In the ongoing struggle in the digital world between the creators of content and those who apparently believe that it is their right to take for nothing what others are expected to pay for, in the process depriving the whole value chain of creativity from author to performer to producer to investor to distributor of their right to earn a return on their investment (creative or financial), there is the never-ending debate as to the most effective way to combat this world-wide problem. Solutions vary, with opponents of any anti-piracy or enforcement measures arguing that if only content owners would make their content more easily available, the entire problem of piracy would just go away. This argument, which dates back to the early days of digital music piracy, has little credence these days as content producers have invested heavily in developing alternative delivery models (most of which involve payment in one form or another) and in releasing and distributing content sooner and more widely.
Another possible solution is to target individual users (attacking the demand end of piracy) to try to either educate them or to threaten them with sanctions of one sort or another. Experience has shown that threats are usually of limited effectiveness—although they have some effect—but they risk alienating potential future customers. Yet another option is to attack the supply side of the problem by seeking to block the distribution of pirated content by commercial scale infringers whose business model is based on ripping off the intellectual property of others. There are many ways to do this, some more effective than others, but generally tackling the illegal supply problem through the courts is usually a waste of time and resources as these pirate sites invariably are located offshore in places where normal legal procedures are ineffective.
A parallel issue is that of who should bear the responsibility (and costs) of taking action against pirated content? Is it the sole responsibility of content owners when others in the distribution chain, such as search engines and other internet intermediaries, manage to profit from the posting of pirated content on their sites? And what about a role for governments, whose responsibility it is to create and sustain a legal framework to protect legal property, like the content produced by rights-holders, and who have the mandate to regulate and license the infrastructure that provides internet services? There are many angles to these fundamental questions, and debates around them often generate more heat than light. Thus it is refreshing to read a serious analysis of these questions, based on research and not just opinion, and to reflect on this paper’s “key insights”.
While a study of this nature could well comprise several thick tomes, authors Brett Danaher, Michael D. Smith and Rahul Telang, in their article Copyright Enforcement in the Digital Age: Empirical Evidence and Policy Implications, published in Communications of the ACM (Association for Computing Machinery) have managed in just seven tightly written pages (plus extensive references) to summarize and synthesize the literature and research on the topic and to produce a number of well-argued conclusions and recommendations.
Piracy Causes Harm
To begin, the authors address the question of whether piracy in fact does any harm to the creative industries. While recognizing that there will always be some people who are prepared to argue that the disruptive technology of digital piracy through illegal online file-sharing promotes rather than hinders content creation, the paper makes the point that of 26 peer-reviewed articles on the subject, no less than 23 conclude that piracy causes significant harm to legal sales. Having established that the harm is proven and widely accepted, the paper goes on to focus on the remedies. In the words of the authors:
“…we focus specifically on evaluating the effectiveness of a number of strategies rightsholders can use to respond to piracy, including making legal content more available or convenient, prioritizing links to legal sites in search results, and removing title-specific copies of media files from the Internet. We then analyze the results from various studies of specific government anti-piracy interventions, synthesizing these results to provide insights into the determinants of the effectiveness of such interventions.”
The Role of Content and Technology Providers
The study first looks at what firms can do to curb piracy and convert pirate consumers to paying customers by making their content more readily available. Using several empirical studies, the authors conclude that making content more available at an earlier date (e.g. timing the international release of films with the US release) can reduce demand-side piracy. On the supply side, the study concludes based on research conducted by one of the authors that “demoting search results that link to piracy websites can shift user behavior toward legal consumption”, suggesting that search engines have a part to play. All of these actions come at some cost to the company, whether a content-creator or internet intermediary, which raises the issue of cost-benefit. Forgoing some revenues in return for reducing losses from piracy will be more attractive to content producers than to internet intermediaries who may be indirectly profiting from their role in facilitating access to pirated content.
