Category: Intellectual Property

DCA Releases New Report on Ad-Supported Piracy

The Digital Citizens Alliance, has released its second annual report on the for-profit, ad-supported media piracy trade.  In collaboration with MediaLink, the report titled Good Money Still Going Bad studied 2014 data to reevaluate the central questions posed in the research done with 2013.  How profitable are these pirate sites, and where does the money come from? The macro view is much the same as the prior year.  Piracy is still big business, and brand advertising represents the lion’s share of the revenue.  Several sites that were operating in 2013 were gone, while new sites came online.

Overall, revenue ($209 million) for the sites studied appears to be relatively flat, but there are some new trends apparent in the 2014 data, notably a shift among users from illegal download portals to illegal streaming portals.  This is significant because video ads are more valuable than banner ads and can be embedded into streams so that viewers are forced to see them.  But let’s take a step back for a moment and understand what reports like this one from DCA and MediaLink tell us about the revenue streams for pirate sites, regardless of scale of the enterprise or delivery platform.  Because for all the ersatz intellectuals who tread the boards on TEDx to talk about “sharing” and piracy as some sort of socially or ideologically progressive revolution, it’s important to remember that this black market simply would not exist without the money that is available exclusively in a bottom-feeder’s strata of trade. Revenues for these sites are generated by essentially three drivers, in the following ascending order:  malware, affiliate marketing, and advertising.

Malware

Of the 589 sites studied for this report, at least one-third contain bogus links that offer to “update players” and other options designed to fool users simply into thinking they need to go through such steps in order to watch a program they’ve selected. The site owners are paid for every click, and the bogus players and plug-ins users think they’re downloading install malware that is typically used to facilitate identity theft and other data abuses tied to profitable criminal activity.  I discuss this in more detail in this post regarding another report released by DCA in collaboration with NetNames.

Affiliate Marketing

The estimated total revenue earned by the sites studied is $209 million.  Of that total, I am told by Mark Berns of MediaLink that roughly $60 million is generated via links to affiliate marketing. Affiliate Marketing is a generic term for advertising that links directly to services and products in which an actual transaction takes place between consumer and some third party with something to sell. Not everything sold via affiliate marketing is a scam, but it is a great platform for all manner of scams, from get-rich-quick promises to bogus “dating” services to nine zillion secrets to six-pack abs.  So, if a user ends up buying Guru Gus’s Great Guide to Getting Gorgeous Girls, Gus is happy to pay the pirate site owner who attracts that sucker with ads that provide click-through to his e-commerce site.  And of course on many pirate sites, some of the ads are even more unsavory with possible ties to sex tourism that may be directly linked to human trafficking.

Brand Advertising

Such unappealing associations, along with the exploitative nature of piracy itself, have led the major advertising community to begin looking for ways to extricate their brands from  the piracy business.  The $149 million in advertising revenue indicated by the report represents media budget dollars that we might say fall through the cracks of the online media buying system. As explained in other posts, the major brand advertisers do not intentionally seek to place their ads on these sites; the ads wind up there as remnants via secondary or tertiary media placement companies. And while no advertiser likes waste, the truth is that $149 million spread across the media budgets of even just a few hundred major brands does not represent massive waste in hard dollars relative to other forms of waste in traditional advertising.   But, as the report points out, “Legitimate brands take a double hit when their ads appear on content theft sites. Their reputations suffer by association with content theft itself and with the illicit services whose ads also appear on the sites. In addition, they are being defrauded. The money they spent to advertise on legitimate sites is instead fueling content theft, and the impression counts are being boosted by bots and other fraudulent means.”

GoodMoney_Infographic3a

Regardless of any attempt to measure exactly how many dollars are wasted, what both advertisers and advertising professionals have begun to take most seriously, is the damage done to brand value (which represents billions in investment) when their brands are associated with sites that are both criminal in function and sleazy in nature.  Tiffany doesn’t want to be associated with Guru Gus’s Guide just like Bank of America clearly doesn’t want to be associated with a site that feeds people malware that can result in identity theft.  And in an effort announced this past February, major advertising organizations launched a new program designed to create a kind of Good Housekeeping Seal of Approval (in this case Digital Advertising Assurance Providers or DAAPs) to give advertisers insight they can use to protect the integrity of their brands.

