ratpie

Category: regulation

  • Collectives versus Pools in Pursuit of Copyright Efficiency

    YouTube’s generous approach to on-demand video streaming, while historically the cause of some friction with copyright owners, is also this year a great blessing to anyone interested in the regulation of copyright business. For it has provided a platform to view and review a length discussion between some of the key figures about Europe’s policy on collective copyright management.

    Watch here a Midem panel dominated by Maria Martin-Prat:

    https://www.youtube.com/watch?v=tRoSvXAohss

    Simultaneously, large owners of rights in songs have been withdrawing from collective management. Just before Midem news broke that Sony/ATV had struck a private deal with Pandora. The man with the big cigar was reported to have said that it was ‘hopefully the first of many’. And not to be outdone, there are some signs that even where there are compulsory licences available, labels and services are finding a private path more advantageous. For instance, MRI is assisting satellite broadcaster Sirius XM to deal direct at rates lower than SoundExchange offers. The 50% SoundExchange deducts at source for performer payments might have something to do with this, as labels rarely pay out half of public performance, especially where there are unrecouped advances.

    The costs of finding rights owners, and the costs of doing the deals, are rightly considered great impediments to the development of exciting and popular digital music services. The number of successfully licensed services might suggest that other problems are equally critical; licensing efficiency does however deserve the attention it is getting from regulators and law makers in the main copyright territories.

    Is the emphasis on better regulated collectivisation the right way to consider the problem however? It seems that even the very well informed and cautious European bureaucrats risk taking an idealistic view of the collective, as well as an over-optimistic one of how much regulation can achieve to create better governance and behaviour. ‘Rocked by scandals’ is a very emotive phrase, but has been widely used in the last few years about the world of collective rights management as artists in particular find their voices. Even the Pirate Party’s MEP points out how unambitious the current EU reform proposal is by modern standards of business and administration.

    Generalising from some of the changes that are affecting the market during the digital transition suggests that other approaches might be equally valid, and might even be easier to achieve. For instance, once the larger copyright owners develop the capabilities in house that they previously outsourced to collecting societies, simple organisational inertia will maintain them even in preference to a cheaper option. Add to that the ever growing catalogue that has never made it into a collecting society, as digital production and distribution technology breaks down barriers to market. In some markets collecting societies actually know about only the top 25% of the extant catalogue, and are reluctant to bear the costs of dealing with the rest.

    Classes of rights are being brought together, particularly by new entrants, in ways that collective administration certainly has not anticipated, and seems still quite radically opposed to. Cooperation between performer and performance rights societies seems still reluctant and rudimentary at best, despite the need for each of their customers to obtain complementary licences. This is pushing rights owners who would ordinarily be collectively minded to find other more transparent and faster routes into the previously blanketed world.

    These realities are behind the tendency for Karaoke machines, Juke boxes, and piped music to come as a bundle of service and rights. The internet scales this up to a huge degree, to the point where it is now imaginable for a specialist music service to carry only what it can license ‘all rights’ directly. It might not be the most comprehensive or exciting service in the world, but it will certainly have a value.

    And, at the other end of the scale, a phenomenon that is very visible in territories with one dominant record label, a select catalogue provided into a heavily branded service. Without wishing to promote one particular supplier, here’s Universal Music’s ‘one stop shop’:

    http://u-bee.biz

    with its own surprisingly corporate promotional video:

    http://www.youtube.com/watch?v=F7m3GWJjJuU

    Short of forced collectivisation there’s not much regulators can do to deter rights owners from putting together bundles to suit different customers in different markets. Maybe they should embrace it instead? Just as patent pools enable rights owners to bring complementary technology together to enable markets that would not otherwise exist, perhaps copyright pools could do the same for music. So instead of the owners of each class of rights sitting in their separatist stockades waiting to be regulated, pooling and bundling could create the efficiency that regulators want, with transparency provided through terms of engagement open to all participants.

    To me at least this seems much more progressive, and business friendly. How to get there? Well, a command driven economy is as fragile thing as an unregulated one, as we have discovered over the last few decades.

