Netherlands Rejects Ban on Illegal Downloads December 21, 2012
Posted by Bill Rosenblatt in Economics, Europe, Law.1 comment so far
A lengthy political debate in the Netherlands has resulted in rejection of a law banning illegal downloads in that country, as the Dutch parliament finally voted against the law yesterday. This development paves the way for enactment of a private copying levy of up to €5 per device on devices such as PCs, smartphones, tablets, and set-top boxes.
Without a law against downloading infringing content, it will be impossible for the Netherlands to adopt the kind of graduated response scheme that France has implemented and that shows promising early results. Instead, the country will go down a path that has led to unfairness, confusion, and inaccuracies in compensating rights holders according to actual use of content.
Levies on consumer electronics have their origins in German taxes on photocopiers. Under EU copyright law, people have the right to make copies of content for their personal use, but rights holders have the right to be compensated for those copies. Levy schemes were enacted in order to compensate rights holders according to formulas for estimating the value of copies likely to be made by each owner of consumer electronics. These schemes vary widely from one country to the next and have been the source of unnecessary complexity in European content licensing as well as gray-market consumer electronics sales in high-levy countries.
(A notable exception to this is the UK, which has neither levies nor private copying rights, though the latter, at least, is about to change.)
The European Commission has been working for years to eliminate — or if not possible, at least harmonize — the unfathomable levy system in the EU. This step in the Netherlands works against the EU’s efforts. It is, admittedly, politically expedient: given the choice, politicians would rather be seen adding a tax onto consumer electronics purchases (thereby motivating Dutch people to drive the short distance to Luxembourg, where consumer electronics are levy-free) than passing a law that criminalizes online infringement. Media companies also find levies desirable because they create more stable and predictable revenue streams.
Yet this is a retrograde move. Levies are blunt, unfair instruments in an age where fairness and accuracy — at least relatively speaking — are available through technology. Everyone has to pay the same levy regardless of how many copies of files they make or whether those files are infringing or not. It’s not even clear whether the levy is meant to compensate rights holders for infringement or for private copies (of anything). It is especially disappointing to see levies spread in the home country of Europe’s leading authority on levy chaos, Prof. Bernt Hugenholtz of the University of Amsterdam.
The new levies are set to take effect in the new year. Yet this issue may not be resolved after all, as several makers of consumer electronics have filed suit against the Dutch government over the levies.
The Future of HADOPI October 26, 2012
Posted by Bill Rosenblatt in Economics, Europe, Law.add a comment
A recently-released report from the French government, Rapport sur les autorités publiques indépendantes (Report on the Independent Public Authorities), includes a section on HADOPI (Haute Autorité pour la diffusion des oeuvres et la protection des droits sur internet), the regulatory body set up to oversee France’s “graduated response” law for issuing warnings and potentially punishments to online copyright infringers.
The headline that most Anglophone writers took away from the 24 pages in this report that were devoted to HADOPI was “HADOPI’s budget to be cut by 23%.” These writers took their cues from anti-HADOPI statements by various French politicians — including new French President Francois Hollande — and mischaracterized a statement about HADOPI by the French culture minister, Aurélie Filippetti.
Unfortunately, none of these people appear to have actually read the government report. (Yes, it’s in French, but there is Google Translate. I used it.) HADOPI is not on the way out; not even close.
Let’s get the most obvious facts out of the way first. Yes, HADOPI’s operating budget is being cut from €10.3 Million to €8 Million, but its headcount is being increased (from 56.2 to 65.2 FTE). Apparently the budget cut reflects the fact that HADOPI’s ramp-up period is coming to an end in 2012, and the focus is being shifted to increasing operational efficiencies and cutting overhead. Moreover, HADOPI’s purview is being expanded to include video games as well as music and video content.
Another bit of factual cherry-picking in the Anglophone press: HADOPI has merely sent out more than a million emails but only prosecuted 14 people and only fined one (less than €200), so therefore it must be a big waste of money.
On the contrary: all of the data in the report, as well as the conclusions it draws, point to an agency whose successes are outnumbering its failures and whose mission is quite properly being optimized.
