Category: Economics

Spin This: Copyright Industries Grow at Twice the Rate of US Economy

A new report released today by the International Intellectual Property Alliance (IIPA) offers the following big headlines for FY2012:  the copyright industries, for the first time, contributed over $1 trillion to the U.S. economy, accounting for nearly 6.5% of GDP; these industries represent nearly 5% of all private-sector jobs (5.4 million) in the U.S.; these industries grew at an aggregate annual rate of 4.73%, which is more than twice the rate of the U.S. economy (2.1%) overall.

So, what are we to make of these numbers?  Or just as importantly, how will copyright’s antagonists spin this report?  They could try to punch holes in the findings themselves, but that seems unfruitful; numbers this big would have to be grossly inaccurate to suggest that copyright industries aren’t a critically important segment of GDP, as has been attempted in the past.  On the other hand, copyright’s foes could spin this report as “See, we told you internet phenomena like piracy aren’t hurting anyone. Look how good things are, you whiners.” But here’s the bottom line I think we should take away from this report and any pollyanna attempts to rebut or redirect its relevance:  copyright works, don’t break it.

Seriously, the only reason I write about this stuff is that a massively powerful — although not so economically valuable — minority of companies  spend a lot of time, energy, and money trying to reverse, weaken, or obliterate IP laws on a global scale; and if nothing else, I happen to think squandering the economic engine fueled by copyright is a really bad idea unless someone can demonstrate precisely why we should monkey with a trillion-dollars worth of GDP.  So far, for all the academic theorizing and economic divination that claims without any evidence that “copyright stifles innovation,” the record is clear that investment in these industries supports economic health, and that should matter to anyone with a job in any sector.  To put that in perspective, if you’re a truck driver, you are at least 5,000 times more likely to be delivering goods to someone who works in a copyright-supported industry than to someone who works for a company pushing to weaken this legal framework.  It should be understood that the antagonists to which I refer are not all technology companies by any means.  To the contrary, this report includes software and other technologies that rely substantially on copyrights.

This afternoon, the House Judiciary Committee resumes deliberations on an ongoing review of copyright; and while there are reasonable grounds for revising this body of law, the process should, in my opinion, be viewed as requiring surgical revisions with particular attention to more robustly protecting the independent entrepreneur in the digital market.  Beyond that, it is hard to fathom why any American would want to needlessly and recklessly tamper with a system that promotes this kind of economic prosperity.  We have enough real problems.  Copyright isn’t one of them.

“More YouTube’s” My Foot

First of all, name if you can the serious competitors of any of the following: Facebook, YouTube, Amazon, eBay, Twitter, Google.

Go back ten years, name the biggest sites on the web, and you might notice that some of those names are either gone or really quite small compared to the dominant sites today. It isn’t even necessarily sinister, but it is a fact that the Web doesn’t tend to foster competition so much as it fosters monopolies — some short-term, others long-term.  In the potentially short-term monopoly category, we might look at Facebook’s current dominance and recognize that the company could make a misstep that turns us all off (or we could just get bored), and the site would evaporate into MySpace obscurity.  In the long-term category of web-based monopolies, we look at an Amazon and understand that its elaborate and capital-intensive fulfillment system would be very hard to replicate or beat rapidly enough to realistically grab much of its market-share.  And then, we look at a YouTube, which is somewhere between a Facebook and an Amazon inasmuch as there are other video hosting options but none that are owned by the company that also owns (i.e. controls) more than 90% of search worldwide. So, if you want to use video to promote yourself, your business, your ideas, your work, or even your shaking booty, YouTube is really your only option. And Google likes it that way.  What company wouldn’t?

Still, mere market dominance and unlimited wealth isn’t enough for some people; they want your soul, and they’ll tell you any lie in order to get it.  For instance, I offer this brief article about a panel discussion called Expand NY on which some of the usual suspects sat agreeing with one another about the future of copyright, all predicated on the assumption that copyright is just one legal framework that remains an out-of-date barrier to future economic growth in the digital age.  But even if you don’t give a damn about copyright, pay attention, because like I say, these people want your soul, by which I mean to argue that companies like Google ultimately want a world where people no longer believe they have a right to privacy or a right to control how their words or images are used.  The war against copyright should be viewed by the general public as the precedent-setting, legal groundwork for a world in which certain civil rights simply cease to exist.  And when your kids’ birthday video can be used to sell McDonalds without your permission, you might find the expression “steal your soul” is no exaggeration.

But what does that have to do with the panel discussion in New York? If a premise is false, the conclusion is also false. And the reason I draw attention to this discussion is not to argue about its conclusions — that copyright may or may not need updating — but that people with false, even dangerous, premises have no business in the debate. The premise being put forth is that a framework like copyright is stifling economic potential in the digital age, but the reason we can know this is a false premise — other than the 20 years of history — is that Julie Samuels of the Electronic Frontier Foundation says it’s a false premise when she overreaches with a really big and tactically dumb lie.  At the bottom of the article, Samuels is quoted as saying, “We want a thousand more YouTubes,” and this is meant to be an example of that as-yet untapped potential growth supposedly being stymied by pesky copyrights.  But who is it that wants a thousand more YouTubes?  Google certainly does not, and anyone who believes otherwise is a sucker.

So, if by “we,” Samuels presumes to mean “we the people,” then we the people can do the math and see that there will never be so many as three more YouTubes in a world where there remains only one Google encoding the fate of all Internet search. At a certain point, the cost of entry for a presumptive competitor is too high for the same reason you’d be hard-pressed to replicate what Amazon does. And that financial threshold was crossed a long time ago. As Google now earns an estimated $52 billion in annual revenue, I double-dog dare anyone to approach a VC with a business plan to be the “next YouTube.” Copyright may indeed be due for review and even revision to reflect new technological realities, and I certainly agree with one point made by panelist Mike Masnick, that copyright review could be “good or bad depending on who’s involved.” So, if he and his colleagues would stop promoting utter bullshit, maybe responsible review can proceed.

It’s Not All About What We Want

 “People tend to want artists to do the same thing, and it is incumbent upon artists to do something that the audience doesn’t want — yet.”

This quote comes from composer, artist, and producer T Bone Burnett in a recent Q&A with The Hollywood Reporter that has been circulating over the past week. The whole article is worth a read for several of Burnett’s observations about music, the music and film businesses, and the Internet industry, which he unapologetically calls a “con game.”  The above quote, however, is particularly resonant in that it says something true about both the artist and the technologist, who are too often poised as antagonists in the great debates of the digital age.  When it comes to innovation, real innovation, in either creative works or technological advancement, the endeavor is rarely about delivering what the market thinks it wants, but about providing something new we consumers didn’t know we wanted until we had it.  And although the creative artist and technological innovator are cousins related through this maternal principle, it seems they are frequently dragged into a blood feud over a contemporary misconception that we can only support the artist at the expense of technology or vice versa.  Perhaps the reason this feud persists is that it is perpetuated on virtual battlefields by people who misunderstand both artistic and technological innovation.

Specifically, Burnett is addressing the subjects of self-promotion and crowd-funding — two advantages offered by Web 2.0 to the independent artist that are presumed to obviate the need for legacy business models like studios, labels, or publishers.  But inherent in what Burnett is saying — and it is interesting that he uses the word incumbent to imply a kind of responsibility for the artist — is the reality that innovation in creative works, in technology, in science, in anything requires old-school, long-term investment (i.e. faith) in a process that yields mostly failures but also the unpredictable successes that spawn both cultural and economic rewards for subsidiary beneficiaries.  This is equally true for a miracle drug or a generation-changing novel.

If we want a rich, culturally diverse society with a solid middle class, I believe we have to resurrect the value of long-term investment and reject the fast-burn, short-money culture that has become the cultural norm over the past half century. But the persistent, blind faith in the digital revolution runs at full gait in the opposite direction. Web 2.0 success stories are largely wealth-consolidating, non-job-creating enterprises.  Nevertheless, while a sense of hopelessness persists among the generation now coming of age, this demographic maintains an unhealthy crush on the Internet, clinging to the futile hope that one day its reductive economics will magically yield collective prosperity if we just wait long enough.

To Burnett’s point, it may seem populist and terribly democratic for the artist to exclusively crowd-fund.  It may seem like this is the ultimate answer to the so-called gatekeeper corporations, portrayed by netizens with no experience to be sinister hoarders of culture and abusers of artists.  But even the smallest, independent imprint or record label or production company will tell you that the fundamental work surrounding the products — from investment to distribution to marketing — hasn’t changed at all. Crowd-funding and self-promotion have their uses and are wonderful opportunities for any number or artists or other entrepreneurs, but the mandate to sell ahead of production, ahead of discovery, is not always going to be the best path to innovation.  At the same time, the middle class has historically been sustained by business models that enable investment in a process — it doesn’t matter if it’s pharmaceutical research, auto manufacturing, or music production — and that process might employ dozens or hundreds or thousands of people whose continued livelihoods are maintained by occasional hits amid a lot of trial and error.

A drama professor in college once told us a story about the Irish playwright Sean O’Casey taking one of his comedies out to the country to perform for the local residents.  Early into the first act, the audience sat mute and confused until it occurred to someone in the company that these people didn’t know what a play was.  The performers stopped the show, explained the fundamentals of theater, and then restarted the play from the top.  Given context, the audience supposedly laughed its heads off at the show.