The case centered around Sony's manufacture of...
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The Internet. It’s a simple concept — connect computing machines to each other with copper, radio waves, microwaves, fibre optics, lasers, and satellites; give them a method of discovering each other and exchanging information and just look at what happens.

If your works can be either created or transformed into digital objects, the Internet lowers the distribution cost effectively to zero. Why? Because the architecture allows for one copy to be replicated and consumed multiple times. The only real constraint is bandwidth, the speed and volume of information that can be squirted from point A to points BCDEFG and on.

The Internet is a universal digital copying machine. That’s how it gets to be so fault-tolerant (that being one of its design principles). So we couple this scalar distribution machine up to machines that themselves are built around the very fundamental concepts of digital copying (the never ending flux of bits swirling between ROM, RAM, and storage), and we train ourselves to CTRL-C and CTRL-V without really thinking too hard about it. Copying digital objects is ridiculously simple when compared to the tricky business of copying physical objects (all those jigs and templates and machines and tolerances and tools and raw materials). So we copy things, regardless of whether we actually have the rights to do so. Technically speaking, nobody in the UK has the right to format shift their CD collection to any sort of digital playback device. A prosecution has never been brought and will not be because, bluntly, everybody does it. The UK government is proposing to legalise this form of copyright infringement.

And so to piracy. Traditionally, this has been the practise of unauthorised manufacture and distribution of works for commercial gain. The idea that this might happen without commercial intent is a by-product of the digital age — no one in their right mind would bear the costs of physical piracy for free. Piracy isn’t theft as it does not deprive the owner of their property. In a digital context, for it to be theft, the pirate would have to be the sole possessor of the digital property in question. Of course, they can steal media that holds the digital item, in which case they would be guilty of the theft of the media.

The Internet has changed the whole business of piracy. What it gives with one hand (frictionless distribution) it takes away with the other (frictionless copying). Humans are a social species. The sharing of culture is seemingly hard wired into our biology. We share stories, songs, images — all the rich panoply of cultural objects. What has changed is the vanishing of the transaction costs of sharing. It’s hard to think about the consequences of illicit sharing when the process is so frictionless; CTRL-C, CTRL-V. Compare and contrast with the whole palaver of, say, the construction of a well crafted compilation tape:

Step 1) Choose tracks

Step 2) Set recording level for each track

Step 3) Cue the needle or the CD

Step 4) Repeat

It’s time-consuming and not without cost; tapes were not free. We didn’t mass share videos back in the day, VCR tape was too expensive. These things acted as a brake to non-commercial illicit copying. In fact, home audio and video technology drove two massive new markets for content and, in the case of video, got people back into the cinema as well.

Anyway, piracy control revolved around locating commercial pirate manufacturing and distribution centers, and shutting them down, seizing assets and throwing the scurvy wastrels into jail . . . after going through due process, of course. There were, and indeed are, very good laws for this. But even back in the days of physical copying, media companies did try to reach into the non-commercial home use cases and stop the copying. I’m talking of course about Sony v. Universal, which went to the Supreme court in the US in 1984.

Sony won. The legitimate non-infringing uses for Sony’s VCR technology, allied to the decision that time-shifting constituted fair use, outweighed the concern that yes, the technology could be used for explicit acts of copyright infringement. Although it was a US case, Sony v. Universal was a guide for courts around the world, transforming what users could do in terms of legal copying of works, and smearing the perception of what was OK and what wasn’t. Remember that format shifting is illegal, yet everybody does it.

In Sony v. Universal, we can see some very important principles when trying to draft or test laws that revolve around the subject of cultural property rights:

  1. Would the restriction or limitation work? In the case of Sony v. Universal, the proposal was to ban the sale of VCRs, and it would have worked.
  2. If the answer to 1 is yes, what are the additional consequences of the proposed solution; do any of these outweigh the benefit that is being sought? In the case of Sony v. Universal, non-infringing use would have been prevented, and crucially, time-shifting was seen to be a legitimate activity.

So how are we doing when it comes to digital copying control? Really really badly. So far, none of the approaches or laws proposed (and in some cases passed into law) has passed the first test, let alone the second. DRM doesn’t work, and never will so long as the decryption key needs to reside on the computer (which is always, in case you were wondering). Of course, there are laws to make reverse engineering of DRM illegal, and they don’t work either. The evidence is just a torrent away.

And so to SOPA and its relative, PIPA.

