Every new technology heralds exciting possibilities and unforeseen problems. The advent of digital media, championed by Microsoft and Google, has led to an era of instant information, consigning the traditional library and much of our print media to the archives of history. Generations raised on transactions of hard cash for hard copy have accepted the exchange of ‘virtual’ money for digital copy surprisingly quickly. This ‘quantum leap’ in technology has led consumers to migrate in their droves from news stands and DVD stores to online shopping and iPods. In an age in love with media, our artists, musicians and writers should be enjoying unprecedented prosperity. In theory, the costs of getting digital media to the consumer should be lower, and both sales and margins should be higher, but the reality is altogether different.
The Internet has become the new Wild West, a previously barren landscape which was quickly populated by brave new pioneers, marauding Indians, and more bandits than the fledgling lawmen of the digital age could ever hope to deal with. Rumours of another Californian gold rush led to wave upon wave of entrepreneurs and venture capitalists seeking their fortunes in the Beverley Hills and Silicon Valleys. Yes, there are vast sums of money to be made on the Internet, as Google and Yahoo will attest, but these are corporate giants, fuelled by advertising, that required vast investments and many years to reach profitability.
Digital piracy is by no means restricted to music and film, and a widespread copying of the intellectual property (IP) of authors, news agencies and bloggers has occurred, driven by the global rush for online advertising revenues. This makes the task of tracking copyright infringement a massive undertaking. While it may be individuals and small companies who are ultimately responsible for the mass theft of IP, it is the corporate giants themselves who are reaping rich rewards from supplying the necessary platforms for the illegal copying of digital media. Blogger, YouTube and MySpace provide a haven for the theft of clips, images and writing, resulting in the creation of astronomical numbers of pages for IP lawyers to police.
However, it is trickle-down rather than tumble-down economics which appears to dominate the online advertising industry, with websites that are dependent upon advertising income for their existence failing to convert their popular content and heavy traffic into adequate revenues. Companies such as Amazon and Google, which made their fortunes from the targeted display of online advertising and search boxes, pay out only a small, indiscernible proportion of their revenues. In 2006 Google earned over $10.6 billion from online advertising (up 42% on 2005), £1 billion of which came from the UK. However, some content-rich websites with almost a million visitors a year may fail to realize even $1,000 a year in revenues from Google ads. Given that the consumer has been spoiled over the past decade by an abundance of free content, content-rich websites are faced with the limited alternatives of a subscription-based income or of online advertising, following the false dawn of micropayments. Such poor returns from content provision have led to the demise of many quality online content providers, including news sites, galleries, directories, and electronic magazines. Limited revenue streams represent only part of the problem faced by online content providers however, as the widespread piracy of digital images, articles, movies and other content has led to a cultural epidemic of ‘file-sharing’.
Historically, Napster was probably the first commercial site to facilitate the unlawful mass sharing of copyrighted files. Originally Napster allowed its users to share MP3 music files over the Internet in exchange for revenues for site membership. In February 2001 Napster finally reached an out-of-court settlement exceeding $1 billion with the recording industry relating to their copyright infringement lawsuit. A Federal court ruled that Napster knew full well that its users were violating copyright laws through its MP3 file-sharing platform. Whilst Napster intended to continue its MP3 file-sharing activities, the court ruled that it had to stop its millions of users from exchanging copyrighted music files. In a nutshell, Napster had infringed upon the copyright holders' rights to control the reproduction and distribution of their music, an action which record companies alleged had cost them billions of dollars in lost revenues. This was a landmark ruling which defined how IP law is interpreted on the Internet. Fortunately, Napster was able to adapt and survive, and this year announced record revenues of $32.3 million. Napster is now in pole position to exploit the emerging market for downloading MP3 files onto cell phones.
YouTube's popular platform for the sharing of clips featuring movies, TV shows and music videos has stirred up yet another hornet’s nest, on this occasion that of the global film and television industry. The outcome of the lawsuit brought by Viacom against YouTube may depend upon a considered evaluation of the Digital Millennium Copyright Act, or DMCA, of 1997. As this Act pre-dates the evolution of video streaming technologies developed by YouTube (now owned by Google) and the increasing prevalence of high-speed broadband connections, the fate of YouTube and its massive popularity depends upon the precise interpretation of the DMCA by the courts. Viacom filed their lawsuit earlier this year seeking a permanent injunction requiring Google and YouTube to stop enabling copyright infringement, claiming that over 150,000 unauthorized clips of Viacom material had been viewed an astounding 1.5 billion times. YouTube’s defense rests upon section 512 of the DMCA, which provides a ‘safe harbor’ exempting web hosts from legal liability, just so long as they don't ignore cases of copyright infringement and act to remove such material when notified.
