[pp.int.general] pirates on parade (from the fin'l times)

[Alex Foti]

Pirates on parade
By Salamander Davoudi and Tim Bradshaw
Published: July 22 2009 03:00 | Last updated: July 22 2009 03:00

In April, when a Swedish court sentenced the founders of Pirate Bay to
one-year prison terms for promoting copyright infringement on the
world's largest filesharing website, the music and film industries
gave a standing ovation. But their triumph was short-lived.

The four men, who "tweeted" vigorously on Twitter during their trial,
may not be able to communicate so freely from their prison cells. But
their struggle for internet freedoms has developed into a political
issue: Sweden's Pirate party , dedicated to the legalisation of
file-sharing, won a seat last month in the European parliament.

The war being waged by the entertainment industry against online
piracy was further weakened when its powerful ally and champion of
internet policing, Nicolas Sarkozy, president of France, had his
anti-piracy bill watered down by his country's highest court in April.

Ten years after the launch of Napster, the first online file-sharing
service, the music industry is no closer to solving the problems
created by digital piracy. As advances in technology make television,
film and video games companies more vulnerable to piracy, that
decade-long failure to change consumer behaviour threatens to
undermine business models across the media industry.

Piracy has helped to create momentum around legal and intellectual
challenges to copyright law. "Piracy has gone from being a simple
argument about infringement or using something without permission to
questioning the very basis of copyright," says Gregor Pryor, a digital
media partner at Reed Smith, the international law firm.

For most music and film fans, its appeal is more simple. With a little
technological know-how, they can find and download free copies of the
latest releases. Many albums and films appear online before they reach
the shops or cinemas.

In removing the cost of distribution, the internet has proved itself a
perfect piracy incubator and has made it harder for those involved to
be prosecuted successfully. The Pirate Bay case is due to go to appeal
later this year. But the scale of the problem for content owners is
worldwide.

Russia, China, Spain, Mexico and Canada were this year singled out by
the US Congressional International Anti-Piracy Caucus as having the
highest rates of copyright infringement, largely as "the result of a
lack of political will to confront the problem". Russia's lack of
progress in respecting intellectual property rights now threatens its
accession to the World Trade Organisation.

"In Russia there is no concept of copyrighted recorded material. They
get away with selling it and only paying publishing royalties, not
recording ones," says James Bates from Deloitte, the consultancy.

The statistics make uncomfortable reading: the music industry has been
decimated by online piracy, which remains the default way of
consumption for many. For every track bought online, 20 were
downloaded illegally last year, according to IFPI , the international
music industry lobby group.

The film industry is fearful of repeating the mistakes of the music
business. Hollywood executives have waded into the debate, while large
media companies such as NBC are joining forces with trades unions as
rising unemployment levels focus their attention on the threat to
members' jobs and incomes from copyright breaches. IFPI has been
working with the Motion Picture Association of America to share
information on anti-piracy and enforcement.

The statistics are not encouraging, however. A total of 13.7m films
were distributed on peer-to-peer networks in France in May 2008, for
example, compared with 12.2m cinema tickets sold, according to Equancy
and Tera, two Paris-based consultancies.

But the entertainment industry does not always endear itself to
consumers by painting itself as the pained victim. A widely reported
study in the UK this year said downloading cost the economy £120bn
($198bn, €139bn). Other industry associations scrambled to lament the
losses. But the figure was later revealed to be an error - the
estimate was really £12bn.

Such estimates commonly assume each downloaded album is a lost sale,
ignoring other studies that show the most prolific downloaders also
buy more music. One of the few people to be hired by the music
industry who dared to suggest pirates were also labels' best customers
- ex-Googler Douglas Merrill - left EMI after less than a year.

An industry that portrays itself as the victim while suing single
mothers and other ordinary consumers for big sums has only helped the
cause of Pirate Bay and those downloaders who are trying to make an
ideological point by stealing music and movies. An anarchic and
nihilist foe - which is yet to make a coherent argument for how
content production would be paid for in a copyright-free future - is a
tough opponent.

But the majority of file-sharing sites are commercial, not political,
in motivation. Few of the pirates want to build a business to take on
Universal Music or EMI. Like a market stall selling pirated DVDs, they
just want to make a small profit from a virtual commodity and do not
mind whose business model they ruin to do so. What started out as a
hobby for computer geeks such as Sean Fanning, who developed Napster,
has become big business for website owners.

Most piracy sites rely on advertising for their income. Global Gaming
Factory X, a group that is planning to buy Pirate Bay , told industry
blog PaidContent it could make $40m (€28m, £24m) a month from
advertising. But while that figure has been met with scepticism, many
sites make substantial sums from advertising placed around other
people's content.

"These kinds of sites often generate significant profit through
advertising and advertisers will pay a lot of money," says Helen
Saunders, head of internet investigations at the BPI, which represents
the UK recorded music industry. "Just think about how many people are
going on to them. They can be very attractive to companies whose
target audience is 16-24 year-olds."

Questionable legality means most mainstream advertisers try to avoid
media sharing sites such as Pirate Bay and Mininova, even though they
attract millions of visitors. Most ads are for gambling, "adult"
chatrooms or dubious offers of free iPods. But some big brands - such
William Hill and even Microsoft - have found their ads appearing
alongside pirated content, even if that was not the advertiser's
intent.

The ads may not always be genuine - the appearance of such brands
boosts sites' appearance of legitimacy. But more often it is simply a
factor of advertising space being sold across "blind" networks of
so-called remnant inventory, typically yielding very low revenues for
site owners.

