Is the EU Parliament going to break the internet? Yes, at least according to some who oppose the EU’s Copyright reform. Does this sound familiar? That’s because this song has been playing for a long time. Every proposal to bring some kind of rule of law to online heard that same refrain. The current (and ineffective) process of notice and take-down has been argued to break the internet. It has been in place since 1998, by the way. Not only copyleftist and internet activists use this last line of defense, Google chairman Eric Schmidt said it on a visit to Stockholm in November. Except he may be a copyleftist and or internet activist in his own right. (At least his business pays them.) The IPRED Directive was supposed to break the internet (that is from 2004). In fact, if I had an ice cream for every time somebody told me a policy would break the internet, I would have to get a bigger freezer.

Behind the idea of breaking the internet, is the notion of the virgin land, a new frontier, where everybody is happily sharing files and helping one another. The only threat to the virtual campfire Kumbaya is the evil copyright owners who will do anything to wreck the party. That may have been the feeling when Napster first came out twenty years ago, but on closer inspection it has never been the case. The internet was born from regulation, military research, public funding and ideology. The utopian freedom was always a pipe dream. Look at the internet today and it’s nothing like a campfire with boyscouts with marshmallows on sticks. It’s a fundamental infrastructure for modern society. But it’s run by a handful of big companies who hardly make rules that favour the common good over their share prices. On the other end is an underbelly of phishing, trolls, crime, spam and all sorts of crap. The rest of us our stuck in the middle. Not a minute too late to introduce the concept of democracy to the internet. The internet has never been free and open. The threats to freedom and openness don’t come from the European Parliament. In fact the EP may be our best bet to protect freedom and openness.

Will the copyright reform kill memes? Remixes? Kill Wikipedia? Bring censorship? Just like previous policies did not break the internet, of course not. Here is a good walk-through of the various misunderstandings. However, it may be that the copyright reform will make illegal content harder to access. If you think that would be bad, it’s probably better to talk about memes and Wikipedia than pirated blockbusters. Much more convincing, at least until you take a closer look.

Anyway, we should know by now only Kim Kardashian can break the internet!

Facebook-founder Mark Zuckerberg’s appearance in European Parliament last month raised many questions: Did he respond properly? Were the questions too friendly? Will a few thousand extra content screeners make any difference? And what about that selfie? Whatever your answers may be, one thing is clear: Zuckerberg is in trouble because his business has failed to take proper responsibility for its service. There has been plenty of fallout, in fact some call it a threat to democracy.

How did this happen? One part of the answer is the business philosophy embraced by some tech startups. Zuckerberg said it like this “Unless you’re breaking stuff, you aren’t moving fast enough”. (If you think that sounds like a misguided teen more than a global leader, I will agree!) But that’s not all, the other part is that we let him do it. That’s right, when making policy for the internet back in the 1990s, the politicians of that era – in their infinite wisdom – came up with the idea that internet companies should not be held accountable for what users do on their service. At least not as long as they would act on illegal activity when prompted. Some call this “safe harbor” but intermediary privilege may be more appropriate. This immunity may have made sense in those days when the concerns were around private communication and the internet was thought of as some kind of pipes anyway. Man, that backfired! This privilege is the root cause of all the problems that are obvious now: fake news, fake meds, disruption, surveillance, monopolies, abuse of power… What was once a protection of private communication has made the world’s biggest democracy tremble. Intermediary privilege makes possible everything from operating a global taxi service (without license) to unlimited video distribution (without license) to running child-trafficking sites (no such license).

It would be unfair to demand of the policy-makers in the 1990s to see this coming (in spite of their infinite wisdom!), but we can demand the policy-makers today at least do not repeat this mistake. And how could they? Well, actually they may be just about to. The EU Copyright Directive, being voted on today in the European Parliament’s legal committee. One part is a proposal for a new(!) immunity for internet platforms, as long as they make their “best effort” to stop copyright infringement. That’s right, a new privilege! It’s like we haven’t learned anything. Who can say how “best effort” can be twisted two decades from now? Making a new loophole doesn’t sound like a very smart idea.

What is best effort, anyway? The clearest example would be YouTube’s Content-ID system. The idea here is that rights-holders should put their videos into a database so that YouTube can match what users upload and check for infringement in copyright (this is what the pirates and so-called internet activists call “upload filters”). Sounds smart, right? Except it’s very easy to work-around. Put a legal video, like a movie trailer, on Youtube and add a link to a pirate-site where the whole movie can be found. Or put a frame around the video and Content-ID won’t find it. If this is the poster child, it’s not best effort. It’s least effort.

