzano), and the survivors, while fine and accomplished players and diligent hard workers, are not the kinds of names whose exploits can be easily sold to editors. The national interest is in British players, who had all lost by the second round; the international interest is limited to Wimbledon contenders. You know it's a bad situation when journalists start going home before the quarterfinals.

To some extent, it's arguable that professional tennis writers are not as essential as they were. In 1989, say, if you wanted to follow the tour year-round you had to scour the sports pages for box scores and terse match write-ups. Today the Net is awash in tennis reporting: player sites, fan sites, official and unofficial blogs, Facebook pages and groups, Twitter, news wires, and official releases from the tours, the national federations, individual tournaments, and the overall governing body, the International Tennis Federation. It's a rare match whose report you can't find online within half an hour, and even if you don't sleep you probably couldn't read all of it.

In addition, the matches themselves are far more accessible than ever before: Europe has Eurosport; the US has The Tennis Channel. And if you can wait a day, more and more tennis matches are being posted online for download, legally or otherwise.

A couple of decades ago, the famed American sportscaster Howard Cosell wrote a book complaining that sports journalism was failing the public, that to cover sports properly journalists should have a working knowledge of economics, labor law, business, and medical science. You could see his point, especially over the last decade in baseball, where a bitter players' strike was followed by steroid scandals. Go back to the beginning of the Open Era of tennis, which began in 1968, and you'll find long-serving commentators like Richard Evans writing books about the considerable complexities of tennis politics. But that kind of coverage has largely shrunk: this week what you can sell a newspaper is either 1) local players or 2) Wimbledon contenders - that is, the stars. You hear many complaints among the tennis press about how little access they now have to the players, but they have even less access to the game's controllers.

Tennis is not alone in this: stars in every area from technology to movies would rather sequester themselves than answer too many unpleasant questions. And I can't always blame them. Explaining a bad loss to the media while the disappointment is still raw must be one of the most unpleasant moments for a player, almost up there with having your physique closely inspected and criticized. That sort of thing was something stars put up with when their industry was young and struggling to establish itself; the early pioneers of the women's tour did 5am talk radio, appeared in shopping malls - whatever it took.

We are not in those times any more. But as newspapers fail and lay off staff and reduce their expenditure on coverage of minority interests - which include tennis - both tours, and the movie industry, and many other industries that rely on sponsorship for fuel should be asking themselves how they're going to keep their public profile high enough to stay funded. The Slams - Wimbledon, the US Open, the Australian Open, and the French Open - will most likely survive (although the Australian has already announced the loss of several important sponsors). But creating the field of high-quality players for these events requires a healthy ecosystem of feed-up events that keep coaches, juniors, and amateurs engaged and involved. New media may sometime fill the gap, but not yet; no single outlet has a big enough megaphone. (And Wimbledon, apparently living in the past, does not accredit online-only writers.)

You may not feel that losing tennis as a spectacle would be much of a loss, and I'm sure you're right that the world would continue to turn. But the principle that the loss of traditional media disrupts many more industries than just its own applies to many more industries than just the one that will dominate the BBC for the coming fortnight.

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of earlier columns in this series. Readers are welcome to post here, follow on Twitter, or send email to netwars@skeptic.demon.co.uk.

Posted by Wendy M. Grossman at 1:47 PM | Permalink | Comments (0) | TrackBacks (0)

So we were at a thing in London this week where practically everyone was a Twitter user. Not surprising, since Twitter use has gone up nearly 1000 percent in the UK in the last year. As you do, we rehearsed various dissatisfactions with the service and wishes for feature improvements. Among them: people wished they could actually pay for the service so they could get it to do more of the stuff they want. There's something very odd about a company that people are so devoted to that they actually spend recreational time in a pub debating its business model. People were in love with Google in its early days, too, yet I don't remember pub chats about it.

That 1000 percent still makes Twitter tiny in context: it lags way behind Facebook, YouTube, Bebo, MySpace, and even Yahoo! Answers, as weirdly chaotic as that list is. YouTube compared with Twitter? As that article points out, the ecology of third-party software built around Twitter and automated feeds from Twitter into other sites like Facebook mean that many people use the service without ever accessing its Web site or even necessarily knowing they're reading a Twitter feed.