As it turns out, HADOPI has several objectives, not just issuing warning notices to illegal downloaders. Those other functions are where HADOPI does not look as successful as hoped. One objective is to increase the number of legal content offerings in France. To do this, it has put a labeling system into place, along with a website called PUR (Promotions des Usages Responsables, also an acronym for the French word for “pure”) that lists all of the labeled services. Although the report cites a sharp increase in the number of such services in France over the past year, that increase is surely attributable to market forces and is no different from similar increases in other countries.
Another of HADOPI’s objectives is to regulate the use of DRM technology according to rules derived from the European Union Copyright Directive of 2001. This means both ensuring that DRM systems don’t unduly restrict users’ rights to content and that DRM circumvention schemes (hacks) are prosecuted under the law. So far, HADOPI has only been asked to intervene in two DRM disputes concerning users’ rights, and both reviews are ongoing. This can’t be counted as a great success either.
Yet regarding HADOPI’s core “graduated response” function, the data in the report shows nothing but success so far. Fining people (a maximum of €1500) and suspending their Internet access (up to one month) is not the objective; reducing copyright infringement is. The number of people who have been fined or had their Internet access suspended is simply the wrong metric.
The good news is that HADOPI appears to be succeeding as an education program rather than as a punitive one. In 2011, HADOPI reports that fully 96% of people who received a first warning message did not receive a second one; this number stayed about the same in 2012. In addition, the percentage of people who received second notices but not third ones rose from 90% to 98% from 2011 to 2012. (The legal steps that could lead to fines or suspensions begin after the third notice.) To buttress this data, HADOPI has published results from four independent research reports that note significant decreases in illegal downloading in 2011. No one has substantively debunked any of these findings.
Furthermore, HADOPI does not simply take complaints from copyright owners — which monitor the Internet and submit complaints to HADOPI — at face value. For more than half of the users who received three warnings, HADOPI chose not to send the cases to French authorities for prosecution.
It is also interesting to note that the educational aspect of HADOPI appears to be succeeding despite the fact that it treats violations as misdemeanors, with small punishments, in contrast to the enormous criminal penalties associated with copyright infringement in France (as they are in the U.S.). This points to the conclusion that online education is more effective than large statutory damages in curbing infringement.
Now let’s talk about the economics. Ideally, this type of program would be funded by copyright holders — the ones with rights that they want protected. France is funding HADOPI with taxpayers’ money, although copyright owners do pay for the monitoring services that detect allegedly illegal downloads and report them to HADOPI.
At the same time, €8 Million isn’t a bad deal. France currently has about 50 million overall Internet users and about 25 million fixed broadband subscribers. Let’s assume that the total number of French people who pay for Internet subscriptions is about 30 million. In that case, HADOPI’s annual budget could be apportioned as a levy on Internet subscribers of about €0.27 (US $0.35). This is two orders of magnitude smaller than the £20 (US $32) annual antipiracy levy on ISP subscribers that the Digital Britain Report proposed for the UK in 2009.
Furthermore, HADOPI measured the market impact of unauthorized downloading (not counting P2P) as €51 to 72.5 Million annually. Although this figure can’t be taken as a magnitude of lost sales, the worst case break-even point for HADOPI’s cost-effectiveness would be that 16% of illegal downloads displace sales (one study attempted to measure promotional effects vs. sales displacement and suggested that about two-thirds of illegal downloads displace sales).
It’s still too early to proclaim HADOPI’s success or failure. For example, the more determined infringers could move to ways of obtaining content that evade detection (e.g. HADOPI only deals with downloads and not streaming). But the signs are encouraging enough that the French government has decided to keep the experiment going.
(By the way, if you would like to argue with me about this, I will be in Paris from November 7 through 11, speaking at the SNE conference “Les assizes du livre numeriques” on Thursday November 8.)
Copyright and Technology London 2012 and Hadopi June 21, 2012
Posted by Bill Rosenblatt in Europe, Events, Law.4 comments
The first European edition of the Copyright and Technology conference took place in London this past Tuesday. The highlight of the event was surely the non-appearance of the keynote speaker: Eric Walter, General Secretary of Hadopi, the French government agency set up in 2010 to administer the French graduated response system. Walter cancelled his appearance at the last minute owing to unspecified “agenda issues.”
