Zune stinks? Blame Grokster.

Andy Ihnatko is none too impressed with Microsoft’s new Zune portable media player. His review essay in what the rest of us think of as Roger Ebert’s newspaper declares the Zune “just plain dreadful,” “absurd,” “immune to success,” and “about as pleasant as having an airbag deploy in your face.” And that is just in the first two paragraphs. (Hat tips to Dr. Weinberger and Boing Boing for the links.)

Now, on this blog I have missed few opportunities to tweak Microsoft for the failings of its products. And it’s not as if the company isn’t constantly providing a stream of crummy technologies for reviewers to pan. (What made that great internal Microsoft iPod video simultaneously hilarious and bittersweet was that Microsoft applies exactly the same philosophy to product development as it does to packaging design — never develop an elegant solution where a kludgy one will do.) But there’s another culprit here who bears a good deal of the responsibility for the failings of the Zune, and that’s the Supreme Court.

The Zune is one of the first major consumer electronics products to be developed since the Supreme Court’s 2005 decision in MGM Studios v. Grokster, which rewrote the rules on how media products could be designed and marketed. Before Grokster, developers of consumer electronics products were believed to enjoy broad immunity from secondary liability for copyright infringement by users of those products as long as their devices were “capable of substantial noninfringing uses,” in the famous formulation from the Sony Betamax case. That was the liability regime under which lots of user-friendly consumer electronics technologies (including the CD burner and the iPod) were developed. So long as Apple knew that the iPod could be put to substantial noninfringing uses (such as playing authorized downloads from the iTunes store), it didn’t need to worry that the iPod was also capable of infringing uses (such as playing MP3s swapped over a file-sharing network).

Grokster puts Microsoft in a very different position from Apple. Under the Grokster inducement test, the courts are empowered to look very closely at a company’s internal records for any indication that it knew and intended for its product to be used to infringe copyrights. The Grokster Court found such evidence in internal corporate memoranda and e-mails, in the defendants’ business plans, and (most tellingly) in the fact that neither defendant “made an effort to filter copyrighted material from users’ downloads or otherwise impede the sharing of copyrighted files.” Indeed, if the lower court’s subsequent opinion in Grokster on remand from the Supreme Court is correct (about which I’m skeptical, but only time will tell), plaintiffs now aren’t required to demonstrate anything except that the defendant distributed a product with the intention that somebody use it to infringe.

This means, in practical terms, that consumer electronics manufacturers must get much cozier with Hollywood if they want to avoid secondary liability for their customers’ infringing acts. The price Hollywood extracts for peace of mind is the inclusion of consumer-unfriendly copy-deterring technologies and inflexible DRM schemes in the products.

Thus, Andy has the shoe on the wrong foot when he writes that:

The iPod owns 85 percent of the market because it deserves to. Apple consistently makes decisions that benefit the company, the users and the media publishers — and they continue to innovatively expand the device’s capabilities without sacrificing its simplicity.

Companies such as Toshiba and Sandisk (with its wonderful Nano-like Sansa e200 series) compete effectively with the iPod by asking themselves, “What are the things that users want and Apple refuses to provide?”

Microsoft’s colossal blunder was to knock the user out of that question and put the music industry in its place.

The iPod and many of its existing competitors were developed in, legally speaking, a different universe. The “capable of substantial noninfringing uses” standard provided breathing room for companies who wanted to put consumers first. That breathing room is now essentially gone, thanks not to Microsoft, but to Grokster. Will some other company come along and find an innovative, but lawful, way around the strictures of the new legal/technological regime the Supreme Court has decreed? Perhaps. But until that happens, we may all need to get used to seeing many more Zune-like products in our future.

5 Responses to “Zune stinks? Blame Grokster.”

  1. Thanks much for a very well-researched and insightful piece. Although I’m a trademark lawyer myself, my Zune-related blog focuses on the business issues associated with Zune (simply because I find those more interesting than the legal issues – but I’m very happy to read some legal analysis from someone like you, who obviously knows what he’s talking about).