  • A Humane Approach to Copyright Term

    As the increasingly frantic public domain regurgitation business trawls through 1942 deaths of authors and composers (sadly we shall have to wait another 4 years for a copyright free revival of Chu Chin Chow unless someone wants to set the lyrics to new tunes), it seemed the right time of year to offer a different approach to the question of an optimal length for copyright.

    If you buy the arguments of either extenders or shrinkers, copyright term has the ability to change things for better or worse, for creators and for the public, and for investors as well. Of the shrinkers, the favourite argument was advanced with some almost robust reasoning by Rufus Pollock. Here’s the formula:

    a single simple equation which defines optimal copyright term as a function of exogenous variables potentially estimable from available data: the discount rate, the rate of ‘cultural decay’, the supply function for creative work and the associated welfare (and deadweight-loss) associated with new works.

    Without going into a lengthy discussion, what Pollock leaves out is as important as what he includes. His answer seems to me to be more an artefact of our current complex of interrelated interests and terms than a ‘start from elsewhere’ route to optitopia.

    Lengtheners either cite a fundamentalist belief in property – in which case any diminuendo from infinity is a blow against natural justice – or appeal to ‘fairness’, sometimes on behalf of people they neither represent nor intend to benefit. Lobbyists managed to halt the slide into the public domain for sound recordings in Europe at 1963 – that’s Love Me Do for us ordinary folk who had to make do with another remastered special edition. Citibank must have breathed a sigh of relief.

    It would seem absurd to cite a crisis of supply, when the available catalogue is rapidly climbing through the 20s of millions; or indeed a crisis of quality as the production cost of music is often now dwarfed by the marketing cost, and there are many efficiencies yet to be realised in the processes that bring new music to market. So for those reasons there is little to justify any change at all. If incumbent catalogue owners are behaving badly with exclusive rights perhaps some incentives need a shuffle, but that is no reason to weaken the position of the creators. They are as much at a disadvantage as the rest of us if the global music groups decide to hold businesses and consumers to ransom over how we may buy and listen to music.

    No. In the age of nutraceuticals, the only justification for fiddling with term of copyright has to be a humanitarian one. Here’s a suggestion.

    Artists and other creators famously die young and often lead troubled and wretched lives. It is often a young person’s career, involving the stress of fame and overwork, and the prospect of abandonment by the industry when the hits dry up. Here’s a heart wrenching story from 2000 about Steve Strange, style icon and Visage singer. Thankfully he seems to be a music industry survivor.

    So, what about linking copyright term to the national average life expectancy (NALE) and bundling it with a compulsory life insurance scheme to deal with the genuinely unexpected? In the UK, an average 20 year old would need a 60 year term to see them out. So lets make it life for the creators and artists, and bribe record companies and other exclusive assignees with an additional two years for each year that the artist lasts above NALE minus 10.

    In case you think I have really lost the plot, here’s a bit of research that shows how much ground needs to be made up.

    South Korea has given us a fantastic global hit recently, but spare a thought for the already mature pop star Park Jae-sang, 35 years old, who according to Professor Kim Jong-In (in Korean here) is likely to live only 65 years. That’s right, entertainers have about a 15 year handicap over other professions. Even politicians live for 79 years in South Korea. How unfair is that?

    So an entertainer or artist who failed to live the requisite length would be doing their label out of valuable years of protection, at no benefit to themselves, as well as depriving the beneficiaries of their life insurance of whatever the extra premiums might buy. Would this not give creators the right kind of incentive to lead long, healthy and productive lives, and assignees the motivation to help them? And Government too would have a much easier route to helping the ‘creative industries’, via policies that benefit all of us.

  • Yet Another Private Internet

    Lobbyists sometimes try to simplify issues, for policy makers and for grassroots and other supporters, and one of the most potent ideas surrounding Internet policy is that what you don’t like will ‘break the Internet’.

    Here’s John Naughton neatly encapsulating this approach for the UK’s Guardian newspaper in a comment on SOPA/PIPA early in 2012:

    …the most worrying aspect of these bills is that they would distort the architecture of the internet in ways that would cripple its capacity for enabling innovation

    Read the whole thing here under the headline ‘Sopa and Pipa: don’t let big business break the internet’: http://www.guardian.co.uk/technology/2012/jan/08/online-piracy-challenge-sopa-pipa

    The attraction of this is easy to understand. For any highly technical question with complete uncertainty about the outcome of any policy decision, all the attention-deprived Government official or politician has to do is ask, ‘will it break the Internet?’ If there is sufficient noise in the ‘ayes’, risk that they may be right will ensure inaction.