Dear European policymaker: when you make policy for the “value gap,” please don’t forget about the different kinds of intermediaries.

I was on a panel once with a professor who argued that copyright must be reformed for the digital age. He said that intellectual property is granted by the public. I said I once wrote a book, and it sure felt like it belonged to me and not the public. It was I who pressed all those keys to make the words appear. Not the public. Our brief exchange captures the polarised positions of tech companies and creators. Who does the content belong to? If everything belongs to the public, how do we make it worth the effort to make something new? Can we have the cake and eat it?

Looking at the Right Question

From the abstract to the tangible, this may be the issue of the day: How should internet platforms pay for the content they monetise? Assuming the conversation on this topic has progressed from “internet platforms are only technology providers” and “if users post unauthorised material, rights owners should request it to be taken down,” this is the right question today. Youtube is the best example, but the same is true for other types of content and platforms. Many use Youtube as a music player. It has the biggest and best collection of music on all platforms, but it does not pay license fees at anything like the same level as its competitors Spotify and Apple Music. In fact, Spotify pays music rights owners over 20 times more than Youtube per user, according to the industry. This is not because of technology innovation or a better business model, only because Youtube can hide behind its users and the competitors can’t. Youtubemonetizes the content and promotes the content, and court records from a case brought by Viacom in 2007 show that this was always part of the business strategy. In fact, it has announced plans to make a music player for “their” content. The European policymaker does not buy these objections but instead looks for a way to bridge this “value gap.”. That is looking at the right question. But is it thinking about the right answer?

Remedy for the Value Gap

Now, in trying to figure out the remedy for the value gap, we must consider the process of how the works reach their audience and the associated cost. The traditional communication model is source-channel-receiver. Or in the case of music: artist, channel, listener. Real life is, of course, a little more complicated. There is not one channel but many. Youtube, Spotify, Apple Music, and others are shopfronts. They pay different prices for the same content, but they pay after the song is played. No advances, no investment, no financial risk (in the content at least). Except the cost for creating the content has to be paid earlier (duh!), so somebody else has to put some money upfront. Also, the artist might like some help making the song sound better, like bringing in a producer, renting a studio, or hiring a background vocalist or string section for the recording. Besides the song itself, a lot of work goes into things like styling, press photos, album cover (yes, still relevant in the digital age! ), making a music video, and promoting the song to radio DJs and playlist makers. And lots of other marketing activities to help make the song known to the public. Life is unfair: even the best song ever cannot be sure to reach its audience just by being made available somewhere. One in five songs on Spotify have never been played by anyone. Even if you throw the best party in the world with balloon animals, fireeaters, and free ice cream, you must anyway send out invites for guests to turn up. For music, this is the work of labels, publishers, managers, agents, and such. For other types of content—movies, books, games, TV, etc.—similar roles exist with different names. The point is that besides the shopfronts, the creator needs commercial partners who take financial risk by putting up money up front and help develop the quality of the content and its delivery. Ergo, the communication model for music is more like: artist—risk-taking partners—channel—listener.

New Forms of Licences

In order to bridge the value gap, it would be tempting to resort to a one-size-fits-all solution. The easiest would likely be to rely on collective rights management organisations to make agreements with the platforms on behalf of creators. There is definitely a role for the collecting societies in the digital era. It is likely to be more important than in the analogue world, looking, for example, at how technology can be used for more granular licensing. But the main focus of the collecting societies is to look after the financial rights for the creative work in its pure form rather than the refined end product, which is the result of investment by the risk-taking partners. That is called collective licensing (a radio station does not need to get a licence from all songwriters, but only a collective license from the collecting society). The other part of the value chain is licensing agreements: the creator licenses or assigns the work to a label, and the label licenses it to shopfronts. This is necessary to make the up-front investment possible. The label is like a bank: investing money, collecting some rewards, distributing risk (in theory, an artist could borrow money from a regular bank, but show me that bank!). Also, the collective rights management system is most developed for music, so the one-size-does-not-fit-all argument goes for other types of content, perhaps even more.

The Dog Ate My Homework

With the unauthorised distribution of copyright content on internet platforms and the legal loophole of “safe harbour,” Youtube et al. found a way to reverse the content licensing system. In all other circumstances, you have to ask first before you post. Now, post first and let the creators patrol the platforms and prompt them with cease-and-desist notices to take down unauthorised content. Post first and ask permission only after you get caught. It’s “the dog ate my homework” on an industrial scale. In fact, YouTube’s “content first, copyright later” approach has been the foundation of its vast success.

