It’s oh-so enticing: you find a copy of a brand new game like Call of Duty: Modern Warfare 2 on a pirate site and the temptation to download it is too strong.

Well, that temptation may have cost up to 1 million users of Microsoft’s Xbox Live the ability to use that service. According to a report in InformationWeek, Microsoft has banned as many as a million players from Xbox Live for altering their consoles in order to play pirated versions of games.

This week, Activision’s new Call of Duty was released, and InformationWeek speculated that because pirated versions of the game appeared on various sharing sites in advance of the release, the game’s developer may have exhorted Microsoft to enact the bans.

“Xbox 360 consoles are equipped with digital rights management technologies designed to detect pirated software,” InformationWeek wrote, “but some players have successfully ‘modded,’ or modified, their machines to circumvent DRM protections.”

Even if someone has been banned, their Xbox will still play offline games, InformationWeek said. But it’s not at all clear if the bans are permanent or if Microsoft will allow those who have been booted from Xbox Live to return at some point down the line.

Microsoft did not immediately respond to requests for comment. But in a statement received by InformationWeek, the company said, “All consumers should know that piracy is illegal and that modifying their Xbox 360 console to play pirated discs violates the Xbox Live terms of use, will void their warranty and result in a ban from Xbox Live.”

And on the Xbox support page, Xbox Live Director of Programming Larry Hryb, aka Major Nelson, has addressed some of the circumstances that could lead to a player’s being banned.

“Players who find their Gamertags banned from Xbox Live have wound up in that situation due to violations of the Xbox Live Terms of Use,” Major Nelson wrote. “The Xbox Live team monitors players for not just cheating, but also for things like threats, racism, profanity, and just being an all around poor sport and ruining the game for others.

“When a Gamertag comes up as violating our policies for online behavior, the person who owns that Gamertag is punished by being banned from the service. Keep in mind, this isn’t just a ban on a particular game. This is a ban on the Xbox Live service as a whole, so you won’t be able to go online at all during your ban. Initially, you may be banned for a day, a week, or depending on severity, permanently! Kiss that $50 goodbye.”

Copyright ©1995-2009 CBS Interactive Inc. All rights reserved. Used by permission.

Just when I was coming to terms with my ambivalence toward my Kindle e-book reader, Amazon and the publishers have gotten greedy.

I’ve had a love-hate relationship with the device since I bought my first one about 9 months ago. As a frequent traveler and voracious reader, I’ve found the Kindle to be nearly ideal. I never have fewer than a dozen books in its memory, and they’re always things I want to read.

As someone who believes we should often interact with media instead of passively consuming it, however, I don’t think much of the Kindle for any purpose other than reading a narrative. And given what a disaster “digital rights management” (DRM) is becoming for scholarship, culture and ultimately freedom, the device’s restrictions on how I can use what I’ve purchased are deeply troubling.

Still, I’ve been using it with some degree of satisfaction (as have enough other people to have helped boost Amazon’s stock price, so as the holder of several hundred shares I’m slightly better off in that way, too). The second-generation model improved nicely on the first–among other things, fixing some user-interface quirks, letting me charge it via a USB cable, and boosting the battery life.

The books I load onto the device fall generally under the casual entertainment category. I buy a Kindle book the way I buy a movie ticket (or did before going to theaters became such a crappy experience).

These are books, like most movies, that I’ll read or watch once and forget about. A physical book is more like a DVD–something I want to own and enjoy again and again.

So the kinds of books I tend to buy for the Kindle are the sort I’d often pick up at an airport newsstand, namely mysteries, thrillers and semi-trashy novels that I’d sometimes leave in hotels or airplane seat-back pockets once I’d finished them. (I also subscribe to several magazines, and consider it a favor not to see the advertising.)

Once I got accustomed to reading e-books, I started doing something that had been out of character in the analog era: buying new books that, in print, were available in hardcover only. Why? The price, typically $10 (okay, one penny less), was right. In fact, my new-book purchases soared.