    While this is going on in public, privately companies are breaking the internet in all sorts of useful and interesting ways. For a small business I am a large buyer of datacentre services and connectivity, operating a highly connected music platform hosted at Interxion in London. For many reasons we own and manage our hardware – but I can now, should I so wish, buy private connectivity within the datacentre to Amazon’s Web Services. Here’s what they say about it:

    Using AWS Direct Connect, you can establish private connectivity between AWS and your datacenter, office, or colocation environment, which in many cases can reduce your network costs, increase bandwidth throughput, and provide a more consistent network experience than Internet-based connections.

    A quick survey shows that Amazon has been rolling out private connectivity via high quality datacentres around the world. You can bet also that the peering points which connect consumer access providers to the Internet also benefit from these direct connections, alongside connections to Google, to Akamai, Limelight, and other providers of media and application delivery services.

    The chances are increasingly slim these days, if you stick to fairly popular sites and services, that your bits will ever touch the Internet. In fact the real Internet is already significantly more expensive, more congested, less reliable and less consistent than all these private platforms.

    Why is this important? Well, perhaps monopolies built on private networks should be regulated as private businesses, rather than as users of a miraculously unlimited and unfettered Internet commons. So when Google in Germany launches a campaign saying ‘Defend Your Network’ (Verteidige Dein Netz), it is important to understand that Google no longer uses our public Netz, it has its own, private Netz.

    Google’s property rights in its network should of course be respected, and robustly defended, in all the territories it operates in. Help them if you wish, but not in the name of the extraordinary communal efforts that enabled them to achieve their scale, and which they have now left behind.

  • What Happened to Vint Cerf?

    This August, 2012, on FT.com Vint Cerf was quoted in an article about the upcoming UN discussions over Internet governance.

    But Mr Cerf says that pricing structures are antithetical to the internet as they could stifle innovation. “When Larry Page and Sergey Brin started Google, they didn’t have to go and cut a deal with every ISP in the world. It’s a gun-to-the-head model to say: ‘You’re making a lot of money, give us some.’ An alternative would be to compete – improve your own value-added services.”

    What a concentrated and irresponsible little bundle of words this is! Cerf has many public roles – as a scientist, and as an honoured innovator, and as an expert on set of technologies that are important for many aspects of the improvement of the human condition. How disappointing to find that his role as a paid evangelist – a faith based persuader for money – overrides all of these honours and achievements.

    He starts with a half-lie. As a startup, Google did not have to negotiate with every ISP because they were able to buy connectivity in the market, like every other internet business, and piggy-back on the deals ISPs had done with each other. Today’s new businesses can follow the same path, and can also take advantage of a much more developed infrastructure market that puts massive processing and connectivity within reach of almost anyone. In fact Google preferred to move away from the wholesale hosting market in favour of public and private peering, where in effect it did cut a deal with many many more ISPs, in order to get preferential treatment and lower costs for its traffic.

    What Google demonstrated conclusively was that when you generate a little traffic it’s your problem, but when you generate a lot it’s everybody else’s. Peering was not supposed to be quite so asymmetric, so a market was never fully developed. Now Cerf is lobbying to prevent a market being created and to preserve privileges that Google enjoys over newer startups; the original gun was Google’s when it bought YouTube, and Cerf wants to make sure the other side remains unarmed.

    Having positioned Google as a startup at the mercy of arbitrary behaviour in wholesale connectivity markets Cerf goes on to deploy all the sophistication of the teenage sneer. While for an online advertising business Google owns a lot of infrastructure, compared with the investment it requires from other network providers to keep its platform connected it is still well on the right side of the deal. The excitement surrounding a very limited trial of Google fibre internet access seems to have died down a bit since the limits and the price, as well as the behind doors politics, have emerged. And no ISP is more upfront than Google about preferential treatment for its own value added services.