A Role for Governments (Demand Side Restraints)
This raises the role of governments, the entities that set the legal framework and adjudicate what is within the ambit of that framework, and they have responded to the upending of the traditional copyright regime by digital technologies. The paper examines the results of both demand-side actions, like the French HADOPI regime (which implemented a “graduated response” system in 2009, warning infringers, then fining them and ultimately cutting off internet access), and supply-side actions like site blocking. While the HADOPI law was effective in reducing illegal file-sharing, in the end it was terminated by the French government on the grounds that it was not cost-effective (for the government), requiring a large bureaucracy to monitor and implement a system that in fact led to very few sanctions against infringers. Even though the HADOPI regime was eventually dropped by the French government, the study concludes that it was effective as long as potential infringers believed there was a real possibility of sanction.
“With demand-side anti-piracy enforcement, awareness of the policy and an expectation of its enforcement appear to be necessary conditions for effectiveness. When these conditions are met, it appears that demand-side policies significantly reduce piracy and increase legal consumption and revenues.”
Supply Side Actions
With respect to government actions to curtail supply of pirated product, the paper examines two specific cases, the shutdown of Megaupload by US authorities in 2012 and the experience of blocking pirate sites in the UK. In the case of Megaupload, the impact of the shutdown on increased sales or rentals of legitimate digital products depended on the degree of Megaupload penetration. The impact was greater in markets where the penetration rate was higher, although overall the authors conclude that the closing of this site resulted in an increase of global revenues from digital movie sales and rentals by 6.5% to 8.5%. This occurred despite the presence of other similar pirate sites that allowed consumers of infringing content to access most of the content available on the Megaupload site. The resulting positive impact for legitimate sales probably occurred because of the “inconvenience factor” for infringing consumers.
In the UK by contrast, the blocking of just one offshore site through UK ISPs, Pirate Bay, had only limited results.
“We found when the Pirate Bay was the only site blocked, former users generally increased use of other piracy sites and VPNs, thus causing only a small decrease in total piracy.”
This finding was consistent with other studies in the Netherlands and Germany when just one prominent pirate site was blocked. However, subsequently the UK instituted a more widespread program of blocking infringing offshore sites with a very different result. Applying the same methodology to the study of the effects of just blocking Pirate Bay, the authors found that when a wider range of sites was simultaneously blocked, there was a large decrease in total piracy and a 12% increase in legal site visits. These findings are similar to the results of a similar study published by INCOPRO in 2015 that examined the efficacy of site blocking in the UK.
The authors thus conclude that supply-side measures that involve blocking access to offshore sites offering infringing content are effective because of the inconvenience factor, notwithstanding the fact that savvy users can find workarounds such as proxies and VPNs, an argument used by opponents of site blocking to argue that it is ineffective. Success depends on how effective the blocking measures are in increasing the search and transaction costs for consumers who are seeking to find alternate sources of pirated content.
These findings are significant in the context of both Australia and the UK, where site blocking action through the courts is successful, is continuing and is expanding, and in Canada, where a proposal to institute a site blocking regime is before the Canadian regulator, the CRTC.
Probably the best way to summarize the conclusions of the Danaher et al study is to cite its key insights;
- The empirical evidence shows the best way to reduce the economic harm caused by digital piracy is through combined anti-piracy efforts from rightsholders, technology firms and governments;
- Rightsholders can reduce piracy and increase legal sales by making legal content more easily accessible in digital channels and synchronizing international release dates; technology firms can respond by making pirated content more difficult to find on digital platforms;
- Governments can respond to piracy by introducing well-known and well-enforced legal penalties against individual pirates, by taking action to shut down or otherwise block Internet access to prominent pirate sites.
In other words, this is a complex problem and there is no one single remedy. To turn back the tide of piracy requires a concerted and coordinated tripartite effort from all three stakeholder groups; rights-holders, technology intermediates and governments, with each playing its appropriate part. The documentation of these roles is an important contribution of this study.
© Hugh Stephens 2018. All Rights Reserved.