(If you are familiar with the basics of these two proposed laws, you can skip the next paragraph)

SOPA is the Stop Online Piracy Act (The Wikipedia entry is an excellent place to keep up to date by the way. I particularly recommend the discusion section). It is currently making its way through the House of Representatives. SOPA is intended somewhat as a rewrite of PIPA, the Protect IP Act, which is a separate bill making its way through the US Senate. SOPA isn’t just about digital goods. It aims to stop the sale of counterfeit medicines online, for example. I think it’s fair to say that the bits that are (really!) controversial mostly revolve around digital property and the proposals to stop alleged illicit copies thereof, making it into the computers of the USA. Note I talked about stuff making it into the USA. SOPA and PIPA are aimed at foreign Internet sites that are currently outside the jurisdiction of the US government. SOPA and PIPA also use the term “theft,” which is interesting. Both bills look to block access to foreign sites that are determined to be largely dedicated to facilitating copyright breaches. This is to be achieved by requiring US-based Domain Name Servers to block Internet domains or portions thereof. Both bills allow accusations of copyright infringement to be levelled at target sites and require response and refutation to occur within a short period of time. There are penalties if the target site does not respond according to the time scale. Both approaches are drawing a volley of criticism about the approaches being taken. (Update: as of the 15th January 2012, it looks as though SOPA may not be coming back to the house in it’s current form. PIPA is still scheduled for debate on the 24th January).

If you’ve been following the “debate” about these two acts, you’ll have no doubt been assaulted by a barrage of claim and counter-claim about what the bills do or do not enable. There’s been a sadly all too common pattern to the articles that have been written, with too many of the arguments resorting to the same mudslinging techniques. Furthermore, the adversarial nature of the legal and legislative debate seems to make such discussions a game of “s/he who can make the best arguments, wins,” which isn’t quite the same as an evidence-based approach. That’s quite a problem because we are not actually discussing the nuances of what copyright is or isn’t, or whether lawmakers should legislate for one business model over another. This is actually a discussion about what the Internet is or isn’t.

So let’s try to take a look at what is proposed using the rules I described above. First up, will the bills’ approaches work?

No. The main approach is to block users in the US from accessing foreign sites by preventing browser access to those sites. If you happen to know the numerical address of the site, you can still get there. Blocking access doesn’t result in the foreign sites ceasing to exist. This means that any infringing content is still available, just not to US citizens resident in, and accessing the Internet from, the USA. Of course there is the route of requiring the sites to be taken offline, but pirate sites just tend to pop back into existence a very short while later to continue their piratical ways. In fact, the futile game of pirate site whack-a-mole is one of the arguments used to support the SOPA/PIPA proposals. There are also issues with the blocking itself. You may have heard a number of arguments about the threat to the architecture of the internet from the DNS blocking approach. With all the incoming debate rhetoric detonating overhead, it can be very hard to determine what is hyperbole, and what isn’t. I like to listen to what proper experts have to say. Steve Crocker, Dan KaminskyPaul Vixie, and David Dagon are all true experts in the very serious, very technical deep level architecture of the Internet. They wrote a (quite readable) document (note: link is to pdf) in response to the proposed PIPA legislation, detailing the very serious knock-on consequences to the proposals put forward to try and block access to an infringing site. Their conclusion? Site blocking does not work. Here in the UK in 2010, the government passed a somewhat similar act, the Digital Economy Act, which also contained website blocking proposals. This legislation was subsequently the subject of a detailed review of the website blocking proposals by OFCOM, a UK regulatory authority. Their conclusion was that the website blocking proposals detailed in the UK act were not technically feasible (which was also the position of just about every ISP here in the UK).

