Supplementary Submission 2 for Commerce Select Committee
Copyright (Infringing File Sharing) Amendment Bill
Independent Studies

The Committee, during my oral submission, asked me for some example of independent studies that refute the line taken by the music and motion picture industries in particular, that file-sharing is destroying their industries. By no means are these studies the only ones that exist. They are perhaps useful to give the Committee insight into how some researchers who are generally not funded by the industry see the matter.

The Effect of File Sharing on Record Sales An Empirical Analysis
File Format: PDF/Adobe Acrobat 
Oberholzer-Gee, Felix & Strumpf, Koleman (March 2004)
http://www.unc.edu/~cigar/papers/FileSharing_March2004.pdf

File-Sharing and Copyright
File Format: PDF/Adobe Acrobat
Oberholzer-Gee, Felix & Strumpf, Koleman (2009)
http://www.hbs.edu/research/pdf/09-132.pdf

The Impact of Music Downloads and P2P File-Sharing on the Purchase of Music: A Study for Industry Canada
Description: Industry Canada undertook a music file sharing study during 2006-07 to measure the extent to which music downloads over peer-to-peer file sharing networks, for which the sound recording industry receives no remuneration, affect music purchasing activity in Canada. The data used for this analysis are from a Decima Research survey conducted between April and June, 2006, on behalf of Industry Canada. The report, prepared by University of London researchers, Birgitte Andersen and Marion Frenz, found that music downloads have a positive effect on music purchases among Canadian downloaders but that there is no effect taken over the entire population aged 15 and over.
Birgitte Andersen and Marion Frenz
University of London
PDF 61 pages and HTML

The Impact on Piracy (and P2P) on Booksales
Brian O’Leary, Magellan Media
Presentation Slides and transcript
http://www.slideshare.net/bfoleary/impact-of-piracy-and-free-t-o-c-f-f

The Recording Industry is Trying to Kill the Goose That Lays the Golden Egg
Dan Bricklin – September 2002
http://www.bricklin.com/recordsales.htm

STUDY: Pirates Buy 10 Times More Music Than They Steal
Article quotes “Consumer Culture in Times of Crisis which was conducted by the BI Norwegian School of Management>,  but is only available in Norwegian.
http://www.zeropaid.com/news/86009/study-pirates-buy-10-times-more-music-than-they-steal/

Digital Music Survey
DEMOS 2009
Ipsos MediaCT
http://www.zeropaid.com/wp-content/uploads/2009/11/survey.pdf

Analysis of Music Consumption in French Graduate Schools
Eric Brousseau (with David Bounie, Marc Bourreau and Patrick Waelbroeck)
http://www.brousseau.info/semnum/pdf/2005-03-24_Bourreau2.pdf

Social Science Research Network
This organisation publishes academic papers that can be downloaded free.
http://papers.ssrn.com

Papers include:

id600802-The Case against Copyright A Comparative Institutional Analysis
F. Scott Kieff
Stanford University October 2004

id1005564-How Magicians Protect Intellectual Property Without Law
By Jacob Loshin
Yale Law School July 2007

id1469564-Piracy on the Internet_Accommodate it or Fight it
P. Jean-Jacques Herings, Ronald Peeters, Michael S. Yang
Maastricht University August 2009

id1474929-Real Copyright Reform
Jessica Litman
University of Michigan September 2009
(there are 15 other papers by Litman on SSRN – all are worth reading)

id1480160-Content, Control and the Socially Networked Film
Professor Jon M. Garon
Hamline University School of Law August 2009

Finally, a piece that arrived in my inbox only this morning that is very timely:

id 1656485 – Is the Sky Falling on the Content Industries?
Lemley, Mark A. August  2010.

Supplementary Submission 1 for Commerce Select Committee

Copyright (Infringing File Sharing) Amendment Bill

Alternative Business Models

The Committee, during my oral submission, asked me for some example of alternative business models that could enable people to access content in a legal and timely manner.

There is, in my opinion, no single business model that will apply across all content-based industries. The key to providing legal and timely access is a mindset change by the content industry providers from control to service.

To get a handle on this, let’s look at the major business model that exists at the moment – that of the gatekeeper, or middle man. By controlling the supply of content, publishers have managed to charge the prices they want to charge rather than letting the price be determined by market mechanisms. They can do this because they have a monopoly right on particular items of content, which is granted to them by the state in the form of copyright. In theory, the monopoly is granted to the creator of the work, not the publisher, but the creator has usually not had the resources to a) manufacture copies of their work and b) distribute and publicise the work. The publisher has invested in the resources to do this and take the bulk of any revenues that accrue, paying a much smaller royalty to the creator.

The Internet changes this because it empowers creators to publish without the intervention of the publisher. However, because of the inherently democratic nature of the Internet, the work appears to take on a life of its own, and can be republished without the intervention of either the creator or the publisher. We call this: “copying”. For the creator, this can be as beneficial as they allow it to be, as it enables the work to reach an ever wider audience. For the publisher, whose revenue stream depends on control of access to the work, it is problematic.

In economic terms, in a pure market, price is based on scarcity – the less of something there is, the higher the price it commands, as long as it is something that consumers value. A state monopoly on production introduces an artificial scarcity. This has three impacts:

1. price is determined by the monopoly holder, not the market;

2. competition, which would tend to drive prices down, cannot eventuate as there is an insuperable barrier to entry; and

3. the monopoly holder has no incentive to innovate and every incentive to maintain the status quo.

While multiple publishers exist, only one publisher can produce copies of a particular work that falls under copyright. Thus, true competition in that work does not exist and thus price is not affected.

