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Friday 20 August 2010

It's Gamers vs. Game Companies

Companies struggle to balance copyright technologies with players' interests.
Computer game companies use increasingly complicated software to protect against piracy. But these efforts can frustrate gamers, who protest that the protections restrict legitimate game play. Last week, Ubisoft, a company accused of using a draconian and convoluted protection scheme, backed down by announcing that its new game RUSE would use a less restrictive scheme.

Credit: Technology Review   

The change highlights the tension between gamers and game companies regarding copy protection schemes. And it shows how companies struggle to balance fears over copyright infringement and the demands of their customers.

Legitimate copies of games, like other pieces of software, usually come with a unique code that unlocks it. But game companies are concerned about rampant sharing of pirated games online and the speed with which hackers can break ordinary "digital rights management" (DRM) schemes.

Earlier this year, Ubisoft launched a game called Assassin's Creed 2 with a controversial new "always-on" DRM scheme. The game required a player to be online so that it could check in with the company's servers to verify that the gamer had a genuine copy. Some players grumbled about the scheme before it even launched, and worried that the game would be unplayable if the company's servers went down, or if players didn't have a network connection. There was more trouble once the game went live--Ubisoft's servers couldn't handle the load of players, which meant that many people who had bought the game couldn't play it.

Richard Esguerra, an activist with the Electronic Frontier Foundation (EFF), says tensions tend to erupt when a DRM scheme violates customers' sense of ownership. "Gamers have an idea that if you bought it, you own it, and that's what's being violated here," he says.

Esguerra says an "always-on" DRM scheme can unfairly affect those who live in rural areas and lack consistent connectivity. He adds that such DRM schemes can render a game worthless if the company behind it goes bust or decides to stop supporting that title. Some games, such as World of Warcraft, need a connection to provide integral features. But Esguerra thinks players are offended when the connection isn't essential to the game play.
Russ Crupnick, vice president and senior industry analyst for NPD Group, says the intricacies of DRM technologies don't matter to most consumers unless the system gets in the way. The key for companies, he says, is to find a system that's unobtrusive.

Ferdinand Schober, a graduate student in computer science at Georgia Tech who previously worked at Microsoft on the popular games Gears of War and Halo, says some companies are pursuing ever more restrictive DRM. One possibility is "executable content"--forcing players to download new pieces of a game as they progress through it. He says that hints on forums and in game code have led him to believe that companies are experimenting with this technology.

Ultimately, Schober says, companies are moving toward a model where hackers wouldn't just have to break through protections on a game, they'd also have to crack company servers. The unfortunate consequence, he says, is that it's getting more difficult for legitimate gamers to use and keep the products they buy.

But there are alternatives to DRM in the works as well. The IEEE Standards Association, which develops industry standards for a variety of technologies, is working to define "digital personal property." The goal, says Paul Sweazey, who heads the organization's working group, is to restore some of the qualities of physical property--making it possible to lend or resell digital property.

Sweazey stresses that the group just started meeting, but he explains that the idea is to sell games and other pieces of software in two parts--an encrypted file and a "play key" that allows it to be used. The play key could be stored in an online bank run by any organization, and could be accessed through a URL. To share the product, the player would simply share the URL. Anyone with access to the URL could claim the play key for himself, Sweazey says, meaning that users would be unlikely to share the URL on the open Internet.

Game makers are exploring other ways to encourage players to buy legitimate copies of a game, or to make money without relying on selling legitimate copies. These include adding special features that can only be accessed through official versions, and providing downloadable content for legitimate copies that expands a game's story or adds additional side quests and characters. Some games, such as those that run through Facebook, like Zynga's Farmville, are free to play but earn revenue by selling virtual items within the game.

Some game companies use copy protection that experts agree protect content effectively without restricting players. Schober and Esguerra both point to the DRM used by Valve's Steam, a site that sells downloadable games and allows online play. Schober notes that Steam is designed to be simple to use--gamers can download files ahead of release, and when the game becomes available, they get the codes needed to unlock them. This avoids situations such as the pounding that Ubisoft's servers received at the release of Assassin's Creed.

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Back-To-School Tips: Embracing and Practising Diversity

Newswise — Successfully navigating in a diverse community and getting the most out of your education to prepare for the world of work should be students' primary goals, regardless of gender, race, ethnicity, sexual orientation or ability. Here's how students can accomplish this, according to Ryerson University experts.

1. Know yourself - conduct a SWOT analysis- Strengths, Weaknesses, Opportunities and Threats - on yourself. Be honest. What are you good at? What do you need to improve? Leverage your strengths and work on your weaknesses. Grasp opportunities and mitigate threats.

2. Respect other perspectives - it allows for a healthy exchange of ideas - new and better ideas. Celebrate the differences - start by exploring new communities, foods and customs. Walk a mile in the shoes of someone who is different from you.