    And yet the answer is almost certainly not to attempt to regulate paid peering, or paid for QoS at peering points. Content and services gain in value the more they localise, and while it’s Cerf’s employer who is as he says ‘making a lot of money’ at this point, competing on thousands of local exchanges is not the same as competing on dozens or hundreds. Regulators would do well to preserve the mostly unpaid and informal peering model, not because Google does so well out of it now, but because it is more likely to deliver a platform for Google’s competitors in the future.

    Preserving the openness of Internet Exchanges in the future from crowding out and from anti-competitive contracts will be a far more important regulatory challenge than defending Google from pricing of traffic exchange is now.

  • Orphans Don’t Belong in Collective Farms

    The case for exemptions from copyright for some limited purposes, such as preserving our cultural heritage, or advancing scholarship, is surely uncontroversial. Who would really argue that old photographs or diaries, letters home, and the ephemera of life should not be allowed to become a window into past times or important events. With some minimal adjustment to our copyright laws, diligent preservation and digitisation can make material available, free of legal risk and without touching any markets.

    Without really bothering to explain why, or for whose benefit, the UK Government plans to go far further, effectively nationalising anything that is found without a copyright assertion, and creating a State sponsored competitor to the national copyright industries. This much was clarified at the recent Hooper enquiry session, by the Intellectual Property Office – presumably to be merged with the lost property office as it seems to want much the same function. There might be a fight as the legality of the move seems open to question given Berne’s clarity on automatic copyright. Win or lose however the UK Government seems to be indicating with this move that if it thinks it needs to choose between creators or users of copyright material, it’s firmly for the latter.

    But how did we get to this sorry state? The presumption behind Hargreaves’ and Hooper’s enquiries was that copyright management had failed to keep up with the demands of digital businesses. Hooper has been keen to stress that he sees a huge amount of excellent work going on. In response he moved the focus from trading platforms, of which there are many and more coming, towards coordination, to make sure the full value of all the investment could be realised. This is all smart, and admirable. The Government however seems irritated – firstly by all the digital detritus hanging around untaxed and poorly managed (to you and I these are our photos, our lame attempts at making pop music, and our fan fiction etc.) – and secondly by the copyright industries rather monomaniacal demand for protection before reform. Hooper seemed last month to have been asked to convey a message to the copyright great and good at his last big meeting, that not until the Government (Vince Cable) had seen dramatic improvements in licensing efficiency would the enforcement agenda creep up the priority list.

    More than this though, it seems that the UK Government has given up on the ability of the creative industries to generate value directly and by private negotiation. Given a simple choice, between a Wikipedia world, where free to re-use content on a huge scale provides context for search driven advertising, and a Britannica world where expertise is packaged and sold to consumers who care about quality, the UK plumps for flat rate, low to zero cost content as a superior engine of growth. And it is prepared to go into competition with its own domiciled creators and copyright businesses to achieve this aim.

    Given that they can change the law (probably), the UK Government seems to have a great opportunity here to ensure than it can never be proved wrong. After all you can’t really do A-B testing with copyright law. If the outcome is not great the copyright industry lobbyists have spun such a tale of trouble and decline that you’d be forgiven for thinking that saving them was an impossible task anyway. No situation is so dire it’s not better than it might have been.

    And that leads me to my greatest criticism of the UK Government approach, for its inability to see the industry behind the lobbyists, or look for a simple intervention that helps creators to bring their work to fair and open markets. We don’t need the British Library setting up a commercial content library with whatever its interns can shovel in off the web, and with rates set at two thirds the expected advertising CPM. That will simply divert much needed investment away from new creation, while undermining the markets that do support creators. Instead, the Government could, if it wanted to, help creators find and use the markets that already exist, through training and encouragement for market infrastructure, without sending any orphans to the collective farm.

     

  • How Art Changes the Architecture of the Internet

    Reading Neelie Kroes’ recent blog post on net neutrality (link updated Dec 2017) reminded me of a startling presentation that was given to Nanog in 2009 (I was not there so was thankful that the slides were made available here) which brought into focus some vague ideas I have been thinking about for the last few years.