The existence of the third-party ecology is both a good and a bad sign. Good that people find the blogging-for-the-mobile-phone-generation platform so useful that they are willing to put in the effort. Bad, in the sense that it makes clear how utterly unusable Twitter is on its own. I've had an account for nearly two years, but left it mostly dormant until someone recommended Tweetdeck.

The whole conversation started because I was trying to find a tactful way of asking one of those present whether she could divide her Twitter feed into two: one for the really interesting work type stuff she does, and the other for the..."crap?" she said helpfully.

"It would be great if you could filter the feed by putting on "stop" words," someone said. Yes, and "go" words, too, so you could select what kind of thing you wanted to get when. You don't need many Twits on your list for the tweet stream to become unmanageable. Others have had this same thought and there is in fact something that does it.

Filtering would be a great thing because it's the lack of it that is the reason I've never dared turn on the switch that has Twitter send updates to my mobile phone. In the UK now, however, that element of the service is turned off. All to do with money, which mobile network operators tend to insist on and Internet users don't like to spend, leaving service providers squeezed in the middle.

"I'd pay for that," said one of the group. "The service is that useful to me."

"So would I," said someone else.

"Can't we make ask them?"

"Lots of people have tried."

Twitter's business model has in fact been the subject of some speculation even outside of pubs, and even ideas how to turn it into a billion-dollar company. It has, apparently, enough money to go on with from its funding rounds.

No one's actually sure exactly what Twitter's business model is, but it seems clear that charging for SMS updates isn't it. The site has no advertising (not even on its blog or home pages), and even if it did that ecology of desktop clients would render it moot anyway. It also seems that making life easy for third-party developers isn't necessarily it either. Twitter so far seems to be following in the footsteps of the early Web: if they come in sufficient numbers and you keep control a business model will present itself.

It worked for Google, the last successful company that fed a lot of similar speculation in its early days. Another parallel: those stories were written about Google in 2001-2002, just after the dot-com bust, when it was fashionable among Old Media to opine that New Media would never be able to grow up, move out, and make a living. Now, in this much worse economic crash, how will Twitter ever be able to leave home?

Some things clearly won't work. No matter how small, there is probably no number of ads that wouldn't send users fleeing to a Twitter competitor without them. Google locked in its users by being better than its competitors, by offering added services, and by acculturation: the more you learn about constructing good searches on Google the less you want to repeat the learning curve elsewhere. Social networks have proved in the long term to be more fungible: look at what happened to the well established discussion groups on early online services once everyone had access to the Internet.

More likely is the idea of marketing accounts, which is already happening anyway, built on the interests users indicate via their choices of whom to follow.

Our idea, which seemed logical in the pub: Twitter users start sending money to one of the company's email addresses using Paypal and force them to accept payment. Take control. Force a business model on them. Yeah!

It would be a great hack.

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, at her personal blog, or by email to netwars@skeptic.demon.co.uk (but please turn off HTML).

Posted by Wendy M. Grossman at 2:41 PM | Permalink | Comments (0) | TrackBacks (0)

We'll have to wait some months to find out what Steve Jobs' health situation really is, just as investors will have to wait to find out how well Apple is prepared to handle his absence. But that doesn't stop rampant speculation about both things, or discussion about whether Jobs owes it to the public to disclose his health problems.

As an individual, of course not. We write - probably too often for some people's tastes - about privacy with respect to health matters. But Jobs isn't just a private individual, and he isn't an average CEO. Like Warren Buffett, who saw his company's share price decline noticeably some years back during a scare over his health, Jobs's presence as CEO is a noticeable percentage of Apple's share price. That means that shareholders - and therefore by extension the Securities and Exchange Commission - have some legitimate public interest in his state of health.

