At Sony, The Customer Is Captive

The problem with Sony is evident in its financial filings. No, it's not that the company expects to post a net loss of $90 million for its fiscal year ending March 2006. That's a symptom, not a cause.

The company has locked the PDF file that contains its Q2 financial results to prevent computer users from copying the data in the document. Note that these are public financial filings. Sony just can't bring itself to allow those viewing its quarterly results the convenience of being able to copy and paste its data.The problem with Sony is its fear of openness. In a networked world, that's a terminal condition.

Listening to Sony CEO Howard Stringer, you might think things are looking up at the beleaguered media and electronics company. In a recent Hollywood Reporter interview, he acknowledged the demand for openness in the market place. "[E]ventually consumers are going to want devices that play everything and everybody's content in the end," he reportedly said. "And the customer is king. So, I have no doubt that Sony will prevail."

If the customer is king, Sony has turned to treason. On Halloween, news broke that Sony BMG was using copy-protected CDs to sneak digital rights management software onto customers' PCs in order to restrict how customers can use lawfully purchased content.

The Sony DRM software, XCP, made by a company called First 4 Internet Ltd, installs as a rootkit to conceal its presence and inhibit its removal. Rootkits are generally considered to be spyware. Sony has even provided a Mac version through a company called SunnComm.

Sony's misplaced zeal to protect its intellectual property suggests that the company sees its customers not as kings but as captives. The Electronic Frontier Foundation yesterday dissected the Sony-BMG end-user license agreement (EULA) that accompanies Sony-BMG CDs and detailed the terms of imprisonment.

As the EFF explains, the EULA says that 1) if your house gets burgled, you have to delete all your music from your laptop when you get home; 2) you can't keep your music on any computers at work; 3) if you move out of the country, you have to delete all your music; 4) you must install any and all updates, or else lose the music on your computer; 5) Sony-BMG can install and use backdoors in the copy protection software or media player to "enforce their rights" against you, at any time, without notice. And the list goes on.

Insisting that the customer is king while fitting him with digital shackles rings as hollow as the mantra heard while on hold in voice jail: "We value your call." It rings as hollow as the first line the privacy policy on the Sony Music Web site: "Your privacy is important to us."

What Sony really means is your piracy is important to us. That's a fair concern, but only in the context of organized criminal copying operations, which have the resources to defeat DRM technology anyway. Trying to prevent consumers from burning CDs for friends is just asinine.

The sad part about all this is that someone in Sony gets it: The company recently joined IBM, Novell, Philips, and Red Hat to form a company called the Open Invention Network that aims to promote Linux, an open-source operating system, and to share patents in order to avoid intellectual property litigation. If only Sony could find a way to be as open with its copyrights.

A class action suit has been filed against Sony in California and at least two other lawsuits are expected. Stringer may believe that Sony will prevail in the market place, but in court Sony will likely settle. And in the court of public opinion, Sony has already hung itself.