Oh For Crying Out Loud!!!
I am just a lousy conspiracy theorist, or else I would surely accuse organizations like IFPI and now IIPA with planting research on their sites to make them look objective because it conflicts with the basis for their lobbying for regulatory relief. The RIAA is a member of both umbrella organizations, but they are governed differently. I like both organizations because they are systematic supply-side data collectors of record for the industries they represent, their data attempts to represent the total economic value of the sector not just the part their members contribute, and they release their data to the public, not just to their members.
Right on the main page of the IIPA site is a link to a press release detailing a study apparently commissioned by the IIPA released in 2002 showing that the industries which sell copyrighted intellectual property, including motion pictures, recorded music, entertainment software, business software and books, grew more than twice as fast (7%) as the U.S. economy (3%) over the last twenty years, and continued that rate of growth as recently as the study was conducted in 2001, to reach $535 billion or 5.25% of the entire GDP, and representing 6% of total employment. You can read the whole thing here.
This does not look like the picture of an economic sector crushed by overseas, low-wage, sweat shop competition, bleeding red ink from losing sales to foreign government subsidized imports, or otherwise in need of very much intervention of any sort from the government, much less the kind I am beginning to realize is potentially harmful to the future accessibility of the very content it purports to protect.
Last week I posted the location of an IFPI report quantifying the demand for online track downloads was four times the size of the decline in track sales represented by softening CD sales.
This does not portray an industry where demand is weak, but rather looking at the state of online music services, specifically where less than 10% of the catalog is offered, and only that in the last year, and where most of the services impose copy protection encoding to enforce restrictive usage conditions, it resembles an industry that is unable to recognize and supply what the market wants.
Content Wants To be Encryption-Free
At first, the notion that content wants to be free appeared to be another misguided bit of propaganda from out of left field disguised as a descendant of the razor/razor blade phenom. Of course, the guys who sell the pipe and the hardware want the information to be free, they would, wouldn’t they? The machine perspective is the copy literally bears little to no cost, therefore it should be priced accordingly. This argument is economically unfeasible when you look at it from the standpoint of the fuel or content perspective, in which the cost of producing and distributing the original is spread across each copy.
But I have decided that in a way, content does want to be free — encryption-free.
By now it should be very clear that there are product features the market appears to desire:
1. the right to download songs, movies, games, ebooks, and software programs from the Internet,
2. the right to extract content from physical media and transfer it to other media for personal use and back-up,
3. the right to record broadcast, cable, and IP network signals and retain them in a personal library,
4. the right to make limited excerpts of prerecorded content for educational purposes or for new creative works,
5. and in short, to enjoy the entertainment and information value the content represents without limit.
It is simply good business to pay close attention to what consumers desire to do with your content, and facilitate that, or lose your market to someone else who will. The regulators should also heed these market preferences, and should not make any laws or regulations that obstruct some content owners from fulfilling legitimate market desires by requiring permanent copyright protection that depends upon proprietary software for consumption. If companies choose to wrap their content in proprietary DRM software that only they have the keys to, as in the case of iTunes, that is their business. By the same token, if companies choose not to copy-protect their content, that is their business.
We have more than enough examples (see yesterday’s post) to show that the practice of tying content to technology effectively removes it from circulation over time and far too little evidence that the survival of intellectual property enterprises depends on such legislative mandates (see the previous week’s posts).
Anti-Piracy Needs a Double Standard
At issue, rather, should be how to prevent the illegal sale of pirated content. This should have the full attention of everyone, producers, distributors, users, regulators, and analysts.
Consider the real villains in this drama. In 2003, losses estimated by the International Intellectual Property Alliance for content sold illegally worldwide were nearly $10 trillion dollars, down from slightly over $10 trillion in 2002. For those of you not familiar with this kind of piracy, its staggering to get your head around, but for those who have been following this data for years, its a very real menace in many ways. This breaks down to $1.5 trillion for motion pictures, $2.3 trillion for records & music, $4.1 trillion for business software, $1.5 trillion for entertainment software, and $0.5 trillion for books. In countries with lower personal incomes and little to no effective piracy laws or enforcement, including Vietnam, Serbia, Guatemala, Bosnia and Herzegovina, Malaysia, Latvia, Ecuador, Bolivia, Thailand, Russia, Philippines, Lebanon, Kuwait, Indonesia, India, Colombia, China, Paraguay, Ukraine, and Pakistan, piracy represents over 90% of total expenditures on movies. Even G7 countries Italy, Spain, and Canada, and major trading partners Israel and Turkey, have piracy rates over 10% of legitimate revenue.
One could make the argument that this is play money, that these sums aren’t meaningful because, as has been shown in the Infotech 2020 models, there is insufficient disposable income to support an increase in legitimate entertainment spending $10 trillion dollars. In unit terms, last year, one out of every three CDs manufactured was sold illegally - not given to a friend, not traded over the Internet, SOLD by organized crime and enterprising local con men, with not one cent made by the artists, authors, or producer/publishers, according to the IFPI, worldwide.
Then consider that bandits have been shooting the padlocks off the strongboxes full of stolen booty, throwing their heads back and laughing in menacing tones, and making off with the contents for frigging ever. Trade agreements based on the enactment and enforcement of effective anti-piracy laws and prosecuting pirates in our own country is what we should be focusing on to protect our IP assets.
But Wait, There’s More
Intellectual property is much more than what is referred to above as the ‘copyright industries’ or the ‘core copyright industries’. Trademarks and patents also fall under this term, and internationalization of IP rights are critical to the economic viability of much of the entire infotech sector, not to mention biotech and all the mainstay economic sectors.
The World Intellectual Property Organization announced this month that a total of 45 countries, including G7 country Japan, but not Canada or any EC country, have joined the USA in signing two major treaties, the WCT and the WPPT. A few of the biggest havens for IP piracy mentioned above, including the Philippines, Indonesia, Colombia, Paraguay, Ecuador, Guatemala, Serbia, Ukraine, and Latvia have signed it, too.
The WIPO announcement declares, “To fully implement the WIPO Internet Treaties, (these) countries will need to upgrade their copyright laws, whether through minor changes or more substantial revisions. When implementation is complete, each country will have:
Protections against the unlawful circumvention of effective technologies that right holders use to prevent theft of their creations.
Protections against the unlawful tampering with tags and codes associated with copies of protected works and phonograms that are used to facilitate legitimate distribution and licensing.
Recognition of extended or clarified rights for copyright owners: for example, a right to control distribution of copies of creations, and a right to control communications of a work, including the “making available” of a work or phonogram to the public in an interactive manner.
Harmonized protections (through implementation of the WPPT) for the rights of performers and producers of phonograms.”
Basically what this means is that the US cannot easily reverse its position supporting these agreements once we have asked the rest of the world to join us. You can read all 200 pages of the background behind their thinking here.
And Then There is Canada
In Canada, making copies for personal use is legal, and a Federal judge ruled last month that sharing copyrighted works on peer-to-peer networks is therefore legal in Canada. However, to offset the economic impact of this on artists and producers, Canada taxes blank tape, CD-R/RW discs, and MP3 players and allocates the proceeds among the content owners. Oh Canada!