Building Delivery Systems at the Expense of Content Creators

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Soumis par ole 2010–07–12 11:24:02 HAE
Thème(s) : Le contenu numérique canadien

Sommaire

We cannot build our delivery systems at the expense of the content creators. Current and proposed laws favor the companies who make the devices and delivery networks over the creators and suppliers of the content. The true potential of the Digital Economy will never be realized until this inequity is rectified. Intellectual Property is one of the largest and fastest–growing parts of the Canadian and global GDP. It is also the main driver behind the growth of the delivery system providers.

Vast wealth has been diverted into the pockets of industries that enable and profit unjustly from infringement as they enable content distribution and aggregation. Internet Service Providers (ISPs) act like short circuits that enable their customers to circumvent markets. As long as they are free to do so, there will be no viable market for recorded music and similar media.

The Problem

Canadian families often buy their "infotainment" from a single Cable and Internet supplier. Typically they pay $150/month for one connection, called "Cable TV", and $50/month for the other, called "Internet".

Consumers, especially young ones, are frequently accessing the $150 material through the $50 connection. Here is the heart of the inequity being practiced by those controlling the communication pipeline. The Cable/Internet Company will take the lion's share of the $150 monthly access fee and redistribute it to the creators and suppliers of the Cable/TV content, while they do not distribute any of the $50 monthly access fees to the creators and suppliers of the same content on the Internet connection.

The reason for this inequity is that there are laws that require the ISP's to pay for content on Cable/TV portion of the communications pipe and there are no laws compelling them to pay for content on the Internet portion of the pipe.

The Solution

The ISP business model for the Internet could and should mimic that of Cable/TV. Modern technology allows the ISP to identify what content is being used and then they can allocate the appropriate share to the creator or supplier of that content.

Conclusion

It is important that we do not lose sight of the fact that the Copyright business is an important and growing part of Canada's and the global GDP and export trade. Intellectual Property companies such as ole are also a large employer that supports many individuals (singer, songwriters) and families that contribute to the common good through the taxes they pay.

Failure to address the ISPs and other enablers of mass copyright infringement on the Internet will ensure that whatever legislation is enacted will be inadequate, and inadequate legislation will ensure that the copyright issue will never go away. More importantly, the Government will have failed successive generations of creators, and their families, and the Canadian public will be deprived of the richness of their future work and the economic potential of the Digital Economy.


Soumission

As a successful Canadian intellectual property business focused on both the Canadian and world markets, we definitely have a stake in, and opinions on, the future direction of the Canadian Digital Economy.

ole (oh–lay) is Canada's largest full–service music publisher, with offices in Toronto, Nashville and Los Angeles. We are also 100% Canadian owned. With over forty thousand songs, and thirty thousand hours of TV music across all genres, we are also one of the fastest growing and largest independent music publishers in the world. Our diverse catalog contains songs from heritage Canadian artists such as Lighthouse; current hits from American country star Taylor Swift; and all of the music from the vast library of Canada's legendary children's television producer Nelvana. Our music publishing copyright business uniquely straddles two digital media silos: music and TV/Film. We also employ over 30 individuals and support an equal number of songwriters.

ole has completed over $95 Million USD in acquisitions over the past five and a half years, and we employ a team of 30 experienced industry professionals, the majority of them in Canada.

We have focused our submission on the discussion themes of Digital Infrastructure and Canada's Digital Content.

ole's Position

We cannot build our delivery systems at the expense of the content creators. Current and proposed laws favor the companies who make the devices and delivery networks over the creators and suppliers of the content. The true potential of the Digital Economy will never be realized until this inequity is rectified. Intellectual Property is one of the largest and fastest–growing parts of the Canadian and global GDP. It is also the main driver behind the growth of the delivery system providers.

The government states on its Digital Economy Consultation Website that, "…the digital media sector is shifting away from linear production chains with distinct players and discrete products into three main areas of activity: 1) The creation of content; 2) enabling content creation and distribution; and 3) the aggregation of content. A significant part of the innovation taking place today and the prospects for future prosperity are related to these activities."

The companies involved in the activity of enabling content creation and distribution and the aggregation of content are largely shielded from liability and thus have no incentive to pay the parties involved in the creation of content. This is the fundamental flaw in our current and proposed laws. Once again, the true potential of the Digital Economy will never be realized until this inequity is rectified.

We Need a Viable Marketplace

The government says, and we agree, that, "The Government of Canada's role is to put in place a marketplace framework in which our creators, inventors and entrepreneurs have the incentives to innovate, the confidence to take risks and the tools to succeed."