That doesn't mean that all the speculation going on is a good thing. If Jobs is smart, he doesn't read news stories about himself; in normal times no one needs their sense of self-importance inflated that much, and in a health crisis the last thing you need is to read dozens of people speculating that you're on the way out. The pruriently curious may like to know that there is some speculation that the weight loss is the result of the Whipple procedure Jobs reportedly had in 2004 to treat his islet cell neuroendocrine tumor (a less aggressive type of pancreatic cancer); or that it's a thyroid disorder. No one wants to just write a post that says simply, "I don't know."

It would not matter if Jobs and Apple did not so conspicuously embrace the cult of personality. The downside of having a celebrity CEO is that when that CEO is put out of action the company struggles to keep its market credibility. The more the CEO takes credit - and Jobs is indelibly associated with each of Apple's current products - the less confidence people have in the company he runs.

To a large extent, it's absurd. No one - not even Jobs - can run a tech company the size of Apple by himself. Jobs may insist on signing off on every design detail, but let's face it, he's not the one working evenings and weekends to write the software code and run bug testing and run a final polishing cloth over the shinies before they hit the stores. Apple definitely lost his way during the period he wasn't at the helm - that much is history. But Jobs helped recruit John Sculley, the CEO who ran Apple during those lost years. And Jobs's next company, NeXT, was a glossy, well-designed, technically sophisticated market failure whose biggest success came when Apple bought it (and Jobs) and incorporated some of the company's technology into its products. Jobs had far more success with Pixar, now part of Disney; but accounts of the company's early history suggest was the company's founders who did the heavy lifting.

Unfortunately, if you're a public company you don't get to create public confidence by pointing out the obvious: that even with Jobs out of action there's a lot of company left for the managers he picked to run in the direction's he's chosen. Apple, whose relations with the press seem to be a dictionary definition of "arrogant", has apparently never cared to create a public image for itself that suggests it's a strong company with or without Jobs.

Compare and contrast to Buffett, who has been a rock star CEO for far longer than Jobs has. Buffett is 78, and Berkshire Hathaway's success is universally associated almost solely with him; yet every year he reminds shareholders that he has three or four candidates to succeed him who are chosen and primed and known to his board of directors. His annual shareholder's letters, too, are filled with praise for the managers and directors of the many subsidiaries Berkshire owns. Based on all that, it is clear that Buffett has an eye to ensuring that his company will retain its value and culture with or without him. That so many Berkshire Hathaway millionaires are his personal friends and neighbors, who staked money in the company decades ago at some personal risk, may have something to do with it.

Apple has not done anything like the same, which may have something to do with the personality of its CEO. Jobs's health troubles of 2004 should have been a wakeup call; if Buffett can understand that his age is a concern for shareholders, why can't Jobs understand that his health is, too? If he doesn't want people prying into his medical condition, that's understandable. But then the answer is to loosen his public identification with the company. As long as the perception is that Jobs is Apple and Apple is Jobs, the company's fortunes and share price will be inextricably linked to the fragility of his aging human body. Show that the company has a plan for succession, give its managers and product developers public credit, and identify others with its most visible products, and Jobs can go back to having some semblance of a private medical record.

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, at her personal blog, or by email to netwars@skeptic.demon.co.uk (but please turn off HTML).

Posted by Wendy M. Grossman at 3:36 PM | Permalink | Comments (0) | TrackBacks (0)

It took a confluence of several different factors for a six-year-old news story to knock 75 percent off the price of United Airlines shares in under an hour earlier this week. The story said that United Airlines was filing for bankruptcy, and of course was true - in 2002. Several media owners are still squabbling about whose fault it was. Trading was halted after that first hour by the systems put in place after the 1987 crash, but even so the company's shares closed 10 percent down on the day. Long-term it shouldn't matter in this case, but given a little more organization and professionalism that sort of drop provides plenty of opportunities for securities fraud.