The law creating Hadopi was very much an artifact of the administration of French president Nicolas Sarkozy. Eric Walter had cycled through a number of ministerial advisory positions in the Sarkozy government before his appointment at Hadopi. In other words, both Walter and Hadopi itself have been very much tied to the now former president.
Furthermore, new French president Francois Hollande had made a campaign promise to dismantle Hadopi (as had his other opponent, the right-wing candidate Marine Le Pen).
So we all had to wonder: was Walter’s cancellation a sign that Hadopi’s existence is being threatened? (And for that matter, was his original request to speak at the conference a sign that he was concerned about the future of his job?)
Fortunately, some of the well-placed attendees at Copyright and Technology London 2012 had some relevant information to share. It seems that the Hollande administration is backing away from its promise to pull the plug on Hadopi, and instead is taking a more deliberate course of reevaluation.
The ambivalence over Hadopi (and over graduated response in general) in the context of France’s move from center-right to socialist government should lead to a healthy dialog about the purpose and economic effects of such a system. This has the potential to be a more productive conversation than the usual ones we get from lawyers, some of which ultimately boil down to complaints that automated systems like Hadopi disenfranchise them from copyright claims processes. (One such comment came at the conference this week from Gilles Vercken, a leading French intellectual property and technology lawyer who gave a very interesting overview of recent developments in France.)
Who actually benefits from a system that is meant to educate users about copyright responsibilities and prosecute repeat infringers? Is it “Big Media,” as epitomized by Vivendi, the French owner of Universal Music Group which pushed hard for the enactment of the Hadopi law? Or is it individual content creators who are finding it harder and harder to get paid?
Governments like those of Francois Hollande are caught in the middle of this. Sarkozy, a conservative, was seen as favoring big business, in this case Vivendi. Hollande is a socialist and therefore presumably in favor of distributing economic goods to the people — including individual content creators. There isn’t much disagreement that online copyright infringement is a problem that has gotten out of hand. Yet the economic statements used to refute graduated response usually come down to “it only benefits Big Media” (a cop-out without analysis to back it up) and “they don’t pay artists anyway” (a separate and irrelevant issue).
The good news is that Hadopi has been amassing statistics on the system’s use that the Hollande administration can use to make a substantive analysis before deciding what to do next. Some of these statistics were in Walter’s presentation, which I obtained from his office and presented myself at the London conference.
There was some discussion at the conference over the validity of statistics on Hadopi’s effect on online copyright infringement in France. Everyone agreed that these things are difficult to measure with any accuracy. Yet the fact remains that four separate independent research studies showed significant reduction in online infringement in France over the first year of Hadopi, and none of the “usual suspects” (such as the advocacy group La Quadrature du Net) have substantively debunked any of them. Steps against online infringement need to be taken in response to hard data; government’s responsibility includes insuring that the data is the best and most unbiased available, even if it isn’t 100% reliable.
Thanks once again to the Copyright and Technology London 2012 sponsors: MarkMonitor, castLabs, Civolution, PicScout, Simons Muirhead & Burton, and Booxtream. And a huge thank-you to Music Ally, the event producers and as excellent a partner as I could hope for.
Graduated Response in the Post-Sarkozy Era May 24, 2012
Posted by Bill Rosenblatt in Europe, Events.add a comment
Now that Nicolas Sarkozy is no longer president of France, there’s some question about the future of the graduated response regime that was implemented during his tenure in the Elysee Palace through the HADOPI regulatory body. Although it wasn’t exactly the leading campaign issue, government response to online copyright infringement did get highly politicized during the Sarkozy years, to the extent that his opponents built campaign platform planks around graduated response repeal.
As an American, I watched this take place across the ocean with a sense of bewilderment — not only that an arcane issue like Internet piracy would be discussed alongside larger issues like unemployment and the European debt crisis, but also at the seeming political inconsistencies and opportunism that characterized other candidates’ responses on both the left and right.
That’s why I am proud to say that we will have a very timely opportunity to hear from Eric Walter, General Secretary of HADOPI, share his thoughts on his organization and its future at the Copyright and Technology London 2012 conference coming up on June 19th. France’s leadership on graduated response ensures that whatever happens with it under new president Francois Hollande will influence the rest of Europe and beyond. Hollande’s socialist party campaigned on a promise to replace the graduated response system with a system of flat taxes and statutory license; yet M. Walter is still at HADOPI.