3. Be inclusive - each of us is different and we contribute differently. By working together we complement each other’s strengths. Include people of different backgrounds in your group.

4. Network, network, network - make friends with many different people in class, in school, and in all your external activities. Extend a helping hand to others and don’t hesitate to ask for help when you need it.

5. Display excellence in everything you do - whether it’s course work or volunteering with student associations. Don’t be afraid to display your accomplishments. And give credit where credit is due.

6. Set specific but stretch goals - push yourself to reach higher. Do not let the fear of the unknown hold you back. If you find something new and don’t know much about it, start a discussion. You’ll be amazed at what information you can gather.

7. Get out of your comfort zone - progress, innovation, and creativity happen when you are willing to stretch. Make it work for you. Talk to several people and ask for their opinion. It will help you get an all round perspective.

8. Find a mentor, be a mentor - mentors help us navigate paths and help open doors.

9. Give back when you can - mentor someone. Help others and practice your leadership skills. It’s good to ask what you can do for others and not just what someone could do for you. You will find it very rewarding.

10. Speak up - when someone acts in a disrespectful manner towards you or towards others.

Source: Ryerson University
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Experts available for interviews:
Dr. Wendy Cukier, MA, MBA, PhD, DU (HC), LLD (HC), MSC

Associate Dean, Ted Rogers School of Management
Privacy and Cyber Crime Institute
Dr. Margaret Yap, MIR, PhD

Assistant Professor, Human Resources
Director, Diversity Institute

Long-term debt: The real problem


chart_long_term_debt2.gif  
By Jeanne Sahadi, senior writer

NEW YORK (CNNMoney.com) -- Starting next month, lawmakers will argue until they are hoarse over what to do about various spending bills and the Dec. 31 expiration of the Bush tax cuts.
But make no mistake: The fevered debates will take place in a vacuum.

That's because lawmakers have yet to seriously address how to rein in the country's long-term debt. And that broader debate will involve significant policy changes: A likely overhaul of the federal tax code and a reduction in spending across the board.

Policymakers have been mostly mum on the issue. By December, however, they will have a harder time ignoring the matter, since they will have in hand reports from the Bipartisan Policy Center's Debt Reduction Task Force and President Obama's fiscal reform commission.

Both panels will starkly lay out the magnitude of changes needed to correct for two unpleasant realities.

The first is a combination of habit and circumstance.

For years, the country was spending more than it was willing to pay in taxes, and then it was hit by a gob-smacking economic and financial crisis that spurred a lot more spending to stem the pain of the downturn.

The second reality, however, is more worrisome to budget experts. Even after the economy recovers, the gap between money out and money in will persist largely because of long-anticipated demographic changes such as the aging of the population. And borrowing to fill that gap could become much more expensive than it has been.

Deficit hawks: A dangerous trajectory
This year, U.S. debt held by the public, which does not include money owed to Social Security and other government trust funds, will top 60% of the country's economy as measured by gross domestic product. By 2022 it is projected to reach 100%. And by 2035, it's on track to approach 200%.

By comparison, the average debt held by the public between 1960 and 2000 was just 37%, according to information from the debt reduction task force.

The large leaps in indebtedness mean, among other things, that by the end of this decade, the vast majority of all federal tax revenue will be swallowed up by just four things: Interest payments on the country's debt, and the payment of Medicare, Medicaid and Social Security benefits.

By 2021, the cost of annual interest payments alone would top that of the defense budget and itself eat up more than half of all federal taxes, according to information from the debt reduction task force.

On tap: The call for sacrifice
Getting the federal ledger on a more stable track means that future legislative dogfights won't be about what breaks to offer voters so much as what sacrifices to ask of them.

"If we have not asked Americans to sacrifice, we have failed," said former Sen. Pete Domenici, R-N.M., who co-chairs the debt reduction task force with Alice Rivlin, the former White House budget director under President Clinton.

"And if we have asked you to sacrifice and you choose not to do it, we've failed again because we haven't convinced you that this is one of the few ordeals facing America that is as bad as being in a war," added Domenici, who used to head the Senate Budget Committee.

The task force, and the president's commission, have said that the entire federal balance sheet is on the table. And they're both likely to recommend spending freezes, a serious curtailment of many tax breaks and various reforms to entitlement programs, to name just a few.

Still, neither Domenici nor Rivlin believes the effort to deal with the country's long-term debt will be all spinach and no sugar.

"In every major problem that a great country like ours has, there is a silver lining," Domenici said. His group, for instance, will propose ways to simplify the federal tax code, which both parties have wanted to do for a long time.