    That 2009 report was one of those ‘everything you thought you knew about x is wrong’ moments. Because by 2009 the open, public, internet, with a predictable hierarchical cascade from core to access, was over. Instead we had arrived at a world of private connections between big content and service platforms where IP protocols carried private bits over private networks. And what drove the change was, bizarrely, art – or rather content if you want to avoid aesthetics. More specifically, Google’s YouTube acquisition could create so much traffic for ISPs that it was uneconomic to carry it via IP transit, bought from upstream providers. Google had to be let into the peering points, and the biggest ISPs choose to peer privately with large partners to avoid overloading the public switches and getting into complicated recharge discussions.

    Earlier in the evolution of the internet CDNs had been let into the exchanges, to some grumbling, but as wholesale suppliers of connectivity they sit behind the consumer services so arguably were similar in their role to the wholesale transit providers. Having a consumer service in the networks club was a new experience.

    Now here’s some conjecture and speculation. Carpathia, a Dulles, Virginia blue chip hosting business, joined a select club when it accepted a new customer, MegaUpload, in November 2008. Almost instantly it was generating 1/20th of all internet traffic. If Carpathia did not manage to use that leverage to move into the internet exchanges and form some private peering agreements it should have. Private traffic is cheaper and inherently less visible than public. And some more speculation on a historical matter – the apparent drop in internet traffic resulting from Sweden’s introduction of IPRED laws could at least partly have been the effect of some publicly peered traffic going private for similar reasons.

    A minor version of this happened very recently when customers of UK ISP Virgin Media were reporting severe difficulty using Spotify. The Register extracted a comment from Virgin Media to the effect that they had been suffering from poorly configured peering with one of Spotify’s data centres. To fix it they will have either turned up the public peering, or gone private. Either way the shape of the internet changed in response to demand for music.

    I suspect it would be possible now to avoid the internet entirely and just use private networks if your access comes from a major consumer ISP. And it is art/content that has driven this change. How much the content creators and their industrial representatives have been party to the changes is anyone’s guess, but I suspect not very much. That looks like an opportunity to me.

  • Some Numbers In The Digital Music Industry

    There are now very few barriers to entry in the digital music industry, if you are lucky enough to be middle class in a developed economy. Production tools are essentially free if you have a computer; broadband connects you to a number of service providers that can put you on sale. Even if you have no musical skills there is a growing public domain of sound recordings that can be repackaged and sold. Low costs and no gatekeepering are driving a continuing expansion in the number of tracks in the market, with 2012 seeing perhaps 15 million already on sale and probably at least another million or two arriving each year.

    I have gathered a few numbers from around the industry, which I shall present rounded off and anonymised or generalised to respect confidence and commercial sensitivity where they have not been widely published elsewhere. Some of them might well be wildly wrong, due to mis-remembered conversations or just poor data management.

    One of the many music services that includes on demand streaming has delivered at least one listen for each of 720,000 tracks over a year, out of a catalogue of approximately 5 million tracks. A similar service, aimed at families, finds that each  account expands by 15 tracks the diversity of the music that gets listened to. A European neighbouring rights society knows about approximately 5 million tracks of which somewhere between 5 and 6% get payments allocated over a year.

    ASCAP, the American organisation that collects and distributes royalties for the performances of compositions, shares the money it collects between the 200 highest grossing tours or concerts. It also makes discretionary awards to about 4000 applicants each year who would be entitled to be paid under a scheme that simply allocated royalties to reported performances. College webcast radio in the USA can pay an additional $100 on top of the $500 minimum fee to avoid reporting up to 825,000 performances of sound recordings per month, (9,900,000 performances per year).

    The global digital music industry brought in $5.2b for record labels in 2011 according to the IFPI. If that were evenly distributed across the sound recordings in the market that would mean each earned approximately $350. Markets don’t tend to work like this; if the revenue followed one of the most likely distributions, 70% of the revenue would be generated by 1% of the tracks. Each of those 150,000 tracks in the top 1% would therefore earn a little more than $24,000 on average. Assuming the same distribution the top 150 tracks would average about $8.66m each. Just sharing that money out between performers registered in the International Performers Database, a joint project between neighbouring rights societies, would net each performer about $10,000.

    Digital music is full of strangeness and contradiction, and as these numbers show, as a business its existence on its current scale is a triumph of either ignorance or hope over expectation. If any more interesting numbers pop up I shall update this article.

