Copyright in the digital ageMark Smith

8 July 2010

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Overview

• Challenges facing content owners;

• Brief overview of the Digital Economy Act;

• Developments in other jurisdictions;

• How content owners are adapting to the digital environment;

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Challenges facing content owners

• Creative works are now easier to produce and reproduce than they have ever been;

• Consequently consumers are less willing to pay the prices that are charged for these works;

• Many consumers have turned to piracy;

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Challenges facing content owners

• UK creative industries generate 6%-7% of GDP;

• According to the Digital Britain report:

– BPI claim peer-to-peer file sharing costs the UK music industry £180m per annum;

– IPSOS estimated a loss in the UK for the TV and film industry of £152m in 2007;

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Challenges facing content owners

• Content owners face real challenges monetising their content;

• Need to take effective action to reduce piracy;

• Pressure to develop new business models;

• Should aim to offer consumers something they value at prices they are willing to pay;

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Digital Economy Act 2010

• Controversial piece of legislation;

• Passed in “wash-up” in April 2010;

• Implemented many aspects of Digital Britain report;

• Response to the problem of piracy via the internet;

• Various obstacles to implementation of measures;

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Digital Economy Act 2010

• Content owners can issue copyright infringement reports (CIRs) to ISPs providing an IP address;

• ISPs must notify the relevant subscribers of the CIR;

• ISPs must also supply copyright infringement lists (CILs) to content owners listing subscribers who have exceeded a threshold number of CIRs;

• CILs will be anonymised, but content owners will be able to recover subscriber details by court order;

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Digital Economy Act 2010

• Contains provisions granting SoS the power to require ISPs, by order, to take technical measures against repeat infringers (e.g. suspending their service);

• Permits SoS to make regulations granting courts powers to order blocking injunctions in relation to specific websites;

• Increases and standardises maximum fines for copyright offences generally;

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Developments overseas

• Similar legislation recently adopted in France:

– ISPs follow three-strike procedure on notification by a rights holder;

– Internet access suspended if infringer fails to comply;

• New Zealand Copyright (Infringing File Sharing) Amendment Bill proposes a similar system;

• Government ministers in other countries (e.g. Germany and Australia) have rejected calls for legislation there;

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Developments overseas

• South Korea introduced a similar system to the UK in July 2009;

– Physical and digital music sales increased;

– An indicative survey suggests that 45% of infringers had reduced their illegal downloading;

• IFPI report suggests countries with the least stringent anti-piracy measures suffered the most serious falls in sales (e.g. Canada and Spain);

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Adapting to the digital age

• Rights owners have tried to adapt to the digital age in a number of ways:

– Pursuing copyright infringers;

– Employing Digital Rights Management (DRM);

– Developing new business models;

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Pursuing infringers

• Some content owners have acted by taking legal action against pirate websites:

• Pirate Bay case

• Twentieth Century Fox v. Newzbin [2010] EWHC 608 (Ch)

– Defendant's website provided an indexing and search tool facilitating the download of films by its members;

– Held that it had communicated films to the public contrary to s.20(2)(b) of the CDPA 1988.

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Pursuing infringers

• Other content owners have decided to pursue individual file sharers;

• IP addresses identified and court orders obtained compelling ISPs to hand over physical address details;

• ACS:Law has sent thousands of letters to alleged infringers on behalf of content owners;

• Letters invite the alleged pirates to settle out of court;

• Resulting negative publicity and SRA attention;

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Digital Rights Management

• DRM imposes limitations on the usage of digital content, such as the number of times it can be copied or the devices it can be played on;

• Used by companies including Sony, Apple, Nintendo and the BBC to protect their content;

• DRM is usually cracked leading some opponents to argue that it is pointless;

• However, it could still offer protection during the key initial release period of a product and deter casual pirates;

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Digital Rights Management

• Since February 2010 Ubisoft has included DRM in its PC games which requires an always-on Internet connection;

• Attracted harsh criticism especially from those with poor internet connections or who game on the move;

• Encouraged denial of service attacks;

• However, piracy was undoubtedly reduced, even though the DRM was eventually cracked;

• Ubisoft considers effective DRM "vital" to the success of its PC games;

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New business models

• Music industry is a pathfinder for other creative industries in this area;

• Smaller size of files has traditionally left it more exposed to new technologies;

• Initially slow to respond to the digital market;

• Now arguably leading the way;

• Advances in technology mean that TV, film and computer games are increasingly vulnerable too;

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New business models

• Emergence of music downloads:

– iTunes is now the biggest music retailer in the US;

– Traditional bricks and mortar retailers such as HMV and Tesco now sell music online;

• Streaming services such as Spotify:

– Often advertiser funded with short adverts streamed before or between songs;

– Alternatively can be subscription based;

• Monetisation of music videos;

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New business models

• UK music collecting society PRS has responded by:

– Reducing its royalty rate from 0.22p to 0.085p per track played online;

– Increasing its share of licensee’s advertising and other revenues from 8% to 10.5%;

• Lured YouTube back to the UK market following previous failure to reach license agreement;

• Currently consulting on royalty fee for live concerts;

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New business models

• Examples of music industry players responding to consumer demand:

– Record label Apple releases material to download for the first time;

– Amazon cutting download price of some tracks to 29p;

– iTunes and other major stores responding to preference for DRM free music;

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New business models

• Developments in other industries:

– Increasing trend for digital distribution;

– Launch of Borders eBooks offering 1.5 million titles;

– Emergence of MMOGs;

– Product placement in TV, films and computer games;

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