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July 19, 2002
Third Circuit Digital Transmissions Appeal

Having been directly involved in the law being appealed by NAB in the 3rd Circuit, the NAB will lose.

Basically, what occurred was that my partner in EMusic.com (and author of Kohn on Music Licensing) Bob Kohn gave a lecture at the very first MP3 summit that explained how the '95 Digital Performance Rights in Sound Recordings act worked as it related to internet broadcasters. This was in response to the RIAA sending out cease and desist letters to all internet broadcasters at the time (late '88). The original act exempted all non interactive non subscription streams from a requirement to pay for a digital right in the sound recording. Quietly, the RIAA had been starting to hassle Yahoo!, who had very recently acquired Broadcast.com from our now favorite NBA owner - Mark Cuban. The RIAA had trumped up that they would hold Broadcast strictly liable for the ephemeral copies they made to facilitate streaming of sound recordings

Presented with Bob's presentation at which Steve Marks of the RIAA attempted to claim that Bob's plain language chart of the regulation didn't say what it said and a later article in the Entertainment Law Review, the RIAA made a faustian horse trade with Yahoo! They swapped a clarification that the ephemeral recording exception applied to digital transmissions for a performance right in sound recordings for non interactive non subscription streaming into the Digital Millennium Copyright Act. The saddest part of the deal was that Yahoo! had excellent standing to claim that the ephemeral recording exception did apply to internet broadcasts.

At the time, we tried to get NAB to pay attention, but they told us that it was to "inconsequential." Now they will pay the piper.

To view Bob's article and the RIAA demand letter and response to Bob's article, scroll down Kohnmusic.com to the headline, "Legal Aspects of Webcasting and Digital Music Delivery."

Posted by hoffmang at 12:25 AM

July 18, 2002
The Right to Fly

John Gilmore has sued various departments of the Federal Government and the FAA charging them with violating passengers 1st, 4th, and 5th amendment rights and violations of the Freedom of Information Act.

This little ball of wax has been one of my largest pet peeves. "Your papers please" is what the Nazis or the Communists in the first color movies said, not the smiling gate agent at the United 1K club.

It is pretty clear to me that the case is spot on in its constitutional arguments. Now the test will be whether the court has the guts to ignore the political climate regarding these issues.

I believe that there is direct correlation between the Executive Branch's desire to not arm pilots, while at the same time routinely violating passengers fundamental rights. The opposition of these two situations elucidates that the government is violating rights worthy of strict scrutiny with tools that are not the least invasive solutions to the problem at hand.

Posted by hoffmang at 11:42 PM

July 15, 2002
The State Department and Saudi Arabia

"Juan Non Volokh" has a very good roundup of the current State Department mess including the detaining of a reporter from their press pool that published embarrassing information about the State Departments assertions that they had stopped the Visa Express program.

Posted by hoffmang at 04:12 PM

Management Styles and Consultants

The New Yorker has an article regarding the failure of superstar style management systems using Enron and McKinsey as the poster children.

I think this article points out the obvious and in so doing fails to be all that convincing while still being engaging. First, to promote star talent with utter lack of appreciation to common sense capability and general ability to complete work is clearly a bad idea. Second, to manage an organization that emphasizes talent and not take responsibility for organizational structure and efficiency is just bad management. Third, the need to hire "consultants" like McKinsey without a specific project basis smacks of failure at the hiring organization and perpetuates full employment at consultants. Finally, the tying of brand name business degrees to talent is a laughable and all to common practice. Business School academia is far afield from business reality and thus the freshly minted MBA almost always has a lot to relearn.

Here is a fascinating article by the same author on the interview process.

Posted by hoffmang at 12:32 AM

July 14, 2002
Medical Quackery

Having just had a very unpleasant experience with the medical establishment as a doctor rushed to over diagnose my newborn daughter's birth defects, this article in the Boston Globe Magazine hits very close to home.

I had always thought that medicine was a science and that surely the medical profession was pursuing information technology to assist in care. How wrong I was and remain on both counts.

Posted by hoffmang at 10:38 PM

The Biggest Accounting Scandal

Martin Crutsinger, writing for AP, has exposed the real accounting scandal.

All of the politicians cook the books in far worse ways than Corporate America. It seems that things are a little too close to home.

My main concern with the corporate witch hunts is that they have become just that. The arm chair quarterbacking of these scandals is that this stuff is all easy. Certainly - in these cases the leaders were doing something fraudulent and they deserve to be punished, but in the heat of the moment I don't hear many people standing up for how hard the interaction of auditors and company, company and shareholders is.

I recently read a very good post regarding the new requirement that CEOs and CFOs personally certify filings. Robert Musil outlines how the current proposal is at best meaningless and at worst would further disincent timely and factual disclosure. (Thanks to Overlawyered.com and this post!)

My main concerns with the current over-reactions center around board quality and auditor interaction. To the first point, recruiting and retaining high quality board members is darn near impossible when the subtext of most all of the regulator's current comments is that they wish to make it much easier to make board members individually liable. That coupled with NASD's new rule that limits outside board members to $60K in cash compensation starts to force the question of why a successful business person would choose to be on a public company board. Being a board member, I am starting to ask myself that question.

