I actually have much better texts-in-the-making about the subject, but thought I long owed this blog a music business-related update, so here is an essay* I wrote on the “Copyright Industries and the challenges of protecting Intellectual Property in the digital age” for which I was awarded a First Class mark (pretty great for something I had to write in a rush before a flight for a work trip! – which you can tell by the poor conclusion – and a 3000-word limit for such an extensive subject).

*references removed

“INTRODUCTION

This paper aims to discuss and analyse how the copyright industries have responded to the challenges of protecting their intellectual property in today’s digital age. Considering the “borderless” status of the Internet, EU laws and worldwide Intellectual Property and Copyright treaties, this discussion will not be focused on the UK solely (and the EU, by default), but also the USA as home to some of the biggest media and technology companies. Innovative- or at least different- strategies adopted by other countries to deal with the issue will also be examined.

THE COPYRIGHT INDUSTRIES

The introduction of copyright law has been justified by the argument that “it protects the creative investment of the author”. As Jennifer Davis suggests, without such protection, “authors would have no economic incentive to create” . And besides the right to own one’s creation being a natural concept, through copyright law such individuals are able to profit from their works when sharing it with the public, subsequently enriching the cultural public domain after such copyright term expires.

However, due to several changes not only in the copyright industries such as various term extensions in the US and the recent 20 years addition to the EU sound recordings’ copyright term and the technological developments that allowed for the entrance of different players in the media distribution market, intellectual property and copyright law has become more complex/controversial in the past years. As Professor Ian Hargreaves suggests in his Review of Intellectual Property and Growth, “copyright involves a necessary balance of divergent interests. When new opportunities arise, the law sometimes needs to adapt so that the right balance is maintained” .

On one side of the discussion are the believers in looser regulations to avoid the stalling of the cultural industries and technological innovations such as Lawrence Lessig, lawyer, activist and founder of the Creative Commons, an organisation that provides “copyright licenses and tools that create a balance inside the traditional “all rights reserved” setting that copyright law creates giving everyone from individual creators to large companies and institutions a simple, standardized way to keep their copyright while allowing certain uses of their work — a “some rights reserved” approach to copyright — which makes their creative, educational, and scientific content instantly more compatible with the full potential of the internet.” . The initiative could also be quoted under the heading of legal strategies reviewed later on in this paper.

Lessig argues that there is a certain confusion in today’s copyright law due to the lack of “distinction between republishing someone else’s work […] and building upon or transforming that work on the other” and that may put off small and/or up-and-coming creators when it comes to using someone else’s work even if it falls within the “fair dealing” doctrine (UK) as these people usually cannot afford the litigation that might emerge from such action. As was the case of filmmaker Jon Else who, upon working on a documentary focusing on stagehands at the San Francisco Opera, caught a shot where, in the corner of the screen, there was a television with a 4.5-second clip of the cartoon The Simpsons.

Even though he consulted lawyers who assured him there was no need to ask for a permission to use the clip as it fell within the US’ “fair use” doctrine, they also warned him that FOX – The Simpsons’ copyright owner – as a big, powerful corporation, would “depose and litigate [him] to within an inch of [his] life”. As Else confessed, “as a documentary producer working to exhaustion on a shoestring, the last thing I wanted was to risk legal trouble” .

The case also touches on another of Lessig’s argument that states “law’s role is less and less to support creativity and more and more to protect certain industries against competition” .

When it comes to peer-to-peer file-sharing, which is the focus of this paper, Lessig does not necessarily endorse the service, but he does believe there is some value in it, in that it allows for users to not only distribute their own creations for free, should they wish, but it also provides works that are either no longer available or have long fallen into public domain and therefore can be legally shared as there is no copyright to be infringed.

To emphasise such statement, he goes as far as explaining why piracy should not be solely responsible for the decline in album sales the way studies appoint. “There are too many different things happening at the same time to explain these numbers definitively” .

Among reasons for such decline, he suggests that the number of CDs released have also reduced, their prices have risen and other forms of media- streaming, for example- have entered the competition.

Although on the other side of the fence, one who agrees that studies and statistics are not always accurate due to the number of parties involved in the analysis is Robert Levine, one of the advocates of copyright law who believe that, if authors cannot profit from their works, then it is the future of the creative industry that will be jeopardised. As the writer suggests, “the public interest lies not only in enabling faster, less expensive access to work but also in giving artists an incentive to create more of it”.

He also agrees with Lessig that this copyright war boils down to the big media corporations and their wishes to hold on to copyright for as long as possible against the Silicon Valley’s technology companies such as Google, who are opposed to Internet restrictions and who has strong lobbying and spending power.