The factor the companies involved can't sue: human psychology. Any time you encounter a story online you make a quick assessment of its credibility by considering: 1) the source; 2) its likelihood; 3) how many other outlets are saying the same thing. The paranormal investigator and magician James Randi likes to sum this up by saying that if you claimed you had a horse in your back yard he might want a neighbor's confirmation for proof, but if you said you had a unicorn in your back yard he'd also want video footage, samples of the horn, close-up photographs, and so on. The more extraordinary the claim, the more extraordinary the necessary proof. The converse is also true: the less extraordinary the claim and the better the source, the more likely we are to take the story on faith and not bother to check.

Like a lot of other people, I saw the United story on Google News on Monday. There's nothing particularly shocking these days about an airline filing for bankruptcy protection, so the reaction was limited to "What? Again? I thought they were doing better now" and a glance underneath the headline to check the source. Bloomberg. Must be true. Back to reading about the final in prospect between Andy Murray and Roger Federer at the US Open.

That was a perfectly fine approach in the days when all content was screened by humans and media were slow to publish. Even then there were mistakes, like the famous 1993 incident when a shift worker at Sky News saw an internal rehearsal for the Queen Mother's death on a monitor and mentioned it on the phone to his mother in Australia, who in turn passed it on to the media, which took it up and ran with it.

But now in the time that thought process takes daytraders have clicked in and out of positions and automated media systems have begun republishing the story. It was the interaction of several independently owned automated systems made what ought to have been a small mistake into one that hit a real company's real financial standing - with that effect, too, compounded by automated systems. Logically, we should expect to see many more such incidents, because all over the Web 2.0 we are building systems that talk to each other without human intervention or oversight.

A lot of the Net's display choices are based on automated popularity contests: on-the-fly generated lists of the current top ten most viewed stories, Amazon book rankings, Google's page rank algorithm that bumps to the top sites with the most inbound links for a given set of search terms. That's no different from other media: Jacqueline Kennedy and Princess Diana were beloved of magazine covers for the most obvious sale-boosting reasons. What's different is that on the Net these measurements are made and acted upon instantaneously, and sometimes from very small samples, which is why in a very slow news hour on a small site a single click on a 2002 story seems to have bumped it up to the top, where Google spotted it and automatically inserted it into its feed.

The big issue, really - leaving aside the squabble between the Tribune and Google over whether Google should have been crawling its site at all - is the lack of reliable dates. It's always a wonder to me how many Web sites fail to anchor their information in time: the date a story is posted or a page is last updated should always be present. (I long, in fact, for a browser feature that would display at the top of a page the last date a page's main content was modified.)

Because there's another phenomenon that's insufficiently remarked upon: on the Internet, nothing ever fully dies. Every hour someone discovers an old piece of information for the first time and thinks it's new. Most of the time, it doesn't matter: Dave Barry's exploding whale is hilariously entertaining no matter how many times you've read it or seen the TV clip. But Web 2.0 will make new money for endless recycling part of our infrastructure rather than a rare occurrence.

In 1998 I wrote that crude hacker defacement of Web sites was nothing to worry about compared to the prospect of the subtle poisoning of the world's information supply that might become possible as hackers became more sophisticated. This danger is still with us, and the only remedy is to do what journalists used to be paid to do: check your facts. Twice. How do we automate that?

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, at her personal blog, or by email to netwars@skeptic.demon.co.uk (but please turn off HTML).

Posted by Wendy M. Grossman at 3:18 PM | Permalink | Comments (0) | TrackBacks (0)

"His checks keep bouncing because his signature varies," says a CIA operative (Sam Waterston) admiringly of the movie's retired spy hero Miles Kendig (Walter Matthau) in the 1980 movie Hopscotch. "He's a class act."

These days, Kendig would be using credit cards. And he'd be having the same problem: the part of his signature would be played by his usage patterns as seen by the credit card company's computers.

This would be doubly true if he used Amazon's Marketplace sellers. It seems - or so Barclaycard tells me every time they block my card - that putting through several purchases through Amazon Marketplace and then, a few days later, buying something larger like a plane ticket or a digital recorder exactly fits one of the fraud patterns their computers are programmed to look for.