If you’ve read the document above and you think the experts’ opinions merit very serious consideration, then considering the unintended consequences of implementing site blocking is moot (in the American sense). But let’s do it anyway, because the debate about what to do about piracy isn’t going to end any time soon. If site blocking were to be implemented, what would the consequences be? Well, given that we rely on online data transactions in much the same way as we rely on water, fuel, and electricity supplies, we should look at this from the point of security. One of the fundamental engineering principles of the Internet is that no matter where you are in the democratic world, no matter what computer you are using, a URL gets to to exactly the same site, every single time. The principle is called universality, and it’s what the DNS keep checking on all the time. If it ceases to be, then inevitably there will be gaps and differences around the world, and that’s a security problem. If you can’t be certain that the site you are visiting is in fact the the site you want to visit, then it will be increasingly difficult to determine which sites are legitimate, and which are not. You want to be be very certain that information you are sending to a party is not ending up somewhere entirely different. Which leads us to a second security issue: How to tell the difference between information that has gone astray and has arrived at an unintended location and information being deliberately targeted to a location in order to bring it down. I’m talking here about denial of service attacks, which are a very nasty and effective technique for bringing down a domain, anything from a website to an entire country’s internet infrastructure. It’s going to be extremely challenging (to put it mildly) to spot such attacks in a world where there are different lists of sites, depending on where you are coming from. Again, I’m paraphrasing the considered knowledge of experts here. There appear to be very serious security consequences to what is proposed. I’d suggest SOPA and PIPA fail the second part of the test as well.

I’ve been the victim of theft. I very carefully restored a classic motorbike. It cost me time, money, and a fair amount of skinned knuckles and blood. And some thieving bastards nicked it. It feels horrible. Now, whilst copyright infringement isn’t technically theft, it sure as hell feels like it when you are staring at a site wantonly showing links to your creative toils. Tim O’Reilly may have a point when he talks about authors having more to fear from obscurity than copyright infringement, but that’s cold comfort when dealing with the visceral feelings of seeing your works exchanged illegally. But visceral emotions are not a good starting point for useful debate. I’d like to see real numbers. I’d like a detailed evidence-based assessment of what digital piracy actually is, what the pirate environment actually looks like for different business sectors, whether pirates become paying customers, and what the true effect is on businesses as a result of the ease of copying. I’d like it to be independently run, free of think tanks, special interest groups, and the rest. I’d like to see this study repeated at scale. I’d like to get the data here. Because then we might be better able to determine what exactly we should do about digital piracy, what the proportionate response actually is, what the pirates actually are, and what’s the best way to manage them.

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David Smith

David Smith

David Smith is a frood who knows where his towel is, more or less. He’s also the Head of Product Solutions for The IET. Previously he has held jobs with ‘innovation’ in the title and he is a lapsed (some would say failed) scientist with a publication or two to his name.

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Discussion

13 Thoughts on "Pirate Attitudes: SOPA, PIPA, and the Struggle to Control Digital Properties"

The following is a persistant myth that sounds good in theory, but has no basis in fact. If this were true Amazon would have a 100% profit margin on their eBooks. There are costs associated with digital distribution; they justy don’t look like costs associated with print.

There are costs involved in digital distribution. If your works can be either created or transformed into digital objects, the Internet lowers the distribution cost effectively to zero. Why? Because the architecture allows for one copy to be replicated and consumed multiple times. The only real constraint is bandwidth, the speed and volume of information that can be squirted from point A to points BCDEFG and on.

Hi there, I’m very aware of the fixed costs that surround putting digital objects on the Internet. I wasn’t refering to those when talking about distribution. Remember though, that I’m not talking solely about digital works that are distributed with commercial intent. There are millions of users of youtube for example, who are uploading and distributing their digital works, for whatever fractional cost of their internet connection is consumed by the upload. Likewise, the consumption cost of a youtube video is also a fractional cost of the users connection. The ISPs make a profit on that, and whilst we don’t know whether Youtube is self sustaining on its own, the costs are estimated at about $400 million annually (a contentious number by the way) Whilst there were 1 trillion video views in 2011. Distribution cost per video, effectively zero.

I like the call for an independent analysis of the actual effects of piracy on different business sectors. But this can’t capture the counterfactual type of situation that is involved in piracy’s effect on something not being produced at all, as revealed in this testimony delivered by the Independent Film Trade Association to the Office of the Intellectual Property Enforcement Coordinator on March 2010, which may be found in full here here: http://www.ifta-online.org/issues.

