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Who says we live in a loveless society?

In a day and age when the term “customer service” is at best an oxymoron the love fest continues at Digg, where users have rallied around founder Kevin Rose for his refusal to remove posts containing the worse-kept-secret code on the Internet.

“I support Kevin Rose and Digg” continues to be a top-rated story at Digg.com, the community news sharing site that has been the buzz of the blogosphere all week. For those just tuning into the story, here’s the cliff notes version to date:

In February a hacker named arnezami cracked the AACS, an encryption technology used to restrict access to and copying of HD-DVD and Blu-Ray disks. Arnezami posted the so-called “processing code” (09-f9-11-02-9d-74-e3-5b-d8-41-56-c5-63-56-88-c0 - just in case anyone is interested) on an Internet bulletin board.

From there, the code started to spread around the web, to blogs and tech forums as well as mainstream media like Wired. Sniffing out lawsuits in the making, last month lawyers for the AACS-LA, a consortium that includes Disney, Intel, Microsoft, IBM, Sony and others, began sending out cease-and-desist letters, claiming web pages carrying the code violated intellectual property rights under the 1998 Digital Millennium Copyright Act.

Interestingly, the campaign to remove the code from circulation went largely unchallenged: Wikipedia duly complied, removing entries containing the code and restricting users’ ability to recreate pages. Digg fell in line too; acting on the advice of its lawyers it removed submissions about the code from its database earlier this week.

And that’s when things started to get interesting.

Digg users revolted. The removals were seen by many as caving into corporate interests and an assault on their right of free speech. In response, they flooded Digg with stories about or including the code, swamping the site’s main page for most of Tuesday. By the end of the day, founder Kevin Rose had a change of heart, posting this message to users:

“… after seeing hundreds of stories and reading thousands of comments, you’ve made it clear. You’d rather see Digg go down fighting than bow down to a bigger company. We hear you, and effective immediately we won’t delete stories or comments containing the code and will deal with whatever the consequences might be. If we lose, then what the hell, at least we died trying.”

There area couple of interesting aspects of this story.

First, the obvious: the Digg maelstrom highlights the raging war on digital rights management (DRM). The story about the AACS being cracked wasn’t just reblogged; the code itself has been posted on every corner of cyberspace, making the blogosphere a giant collective accomplice and a 32-digit string of code a manifesto for the future of copyright and IP.

This is also a great example about the social life of ideas - that is, how ideas emerge and migrate throughout social spaces. Consider how fast the story spread: when the story broke on May 1, Technorati was listing slightly less than 300 blog posts where the code had been mentioned; the next day that number had jumped to over 800; today it’s above 1600. On Monday, April 30, Google search results for the code returned 1000 hits; by the end of the week it was over 1 million.?

The story was front-page news in the New York Times on Thursday and yesterday Alexa Internet reported that web traffic from the last week had propelled Digg into the world’s top 40 most-visited websites.?

Finally, in less than three days a DRM technology has transmogrified into an icon of social media expressed as music (viewed 181,000 times on youtube), fashion, a saleable “product” (up for bid on ebay).

But wildfires breakout in the blogosphere all the time. The question is: why was Digg the tipping point?

One reason is that Digg and other social media companies (youtube, del.icio.us, etc.) are built on “user-generated content” (UCG). In this business model customers are no longer at the end of the supply chain, they ARE the supply chain: they’re designers, producers and marketers all in one.?

By removing posts Digg managed to piss off both their customers and their suppliers at the same time.

It’s no surprise that Digg users feel they own the content - they do. The upside is companies like Digg inspire passionate users with a sense of brand loyalty that any Fortune 100 company could only dream of (anyone seen an “I (heart) Jeff Immelt” t-shirt lately?).

The open question is: what does this foretell about the emerging ethos of social media companies and their leaders? At the end of the day will Kevin Rose be seen as a sacrificial lamb or a soldier of Internet fortune??

Stay tuned: it looks like this mini-series is just getting started.