As time passes and new technology develops, law must also change to take into account the dynamic conditions it regulates. As was seen in the Sony v. Universal (1984) case, each generation of new technology brings up new legal questions. Recently, the proliferation of P2P networks, from Napster and Grokster to Bit Torrent and ISO Hunt, has raised numerous questions about the concept of copyright, the “fair use” of copyrighted works, and how they are “shared” in the 21^st century. Stemming from these questions, numerous lawsuits have been brought to court challenging P2P networks and demanding secondary liability from the providers hosting content and giving access to those sharing it. In addition, the individuals themselves who knowingly (or in some cases unknowingly) share copyrighted works are pursued with legal action.

In thinking of possible solutions between copyright holders (usually large corporations) and individual content users, are lawsuits really the best way to move forward? With the worldwide economy in shambles, paying exorbitant attorney and court fees on top of spending an inordinate amount of time on any given case does not seem like an efficient use of either side’s resources. In fact, legal action on the part of corporations might have far reaching negative effects on the sales of said entity, as individual consumers may get turned off by a company’s authoritarian stance on copyright. Beyond this hypothetical, however, there are bankable incentives to embrace new technologies. The Sony v. Universal decision allowed for the creation of the VHS market, which eventually became the DVD market, from which media companies are greatly profiting. While DVD, and now Blue Ray, sales have recently declined, they still reached an astounding $29 billion in 2008. This crucial market would not have existed without the landmark decision made by the Supreme Court in 1984.

Like most market leaders, the major players in the entertainment industry are hesitant to change. But, as they have in the past, change they must. The old models of hundreds of millions of CDs sold, hundred-million dollar ticket receipts from blockbuster movies, and primetime television with expensive ad slots are out-of-date. Consumer preferences are clearly changing over time in light of technological advancement and the entertainment industry should find ways to adapt to these shifting consumer expectations.

While there has been much opposition to change, the entertainment industry has begrudgingly adapted. The music and movie industries were eventually wooed by Apple’s iTunes to fend off revenue loses to unrestricted P2P sites. While traditional revenue streams are indeed shrinking, iTunes sales were up to an unprecedented $3.34 billion in 2008. As mentioned before, movie studios eventually embraced the Sony v. Universal decision and found innovative ways to tap into a new market, examples including DVDs jammed with exclusive extras and low-budget sequels released direct-to-DVD. iTunes and the DVD/Blue Ray market, affecting the major music industry (RIAA) and film industry (MPAA) groups who have fought against technologies such as P2P, have brought in a combined $32.34 billion in 2008. Movie theater ticket sales totaled $9.6 billion and CD sales were approximately $4.6 billion (assuming a price of $10 per CD) making their combined total $15.2 billion in 2008. Even though profits from traditional revenue streams have dipped, the new markets afforded by technological innovation bring in more than double the revenue of these traditional markets. It is important to realize that not all of this money goes directly to music or film industry content-producers, but the difference in scale is hard to ignore.

Critics of P2P frequently mention the direct negative effect and market competition of such sharing, yet this is not always the case. For example, one of the main sources of revenue for artists is live concerts. Live performances do not compete with downloaded and prerecorded content. To the contrary, fans may decide to buy a ticket to an artist’s show after listening to their P2P downloaded performance. Ticket sales, totaling over $4.2 billion in 2008, are still robust and, for the music industry, adds to CD sales and royalties from iTunes downloads.

But instead of fighting consumer trends, why not try to find new ways to monetize these new preferences by adapting content distribution models? The television industry has done just that with some innovative solutions that deserve credit. T.V. episodes are now available online from most major networks, a major example of which is Hulu (a site developed by NBC). Content is easily available in streaming, high quality. And it’s legal. By considering consumer preferences, television studios such as NBC have outdated the need to download files with unreliable quantity and the threat of virus infection from underground P2P sites. There is now no need to spend 10 hours downloading a grainy episode of >Lost which, you learn after downloading it, is disappointingly dubbed in French. ABC has also developed a site like Hulu with HD episodes of its show, such as Lost, available to stream within seconds.