     

     

  • Hooper’s DCE Probe is Artists’ Best Hope for Transparency

    While there will be a lot of whining about yet more reviews and enquiries, the latest phase in music’s troubled relationship with Government represents the best and perhaps only hope for artists to reset the relationship with their record label partners. It’s likely to be ‘use it or lose it’, because the infrastructure changes being contemplated are necessarily long term.

    The background: Richard Hooper has been appointed by the IPO to conduct a feasibility study into one of the main recommendations of the Hargreaves enquiry, a Digital Copyright Exchange. Hargreaves left the idea vague, hoping that industry would grab hold of the idea and run with it. Some bits did, but others were very much more cynical, or just lukewarm. Now Hooper has to consult and define, before being arbiter on what the Government hopes will become industry led upgrades to the digital copyright licensing system.

    Why is this so important for artists? The digital market should have been about accountability end to end, and many new ways to curate and enjoy the amazing depth of the recorded music archive, as well as discover new artists from around the world. It has partly delivered, but to some degree that value has disappeared into black boxes or been expended on a bid for control. Copyright owners have controlled consumer offerings and played pick the winner at least partly on the size of unattributable advances and sales guarantees. With access to markets effectively gatekeepered, artists have found their own copyrights used against them as the recorded music industry has consolidated over the last 15 or so years.

    Would a full audit catch the ‘content delivery fees’ rumoured to have been paid to Beyond Oblivion before it met its untimely end? Was equity in Spotify handed over because of the head offices of major labels, or because of the catalogues? Not that a Digital Copyright Exchange could answer those questions directly. That would be a giant leap too far for many at the wholesale side of the licensing table. But what it can do is start to drop a few breadcrumbs along the path, so that people know where to look for answers to difficult questions about rights and royalties.

    I know I am far from alone in thinking that the music industry has a big internal infringement problem, a hangover perhaps from the days when handshakes by power brokers were the conduits for rights and money and nothing much else really mattered. Those days are gone. Today we work with billions of lines of data in databases, each representing tiny increments of revenue and usage. Their large and valuable catalogues are giving the old power brokers an indian summer – though they don’t seem to be enjoying it much – before they are shuffled off into the Autumn of their lives.

    What replaces them needs to have songwriters and performers at its heart, and accountability from end to end. The end to piracy comes when people understand that their actions damage what they profess to love, and the old robber barons have no place in that picture. Technology with all its disruptive and awkward force is much more a friend to artists than their old music industry partners can ever be, and so artists should be first to work with Hooper on defining their new digital business systems.

    Find the details here.

  • A Simple Suggestion for Copyright Policymakers

    This simple suggestion is offered to copyright policymakers around the world.

    Copyright economies are complex. So complex that your most carefully designed reforms are likely to have consequences you could not foresee, and may even damage the sectors or people you intended to help. But this does not mean that policymakers are powerless to effect changes that have, over time, a strong positive influence on the creators and businesses that rely on the regulation and oversight of copyright markets.

    One area of copyright regulation suffers none of these uncertainties, however, and has an important additional benefit. That area is the shared technical standards by which copyrights are identified and traded. Improvements and regulation there makes future copyright market reform much less controversial by creating a platform of reliable market information on which new proposals can be designed and measured. Get the shared technical standards right and new copyright laws can be future-proofed.

    Technical standards help markets by identifying the rights that are being offered and traded, the works in which they are embodied, and the interested parties. They offer tools for efficient and reliable exchange of data about deals and terms, and used honestly they create trust by making copyright industries transparent and auditable. For such a technology driven sector the copyright industries have been surprisingly patchy and slow to adopt electronic trading systems. It’s clear that they need help.

    Policymakers do not need to employ teams of experts to design systems, nor attempt to impose technology on the market. Instead, like they do in many other areas of life, their role is to set minimum standards and ensure compliance. Standards will help industry cope with the massive increase in opportunities brought about by digital technology without resorting to radical interventions such as compulsory collective licensing.

    Let’s look at how this would work in practice. Take as an example a web site that allows people to upload music tracks and offer them for listening or downloading. In addition to the usual terms and conditions the site would add a requirement that each copyright is identified under an approved scheme, and that uploaders identify themselves. The site would keep proper records of who uploaded what, and would in return get the assurance that they were in compliance with copyright law. Anonymous and unidentified services would not be affected, but could not continue to rely on click-through warrants to provide legal safe-harbours.

