Who’s Stifling Innovation?

Powerful internet platforms have spent millions promoting the message that copyright “stifles creativity and innovation.” They argue that the legal framework that supports your work is in their way. It has advanced this false claim on social media and blogs, in the mainstream press, in academia, and in testimony before Congress for years. At this point, it’s been said so often that people have begun to think it’s actually true without any clear evidence to support it.  So, we have a couple of questions:

First Question:  Where’s the stifling?

If the digital market is being stifled, you wouldn’t know it from powerful internet platforms’ vital signs.

Innovation means more than just gadgets: It’s about competition, technology, new business models, and new work opportunities for more people. But large, monopolistic companies, like many of the powerful internet platforms, are not necessarily fighting for that kind of innovation. Instead, their definition of “innovation” seems to favor laws and policies that protect their own market dominance. Just because the new boss wears a hoodie and makes killer apps doesn’t mean he’s on our side. Suggested Read: America’s New Oligarchs, by Joel Kotkin.

Second Question: Since when are we not innovators?

We can’t deny that powerful internet platforms engage in innovation, but they certainly don’t have the exclusive on it. Innovation takes lots of different forms and has lots of different dimensions. The creative community is itself innovative: new stories, new ways to tell stories, new technology, and new distribution models – each of which drive technological innovation through new filmmaking techniques, special effects, theater presentation technologies (like laser projectors), distribution platforms, and digital business models.

The creative community doesn’t need to be schooled in the concept of innovation. Our industries employ millions of people. And we continue to prove that protecting the rights of individual creatives, collaborators, and contributors yields a cycle of progress in technological development and new creative expression.

It’s time for a mature and sustainable digital market.

The internet is sometimes characterized as the “Wild West.” But being in the creative community as we are, we know a few things about the proverbial Wild West: A lot of innocent people get hurt, no progress is made, and bad guys run the whole town. Until Denzel Washington shows up.

The global, digital economy is too important to remain the Wild West. Too often, powerful internet platforms use words like “openness,” “freedom,” or “innovation” to justify a hands-off approach to all things internet. For the creative industries, this means that nearly any proposed solution to address online theft of our rights and work gets labeled as some form of censorship. But it isn’t. The label is nothing more than a scare tactic used to mask the truth – that there is a lot of money being made by exploiting our work without permission or compensation.

This hands-off policy may suit powerful internet platforms, which derive revenue from selling ads and mining data about internet users, but this approach can also leave creatives, entrepreneurs, and even consumers vulnerable to predatory practices like mass infringement, counterfeiting, and hacking. We believe real innovation has to include a fair, legal, and safe digital marketplace for everyone.

Threats to Sustainability

Piracy is a for-profit, criminal enterprise that contributes directly to financial losses for creatives and to reduced investment in new projects. Pirate and counterfeit sites also degrade the digital market, creating an environment that is unreliable for businesses and unsafe for consumers.

In 2015, the International Advertising Bureau identified $8.2 billion in lost advertising value due to flaws in the internet advertising ecosystem. Over 30% of that loss was attributed directly to online piracy.

For better or worse, the “free” web as we know it functions as a massive advertising platform. There are multiple ways bad actors leech value out of the advertising ecosystem, including piracy and click fraud. Powerful internet platforms, advertisers, and the public have an interest in fostering a reliable online market, a goal that coincides with the need to enforce reasonable boundaries such as intellectual property rights.

Piracy Spam isn’t actually piracy, but it can adversely affect the quality of search results and diverts traffic away from sites providing legitimate links to creative works. Fraudulent entities set up fake “pirate” sites offering free books or music or movies to consumers who type in key search terms. Because these sites don’t actually host illegal files, they’re not infringing copyright interests, but they do lure consumers into click holes and/or expose them to malware.

Suggested Reading: eBook piracy Spam, by Jonathan Bailey.

Malware is becoming more widespread, more hazardous, and much easier to deliver. Some viruses are so sophisticated that a user doesn’t even have to click a link to infect a device. Malware leaves consumers vulnerable to identity theft, ransom demands for hijacked data, privacy invasions, and outright theft of funds from bank accounts. Not surprisingly, the black-market of pirate websites has become an ideal hunting ground for digital predators to set malware traps.

Suggested Reading: Digital Bait Report, from Digital Citizens Alliance.

A Sustainable Market Means Competition

A healthy, free-market economy requires diversity of choice. Too much consolidation leads to less competition, which produces the opposite of innovation. You might have noticed that the market forces of the internet haven’t traditionally produced multiple competitors. Instead, we tend to see one or two dominant players at a time – like MySpace followed by Facebook. Investors and economists refer to industries with such characteristics as a winner-take-all market. The result is a handful of companies that can dictate – rather than negotiate – terms to suppliers, advertisers, and consumers. Over time, this is not sustainable – at least not as a free market.

Suggested Reading: In Silicon Valley Now, It’s Almost Always Winner Take All, by Om Malik, The New Yorker. 

We Don’t Need Rhetoric

Powerful internet platforms often propose that measures to prevent intellectual property theft will make it more difficult for new internet-based companies to grow and flourish, thereby fortifying the monopoly positions of existing players. “We want a thousand YouTubes” were the words of Julie Samuels of the Electronic Frontier Foundation at a panel discussion in 2013. This kind of statement is a distraction from an honest discussion about the issues. There are fundamental, market-based reasons, entirely unrelated to copyright, why we are unlikely to see two YouTubes, let alone a thousand. We think there should be serious engagement aimed at fixing flaws in the online market instead of rhetoric.

Collaborative Solutions Can Work

Voluntary initiatives are among the best solutions to balancing the needs of consumers, creatives, and online service providers. Working as partners, content producers and service providers can find solutions to maintain the fair and safe trade necessary to attract and sustain investment in new creative products and new distribution services.

In February 2016, the MPAA and domain-name provider Donuts entered into a voluntary agreement to reduce large-scale digital theft of motion pictures. The terms of the agreement allow the MPAA to report potentially infringing websites using Donuts domains and Donuts will promptly investigate. The agreement gives Donuts full discretion to take action (or not) against a domain following its own independent review of the evidence.

This agreement demonstrates that rights holders and service providers can cooperate to weed out large-scale abusers of the internet while protecting the interests of legitimate website operators and individual users.

Just two months later, the MPA entered into a similar agreement with domain-name provider Radix. These examples illustrate how online service providers and the creative community can develop collaborative solutions to preserve the legitimacy of the digital market. Read about this agreement at MPA.

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