“Since 1982, IFTA Members have been involved with the financing, development, production and distribution of 64% of the Academy Award Winning Best Pictures® including The Hurt Locker, Slumdog Millionaire, No Country for Old Men, The Departed, Crash, Million Dollar Baby, Braveheart, Lord of the Rings, Dances with Wolves and Gandhi…. Independent films and television programs are made at every budget level and may be mainstream, commercial or art house. Independent producers and distributors are those companies (apart from the major U.S. studios) that assume the majority of the financial risk for the production of a film or television program and control its distribution in a majority of territories worldwide. IFTA Members finance, produce, and distribute about 500 feature films and countless hours of television programming annually, accounting for nearly 80% of all films produced in the United States and exported around the world…. Independent producers routinely secure financing and distribution for each project on a one-by-one, country-by-country basis by means of licenses to commercial users (e.g., to film and video distributors, broadcasters, online platforms, etc.). The production, financing and distribution models of independent producers and distributors differ substantially from those of the major Hollywood studios who may self-finance and then control their own distribution through worldwide subsidiaries and affiliates. Independents work closely with local distributors in each country to secure distribution of each film. The distributors assess the value of the film (gross receipts across all distribution media) based upon many factors including script, director, writer or key cast; subject matter or genre; estimated production budget; and projected season and year of release. In turn, distributors may enter into license agreements with the producer that provide minimum guarantees (minimum license fees to be paid) to secure the exclusive rights to a film or program in a particular territory or region in advance of production…. . Once enough minimum guarantees are secured from local distributors, those license agreements are then collateralized by financial institutions which loan production funds for the underlying project (or are informally used to support private investment), providing the financial means needed to create the project. Such financing deals are based on the confidence of local distributors and financiers that they will receive the expected return on their investment from the exploitation of the film…. Due to the unique financing and distribution models (some would say challenges) for the independent production and distribution industry, piracy has damaging effects beyond lost revenues…. IFTA Members utilize the same local distribution companies worldwide as do the indigenous film producers, and the health of those local distributors and film industries is of the utmost importance to U.S. independent producers. Quite simply, legitimate distributors cannot compete against the pirates when such pirated product is free or nearly free. As the local distributor assesses the value of a proposed film, the local distributors’ assessment will reflect declines in, for example, DVD sales because of rampant online piracy in the marketplace. The minimum guarantees to which a distributor is prepared to commit for a new film drop accordingly (and in the case of direct-to-DVD films, may disappear completely). For the producer, the drop in the minimum guarantee translates into loss of production funding and may kill the project completely due to the inability of the producer to secure financing….”

It does become difficult, because in some ways you’re trying to measure the unmeasurable. When music companies point to illegal downloads and declare them to result in $X worth of lost sales, it’s often declared inaccurate, as there’s no way to determine whether the free downloader would have purchased the song had it not been available for free. The same can go for physical bootleg copies of content–how do you know that someone who bought a dvd for $2 would have paid full retail for the legitimate version?

While I’m all in favor of better data, I’m not sure how one would go about collecting it in a meaningful manner. I can’t read the linked study because of the anti-SOPA blackout today, but is it possible to determine the true effect of piracy on sales if you don’t know what sales would have been in the complete absence of piracy?

So the study, which I saw an excellent talk on a few years back, looked at the sales curves af books and made a very detailed search for the first appearance of those books online. For DVDs I ‘d suggest looking at the sales curves of straight to DVD films. You then look at what happens to the sales curve when the illicit versions show up. Detailed interviews with non-commercial pirates could assess what their purchasing habits are. There are studies out there that say many pirates are in fact very large purchasers of content. I don’t know how robust those studies are.

I heard an “expert” economist whose name I can’t remember interviewed on NPR’s “Marketplace” today, and he asserted that there have been quite a few studies that gathered information from surveys of people who actually revealed how many downloads of pirated works they made and answered another question about how many items they would have purchased if the pirated works were not available. The figure he cited, saying it was pretty much a consensus among the experts who study piracy (not including counterfeit goods, however) was $50 billion annually.

I’d counter that with Neil Gaiman’s comments on “piracy”, which he found actually increased his future sales. – http://www.youtube.com/watch?v=0Qkyt1wXNlI

The problem with SOPA and PIPA is that they’re going about it the wrong way. Breaking the internet and allowing rightsholders to accuse sites with little regard for accuracy could chill speech they disagree with. I point to the ICE seizure of dejaz1, which they held for a year without charge, and then reluctantly gave back to the owners due to lack of evidence. The RIAA swore this site was “pirating”, when in reality the rightsholders were giving tracks to dejaz1 as part of marketing campaigns. Dejaz1 lost a year of business with no real ability to sue those who falsely accused. Giving rightsholders blanket rights while allowing those accused little time to respond is asking for abuse. Much like Universal taking down Megaupload’s music video simply because they didn’t like it.

Dejaz1 situation: http://www.techdirt.com/articles/20111209/03385017020/ice-admits-to-returning-domain-while-riaa-threatens-dajaz1-with-more-legal-actions.shtml

Megaupload music video: http://www.hollywoodreporter.com/thr-esq/megaupload-universal-music-lawsuit-kim-kardashian-kanye-west-272322

Piracy is wrong, however people have been lending books and musics for as long as those formats have been around. A true pirate probably never would have purchased. Some “piracy” will certainly exist – it’s the cost of doing business. The problem with SOPA and PIPA is that it’s being ramrodded through by folks like the MPAA and RIAA who have steadfastly refused to innovate, and instead try to beat down innovation at every turn.

The MPAA 30 years ago fought to kill the VCR. Now it’s “piracy”. I question how much these companies are losing all this business why are they making record profits?

http://www.forbes.com/sites/joshbarro/2012/01/18/thirty-years-before-sopa-mpaa-feared-the-vcr/

http://www.firstpost.com/topic/place/hollywood-hollywood-pushes-for-sopa-earns-record-profits-video-59gx1qA0pSg-113-2.html

Sandy is right to call attention to the impact of the perceived effects of unauthorized sharing as opposed to the impact of the actual effect. People do indeed respond to what they believe or fear to be the case. It’s called decision making under uncertainty. So doesn’t this argue for just the sort of study called for here? If we knew the actual effect of unauthorized sharing on different markets rather than relying on admittedly fictional numbers currently thrown around, investors – and lawmakers – could respond accordingly.

A couple of things. First off, I’m pretty sure SOPA and PIPA are tabled for the moment, but every day brings a new surprise on that front so…Second, the SSRC has a great pair of research projects which survey piracy in emerging economies – and what they call “the copy culture” in the US and Germany.

MPEE http://piracy.ssrc.org/the-report/
and copy culture (due in full any day)
http://piracy.ssrc.org/get-the-copy-culture-report/

In the case of emerging economies, they find (as people like Siva Vaidhyanathan said long ago) that in many cases the “pirates” serve as the only affordable distribution channel. If they could afford to buy it, and it was available, they would likely buy it. The flipside of this is that their purchase of a pirated work doesn’t usually represent a lost sale because they couldn’t afford to buy it if they wanted to. The dastardly pirates are basically the only service available (as they were in the US before we decided to go ahead and honor copyright of foreign authors around 1870 or so.) While media distributors serve both domestic and foreign markets, their prices are solely focused on the domestic market as that’s where they get the bulk of their revenue. This means everywhere in the world gets the first world price, regardless of the PPP.

The copy culture report, at least the brief so far, basically says the flipside of this – and replicates results of many other studies – saying that within developed economies, while downloading illicit works is relatively common, large scale piracy is rare (only 1-2% of surveyed download heavily, which they capped at 1000 music files or 100 movie files) and most often the people who download illegally are some of the heaviest legal consumers of those products (as in the case bjr70 cites, it is often the case the illicit downloads often fuel legitimate sales. This is part of the reason that megaupload was popular among certain artists – to the point where its founder was planning to start his own record label. In both movies and music, legal streaming services have largely cut into even those practices – the report finding that a third or more people who did this frequently had scaled it back significantly now that there were sites like Pandora or Netflix to give them affordable, easy access to material in the way they want it.

These reports join many of other reports and surveys that say similar things as well as analyses that point out the rude health of the content industries.

Finally, I didn’t have the time to read all of Sandy’s post, but I’d point out that orphan works (and fair use) in films (especially documentary films) have become such a problem that, before Jaszi and Aufderheide made their fair use guide for libraries (recently promoted by ARL) they were working to help filmmakers identify these pitfalls – many of which were preventing documentaries from being cleared for release by anxious studio attorneys who demanded clearance from every possible rightsholder, often an impossible and self-defeating demand.

It’s clear that many of these things are illegal: whether they are harmful to culture or to cultural producers seems much more ambiguous and, as I think this post illustrates very well, the propositions on offer for curtailing this activity do far more harm than good. The best way to beat pirates is to offer goods in ways people want and can afford to buy. It means you have to adapt to a new business model, but if millions of US workers have to quietly accept their jobs offshored or taken over by computers because, hey, that’s the future; if professors and universities have to accept that Udacity and U. of Pheonix are the way of the future; I don’t see why the content industries should be completely protected from disruption. The RIAA and MPAA should grow up and figure out how to operate in a truly global economy rather than periodically threatening to break the internet because they don’t know how to use it.

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