This may come as a surprise, but I have a lot of sympathy with artists' rights groups and even entertainment companies that mistrust giants like Amazon.com Inc. (Nasdaq: AMZN) and Google (Nasdaq: GOOG).
Now, it's not that I hate Amazon or Google, but I do understand that they are fast becoming the intermediary between creators and audiences (and vice-versa), and that this poses a danger to everyone involved in the creative industries.
That danger is that a couple of corporate giants will end up with a buyer's market for creative works, control over the dominant distribution channel, and the ability to dictate the terms on which creative works are made, distributed, appreciated, bought, and sold.
And the danger of that is that these corporate giants might, through malice or negligence, end up screwing up the means by which the world talks to itself, carrying on its cultural discourse -- a discourse that ultimately sets the agendas for law, politics, health, climate, justice, crime, education, child-rearing, and every other important human subject.
So read on, for a detailed outline of this problem and my proposed solutions.
Contents:
— Cory Doctorow, Internet activist, blogger, co-editor of Boing Boing
Next Page: What We're Facing
Competition improves markets, and the market for culture is no different in this regard from the market for auto parts or bananas. A fragmented, disorganized, and disrupted search, distribution, and sales channel creates a seller's market for culture, in which creators and audiences can shop around for firms that will give them the best deal.
On the other hand, a static industry governed by a few entrenched firms will tend to create a buyer's market for creative works. We know what that looks like: It looks like the market today.
Today, the motion picture industry is dominated by six gigantic studios, the record industry is dominated by four giant labels, publishing is dominated by fewer than a dozen major players -- and whether you're making a movie, a record, or a book, you generally find yourself getting a similar deal no matter which publisher, studio, or label you go to.
All the labels screw you on your royalties for electronic downloads (these are licensed, not purchased, so artists should be entitled to the standard 50 percent licensing royalty; instead they get 7 percent, the standard for sales).
All the film studios make you go out and spend a fortune getting clearances for copyrights and trademarks, even when covered by fair use.
All the publishers have the same opaque system for determining withholding on royalties.
And it's turtles all the way down. Publishing is constrained by a tiny number of giant distributors and two major bookstore chains, all of which demand ridiculous terms on the books they carry. Theatrical distribution is controlled by a couple major chains, which shaft the production companies at every turn. And everyone knows about the payola and other rip-offs that the highly consolidated radio industry visits upon the record labels that want to get their music aired.
In the aftermarket, it's even worse: A heavy concentration in big-box stores lets firms like Wal-Mart tell studios how to re-cut their movies and record companies what to bleep out of their CDs.
So hell yeah, I sympathize with companies and creators who want to keep Google or Amazon from becoming gatekeepers on culture. Not because of who runs Amazon or Google -- I know senior people at both companies whom I believe to be honorable and decent -- but because no one should be that gatekeeper.
I'd oppose consolidation in distribution and sales channels, even if the companies involved were Santa Claus Inc., Mahatma Gandhi Ltd., and Toothfairy Enterprises LLC.
Unfortunately, practically everything the entertainment cartel and creators' rights groups do ends up making the market less competitive and undermines the bargaining power of creators everywhere.
Nice going, guys.
Next Page: The Cycle of Piracy
Copyright and technology are inextricably bound together. The story of copyright is the story of new technologies and the rules that were created to deal with them.
And here’s a corollary: So long as innovation is taking place, piracy is the norm.
By definition, pirates are people who are disrupting the existing market. When the market is consolidated into a few gatekeepers, they're unlikely to license their copyrights to upstarts that are entering the market without having to invest in last year's inefficient technology.
The first techno-pirates were the record companies that ripped off composers to put their music onto discs. Then the radio pirates ripped off the record pirates. Then the cable pirates ripped off the broadcast pirates. Then the VCR pirates ripped off the cable pirates.
Today, companies that have paid for broadcast equipment understand that netcasters can distribute their programs for a tiny fraction of their costs, and so they fear them and lock them out of the market by refusing to license them. Instead, they hand-pick a few easily controlled successors (sometimes these successors are subsidiaries, like Hulu LLC ) and threaten to sue anyone who competes with them.