With the Internet and digital technology, scarcity of product disappears. The act of listening or viewing a work creates a copy by its nature – a copy in every respect identical to the original, and it is trivial to retain the copy and redistribute it, regardless of the originating source. Under law, this may be deemed illegal, but the law is unenforceable in practice and the copying continues. Because the publishers have relied on the state monopoly and lobbied for increased force of law, they have not innovated their way past this dilemma.

The economics are still the same: abundance is inversely proportional to price. With infinite availability, however, the price becomes infinitesimal and indistinguishable from zero.

New business models, then, must find new scarcities to market and new ways to compete.

Mike Masnick, an American consultant, commentator and entrepreneur runs a blog called Techdirt which “uses a proven economic framework to analyze and offer insight into news stories about changes in government policy, technology and legal issues that affect companies ability to innovate and grow.” He has chronicled the birthpangs of new business models, and questioned the old ones, since 1997. In 2008, after the release of the Nine Inch Nails album “Ghosts I-IV” as an independent release under a Creative Commons licence, Masnick analysed what Trent Reznor was doing and came up with a formula, dubbed the Reznor-Masnick formula:

CwF + RtB = $$$$

Connect with Fans + Reason to Buy = Revenue

However you package it, this is an essential truth behind creative endeavours in an era of abundant content – if you connect with people who want to hear/see/read your work and give them a reason that they agree with to buy what you are selling, they will give you money. The control of price is no longer with the supply side, but with the demand. If the customer can get the product for nothing, you must persuade them that there’s a good reason to give you money, so that you can continue to produce more content.

Technically, there’s a number of ways to do this. Let’s call some of them:

• the tip jar approach

• the graduated value approach

• the merchandise approach

• the micropatronage approach.

And the exciting thing is that there are probably many more approaches available, as long as one can free one’s mind from the old paradigm of command and control.

The tip jar approach takes its name from the food service industry, where a small container on the counter is used to request that you reward the staff for exceptional service. Essentially, the creator says to the customer “here’s my stuff for free. If you like what I’m doing, give me some money so I can keep on doing it”. It’s analagous to a busker passing the hat around after a performance. It is often seen on agglomeration/community sites like Jamendo.com and ccMixter.org and is most used by people who don’t pretend that music is their sole source of income but would like to see some reward for their efforts, if other people think them worthy. No one expects to get rich from a tip jar but we should remember that, in America at least, tips and gratuities are regarded as a legitimate source of income to the point that basic wages are low because tips make up the rest. We can regard it as the ultimate in performance-related remuneration.

There are some that deride the tip jar approach as “begging”, but it is not charity – it is simply saying “if this was worth something to you, why not give me something in return?”

The graduated value approach may draw its origins from the drug sub-culture where “the first taste is free”. Creators give away their work in its basic form in the hope that it will attract fans who will pay to purchase more advanced forms of the work, perhaps in higher quality or with additional extras that can’t be obtained otherwise. Techdirt, itself, has adopted this approach with a campaign (http://www.techdirt.com/rtb.php) that offers ever increasing benefits, from a $5 “Our gratitude.

“Techdirt Insider” Badge on your Profile” level to the $100,000,000 level of silencing Techdirt for a year, so it can’t criticise your business practice (I don’t think Mike ever seriously expects to sell that one). Along the way you can get t-shirts, signed books, consultancy sessions, a “ Day Hanging Out with Mike Masnick and the Techdirt Staff” and more. Masnick is offering experience – his to advise you, yours to enjoy being part of “his” crowd, for a little while anyway. Masnick is of the view that the personal approach will attract buyers.

This is similar to the approach that Nine Inch Nails (NIN) used with “Ghosts I-IV” and Radiohead with “In Rainbows”. With NIN, the music was downloadable for free and you could pay to get different levels of quality physical product (http://en.wikipedia.org/wiki/Ghosts_I–IV ) – with a $300US ultimate edition as the top level. Reznor then went on to connect with fans by releasing gigabytes of raw recordings and encouraging fans to remix them and use them in other works. A week after the release of “Ghosts”, it had amassed $1.6 million in sales. None of this went to a record label gatekeeper – the band got it all.

Radiohead also took a similar approach with a twist – they released their album onto the net and said “pay what you like” – the average price paid was £4 and in one year sold more than 3 million copies in digital and physical format. (http://en.wikipedia.org/wiki/In_Rainbows#Formats_and_promotion)

A revealing quote: “In October 2008, a report from Warner Chappell revealed that although most people paid nothing for the download, pre-release sales were more profitable than the total money from sales of Hail to the Thief [their last label-connected album]. The report also stated that the discbox sold 100,000 copies “

While these bands are at the top of their profession, and can command the large sums, the model works for all levels as long as your expectations are relative to your reputation and capability.

The merchandise approach is one that bands have used for years and often made more from than the record deals they have signed. It involves creating and selling paraphenalia associated with the creator or work, such as t-shirts, mugs, books, signed photographs. It’s not new – the only new aspect is the focus now going on it – rather than being an ancillary to the production of music, it is a genuine revenue stream that must be designed and nurtured.

The difference that the Internet makes is the breadth of distribution available. A creator is not limited to selling merchandise only in the local area, or at personal appearances. The world is your market and, with the advent of make-on-demand services like CafePress, Ponoko (an NZ success story) and print-on-demand machines in booksellers in the UK and elsewhere, the need to build an expensive inventory is much reduced with most items only being produced after they have already been paid for. This changes the economic dynamic for the content creator.