This new development gives viewers access to content for free and they are able to view their favorite show whenever fits their schedule. Everyone wins as the television studios benefit from online ad revenues. Despite the change, traditional television advertising in the U.S. is projected to grow from its 2007 level of $43.2 billion in the coming years. This revenue will only be added to by online advertising sales tied to programming on sites like Hulu.

Ratings are also a concern for the television industry which uses them to price and sell ads. This need does not pose a problem, however, as Nielsen (the definitive producer of rankings for the industry) now ranks online television viewership. Shows like Gossip Girl (which, as an aside, prominently features Yale in its storyline) have survived cancellation fears because of these new online rankings, which are becoming increasingly influential.

Another promising solution has been a reduction in industry production costs tied to an understanding that content created will not necessarily bring in the same revenue it has in the past. A landmark example of this trend came out of adaptation to industry realities, albeit in a different setting. Joss Whedon of Buffy fame scaled-down his production of Doctor Horrible’s Sing Along Blog due to the realities of the union strikes in Hollywood. In spite of its low production costs, Whedon’s “Sing Along Blog” received positive reviews and, despite being available for free on Hulu, was ranked #1 on the iTunes download charts after its release. By spending less time and fewer resources on production, talented people can make quality content on a shoe-string budget that delivers results. While poor content will not be profitable, there will be a trend towards “better” content, as determined by the “votes” of consumers cast by what they choose to watch and buy. Production values may decrease, but this could be seen as a positive as it equals the playing field by lowering barriers to entry and necessitates innovative means of production on a tight budget. The cream will rise to the top and, at least ideally, everyone benefits. While entrenched industry players might be opposed to these “democratic” changes, this shift will incentivize creativity and quality entertainment which, in essence, are the core values behind the idea of copyright and its protection in the first place.

While it is unclear how the connection between the entertainment industry and new content distributors such as P2P networks will develop, this relationship must change one way or another. If it becomes increasingly negative, the interaction will be overwhelmingly unpleasant for both sides resulting in high costs for all parties involved and, ultimately, a waste of time and energy resulting in limitations that will stifle creativity. If, however, there is a consensus to find ways to move forward, the issues raised by P2P networks, and the resulting shift in entertainment industry norms and models, could mark a promising new beginning.

Most of you probably know about Hulu, but for those of you that haven’t heard of it, check it out!

Obviously, the biggest issue in the news right now is The Pirate Bay, and their ongoing trial in Sweden.  But I’ll leave that topic for someone else, and instead offer up my thoughts on Grokster’s aftermath, and the way Grokster prompted the RIAA to respond with its gigantic lawsuit campaign.

Exposition: Everyone’s already aware of the RIAA’s gigantic legal campaign, I think.  But in case somebody isn’t, the Recording Industry Association of America sued approximately 30,000 individuals for copyright infringement based on their use of P2P software.  It built a gigantic legal machine and targeted consumers with limited ability to fight back.  The vast majority of the RIAA’s victims either settled or agreed to a “pre-settlement letter”, with only one case (Capitol v. Thomas) actually making it all the way to a trial (currently headed for a retrial based on faulty jury instructions).  Just last December, the RIAA made the surprise announcement that it had already ceased filing new lawsuits, though that claim should probably be taken with a grain of salt, considering they lied about it at the time.

The facts of their campaign are mostly well-established at this point, and probably everyone reading this blog has read plenty about it before.

A lot of people have praised the MGM v. Grokster decision for its fairness; the Court found a way to hold Grokster and Streamcast liable for inducing their users to commit copyright infringement without having to decide whether P2P itself was illegal.  The Court specifically shied away from that, not wanting to stifle emerging technologies; but there was significant evidence that both companies knew their products were primarily used for infringement, and actively relied on that infringing activity to generate the bulk of their profits (through advertising).  I like the decision, myself.  I think they were right in holding the companies liable, and very appropriately left a lot of issues ambiguous.