However, contrary to Lessig’s beliefs that copyright laws are too tight to promote a healthy cultural growth, Levine believes that the “fair use” provision is enough of an “opening” in copyright law. Which, if we take the Else and Fox aforementioned case, works well in theory; not so well in real life, however.

COPYRIGHT INFRINGEMENT

Copyright infringement can be divided into two types: primary, which consists in file-sharers who provide the copyrighted content without permission; and secondary, which is attributed to the equipment that allows for the alleged infringement to take place which goes back to 1980s and the Sony Betamax case which will be later discussed within the other legal strategies applied to the copyright industry protection.

The big question is: how to ensure copyright law protects creative works in order to maintain its economic value without standing in the way of innovation and technological and cultural development and economic growth?

Below are some of the strategies that different countries/parties have adopted.

PUBLIC RELATIONS

Labels suing individuals

More common in the USA with the RIAA suing individual file-sharers, the herein treated as PR move, not only is not popular with consumers who just tend to perceive the recording industry more and more as a “big meanie”, but it is also not accurate having found the recording industry body suing “a 12-year-old girl living in public housing and a 70-year-old man who had no idea what file sharing was”. Not to mention the extremely high fines such lawsuits request from the alleged offender, which make stealing a physical copy of an album, a cheaper action.

Metallica v Napster

While it is understandable that a band wants to “stand up to technology companies trying to profit from their work”, Metallica used the file-sharers who had illegally downloaded their music- potentially, the band’s own fans- to attack Napster. Not only that, but the band “tipped off reporters to hear [Lars] Ulrich” protest against the P2P server. The staged action obviously backfired and upset their fans.

Radiohead and their “free” album

“Radiohead famously let their fans name their price” for the album “In Rainbows” before it hit the stores in physical format. It did create an impact, a high number of fans did pay for the download but, however genuine the band’s intentions were, the action wasn’t much beyond PR in that Radiohead is a long-established band with enough clout and large following to be able to pull such a stunt and actually manage to achieve success. If a new artist, for example, does the same, the maximum that is going to happen is people will download the album for free and it will serve as promotional material.

EDUCATIONAL

Why Music Matters

Why Music Matters is “a collective effort by artists and all those who work in and around music to remind listeners of its enduring value”. It aims to educate the audience and explain how damaging file-sharing can be for the future of investment in the industry, but it seems to be a bit late in the game for that kind of approach, especially as the “Napster generation” grows and passes on the file-sharing behaviour to the next ones. The “new generation [is] raised believing […] property […] should be free”.

TECHNOLOGICAL

The Digital Rights Management (DRM) is a set of technologies that allow copyright holders and media companies to restrict a user’s ability to copy such content.

Because only authorised programs and portable players can use the tracks, it does not prove popular with consumers nor with record labels who know this technology will turn people off buying records.

LEGAL

Sony Betamax v. Disney, Inc and Universal

Referring back to the Betamax case, Sony was sued for allegedly producing “a device, Disney and Universal claimed, that enabled consumers to engage in copyright infringement” for the fact that it had a ‘record’ button which allowed users to record movies and TV shows and therefore the media companies found Sony “partially liable for that infringement”. And so did the Ninth Circuit Court of Appeals. However, the Supreme Court “reversed the decision” as, not only “Congress was convinced that American film got enough”, but also Sony’s defence was that their device had “substantial non-infringing purposes and [they] had no knowledge or control over end users’ infringing activities”.

And that defence is still being tried and tested by today’s technology companies.

Nowadays, not only there are similar “infringement-inducing” arguments against devices such as the iPod, but also against technology businesses like YouTube which, some argue, is profiting from content it provides- through its users- without actually investing in its creation.

Viacom v. YouTube

Although Lessig and the “free culture” advocates can argue that websites like YouTube are a platform that is also used by people sharing their homemade works out of free will and other either non-copyrighted or permitted materials, these same services “need professional content to build a viable business” and these aggregators draw audiences away from sites that pay to provide programming, driving down the price for advertising because their [YouTube and such] costs are low, thus, making it harder for the actual content producer to broadcast their own material competing with the other advertising rates. According to YouTube employees, “more than three quarters of the site’s views came from copyrighted content […] programming other companies paid to create”.

After Viacom’s lawsuit against YouTube in 2008, the broadcasting service started monitoring and filtering its uploaded content to remove copyrighted material from its website and “has partnership deals with thousands of content providers who share ad revenue”.