The role of the Canadian government with respect to any new digital age Copyright Bill must be to create legislation that will foster a viable online market place for recorded music.

A free market exists when a willing seller and a willing buyer are free to negotiate for the sale of goods or services. When the buyer can take the product without paying, there is no negotiation and it is a failed marketplace. For the creators of music, the Internet is a failed marketplace.

Vast wealth has been diverted into the pockets of industries that enable and profit unjustly from infringement as they enable content distribution and aggregation. Internet Service Providers (ISPs) act like short circuits that enable their customers to circumvent markets. As long as they are free to do so, there will be no truly viable market for recorded music and similar media.

The ISPs have built a very lucrative business charging covertly for unauthorized content, by billing customers for the amount of bandwidth they use for unauthorized access to large bandwidth media containing unauthorized audio and visual content.

Legislation can be used to make this covert, underground business a legitimate one, creating a win for all stakeholders including consumers, creators, their ISP intermediaries, and especially governments through increased tax collection on a current underground economic activity.

This is central to our position — namely that creating ISP liability for content on their networks would create a corresponding ability for them to overtly, rather than covertly, profit from it. Following introduction of legislation establishing liability for copyright infringement on their networks, ISPs would have a very simple decision to make. They either:

  1. Take the infringing material off of their networks; or,
  2. Negotiate payment with the owners and suppliers of this content.

This is the very definition of enabling a marketplace.

The Canadian Government goes on to say that, "…the value of our digital infrastructure depends on the content it carries." Again we agree. ISPs and various websites that enable infringement such as YouTube derive nearly all of their value from the existence of the content on their network. Given that infringing material makes up a significant proportion of this content, a corresponding portion of their value is due to this material. Without making these services liable for infringement on their networks, there is no effective mechanism for the creator and owners of music to participate in this value. When YouTube was sold to Google in 1996 for $1.65 billion, none of this was shared with the creators of the content upon which the company's value was built.

The Government adds that, "…new technologies have disturbed existing means of control or appropriate compensation for the use and copying of their works. Fair and appropriate remuneration for creators is essential to the growth of digital media content in Canada."

"Fair and appropriate remuneration" does not mean "free". Individual creators and owners of music rights should be able to decide if they want to participate in promotional programs that require them to give away or license for gratis their copyrights to others. However, in and of itself this is not a viable business model for the future. For it to be so, other links in the value chain would have to subsidize the creation of the content. There is no adequate legislation in place that would require this and it is highly unlikely that it would evolve on its own. History has shown — particularly with music — that the players in the business value chain are only motivated to pay for music to avoid paying large infringement penalties.

The Internet

The Internet is like a theme park, where the consumer paid at the gate for the right to go on all the rides. Operating an 'a–la–carte' music service inside the Internet is like trying to operate a pay per ride attraction inside a theme park. Some people will pay, but the vast majority won't, dooming the ride to marginal status. Moreover, it is fighting the obvious business model of charging the consumer at the entry point for the primary value of the park. Either the Theme Park owns the businesses, or it distributes the gate revenue to the creators of the attractions on a pro rata basis.

Copyright Enforcement

To date, efforts to prevent consumers from violating copyright ownership online have proven futile. Piracy levels worldwide have not been materially affected by strict local law enforcement aimed at the individual. Years of high profile lawsuits against individuals in the U.S. have barely dented piracy rates.

Technological measures such as Digital Rights Management (DRM) have largely been abandoned, and voluntary graduated response measures such as "Three Strikes" have either failed at the implementation stage, or have not had any meaningful effect on piracy rates.

The only minor exception is the U.S. Television industry, where application of the "notice and takedown" provision in the DMCA has been somewhat effective. At the present time it is somewhat effective because the bandwidth required to distribute video is still relatively large. This renders video akin to music before the MP3 made downloading practical. As a result, a website — the intended target of the DMCA notice and takedown regime — is still the primary method for consumers to access video content. Inevitably, technological progress will erase this advantage, putting video content on the same plane as music as the bandwidth required for video delivery shrinks.

Any legislation addressing these issues needs to be technologically neutral, targeting enabling behaviour, rather than fast changing technology. Otherwise, the Act risks being out of date by the time the ink is dry. It is the enabling role of ISPs that creates the scale of the infringement problem, not their use of any particular technology.