M. Walter will provide the keynote speech at the conference and will then participate in a panel on “Policing Piracy” that will include speakers from all sides of this controversial issue. There will be no better place to learn about the future of graduated response than at the King’s Fund in central London on June 19.
Please join us — register today!
Hadopi Becomes un Ballon de Football Politique February 21, 2012
Posted by Bill Rosenblatt in Europe, Law, Uncategorized.2 comments
Those of us who deal with the so-called copyright wars here in the United States can take comfort in one thing: the battles between Big Media and Big Tech have mostly avoided getting sucked into this country’s corrosive, debilitating party politics.
The “balanced copyright” movement has some alignment with leftist politics — not for nothing do many call it “copyleft” — but that’s mostly confined to academics and a handful of not-very-industry-aligned advocacy groups. Now that SOPA and PIPA are dead, the Republicans who run Congress can’t decide whether to continue to align themselves with the politically entrenched media industry and promote further legislation, or to tout individual liberties (and appease the burgeoning Big Tech lobby) and repudiate such legislation. Nobody involved in this year’s presidential election has touched the online copyright issue.
France, however, shows a completely different picture. As a recent New York Times article describes it, the Hadopi progressive response legislation has been in place for two years, warnings have been issued to consumers caught downloading illegally, and the first group of repeat offenders — 165 of them — have been handed over to the justice system for potential fines and suspension of their Internet accounts. The first warnings were sent out in October 2010, about 1-1/3 years ago.
First of all, let’s compare this with the RIAA’s campaign of individual lawsuits in the US: the RIAA appears to have gone after between 18,000 and 35,000 people over a period of five years, or 3600-7000 per year on average. Even if one allows for the fact that France has 19% of the Internet-using population of the US, the number of French Internet users thus affected by Hadopi is only 18-35% of the proportionate number of US Internet users sent nastygrams by the RIAA.
Every study of the Hadopi system that has been done so far has shown the system to be successfully reducing illegal downloading and increasing legitimate consumption of content, particularly music sales on iTunes. (The effect of the law on subscription streaming services like Deezer and Spotify hasn’t been measured.) One would expect the “usual suspects” to debunk the studies, but they haven’t. Instead, there have been statements such as “the effects are undeniable but hard to quantify” (the liberal newspaper Le Monde) and “Apparently some of its intimidation is having a psychological effect” (La Quadrature du Net, a French advocacy group which otherwise argues that Hadopi is a waste of taxpayers’ money to solve a nonexistent problem).
In other words, like it or not, the Hadopi system seems to be working so far.
French President Nicolas Sarkozy, who actively supported the Hadopi law, is up for re-election himself. As a result, online copyright has become in France what we in America call a political football. Socialists have been the most vocal enemies of the Hadopi law in France and have been calling for flat-tax statutory licenses, following the ideas of the Electronic Frontier Foundation, Terry Fisher of Harvard Law School, and other copyleft figures. Yet now that the right-wing candidate Marine Le Pen is now stealing the socialists’ thunder by calling for a statutory license herself, the socialists are backing away from the idea, calling instead for some hazy combination of taxes and crackdowns on sites that enable illegal copying. Nevertheless, both anti-Sarkozy parties have professed Hadopi hatred, as both a populist gesture and a Sarkozy differentiator.
This is just a little bit crazy. Conservatives are supposed to be for individual liberties, low taxes, and small government. So what is a hard-right politician doing embracing a system that amounts to a tax on content, no matter how much each consumer uses, and that distributes money to content creators through opaque, government-entrenched entities like the collecting society SACEM? And what are the socialists, who are supposed to be for big government and equitable distribution of resources, doing opposing it? I’m sure that I, as an American, do not have a proper understanding of French politics. But to me, this smacks of political opportunism and demagoguery of the type that we are deluged with in this US election year on issues such as healthcare, taxes, gay marriage, etc., etc. It’s sad.
I think five years is a reasonable timeframe in which to judge the success of Hadopi, so it’s premature so far. Die-hard infringers will find ways around the system, such as through anonymizers, virtual private networks, and file encryption; we have yet to see how popular such methods become. The fairness and effectiveness of the enforcement and appeal mechanisms have yet to be established. But one hopes that Hadopi’s educational effect coupled with the fear of getting caught will reduce infringement enough to make it worthwhile; in that case, other countries should adopt progressive response with a strong educational component too.