Buy a dozen items in a day on eBay (go on, I dare you), and your statement will show a dozen transactions - but they'll all be from Paypal. Buy a dozen items in a single shopping basket on Amazon, and you'll get a dozen transactions all from different unknown sellers. To the computer what seems to you to be a single Amazon purchase looks exactly like someone testing the card with a dozen small transactions to see if it's a) live and b) possessed of available credit. Then, y'see, when the card has passed the test, the fraudster goes for the big one - that airplane ticket or digital recorder.

It's not clear to me why Barclaycard's computer doesn't recognize this pattern as typical after the first outing or two. (I fly one route, but my Barclaycard will not buy me a plane ticket.) Nor is it clear to me why it doesn't occur to the Barclaycard computer that as frauds go buying a digital recorder or a plane ticket for delivery to the cardholder's name and address ranks as fairly incompetent. Why doesn't it check that point before causing trouble?

You might ask a similar question of one of my US cards, which trips the fraud meter any time it's used outside the US. Even though they know I live in...London.

This week Amazon announced that it's offering its payment system, including One-Click, to third party sellers as one of its Web services offerings.

Much of the early press coverage of Amazon's decision seems to be characterizing Amazon Checkout, along with Google Checkout, as a competitor to Paypal. In fact, things are more complicated than that. Paypal, before it was bought by eBay, was one of the oldest businesses on the Net. Its roots, which still show every time you go through the intricate procedure of opting to use a credit card instead of a bank transfer, are in making it possible for anyone to send cash to anyone with an email address. Its first competitor was Western Union; its long tail business opportunity was online sellers who couldn't get credit card authorizations because they were too small. For eBay, buying Paypal meant being able to integrate payments into its ecology with some additional control over fraud while making extra money off each transaction.

Paypal is being adopted as an alternative payment method by all sorts of third parties, and as much of a pain as Paypal is (it can't cope with multinational people and you cannot opt out of giving it a bank account to verify) this is useful for consumers. Its security is generally well regarded by both banks and credit card companies and surely it's better to store financial details with one known company than with dozens of less familiar ones you may only trade with once. Given the choice, I'd far rather that single account were with the much-pleasanter-to-use Amazon. It's clear, though, that if you're offering a platform for others to build businesses on, as Amazon is, payment services are an obvious tool you want to include. Most likely, just as many stores now display multiple credit and debit card logos, many Web sellers will offer users a choice among multiple payment aggregators. Who wants to call the whole thing off because you say Google and I say Paypal?

Unfortunately, none of this solves my actual problem, those damn fraud-detecting algorithms. If Amazon actually aggregated payments into a single transaction - which is actually what you imagine it's doing the first time you buy from Marketplace - and spit the money back out to the intended destinations, there'd be no problem. For you: for Amazon, of course, it would raise a host of questions about whether it's a financial service, and how much responsibility it should assume for fraud. Those are, of course, very much the reasons why Paypal is so unpleasant - and yet also why it offers eBay buyers insurance.

What is clear is that this is yet another step that brings Amazon and eBay into closer competiton with each other: they are increasingly alike. Amazon's recent quarterly statement notes that about 30 percent of its revenues come from Marketplace sellers - and that the profitability of a sale is roughly the same whether it's direct or indirect. On eBay 42 percent of items now are straightforward sales, not auctions, and the changes it's made that favor its biggest sellers are making it more Wal-Mart than flea market.

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, at her personal blog, or by email to netwars@skeptic.demon.co.uk (but please turn off HTML).

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Most net.wars are not new. Today's debates about free speech and censorship, copyright and control, nationality and disappearing borders were all presaged by the same discussions in the 1980s even as the Internet protocols were being invented. The rare exception: online gambling. Certainly, there were debates about whether states should regulate gambling, but a quick Usenet search does not seem to throw up any discussions about the impact the Internet was going to have on this particular pastime. Just sex, drugs, and rock 'n' roll.

The story started in March, when the French Tennis Federation (FFT - Fédération Française de Tennis) filed suit in Belgium against Betfair, Bwin, and Ladbrokes to prevent them from accepting bets on matches played at the upcoming French Open tennis championships, which start on May 25. The FFT's arguments are rather peculiar: that online betting stains the French Open's reputation; that only the FFT has the right to exploit the French Open; that the online betting companies are parasites using the French Open to make money; and that online betting corrupts the sport. Bwin countersued for slander.