Viacom claim that YouTube have so far failed to implement reasonable safeguards to substantially reduce the extent of copyright infringement on their site. The plaintiff further contends that Section 512 does not provide YouTube with safe sanctuary, as this clause only applies in the event that the site does not directly profit from the alleged infringement. The original ‘safe harbor’ clause was intended to create strong incentives for web hosts and copyright owners to co-operate in discovering and removing any material that infringes copyright. Viacom believes that the spirit of this law is not being upheld by YouTube. Section 512 states that the website operator must in effect neither profit from, nor be aware of the infringing activity, two preconditions which Viacom believe that YouTube has violated. Whilst YouTube already has deals in place with several media giants including CBS, Warner Brothers and Sony, others feel that their expensive media are being broadcast for profit at their expense.
To its credit, YouTube has pioneered by creating a platform which converts all videos into a common file format that may be viewed using almost any web browser, and, despite the appearance of a score of similar services, YouTube has amassed almost two-thirds of all video-related Internet traffic. However, in doing so YouTube has also rapidly acquired a reputation for being selectively permissive. Although YouTube quickly removes unsuitable adult material from its site, it has been surprisingly slow to remove copyrighted music videos, TV episodes and sports clips. It has also become a popular medium through which sub-cultures can upload scenes of violence, extreme sports, and lawless behaviour. This has established YouTube as the Internet’s leading cache for choice highlights, bizarre events and social crazes, stealing thunder (and audiences) from TV networks and music studios. If you wish to see the latest music video, community craze or sporting highlight, YouTube is undoubtedly the place to go - and they would certainly like it to stay that way. In an age of audience ratings and mass publicity, YouTube has become the place to be seen for new talent who lack studio backing or corporate investment. This allows the gifted and unknown unprecedented access to the general public to carve out a niche within the entertainment industry. The middle man's place in the loop is ultimately threatened by this digital revolution within the media. However, another Prague Spring may come to a swift end if YouTube’s heady mix of runaway success and of antagonizing jealous rivals within the entertainment industry succeeds in provoking a gigantic class action lawsuit.
The legal action against YouTube echoes the recent and related story of Kazaa, another file-sharing platform infamous for film and music piracy (not to mention all of the viruses, trojans and worms whose spread it allegedly facilitated). Kazaa eventually became a legitimate concern after paying out more than $100 million in damages to the film and music industries for all of the copyrighted materials that were plundered through its file-sharing service. Kazaa no longer technically appears to be trading, although once it was an underground buzz word for the illicit downloading of copyrighted music and movies.
Google's copyright nightmare is not limited to its YouTube service. Google Print planned to scan books and make them fully searchable, a service that was to be paid for by Google advertising. This proposal triggered an outburst of fury from authors and publishers alike. Last year, an international consortium of publishers claimed that Google’s indexing and distribution of content from their newspapers constituted copyright infringement. Their argument was that displaying their thumbnail images and news headlines benefited Google revenues without appropriate compensation. Clearly the traditional newspaper industry feels threatened by Google and by the online news revolution, as their sales and advertising revenues continue to slump. Google news employs aggregators which automatically compile headlines, photos and extracts from news agencies. Agence France Presse (AFP) recently sued Google in the American courts to stop the company from indexing their content, originally seeking some US$17.5 million in damages. The suit was subsequently dropped in April of this year after the two parties reached a licensing agreement. In a similar vein, Google was forced to take down content that was published by regional Belgian newspapers.
In a modern age dominated by the media, publicity is popularity. The most popular of today's celebrities and entertainers are those whose images and materials are the most widely available on the Internet. If models, artists, film makers and musicians are uploading their images and materials cost free onto sites such as YouTube and MySpace, gaining revenues from those public and televised appearances which directly derive from their online popularity, then it follows that new releases are fast becoming loss leaders for downstream commercial success. Up-and-coming bands are effectively marketing themselves online with only a shoestring budget, and even eighties pop icon Prince intends to release his next album (3121) free of charge to maximize its commercial success. Well, if you can't beat them, join them...