Professor Peter S. Menell1
University of California at Berkeley School of Law
February 13, 2012
Throughout history, technologies for instantiating, reproducing, and distributing information have evolved in tandem with the creative industries that cultivate, fund, and distribute literature, music, film, and art. Although the relationship between these technology and content industries is often characterized in contemporary policy debates as deeply polarized and antagonistic, the historical record reflects a more symbiotic and multi-faceted story.
Symbiosis in Historical Context
Technologists and technology companies have long played critical roles in the emergence of the content industries and many eventually came to see protection and promotion of expressive creativity as critical to the growth and development of their businesses. It is no accident that the General Electric Company (GE), after acquiring rights to the Marconi wireless patents in the United States, spearheaded the formation of the Radio Corporation of America (RCA), which in turn launched the National Broadcasting Company (NBC), one of GE’s many subsidiaries and a leading content company. GE profited from the manufacture and sale of broadcasting equipment, selling advertising on NBC stations, and selling radio receivers and other consumer electronics products.
The emergence of the American Society of Composers, Authors, and Publishers (ASCAP) during this period posed a challenge for the early radio industry. Using litigation and negotiation, ASCAP developed a licensing model that provided the foundation for a highly symbiotic relationship between the radio and later television industries and composers. The radio industry, composers, and American consumers prospered from the innovation, information dissemination, and artistic creativity that this synergistic technology-content ecosystem spawned. The availability, quality, and quantity of content increased demand for better broadcasting and consumer electronics and vice versa.
In analogous ways, other content industries trace their development to early patentees and the companies commercializing this technology. The Victor Talking Machine Company, so-named according to some sources for having prevailed in a costly phonogram patent battle, would emerge in the marketplace as much through cultivation of the most popular performing artists as the quality of its technology. While Thomas Edison, the developer of the competing cylinder recording technology, refused to promote “stars” on his medium, the Victor Company paid Enrico Caruso and other leading performers of the day handsomely to work exclusively on the Victor label.
As a result, Victor’s Victrola players won the phonogram market (and related format war) and its “His Master’s Voice” discs dominated the early content sector. In England, EMI (Electric and Musical Industries) Ltd. was formed in 1931 by the merger of the Columbia Graphophone Company and the Gramophone Company (which controlled the “His Master’s Voice” record label outside of the United States). This vertically integrated company produced sound recordings as well as recording and playback equipment and became one of the most important record labels of the 20th century.
Digital Symbiosis and a Widening New Digital Divide
These patterns continue today with new platforms. Apple (the computer company, not the record label) leveraged the development of the first broadly licensed online music store (iTunes) to great success in the markets for portable music devices (iPods, iPhones, iPads, and a growing family of consumer electronics) as well as music and now television and film programming. Google has used YouTube and Google Books to enhance and expand its advertising platform. YouTube’s ContentID and Partner Program, under which many copyright owners pre-clear and derive advertising revenue from use of their content, leverages professional content to expand the attractiveness of Google’s family of services. More than 3,000 content owners participate in Google’s revenue sharing model. Facebook leverages music-streaming services – such as Spotify – to enrich its social networking platform. Microsoft’s Xbox, Netflix, and a host of other technology platforms develop and expand the symbiotic pathways that bind technology innovators and content creators. Sony’s recent effort to enter the smartphone industry seeks to integrate devices, music, video, and game content seamlessly.
Yet the principal technology and content sectors are deeply divided over how to address the widespread availability of unauthorized copies of copyrighted works available on the Internet. The vertical fragmentation of distribution platforms in the Internet Age has created a wedge between platform innovators and creative industries that hinders e-symbiosis. Whereas broadcasters historically hosted content and hence bore direct responsibility for infringement, Internet platforms attenuate responsibility. For example, Google profits from advertising impressions and click-through monetization via its search engine and AdSense network that derive from websites distributing copyrighted works without authorization. Although Google might be insulated from liability so long as it complies with the Digital Millennium Copyright Act’s (DMCA) takedown procedures, its bottom line benefits handsomely from delivering advertisements to people searching for pirated content. The same can be said for payment processors working for websites distributing copyrighted works without authority.
The major content industries – music, film, books, as well as some video game manufacturers – have called upon Congress to enact strict new enforcement tools – such as domain name blocking, expanded public enforcement powers, and broader private rights of action – to combat piracy of their works on foreign websites. The major Internet companies have strongly opposed these measures on the grounds that they would undermine the Internet’s functioning, compromise cybersecurity, and hamper free expression. They also contend that these measures could be easily circumvented. At a minimum, such measures could substantially increase the screening costs of advertising networks and payment processors.
