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Media Piracy, Litigation & Internet Liability Risks

I’m speaking today at Oxford & York’s New Media & Entertainment Summit. The organizer, Chris Clark, generously sent me some of the questions which he thought would come up, and I have added them below. I want to thank some of my colleagues for their quick and insightful comments, which are reflected below: Scott Lichtman, Ken Yarmosh, Scott Allen, www.PaidContent.org .

The panel is 2:15 EST today, so if you have any feedback, please add it to the Comments section, below. Thanks!

I. How big is the piracy problem on the Internet? How much does it cost distributors and content creators in terms of revenue?

Recording industry AA says they lose about $4.2 billion annually per year (globally).

Source: www.riaa.com/issues/piracy/default.asp

MPAA states they lose ~ $3 billion

Source: http://news.bbc.co.uk/1/hi/entertainment/film/4737233.stm

From a moral point of view, there’s a difference between committing a crime yourself, and leading others to a crime. For example, piracy for personal use is less of a crime than piracy for profit, in which you (a) lead others to crime and (b) exponentially reduce the vendor’s sales by much more than if only you personally stole.

Yarmosh: "Of course, these figures measure total piracy, but the Internet plays a large part in it. It is extremely difficult to gauge how much of the pie the Internet takes up because of the anonymity. Also, be weary that those numbers come from the producer side of the equation."

Allen: "Big enough to be a real problem, but not nearly as big as some (i.e., RIAA) would have you believe. The missing factor when they provide these numbers about the billions of dollars in lost revenue is that it’s only lost revenue if someone would have actually paid for it. And someone may download 100 songs a month from P2P file-sharing, but they would never spend $100-$200 a month on buying music at $1-$2 a track. I might read the New York Times editorials if I had free access to them, but that doesn’t mean I perceive enough incremental value from them compared to everything that’s freely available that I want to pay for it."

II. Are there ways to stop, or at least slow, criminal behavior on the Web that is both effective and proper? How should content providers handle enforcement?

+ Think of alternative revenue streams. Cf. Grateful Dead earning much of their revenues from concerts, not recordings.

+ Provide a legal alternative: e.g., 99c high quality downloads from iTunes – no need to search all over creation and verified ‘virus free’.

+ Charge lower rates for content and bet on volume rising.

+ Focus on the people who are pirating for profit vs. personal use. It will have a bigger pay-off and create less consumer ill-will.

+ Education (cf. stop-smoking ads)

+ Plant fake tracks, or even virus-laden tracks, in the P2P networks.

Scott Lichtman: "A large portion of copyright infringement is in developing countries. One could debate whether inappropriate but low-cost/free access to western content will make these markets and revenue-streams grow faster over time than otherwise (just as email, Skype or portions of the web were no-charge services). But I think as these countries democratize and become information providers in their own right they will come into line."

III. How do we reduce Web crime, while at the same time protecting free speech and preserving the "commons"?

See above.

+ Educate people about fair use.

+ We need to convince people that the "digital world" is the same as the "real world" – prosecution and enforcement of regulations is a good start.

Lichtman: "The Commons is quite robust right now. Its an amazing thing that open source, and the human traits that drive it like intellectual curiosity and greater good sharing, are so robust. The process the western world has, including mandates for free speech and a political legal system to work out the details work as well as anything."

IV. Users don’t really believe they should have to pay for content. Where does this attitude come from?

"Information Wants to be Free …" is usually attributed to Stewart Brand , who confirmed he originated this on Tue, 29 Jun 1999 07:00:58 -0700 in an email to TBTF (thanks Eric Scheid, Keith Dawson and Kragen Sitaker). Stewart wrote:

"In fall 1984, at the first Hackers’ Conference, I said in one discussion session: "On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other." That was printed in a report/transcript from the conference in the May 1985 *Whole Earth Review*, p. 49. (Source: http://www.anu.edu.au/people/Roger.Clarke/II/IWtbF.html )

Why?

+ Economics 101 – People are more likely to be moral if it’s not too expensive. the perceived incremental value has to be worth the cost. When comparable, if slightly inferior, content is freely available, most people will take the slightly inferior free stuff. Consumers have considered a lot of content prices to be too high. Cf. Gary Becker and economics of crime.

+ Consumer expectations. Lichtman: "much of the web model has been free, or free trial, or limited edition, whatever… Whether web browsers, or free short clips of baseball games on MLB.com or 1-user salesforce.com free licenses, we have created our own expectations for free content. This has changed since 2001 somewhat, as more services are pay to play, but it will continue to be a basic part of how services create buzz online."

+ Lack of enforcement.

+ Little opportunity for empathy. The victim of your theft is invisible, so the personal hurt is hard to relate to.

+ Peer pressure. Everyone else is doing it.

+ Fundamental immorality of human beings. Ken Yarmosh: "Recounting “The Ring of Gyges” from Plato’s Republic, the argument goes that if two men, one just and the other not, were given rings of power that allow invisibility, both would perform equally as unjust. The reasoning eventually follows from a simple thought – take away the fear of punishment and no one can resist acting immorally. Both eventually would steal and use the ring to their advantage because, as Plato writes, “men believe in their hearts that injustice is far more profitable…than justice.”"

V. There seems to be a race between technologies— technologies of the criminals vs. the technologies of the providers. Any predictions on who will win?

They will leap-frog forever. I think it’s a basic truism that if you create a system that is unhackable, it will be too cumbersome and/or expensive for general consumers to use. Compare Gary Becker’s argument that society chooses an optimum level of mugging, and other crimes.

Scott Allen: “Consider the analog world. Grocery stores, for example, lose millions and millions of dollars a year to shoplifters. There are all kinds of measures they could take to curb shoplifting more, but they don’t. Why? Because the cost of prevention would be greater than the cost of loss. There’s an equilibrium point of “acceptable loss” that they’ve found after years and years of studying it very closely. …Content providers would do well to observe and learn from this. You can’t stop everything. What you want to do is find the optimum balance that maximizes the difference between the cost of prevention and your real loss (not some imaginary number of what the content would have sold for if people had paid for it, but what people would really be willing to pay, plus real lost advertising dollars from diverted traffic).”

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