The 2014 data in this report reveals a slight drop ($18 million) in total revenue overall since the study of 2013 data, but that is not an indication that the profitability of piracy is trending downward. For one thing, the dynamic ecosystem in which sites continuously disappear and reappear means that the revenues will vary depending on when the data are collected. Moreover, the aforementioned rise in illegal streaming is the one category that appears to be growing. As stated in the report:  “Video Streaming Host Sites segment was the only one in which revenue grew from 2013 to 2014, fueled by higher video CPMs and a 40% increase in the number of sites. Average site revenue more than doubled for sites in the segment, and aggregate revenue was up 68.2% to $46.2 million.” Illegal streaming poses a significant threat to both the media producing and the advertising communities, particularly as it offers a much easier user experience than Bit-Torrent or cyberlocker portals. In all likelihood, this report reveals the start of growth in the illegal streaming market rather than a plateau.

Ultimately, reports like this are most meaningful to major advertisers whose coffers very clearly, however unintentionally, provide 75% of the revenue that supports these exploitative sites.  It’s time for that to change.  Having been around advertising people my whole life, I believe the brand managers and ad professionals are predisposed to want to make that change, and I hope good-faith efforts continue in that regard.  And just think, if the advertisers are able to starve content thieves of enough revenue, a really cool byproduct might be that we don’t have to listen to any more idiots on TEDx tell us how piracy is all about freedom.

Coalition Claims to Seek Balanced Copyright

balanced?.001Once again, a confederacy of the usual suspects has regrouped, rebranded, and relaunched a campaign on copyright in the digital age. They call themselves the Re-Create Coalition. David Lowery on the Trichordist referred to them as “getting the band back together,” and it is true that this familiar list of mostly Google-funded organizations (with bizarrely similar logos) has been trying to get its act together, a bit Keystone Cop-like, ever since the defeat of SOPA in an effort to relive that glory day. Once again, they are eager to rally citizens to their point of view on copyright, though that point of view may be hard to discern if you’re looking too carefully for specifics.  Broadly, the coalition says it wants to balance the rights of creators, consumers, and innovators, which happens to be more or less the goal of every copyright professional since James Madison. So, the only thing that matters is what’s behind those pretty words.

Does copyright need changing in the current market?  Sure. Register of Copyrights Maria Pallante was on Capitol Hill this week offering testimony in the final round of hearings on that very subject.  But like any complex system that might demand revision to conform to a new market, it’s reasonable to assume we’re talking about tweaks, not radical overhaul. Or to paraphrase author and attorney Elizabeth Wurtzel, law requires “granularity” to make it work. Because on the whole, copyright is relatively balanced except in the eyes of extremists and really big Internet corporations, who consider the whole legal framework (not to mention legal frameworks in general) a nettlesome barrier to their dreams of world domination.

Funding source alone does not negate the arguments or a point of view of a group or organization.  Nearly all organizations are funded by private industry in one way or another.  But readers should bring at least a dash of salt to the party when the company that’s been described as the most powerful in the world (i.e. Google) walks into the room and says, “We want a level playing field.”  In general, populist words alone don’t mean anything; mission statements are usually boilerplate.  There are plenty of organizations out there that use terms like freedom and fairness and American ingenuity while behaving as the most industry-serving, right-wing, bigoted group of grumpy white men you ever wanted to meet.  So, cutting through the fog a bit, what does the Re-Create Coalition appear to care about?  Based on their stated agenda, they seem to be focused on two things above all:  fair use and safe harbors. So, let’s look at those …

Take the example of my friend Sarah, cited in my last post, who inadvertently committed copyright infringement on the assumption that her use of a photograph as a supplemental asset on her blog was a fair use.  If we were to, say, broaden the application of the principle to include her use in this instance, that would not be balancing copyright so much as it would erase the purpose of having a fair use exception mean anything at all. It would simply be a free-for-all. If, on the other hand, we review statutory caps on awards for damages so that honest mistakes like hers cannot induce undue financial burden, perhaps there is room for some nuanced adjustment to the law. And admittedly, this appears to be one focus of the coalition. But …

Even the matter of statutory limits might be pretty tricky.  Potential damages function as a deterrent to unlicensed use.  Lower those barriers too far, and it’s not just the big corporations who can get away with anything.  Although it’s not a copyright case, the recent story about the couple whose engagement photo was used without permission on the cover of a cheesy, self-published erotica novella makes a pretty good example of what the market might look like without barriers (what Jaron Lanier calls levees) — rampant violation of several forms of IP rights.  Ironically enough, it probably wouldn’t take too many incidents of personal photos being ripped from social media and used in unpalatable ways like this before people started to think twice about sharing photos on social media.  So, IP barriers play a role in what the Re-Create Coalition folks call the “innovation economy,” too.  And ultimately, why should Amazon earn dime one from the sale of this self-published book (or perhaps hundreds just like it) when those sales involve printing and distributing a couple’s photo without their permission and in a way they find degrading?  So, fair use is good; we all like it.  Is it a doctrine in need of “re-balancing?”  Certainly not if all it does is tip the scales in the favor of one industry.