Whether Congress chooses to adopt either group's suggestions is impossible to say. Many deficit hawks believe it will take nothing short of a crisis for Congress to act. A crisis such as the fall of the dollar, loss of confidence in U.S. ability to pay what it owes, rampant inflation, or a sovereign rating downgrade.

Rivlin is more optimistic.

"My hope is that after the [mid-term] election, both parties will see the advantage of working together to get part of this problem behind them," she said. "I believe people are sensible enough to come to grips with this problem long before we're facing a downgrade of U.S. debt."

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Related articles:
 U.S. debt: When is it safe to start cutting?
America's hidden debt

Entrepreneurs As The New Asset Class


Forget about technology, market size and products. VCs should invest in the entrepreneur.

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As a reputed hacker and a serial entrepreneur, Rich Skrenta personifies the kind of person that I love to invest in. He is by most accounts a prodigy--his technical prowess showcased to the world while still in the ninth grade. Early successes in his career include NewHoo (subsequently the Netscape Open Directory) and Topix. Our paths crossed while Rich was still at Topix, and it was instantly clear that his future was infinitely bright. I jumped at the chance to invest when he started Blekko, but the reality is I'm just as excited about what tomorrow will bring.

Enter my new lens on investing: Entrepreneur equity. Specifically, equity in all the commercially productive activities of a person's career. I want to invest in the innate drive, talent and potential of a person. I want to invest in what they're working on now, what they're thinking about next, and whatever they dream up in the future. When it comes to exceptional talent, I've stopped worrying about technology, market sizes, product-market fit, etc. I just want to invest before the valuation gets frothy (seed is so 2010).

In case you're wondering, no, I'm not a feudal overlord. I'm not talking about payday loans and cement boots. In fact, what I'm talking about is not a new idea at all. The concept of making long-term investments on a person's complete body of work has analogues in many industries. Bowie Bonds (and the further music-backed securities that followed) in 1997 were an example of what can happen when you securitize the intellectual output and associated property rights that span the career of an artist (starting notably with David Bowie and much of his work).


I want a cross between Bowie Bonds and the MacArthur "Genius Award," the $500,000 grant given by the MacArthur Foundation to exceptional people to work on projects of their choosing. Perhaps a more recent analogue is the social venture Enzi, which is like Kiva for education. They're finishing up pilots at Stanford University to allow peer-to-peer investments in Stanford international students with financial need. Help pay their tuition and you get a share of their income streams for a fixed period in their future. The first batch of these students has already graduated and is now entering the productive period of the cycle.

Let's take a test case--Jim Everingham. He was the technical cofounder of LiveOps, and most recently the founder of image monetization platform Pixazza. Both are portfolio companies and repeat bets on people, notably ex-Netscape veterans, Everingham and his team (including hacker-ninja Lloyd Tabb). To date, my firm has had to make multiple discrete investments in both entities, but the reality is those investments were just a proxy for following the career of a prolific talent. If there had been a mechanism to invest directly in Jim (and others in the nexus), I'd be the first to do it and posit that it would be a more accurate reflection of our actual investing behavior.

Venture capitalists, today more than ever, need to be talent scouts. In "Why Entrepreneurs Don't Need VCs," I outlined the reasons why the current landscape has fundamentally altered the role of venture capital, and as embryonic investors we have to think in terms of people, not companies. It's well established that most start-ups pivot multiple times, and the idea we invest in is rarely what the company ultimately does.

More recently, I started to ask the question, if the art of investing is really about identifying great talent early, then lately I feel like I'm working at the wrong abstraction layer. Investing in financials, products, market opportunities, companies, ideas even--these are all second-order consequences of something more basic. I want to invest in the underlying asset. I want to invest in first principles. I want to invest in him (or her).
It seems to me it should be possible to make an equity investment in a person's future. It can be proscribed for entrepreneurial activities, or it can be structured around future income. The point is to give future entrepreneurs the validation and resources to take chances early in their careers. Imagine the Omar Hamouis and Caterina Fakes that could have been if they just had the flexibility to leave their day job and take a chance.

How does one actually make any of this happen? How do you value entrepreneurs? I hand-wave for now and leave that to wiser folks (like Forbes readers). But I do know where I'd put a couple of these bets. I've seen a twinkle in a few eyes lately and I want to double down.

Saad Khan is a partner at venture capital firm CMEA Capital where he leads CMEA's Web, digital media, and twinkle-stage investments in Pixazza, Blekko and Jobvite. He blogs at SaadWired.com and cmea.com/blog. You can follow him on Twitter @saadventures.
 