The Answer

The answer is two-sided. First, platforms must be responsible not only for the takedown of unauthorised content but also for making sure it doesn’t reappear. Second, internet platforms must make licence agreements for the content they monetise. The creators or their commercial partners should be free to make the choice whether to license the content or to have it removed. The onus should be on the platform to make certain it has the approval of the creators. That may look complicated, but it’s nothing compared to serving personalised ads to billions of users. Technology will find a way.

The book I wrote belongs to me and not the public. I can do what I like with it: put it in a drawer. Put it online for free. Sell the rights to a publisher. It’s for me to decide. This is the beauty of intellectual property. It’s an economic right and a moral right. I have the freedom to make arrangements as I wish with what I created. (And of course the public is free to love my work or ignore it!)

Dear European policymaker, when you make policy for the value gap, please protect the creators’ freedom to do what they want with their work. Thank you.

One of my favourite lines from contemporary Hollywood is from Steve Buscemi in Con Air (speaking of Lynyrd Skynyrd):

– Define Irony: A bunch of idiots dancing on a plane to a song made famous by a band that died in a plane crash

The phrase leaps to mind when the news of Microsoft’s $7,5 Billion acquisition of Github. Git-what? Github is a space where programmers share pieces of software code with one another. Instead of each programmer solving every problem on their own, they can often find somebody else’s solution on Github and adjust it to their needs. Beautiful stuff, saves a lot of time and energy. The foundation is open source rules and a spirit of sharing.

OK but what’s the irony? Pirate MEP Julia Reda has made Github the poster child of her criticism of the “value gap” proposal in the DSM-directive’s Article 13. The idea that platform providers must put measures in place to make certain that user uploaded content does not violate copyright has been met with the usual “the internet will be destroyed”-refrain that has played so many times now it’s weird you can read this blog at all. There are many holes in that argument (upload filters are not the only way to comply, Github users upload code they wrote themselves and so on). But the main confusion is the idea that open source is some alternative to copyright and that sharing platforms are idealists in any way.

Open source is based on copyright, when you use open source-software, you agree to terms and conditions – it’s just a form of licensing. It is perfectly compatible with copyright law, in fact it exists within the current copyright law and would be difficult to imagine without it. There are both advantages and disadvantages for the user when comparing open source to other licensing forms. This blog is published using an open source tool – WordPress. Had it been a proprietary software tool, it would not be free but on the other hand there would be a supplier to turn to in case of problems. The choice is for the user to make. How great that there are different options available!

It’s not the first time the pirates have been let down by their prodigies. The Pirate Bay was sold for 60 Million SEK (circa 6 Million Euros) in a deal that was never completed but forever proved it was a commercial operation, far from the grassroots idealism it had been broadcast as. (Github cannot be compared to TPB of course, in contrast most of its stuff is legit.)

The double irony of course is that Microsoft used to be the anti-open software champion and are regarded as the main adversary by many open source enthusiasts.

I don’t mean to gloat (okay, I do mean to gloat), but the Pirates will need to find a better poster child. 

Does GDPR mean I have to contact all my old dates and ask if I can keep their phone numbers?

Whatever becomes of GDPR, it has at least inspired scores of jokes. The bright side of the internet, people laughing and trying to come up with something better and funnier. Of course, GDPR exists to deal with the dark side of the internet, personal data collection in the surveillance economy. Consumer power is not strong enough to deal with this issue, regulation is needed. So good move European policy-makers. But can GDPR do what it is supposed to do? Bring control over personal data back to the users?

The principle of GDPR is to regulate the collection of data and give users control of the data businesses have on them. That means the users have to do much of the work and some users will be more capable than others (some focus more on the jokes). It also means that big businesses can find ways to “cope with” GDPR, which the same as saying they can work around it. For smaller businesses that coping may be more difficult and costly.

– Hey DJ, play Love to Hate You!

– No.

– I demand it under my Right to Erasure!

Could there have been a different approach? Oxford professor Viktor Mayer-Schönberger wrote the book Big Data (with Kenneth Cukier) in 2013. He suggests the opposite principle: to regulate the use of the data rather than the collection. (At least as I read him!) This would put the onus on companies to think carefully about how the data is applied. Mayer-Schönberger also suggests a watchdog authority and a system of fines and insurances to deal with abuse. The pitfall in this approach is that once data is collected it can leak or be hacked or otherwise end up in the wrong hands. The fines and watchdog are supposed to make companies extra cautious, but on the other hand we’ve seen leaks of sensitive company secrets so there is no guarantee. Perhaps a combination of the two could be the way forward, depending on how GDPR plays out.