Perhaps more telling is that this old group with the new name sounds rather keen on calcifying safe harbors within the DMCA (Digital Millennium Copyright Act) and the CDA (Communications Decency Act), both authored in a time when the Internet functioned very differently than it does today.  So, when they say they want to balance copyright to protect the rights of creators without standing in the way of innovation and opportunities provided by the digital age, they don’t necessarily mean they want to update statutes that have protected mass infringers in a manner in which the law never intended.  For instance, YouTube has profited from mass infringement thanks to these safe harbors, yet this group’s call for “balance” in this regard is to leave that puppy alone.

Don’t get me wrong, I’ve said in other posts that these safe harbor provisions are important; they’re important to copyright interests as well.  But what’s happened in the case of YouTube is that the application of these provisions provided a free ride to that company, which in turn enabled market dominance it could then leverage to effectively force, for instance, musical artists to accept their lousy Music Key contracts.  The outcome is not only unbalanced, but it’s a worse deal for creators than some of the most underhanded recording contracts ever written. Yet, this progressive-sounding, forward-looking group isn’t talking about updating these 20-year-old components of copyright law.

Are there abusers of copyright?  Absolutely.  And they are as despised by serious copyright defenders as they are by anyone else. Nobody who believes in a set of principles likes to see those principles misapplied.  But abuse is the exception, not the rule; and laws should be written to support the rule.  Speaking of exceptions and rules, here’s a familiar refrain by Executive Director of the R-Street Institute Andrew Moylan, cited on the press release announcing the new coalition:

“The Internet has lowered the barriers for everyone. As technological innovation continues to advance at a rapid pace, copyright law must catch up. Overregulation protects past success at the cost of future opportunities and allows for exploitation of the current system.”

Sounds reasonable, but allow me to translate.  “Copyright terms are too long and only used to protect corporate rights holders (*wink* Disney), and this stands in the way of new creators entering the market.”

But here’s the market reality:  No matter how long or short copyright terms are, devaluation of works due to mass piracy as well as predatory practices by Silicon Valley interests have reduced investment in viable avenues for professional creators.  Thus, while the Internet does “lower barriers” for creators to showcase their works, the companies that dominate digital space have contributed substantially to the reduction of opportunities for those same creators to turn the prospect of discovery into sustainable entrepreneurism.

Meanwhile, to paraphrase Robert Levine, author of Free Ride, “It doesn’t matter if copyright is life plus 50 years or life plus 70 years. Because on the internet, copyright lasts about ten seconds.”    So, balance that, and then maybe we can talk.

Dangerous Little Knowledge

Not surprisingly, friends contact me from time to time with copyright-related questions. I’m careful not to give definitive answers to most of these, but I can usually point them in the right direction toward a solution.  Very recently, a dear friend (let’s call her Sarah) asked my advice regarding an email she received from a photographer who demanded removal of an image from her blog as well as a substantial fee for damages.  Sarah is college educated, a Gen-Xer, an artist herself, wicked smart, talented, and very respectful of people in general, let alone other creators.  I would characterize her as among the last people who would knowingly infringe a fellow artist’s copyrights.

Sarah considers her blog educational and non-commercial, and she credited the photographer. These factors led her to assume her posting the photo was a “fair use,”  and the mistakes she made are consistent with the kind of questions and assumptions I hear all time.  Real copyright experts may have another view, but it seems to me that the non-commercial thing is among the most common mistakes made when it comes to assuming a use is fair. In reality, commercial or non-commercial use of a work is is not necessarily dispositive (as the lawyers say) when determining whether or not a use would be judged fair. Setting aside the question of the photographer’s award demand — I can’t comment on whether or not it was in line with common practices among visual artists —  I was sorry to tell Sarah that her use was almost certainly an infringement. It only took her doing a bit of research to realize that fair use is a very specific component of copyright law that requires a federal court to weigh four factors in order to reach a conclusion.

