Innovation and new ideas are often met with violent reactions from those who feel most threatened. Book-burning springs to mind as does prosecuting downloaders.
The recent and ongoing persecution, for that is an apt word, of PopCorn Time (PCT) is merely the latest manifestation of the debate with regard to the legality of downloading (particularly of films and music) as the BBC sets out. PCT is an app that allows for much improved downloading and streaming of material (especially films, videos, TV series, music, etc) based on the well-established BitTorrent computer protocol.
Evidence suggests that music piracy actually increases Entertainment Industry revenues. At its essence the current debate speaks to protection of copyright-holders versus the accessibility of copyrighted material to the public. The debate, though, extends far beyond this narrow confine. The debate exposes the divide between civil rights and copyright in a continuing struggle for society utility as explained in Justin Jenk‘s post. “Pochoclin” (as the PCT icon is known as) is a digital David in a valley full of confused Goliaths of governments and corporations. Downloading is the modern day’s equivalent to Prohibition, Drug Use, even Emancipation. While fundamental issues with regard to the Internet are involved, the current struggles seem unnecessary and unproductive in light of historical precedents. There is a basis for mutually beneficial accommodation between copyright-holders and the free spirits of the Internet that would benefit consumer-citizens.
Downloading – legal? illegal? Downloading has become a badge of an individual’s digital rights – like the vote! No-one is condoning illegal actions but the combination of: historical precedents; continuing technological developments, emerging digital practices as well as the actions of citizens reveal that the current spate of legal battles by copyright-holders and governments seems sadly misplaced, unnecessary and a wasteful use of resources. There is scope for productive accommodation that meets the needs of all parties. Interestingly given the nature of file-sharing, peer-to-peer (P2P) networks, streaming and downloading activities; the actions of governments reveal a more sinister encroachment of individual liberties engendered by cyber-security and use of Big Data. Citizens need to remain vigilant to protect their rights – often taken for granted.
Illegal downloading may be the issue of dissent for the current generations of Millennials and Generation Z . Just as alcohol and Prohibition was for our great-and grandparents and drug use (especially marijuana) was for our grandparents/parents as downloading seems to be for the Millenials. In the two historic both cases, outmoded overreactions by the authorities and vested (commercial) interests saw a wave of ossified regulations and laws that tried unsuccessfully to curb the natural tendencies, desires and actions of the populace. These inappropriate restrictions eventually gave way to more sensible licensing and codes of use.
Sadly the current thrust of legal battles by the Entertainment Industry (especially film and music) as well as several governments and regulators are ignoring precedents and best practices. It also reveals how the ‘copyright industry’ has promoted and had enacted laws that benefit itself with little regard for consumers. For the ‘record’, it is currently illegal in numerous jurisdictions to download or have stored on one’s computer copyrighted material that one does not have the right of access, usually through purchase. Use of material, hosting and or even possession of the means to download is deemed illegal. The concept of “collaborative liability” has been used to shut down many a site with punitive damages. Even downloading an app, such as PCT, poses a risk to a user.
Odd as bullet manufacturers are not indicted for gun-related crimes.
The whole concept of “open source” and “sharing”, so beloved of the proponents of the Internet, is being challenged by the legal actions of (narrowly defined) copyright-holders. However, these web champions forget that the Internet was at its inception a US military asset; gifted initially, in part, to the world of academia, then commerce and latterly to the general public.
There is a confusing mix of reactions at a national, EU and international level to PCT. The recent suspension of PCT’s domain by EURid, the UK blocking order (first time ever) and the Swedish Government making use of the software illegal (also a first) all echo the rampant steps of the US regulator and MPAA (Motion Picture Association of America) to increase the prosecution of companies and individuals. Despite these sanctions, “illegal” downloading is on the increase. Confusion abounds as the Dutch authorities have protected the right of downloading. Furthermore, the current EU directive clearly states that downloading for private use is not illegal.
