The history of consumer electronics technology has been a never-ending
series of Chicken Little pronouncements about the demise of professional
entertainment, all of which seem silly in retrospect. The recordable
audiocassette was supposed to doom the record industry, but pop stars
continued to flourish. The VCR was supposed to destroy Hollywood, but
ended up as a multibillion-dollar flood of new revenue streams and business
models.
Thus it is easy to dismiss recent predictions that "peer-to-peer" software,
which allows Internet users to download virtually any kind of media for
free, will condemn artists to poverty forever. But there is reason to
believe that this time, Chicken Little might have a point. Internet distribution
of digital copies goes way beyond the guy at the swap meet with a box
full of bootleg tapes. We are now facing a problem the world has never
seen.
Of all the industries that have been changed by the rise of digital technology
and the global Internet, few have been hit as hard as the "content" industries
-- the makers of music, movies, television programs, interactive software,
books, photos, and periodicals. The Internet has made global distribution
of content easier than ever, and it holds the ultimate promise of slashing
costs by reducing the role of middlemen who produce, distribute, and
sell physical copies. Unfortunately, the digital era also has a serious
downside for content producers: It has made it easier than ever for consumers
to get access to content without paying for it.
Digital copying of intellectual property is poised to do major damage
to the content industries. Global sales of recorded music, for instance,
fell 8 percent in 2002 alone. The recording industry has been hardest
hit thus far because digital song files are small enough to transmit
quickly. But peer-to-peer networks such as Kazaa and Morpheus now contain
every conceivable kind of content: films, television programs, software,
even the latest Harry Potter novel.
The vexing part is that this piracy is not a massive criminal conspiracy,
but rather the collective actions of millions of otherwise law-abiding
Internet users who have grown accustomed to the culture of free Internet
content. Many people have a hard time distinguishing between the vast
amount of free content -- music, video games, other programs -- and the
illegally pirated content.
This is not merely a battle between giant media conglomerates and a group
of cyberlibertarians who want to rethink copyright law. Widespread Internet
piracy seriously harms the artists (both the famous and struggling) who
create content, as well as the technicians -- sound engineers, editors,
set designers, game programmers -- who produce it. Rampant piracy also
has serious economic implications beyond the lost revenue of the stealing
itself. Fear of piracy has caused many content providers to resist making
their products available for download over the Internet, which could
save consumers millions of dollars by eliminating the middleman retailers.
This resistance, in turn, has slowed the growth of broadband deployment
and the digital economy, since many Internet users do not want to pay
for high-speed access if they cannot use it to get movies, music, and
television programs.
Of course, virtually every product sold to consumers is vulnerable to
theft, which is why retail stores spend money to prevent shoplifting.
Content is particularly vulnerable in the digital environment, however,
because an infinite number of perfect copies can be made from just one
original, and because those copies can be distributed to millions of
Internet users around the globe at no cost.
If the content industries can't protect their intellectual property,
there are two likely scenarios: One is a marked decrease in the production
of high-quality content, as investors refuse to put money into a product
that is sure to be widely stolen; the other is a tighter lockdown of
content through encryption and other technologies that restrict consumer
uses of content. Both of these scenarios punish law-abiding consumers
along with the pirates. Protecting content will, of course, have costs
and inconveniences, but the goal should be to place those burdens, to
the greatest extent possible, on the pirates themselves, rather than
on law-abiding consumers as a whole.
It is possible, however, to hold piracy to a manageable level if two
things happen together. First, the inconvenience of piracy and the risk
of getting caught and punished for it must increase. This means that
government and industry must cooperate to make it more difficult to put
pirated content on the Internet and to make it more difficult for people
to find and download.
Second, both public and private measures must be taken to make it easier
for consumers to pay for the content they want to download. The recent
stunning success of Apple Computer's iTunes service, which sold more
than 1 million songs in its first week of operation, proves that consumers
are willing to pay for content if it is easy to find, flexible to use,
and reasonably priced.
Pursuing a public policy agenda that facilitates these two changes will
lead eventually to a point where consumers feel it is worthwhile to pay
for content rather than steal it. Reaching that point will have immense
economic impacts as content providers stop resisting the digital revolution
and embrace the Internet to sell music, movies, software, and other content
directly to consumers. This will move us toward the truly desirable goal:
an environment in which digitally transmitted content is widely available
and the creators of content are fairly compensated for their efforts.
Here are 10 steps we could take to reach this goal:
1. Congress should give industry time to develop standards for
protecting digital content. Rather than rushing to impose deadlines for solving
the piracy problems (or worse, creating government standards for copyright
protection), the industry groups at work on the problem should be given
an opportunity to complete the task under the watchful eye of Congress.
2. Once standards are developed, Congress should, if need be,
mandate their implementation. A legal requirement to comply with copy protection
systems will eliminate the incentive to create "piracy-enabled" machines
to compete with computers, digital recorders, and other devices that
conform to the industry-set standards.
3. Congress should impose criminal penalties for acts that lead
to widespread copyright infringement, punishing not only the act of infringement, but
also the steps leading up to infringement, such as acquiring in-the-clear
copies without authorization or registering for peer-to-peer networks
under a false identity to evade prosecution.
4. Congress should clarify the laws governing computer hacking
to allow content producers to fool potential pirates with decoy files. Flooding
peer-to-peer networks with annoying files disguised as sought-after content
will make the process of piracy more difficult and encourage individuals
to purchase their content legitimately.
5. Congress should not interfere with the ability of rights holders
to identify and prosecute pirates. If online piracy is to be deterred, the
rights holders must be able to identify the perpetrators and initiate
legal action.
6. Government, industry, and educational institutions should
work together to educate the public about piracy. Many people have an expectation that
any information on the Internet is (or should be) free, and that expectation
must be changed if online piracy is to be brought under control.
7. Federal and state laws should not discriminate against online
sale and distribution of content. Protectionist laws that favor brick-and-mortar
retailers will only slow the digital transition and encourage users to
resort to piracy to acquire what they cannot get legally.
8. Congress, rather than the courts, should lead the debate on
how consumers can use digital content. Excessive confusion over what consumers are
permitted to do with purchased content ("Am I allowed to burn a
copy for the car?") creates a gray area where the culture of piracy
can flourish.
9. The government should not restrict innovative business models
for making content available to consumers. New technologies will lead to
new ways of selling content, such as self-destructing files, and the
laws must not entrench analog-era notions that "buying" and "renting" content
are always two different things.
10. The federal government should grant antitrust leeway to portal
sites operated by content producers. Digital distribution will only work if
it is simple for the average user. Just as portal sites have benefited
consumers in the travel industry, the content industry should be allowed
to join together, within strict limits, to make purchases as easy as
possible.
Of course, no package of legislation and regulation will completely eliminate
illegal distribution of content, any more than speed limits completely
eliminate reckless driving. The goal must be to minimize the damage done
by piracy. That goal will be met when the majority of consumers can say
to themselves, "Why go through the hassle of stealing it when buying
it is so easy?"