I have heard some in the music business say “But I don’t want to sell t-shirts! I want to make music!”. My view is that a professional musician has to focus on both parts of that title, the professional, business role, and the art-based musician role, if they want to be successful. No-one will force them to sell merchandise, but it is available as an option.

The micropatronage approach is also called “crowd-funding” and is achieving some success in all sorts of endeavours. This is where the creator asks a large number of people to make a small contribution each in order to fund a project. Patronage of artists is nothing new, either, but it has traditionally been the domain of individuals, companies and institutions with lots of money to give away. Micropatronage looks to the fans of a performer/creator and says “If you help me out here, I can produce my next project, which you will get a benefit from. A classic example is singer Jill Sobule, who crowd-funded her last album California Years (http://www.jillsnextrecord.com/). Jill offered a rising scale of benefits from the “$10 – Unpolished Rock” level (A free digital download of the album, when it’s released) to the “$10,000 – Weapons-Grade Plutonium Level: You get to come and sing on my CD. Don’t worry if you can’t sing – we can fix that on our end. Also, you can always play the cowbell.” She raised $88,969 (including one $10K pledge!) and the album was released in April 2009.

The key similarity between these four approaches is that they involve engaging with the fans of a creator and involving them in the process of creation as supporters and contributors. This is the “Connect with Fans” part of Masnick’s formula. Publishers don’t have much experience with the connection process, as they are about “shipping product” rather than creating content.

The “Reason to Buy” part of the formula is key to all economic transactions, but especially true on the Internet, where you can probably find the content for free. So why would you buy? For a number of reasons, including:

• altruistically supporting the artist

• getting something that can’t be copied and downloaded (such as a t-shirt, or an autographed item) i.e. something scarce.

• getting prior access to the finished product

• being part of the production

• [insert your reason here]

Another similarity to note is that these models will work both with and without copyright. Getting someone to buy something is less about having exclusive rights and more about offering something of value that the customer is willing to pay for. Ever stronger copyright rules and enforcement will not change this but will only make true innovation harder.

This doesn’t necessarily mean the end of publishing as a business, but it has to evolve from a control mentality to a service mentality, servicing both the creator and the customer. Publishers must add value to the process rather than just collect revenue for putting stuff up for sale. Publishers can have a role as curators, finding the quality work in amongst the dross; as collaborators, assisting a creator to achieve the potential of a work and as outsourcers, doing the work that the creator can do themselves but doesn’t want to. But they need to remember that, now, they need the creator more than the creator needs them and act accordingly.

There are the old standbys of subscription and advertising and these are in use now. Advertising really only works in a high traffic environment, if you want to garner solid revenue, but subscription for access can be a valid alternative to a per copy fee. Internet radio sites use this, in some variation. Last.fm has a ‘freemium’ model, where the basic service is ‘free’ (in exchange for some information about you) but premium features are available on subscription. The freemium model is also prevalent in software distribution.

As I said earlier, these are not the only alternative business models around. Techdirt is a great resource (http://is.gd/ef73a) as Masnick crowd-sources the items he lists and comments on, so his net is very fine indeed. More occur every day as creators find new ways to get their work in front of their audience.

I’d like to finish with a quote from Robert Heinlein:

There has grown in the minds of certain groups in this country the idea that just because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with guaranteeing such a profit in the future, even in the face of changing circumstances and contrary to public interest. This strange doctrine is supported by neither statute or common law. Neither corporations or individuals have the right to come into court and ask that the clock of history be stopped, or turned back ~ Robert Heinlein, Life Line, 1939

No surprise to those of us who have been calling “bullshit” all along, but what’s really interesting is why they’ve made the study. According to Ars:

It’s all due to the PRO-IP Act, which passed under President Bush and has led President Obama to appoint an Intellectual Property Enforcement Coordinator within the White House. Part of the IPEC’s duties include gathering data on piracy and counterfeiting, and current IPEC Victoria Espinel is now rounding up that data. The GAO report is part of this process, and it certainly doesn’t make industry estimates look compelling.

Espinel hasn’t said much since her appointment, but what little she has said has pointed to a desire to do her job properly, which may annoy the industry trade organizations who urged the Senate to appoint her. Espinel came out of the USTR, and many expected her to follow the same old line that Susan Schwabbe and Ron Kirk have been following, namely: “copying is bad, mmmkay?”. However, Gigi Sohn of Public Knowledge was one of the first on the ‘open’ side of the debate to declare support for Espinel saying “We believe she will be fair in her approach to intellectual property enforcement issues.”

It’s important to distinguish, however, between the GAO’s report and Espinel’s ultimate decision. The GAO report is only one of the inputs for Espinel to consider, and I have no doubt that industry spin-meisters are working hard to counter its implications, as I type. But it is a significant data point, as the GAO is an arm of Congress, not the Executive, and their reports carry a lot of weight with lawmakers in the US.

It’s also worth remembering that the GAO accepts that piracy and counterfeiting are real and “sizable” problems, but their assertion that the accepted figures, the studies leading to those figures and even the base data that fed into the studies are all flawed is a huge admission from any branch of the US government, and a big boost to those of us who have been arguing this for what feels like forever.

What would be interesting to do, if I had the time, would be to go through official pronouncements and Congressional records to find out where these bogus studies have been cited, and determine what policies became law because of them (I suspect the PRO-IP Act would be one of them) and how much has been spent on the basis of them.

I’ll await Espinel’s final report with interest.