Viacom has now entered the streaming business too, which seems to suggest the same theory Lessig uses to describe the RIAA’s argument against webcasts that says they [RIAA] “don’t really model this as an industry with thousands of webcasters, we think it should be an industry with, you know, five or seven big players who can pay a high rate and it’s a stable, predictable market”. In the Law Professor’s words “the aim is to use the law to eliminate competition so that this platform of potentially immense competition, which would cause the diversity and range of content available to explode, would not cause pain to the dinosaurs of old”.

The old media businesses do not seem opposed to the development of technology and new distribution platforms; they just don’t want someone else fiddling with it besides themselves.

France’s HADOPI

The Creation and Internet Law (HADOPI) was approved in 2009 and consists in denying Internet access to repeat copyright infringers, which led to the introduction of a similar measure by the UK’s Digital Economy Act 2010 below.

Digital Economy Act

Sent for review in 2010 and only recently introduced, the Act “calls for repeat infringers to suffer consequences that would most likely consist of having their access slowed or suspended”.

The measure raised some controversy regarding the slowing down/switching off someone’s internet access going against their rights to communication and free speech. Not only that, but it is also unknown rather it will be efficient or not considering it is based on monitoring file-sharing networks, but not online lockers like RapidShare, for example, where users upload content for sharing whether it is copyrighted or not. It also does not monitor streaming websites like YouTube.

NEW BUSINESS MODELS

Streaming

One of the most popular music streaming services has been Spotify, launched a few years ago offering ad-funded streaming, thus free for its users. However, after building its reputation and establishing itself in their users’ lifestyle, it started charging for unlimited access and mobile use.

As statistics suggest, consumers are shifting from “owning” to a “having access to” behaviour, which might potentially lead to a decline in file-sharing. But not only it doesn’t contribute to physical sales’ rise considering the “access” rather than “owning” factor, but it also doesn’t generate a substantial enough revenue for copyright holders- unless for big hits and superstars who attract a large enough number of streams to accrue considerate profit.

One independent label especialised in a very niche market, upon offering their catalogue on the streaming service, noticed a considerate decline not only in album sales and downloads, but also was not making much money from the streams, especially after the approximately 83% decrease in royalty rate from £#.#### to £#.##### per track per stream.

Due to the confidentiality nature of these numbers- herein disclosed for the sake of argument-, the source requested to remain anonymous.

But the label above mentioned is not alone. Hundreds of others have chosen to pull out of the subscription service due to a drop in their catalogue’s digital revenue.

Danish ISP

After several injunctions against Danish ISPs that required them to either block user’s internet or access to websites illegally offering copyrighted material, Denmark came up with the much talked about subscription service.

“TDCPlay is Denmark’s leading music subscription service and accounts for more than 80% of the digital service of its kind”. It offers downloads and streams of over 6 million Danish and international tunes to its subscribers.

Tipped off to be introduced in the UK, the ISP-incurred subscription fee model also has not proved successful enough to be followed by other territories. Denmark’s KODA’s monopoly allow for the collection society to charge high royalty rates which damages licensing negotiations between labels and streaming services and practically leave no room for competition to decrease such fees.

iTunes

Although the online shop may have briefly revolutionised the digital music distribution world offering users a legal way to download songs, it still has not been proved to be the solution to the peer-to-peer issue.

In the UK, for example, although digital album sales increased by over 24%, it still hasn’t “offset a decline in physical CD albums”.

The digital distributor seems to serve the purpose more as a promoter of the company’s music player device than an alternative to illegal file-sharing.

Ad-funded downloads

Brazilian indie label, Trama, used to offer free downloads to its customers that was paid for by the advertisements that were played before the download/streaming.

However innovative the idea was, the advertising industry itself has also seen a great fall in revenues due to a number of reasons, especially the further segmentation of markets. Therefore, as much as it could work for a while, the effectiveness of this model would be very short lived.

CONCLUSION

It is highly unlikely this copyright war will cease to exist. For as long as there are content creators being underpaid – or not paid at all – and content distributors profiting from these works, for as long as the old entertainment industry executives hold on to the old business models and the fact that they could once control their market, for as long as technology continues to innovate, for as long as human behaviour leans towards selfishness and individualism.

As we found out through this research, there are numerous different parties involved and too many things happening at the same time around the globe to keep track of it all and try to control it.

Instead, entertainment and technology businesses should work together towards finding new business models that could counterbalance the negative effects the past two decades of internet evolution brought to the creative industry alongside the new consumer behaviour in order to exploit the weaknesses and threats such changes brought and turn them into new opportunities.”

© Livia Cruz 2011