But not for long. In recent weeks, Amazon (AMZN) or the publishers (or both) have done their best to deter me from buying the latest releases. Prices have gone up, way up.

Now, I often find books for which I’d have gladly paid $10 listed at $14 or $15. I save these to a list I keep on the Amazon website, called “Too expensive for Kindle,” and periodically check to see if the price has dropped. So far, not yet on any of these.

Hiking prices this way creates a bad deal for the customer. Amazon’s price for a new hardcover is typically just a couple of dollars higher. This means I could buy the hardcover, read it and donate it to my local library, and–after the tax deduction–come out ahead. I’d do even better taking the book to my local used-book store and getting cash.

But I almost never buy new hardcovers of books I don’t expect to reread or use as a reference, because a) I’m kind of cheap; and b) I can stand waiting for the paperback. So if prices stay high, I stay away.

Now, sellers have every right to charge more for popular books, especially when they’re new. This is basic supply and demand. But when the price only makes sense for people who consider the ultra-portability of an e-book paramount, that’s a turnoff for other potential buyers.

As a customer I also understand supply and demand. My demand is extremely elastic, and in this case it’s snapped.

Last week’s introduction of the Kindle DX was framed in many ways by different constituencies, but I was taken aback by the praise heaped on the device by several newspaper people, including the CEO of the New York Times Co. (NYT) (in which I also own a small amount of stock). Newspapers aren’t going to fix their considerable woes with Kindles, and anyone who thinks so lives in a fantasy world.

The DX, with its bigger screen, strikes me as potentially useful in several ways, possibly including the textbook function that Amazon hopes to jumpstart with the help of several universities (including the one that employs me). But if textbook publishers don’t radically cut prices on the outrageously expensive books they sell, they will find themselves creating a strong incentive for precisely what they don’t want: unauthorized copying.

I suspect the DX will prove most useful in more prosaic ways. For example, it could be a nearly ideal container and viewer for technical documentation–thick manuals that need periodic updating, where the cost of printing is prohibitive and the bulk of the books is daunting for the user.

Will all of this be made moot by the widely anticipated Apple (AAPL) “NetPad” or whatever it’s going to be called? I refer to a device that looks like a larger version of the iPod Touch, which would be a wonderful mobile multimedia player, among other likely capabilities.

I doubt it. If you enjoy severe eye strain, reading books on a back-lit, glossy display is just the ticket. The passive displays on Kindles, the Sony (SNE) e-reader and other such devices are much better for this kind of reading.

One size does not fit all in the emerging world of devices. Then again, one carry-on bag doesn’t hold all devices. For now, however, the Kindle has a place in mine.

Apple’s (AAPL) iTunes makes saving music from CDs onto one’s personal computer a simple process, but doing the same with a DVD is much more complicated endeavor. Most DVDs are encoded with digital rights management technology to prevent copying.

Most DVD viewers think that’s hypocrisy. A study of 1,000 consumers conducted by the National Consumers League found that 90 percent think that they should have ability to back up DVDs on their personal computers in the same way they are able to do with music from a CD.

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Want to know how not to respond to criticism? By deleting it. Yet it appears that’s what Amazon has done. Earlier this week we wrote about the controversy of EA’s decision to put cumbersome DRM on the highly anticipated video game, Spore. The response was that thousands of people started posting one-star reviews of Spore, noting the problems with the DRM. Things then got worse when people realized that EA had misled customers about the fact that they could only have one user account on Spore.

Now, a bunch of people have noticed that Amazon appears to have deleted all of the reviews on the Spore page. This is only going to end badly. When you try to shut down a large group of people who feel wronged, you’re not just whacking the bees’ nest with a stick, you’re setting it on fire with a flame thrower.

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If you like to download the latest episodes of “Heroes” or other NBC shows from BitTorrent, maybe you shouldn’t buy a Microsoft Zune to watch them on. A future update of the software for Microsoft’s portable media player may well include a feature that will block unauthorized copies of copyrighted videos from being played on it.