At which point, netcasters do to the broadcasters exactly what the broadcasters did to the record companies: They take their stuff without asking, declare themselves to be legit operators stymied by anticompetitive dinosaurs, and wait for the courts or Congress to legalize them on the ground that they're too beloved by the voters to destroy.
Today's representatives of the most profitable collections of copyright are simultaneously poor guardians of their own future and poor stewards of their own present. They are so accustomed to a market dominated by a few grumpy giants that they prefer that broken status quo to a future characterized by a shifting landscape of constant innovation, even though the latter would be a better deal for them.
Next Page: A Self-Defeating Market Pattern
Take Internet radio. Back in 1998, Congress promised a package that would make operating a legal Internet radio station easy, provided you collected a reasonable royalty and adhered to the rules of the road. The edict promised to enable anyone to operate an Internet radio station.
The spectral scarcity that only allows a couple dozen radio stations in each market is a bug, not a feature, and it needn't be so on the Internet, where a user might be able to have her pick of a billion radio stations (or opt to become a radio station herself).
But this is what happened instead: Congress turned the job of figuring out the royalty structure and the rules of the road to the Copyright Royalty Arbitration Panel, which was fast becoming dominated by the record industry. The subsequent deal the record industry oversaw wiped out the vast majority of Webcasters by establishing an onerous, expensive process that you could only get out from under if you were already a traditional broadcaster. This meant that the same screwed-up radio-station conglomerates that the record industry had been battling for decades were also the new gatekeepers for Internet radio.
That turned out well, huh?
While we're on the record industry, take a look through the history of the iTunes Store. First the entertainment industry created the 1998 Digital Millennium Copyright Act (DMCA), which makes it illegal to break anti-copying software (which contains Digital Rights Management or DRM). Then the entertainment moguls entered into a deal with Apple Inc. (Nasdaq: AAPL) to sell their music for $0.99 a track, using Apple's DRM. Then they turned around one day and said, "How about selling a track for $0.25, or $1.50?" and Apple told them to get lost.
So the entertainment giants tried to create a competitor to Apple to play the DRM’d files Apple had sold, but quickly discovered that Apple would and could use the DMCA to fight this kind of competitor. Then they tried to shame Apple into supporting competitors' DRM on the iPod, and Apple laughed them out of the room. Finally, they had to give up on DRM and start selling MP3s on Amazon, which created a duopoly through which some competitive leverage could be applied to Apple, creating a price structure close to the one they were hoping for.
The film and TV industry are racing to repeat these mistakes by ensuring that Google and its video subsidiary, YouTube Inc. , are the last disruptive entrants into the market.
Broadcasters and film studios are suing Google on the grounds that it has not done enough to stop users from uploading infringing content. Ignoring the text of their own DMCA (which says that Google doesn't have to ensure that user-generated content doesn't infringe, merely expeditiously remove infringing material once notified of the infringement), they argue that Google must invest in notoriously unreliable infringement-detection software and must further invest in an army of copyright screeners who'll look at all video uploaded to YouTube (14 hours' worth of video every minute, according to one insider I spoke to) before it is released for public viewing.
The most likely outcome of this saber-rattling is some kind of settlement in which Google dedicates a fraction of its billions in profits to satisfying the video companies, producing a small decrease in infringement, providing a modest amount of money for the plaintiffs (though it's unlikely that they'll pass that on to actual video creators -- after all, the record industry doesn't turn over the settlements from its 30,000+ file-sharing lawsuits to the artists whose copyrights they're supposedly defending), and creating a radically more expensive cost of entry to Google's market.
Remember, a decade ago, Google was two grad students in a garage with a server built out of Lego. They were able to topple spectacularly well funded, successful companies like Yahoo Inc. (Nasdaq: YHOO) and Altavista because the only expense they had to bear was that of inventing a better technology -- they didn't have to start by raising a billion dollars to settle entertainment industry lawsuits.
But anyone these days who hopes to do to Google what Google did to Altavista won't be so fortunate. And that means that Google need only fear competition from other established giants like Yahoo or Microsoft Corp. (Nasdaq: MSFT) -- companies whose character as gatekeepers of video distribution and discovery won't be substantially different from Google's.
For the broadcasters and studios, it's "meet the new boss, same as the old boss."
And they've got no one to blame but themselves.