On Tuesday of this week, the Liège court ruled comprehensively against the FFT and awarded the betting companies costs.

The FFT will still, of course, control the things it can: fans will be banned from using laptops and mobile phones in the stands. The convergence of wireless telephony, smart phones, and online sites means that in the second or two between the end of a point and the electronic scoreboard updating, there's a tiny window in which people could bet on a sure thing. Why this slightly improbable scenario concerns the FFT isn't clear; that's a problem for the betting companies. What should concern the FFT is ensuring a lack of corruption within the sport. That means the players and their entourages.

The latter issue has been a touchy subject in the tennis world ever since last August, when Russian player Nikolay Davydenko, currently fourth in the world rankings, retired in the third and final set of a match in Poland against 87th ranked Marin Vassallo Arguello, citing a foot injury. Davydenko was accused of match-fixing; the investigation still drags on. In the resulting publicity, several other players admitted being approached to fix matches. As part of subsequent rule-tightening by the Association of Tennis Professionals, the governing body of men's professional tennis, three Italian players were suspended briefly late last year for betting on other players' matches.

Probably the most surprising thing is that tennis, along with soccer and horse racing, is actually among the most popular sports for betting. A minority sport like tennis? Yet according to USA Today, the 2007 Paris Masters event saw $750 million to $1.5 billion in bets. I can only assume that the inverted pyramid of matches every week involving individual players fits well with what bettors like to do.

Fixing matches seems even more unlikely. The best payouts come from correctly picking upsets, the bigger the better. But top players are highly unlikely to throw matches to order. Most of them play a relatively modest number of events (Davydenko is admittedly the exception) and need all the match wins and points from those events to sustain their rankings. Plus, they're just too damn rich.

In 2007, Roger Federer, the ultra-dominant number one player since the end of 2003, earned upwards of $10 million in prize money alone; Davydenko picked up over $2 million (and has already won another $1 million in 2008). All of the top 12 earned over $1 million. Add in endorsements, and even after you subtract agents' fees, tax, and travel costs for self and entourage, you're still looking at wealthy guys. They might tank matches at events where they're being paid appearance fees (which are legal on the men's tour at all but the top 14 events, but proving they've done so is exceptionally difficult. Fixing matches, which could cost them in lost endorsements on top of the tour's own sanctions, surely can't be worth it.

There are several ironies about the FFT's action. First of all (something most of the journalists covering this story don't mention, probably because they don't spend a lot of time watching tennis on TV), Bwin has been an important advertiser sponsoring tennis on Eurosport. It's absolutely typical of the counter-productive and intricately incestuous politics that characterize the tennis world that one part of the sport would sue someone who pays money into another part of the sport.

Second of all, as Betfair and Bwin pointed out, all three of these companies are highly regulated European licensed operations. Ruling them out of action would mean shift online betting to less well regulated offshore companies. They also pointed out the absurdity of the parasites claim: how could they accept bets on an event without using its name? Betfair in particular documented its careful agreements with tennis's many governing bodies.

Third of all, the only reason match-fixing is an issue in the tennis world right now is that Betfair spotted some unusual betting patterns during that Polish Davydenko match, cancelled all the bets, and went public with the news. Without that, Davydenko would have avoided the fight over his family's phone records. Come to think of it, making the issue public probably explains the FFT's behavior: it's revenge.

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, at her personal blog, or by email to netwars@skeptic.demon.co.uk (but please turn off HTML).

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Las Vegas shouldn't exist. Who drops a sprawling display of electric lights with huge fountains and luxury hotels that into the best desert scenery on the planet during an energy crisis? Indoors, it's Britain in mid-winter; outdoors you're standing in a giant exhaust fan. The out-of-proportion scale means that everything is four times as far away as you think, including the jackpot you're not going to win at one of its casinos. It's a great place to visit if you enjoy wallowing in self-righteous disapproval.

This all makes it the stuff of song, story, and legend and explains why Jeff Jonas's presentation at etech was packed.

The way Jonas tells it in his blog and at his presentation, he got into the gaming industry by driving through Las Vegas in 1989 idly wondering what was going on behind the scenes at the casinos. A year later he got the tiny beginnings of an answer when he picked up a used couch he'd found in the newspaper classified ads (boy, that dates it, doesn't it?) and found that its former owner played blackjack "for a living". Jonas began consulting to the gaming industry in 1991, helping to open Treasure Island, Bellagio, and Wynn.

"Possibly half the casinos in the world use technology we created," he said at etech.

Gaming revenues are now less than half of total revenues, he said, and despite the apparent financial win they might represent problem gamblers are in fact bad for business. The goal is for people to have fun. And because of that, he said, a place like the Bellagio is "optimized for consumer experience over interference. They don't want to spend money on surveillance."

Jonas began with a slide listing some common ideas about how Las Vegas works, culled from movies like Ocean's 11 and the TV show Las Vegas. Does the Bellagio have a vault? (No.) Do casinos perform background checks on guests based on public records? (No.) Is there a gaming industry watch list you can put yourself on but not take yourself off? (Yes, for people who know they have a gambling addiction.) Do casinos deliberately hire ex-felons? (Yes, to rehabilitate them.) Do they really send private jets for high rollers? (Cue story.)

There was, he said, a casino high roller who had won some $18 million. A win like that is going to show up in a casino's quarterly earnings. So, yes, they sent a private jet to his town and parked a limo in front of his house for the weekend. If you've got the bug, we're here for you, that kind of thing. He took the bait, and lost $22 million.

Do they help you create cover stories? (Yes.) "What happens in Vegas stays in Vegas" is an important part of ensuring that people can have fun that does not come back to bite them when they go home. The casinos' problem is with identity, not disguises, because they are required by anti-money laundering rules to report it any time someone crosses the $10,000 threshold for cash transactions. So if you play at several different tables, then go upstairs and change disguises, and come back and play some more, they have to be able to track you through all that. ID, therefore, is extremely important. Disguises are welcome; fake ID is not.

Do they use facial recognition to monitor the doors to spot cheaters on arrival? (Well...)

Of course technology-that-is-indistinguishable-from-magic-because-it-actually-is-magic appears on every crime-solving TV show these days. You know, the stuff where Our Heroes start with a fuzzy CCTV image and they punch in on a tiny piece of it and blow it up. And then someone says, "Can you enhance that?" and someone else says, "Oh, yes, we have new software," and a second later a line goes down the picture filling in detail. And a second after that you can read the brand on the face of a wrist watch (Numb3rs or the manufacturer's coding on a couple of pills (Las Vegas. Or they have a perfect matching system that can take a partial fingerprint lifted off a strand of hair or something and bang! the database can find not only the person's identity but their current home address and phone number (Bones). And who can ever forget the first episode of 24, when Jack Bauer, alarmed at the disappearance of his daughter, tosses his phone number to an underling and barks, "Find me all the Internet passwords associated with this phone number."

And yet...a surprising number of what ought to be the technically best-educated audience on the planet thought facial recognition was in operation to catch cheaters. Folks, it doesn't work in airports, either.

Which is the most interesting thing Jonas said: he now works for IBM (which bought his company) on privacy and civil liberties issues, including work on software to help the US government spot terrorists without invading privacy. It's an interesting concept, partly because security at airports and other locations is now so invasive. But also because if Las Vegas can find a way to deploy surveillance such that only the egregious problems are caught and everyone else just has a good time...why can't governments?

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, at her personal blog, or by email to netwars@skeptic.demon.co.uk (but please turn off HTML).

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This year, 2008, may go down in history as the year geeks got politics. At etech this week I caught a few disparaging references to hippies' efforts to change politics. Which, you know, seemed kind of unfair, for two reasons. First: the 1960s generation did change an awful lot of things, though not nearly as many as they hoped. Second: a lot of those hippies are geeks now.

