Online Software as an Anti-Copy Device

1.-If you can play it…you can copy it.

The availability of technologies for easily downloading and copyng music, software, films and texts is one of the most important structural changes in the modern economy, because precisely when the world economy is becoming increasingly intensive in knowledge, companies are increasingly unable to collect revenues out of it.The difficulty to internalize added value is probably one of the most important bottlenecks for growth, and the most important driving force behind the collapse of .com companies at the beginning of the millennium.

As all free lunches, the death of copyright is extremely popular, and the simultaneous development of open source software and peer-to-peer technology has created an illusion of “democratization of knowledge”: a “New-new Economy” in which creators and companies would be able to develop new technologies and artistic works in return for nothing. In the beginning of the process, the companies tried to counter strike developing anti-copy systems, but none of them has been successful. For linear pieces of information, as music, books and movies, there is no way to develop efficient those anti-copy devices.

As long as you can play the music, you can record it. The same is true for movies or books. To prove the futility of all anti-copy systems there is no better example than the modern freak sport of going to movie theaters with small video cameras to record the films just after release. It has become a secret source of delight for many to buy a DVD of a film before the movie actually arrives to the cinemas. So there is not a deux-ex-machina to solve the problem. The improvements that are destroying copyrights have not been in the ability to copy but in the ability to share information. And this goes beyond P2P programs: the email is enough to share mp3 files, books and films.

When I write this words, the music industry is slowly dying, and the mp3 players are among the most fashionable gifts for Christmas. The profits of all music companies have sharply decreased in the last years. Books are still untouched by this illegal copy boom, but the development of more eye-friendly screens is a Damocles sword over the editorial industry.

Both music and books have very low costs, so the production of music and literature won´t be seriously damaged by the end of copyright: the music groups can receive revenues through concerts and merchandising. The writers can take part in conferences and other life events. Anyway, with the current system, both markets have a “winner-takes-all” structure, so the number of artists living out of copyright revenues is very low. The end of copyright system can even improve the quality and variety of the production.

But the movie industry is completely different. The sunk production costs of films are high and even with full copyright enforcement, the movies are not always profitable. The development of P2P technology has gone parallel with the improvement of home cinema systems, so the movie theaters have no longer such a comparative advantage in displaying the films. I don´t expect the full destruction of the movie industry as we know it, but the stream of funds going to Hollywood will significantly reduce. And given the sunk costs of production, this will reduce the number of films.Specially the number of super productions.

The cinema will be the first sector where the destruction of copyright will seriously harm the production. The first place where we will see that the free launch is not so free.

2.-But what if you cannot play it?

At this point I hope to have convinced the reader that there is no way to defend copyright for linear productions as books, movies and music. The linear structure implies that nothing can be hidden, so everything can be copied.

But there are lots of pieces of information that are not linear, but interactive. And interactive software is not fully displayed in use. Let´s think about a video game. Every game you play is different from any other, and the ability to record the sequence of images and sounds in a given game is useless in order to play it.

The existence of an underlying software behind what you see in your screen makes the video games different in terms of revenue collection.

In the classical Neal Stephenson e-book “In the Beginning it was the command line”, it is vividly described how the current system of software commerce was born when Bill Gates began to sell disks containing his OS2 operative system. The idea that an inmaterial product as “software” could be “sold” was not straightforward. For example, McIntosh still gets a good share of its revenues selling the computer box itself. When the OS2 operational system was sold in disks, it was the birth of an industry devoted to selling disks containing ready-to-use software.

Fair enough, but if you sell the code in a disk, and the disk can be perfectly copied, you are again in the same place where you began. Once ready-to-use software is sold in a copyable system, it can be (obviously) copied.

But something has changed since the good-old times of Microsoft birth: apart from disks, there is another channel for software commerce: the Internet.

So what I propose is to keep the code for the video games stored in remote locations, and sell the users online time of use. Selling online time instead of a disk containing the software, makes copy imposible.Users don´t have the source code, nor an encrypted version of the program. In fact they only interact with the game. Moreover, as long as the game is physically stored on a remote location, inverse engineering becomes far more difficult.

Of course, some games can need a plug in the user´s computer, but the essential point is to sell the game in such a way that the online part becomes necessary, making the plug useless without the online part. This system of online interaction can be used not only for video games, but for all interactive software, for example translators. If a company develops a significantly innovative translator, there is not reason to sell the software in disks: if somebody wants a translation, she only has to feed the on-line translator with the text, receive the translation and pay for the service with a credit card, or even better with some prepayment system.

Online interaction makes unnecessary any system of software patents or copyrigths. From a welfare viewpoint, the remote storage makes innovation non copyable, so profitable, and as long as there is not governmental protection, any enterprise can try to replicate the innovation. An attackable monopoly, where companies get revenues, but not forever.

Some pieces of software have to be used as a part of programs. So if they are kept stored online, there should be an automatic use facility, that helps a given user some authorized and automatic use. The development of this online stored software industry leads us towards an ecology of programs channeled through the Internet [1]. A paradigm of software commerce where companies jealously keep their secrets, in a production and trade system carefully designed to make industrial espionage impossible, dividing the development in small pieces in such a way that “the left hand doesn´t know what the rigth hand does”.

[1] David Boxenhorn´s Domicel is just a platform developed to be a “operational system” for online software.