PCT the latest skirmish in a broader war In its current form PCT is just twelve months old. The legal actions against PCT speak to the success and popularity of this application.To date it has over 4 million installs in six major markets: with 400,000 average users and 15,000 new installs every day. Stunning figures for a start-up and certainly one without any central organisation, nor any marketing and advertising efforts. In the Netherlands, PCT has achieved dramatic penetration: 1.3 million installs in a nation of 16 million. In corporate terms, PCT has a stronger following than Netflix, Amazon and Hulu.
So what is the issue that PCT has touched off? In short PCT is an improved ‘wheel’ in the world of downloading; offering a better service than that of the Entertainment Industry and dedicated ISPs, such Netflix. To add insult to injury PCT is offered for free – without fees or advertising. PCT has been made available in the spirit of “we just did it for the love of this project”. PCT has been dubbed “Netflix for pirates”. That is a catchy moniker but does not do justice the quality of the PCT offering: it offers faster and better quality downloading and streaming of material video in a more elegant, simpler and faster form. The Entertainment Industry cry foul for lost royalties, Netflix for unfair competition: so there is money at stake.
Technology promoting rights but it is not all about the money. Technology is the well-spring of change, choice and doing things better. One needs to step into the technology of Peer-to-Peer (P2P) file sharing and the BitTorrent protocol to appreciate the technical brilliance of it; which explains the resilience of the downloading practice and the legal challenges it engenders.
BitTorrent remains the most productive way that allows P2P file-sharing, distribution of data, especially for large files. The Internet prodigy, Bram Cohen (in the same league as Steve Jobs, Steve Wozniack, Bill Gates and Elon Musk) developed the BitTorrent protocol in 2001.
BitTorrent is the main protocol facilitating P2P file sharing. File-sharing, especially amongst P2P networks, is an accepted and essential function of the Internet that allows for productive streaming and downloading of media files. To put this activity into perspective there are over 150 million registered and active BitTorrent users. Globally, BitTorrent traffic is the third largest category (after web browsing and real-time entertainment), with its share accounting for about 15% and for half of all the bandwidth dedicated to file-sharing on the internet.
Any transmitting/receiving computer must have a Torrent client installed (such as: μTorrent, Vuze or Cohen’s own BitTorrent). The protocol works by disaggregating and segmenting files into unique identifiable pieces in such a manner that they can be transmitted and reassembled seamlessly. The low density distribution is achieved by a sending/receiving computer joining a “swarming” – allowing for the simultaneous transmission/receipt of data. While material is “scraped” from the Internet, a well as from an original “seeder” computer, the number of peers is unlimited as all subsequent computers are inadvertent sources of files. The nature of the protocol with its ‘rarest-first’ approach, in conjunction with a cryptographic hashtag, allows for data integrity, authenticity and instantaneous access amongst peers. BitTorrent trackers are the repositories of algorithmic based list of files available on seeders; The Pirate Bay being the most famous and popular tracker with (25 million members).
BitTorrent does not provide for user anonymity. Despite the successful prosecution by the Swedish authorities in 2009, the number of Pirate Bay users has increased. Throttling has had an effect limiting BitTorrent traffic, but there are active workarounds available. The design aspects of BitTorrent are accepted and fundamental characteristics of the Internet that we all take for granted.
The beauty of the PCT client is that the complexity of BitTorrent search engines, trackers, clients, seeds, decompression, playback, and storage is reduced to a single click. The developed and distributed nature of the BitTorrent protocol (or any successor to it) in combination with VPN-networks will make the service virtually impervious to law enforcement. That is the fear of current copyright-holders and hope of the Internet activists.
Copyright debate now in the mainstream Copyright is an arcane and archaic legal construct. Its application by the Entertainment Industry with regard to digital media has brought copyright’s shortcomings under increasing public scrutiny and criticism. It is an accepted fact that copyright is monopolistic: curtailing consumer access to information and material; as well as damaging – through overpricing, curbing competition, limiting distribution and stifling creative development. These are all well document and proven examples of monopolistic abuse.
The actions of the Entertainment Industry, such as Comcast (itself the subject of ongoing legal challenges), lobbying aggressively for new protective laws; prosecuting individual and corporate “pirates” as well as the questionable reimbursement and treatment of artists further reflect on the biased nature of copyright. These actions undermine the hoped for adherence to the concept of ‘net neutrality’.
