Hargreaves, Copyright, Technology and the Future of the Creative Industries : a UK multidisciplinary perspective

Lilian Edwards – Deputy Director CREATe
Professor of E-Governance, University of Strathclyde

Copyright was invented simultaneously to provide a revenue stream for creators and also to provide an incentive for the production of works useful to the public. As the Statute of Anne’s preface  put it in 1710 : “Whereas printers, booksellers, and other persons have of late frequently taken the liberty of printing, reprinting, and publishing, or causing to be printed, reprinted, and published, books and other writings, without the consent of the authors or proprietors of such books and writings, to their very great detriment, and too often to the ruin of them and their families: for preventing therefore such practices for the future, and for the encouragement of learned men to compose and write useful books”. The further development of copyright over the decades has identified as equally important to the concept a contract of a kind between creators and the public interest, such that the award of a limited monopoly to creators, in respect of their works, is balanced by limitations as to term and scope and exceptions for public benefit, such as the “fair use” or “fair dealing” exceptions variously found in different legal systems. In recent years, awareness has grown of the value both to users and to economic growth of a public domain created by such limitations and exceptions, complementing a productive copyright-protected zone.

These careful balances evolved over centuries have however been dangerously unbalanced by the arrival of the digital world. Over the last decade, the creative industries have been undeniably and beneficially revolutionised by information and communications technologies (ICT) and the digital economy. This has resulted in the emergence of: new types of creators, cultural products and processes; new platforms, physical and virtual, for production and distribution; new intermediaries, finance sources and distributors (as well as disintermediation); and  new engagements with consumers (notably, in the interactive user-generated content (UGC) or “web 2.0” world). In Europe, historically lagging behind the US in reaping the benefits of the digital  renaissance, we are arguably at a pivotal moment where we have the opportunity to build a cultural and regulatory infrastructure where a next generation of first movers as successful as Google, Facebook or iTunes can flourish.

But the transition from analogue to digital for established creators and rightsholders has sometimes been as problematic as it has been promising. The UK’s Hargreaves Review[1] has taken a lead on reshaping copyright as “fit for purpose” in the digital era and provides support for the optimistically non-Luddite notion that if technology has threatened the creative industries, it can also save them. However, reform will fail if consensus and compromise on encouraging innovation cannot be found at the same time as supporting established industries during this digital transition. Policymaking in the digital IP and creative industries arena is known to be a controversial matter, bedevilled by a well-funded lobbying community and a lack of technological expertise among legislators, as well as the absence of a robust evidence base assembled via open and transparent methodologies to back policy proposals. The recent Stop Online Piracy Act debate in the US, prompting a personal intervention by President Obama, shows that copyright policy based on rhetoric not research – however well meaning – has the power to undermine the essential working of the Internet.

The author is part of a consortium of seven universities and around 80 non research partners, including 45 SMEs or micro-creators, who, inspired by the Hargreaves reforms, are seeking to build a roadmap through the digital forests (or swamps) for the creative industries in the UK, the EU and globally. Our participants are drawn from academic departments of law, business, economics, psychology, cultural studies and technology, and from every one of the creative sectors. Our preliminary work has identified what we see as a number of axiomatic starting points:

  • IP policy needs to be focused around the needs of SMEs and individual creators as the incubators of innovation, especially in the digital start-up era. In the past, IP policy, especially at international treaty level has been dominated by the needs of major rightsholders, often themselves intermediaries or distributors not original creative forces. Such an approach, while important to sustaining existing revenues,  may fail to  incentivise and sustain new growth and new types of innovation from the grass roots origins of creative revenues, namely, creators, and from the users who consume and build upon their products.
  • Work is needed to identify what business models can survive in the digital world, which cannot and what new ones can succeed and scale to create growth and jobs in the cultural sectors, as well as support the public sector in times of recession (“good, bad and emergent models”). Conditions in one creative sector are obviously not the same as in another, yet learning and experience may still be transferable. For example, the copyright infringement (“piracy”) problems of the music industry are well known, yet such infringement has been generally associated with a young adult demographic, and an anti-establishment, non-compliance with law tendency among youth. This has arguably driven some of the more punitive public enforcement measures, such as disconnection on allegation of file-sharing (“three strikes and you’re out”) which in its guide as “graduated response” has also been promoted on its “educational” qualities[2].Yet recent studies on the experience of infringement in the e-book industry show a very different pattern[3]. In a 2011 study, almost 30% of owners of e-book readers admitted to downloading an unlicensed book; yet the predominant demographic involved was older women, with 1 in 8 women over 35 admitting to having downloaded e-books without permission, compared to only 1 in 20 women of that age who had downloaded music in breach of copyright.  Such evidence perhaps points to patterns of infringing consumption being driven more by a lack of legal alternative sources, and the current system of “windowing” releases (eg a US-authored bestseller being available in paperback later in the EU than in the US), allied to confusion as to when a free copy is indeed legal (eg, term-expired, as with many literary classics) than by sheer disdain for the law. This points to different solutions than punitive sanctions, such as an enhancing of the availability of legal online content in all markets, or a clearer marking of legal content.