• Nat Torkington
• Michael Geist
• Jamie Love
• Cory Doctorow

One thing that stands out, as Nat notes, is that the reported New Zealand positions are much more realistic and reasonable than MED’s public utterances would have lead us to anticipate. That’s great, but we’re only one voice at a table we shouldn’t really be sitting around. And I say again, there is nothing in a confidentiality agreement that limits you exposing your own position to your own citizens. If you’ve got nothing to fear…

ACTA is coming!! That’s right, sportsfans! The circus called ACTA is coming to Wellington on 12-16 April this year. In the lead up to that, the Commerce Minister, Simon Power, is calling for submissions “to help set a higher benchmark for the enforcement of intellectual property rights”, so there’s obviously no prejudging going on there ¡  Make your submission by 31 March.

Also, this week, InternetNZ announced that they will be hosting a PublicACTA session on the 10th of April, as a counterpoint to the SecretACTA sessions the Government is hosting. I’ll be at that session and I encourage anyone with a Saturday to spare to be there two.

And lastly, this week, I gave a presentation on ACTA at Ignite!Wellington, focussing on the secrecy, as well as something we haven’t heard too much about – pharmaceuticals. It’s worth noting that at the USTR Special 301 meetings this week counterfeit drugs was very prominent in the committee’s questioning of NGOs.

Have a look at the Ignite! site, as there were some other good sessions (Mike Brown’s zen poem about cycling across America was my favourite) but I’ve embedded the video of my talk below as well, if you just want the ACTA bits. It’s a testing format – 5 minutes, 20 slides changing every 15 seconds – but I enjoyed it and learned heaps for the next one ;-)  Very hard to draw down hours of material into 5 minutes. Might help to think of it as a series of tweets…

There’s another interesting contrast: President Obama’s transparency memo – his first presidential act –  seems to have no impact on the United States Trade Representative, Ambassador Ron Kirk, who still insists that the ACTA negotiations are a matter of “national security”. It’s an interesting sidenote that almost all the other nations involved in ACTA swear they’ve all urged greater transparency in the negotiations, so one is left wondering which country is actually keeping it secret. Lookin’ at you, Barack!

What do we actually know about ACTA? Well, it’s named the Anti-Counterfeiting Trade Agreement, even though there appears to be nothing tradeable involved, and precious little about counterfeiting. It’s happening outside the bounds of the two international agencies specifically set up to do this sort of work – WIPO and the WTO. Why? Because the USTR couldn’t get it’s own way in those fora (having tried both – TRIPS did not deliver all the US wanted in the DMCA, and the WTO nations decided that they had more important things to worry about than the business models of US corporations) so it created a new one – a plurilateral, ‘voluntary’ arrangement where they could make up some rules and you’d have to agree if you want to play. The USTR has admitted that a lot of ACTA is based on the US-South Korea Free Trade Agreement, so anyone who wants an FTA with the US can excpect a requirement to join ACTA (“It’s not just us, you understand – it’s an *international* agreement” – yeah right).

But we are not allowed to see any details of the draft agreement or, if we are, we are not allowed to talk about it. Lawyers are, especially entertainment industry lawyers, but citizens (who are paying for it through taxes and who will be affected by it when it becomes law) are not. Even elected government representatives are not allowed to see the details that subordinate officials are negotiating – in Europe, America, the UK, questions have been asked at high levels, but no answers are forthcoming.

Pressure from individuals like Michael Geist, Jamie Love and myself through our respective freedom of information laws, from Organisations like the EFF, Creative Freedom Foundation, TechLiberty and acta.net.nz, from media commentators like Glyn Moody, Mike Masnick, Colin Jackson and many more, from actual politicians like Tom Watson(UK), Clare Curran(NZ), Jens Holm (Swe) and Senators Leahy, Spector, Sanders, Brown and Wyden(US) have forced some information into the public arena.

We know that:

There are 6 sections to the agreement:

1. Initial Provisions and Definitions;
2. Enforcement of Intellectual Property Rights;
3. International Cooperation;
4. Enforcement Practices;
5. Institutional Arrangements; and
6. Final Provisions.

The Enforcement of Intellectual Property Rights chapter has four sections:

• civil enforcement,
• border measures,
• criminal enforcement, and
• the Internet.

Other than that, we know very little. We get bland bullet point agenda and anodyne reports from the nations involved but nothing of substance, nothing that would reasssure us that the officials actually have our interests at heart, as well as the “copyright industry”.

What we do get are (very occasional) leaks – first, that list above released on Wikileaks, back in 2008 (which was probably the first time most people heard about ACTA), and more recently (via Wikileaks again) a memo from a European Commission bureaucrat commenting on some draft text proposed by the US. (Wikileaks is currently unable to be used as they are cramped for funds – please donate)

Let’s look at that memo. It’s worth quoting the summary in full:

A. GENERAL COMMENT

An overarching issue is the relationship between the US proposal and relevant EU legislation. These particular themes relating to the concepts involved the scope of the proposal and the identification of possible conflicts.

Scope of the proposal

The US proposal mainly deals with copyright, apart from a single reference to trademarks in paragraph 1. Relevant EU legislation is generally broader in scope and this issue will require further clarification from a policy perspective. This clarification concerns paragraphs 2 and 3 as paragraphs 4 to 7 are only applying to copyright.

Concept

The US proposal refers to the “Digital Environment”.

This seems to imply all digital technologies. Digital technologies are not only used in an online environment but also off-line, for example in CDs, DVDs and Blue Ray. However, this chapter has been nicknamed “the internet chapter”. Does is cover both online and offline?

The EU Acquis wording refers to “Information Society Service”.

This concept defined ISS as “services normally provided for remuneration, supplied at a distance, by electronic means and at the individual request of a recipient of services”.

Possible conflicts

1) The US proposal provides for both civil and criminal protection against copyright infringement.

This goes beyond the WIPO treaties and the EU Acquis (Directive 2001/29/EC) (CISD) which refers to “adequate legal protection” without specifying in what this protection would consist of (see 1st comment regarding paragraph 4). Furthermore, the e-Commerce Directive (2000/31/EC) (ECD) applies horizontally across all areas of law which touch upon the provision of information society services, regardless of whether it is a matter of public, private or criminal law. It is not clear how the US proposal interprets this, if at all. For example, paragraph 3.a. is limited to civil remedies only.

2) EU may wish to review the potential implications, if any, with the recently adopted Consumers Rights Directive, which is part of revised Regulatory Framework for Electronic Communications (Telecom Package).”

Right off the bat, we can see that there are inconsistencies between what the US wants and what the negotiators appear to have been talking about. The commentary points out the inconsistency with existing EU understanding, practice and law, and points to potential conflicts between ACTA, as proposed, and EU practice.

Sorry? They’ve been talking about this for 2 years and they still don’t understand what THEY mean by “digital environment”?? But we do get the point that “The US proposal mainly deals with copyright”. So why is this still the Anti-Counterfeit Trade Agreement?

I was going to go through the document point by point, but this entry is already long. It’s worth doing and I will soon, but right now I’d like to focus on a few things:

• The document is 7 pages long.
• It disects a proposal document that is probably longer, but is broken up into 7 sections.
• It comments on each section, in detail.

I don’t know how many bureaucrats are reading this but, let me tell you, my old grey ears were hearing alarms right at that point. If there’s disatisfaction with every section of a document, because of first principles, it’s time to send it back to be rethought. Instead, the EU commentary is attempting to wordsmith it into acceptability.

The sections (paragraphs in govtspeak) are:

• Paragraph 1:  General Obligations
• Paragraph 2:  third party liability for copyright infringements.
• Paragraph 3:  circumstances under which third party liability may be limited.
• Paragraph 4:  Technical Measures.
• Paragraph 5:  independent civil and criminal enforcement
• Paragraph 6:  Rights’ Management.
• Paragraph 7:  limitations of Right’s management

Without the text of the proposal, it’s difficult to really determine what the commentary is actually refering to but a few quotes stand out.

Re Para 1

However, unlike these latter provisions, the proposal does not state that the procedures etc. also shall be fair, equitable and/or proportionate in relation to, for example, an alleged infringer. Against this background, it appears like the proposed paragraph is not coherent with TRIPs and IPRED

Re Para 2

EU understands this paragraph and accompanying footnotes as providing for an international minimum harmonization regarding the issue of what is called in some Member States “contributory copyright infringement”. This concept does not exist in the current Acquis communautaire and in the law of several Member States

Re Para 3

The aim of paragraph 3(b) is to establish a system that can be considered to make the exemptions from liability subject to specific conditions: notice-and-take down procedure to address the unauthorized storage or transmission of materials protected by copyright or related rights. Such an obligation is currently not found in the ECD.

Re Para 4

It is not clear if the scope of the provision covers only phonogram author rights and neighbouring rights (performers, producers) or do the definition of ‚”author” also includes film, audio, literature.

Re Para 5

Footnote 8 seems to govern “interoperability” issues, i.e. the ability of consumers to play, for example, music which they have downloaded legally, on different players such as an iPhone or a Microsoft Media Player. The footnote seems to be intended to make sure that contracting Parties do not require that such interoperability must be achievable.

We’re talking about some new law here, to achieve this “harmonization’ ACTA seeks. Things that aren’t illegal now in most countries (including the US) will become illegal “in order to fit with our international obligations”.

The US tried this with TRIPS in order to fuel the DMCA through Congress in its original form and fell at that hurdle. The international community said ‘woah, nelly, this far and no further!” and some of the more draconian measures (like ‘graduated response’) had to be dropped. This is them trying it again.

We’re talking about major changes that will hobble innovation and tie us to decaying business models that actually only benefit a very few corporations. How do artists, musicians and authors get any benefit out of this, when they’re already struggling with their respective industries to make a buck? It’s not piracy that’s taking your money, people – it’s the contracts you signed with your publishers.

Although ACTA had its origins with Big Pharma and Big Agribusiness, the copyright industry has leapt on it holus-bolus. They’re the shock troops now, taking the heat, but my money is on the pharmaceutical and agribusiness lobbies still being heavily involved. While we are rightly concerned about what is in the “Internet chapter”, I really want to read the rest of it, where the rules against generic drugs and patent-free seeds will be. That has the capacity to be just as important and we should not lose sight of that in our desire to keep information free.

The process used to get to the end point is just as important in democracy as the result achieved, often moreso. An open, uncorrupt and objective process is the only way to gain any sort of result that benefits all parties. ACTA, so far as we can see, is only going to benefit the corporations, and that’s why, in my opinion, they’re keeping it hidden.

Secretary Clinton said:

“The final freedom, one that was probably inherent in what both President and Mrs. Roosevelt thought about and wrote about all those years ago, is one that flows from the four I’ve already mentioned: the freedom to connect — the idea that governments should not prevent people from connecting to the internet, to websites, or to each other. The freedom to connect is like the freedom of assembly, only in cyberspace. It allows individuals to get online, come together, and hopefully cooperate. Once you’re on the Internet, you don’t need to be a tycoon or a rock star to have a huge impact on society.”