Although such legislation is unlikely to pass in its current form or any time soon, the pressure to enact such strict legislation will remain as long as the Internet affords easy access to copyrighted works without authorization and successful Internet companies – from search engines to advertising networks, ISPs, and payment processors – profit from illegal distribution. As experience with the DMCA and other efforts to legislate in areas of rapid technological advance have shown, however, Congress has limited ability to foresee and address technological change. It failed to anticipate peer-to-peer technology, which emerged within a year of the DMCA’s passage, and lacks the sustained attention span or proclivity to adapt legislation in a transparent, broad-based, or systematic manner to deal with new piracy challenges. At the same time, the DMCA’s ISP safe harbor is showing its age.
Collaborative Symbiotic Initiatives
Legislation is but one means for achieving collective action to address problems that cut across multiple sectors of the society and the economy. Private concerted action offers another and potentially more effective and sustainable pathway toward surmounting Internet governance challenges. Relatedly, technological innovation in copyright enforcement systems can play a critical role in improving the technology-content ecosystem.
A key part of the solution to the current challenges over Internet policy relates to the perceived goals of the Internet community. For much of the past two decades, many technology companies have been antagonistic toward or, at best, agnostic about addressing piracy concerns.
This reflects several factors. Cyberlibertarians have advocated the effective abolition of copyright protection on the Internet. The emergence of the Creative Commons and open source software blunt this extreme position. There is little standing in the way of creators pre-committing to sharing their works. And although open source software has made substantial inroads into several key software marketplaces (particularly those exhibiting network effects), shared creative works have had a much more modest impact. Given the continuing popularity of professionally produced and copyrighted works of authorship, the case for abolishing copyright protection on the Internet seems doubtful.
A more serious concern relates to the fear that copyright protection may be chilling technological innovation. Yet the picture is mixed. The DMCA’s safe harbors have significantly limited platform innovators’ exposure to copyright liability. Furthermore, corporate law’s limited liability regime provides substantial insurance against crushing liability. The emergence of new technology platforms (including some that are highly parasitic) over the past decade suggests that copyright liability is not significantly dampening innovation. In fact, the argument can be made that the equilibrium has tilted toward too much piracy.
As legitimate Internet content distribution models have emerged, many more technology companies stand to gain from consumers accessing content from legal sources. Authorized vendors – such as iTunes, Amazon, Vevo, Netflix, and Spotify – experience greater traffic and commerce to the extent that illegal alternatives are harder to access. ISPs can better manage their traffic when consumers access content from legitimate sources. As ISPs further integrate cable and content businesses, they will see even greater direct benefits from reduced piracy.
Notwithstanding the recent impasse over rogue website legislation, a quieter and more constructive pathway has been in the works. In July 2011, a group of major ISPs (SBC, AT&T, Comcast, Verizon, CSC, and Time Warner Cable) and leading content industry organizations (RIAA and MPAA) entered into a Memorandum of Understanding (MOU) to implement a flexible Copyright Alert System to discourage unauthorized distribution of copyrighted works.2 The signatories to this MOU committed to implement an escalating system of alerts in response to alleged infringing activities: (i) an Educational Step Copyright Alert; (ii) an Acknowledgment Step Copyright Alert; and (iii) a Mitigation Measure Copyright Alert Step. The Mitigation Step can include a reduction in upload/download transmission speeds, a step down to a lower-tier service, redirection to a landing page until the matter is resolved, and restrictions on Internet access. The MOU provides for “warning bells” along the alert steps as well as an appeals procedure.
This graduated response system provides a foundation for ISPs and copyright owners to collaborate more constructively in pursuit of a free and less piracy-prone Internet ecosystem. It builds a balanced enforcement system into ISP activities. As this experiment unfolds, the parties will be able to learn more about the ecosystem and how to adapt these techniques to better channel consumers into the legitimate marketplace.
A similar initiative produced the Principles for User Generated Content Services,3 which encouraged the development and implementation of effective filtering technologies for user-upload websites. Although Google did not formally join this initiative, the ContentID system that it implemented for YouTube largely follows the UGC Principles model. In March 2011, Youku.com, China’s leading Internet television company, joined the initiative. This is a particularly encouraging development in light of concerns about piracy in China.
Analogous initiatives could potentially address the roles that search engines, advertising networks, and payment processors play in enabling rogue foreign websites and piracy-prone cyberlocker businesses. Although it is unlikely that such approaches will entirely bridge the divide between Internet companies and traditional content owners, such collaborations provide the most promising foundation for incubating and testing designs for surmounting the dynamic challenges of Internet governance and forging collaborative relationships that can address new problems as they emerge.