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I say we’re on the road to ruin. It’s one panic after another, and with each new stopgap plan, the music industry–really the entire digital content industry–digs itself in deeper. Music lovers are dancing in the streets as one major music company, online music service and online retail outlet after another walks away from onerous digital rights management restrictions. They’ll sell you DRM-free music, as long as you accept lower audio quality. Bands like Radiohead and Coldplay are even letting consumers set their own prices.

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At D5 last week, we announced our new RealPlayer, which makes it easy for anyone to download video from the Internet and keep it for personal use. Not surprisingly, we’re excited about the product. But what I want to discuss today are the divergent reactions to the product and the ideas behind it–it’s basically a Rorschach ink-blot test for how people feel about Internet media and consumer choice.

People who have seen the new RealPlayer fall into two groups. The first group has two reactions–the first being “Wow, this is cool,” followed quickly by “Of course, this was inevitable.” This group believes that progress is inexorably leading to more consumer choice and empowerment, and that this is a good thing. PVRs are becoming a standard TV-viewing feature, and consumers want the same level of control when they’re using the Web. I think of this as the “Manifest Destiny” group.

Different members of the Manifest Destiny group get excited about different aspects of the new RealPlayer. Idealists get excited either because they love how this technology empowers consumers, or because they have ideas that they want to propagate. The more business-oriented people in this group are excited about wrapping new business models around this expanded consumer choice. And of course techies want to know how it all works.

The second group also has two reactions (if they’re being honest). The first is “Wow, this is cool, but…” followed quickly by “Won’t this destroy” some sacred cow, typically an existing media business model. I call this group the “Flat Earth society” (and not in a Thomas Friedman sense).

This group typically asks a lot of questions about how the new RealPlayer works, seeking to find some fatal flaw. They ask questions about digital-rights management and the legality of downloading videos. We then explain the details, particularly how we respect DRM and how careful we’ve been in creating a product that has numerous substantial noninfringing uses. Indeed, the new RealPlayer is completely legal, just like a PVR, VCR or photocopier. After hearing our explanation, this group tends to sidle away glumly, kind of like Washington Generals fans learning the results of their team’s latest match against the Harlem Globetrotters.

The most surprising thing isn’t that both groups exist–having worked in Internet digital media for a dozen years, I know this dichotomy well. What’s truly shocking is how much the ground has shifted over the past two years.

Two years ago, the world seemed kind of split down the middle, with technologists on one side (Manifest Destiny) and content providers on the other (Flat Earth). But that’s not the case anymore.

To my surprise, of the people we’ve talked to so far, the Manifest Destiny group outnumbers the Flat Earth society by at least five to one. More shocking, even inside large media companies, Manifest Destiny thinking is not only ascendant but, in most cases, it’s carrying the day.

Why the big change? I think it has to do with the fundamental nature of media business models. Media businesses are generally based on accumulating the biggest audience possible, which means going where the audience is. Approaches based on locking down the content out of a fear of piracy are self-defeating. Media isn’t like water or oil, where there is fixed demand. Rather, the more prominent and available media is, the more the media gets consumed.

Successful media companies are generally made up of smart executives who get this. They know that simply trying to stop disruptive consumption patterns hurts much more than it helps. Indeed, the continuing free fall of the music industry, even after the industry’s many legal victories against P2P sites, speaks to the downside of misunderstanding this reality.

That doesn’t mean that DRM is 100% irrelevant, or that content-distribution windowing is going to go away, or that rights holders will no longer get paid for their content. But it does mean that embracing the consumer has got to be job No. 1 for everyone. When a great technology comes along–empowering consumers to download and save video, in this case–the winning approach for everyone is to embrace the technology, and then figure out the business models that work best with the technology.

In other words, the world isn’t flat, and more consumer choice and control really are Manifest Destiny.