What we need to see now is the implementation of those high ideals, not more restrictions. The reality has to match the rhetoric. It’s way past time to open the shutters on the ACTA process. To the participating governments, if you’ve got nothing to hide, why are you hiding something?

PS You can sign an international petition for more openness in the ACTA process at http://a2knetwork.org/joint-declaration-acta

So what happened to drag me away from the keyboard?

• I got a dog (using the same rule as cats – see other blog)
• I helped run a BarCamp on Open Government
• I did a couple of other projects that I can’t link to or talk too much about
• I had bronchitis (been a pretty crappy winter all around, health-wise)
• I was accepted as an exhibitor in the Kapiti Arts Trail this weekend (#91)
• (I’m sure there was some other stuff)
• Oh yeah, I signed up on Twitter.

That last is the big one, really, as it chews up the most time. I have barely looked at RSS since April, and have only made one post to my family blog. It’s really quite fascinating to me (10K tweets later) and not a little frightening. I’m following most of the people I used to use RSS for, but now it’s in real time.

So, what’s hauled me back to the keyboard? ACTA – the Anti-Counterfeiting Trade Agreement – you may remember that I’ve blogged on this before. Well, it’s just entered its next round, in Korea, that well-known home of freedom and civil liberties (and the first country in the world to pass a 3 strikes law and implement it).

So, wassup with ACTA? For background, I’d like to point you to a recording of me discussing ACTA with Kim Hill on National Radio recently. Very pleased with the event and it’s now very timely, as ACTA has reared up again.

Those playing at home will remember that I’ve discussed the “intellectual property” aspect of ACTA before, and the fact that it’s being negotiated so secretly, more secretly than any other “trade treaty”. Long time players will also note that, in my submission to MED in June last year, I said (in para 17):

Further, the scarce official information available about ACTA would appear to indicate that it was intended to harmonize the enforcement of existing IPRs. However, the only current approach to a harmonized global concept of IP is occurring through WIPO, and ACTA appears to seek to operate independently of WIPO. There seems to be a fatal disconnect here – how can you harmonize enforcement if you don’t first harmonize the definition of infringements?

So now they’re seriously talking about this area and how they want to do it.

Michael Geist has broken the story and Cory Doctorow has broached it to the BoingBoing community. Neither of them appear to have actual text, but quote sources who say the draft text is modelled on the US-South Korea free trade agreement.

Geist outlines five issues:

1. Baseline obligations inspired by Article 41 of the TRIPs which focuses on the enforcement of intellectual property.
2. A requirement to establish third-party liability for copyright infringement.
3. Restrictions on limitations to 3rd party liability (ie. limited safe harbour rules for ISPs).  Notice-and-takedown, which is not currently the law in Canada nor a requirement under WIPO, would also be an ACTA requirement.
4. Anti-circumvention legislation that establishes a WIPO+ model by adopting both the WIPO Internet Treaties and the language currently found in U.S. free trade agreements that go beyond the WIPO treaty requirements.
5. Rights Management provisions, also modeled on U.S. free trade treaty language

Doctorow’s language is a little blunter – he notes that ISPs will have to proactively police copyright on user-contributed material, that ISPs will have to cut off Internet access of accused copyright infringers or face liability, that the whole world must adopt US style notice-and-takedown rules without evidence of infringing copyright, and that there will be mandatory prohibitions on breaking DRM.

We can’t confirm or deny what is in the actual draft because we don’t have a copy. The US administration wrote this chapter of the draft but is still regarding ACTA as a matter of national security. They recently let 42 individuals see a draft text, but only 4 were from what we regard as “civil society”. The rest were big corporates. This, the Obama Administration calls “transparency” and consultation. To be fair, Bush’s administration was worse, but this is not what we expect from a leader who campaigned on “change”, “hope” and “yes, we can”.

The New Zealand government is no better. Our officials say:

The countries participating in the development of ACTA have agreed that general information about ACTA’s objectives and the negotiating process should be made public. In that regard, MED has provided a range of relevant information about ACTA on its website. However, ACTA participants have also agreed that information relating to formal negotiating positions of governments should be protected, as is the standard practice in international treaty negotiations. It is in this context that we are unable to reiease many of the items you request.

First point – it is not the standard practice – the WTO Doha Round, the Free Trade Area of the Americas, World Health Organisation, WIPO – all publish the texts and proceedings as they go.

Secondly, the material published by all nations, including the Ministry of Economic Development is contextless spin, rather than substantive reporting of negotiations. “General information” is a kind way of putting it – “We’re doing something that will affect all of you but we’re not going to tell you until we’ve done it” is more accurate.

What is hardest to understand is how the governments involved – United States, Switzerland, Japan, Australia, the Republic of Korea, New Zealand, Mexico, Jordan, Morocco, Singapore, the United Arab Emirates, Canada and the European Union – can justify this secrecy in the face of domestic freedom of information laws, pledges of transparency and even the concept of democracy – government of the people, for the people and by the people.

It’s going to get worse before it gets better, and individual protests are going to be little waves crashing against the rocks of government indifference.  The proponents of this type of action have money, power and the ears of their legislators – we have our spirits, our wills and our need to be free. To make sure that’s enough, we need to join together and use our collective voice. In New Zealand, I recommend the Creative Freedom Foundation, InternetNZ and the NZ Open Source Society, all of whom have expressed their concerns to government previously. Elsewhere the Electronic Frontier Foundation, Knowledge Ecology International, even your local Pirate Party and the like are carrying the flag.