What I find interesting, though, is that while I have been associated with originators and users of creative media my entire life, until Web 2.0 came along, I don’t remember people making decisions to use works based solely on what they thought they understood about copyright.  Put another way, I am not surprised Sarah misunderstood fair use so much as I am curious as to how the misinformation got into her head in the first place to the extent that she honestly believed she was on solid ground.  Because I bet her confusion is quite common.  Moreover, I suspect that so much misunderstanding about copyright is aggravated by both the design of the Web and even by the din of the copyright debates in the blogosphere. Not only does an interface like Google image search make potential infringement just a little too easy, but it also isn’t helpful to have a constant drumbeat of headlines written by entities with an interest in weakening copyright.

Lingo is catchy. We hear a unique term, assume we know what it means, then misapply it and spread the gospel. I used to see this a lot in video post production whenever a producer got hold of a new expression he thought he understood. Similarly, I suspect there’s so much chatter about copyright issues swarming around the Internet today, that terms like fair use seep into public consciousness; and then intelligent, thoughtful people like Sarah make perfectly reasonable, yet entirely false, assumptions about what the term means or how the principle is actually applied.  A clear case of a little knowledge being a dangerous thing.

And of course, it’s not just copyright; it’s anything. The wealth of “content” out there doesn’t always make us more informed, but it can make us think we’re informed, sometimes just enough to get us into trouble.  Because it’s one thing to have an opinion about a subject like copyright, but another thing to act on the assumption that you can be your own attorney, which is no more advisable than, say, using WebMD to diagnose the presentation of some new symptom.

Let me pause and write in the imperative for a moment by way of what public service I may offer:

If you have to imagine a fair use argument, then a case for infringement by the rights holder may exist.  Unless you have really researched fair use and you are legally and/or  financially prepared to defend your use, don’t assume you know what you’re doing. Odds are you don’t. There are no bright line rules when judging fair use.  Plus, if you’re just writing a blog and need an image, there are probably better and clearly legal options like Getty Images free embed service. Having said that, there’s nothing wrong with asking the rights holder for permission. He just might say yes.

Of course, the argument from the anti-copyright crowd might be that Sarah’s experience makes a good reason to “expand” fair use in the digital age.  For instance, readers may be generally aware of the Internet industry’s proposal to  “export” U.S. fair use principles through fair trade agreements despite the fact that our trading partners have radically different legal systems, and none has our First Amendment. I bring this up to illustrate the point that I believe this industry continues to trade on the populist tactic of oversimplifying legal frameworks in order to advance its own agenda.

And this goes back to what I meant when I said that the design of the web as we know it adds to the confusion of general users as to what’s fair and what’s infringing.  After all, the image is right there on Google image search.  Why not right click, copy, and paste into a blog, etc.? Yes, that’s certainly a paradigm Google et al want to promote, but let me cut to the chase here:  if you’re an individual with mere mortal resources rather than billions of dollars and a phalanx of attorneys, taking the “infringe now, apologize and maybe pay later” approach of Silicon Valley corporations is probably a bad strategy.

Meanwhile certain experts may convince users that they’re on solid ground.  For instance, fair use scholar Peter Jaszi, in his testimony before Congress in January 2014, stated the following:

“Fair use, one might say, is like a muscle – it will grow in strength if it is exercised, and atrophy if it is not. But, by the same token, fair use is hardly unusual or exotic today. Everyone who makes culture or participates in the innovation economy relies on fair use routinely – whether they recognize it or not.”

I don’t presume to criticize Jaszi’s scholarship; I’m not remotely qualified to do so. But to the ears of fellow laymen, statements like this can be interpreted as permission to push the boundaries of fair use, which may be particularly hazardous if one has not at least researched the basic principles in the first place. High-level theory, debate, testimony, and discussion in the halls of academia do not necessarily provide an accurate picture of the law as it is currently applied.

Add to all that the massive volume of un-scholarly blogs, editorials, and PR messages aimed at weakening one facet of copyright or another, and confusion is likely to be the rule rather than the exception.  Each individual should do the research and decide for herself which among the many proposals on copyright seem thoughtful and innovative and which are serving vested interests. In the meantime, confusion leads to infringement claims, which can lead to damages, which pisses people off who otherwise respect copyrights. And in this sense, all the Sarahs out there become a bit like cannon fodder in a larger battle being waged by billion-dollar corporations.