The situation in the U.S. today is a result of this classic mistake in their Digital Millennium Copyright Act (DMCA). The drafters of the DMCA accepted the "dumb pipe" arguments of the ISPs, and chose to make websites, rather than the ISPs, liable for infringement. Conventional wisdom at the time said that a website was necessary for the average person to distribute or access content on the Internet. Apparently no one foresaw the emergence of P2P technology, which enables consumers to circumvent websites and distribute media person to person via the Internet, leaving a liability no man's land.

The Problem

The "well wired" Canadian family often buys their "infotainment" from a single Cable and Internet supplier. Typically they will pay $150/month for one connection, called "Cable TV", and $50/month for the other, called "Internet". Ironically, these two connections or services arrive via a single physical wire, from the same provider. Both connections provide an increasingly similar combination of information and entertainment.

Consumers, especially young ones, are frequently accessing the $150 material through the $50 connection. This is the heart of the inequity being practiced by those controlling the communication pipeline. The Cable/Internet Company will take the lion's share of the $150 monthly access fee and redistribute it to the creators and suppliers of the Cable/TV content, while they do not distribute any of the $50 monthly access fee to the creators and suppliers of much of the same content on the Internet connection.

The reason for this inequity is that there are laws that require the ISP's to pay for content on Cable/TV portion of the communications pipe and there are no laws compelling them to pay for content on the Internet portion of the pipe.

The Solution

We would argue that within this current inequitable situation is the basis for an equitable solution for all. The ISP business model for the Internet could and should mimic that of Cable/TV. Modern technology allows the ISP to identify what content is being used and then they can allocate the appropriate share to the creator or supplier of that content.

Given that a typical Canadian family is paying upwards of $200 a month for all their infotainment, there is a healthy pool of money from which to pay all of the owners and suppliers of media.

The only viable business model is one that requires the seller of access to the network to be responsible for collecting revenue from the consumer and distributing it to the owners and suppliers of the content.

There is ample precedent for this model in Canadian law and our experience with music Tariffs can point the way forward. We faced a similar problem at the dawn of the cable TV industry, when cable systems were distributing programming containing music to Canadian consumers, without paying performance royalties to SOCAN. Like now, they claimed they were mere conduits for the content, and any liability for copyright was the responsibility of the channels they were carrying.

The drafters of the Copyright Act had not foreseen the development of cable technology, leaving a gap that deprived television music composers of fair compensation for their work. After the Act was amended, the Copyright Board determined that the cable systems, and the channels they carried, were jointly and severally liable for Performance Right payments. They also concluded that the only practical place in the value chain for SOCAN to obtain payment was where the consumer paid their monthly access fee — the cable company.

The fairness, simplicity, and business logic of this solution is obvious in hindsight. Unfortunately it took ten years or more to resolve all the legislative, Tariff, and legal appeal issues. During that time, composers, and their families were deprived of their rightful share of the revenue that others were deriving from their work.

The primary enablers of mass Internet copyright infringement are the ISP's and they currently have no liability whatsoever. As drafted Bill C32 would further enshrine the status quo as "Notice and Notice" merely deflects the liability issue away from the ISP and on to the consumer. The one exception is the Private Copying Statute, which Bill C32 would prevent from being extended beyond CDRs to the devices and services around which the majority of consumer piracy revolves namely the ISPs and MP3 Players.

As written Bill C32 would do little to enable creators and owners of music to find their place of remuneration in the new value chain. Worse, it effectively expropriates us out of two sources of revenue namely Broadcast Mechanicals, and the Private Copying Levy. While the introduction of a "Making Available" right for artists and record labels, and the clarification of this right for copyright holders is a move in the right direction, it is largely symbolic. The inequities will remain as long as the primary infringer of these new rights, the ISPs and YouTube's of the world are protected from liability by the law.

Conclusion

It is important that we do not lose sight of the fact that the Copyright business is an important and growing part of Canada's and the global GDP and export trade. Intellectual Property companies such as ole are also a large employer that supports many individuals (singer, songwriters) and families that contribute to the common good through the taxes they pay.

At the recent Winter Olympic Games in Vancouver Canada proudly paraded our culture and the creators of our culture before the world. If our Creators are good enough to represent our Country when the World is watching they must be able to earn a living. We have the opportunity and the responsibility to deliver to these Canadians economic sustainability.

Failure to address the ISPs and other enablers of mass copyright infringement on the Internet will ensure that whatever legislation is enacted will be inadequate, and inadequate legislation will ensure that the copyright issue will never go away. It will haunt every successive Parliament until it is corrected. More importantly, the Government will have failed successive generations of creators, and their families, and the Canadian public will be deprived of the richness of their future work and the economic potential of the Digital Economy.

Respectfully,

Michael McCarty
President, ole

Avis

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