The proponents of ACTA say it’s about protecting the property of the content creators, letting them earn a living, that opponents  want to steal the food from the mouths of artists and their children. They’ve persuaded (or coerced) some artists and writers to speak up in this matter, to plead their cause. But the real blocks to artists, writers and musicians earning their fair share of income are the publishers themselves, with iniquitous contracts, onerous debts and dubious expenses. All the publishers are trying to protect is a dying business model which even now is still earning them billions each year.

Copyright isn’t about property – it’s about knowledge. It’s a social contract between the creator and the receiver (I won’t say “consumer” because knowledge isn’t consumed; it’s shared) and protects both. Publishers have always owned the gate to knowledge. The Internet and digital technology changes that completely. We’re all publishers now.

In a knowledge economy, you’re not buying and selling knowledge, just as you’re not buying and selling cash in a cash economy. In a knowledge economy, knowledge is the currency used to obtain something from the receiver – attention, loyalty, or something else  - something of value to both parties. It’s a different market model from the industrial one we grew up with of few producers, scarce product and many consumers. Product is no longer scarce, nor can it be made artificially so. The old model is broken, yet the old guard is trying to hamstring the new for as long as possible.

Google ACTA, learn what it’s about and what it’s claimed to be about. Wake up your media who are strangely silent on this matter and make them report it, if only to report your protest. Contact your elected representatives and make them aware that you don’t want this, that you won’t stand for it and that you expect them to represent your will, not the will of Hollywood and the recording industry, the pharmaceutical industry and the big broadcasters, who all stand to make more money by locking in our choices in what we can do with information.

Don’t just sit there – DO something!

The appeal should be interesting

(Tip o’the hat to Simon Grigg)

Yesterday, Rob Stowell posted a link to a series of posts on Hypebot about free music, from inside the industry. I recommend reading them for some insight and to form your own opinion before reading on, because I’m about to dissect them. ;-)

I wrote on PAS:

Some of those people are clinging to a false hope. I think Kevin Kelly (surprise) and the guy from INgroove have it sussed, but most of the rest are still talking about “maintaining exclusivity” and using free as a promo.

I’ll stick with Reznor’s view from the clip I posted the other day – as soon as it gets published, someone will rip it and put it online for free. It is not possible to stop that technically. If your business model doesn’t take account of that, you don’t have a viable business model.

And it doesn’t matter whether it’s music, art, literature or photographs; if it can be delivered digitally, someone is going to give it away, whether you want them to or not.

Now that you know that, formulate a business plan that takes it into account. That is the only sustainable way to make money in this environment

Rob came back and quoted Glenn Peoples’ billboard.biz column that headlined this little angst-fest, saying:

There’s a little more in this than “industry people” wanting to (further) feather their nests. It comes back to robbery’s original feelings of misgiving: “free” sounds great, but it’ll have down-stream effects we may not like so much. Personally, I have a very low tolerance for advertising wrapped round my culture.

Which is interesting because that lets out television, radio, newspapers, movies and much of the Internet, including Public Address itself, which all have advertising support for revenue. But I digress. I started to respond on PAS but the post was getting long and convoluted, so I thought I’d put it here instead. Herewith is my analysis of the Hypebot series.

Glenn Peoples doesn’t take a stand in this debate. He’s reporting on the Hypebot series. But his report is pessimistic, to me:

In theory, a company should set price equal to marginal cost. Digital goods on the Internet, though, are not akin to razorblades. In reality, not all digital music can be priced at zero. The information comes with real costs. Even if it feels free (Nokia’s Comes With Music) it’s not free.

Peoples also quotes David Zaslov:

“We don’t want to lose marketshare, but at the same time, we don’t want to encourage free content. Free didn’t work for newspapers. Free didn’t work for the magazines. And it doesn’t work for the broadcast companies. We have to see how it develops. But ultimately, we all have to follow the behavior of the consumer.”

That’s the general flavour I get from the series, apart from the ones outlined below; we don’t want it but we’ll have to give in to part of it, begrudgingly.

Kyle Bylin is actually inarticulate – I’m not really sure which way he’s going.

Virgil Dickerson is positive, but I tried his sampler and a) didn’t warm to the music (personal taste) but b) thought even less of the technological presentation. I think he “gets” free, but he’s struggling to do more than teasers, despite what he says.

Greg Scholl is very begrudging and only sees the teaser aspect:

As for the second type of free music – giving away tracks to sell tracks – we very much believe in the use of free music downloads as a promotional tool, and encourage our clients to give a song away

Really misses the point, for me. He still sees the revenue as driven by the individual song, but the idea that each copy is monetizable (and therefore each download is “stolen” revenue) is what is standing in his way. Maybe he needs some it zen marketing – you’ve got to let go before you can receive.

Bruce Warila is actively hostile:

Now that music is unbundled and selling for copper (pennies), it’s time to fight a new battle. If sharers rob us (rightsholders) of our right to digital exclusivity, which is our right to exclusively launch, release or to maintain an exclusive digital presence, then we are the fools for not insisting otherwise

And let’s remember, he’s an “investor [and] currently acting as their strategy and technology officer” for this Music Xray outfit (still in beta), so he’s not speaking as a songwriter or musician when he’s talking about rightsholders. He goes on:

Your strategy now should be to prepare for the day when a brand offers to buy your exclusivity. Since your songs are your advertisements, your calling card and your audio pheromones, perhaps consider being a bit more mysterious about everything else in your life. Hold back the baby pictures, the studio session videos and the near death experience stories until the exclusive offer shows up in your inbox. After all, if your free music offers don’t get you marketplace traction, the other stuff is just a pile of (fill in the blank).”