"It's very much like a spam e-mail business," says Eric Garland of Big
Champagne , a research firm. Low costs and high volumes mean it only
takes a few gullible victims to click on an ad - and perhaps be
tricked into downloading computer viruses - to turn a profit.

Pirate Bay, which has about 10m users in more than 30 countries,
carries ads for online games, dating, lottery, mobile ringtone and
computer screensaver sites. It was alleged by the Swedish government
and IFPI to have generated more than $3m in annual revenue from
advertising. That would be low for a mainstream media site with such
substantial visitor numbers, yet one of Pirate Bay's founders argued
that these figures were an overestimate.

Recent surveys suggest peer-to-peer piracy is no longer increasing and
that legal downloads of digital music at Apple's iTunes are also
starting to plateau. "Music piracy has almost found its high
watermark," says Mr Garland. "Clearly there is a saturation point for
digital media."

But if peer-to-peer is peaking, new technologies are rising up to
replace it. Teenagers are experimenting with techniques - such as
swapping computer hard drives or trading songs on mobile phones via
Bluetooth - that are near-impossible to detect.

A more severe new threat to content owners does not rely on swapping
songs or movies at all. Streaming video sites - using similar
technology to the BBC iPlayer , Hulu or YouTube - allow media to be
viewed or heard with just one click. That makes streaming video much
less complex to use than Pirate Bay-style sites. Streaming "is a
problem emerging so fast that it makes my head spin", says Mr Garland,
who expects it to be the industry's main concern within a year.
Specialised search engines, which aggregate links to these video
sites, also operate in a legal grey area but attract substantial
traffic by improving the usability of pirating sites yet further.

As technology speeds ahead of legal precedent, some experts argue that
chasing new sites will remain a futile effort. So content owners have
turned to broadband operators as their last hope to control internet
piracy. By monitoring traffic on their networks, content owners argue,
internet service providers could spot breaches of copyright and throw
persistent offenders off their networks.

But the European Commission has now suggested that cutting off an
individual's internet access is an infringement of human rights. That
has stymied Mr Sarkozy's "three strikes and you're out" proposals. The
UK's Digital Britain report this month stopped short of proposing
anything so drastic, instead leaving it to record labels to take legal
action individually against frequent file sharers who ignore warning
letters from their broadband providers.

Content owners seeking ways to limit the damage are also using their
commercial clout to bring broadband operators to the table. In a
pioneering deal, Universal Music has agreed to let Virgin Media, the
UK cable company, offer an unlimited downloading service to its
broadband customers - as long as Virgin also helps Universal clamp
down on piracy.

But even if this "all you can eat" model offers a user as much content
as piracy does, it will struggle to compete on price. Whether it is
films, TV shows or music, consumers are becoming accustomed to getting
what they want for free.

Before too long, another pirate is likely to face court accused of
copyright infringement. The content industry may well celebrate
another Pyrrhic victory. Whether motivated by ideology or profit, the
media-sharing movement seems set to reinvent itself again and again.

Illegal yet ever easier to do

Illegal file-sharing is almost as old as the internet itself. It began
with friends exchanging files on private discussion boards but hit the
mainstream with the arrival of Napster in 1999. Napster used
peer-to-peer technology but its central index of songs made it
vulnerable to legal action. Successors such as Kazaa and Gnutella
obviated the need for a central site. The path to Pirate Bay - founded
in 2003 - was paved by the 2001 release of BitTorrent, a more
efficient form of peer-to-peer technology. Now, the fastest growing
form of piracy is streaming video. Streaming - similarly to legal
sites such as Hulu and BBC iPlayer - does not require a copy of the
content to be downloaded. Viewers can click and watch shows or movies
instantly.


Legislation
The battle is on to reshape copyright rules for the internet age

Internet piracy has become so difficult to control because it is now
ingrained behaviour among consumers, analysts say.

"It's a social norm," says Eric Garland of Big Champagne, which tracks
file-sharing. "Somewhere along the line in the last 10 years, it
became in most places in the world socially acceptable to infringe
copyright."

A study by Entertainment Media Research found 71 per cent of those
file-sharing gave "free music" as their main reason for doing so.

But the motivation of the individuals uploading copyrighted content to
file-sharing networks - who make it possible for others to download -
is more complex. "These guys operate a bit like the hacking community
and are mostly doing it for kudos," says Helen Saunders of the BPI,
which represents the UK recorded music industry. "They compete with
others to be the first to put the content out and are not looking to
make a profit."

Pirate Bay, the most notorious file-sharing site, sets the ideological
bar somewhat higher. Its founders in Sweden sent out a clear challenge
when they announced that any proceeds from its sale would go to fund
projects on freedom of speech, freedom of information and the openness
of the internet.

That cause will be taken to the European parliament after Sweden
elected Christian Engström, the first MEP from the Pirate party. The
party's stated intent is to reduce the term for commercial copyright
protection to five years. It also believes that "non-commercial
copying and use" - including file-sharing - should be legalised.
Content owners argue that few other MEPs share Mr Engström's views.

Just as businesses that used to deliver ice to households were unable
to make refrigerators illegal, content owners should not be able to
use the law to protect an obsolete business model, he says. Instead
they should build profitable services around "non-commercial
file-sharing", such as search engines.

A key plank of the Pirate party's logic is that copyright was not
designed for the internet age. To that end, Lawrence Lessig, a
professor at Stanford Law School, has devised a system of "copyleft" -
a new content licence that encourages the kind of sharing, remixing
and non-commercial reuse that is common on the web.

While some artists have experimented with Prof Lessig's "creative
commons" licence, few content owners see the merits of a debate about
copyright. Its protection is still seen by labels and studios as the
best incentive to create and invest in content.