Copyright in the digital age Mark Smith 8 July 2010

osborneclarke.com 1 Overview Challenges facing content owners; Brief overview of the Digital Economy Act; Developments in other jurisdictions; How content owners are adapting to the digital environment;

osborneclarke.com 2 Challenges facing content owners Creative works are now easier to produce and reproduce than they have ever been; Consequently consumers are less willing to pay the prices that are charged for these works; Many consumers have turned to piracy;

osborneclarke.com 3 Challenges facing content owners UK creative industries generate 6%-7% of GDP; According to the Digital Britain report: – BPI claim peer-to-peer file sharing costs the UK music industry £180m per annum; – IPSOS estimated a loss in the UK for the TV and film industry of £152m in 2007;

osborneclarke.com Challenges facing content owners Content owners face real challenges monetising their content; Need to take effective action to reduce piracy; Pressure to develop new business models; Should aim to offer consumers something they value at prices they are willing to pay; 4

osborneclarke.com 5 Digital Economy Act 2010 Controversial piece of legislation; Passed in “wash-up” in April 2010; Implemented many aspects of Digital Britain report; Response to the problem of piracy via the internet; Various obstacles to implementation of measures;

osborneclarke.com 6 Digital Economy Act 2010 Content owners can issue copyright infringement reports (CIRs) to ISPs providing an IP address; ISPs must notify the relevant subscribers of the CIR; ISPs must also supply copyright infringement lists (CILs) to content owners listing subscribers who have exceeded a threshold number of CIRs; CILs will be anonymised, but content owners will be able to recover subscriber details by court order;

osborneclarke.com 7 Digital Economy Act 2010 Contains provisions granting SoS the power to require ISPs, by order, to take technical measures against repeat infringers (e.g. suspending their service); Permits SoS to make regulations granting courts powers to order blocking injunctions in relation to specific websites; Increases and standardises maximum fines for copyright offences generally;

osborneclarke.com 8 Developments overseas Similar legislation recently adopted in France: – ISPs follow three-strike procedure on notification by a rights holder; – Internet access suspended if infringer fails to comply; New Zealand Copyright (Infringing File Sharing) Amendment Bill proposes a similar system; Government ministers in other countries (e.g. Germany and Australia) have rejected calls for legislation there;

osborneclarke.com 9 Developments overseas South Korea introduced a similar system to the UK in July 2009; – Physical and digital music sales increased; – An indicative survey suggests that 45% of infringers had reduced their illegal downloading; IFPI report suggests countries with the least stringent anti- piracy measures suffered the most serious falls in sales (e.g. Canada and Spain);

osborneclarke.com 10 Adapting to the digital age Rights owners have tried to adapt to the digital age in a number of ways: – Pursuing copyright infringers; – Employing Digital Rights Management (DRM); – Developing new business models;

osborneclarke.com 11 Pursuing infringers Some content owners have acted by taking legal action against pirate websites: Pirate Bay case Twentieth Century Fox v. Newzbin [2010] EWHC 608 (Ch) – Defendant's website provided an indexing and search tool facilitating the download of films by its members; – Held that it had communicated films to the public contrary to s.20(2)(b) of the CDPA 1988.

osborneclarke.com 12 Pursuing infringers Other content owners have decided to pursue individual file sharers; IP addresses identified and court orders obtained compelling ISPs to hand over physical address details; ACS:Law has sent thousands of letters to alleged infringers on behalf of content owners; Letters invite the alleged pirates to settle out of court; Resulting negative publicity and SRA attention;

osborneclarke.com 13 Digital Rights Management DRM imposes limitations on the usage of digital content, such as the number of times it can be copied or the devices it can be played on; Used by companies including Sony, Apple, Nintendo and the BBC to protect their content; DRM is usually cracked leading some opponents to argue that it is pointless; However, it could still offer protection during the key initial release period of a product and deter casual pirates;

osborneclarke.com Digital Rights Management Since February 2010 Ubisoft has included DRM in its PC games which requires an always-on Internet connection; Attracted harsh criticism especially from those with poor internet connections or who game on the move; Encouraged denial of service attacks; However, piracy was undoubtedly reduced, even though the DRM was eventually cracked; Ubisoft considers effective DRM "vital" to the success of its PC games;

osborneclarke.com 15 New business models Music industry is a pathfinder for other creative industries in this area; Smaller size of files has traditionally left it more exposed to new technologies; Initially slow to respond to the digital market; Now arguably leading the way; Advances in technology mean that TV, film and computer games are increasingly vulnerable too;

osborneclarke.com 16 New business models Emergence of music downloads: – iTunes is now the biggest music retailer in the US; – Traditional bricks and mortar retailers such as HMV and Tesco now sell music online; Streaming services such as Spotify: – Often advertiser funded with short adverts streamed before or between songs; – Alternatively can be subscription based; Monetisation of music videos;

osborneclarke.com 17 New business models UK music collecting society PRS has responded by: – Reducing its royalty rate from 0.22p to 0.085p per track played online; – Increasing its share of licensee’s advertising and other revenues from 8% to 10.5%; Lured YouTube back to the UK market following previous failure to reach license agreement; Currently consulting on royalty fee for live concerts;

osborneclarke.com 18 New business models Examples of music industry players responding to consumer demand: – Record label Apple releases material to download for the first time; – Amazon cutting download price of some tracks to 29p; – iTunes and other major stores responding to preference for DRM free music;

osborneclarke.com 19 New business models Developments in other industries: – Increasing trend for digital distribution; – Launch of Borders eBooks offering 1.5 million titles; – Emergence of MMOGs; – Product placement in TV, films and computer games;

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