See Also:
Why Entrepreneurs Don't Need VCs
Venture Capital's Future
Venture Capital's Midlife Crisis

Wednesday 18 August 2010

US unemployment hits wallet for a long time


Job loss can lead to long-term negative effects on finances, children

Diary of a Recession Baby
Ruth Mantell
Aug. 18, 2010, 12:01 a.m. EDT · Recommend ·
By Ruth Mantell, MarketWatch

WASHINGTON (MarketWatch) -- Since being laid off as a machine operator more than a year ago, Robert Blalock has drained his individual retirement account. Now the 56-year-old resident of Fernley, Nev., doesn't expect to retire until his 70s. 

"We make our house payments, but it's month to month," Blalock said. "If I don't get a job pretty soon we may end up going into foreclosure."

Worried Americans look inward

Jerry Seib discusses why isolationism, protectionism and anti-immigration sentiment is growing as the economy slumps.

Blalock is one of millions of Americans who will experience a long-term lifestyle scar due to a job loss.

The long-term negative effects of unemployment can take different dimensions, said Harry Holzer, an economist at Georgetown and the Urban Institute. There will be earnings losses, and kids may have trouble in school, he and other economists said.

For those who lose a job, the consequences of a layoff are "severe and long lasting," Till von Wachter, an economist at Columbia University, recently testified before U.S. lawmakers.

"The average mature worker losing a stable job at a good employer will see earnings reductions of 20% lasting over 15 to 20 years," von Wachter said.

"The effect of a layoff is devastating," he told MarketWatch. "On average it will take a long time to recover."
Others agreed. "It's a huge hit, and also persistent," said Heidi Shierholz, a labor economist with Economic Policy Institute.

Earnings losses vary among demographic groups and industries, but no group is exempt from "significant and long-lasting costs of job loss," von Wachter said.

Still, that doesn't mean all laid-off workers will suffer the same fate.

"It's not predetermined," von Wachter said. "All of these statements are about averages. Workers can do things differently and they may advance and recover more quickly."

Education matters

Education is a key factor in a laid-off worker's career prospects, many economists said.

"If those same people who lose work experience now take the time to get a little more education, an extra degree or certificate, if it's in the right field that can offset the loss," Holzer said.

For his part, Blalock has been working to expand his skill set. He recently earned his bachelor's degree in special education, and is looking for a teaching job.

"This is one of those things where you kind of circle the wagons, and hope for things to change a little bit," he said. "Hopefully, things will turn around. Sometimes you have to regroup."

While additional training can be helpful, it doesn't help all workers, Holzer said.

"The older they are, the tougher it is, especially for less-educated workers," Holzer said. "If they have never set foot onto a community college campus, and they are 50 years old, it's a hard sell."

Also, the cost of education in both time and money can be off-putting. Also, education isn't a cure-all, von Wachter said.

In the short run, lower-educated workers often are hit hardest by unemployment, in terms of number of people laid off, than more educated labor-market entrants, von Wachter said.

"However, in the long run, less-educated individuals tend to recover faster," he said. "In fact, it is workers in the middle of the education distribution who can suffer close to permanent earnings consequences from entering the labor market in a recession; those individuals at the bottom and the top of the education distribution recover more quickly from a bad initial start.

"Thus, more education in itself does not yield full insulation against shocks occurring in the aggregate labor market," he said.

However, he said, more education may still raise earnings and employment stability.

Negative effects for children, young adults

Adults aren't the only ones affected by a dismal labor market. A parent's job loss raises the risk that his child will repeat a grade in school, according to recent research by economist Ann Huff Stevens at the University of California at Davis.

If a parent gets laid off, the probability of a child's grade retention rises by 0.8 percentage points, raising it to an average of 6.3%, according to the research.

"If we view grade repetition as a signal of academic difficulties, these short-run effects may be consistent with findings of longer-term negative outcomes in education and earnings," Stevens wrote.

And of course, the weak labor market also hits young adults. Fran Dinehart, a 24-year-old cousin of mine who just earned her master's degree in social work, is currently looking for a good full-time position. She's somewhat concerned about her prospects.

"I'm pretty worried. I'm not seeing a lot of opportunities to do the kind of work I'd like to be doing," Fran said.

She may have good reason to worry: The unemployment rate for 20- to 24-year olds was 15.6% in July, compared with 9.5% for the general population. Read government data about employment.
 
In school, Fran specialized in gerontology. Ideally, she would like to work with an agency that helps families and communities maintain seniors in their homes as long as possible. "It's pretty competitive," she said. "I'm not in the position to turn down anything, so I'm not going to be picky about wages."

While unemployment remains highs, young cohorts will be adversely affected, Shierholz said.

"We have this huge swath of workers who are going to see these persistent effects," Shierholz said. "For people who lost a job, or didn't get that first good job, it's not clear how we are going to keep [negative] effects from happening to them."

Young workers "will lose early work experience that they would otherwise have had," Holzer said. "They seem to be permanently on a lower trajectory."


Ruth Mantell is a MarketWatch reporter based in Washington.