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The Customer as Enemy

Why constrain customers instead of creating greater choices for them?

Thanks so much for reading my column, but I have to ask: are you a thief? I need to know because Technology Review reserves the right to sue you if you reproduce this intellectual property without our express, written approval. By the way, this publication uses “smart paper” with patented steganographic technologies explicitly designed to track unauthorized scans or photocopies of my column.

We’ve also placed a radio frequency ID tag inside the cover that can track how much time you’ve spent with the magazine, where you read it, and whether you ultimately save, discard, or share it. Our advertisers love that feature; we’re sure you’ll grow to love it, too. After all, shouldn’t an innovative magazine about innovation create innovative ways to track its readership? Enjoy.

Just kidding, of course. Then again, such humor may be less appealing if you’ve seen those full-page ads in the New York Times in which the record industry threatens legal action against anyone who downloads unauthorized music from the Internet. Or if you’ve been the victim of a copy protection scheme that prevents you from playing a legitimately purchased DVD. In fact, the digital era is giving birth to one of the most remarkable transformations in business history. The Customer is King? No, the Customer as Enemy.

Increasingly, innovators are trying to constrain, curtail, confine, and control their customers as opposed to cost-effectively creating greater choices for them (see “You Bought It. Who Controls It?TR June 2003). For understandable but controversial reasons, innovators invest heavily in techniques and technologies that treat customers as potential thieves and competitors. People procuring innovative products and services are discovering that their ability to pay matters far less than their willingness to behave the way vendors want.

The problem, alas, is that innovators and their customers often have profoundly different notions of appropriate behavior. Your seemingly reasonable desire for a backup copy of your new software program or DVD may be your vendor’s very definition of intellectual-property theft. Shame on you? Or shame on them? Caveat adapter!

Hollywood and the music industry, for example, continue to concoct a growing variety of clever technical schemes to ensure that their intellectual property is not bootlegged, stolen, or inappropriately copied. DVDs, the digital product with the fastest-growing market in consumer electronics history, are encrypted by the Content Scrambling System to ensure they can’t be copied or played outside the region in which they are purchased. Computer-savvy DVD owners can find descrambler software on the Internet, but there have been dark mutterings about secreting software on DVDs that would interfere with the ability of computers to function if they used these programs. In other words, the “crime” would come with a built-in punishment.

The Recording Industry Association of America, meanwhile, has won the right to compel Internet service providers to divulge the names of users who share copyrighted music over peer-to-peer networks. And as any Microsoft customer knows, you don’t actually own digitized intellectual properties like music, movies, or software, anyway-you “license” them under explicit terms and conditions. Violating the license can be a crime. And as ever more sophisticated remote-monitoring technologies kick in, Sony or Microsoft’s ability to seek out miscreants and extract legal damages is dramatically improving.

Unsurprisingly, consumers and even businesses are starting to cry “Foul!” Software licensing terms are but one battleground. Fortune 1,000 firms worldwide, for example, are painfully familiar with their software vendors’ abilities to track who’s using what features and functionality. Not only does unauthorized use of the software assure a call from an aggressive lawyer, but the ability to see how many employees are still using version n lets vendors launch a storm of upselling whenever they decide it’s time to “encourage” their corporate clients to upgrade to version n+1. Many CIOs now point to the onerous licensing terms imposed by Microsoft and other vendors as a direct cause of the rise in corporate use of open-source Linux.

As intellectual property increasingly becomes the critical value-added component of competitive innovation, the fear that it may leak or seep away through inappropriate copying is completely understandable. Similarly, wrapping services such as remote monitoring and tracking around the products companies sell may seem like an eminently reasonable way of maintaining ongoing relationships with customers.

But the business consequences of “customer-as-criminal” mindsets are inevitably perverse. For customers, the prospect that vendors are looking over their shoulders to track whether this copy is authorized and that usage is approved creates a powerful disincentive to embrace innovation. Antipiracy, anticopying, pro-monitoring licensing agreements and the invasive technologies used to enforce them make it riskier than ever to be an innovation adopter. The customer may not always be right, but she ain’t always a thief, either. Honest.

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