    Any business that takes assignments, licences, or buys copyrights for onward sale or licensing would be subject to the same requirements. A robust regulatory framework will assume an unbroken chain from each creator to each user of each copyright, and will make that chain accessible on demand to each interested party. Taking this approach will join up today’s jigsaw of data, and will find all the missing pieces, defending creators and users from unwitting infringement or wilful copyright blindness.

    This simple suggestion is offered as a least bad choice for policymakers, who are rightly cautious about interfering in the complexities of copyright markets. It avoids completely such vexed issues as extended collective licensing, instead making it clear to all users which copyrights should be considered ‘in the market’ and which remain outside. As a private person perhaps sharing photos with family and friends you would remain unaffected and with your copyright intact; to enter the market you would simply ensure that you and your work become clearly identified.

    Many copyrights today are hidden behind layers of assignments and locked in private databases. This is an impediment to trade, as well as making enforcement against counterfeiting and infringement much more difficult. Policymakers should choose to set the rules for the market and let industry do the rest.

  • Unlicensed Downloading Not a Problem in Switzerland

    Unlicensed downloading is just as widespread in Switzerland as it is in most well connected and wealthy countries. Being outside of the European Union however allows the Swiss Government to take its own legal and regulatory path. And the Federal Council has just concluded that filesharing and unlicensed downloading are not a problem.

    Here’s a translation of part of their statement on the subject:

    The share of disposable income spent by consumers and consumers in this area remains stable. However, there transfers within the budget. Thus, users of sharing sites continue to spend the savings they make by downloading free Internet content on entertainment, but instead of buying CDs and DVDs, they choose concert tickets, films, and merchandising.

    It is mainly large foreign production companies which suffer from these new patterns of consumption and they must adapt. As shown in the entertainment budget transfers outlined in the report, fears that these changes have a negative impact on Swiss cultural creativity are unfounded. The Federal Council therefore reaches the conclusion that there is no need to take legislative action.

    In other words a simple nationalistic test is all that is necessary. The Swiss have I suspect a negative balance of payments in music and film, and therefore perhaps are less susceptible to arguments that jobs and taxes are dependent on strong withholding rights.

    With music licensing increasingly a global business it will be interesting to see if the less protectionist approach the Swiss have adopted keeps out the rights licensing businesses that otherwise might have benefited from the sophisticated financial services infrastructure, low tax, and stability the country offers. Some of the well established performers already live there, ironically benefiting from low taxes on royalties earned in less permissive music markets. A less obvious tax haven for artists is Ireland, which offers an exemption for the first €40,000 in earnings. That of course was not nearly enough to keep Ireland’s biggest music exporter from becoming it’s biggest permanent export when U2 moved their business out in 2006.

    The impact of tax rates on royalty flows is dramatic. The Netherlands, despite its unimpressive representation in the creation of music copyrights is nevertheless one of the world centres for licensing due to its zero rate withholding tax on royalty income. If you are shopping for a friendly regime, Deloitte’s provides a handy list and can no doubt advise which presents the best all round value for your particular circumstances. Malta has recently got into the game too with a 0% rate on music.

    Is there any kind of lesson here? Switzerland can hardly be held up as a model of progressive liberalism, and indeed its own rationale is a kind of ‘I’m all right Jacques’ two fingers to Hollywood. Tax arbitrage will ensure that no matter how transparent collecting societies are some royalty flows will always be invisible to regulators. Meanwhile national ‘cultural creativity’ seems to march on regardless – there were at least three accordionists in the train station at Swiss watch town Biel when I visited last summer, and all seemed to be collecting enough Francs for a kebab while playing in front of posters for Alpine Opera (a startled marmoset staring at a soprano) and a Peugeot with Lady GaGa bundled from Universal Music.

    So no, free downloading makes very little difference to the Swiss, beyond marginally shrinking the number of recording artists who might eventually be looking for a friendly place to domicile their wealth. But for the rest of us the Swiss opinion on downloading is equally irrelevant.