Let Hadopi-haters do their own serious quantitative studies, and let’s compare the results. Let’s make the judgments on facts, and for God’s sake let’s not let political posturing pollute the atmosphere. Then let’s see the Copyright Alert System assess what’s working in Hadopi and adopt it here in the United States, where — at least for the moment — no one need worry about the issue being demagogued to death in election years.
IFPI Claims Success of Progressive Reponse in Curbing Infringement January 30, 2012
Posted by Bill Rosenblatt in Europe, Law, New Zealand.3 comments
The International Federation for the Phonographic Industry (IFPI), the global umbrella of national music trade associations like the RIAA in the United States, published its annual Digital Music Report last week. Among the most interesting findings is results of studies of the effects of the progressive response law enacted in France in 2009.
The French Creation and Internet Law, which is referred to as “Hadopi” after the agency it created (Haute Autorité pour la Diffusion des Oeuvres et la Protection des droits sur l’Internet), is one of a handful of so-called progressive response regimes, in which ISPs in a given country are obliged to respond to complaints about file-sharing by issuing a series of increasingly stern warnings and then potentially suspending their Internet accounts or fining them.
IFPI worked with Nielsen to measure Hadopi’s effects on file-sharing in France, and found that the effect was to decrease file-sharing by 26% over the year after Hadopi’s October 2010 implementation, although the numbers have been creeping back up a bit since October 2011. IFPI’s report also published the results of a separate academic study by economists at Carnegie-Mellon University and Wellesley College that claims a net increase of 22.5-25% in paid iTunes music downloads from before to after Hadopi was implemented.
The IFPI report also cites studies that show that warning messages have an effect: a May 2011 study found that 50% of people who either received a Hadopi notice or knew someone who got one stopped their illegal file-sharing. The same measurement for South Korea, another country with progressive response in place, was 70%.
Critics of progressive response reply that P2P file-sharing has been decreasing anyway, that file-sharing is “yesterday’s problem” as copyright infringement moves from file-sharing networks to torrent sites, cyberlockers, and other places. It’s hard to argue that the reduction of 26% in French file-sharing means “piracy has decreased by 26%” (and in fact IFPI isn’t arguing that at all). Yet the graph in the IFPI report clearly indicates a drop in file-sharing activity that coincides with the deployment of Hadopi.
It’s worth bearing in mind that the vast majority of Hadopi activity is warnings, which fall under the heading of “education” instead of “technical protection measures,” because the warnings don’t actually prevent users from doing anything that they could do before.
At the same time, there is one sour note in the IFPI report: in a discussion of the graduated response system in New Zealand (which accompanied a decrease in P2P usage of 16%), rights holders complain that “the high cost of notifications to ISPs … could prevent the graduated response system being used over the long term to optimum effect.” In other words, it’s not enough to have a government-mandated requirement for ISPs to act on complaints of file-sharing; copyright owners also don’t want to have to pay to generate the complaints. I don’t know what they call this in New Zealand, but in France, Marie Antoinette might have called it “Qu’ils ont de la brioche et la manger aussi.”*
P.S. The IFPI Digital Music Report also contains the very exciting statistic that the total of paying users of music subscription services has shot up 65% over the past year to an estimated 13 million plus. That number blows by the 10 million that I thought would be reached by next September.
*”Let them have their cake and eat it too.”
European High Court Says No to ISP-Level Copyright Filtering November 28, 2011
Posted by Bill Rosenblatt in Europe, Fingerprinting, Law, Music, Services.add a comment
Last Thursday the European Court of Justice (ECJ) ruled that ISPs cannot be held responsible for filtering traffic on their networks in order to catch copyright infringements. This ruling was the final step in the journey of the litigation between the Belgian music rights collecting society SABAM and the ISP Scarlet, but it is a landmark decision for all of Europe.
This ruling overturned the Belgian Court of First Instance, which four years ago required Scarlet to install filtering technology such as acoustic fingerprinting to monitor Internet traffic and block uploads of copyrighted material to the network. Scarlet appealed this decision to the Brussels Court of Appeals, which sought guidance from the ECJ.