Also (and this point gets lost all the time): not all data is created equal. Most data is completely useless for most people, but can be priceless for some. My breakfast habits make for boring conversation, but the number of slices of cheese I put on my bread can be valuable for health research or the dairy industry. The data I generate by playing an online game can be great to improve that game, but completely pointless outside it. Some data may be of little commercial value, but very sensitive for the user (the gay dating app Grindr has data on HIV-status, for example). If data is the new oil, this oil works very differently depending on who runs the engine. As GDPR and other regulation of the data economy develops, a more nuanced approach to different kinds of data is essential. GDPR is here, let it be the start of a conversation about how we can make a better life online.

– Do you know a GDPR expert?

– Yes

– Can I have their e-mail?

– No

This afternoon, Facebook’s Mark Zuckerberg is to appear in European Parliament to answer questions about the so-called data leaks connected to Cambridge Analytica. Zuckerberg should probably get used to these types of hearings, it is bound to keep snowballing until Facebook makes some fundamental changes. The problems around Cambridge Analytica, fake news, Alt.right, Macedonian troll farms, foreign involvement in elections, surveillance by government intelligence and the growing list of issues cannot be fixed with some added features or thousands of moderators. It is built into the business model. The free services in exchange for personal data mean that the company’s first loyalty will be to its paying customers: the advertisers. Not the users. This was always the case, and Mark Zuckerberg has been making apologies since day one. It’s just that those apologies have been growing to the point how that it’s EU-parliament scale. And they will continue to grow, because Facebook must continue to grow: that is the expectation of its owners. The current share price is based on great expectations for further growth*. Growth can theoretically come in three ways: more users, higher income per user (more ads or higher ad revenue) and expanded domain. All of these have problems, the domain expansion in particular. This is when Facebook absorbs new parts of our lives, such as the upcoming plans to start a dating service. As the scope of Facebook’s activities grows, so will the magnitude of the scandals, and so will the size of the apologies. Until something breaks. It could come from regulation, anti-trust action, user revolt, pressure from owners… even Facebook’s own staff protesting. We’ll see.

Facebook’s current line of defense – more moderators and more apologies – may buy time but will not change the fundamentals. Instead of seeing itself as a tech platform with little or no responsibility for what its users and algorithms do, Zuckerberg should embrace the criticism, become transparent and invite independent qualified scrutiny. In fact, another digital industry did just that.

Faced with criticism on controversial content about two decades ago, the games industry decided to make a content and age rating system called PEGI. A completely transparent process, operated by an organization independent of the industry, its rules set not by the companies but by a body of experts appointed by EU member states, with possibility to complain and appeal decisions both for consumers and businesses. The games industry pays for the system and informs about the ratings in all marketing and at all points of sales. The system has expanded to more and more countries and is so successful it is now integrated in a global system of ratings for many more sorts of digital content (IARC). This is the opposite of saying “it’s the algorithm”, this is doing something real. It goes further: I had a conversation with an executive for one of the major digital marketplaces for games. He explained his business ideals like this “we want our market place to be a safe and profitable environment for all involved, the game developers and their business partners, as well as the players”. Compare that thinking to the “we’re only a technology company”-refrain from Silicon Valley. No need for intermediary privilege, this game company saw being responsible as a business advantage!

But Facebook promises that it is “free and always will be” (free as in beer, that is) so how could it let go of the surveillance economy? Good news: there is a better free. One that does not require selling user data to the highest bidder. One that keeps the trust between the business and the customer intact. One that does not involve any third parties. Again, it is the games industry that came up with the answer. It’s called “free2play” and it means the service is free for all, but those who want can purchase items within the games by so-called micro-transaction. It has been successfully applied by scores of games companies, big and small and many have made a lot of money from it. It appears that there is a way to have the cake and eat it too. To keep the trust of the users while providing them with a free digital service. The principle of free2play should be possible to apply to digital consumer services outside the games industry.

So, dear Mark Zuckerberg: take a page from the games industry – embrace actual responsibility and change your business model. The other options will only lead to more headaches. And for the European policy makers – when you make policy for homegrown European digital champions, perhaps Silicon Valley is not the right place to go for inspiration. Perhaps there are better cases on your doorstep.

Netopia will cover the Zuckerberg hearing, feel free to follow our Twitter @netopiaforum starting at 18.15 today. Also, you might like to use the Zuckerberg Bingo Board again.

*) Facebook’s current share price to earning ratio (P/E) is 30.58 at the time of writing, much higher than the estimated 2018 average of 18.52 for all the companies traded on the NASDAQ exchange. This indicates investors expect better profits in the future.

