The Unknown Clause that Could Kill the #1 Digital Business Model

I had a conversation with a tech entrepreneur the other day. He told me he wants to make apps on-demand. Why do you have to download apps? Why do users have to wait? All other forms of content are on demand, instantly available. This is the norm. The expectation. Once an achievement, now the standard. Except for apps, you still have to download them and wait. If this entrepreneur is successful, this last frontier may have been conquered too. Onwards and upwards, new problems to fix, new opportunities to take. The future is bright. Except there is a villain in this story.

On-demand is the model of the future. As the entrepreneur I met observed, digital services of all sorts move in this direction, whether it’s banking, education or entertainment. Manufacturing industries did this decades before the internet with just-in-time delivery. The benefits are obvious: no time lost waiting, almost zero cost of warehousing, higher productivity. Yes, it needs to run on a sophisticated system, but as the saying goes: rocketry is engineering, not science. It makes no sense to try and stop this development, instead policy-makers should help it. But here is the catch.

A little known and very technical detail of the EU:s digital single market policy may stand in the way of the future of on-demand services. It could be a barrier to realizing the digital single market, limit the options for European consumers and put EU businesses at a disadvantage in the global competition. Please bear with me as I go through the intricacies.

One of the many rules that govern digital markets in the European Union is the Information Society Directive from 2001. Among other things, it regulates the use of so-called technological protection measures (copy protection). These used to be blunt devices, creating difficulties for users and there was a debate where some said paying users were punished. Over time, however, the technology has evolved and is now invisible to most users. The authors of the 2001 directive were foresighted and included specific rules to make on-demand possible. Yes, they must have had a really good crystal ball back then, so we should thank them. One of the more intricate points is how to balance the exceptions to copyright (say for educational purposes) and the use of technological protection measures. Enter Article 6.4.4 of the Information Society Directive, which says that in the case of on-demand, the ability to protect the content trumps the exceptions. If it were written in any other way, on-demand services would not be an option for content. Train reservations, sure, they may need no such protection, but unless digital content can be protected, it can travel anywhere (via internet, not by train!). The best business model the internet has brought would not be any use for creative content. Bad news for creators and their business partners, terrible news for the audience who not only couldn’t get their content delivered in the way they prefer, but very likely also would have less to choose from overall. And if you care about European culture, it would be at a disadvantage compared to other parts of the world where such rules existed.

“Ok, great, whatever, I get it”, you may say to yourself, dear reader. “Why is he talking about this hypothetical stuff, that 6.4.4 thing is there so who cares?”. Good point. Except this is where the villain enters the story. In the Digital Single Market directive in its current form, 6.4.4 is history.

 “Article 5(5) and the first, third and fifth subparagraphs of Article 6(4) of Directive 2001/29/EC shall apply to the exceptions and the limitation provided for under this Title.”

– Article 6: Common Provisions

That’s right: 6.4.1, two, three and five are all in there, but not 6.4.4! The missing link. The nail that keeps the digital content market in place. Why on earth take that out? Who would do something like that? Do they know what they are doing? Why else skip one of the articles and keep the other four? As the Swedish saying goes: there is a dog buried here. Netopia will work tirelessly to find the answers to these questions. Thoughts, leads and clues are welcome, either in the comment box below or e-mail Watch this space.

Let’s make sure on-demand survives in the digital single market.