People complained because the lines of inducement were blurry, but the significance was that the Court focused on inducement and not on the substantiality issue of Sony v. Universal (i.e., the Betamax case).  The door was left open that other P2P software could still be legal, as long as the owners didn’t attempt to induce copyright infringement.  Perhaps just as importantly, the case took a few years to litigate: in that time, file-sharing applications blossomed.  The Gnutella network spread like wildfire, with dozens of clients being released; the eDonkey network did the same, and torrent sites popped up on servers all over the world.  The Grokster decision meant that if the RIAA decided to sue the companies backing these services, they wouldn’t be guaranteed victory, even as file-sharing clients multiplied like rabbits.

Except, by this point, the industry had built up a considerable amount of inertia pushing it towards legal action.  And when Grokster made it clear that legal action against companies wouldn’t be effective, the RIAA’s lawyers had to go somewhere.  The point of logic to consider is why the industry was so hell-bent on pursuing legal remedies; from an outsider’s perspective, it looks like nobody stopped to consider the option of how to adapt their business models to new technologies.  I can’t second-guess this; it seems obvious to me, but I’m sure that whoever made the decision had reasons.  Not necessarily good ones, but some kind of reasons.

These days, the industry’s changing its tactics; Amazon and iTunes have pushed them to offer DRM-free mp3 sales, they’ve made headway on getting agreements with ISPs on implementing three-strikes (and similar) policies, and there are still a few high-profile secondary liability cases being pursued (*cough* The Pirate Bay *cough*).  But the Grokster decision is still the dominant influence on the shape of p2p today, and on Big Content’s ongoing struggle to deal with it.

image from modernhumorist.com

(courtesy of lessig.org)

In the midst of this ideological battle between copyright owners (who, naturally, want to protect their content) and the users (who want increased access), the gatekeepers are often thought to be mere middlemen. Legally, they are just that: by complying with the safe harbor regulations, internet service providers and content hosts absolve themselves from any responsibility. However, despite being legally innocent, do companies have a civic responsibility to do more?

The unfortunate reality of the situation is that many companies – like eBay, as Brian mentioned below – still have little to gain and lots to lose from defending the rights of their users. eBay’s VeRO program is one of a number of legal safeguards across the industry that protects the content hosts against any possible legal risk; YouTube’s content identification program serves a similar purpose, and has faced similar criticisms, most recently by the E.F.F.

That announcement, in which the E.F.F. stated their intent to pursue legal action in defense of fair use, is not the first of its kind: the McCain-Palin campaign, among others, brought up the same issue during last year’s election. After seeing a number of videos taken down due to alleged copyright restrictions, the campaign sent a letter to YouTube, noting that several “overreaching copyright claims have resulted in the removal of non-infringing videos from YouTube, thus silencing political speech.” The videos in question, which included “fewer than ten seconds of footage from news broadcasts in campaign ads or videos, as a basis for commentary on the issues presented in the news reports”, were called “paridigmatic examples of fair use” by the campaign. McCain suggested that some sort of review process would “provide enormous benefit” to the protection of First Amendment rights. (You can see the full letter at Lawrence Lessig’s site).

YouTube’s response was a resounding no. Part of their objections addressed McCain’s solution to the problem: perhaps unsurprisingly, he politicized his solution by suggesting that YouTube alleviate their logistical burdens by only reviewing videos related to the campaign. (As YouTube Chief Councel Zahavah Levine noted, “We try to be careful not to favor one category of content on our site over others, and to treat all of our users fairly, regardless of whether they are an individual, a large corporation, or a candidate for public office.”)

More importantly, though, the remainder of Youtube’s response perfectly illustrates the shortcomings of the current implementation of the DMCA. Levine noted that “Lawyers and judges constantly disagree about what does and does not constitute fair use. No number of lawyers could possibly determine with a reasonable level of certainty whether all the videos for which we receive disputed takedown notices qualify as fair use.” Thus, any sort of internal evaluation of legal risk would pose some danger to the site’s safe-haven status. “When two parties disagree,” writes Levine, “we are simply not in a position to verify the veracity of either party’s claims.” A judge’s 2008 ruling requiring that content owners consider fair use before sending takedown notices should help the situation, but (expensive) legal counsel is still all-but required to countersue. With the DMCA the way it is, companies will continue to be relucant to pick a side in the fight between copyright owners and users; without any sort of incentive to do otherwise, it’s far safer to succumb to the abuse of the DMCA takedown notices than to risk legal retribution by refusing.