But still. Give a geek something that's broken and he'll itch to fix it. And one thing leads to another. Which is why on Wednesday night Lawrence Lessig explained in an hour-long keynote that got a standing ovation how he plans to fix what's wrong with Congress.

No, he's not going to run. Some 4,500 people on Facebook were trying to push him into it, and he thought about it, but preliminary research showed that his chances of beating popular Silicon Valley favorite, Jackie Speier, were approximately zero.

"I wasn't afraid of losing," he said, noting ruefully that in ten years of copyfighting he's gotten good at it. Instead, the problem was that Silicon Valley insiders would have known that no one was going to beat Jackie Speier. But outsiders would have pointed, laughed, and said, "See? The idea of Congressional reform has no legs." And on to business as usual. So, he said, counterproductive to run.

Instead, he's launching Change Congress. "Obama has taught us that it's possible to imagine many people contributing to real change."

The point, he said, will be to provide a "signalling function". Like Creative Commongs, Change Congress will give candidates an easy way to show what level of reform they're willing to commit tto. The system will start with three options: 1) refusing money from lobbyists and political action committees (private funding groups); 2) ban earmarks (money allocated to special projects in politicians' home states); 3) commit to public financing for campaigns. Candidates can then display the badge generated from those choices on their campaign materials.

From there, said Lessig, layer something like Emily's List on top, to help people identify candidates they're willing to suppot with monthly donations, thereby subsidizing reform.

Money, he admitted, isn't the entire problem. But, like drinking for an alcoholic, it's the first problem you must solve to be able to tackle any of the others with any hope of success.

In a related but not entirely similar vein, the guys who brought us They Work For You nearly four years ago are back with UN democracy, an attempt to provide a signalling function to the United Nations> by making it easy to find out how your national representatives are voting in UN meetings. The driving force behind UNdemocracy.com is Liverpool's Julian Todd, who took the UN's URL obscurantism as a personal challenge. Since he doesn't fly, presenting the new service were Tom Loosemore, Stefan Mogdalinski, and Danny O'Brien, who pointed out that when you start looking at the decisions and debates you start to see strange patterns: what do the US and Israel have in common with Palau and Micronesia?

The US Congress and the British Parliament are all, they said, now well accustomed to being televised, and their behaviour has adapted to the cameras. At the UN, "They don't think they're being watched at all, so you see horse trading in a fairly raw form."

The meta-version they believe can be usefully and widely applied: 1) identify broken civic institution; 2) liberate data from said institution. There were three more ingredients, but they vanished the slide too quickly. But Mogdalinski noted that where in the past they have said "Ask forgiveness, not permission", alluding to the fact that most institutions if approached will behave as though they own the data. He's less inclined to apologise now. After all, isn't it *our* data that's being released in the public interest?

Data isn't everything. But the Net community has come a long way since the early days, when the prevailing attitude was that technological superiority would wash away politics-as-usual by simply making an end run around any laws governments tried to pass. Yes, technology can change the equation a whole lot. For example, once PGP escaped laws limiting the availability of strong encryption were pretty much doomed to fail (though not without a lot of back-and-forth before it became official). Similarly, in the copyright wars it's clear that copyrighted material will continue to leak out no matter how hard they try to protect it.

But those are pretty limited bits of politics. Technology can't make such an easy end run around laws that keep shrinking the public domain. Nor can it by itself solve policies that deny the reality of global climate change or that, in one of Lessig's examples, back government recommendations off from a daily caloric intake of 10 percent sugar to one of 25 percent. Or that, in another of his examples, kept then Vice-President Al Gore from succeeding with a seventh part to the 1996 Communications Act deregulating ADSL and cable because without anything to regulate what would Congressmen do without the funds those lobbyists were sending their way? Hence, the new approach.

"Technology," Lessig said, "doesn't solve any problems. But it is the only tool we have to leverage power to effect change."

Wendy M. Grossman's Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, at her Posted by Wendy M. Grossman at 4:09 AM | Permalink | Comments (0) | TrackBacks (0)