Pirates in Cyberspace
(and why it’s bad to share)

Oct 25, 2011 No Comments by

The Digital Economy Act that this and the previous government seem very keen to implement and police is, among other things, designed to protect those who believe their copyright is being infringed by file sharing. In case you weren’t aware, a digital file such as a piece of music, a movie or TV programme can be copied and disseminated around the world via the Internet with a few mouse clicks. Unlike copying analogue files such as a VHS video or cassette taped copy of an LP there is no degradation with each digital copy. Digital means the 100th copy sounds or looks just as good as the first, the 1,000th or the 1,000,000th. The theory goes that each time an illegal copy is made and shared, the owner of the copyright on that material loses out and if such file sharing continues movie makers, TV companies and the music industry will all go to the wall.

Sound like a fair argument? Well, yes and no.

Been to the cinema lately? Tickets cost a fortune; snacks and drinks likewise. The seats are often painful and you have to put up with the anti-social habits of other audience members. For a family of four to go and watch the latest Harry Potter film with popcorn and drinks (mostly ice) is going to set you back at least £50. Or you could download an illegal pirate copy from the Internet and watch it at home for nothing. The quality might not be that great but when your sprog is asked at school whether he’s seen the latest HP movie he can say ‘yes’ and not seem like the off-spring of paupers. But while no one is forced to go and watch a movie, Hollywood is supremely talented at creating demand for its output. It’s when the audience feels it’s been ripped-off that problems begin. There are no refunds at the cinema for poor quality product. There’s also the slightly peculiar dynamic whereby most movie studios (Sony apart) don’t own any cinemas. It’s not dissimilar to Shell exploring for oil, drilling, extracting and refining the stuff while not owning any petrol stations. Like movie stars, Premiership footballers also get paid obscene amounts and no one seems to grumble, even though it’s the end-user – the fan – who ultimately pays. For fans, though, there is an emotional investment in football that doesn’t exist with movies or TV or the stars that populate that product.

Prior to the advent of pre-recorded VHS tapes there was no market for home consumption of movies and TV other than that scheduled by broadcasters.  An ‘appointment to view’ was the what all those concerned were after.  When it became possible to record TV programmes and watch pre-recorded movies whenever it suited the viewer everything changed.  On the one hand the movie and TV industries were thrilled to have another revenue stream but less thrilled that some ne’er-do-wells copied tapes and flogged them on the cheap. Then DVD arrived and millions of keen consumers bought material they’d already taped off the TV and/or bought on VHS tape. So buying a product on DVD could have represented the third time they’d bought and paid for the same thing; TV airing+VHS tape+DVD. And yes, one way or another we all pay for what gets shown on TV. No one goes to all that effort for fun. Now there is high definition Blu-ray, yet another format for pre-recorded material we’re being cajoled into adopting and paying handsomely for. There’s probably no reason for Blu-ray discs to still cost more than the DVD equivalent but they do.

The movie industry still decides what you’ll watch, when and how. Movies are released at different times in different territories; likewise the DVD or Blu-ray versions. All to maximise profits – which is fair enough – but it often seems as though the movie industry is a touch too pleased with itself; it makes a big fat fuss, draws us in, takes our money and often doesn’t deliver. It then takes the moral high ground when it comes to chasing down and prosecuting those who would cut them out of the profit cycle by sharing digital copies of their product. Organisations such as FACT – the Federation Against Copyright Theft – concede that not every bootleg DVD or file-share is a lost sale but they lobby on the basis that some must be. If you buy a DVD of a current movie release from a bloke on the street it will be crap because it will have been shot from the back of a cinema with a camcorder.

Back in the 70s the music industry was convinced that ‘home taping is killing music’. If you’re ancient enough you might recall the skull and crossbones logo blended into a cassette; a comparison with seafaring pillage that continues today. If you taped an LP onto a cassette to give to a friend or simply play via a more convenient medium such as a Sony Walkman, you were, so the orthodoxy went, committing an offence that would murder music. Somehow the industry survived. Perhaps they didn’t realise that if you had the motivation to home tape anything you must also be a fairly enthusiastic consumer of music and therefore likely to buy more of it legally and so keep all those desperately impoverished musical artistes well-furnished with booze, drugs, hookers and French chateaux. I felt terrible when I taped music off the radio and then played it for my friends so they’d get into a particular band and go out and buy all their albums. I really don’t know how I lived with myself. I was just that evil. Today file-sharing is all the music industry seems to care about even though there is plenty of evidence to suggest that it gets more people interested in more acts and so helps drive legitimate sales. Last time I looked Adele seemed to be doing alright. Maybe she won’t make quite as much money as she would have done in the 70s but neither will all the (increasingly redundant) middle-men who probably don’t deserve it anyway. And there are plenty of artists pocketing great chunks of dosh by playing live and often, as this article from Forbes.com suggests.  And before anyone starts bleating about how it’s only established artists such as U2 and Elton John who are raking in the cash and how file sharing is destroying the market for new talent, scan down the list a short way and you get to Justin Bieber, who was still sperm 12 months ago. Not that he’s ‘new talent’ of course. Unless a haircut can be innately talented. Given that the International Federation of the Phonographic Industry reckons 95 per cent of all music downloads are illegal it makes you wonder where all this cash comes from. I was at a press event not that long ago at Mark Knopfler’s recording studios in Chiswick. Talking to Ed Adlard, drummer with Patch William. I asked what the band would do if they hit the big time? Buy a huge house? A supercar? Nope. They wanted their own recording studio so they could make their music without being in eternal hock to a record company for bankrolling the cost. Talent+ Garage Band (Apple’s music recording software)+ the Internet (Twitter, Facebook, Digg and all the other social media outlets) = less need for record companies. No wonder they’re all worried.