Next Page: Short-Sighted Creators
Creators’ groups are no more savvy than the entertainment giants that exploit them, alas. As a class, these groups are prone to the same litigiousness as the industry associations, and they are setting themselves up to spend another generation as sharecroppers in fields owned by a handful of mega-corporations.
Take the Authors Guild, a tiny organization representing a few thousand American writers, whose deep pockets and shrill voices give them the spotlight whenever they claim it on behalf of all working writers.
The AG recently made headlines by suing Google over that company’s Book Search program, a system that set out to scan and index every book ever published, making it as easy to search the written word as it is to search the Web.
Google proposed to serve up its search results in the same manner as it serves up any other Web results, by providing a snippet of text and a reference to the original book, along with information on buying it, should it happen to be in print.
What's not to like?
Well, plenty, if you're the Authors Guild. They brought a class-action lawsuit against Google alleging that making an intermediate copy of a copyrighted book (a scan) was a copyright infringement (they also suggested that serving up a search result was a similar infringement).
This is a pretty dumb legal theory. If it’s true, then every search engine is a massive copyright infringer, because the intermediate copies they make of billions of Web pages (just as likely to be copyrighted as the books in the library) are not substantially different from copies of books. Further, the search results are not particularly different (from a copyright perspective) from search results comprised of snippets from Web pages.
The Authors Guild asked to have their class certified as representing every author published in America -- living, dead, or unborn. Once a court certified this class, they could negotiate a deal with Google, and Google would get the right to scan books and make them available under the terms of the deal.
Certifying such a broad class should be difficult -- not least because any defendant in such a case should be able to point out to the judge that 8,000 writers comprise a tiny minority of all book authors in the past and future of America.
But Google cannily did not object to the certification. After all, the AG would likely ask for a pricetag that Google could afford. And it's unlikely that future competitors of Google would be able to negotiate with such a class, even if they could afford to.
Once the Book Search settlement was announced, writers around the world were astounded to discover that an arrogant cabal of D.C. insiders presumed to strike a deal on their behalf. These writers are up in arms and won't ever let something like this happen again.
So the AG got a settlement out of Google -- or rather, Google got a settlement out of the AG. For a price that Google can handily afford, its business model is now definitively legal, and any competitors that try to move in on Google will be stuck playing by the system that Google devised, with Google itself elevated to most favored nation.
So rather than guaranteeing a future in which dozens of companies compete to see who could offer the best terms to writers, the Authors Guild just raised the cost of entering Google's book-search market to infinity.
Nice going, Authors Guild.
Next Page: Stop Working for Gatekeepers
So, how do you use copyright to ensure that the future is more competitive and thus more favorable to creators and copyright industries?
It's pretty easy, really: Use your copyrights to lower the cost of entering the market instead of raising it.
What if the Recording Industry Association of America (RIAA) had started out by offering MP3 licenses on fair terms to any wholesaler who wanted to open a retailer (online or offline), so that the cost of starting a Web music store was a known quantity, rather than a potentially limitless litigation quagmire?
What if the Motion Picture Association of America (MPAA) and the North American Broadcasters Association made their streams available to anyone who paid a portion of their advertising revenue (with a guaranteed minimum), allowing 10 million video-on-demand systems to spring up from every garage in the world?
What if the Authors Guild had offered to stop suing Google for notional copyright violations in exchange for Google contributing its scans to a common pool of indexable books available to all search-engines, ensuring that book search was as competitive as Web search?
Copyright is a powerful weapon, and it grows more powerful every day, as lawmakers extend its reach and strength. Funny thing about powerful weapons, though: Unless you know how to use them, they make lousy equalizers. As they say in self-defense courses, "Any weapon you don't know how to use belongs to your opponent."
Recording artists get an extra 45 years of copyright, and it’s promptly taken from them by the all-powerful record labels, who then use it to strengthen their power by extending their grasp over distribution channels. Authors are given the right to control indexing of their works, and it's promptly scooped up by Google, who can use it to prevent competitors from giving authors a better deal.
For so long as copyright holders think like short-timers, seeking a quick buck instead of a healthy competitive marketplace, they're doomed to work for their gatekeepers, rather than the other way around.
— Cory Doctorow, Internet activist, blogger, co-editor of Boing Boing
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