There is broader issue that the Copyright Community is promoting its own interest at the expence of consumers. The Entertainment Industry claims that non-payment and “piracy” infringes copyright; that illegal downloading is robbing it and its artists of copyright enshrined revenues, especially royalties. The Entertainment Industry does not discuss how these royalties are shared between corporations and artists. In short, the artists invariably get very little: there is an important difference between the master and artist licences. Historical averages suggest that 10% of net revenues percolate down to an artist. Yet many artists are receiving as little as $0.004 per play. Put another way: for an income of $16,000 an artist would need over 4 million plays. Data from i-Tunes reveal that for each stream download $0.091 (“less than a dime”) is earned by the artist. Spotify’s records reveal that the average stream song generates a royalty of $0.007; yet a global music star can generate over $3.0 million in royalties a year. At the next level, Netflix maintain piracy, and especially PCT, is the main reason for its own lacklustre performance. It does not advertise the enormous royalty fees it needs to pay to the Entertainment Industry; charges that are not recoverable commercially from consumers.
Hence a dynamic is established that promotes and encourages downloading. In a recent survey of US consumers 40% acknowledged that it was incorrect to download material, yet 78% felt it was illegal to steal a DVD/CD from a store. PCT’s counter-claim is that it is merely a better facilitator of established (yet cumbersome) practices. An improved front-end to a 15 year old practice; a better fix of current service problems that copyright holders are unwilling to embrace. In PCT’s case is organizing and providing access for pre-existing material and files stored on servers, computers and PCs through automated, open-source systems and processes. PCT, as do many citizens and consumers, fully acknowledge the right of copyright-holders to be reimbursed. Also, PCT state that they wish to facilitate access to material, unreasonably held by the Entertainment Industry. PCT and many citizens consider that this restriction stifles sharing and the creative process that reflects and reinforces an essential, yet assumed characteristic of the Internet.
Copyright-holders’ legal pursuit of individuals has been pernicious. Fines have ranged from US$220,000 up to $675,000 for a university student (equivalent to $21,000 per song) as well as criminal convictions, yet one mother had the charges dropped against her with expenses reimbursed due to the excess zeal of the prosecuting companies. To date the draconian legal prosecutions have seen BitTorrent’s share of Internet band reduced, especially in the US from over 30% in 2008 to fewer than 9%; it is 16% in Europe. However, “illegal downloading” remains active: with a third of Americans admitting to having done it at least once and an estimated 18 million active at any given moment. The position is more extreme in Spain, where 84% of digital material is illegally downloaded. While copyright damages are often discussed the inefficient costs of the downloading protocols used by the legal ISPs, such as #64 encoding, are not. This inefficiency is magnified as the percentage of Internet users with paid services is consuming a huge and disproportionate share of the total bandwidth capacity.
The question remains why are such inefficiencies tolerated and who pays? It should be stressed that the data shows that music piracy actually increases overall revenues; a small but positive correlation. It may be an ‘urban myth’ to believe that downloading is economically and morally damaging.
Precedents reveal that current approach to prohibit digital downloading may be misguided. As with alcohol in the 1930s and drugs in the 1970s; the authorities, particularly in the US, have taken a sledge hammer to the walnut of downloading; as it has done in the past for certain other social ills.
Over a one-third of American Internet users admit to having “illegally downloaded” and there have been 10 million convictions during the period 1972-2012. It is a proven fact that it is impossible for governments to enforce laws that are inconsistent with expressed human behaviour. Go far enough back in history and there is a long line of examples that speak to the futility of authorities and vested interest trying to stop a good idea – namely one that has large social acceptance.
The lessons from the imposition and eventual repeal of Prohibition offer interesting insights with regard to how the Entertainment Industry and Government may choose to react in the future. Civil disobedience is the result. For example; at a grander level, the ending of slavery, female emancipation, post-colonial independence movements, the ending of segregation in the US and Apartheid in South Africa as well as the demise of the Soviet Union all are examples and evidence of this natural tendency forcing changes to nonsensical practices and laws. At a more personal level the failed attempts at Prohibition and the ‘war on drugs’ have proven to be ineffective in curbing consumption and a colossal waste of resources (yet vested interests have benefited) in the name of a questionable cause.