To the relationship with the Auditors, I offer up the real life case of EMusic.com. When we licensed music by paying advances we wanted to follow the long held music industry practice of immediately expensing the advance unless the music rights were clearly able to commercially perform. In the music business, all artist advances that are not to the likes of REM in mid career are expensed as the vast majority of artists never recoup those advances (whether that is actually true however is the subject of many other blog rants, but I digress.)

PwC didn't want to let us take that treatment as they felt that it was too similar to in process R&D write downs that were then the focus of the SEC. The final outcome is that we went a couple years with this bogus asset of music advances on our balance sheet which was finally written down after the massive internet equity declines. The funniest part was that our CFO's collegiate accounting professor called and pointed this out saying that our statements were not GAAP. Analysis paralysis is going to be the lasting legacy of the Arthur Anderson's demise.

Finally, take a look at a serious commentary from Scott Adams of Dilbert fame.

Posted by hoffmang at 10:33 PM

July 12, 2002
Moving to Movable Type

I'm making the switch to Movable type. If you want to see my blog in the meantime, you can visit hoffmang.blogspot.com.

I'm currently having some login issue with Movable Type and IE6.mumble... Once that is fixed I plan to move all my blogspot stuff back in here and host myself again.

Update: Fixed the IE problem... Now if only I can massage the template enough to be happy.

Posted by hoffmang at 05:48 PM

July 11, 2002
Boxer Supports Armed Pilots

In a rare twist of irony, Barbara Boxer is supporting an armed pilots bill in the Senate.

Can I say that I am pleasantly surprised. Maybe the rumors of her concealed carry permit are true and now that the political climate has shifted toward gun ownership she may be moving back to center? Nah - she probably just flies a lot.

Posted by hoffmang at 10:52 AM

July 09, 2002
EMusic Adds UMG Music

EMusic has become the first company to make legal MP3 files available from a major label. Somewhat vindicating. Here is one of the first articles out. Hits Magazine has a bit better article, but you may have to register.

Posted by hoffmang at 07:48 AM

July 07, 2002
Stepping Back From Ideology

There is a car that parks down the street from my house. I see it when I walk my dogs. It is clearly owned by a person who is classically liberal as the person is wearing her ideology on her bumper. I notice it because as I step back from the positions and the ingrained liberal/conservative meme it points out a very funny correlation.

The bumper stickers are:
"Love Animals, don't eat them" and
"If your against abortion, don't have one"

Why is it that the destruction of warm and fuzzy animals for food is bad while the destruction of (soon to be) warm and (not so) fuzzy babies is ok? Don't get me wrong here - I support choice wholeheartedly. I don't however support animal rights vegetarian/veganism though I do support attempts to stop needless animal cruelty... No matter. It just seems ironic to me that those two ideologies are so often found together.

Posted by hoffmang at 11:21 PM

July 06, 2002
The Two Great Pyramids of the Late 1990's

An excellent article pair on Beyondvalueinvesting.com talks about the telecom and digital media pyramid schemes that came into being. I would even argue that some of the VCs actually recognized this factor and tacitly kept it moving.

This is one set of retrospective criticisms that I fully agree with. I used to argue with a lot of folks who said that B2B was the only place to be. My argument was that those businesses often were not really businesses. At least at EMusic, the dollars we made from real end users were from real end users.

Posted by hoffmang at 12:30 PM

July 02, 2002
The International Criminal Court

Steven Den Beste has said it far better than I could have. Anyone who questions why the US is unwilling to join the criminal court and would be willing to boycott UN Peacekeeping is willing to suspend both the constitution and the bill of rights.

They kicked us off the human rights council and put Syria on for gosh sakes. We want to trust that entity to mete out justice to American statesmen, soldiers and politicians? I can see Qhadaffi's war crimes complaint about the 1984 F-111 attack now... Does America want to see senile Ronald Reagan stand trial? How about George Bush senior or Clinton for his destruction of an actual pharmaceuticals plant...

Posted by hoffmang at 11:49 AM

The Ecological Restoration

Recently in the news are reports of a study by Mathis Wackernagel that states that humanity has exceeded the carrying capacity of the biosphere. Reason has a rebuttal showing the impact of technology over time on the efficiency of the use of natural resources. The rebuttal points out both that in the fully industrialized nations, forest are re-growing as moderate to poor farm land is phased out (no thanks to the Bush administration farm bill) based on far more efficient production. It then goes on to show that much of the "problem" is actually based on the assumption that carbon dioxide release is a major cause of global warming, etc.

The conclusion is that most botanists see technology in the form of a bulldozer and not in the form of efficiency. In a nice parallel to the post below, what is happening in the economy is directly seen in the economy's impact on the environment.

Update: A related article in the Spectator which raises the real risk of an ice age and queries that increased CO2 may be warding it off.

Update II: H.D. Miller has a wonderful fisking of all the Malthusian predictions.

Posted by hoffmang at 10:21 AM

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