The copyright business model functioned for decades with an equal measure of simplicity and brilliance. That was particularly true for the record industry, a business sector that survives by copying music. »That’s also why it’s called copyright«, says Peter Jenner, who made a name for himself in the 1960s when he signed up bands like Pink Floyd and organised a series of free concerts in London’s Hyde Park. The Englishman is now the director of the International Music Managers’ Forum.

For 15 years the record industry earned a healthy living transferring its music from vinyl to CD. Then along came the Internet and audio formats like MP3 and AAC (Advanced Audio Coding). The industry’s pressing plants became increasingly unimportant. That was not just due to the impact of CD burners and blank recordable discs, but also because the CD industry did not generate many new trends over the last few years. And in the meantime consumers are busy copying existing music themselves. Voluntarily and working from home.

Previously the industry could push its profits sky-high by working on a large scale and armed with the power to dictate prices, explains Peter Jenner. One hit was enough to slash the production costs of a silver disc to around 25 cents, whilst prices in stores continued to run at around twenty to twenty-five Euros. Composers and performing artists, to cite Peter Jenner, saw almost nothing of that revenue. Industry handed over four or five Euros at most to artists, who however had mostly already been paid their share when they signed their contracts.

While the entertainment industry insists in the mantra it recites to its customers »you shall honour and pay your artists«, in the business itself there is scant respect for this slogan. In 2002 Sony/BMG announced to its partners that neither the artist’s consent nor new contracts are required for online sales. To put it bluntly, this means the artists are left empty-handed. However, in August this year a Danish court ruling made observers prick up their ears: the band »Dodos«, which had a number of hits in the 1980s, had taken Sony/BMG to court in protest at their attitude. The court ruling: online sales were not covered by existing contracts, which would have to be re-negotiated.

While droit d’auteur also exists alongside copyright, the former category only has a limited impact on the industry, says Peter Jenner. On the whole the music industry in general, and the record industry in particular, is firmly in Anglo-Saxon hands. And there has never been an agreement in those climes on the copying fee to be paid for CD discs and blank tapes, for that would be tantamount to legalising private copying. Instead from 1994 on the industry increasingly backed the criminalisation approach. Initially individual states were put in the dock for not affording sufficient protection to intellectual property, whilst subsequently the American record industry in particular deluged individuals with court actions. The justification was that protecting the industry like this contributed to the USA’s gross domestic product and helped to secure jobs for American workers. Outside their own market, players from the Anglo-Saxon sections of the industry attempted to bring pressure to bear on the treaty negotiations conducted by WIPO (World Intellectual Property Organization) and the WTO (World Trade Organization) to assert their model for protecting rights in the international arena.

The concept of criminalisation reached new heights in 2007: in the future, illegal copying is no longer to be addressed in civil courts, but will instead be subject to criminal law. This venture is underpinned above all by the industry’s desire to minimise risks: in the future the state is to ensure compliance with legislation and fund prosecution of »criminals«. In the USA this has already become reality: anyone who intentionally circumvents anti-copying mechanisms or removes copyright information and derives economic benefit from these activities faces up to ten years imprisonment and a million-dollar fine. The British government introduced similarly draconian penalties on 6th April 2007.

The Vivendi group, which also includes Universal, apparently thinks this does not go far enough. The group’s legal advisor, Rick Cotton, recently attracted attention with his comment that society should pay more attention to prosecuting piracy and illegal copies rather than spending a fortune on prosecuting crimes like burglary, fraud and bank robberies.² In his study, »The Economics of Criminal Enforcement of Copyright«³, Robert Picard, Professor of Media Economics at the Jönköping International Business School in Sweden and inter alia also an advisor to WIPO, warns against overdoing this criminalisation approach. In his opinion it is pointless to adopt legislation if this is not accepted by society. At present, business generated by the entertainment industry only has an impact on gross domestic product - and thus also acquires a societal value - in countries such as the USA, England, Denmark, Sweden and Finland. Everywhere else it would prove much more difficult for politicians to explain to voters that they would have to swallow increased state expenditure in order to promote wealth in other countries. To cite Robert Picard, that is no way to win elections.

The music industry itself is not simply putting its faith in the power of legislation. Since the mid-1990s it has been looking for and supporting the development of »accompanying technical measures«, subsumed under the acronym DRM. »Digital Rights Management« was first developed and implemented in 1996 by the film industry for DVDs to provide a technical obstacle to unauthorised copies. In 2002 the Bertelsmann group began to affix DRM security devices to music CDs, for the advantages seem enticing, after all: with the assistance of DRM, playback of music and film can be restricted not just to particular devices but also to certain regions. That means that it could become impossible to use a CD bought in the USA in Europe. In addition, the industry hoped to do away with what they feel is a tedious discussion about private copies. DRM, as Peter Jenner puts it, has been sold to the branch as an all-singing, all-dancing, tea-making miracle. »Everyone, from the collecting societies to the film, photo and music industry, succumbed to the fantasy that everything could be controlled on the Internet and that thanks to DRM a veritable torrent of pennies would fall into their laps.« But that’s not how things panned out. DRM turned out to be a complicated and very expensive system. Firms increasingly took their leave of this model. As Jenner explains, this was definitely out of self-interest. »Copy protection not only makes life more difficult for users, it also makes transaction costs for producers shoot up and does not by any manner of means line artists’ pockets.« From a technical point of view, Norwegian Jon Lech Johansen already demonstrated way back in 1999 how DRM protection on DVDs can be cracked.

However there is still hope for the entertainment industry and its clients, in Peter Jenner’s opinion. The solution to the dilemma could be what is known as a »blank licence«, as utilised for decades by broadcasting institutions. In this model a flat-rate is taken as the calculation basis rather than a per-title fee. The same could also make sense for private customers in the digital world, if the fee to be paid were not too significant. »It would have to be set at a level that would give everyone a sense of being treated fairly and which would ensure that buying music, text and images was still something everyone could afford«, says Jenner. As he emphasises, megalomania, excessive demands and above all criminalising your own customers aren’t going to help anyone. That at least is a lesson that could already have been learnt from the history of the Internet. When Napster suggested to the record industry in 1999 that it would pay two billion dollars to disseminate music via »Peer-to-Peer File Sharing«, the industry refused. It demanded 200 billion, according to Gerd Leonhard, author of »The End of Control«.⁴ However, the record industry’s aggressive approach is slowly encountering resistance, at least from music publishers. They want to earn money again at long last. With licences. And in a historical first, a Chinese company sued an American video firm for copyright infringement in summer 2007. The firm affected is »Blizzard Entertainment«, a company from the Vivendi fold.

 

Translated by Helen Ferguson

 

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