The ECJ’s statement affirmed copyright holders’ rights to seek injunctions from ISPs like Scarlet to prevent copyright infringement, but it said that the Belgian court’s injunction requiring ISP-level copyright filtering went too far. It cited Article 3 of European Union Directive 2004/48, which states that “measures, procedures and remedies [for enforcing intellectual property rights] shall be fair and equitable, shall not be unnecessarily complicated or costly and not impose unreasonable time-limits or unwarranted delays.” The ECJ decided that the mechanism defined in the appeals court’s ruling did not meet these criteria.
The real issues here are the requirement that the ISP bear the cost and complexity of running the filtering technology, and the fact that running it would slow down the network for all ISP users. It’s easy to see how this would not meet the requirements in the above EU Directive.
This decision has direct applicability in the European Union, but its implications could reach further afield. For example, the issue currently being argued between Viacom and Google at the appeals court level in the United States boils down to the same thing: whose bears the cost and responsibilty to police copyrights on the Internet?
Of course, EU law doesn’t apply in the United States. In the Viacom/Google litigation, Google is relying on the “notice and takedown” portion of the Digital Millennium Copyright Act (DMCA), a/k/a section 512 of the US copyright law. This says that if a copyright holder (e.g., Viacom) sees one of its works online without its authorization, it can issue a notice to the network service provider to take the work down, and if it does so, it won’t be liable for infringement. Google’s argument is that it follows section 512 assiduously and therefore should not be liable.
Viacom’s task in this litigation is to convince the court that the DMCA doesn’t go far enough. More specifically, its argument is that the legislative intent behind the DMCA is not served well enough by the notice-and-takedown provisions, that network service providers should be required to take more proactive responsibility for policing copyrights on their services instead of requiring copyright owners to play the Whack-a-Mole game of notice and takedown.
The ECJ’s decsion in SABAM v. Scarlet has no precedential weight in Viacom v. Google. But it may help get the Third Circuit Appeals Court to focus on what Jonathan Zittrain of Harvard Law School has called the “gravamen” (which is legalese for “MacGuffin“) in this case: who should be paying for protecting copyrights.
How High Will Spotify’s Paid Subscribership Go? August 10, 2011
Posted by Bill Rosenblatt in Business models, Europe, Music, Services, United States.1 comment so far
More on the direct consumer revenue trend: the first set of results of Spotify’s US launch are in, courtesy of the Wall Street Journal’s All Things D. As of earlier this week, only a month into the service’s US presence, Spotify has signed up 1.4 million subscribers, of which 175,000 are paying. At 12.5%, that’s a bit lower than the 15-16% paid subscribership Spotify is enjoying in Europe, but it doesn’t change Spotify’s overall paid-subscriber rate very much.
All Things D’s Peter Kafka points out that the US conversion rate from free to paid is likely to be lower because US subscribers get more free music during the first six months of the US launch than European free subscribers do. But I would also argue that the conversion rate is lower because Spotify is new in the US, and people are just trying it out — many of whom may already subscribe to a competing service such as Rhapsody.
Given that the addressable market for Spotify increased by 150% when it launched in the US (about 150 million Internet users in the seven European countries in which Spotify operates vs. about 220 million in the US), Spotify’s total subscribership could end up in the multiple tens of millions fairly quickly. But to me, the more important question is: given the steep growth in its percentage of paid subscribers, where does that growth stop?
Here’s a poll:
European Music Rights Database Project Issues RFP August 23, 2010
Posted by Bill Rosenblatt in Europe, Rights Licensing.2 comments
A request for proposals (RFP) has been issued for a Global Repertoire Database (GRD), which would contain rights holder information for music to be licensed throughout the European Union. Submissions are due in mid-October, and the GRD Working Group expects to make a decision on how to move forward by December.
Let’s fill in some of the background details to give this news some context; then we’ll talk about the GRD and its RFP themselves.
A few years ago, the European Commission (EC) determined that the lack of pan-European (or “single market”) music licensing was hurting European citizens’ access to legitimate online music services and causing more Europeans to turn to illegitimate sources for their digital music. And indeed, the bureaucratic hurdles required to get licenses to distribute music in all countries of the EU are monumental.