    Putting aside the legal issues, from a purely business perspective, it does seem as though the MSFT/Universal deal has changed the game, entirely. And it’s an almost sure bet that AAPL and the others will soon be keeping their transactional lawyers busy drafting similar, hardware-revenue-sharing arrangements with the studios and content providers.

    Thanks for a great piece.

    Gene from ZuneChannel.com

  2. Something seems fishy here. You seem to be saying that Microsoft was constrained because it developed the Zune after Grokster, and Apple wasn’t constrained because it developed the Zune before.

    (a) why aren’t new iPod models similarly constrained? The new shuffle (no, that’s not a tie clip) and likely a few other current models were mostly designed post-Grokster. There have been a number of firmware updates released since the decision. Why are these not hobbled to avoid the eye of Sauronthe RIAA?

    (b) for that matter, why doesn’t the danger extend to products designed before the decision. Is the iPod somehow grandfathered in since it was around before the decision?

    I think it’s clear that the iPod is in just as much danger as the Zune is. Mr. Ihnatko may have left out the explicit legalities, but Apple not hobbling its product and even introducing new features shows (to me) that they believe this is a fight worth having if it comes to it. They’re not morons blithely continuing on their path. They know which way the Grokster wind blows, and are ready to stand and fight if it comes to that.

    Mr. Ihnatko is right: Microsoft just doesn’t have that sort of spine. What’s important is not how people should be able to interact with media, but their own bottom line and that of the recording industry. The user is only important as a sucker to sell the product to.

  3. Well, I’m not privy to the terms of the contracts Apple negotiated to produce and market the iPod, but it would have been pretty poor lawyering not to include provisions allowing extensions and enhancements to the same exact product line. So while it’s undoubtedly true that Grokster changed the rules for everybody, not just for Microsoft, I suspect that Apple is still living under essentially the regime it negotiated earlier.

    Even given the change in the law, too, let’s not forget that Apple is the 800-lb gorilla (the Microsoft, if you will) in this market; the large market share of the iTunes store gives them the kind of clout vis-a-vis Hollywood that a new entrant wouldn’t wield.

    Finally, as a practical matter, the industry’s lawyer took pains to reassure the Justices during oral argument in Grokster that their arguments wouldn’t make it unlawful to sell the iPod — not necessarily a concession with legally binding force (and indeed, the industry has been running away from some of its own statements in Grokster ever since), but it gives the iPod a unique status in PR terms, if nothing else, as a product officially “blessed” by the industry (and, indeed, the Court, based on Justice Souter’s questions during argument — after all, he ended up writing the opinion).

    All of which is just to say that Grokster really does leave Microsoft and other new entrants in a qualitatively different position from incumbent players in this market. Would a company with more backbone than MS have found a way around Grokster? Perhaps. But Andy Ihnatko doesn’t even recognize the dispositive issue.

  4. A world of zune type devices! My inner geek screams in pain!

    There has to be some creative way to deal with the issue of the intent to infringe raised in Grokster. Is it possible to differentiate devices like the iPod which don’t foster infringement in quite the same way as Grokster (software for trading music vs. a device for playing music)?

    There has to be a creative way around Grokster…

    Interesting thoughts on the factors dictating the development of the zune. The cynic in me says that MS just got cozy with Hollywood/RIAA because it was easier than providing what the consumers wanted. After all, little in MS’s history has shown that it really cares about the end consumer anyhow ;)

  5. [...] The reaction (”turkey… disaster”) to Microsoft’s Zune player has been almost uniformly caustic. (Tim rightly points out that Apple’s iPod, with which the Zune is contrasted unfavorably in most cases, was developed in an entirely different legal universe.) There are a lot of problems with the Zune, most prominently that PlaysForSure really means PlaysForNow. Apple’s FairPlay DRM may be annoying, but at least it’s consistent. [...]