That’s just sad, to me. It’s all about commodities. His brand new thing is going to crash and burn because it’s based on an old model – he’s just wrapping it in new paper.

Chris Vinson is sort of positive:

Once you have a fan, it’s a lot easier to ‘upsell’ them on other forms of same music — a $0.99 acoustic version, a CD, a live show, etc. But without that easy first step, there is a big chasm to cross. I think the key is to have a overall strategy, and include ‘free’ as that easy first step.

But this is still missing the point. He’s treating the teaser as a loss leader. It’ll work, up to a point, but compare it with Radiohead giving away the whole damn album. And still being the top seller.

Bruce Iglaur is still in the old mode as well:

At this point, no model for monetizing music (for example, advertising-based free streaming or downloading) other than traditional royalties has proven to fairly pay artists, songwriters or their patrons/financiers (the labels). So, a free track or stream with label and publisher approval? Sure. Distribution of music without label and publisher approval? Nope.

It can’t be stopped, but he continues to cling to a belief that it should be.

Jim Mahoney is even more doom’n'gloom:

Know that if you waive performance or other royalties in exchange for “promotional value” you may be putting the final nail in your coffin (at worst) or allowing others to profit on your music (by building their own business models and taking your audiences and selling advertising or subscriptions) while you make nothing tangible in return (at least).

Completely missing the concept that you might be making money anyway though others may be able to “profit on your music”. He’s fixed on the sales model and anything that interferes with that is wrong.

I’d agree that Kevin Arnold is kinda positive, but wary. He’s still on the promotional kick, though:

Just like the handouts at Costco, tasting at a winery, or swag bags at conventions and parties, labels and artists have long given away music in the form of samplers and promo CDs, free performances, and outlets like radio and MTV. In the digital world this act has value in ways that we’re still learning and consistently surprise us. Who would have thought that the free giveaway of Nine Inch Nails’ last record would end up with it being the top selling album at AmazonMP3 last year?

He’s aware but still not there in understanding. ” Who would have thought that the free giveaway [...] would end up with it being the top selling album [...]?” – that’s the key right there.

Think outside that box, as Reznor and co did, and do. It’s not just promo, it’s a new way of doing business that’s as old as the bible: “Cast your bread upon the waters”(Ecclesiastes 11.1) or “Give, and it will be given to you” (Luke 6:38). That’s not to say I’m turning to a deity to look after copyright – not at all – but the concept is not unlike Karma – what goes around, comes around.

Bruce Houghton‘s little poem is almost right – “free music only has value if it sparks action” except it’s still tying the music to the purchase and so, for me, misses the ultimate point.

I’d have to say that, while I think I agree with Robb McDaniels, he’s a little incoherent. What I get out of his piece is that he understands that value is a malleable concept, and subject to perception. Maybe

Jeff Price gets it:

Free giveaway of music was, and still is, an important part of any marketing and promotion campaign. The change that has occurred is a music fan can now get any song they want for free, not just the ones being authorized. [...] I disagree strongly with the statement that the industry is not profitable – it is. In just one month, bands and digital only labels are generating tens of thousands of dollars,recouping their costs more quickly and making a healthy profit on top. Revenue is being generated from MUSIC SALES in unprecedented amounts allowing labels and artists to have real careers and earn significant annual income.

As does Susan Ferris:

Having a song that is available to the masses for free has proved profitable for us. We have been able to give a taste with out spoiling the dinner. Ultimately the fans have been truly appreciative and in return purchased the whole CD

Watch for Tunecore and Long Live Crime Records to move ahead in the future – understanding is everything in a knowledge economy.

Actually, I’m more hopeful than not, having read those pieces. The ones who get it will be the luminaries of the next decade of music. And the ones who don’t, won’t be around.

On Torrentfreak there is a report of an EU vote (481 in favour, 25 against and 21 abstentions) to accept a report about fundamental freedoms on the Internet.

For the third time in a year the European Parliament has spoken out against tougher anti-piracy legislation that would allow alleged file-sharers to be disconnected from the Internet based on evidence from anti-piracy lobby groups. Instead, they chose to protect rights and freedoms of Internet users.

Apparently, the French are not amused.

The report and (press release) contains lots of “whereas’s” and “having regard to’s ” but is essentially a “hands off!” to individual governments. It’s not a bad draft for that ever-phantom “Internet Bill of Rights” actually, and worth the read.

So, Germany has said no, the UK has backed off, Ireland’s action is a) voluntary, b) restricted to one ISP and c) likely to disappear as it was contingent on all the other Irish ISPs coming on board, which they declined to do, the EU has several times said no (three times in the last year, the press release says) and AT&T and Comcast in the US have both denied doing deals with the RIAA, as was reported last week. Oh, and New Zealand blocked it as well. Eventually.

Where does that leave the French? They’re not known for giving a franc about what the rest of Europe thinks, but I can’t see even a massive ego like Sarkozy wanting to jeopardize trade links just to push this through. They were supposed to be the precedent-setting vanguard for graduated response in Europe, just as we were for the English speaking world, and now they stand alone, up un creek sans le paddle, or even much l’eau.

Prime Minister John Key has announced that the government will throw out the controversial Section 92A of the Copyright Amendment (New Technologies) Act and start again.

Justice minister Simon Power will now meet with officials and rewrite the section of the Act from the ground up.

No timeframe has been set for whatever clause will replace Section 92A.

Let’s hope we can do it right this time.