“Compliance Theory” states that Society’s members will follow laws and regulations if they believe the laws are just and legitimate. Thus lawmakers have a choice: laws can be enacted that accommodate Society’s views and practices or; tailored to change Society’s norms. Prosecutions appear to being having little impact on illegal downloading behaviours. The recent banning of The Pirate Bay in the Netherlands actually saw an increase in the rise of illegal download (people and material): from an estimate 15.7% to 18.4 in six months. While recorded BitTorrent traffic is reduced this reduction in share is a matter of both the successful legal actions by the Entertainment Industry and some governments as well as the effects technical modifications that allowing the activity to become invisible. In addition, there are broader issues worth defending that downloading touches upon. It reflects a desire to protect individual rights. This desire and concern is being played out in various arenas. Such as the use of: Big Data, Digital Privacy and Cyber-Security. The precedents established through downloading will influence and echo in these arenas. The current basis of copyright law suggests that the needs of social utility could better met as well as for the copyright-holders and artists.
Routes forwards. It is only a matter of time before the authorities relent in the face of overwhelming civil disobedience or the actors-of-vested-interest age and disappear from positions of power. It would be better, safer and more rewarding for all to reach an accommodation.
Steps should be taken to encourage recalcitrants to fast forward and extract their value on the way. For example Comcast has championed the status quo. Yet a person, such as Mr. Len Blavatnick (the Russo-American oligarch owner of EMI, Harvard MBA and founder of the Blavatnik School of Government at Oxford University) would be an ideal champion to bridge the current unnecessary chasm. His past actions with TNK-BP Russia provide clues to his possible approach. For its part, PCT itself somewhat fractious with rival offerings; and would need to consider how to bring the gap from its side.
It is assumed that all parties are interested in the growth and development of the Media industry; especially harnessing the creative, distributive and accessibility aspects that the Internet offers. There are three strands that provide the basis for a productive route forwards. Some are partially in place, others more speculative but a combination seems most promising.
1. Legal. Within this strand there are an additional three broad areas of accommodation. A levy could be imposed on recording devices. Alternatively there could be a blanket licence on use. Finally access could be legalized by expanding the fair use concept and definition of non-commercial/personal. It seems inevitable that current copyrights will be defended, but on a different basis than the currently.
2. Technology. PCT represents a natural innovative step. The current team of devolved programmers have added significant improvements to the BitTorrent protocol. Already BitTorrent, with its lower costs, higher redundancy and resistance to flash crowds is superior protocol. It is not inconceivable that the next step will be to render the service impervious to current law enforcement. The Entertainment Industry would be better served to co-opt, absorb or adopt such a technological advantage.
3. Business. PCT is just the latest evidence that ‘disruptive innovation’ is alive and well. The example of Uber in the taxi industry shows how technology and a more appropriate digital business have led to a disintegration of outmoded monopolies. Classic proven strategies would suggest that the Entertainment Industry embrace those technologies as well as adopt practices that: improve quality, time and cost. Cartels are often broken, with detrimental effects, if they do not reform themselves. It is not a difficult step to reach commercial terms to open up existing catalogues, alter distribution as well as utilise productive services. These steps would provide for creative growth as well as increased revenues, lower costs and capital for mutual benefit
Game over for the Internet pirates? Not at all! As history reveals, individuals will, at great personal risk and cost, champion causes that society will benefit from. Challenger san incumbent will comingle into a new mainstream. The current frameworks are unsustainable medium term, so better to get to a dynamic accommodation sooner than later for all concerned.
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Raktas has been involved in assisting parties in the Entertainment Industry, Developer and Legal profession to develop their businesses. Feel free to contact us at Raktas or check out related posts at justinjenk.com
Raktas – we offer solutions where decision-makers face complex issues with regard to capturing value from growth and restructuring opportunities. Justin is a business professional with a successful career as a manager, advisor, investor and board member. He is a graduate of Oxford and Harvard. Justin can be found at justinjenk.com or justinjenk.se