    Examinations of the computer games market – now producing more revenue than films, TV or music in most jurisdictions – also valuably illustrate how diverse business models can discourage or circumvent piracy. Online multi-player games such as World of Warcraft rely on the social element of gaming which cannot be pirated; a fake download source would not connect to the WoW server, would not have your friends on it and would thus be of no attraction. At the other end of the scale, free games on mobile smartphones are big business, with Zynga, tied to Facebook and maker of games like Farmville, making  a profit of USD630 million in 2011[4]. Such profits come not from users paying for copies but from a variety of revenue streams, such as sharing of profits derived from advertising revenue on Facebook, and scale of in-game assets or levels. Other smaller games manufacturers make money by creating free “viral” games on commission for TV programmes or other marketing campaigns, distributed by the Web or by apps. One such company, Mudlark, has produced a game based on “checking in” to Transport for London tube and other transport stations, and hopes to use the platform created to sell as a product in itself.  Back in the e-book  and publishing industry, a growing new development is the use of crowd-sourcing to secure the publication of books which might not otherwise find commercial backing[5]. Such diversity and imagination is typically emerging from the SME innovation base of the digital entertainment industries. One project of the consortium will be to map such alternative business models and see if they can indeed be scaled, or transferred to other industries where “pay per copy” as the sole or main revenue model is faltering.

  • This leads to our third starting point that while copyright was established to incentivise  creation it is by no means empirically clear that copyright in its current form really does reward creators and creative work, rather than intermediaries such as publishers and distributors who in many industries typically take control of copyrights by assignation from creators. Our work will thus include empirical studies on how far copyright really is uppermost in creatives’ minds and how far it focuses their working and business practices; on how far innovation may come from “open” business models, such as open film, open data and open publishing;  and  in particular on models where revenues go straight to creators via disintermediation, as has already been pioneered in the music market using sites like MySpace and individual artists’ websites.
  • Fourthly, technology has, understandably, been seen by many of the copyright-founded industries as a disruptive threat. For real recovery and growth in these sectors though, technology must now be embraced as a friend. One solution embraced by Hargreaves is the creation of easy, cheap and fast automated licensing via a Digital Exchange[6].  Such systems will, it is hoped, ease the purchase of bundles of rights for specific business models,  and help break down the industry restrictive practices which have eg caused the successful European online music service, Spotify, such trouble in breaking into the US market. Automated licensing may also have unforeseen positive spin offs : eg Lawrence Kaye, a well known London IT lawyer, suggests that such licensing might ease the copyright problems around data mining, ie, deriving new data or products of worth from existing texts or data via analytics and pattern spotting algorithms[7].  Hargreaves proposes a new data mining exception to clear the field for non-commercial researchers; such an approach is positive, but easier automated licensing permitting data mining could also instigate a productive market in commercial data mining. Another area where technology may aid is in creating new platforms for the group, crowd-sourced, “open” or common-or-garden sale or exchange of creative and digitised works. One striking example of the usefulness of digital platforms can be seen in the US superhero comics market (Superman, Spiderman, et al), which has for years been moribund and maintained primarily for film rights, as the avenues for distribution of hard-copy comics have narrowed to a small number of specialists shops aimed at a dwindling adult market.  A new one-stop platform for download of comics from all companies called Comixology  – an iTunes for comics effectively – promises a potential explosion in the market as users young and old rediscover full-colour comics as a product perfect for the tablet and iPad age[8].
  • Fifthly and, again, connectedly, we see the role of online intermediaries such as ISPs, social networks and mobile operators as crucial in the production and distribution  of cultural goods,  as well as, more controversially, in the enforcement of copyright. Little work has taken into full account the role of these new digital intermediaries in the creative industry space (compared to traditional intermediaries such as booksellers, collecting societies and record labels) – this needs urgent attention Given the important governing role of these bodies, should they be subject to regulation like public bodies and if so, how? How should competition law be applied to large multi-operation and multi-jurisdiction players like Google and Facebook? How if at all should creative revenues accrue to these new intermediaries, and in what proportion compared to the “offline” world?
  • Finally, we considered it vital to always keep in mind how the public interest and human rights, such as freedom of expression, privacy, and access to knowledge for the socially or physically excluded may be affected either positively or negatively by new business models and new ways to enforce copyright. The future of the creative industries will always depend on the participation of the user community and if user rights are not considered, the “social contract” of copyright noted above will wear away.

The Hargreaves report is an invigorating, comprehensive and promising start to the process of reshaping copyright and business models for a vibrant and growing creative sector in the UK. It may yet come to be seen as a model for Europe as a whole; but only if the above points are also taken seriously as a starting place for academics, policymakers and commercial enterprises working in this domain.

[1] See Digital Opportunity : A review of Intellectual Property and Growth, An independent report by Ian Hargreaves, May 2011, at http://www.ipo.gov.uk/ipreview.htm .

[2] See eg Anderson N “IFPI: “Three strikes” efforts hit worldwide home run”, 2008,  at http://arstechnica.com/tech-policy/news/2008/08/ifpi-three-strikes-efforts-hit-worldwide-home-run.ars  .

[3] Digital Entertainment Survey, 2011, and  Telegraph report, “E-books drive older women to piracy”, 17 May 2011, at http://www.telegraph.co.uk/technology/news/8518755/E-books-drive-older-women-to-digital-piracy.html .

[5] See eg “Monty Python’s Terry Jones crowdsources funding for book”, Wired, 5 August 2011, at http://www.wired.co.uk/news/archive/2011-08/05/unbound .

[6] See further, Rights and Wrongs: Is copyright licensing fit for purpose for the digital age? The first report of the Digital Copyright Exchange Feasibility Study, IPO, March 2012 at http://www.ipo.gov.uk/dce-report-phase1.pdf .

[7] L Kaye “Hargreaves & ‘text mining’ – digging up copyright?” , September 22, 2011, at http://laurencekaye.typepad.com/laurence_kayes_blog/2011/09/hargreaves-text-mining-digging-up-copyright.html .

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