Yet the EC’s push for pan-European licensing has met with stiff resistance from member states, mainly for two reasons: fear that such an initiative would only serve to make it easier for US-based media giants to cram their commercial content down Europeans’ throats, and the Culture Ministries of certain EU member states’ belief that it is their duty to advance their own countries’ content and not to make it easier to license content in from other member states.
Meanwhile, the voices being heard in Brussels were those of lobbyists from large technology companies like Apple and Google and the entrenched national music rights collecting societies, such as GEMA in Germany, SACEM in France, PRS for Music in the UK, and so on. Entrepreneurial startups trying to build attractive legal music services throughout Europe weren’t represented in these debates.
The subject of pan-European music licensing fell somewhere among three EC Directorates: Information Society and Media (then Viviane Reding), Internal Market (then Charlie McCreevy), and Competition (then Neelie Kroes). Commissioner Kroes, with her reputation as a tough-minded enforcer of antitrust law against the likes of Microsoft, was able to convene an Online Commerce Working Group in 2008 that brought together stakeholders from across the spectrum. This led to a statement in October of last year in which a group of music publishers and collecting societies essentially promised to maybe someday consider the prospect of possibly working out the parameters of the shape that a potential solution might perhaps take.
Yet in the spring of this year, progress finally began to accelerate. The GRD was conceived, a Working Group was formed, and the group issued a Request for Information (RFI) from companies that would consider submitting proposals to design and build the GRD. Over 30 organizations submitted responses, convincing the Working Group that the GRD could be at least technically feasible. Meanwhile, the EU launched the Digital Agenda for Europe and put Kroes in charge of it. The “digital single market” topped the list of her objectives.
The GRD is a fine idea in concept. Although the idea of a universally accessible database of rights holder information has been a dream for many in the content industries for a long time, the inspiration for the GRD is clearly the Book Rights Registry (BRR) defined in the pending settlement between the book publishing industry and Google. However, there are two major differences between the GRD and the BRR.
First is participation. The GRD Working Group has some of the right players: online retailers (Amazon, Apple iTunes, Nokia), music publishers (EMI, Universal), and collecting societies (PRS for Music, SACEM, and STIM of Sweden) are involved. But conspicuous in their absence from the Working Group are other major collecting societies (particularly GEMA of Germany), the two other major music publishers (Sony/ATV and Warner/Chappell), and any of the new breed of online music startups looking to launch throughout Europe (Spotify, Pandora, and various others). The lack of participation by network operators like Vodafone, Telefonica, and Deutsche Telekom is also problematic. In contrast, the major stakeholders in the US book industry agree in principle on the BRR, even if they may disagree on some terms of the lawsuit settlement itself.
The second problem is that whereas Google is agreeing to spend over US $30 Million to fund the BRR, there is no source of money to build the GRD. In fact, the RFP asks respondents to submit proposals in the knowledge that the project might not be funded and that the Working Group would not consider funding options until after choosing a winning proposal.
Both of these are serious hurdles to surmount. Lack of participation from major players has killed many a well-intentioned standardization initiative. The RFP addresses the “unfunded mandate” issue by suggesting three options for funding: divert money from systems that would no longer be needed with the GRD in place; get a collecting society to run the GRD with existing technology and processes, thereby greatly reducing the costs; or allowing some other entity to run it as a commercial enterprise. More on this later.
The RFP itself is comprehensive, well informed, and well organized. Just as importantly, it is unflinchingly (and refreshingly) realistic. It is forthright about the challenges inherent in launching the GRD: not only the usual technical ones but also problems with the inconsistency and incompleteness of data coming from content rights holders, disputes over ownership, lack of participation by key stakeholders, and so on. It incorporates standards for identifiers and other things in the music industry (ISWC, ISRC, and so on) but acknowledges their current lack of universality at record labels and music publishers. The RFP is also clear about the GRD’s limitations: the GRD is meant to be a source of information about rights ownership, not an e-commerce engine.