Perhaps with the resources and inclination to properly persue legal action (and without partisanship obscuring the issue), the EFF will have more luck promoting fair use.

During my first semester here at Yale, I received an email that Yale Student Computing was looking for more students in Silliman College to be Computing Assistants. I thought it could be a fun and flexible job, so I applied and was accepted for the job. Since then, our division has changed from Student Computing to the Student Technology Collaborative (with the unfortunate acronym of STC) and we are now Student Techs. I am still an ST now, even three years later.

I know many of you in this class are STs, but for those of you who aren’t, let me give a brief overview of some of our roles. The position really entails two separate, yet equally important jobs. First, we repair students’ computers in our respective colleges, which is vital but not particularly relevant to this class. The other function we perform is supervising the public computing clusters in Bass Library, Connecticut Hall, and Dunham Labs. That is where we are on the front lines of Yale University’s gatekeeping operations. Read the rest of this entry »

This?:

This week, the rollout of the Amazon Kindle 2 provides fresh fodder for the debate over intellectual property, copyright infringement and digital business models in the book publishing industry. Although it was just two years ago when Professor James Boyle resigned electronic books to a sampling tool role as the hassle of reading books on a screen were too painful for most, the latest improvements in memory, battery life, e-Ink and e-Paper technology displays for the new Kindle may hold his feet to the fire.

Indeed, it was because books were more easily read on paper that Boyle claimed e-Books were fantastic ways for the small, marginal or up-and-coming author to gain exposure and scale, knowing that hooked readers would put down the sample and go out and purchase the hardcopy. On the other hand, classy and established writers like John Grisham and Danielle Steel would scorn free downloading, digital distribution, Creative Commons licenses and “copy-friendly” business models for fear of cannibalizing paper and hardback sales. But now, with the development of improved e-Book readers like the Kindle 2, the advantages and disadvantages of digital books have become fuzzier.

Kindle 2 books are not yet free. It costs $9.99 to download and store a full book on your Kindle account (your collection can be accessed from another kindle). Still, they are certainly cheaper than hardbacks, and with services like Google Book Search, which uses optical character recognition to scan and digitize written text, as well as copycats and existing P2P destinations, who knows how long it will be before users will find ways to upload free content onto Kindles or for cheaper, more accessible readers to make it to market.

The question that remains is how the obscure author and the famous author will be propelled or set back by digital books, and how they will adjust or maintain their strategies in the wake of this technology, if at all. First, will improved e-readers really revolutionize how people acquire and read texts? Right now, the high-priced ($359) Kindle has only managed to attract the early-adaptors, but eventually as prices come down and new competitors enter the market, I cannot see the common book reader ignoring the increasingly obvious benefits of portability, storage and instant download. Just the idea of skimming a few pages every time I’m bored at the bus stop, downloading a new bestseller instead of hitting up the nearest Barnes & Noble, or busting out my reader on a plane instead of carrying a sack full of books gives me the hibbie-jibbies.

Thus, my thoughts are that the obscure or up-and-coming author will continue to embrace digital books and the new Kindle as a means to gain exposure despite the decreased margins per book sale. Similarly, the established writer will stand to gain volume through an increased following of previous non-readers, seldom readers, international readers and new young readers. Additionally if successful, both types will learn to draw substantially more revenue from conferences, motivational speeches, deal signings with periodicals and regular publications, popular blogs and a web presence, consulting businesses or perhaps even posts in academia; note Tom Wolfe, Salmon Rushdie, Dave Eggers, Peter Drucker, Malcolm Gladwell, etc. And as for those whose works grace mainly the airport stands or express lines at grocery stores, would we really hate to see them “fade into oblivion” anyways?

Ultimately, it’s the publishing houses (especially textbook publishers!) that should be worried most, not the writers. It’s these middlemen, whose margins are based on “the restriction of copying,” and who must eventually face the demands of the “Next Billion” Internet users that will increasingly seek their content in a digital, mobile format instead of analog or print. The other question that remains is how books will learn to compete directly with other textual media, like newspapers, periodicals, blogs and regular publications for digital readership.

Or this?: