David Stoughton of ValueKinetics writes:
Back, after an enforced hiatus, to the main theme, the record companies and their struggle for survival. This time to the second of the big questions, would enforcing copyright restore the status quo?
Possibly a pivotal moment (or not...)
It's a timely question. The government, in the form of the communications minister, Lord Carter (why are so many ministers drawn from the house of Lords? Could it be ... no let's not get distracted by the clowns). Anyway this Lord Carter will publish his Digital Britain Report this coming week. It's slated for the 16th; in it he promises to 'tackle the issue of copyright'.
Previews suggest he will not endorse some of the loonier ideas that have been pitched. Pity about the levy on ISPs to be split amongst media publishers, I was looking forward to claiming my .0000001 pence stipend for publishing these blogs. More especially I was looking forward to the interesting battle when the kid who posted guitar, the 4th most popular video on YouTube which currently claims 60,134,640 views, seeks his share of the loot. Wait! Neither of us you say is a 'legitimate media business', so we don't deserve to share a portion of the pie. That was the good clean fight I was looking forward to, though in another, messier, form it's going to happen anyway.
It appears the industry itself is not that keen on another levy that is core to Lord Carter's proposal, the one to be collected by a 'pan-industry Digital Rights Agency' that would use it to 'help pay for enforcement'. UK Music, an industry pressure group, has - mirabile dictu - come out and said "It is not the ambition of rights holders to sue their own consumers" (all those court cases must have been about something else then).
ISPs will also be "required" to notify individuals using illegal content and to collect "anonymised" data which could be used against repeat infringers (however that is supposed to be reconciled with anonymity).
The issue of who is a legitimate rights holder remains difficult because the act of publishing - barring infringement in the content - confers rights on the publisher, whoever they are. All the proposals so far appear to suggest that 'legitimate' just means anyone with deep enough pockets to bring a court case.
But this all still begs the question, which is not really about the
mechanics but about whether even a successful, non-controversial
regime, would actually save the current business model of the record companies. (I return to record companies specifically here because I believe the issues are different for different media, and the outcomes will be too. It is a mistake for them, for legislators, and for us, to assume otherwise.)
Beware those who can vote with their feet
Let's imagine a time when copyright can once again successfully be collected by those who want to collect. In music, those most anxious to do so are record companies, they are, for the most part, the ones whose ability to do so has been impaired. Will restoring full collection really save them? My answer is no! Bear with me - I have reasons.
It is aspiring performers who will undermine the model. It is specifically not in their interests to charge directly for distribution that guarantees them exposure. The trade-off is clear, charges will deter and the audience will build more slowly or not at all. So the rule is equally simple, first build an audience then decide how to monetise it.
Record companies complicate the issues. Whereas signing to a record company was once the only viable way to reach a substantial audience, now it is just one option. The relatively small advances (loans) they make are in exchange for two things, ceasing to offer any recordings for free, and a majority of future income in recordings released by them. The company will then do most of the work of building an audience - though whether, in the age of the Internet, they can do it any more successfully than the performer can themselves is a moot point.
So the artist must make a complex calculation, essentially about the price of risk. It is this trade-off that will sooner or later undermine the hopes vested in copyright enforcement.
Time for a bit more self harming
I've already covered a lot of the ground about why the artist benefits from going it alone in previous posts and I'm not going to go over it again here. The key point is that the balance between taking the media giants' shilling and struggling through is a fine one at present. Many, perhaps most, still consider income now (though of course it's a loan and will be recouped) as preferable to a larger slice of, less predictable, future income. However, the balance will tip as alternative models are seen to work.
Whilst I'm clear that a rational being (remember classical economics) would now choose to take the risk themselves, real artists will mostly continue to prefer someone to mitigate the short term pain for them. For now that remains, primarily, the record companies, but the very act of enforcing copyright collection changes the balance.
Illegal downloading has, paradoxically, been the saviour of the record companies thus far; it acts as a safety valve. It gives new artists access to large audiences anyway, even if the record companies they sign to try to prevent it. If that access is denied both the artist and the company will find it more difficult to reach a critical mass, risk is increased for both parties. The companies can, and almost certainly will, respond by reducing their advances and probably - in another self-defeating move - the royalties they offer too . At that point unsigned new artists have a clear advantage over signed ones, increasingly they will learn to hold out.
The more artists hold out the greater the opportunity for new business models to develop, especially those that manage the trade-offs better then record companies currently do. Eventually those companies will be forced to change the way they do business. The signs are that most of them will leave it too late to retain anything like the market share they do now.
So all the legislative fuss is just another way of putting off the evil hour. Record companies are betting the farm on external saviours riding to the rescue in preference to questioning the way their business works. Whilst probably not the coup de grace, successful copyright enforcement will certainly prove to be another nail in their coffin.
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