This is Netopia’s Newsletter May 22nd 

The drama around Facebook and Zuckerberg’s congressional hearing was the most exciting show in town last week. But what got us into this mess in the first place? Sure, Facebook started as a frat boy project to peek at girls (which turned out to be quite popular). But it is the idea that the internet is special and should be held to a different set or rules that underpins Facebook’s operations. News publishers would not get away with spreading propaganda from foreign countries, no member club could sell details about their members income and home address to a third party (let alone their holiday photos!). By no means limited to Facebook. The clearest legal incarnation of this idea is the various flavors of intermediary immunity, a privilege that lets business models built around circumventing rules masquerade as technological innovation. Thus, Uber can run a taxi business without licensed drivers and broadband carriers can look the other way when users access pirate services. Finally, this internet exceptionalism is beginning to crumble. Uber is being sued by city governments, broadband carriers compelled by the courts to restrict access to illegal services, the European legislator getting tough on internet platforms and, yes, Zuckerberg reluctantly admitting to Congress that some kind of regulation is needed (except it has to be the “right kind” whatever that means!). So the world is waking up to the fact that the internet needs to play by rules or the big boys will call all the shots. Great news and an opportunity to improve on the digital world.

Except it appears that this insight is missing from other parts of European legislation being brought forward. For all the talk of suing companies for X% of global turn-over, the European legislator is set to repeat the mistake that got us here in the first place: intermediary privilege. That’s right, in the proposed Copyright Directive, there are a number of new immunities proposed for internet intermediaries would you believe it. One is for user generated content, another is exceptions from the “communication to the public” (the legal basis for liability in content distribution). Restrictions on what works are covered by the intermediaries’ responsibilities. Language like “fair and balanced” license agreements which in practice means that the creators are responsible for policing a myriad of internet services to find their content, ask for it to be removed and cross fingers it is not re-uploaded the next instant. That is reverse licensing, the actual rule is get consent first, then post. This list of examples can be made very long. What started as a promising attempt to create a better online market for content is now slowly morphing into something like the Silicon Valley Xmas gift wishlist. Putting more immunities and liability privileges in place is going the wrong way. It would be repeating exactly what put us in this mess in the first place. The names will be different, but the problems the same.

What is it they say about repeating the same action and hoping for a different outcome?

After many twists and turns, the much-debated Geo-Blocking Regulation now comes into force. Does this mean the end of the debate on territories in the Digital Single Market? Of course not. Two years from now, the exception for audiovisual services shall be reviewed (and again every five years after that). This is not the end of the territory debate, perhaps it’s the end of the beginning.

Since the Juncker Commission made the Digital Single Market a priority, the onus has been on taking away geographically tailored offers (yes and roaming and parcel delivery and some other things). Of course, the vision for a Digital Single Market could have been interpreted in many other ways. It could have been tailored offerings or pluralism of content or consumer demands or something else, who knows? Instead, the policy focus was on borders and particularly in content services. The Geo-blocking Regulation is only one of the examples of such attempts. Let’s have a look:

The Portability Regulation comes into force on April 1^st (don’t send us jokes about the date please) and will allow users to bring their subscriptions of content services on temporary visits to other member states. And it presupposes territories, it would make no sense in a world without geographical designations.

The Satellite and Cable Directive for television broadcasts was originally put in place to solve the issue of satellite transmissions and cable television networks not always following the same territories as the licenses. But extending it to the internet would mean that it accesses one global territory, which is a quite different idea. Many have pointed out that it would not only undermine the economics of the film, television, sports and other industries, but also take away the opportunity for tailored language offerings and price points adjusted to local purchasing power. Both the EU Parliament and Council have said no this.

Three attempts, each time the outcome is that freedom of contract including territorial licensing stands. Fair enough, good news for creators, businesses and viewers. But how many times should the policy-makers decide on the same issue? Where does the predictability of the legal situation for the affected end and where does legislative harassment begin? What about the ambition of “better regulation”? And looking at the issue again in two, seven and twelve years?

Some want to make the case that Europe is lagging in the digital economy because there are restrictions holding innovation back. But what if Europe’s digital opportunity is not in innovation but creativity? Recently, we have seen a lot of the bad sides of disruptive innovation (looking at you, Cambridge Analytica!). It may be a dead end, trying to design a digital single market in the same way as made the US tech companies successful. Besides, they have plenty of venture capital over there and last time I looked, territorial licensing is allowed in the American market.

Instead, how about we look for a vision that plays to Europe’s strengths? Cultural diversity, quality of content, respect for rights: areas where Europe shines. That could be a different vision for a digital single market. That could also be the starting point for a better vision of the internet. In fact, it might be saving the internet rather than breaking it.

This was Netopia’s Newsletter March 23rd 2018