The one problem with the conception of the GRD is that it is essentially a recipe for paving the existing cowpaths. On the one hand, it’s necessary to do this, and it would produce significant efficiencies. But on the other hand, it falls short for those who would launch new business models that don’t conform to existing licensing rules. The Google book settlement at least makes mention of new business models, admittedly without saying much about how (or if) the BRR would support them. But even if the GRD is built, entrepreneurs with new ideas will still have to negotiate separately with each of the collecting societies and other rights holders in Europe. (I’m involved in one such negotiation now, one that the existence of the GRD would probably not help.)
Yet even cowpath-paving is a major undertaking, as anyone who reads the GRD RFP will understand. It’s likely that many major technology companies and professional services firms will want to respond, if only for the visibility they would get through the process. However, one of those firms actually building the GRD doesn’t strike me as a likely outcome, because of the dubious commercial proposition. Instead, I suspect that if the GRD gets built at all, one of the major collecting societies will get the job — after sufficient conciliatory representations about cooperation and non-competition, perhaps with oversight by CISAC (the international collecting society umbrella organization).
A precedent for this is the Digital Object Identifier (DOI) standard in publishing. After it became clear that money wasn’t available to hire an outsider to run the initiative, it was given to someone from one of the major scientific publishers (Elsevier Science, as it was then called), which agreed to keep him on salary while he did the job, and while the other publishers involved in the initiative agreed to overlook competitive concerns. As a result, the DOI’s only real impact has been in scientific journal publishing.
Another precedent exists in the US, where the Copyright Clearance Center, the collecting society for text-oriented works, operates RightsLink, the closest thing there is to an online-accessible repository of rights holder information for that type of content. RightsLink is a valuable and successful service, but it only offers “lowest common denominator” rights; anyone wishing to license content on a different basis has to go talk to individual publishers.
All this shows the long journey that the European music industry must take to make their territory more hospitable to the services that are attempting to launch throughout the EU. The GRD is an important step along the way, but the challenges in getting it off the ground are more than enough to think about for the time being.
New Initiatives by the European Commission and UK June 1, 2010
Posted by Bill Jones in Economics, Europe, Law, UK.add a comment
The Copyright and Enforcement Directorate of the UK’s Intellectual Property Office has reported on two new EU developments in a broadcast email. Since I can’t find the URL for the Directorate [I can't either - ed], I’m left to summarize:
The European Commission has published two recent papers which will impact on our industry:
A New Strategy for the Single Market: This report addresses the challenges to the single market. The report comments on the ill-adapted IP legislation as a barrier to economic progress. It also recognizes that low-cost and legally secure protection of IPRs is of great importance.
The paper proposes, inter alia:
- An EU-wide copyright law, including an EU framework for copyright clearance and management;
- Harmonized copyright levies on blank media and equipment (to simplify the business environment); and
- Adoption of the EU-wide patent and a single patent jurisdiction as a matter of urgency.
A Digital Agenda for Europe: This first initiative is under the Commission’s flagship “Europe 2020” economic program and its main Telecoms and Copyright strategy document.
The text is very wide ranging. The Paper considers transactions in the digital environment to be too complex, with inconsistent implementation of the rules across member states.
It concludes that the EU needs to enhance the protection against online violations of intellectual property rights.
Intellectual Property-related key points in the Digital Agenda include:
- A commitment on reforming governance of collecting societies, and a new initiative to look into cross-border licensing.
- A commitment to orphan works legislation, and looking into out-of-print works
- A commitment to evaluate (not revise) the EU E-commerce Directive this year; and
- A commitment to strengthening Europeana, the European digital library.
Meanwhile, UK’s telecommunications regulator Ofcom has published its consultation on its draft code of practice to reduce online copyright infringement as part of its new duties under the Digital Economy Act 2010: Online Infringement of Copyright and the Digital Economy Act 2010.
As austerity bites, many European countries have to reduce government expenditure as a proportion of GDP – some have started already. Figures in the range of 5% to 10% of GDP are bandied around. These will bite very deeply into initiatives, delivery and operations. Individual departments and agencies could well be subjected to reductions of 25%.
One also can’t see the EU escaping this development since it is funded to the extent of approx 1.24% of the Union’s gross national income (GNI), by individual countries (0.73% of their GNI), duties charged on imports from non-EU states, and a VAT component.
So while all the above initiatives are reality, one wonders what effect these austerity measures will have on them over time.
Bill Jones is CEO of Global Village Ltd.
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