Another factor in the furore over illegally downloading music is that it is also illegal to upload music. Er, what? This may come as a surprise but take a CD from your collection and upload it to iTunes and you are breaking the law. Brennan, makers of a nifty music server, discovered this to their cost when the Advertising Standards Authority pointed out to them that the whole thrust of their (somewhat relentless) advertising campaign – upload your entire CD collection to their server-box-thingy – was encouraging consumers to indulge in copyright naughtiness. Few of us know the true extent of what that little © actually means but Brennan has found out. The Hargreaves Report, published in May 2011, makes ten recommendations for changes to the current copyright laws and scrapping that which makes ‘format-shifting’ – as the copying of CD to PC to MP3 player is known – is one of them. Another is for the establishment of a ‘one-stop shop’ for digital rights clearance. The full report can be downloaded here.  Whether anyone takes any notice of it or actions any of the contents is another matter altogether.

TV differs from the movie and music industries because it’s actually in its interest to under-report the effect of piracy/file-sharing. TV revenues depend on advertising which in turn depends on viewing figures. Any factor that might eat into said figures is bad for business and the fewer people who know about them the better. But TV doesn’t do itself any favours by trying to control which parts of the world get to see which programmes and when. Most must-see TV emanates from the US and its cable channels: HBO, Showtime, AMC, FX. It used to be rare that a show would air both in the US and in Europe simultaneously. It happened with the final episode of Lost and was sort-of tried with Prison Break. The second series of both Boardwalk Empire and The Walking Dead are only a week or so behind the US but such scheduling is not the norm. Get hooked on Dexter or the Good Wife or Californication or Breaking Bad or Hung and, well, stuff you – we’ll show you the latest series in the UK when we’re good and ready and not before. And we – the committed, enthusiastic audience – are meant to feel so grateful for this manifest lack of respect that we wouldn’t dream of going onto www.thepiratebay.org and downloading the latest series (in lovely HD quality and without the increasingly frequent and interminable ad breaks). I mean, who’d do such a thing? It could be that the above examples of Boardwalk Empire and The Walking Dead represent a shift aimed at combating file-sharing of TV programmes but neither is available on Freeview so there’s still motivation for the non-Sky crowd to download them illegally.

The current mantra of the mobile entertainment industry seems to be ‘access any content, anytime, anywhere.’ You want to watch Mad Men on your iPad? No problem. Episode 5, Series 2 of Frasier on your smartphone? Easy. Except you could be paying again for content you’ve already paid for via you TV licence or Sky subscription and in the UK you won’t be able to watch anything that’s currently playing in the US but has yet to be broadcast in the UK. It works the other way around too; take your UK laptop/tablet/smartphone abroad and you won’t be able to watch any of the domestic catch-up services such as BBC iPlayer or the ITV Player. And if you buy a TV show from Apple’s iTunes but want to watch it on an Android device a conversion will be required via doubleTwist or somesuch. Always conditions – hoops to jump through – just to watch a bit of telly. Makes you wonder why anyone bothers.

File sharing is a bit like the drugs ‘industry’. Because each is illegal you only get one side of the argument. No drug dealer is going to stand up and be counted for fear of retribution. In the US a few illegal file sharers have been caught and prosecuted as though they’d buggered the president’s wife. Small-time transgression met with big-time prison sentences. To send a message, you understand. To set an example. The Swedish founders of www.thepiratebay.org were jailed in Sweden thanks to the sterling efforts of the movie, music and TV industry lobbies which bullied the Swedish government into, if not changing, then at least reinterpreting its laws. And while it would be massively disingenuous to suggest that the Pirate Bayers weren’t aware that naughtiness on a global scale was being wrought via their site a comparable argument could also be made for imprisoning the head of every postal company in the world for distributing child pornography or every Internet Service Provider (ISP) for doing the same. The Pirate Bay is a distribution platform. Much of what it distributes is legal; much isn’t. Ditto postal services and ISPs.

There is also the morally dubious position occupied by those industries who have vested interests on both sides of the piracy divide. Take Sony, for example. It manufactures everything you would need – PC, TV, Blu-ray/DVD player, smartphones – to illegally download and consume music, TV and movies. But it also makes music via Sony Music and movies via Sony Pictures. And it recently launched its own TV channel. Now imagine a circumstance where Ferrari and Lamborghini were spearheading an industry lobby not only to lower speed limits but also for drastically punitive action against transgressors.

Manufacturers of luxury goods such as watches and posh handbags have fought a long and bitter battle against those who make counterfeit versions of their products. Since most of these operations seem to be in China where economic morality tends to be somewhat flexible we wish them luck. Even fine wine hasn’t escaped the attentions of knock-off merchants. Many prestige wine makers now include an anti-counterfeit hologram on the label but this doesn’t prevent real-but-empty bottles being filled with plonk, resealed and sold as the genuine article. Since a single bottle of 1996 Chateau Lafite could cost over £1,000 there is a market for empty Chateau Lafite bottles (and many others) on ebay.

The difference between digital file-sharing and ‘passing off’ as it’s known, is that the illegal copiers of, say, a Louis Vuitton bag are trying to make a physical object indistinguishable from the ‘real thing’ whereas every digital file is the ‘real thing’. The notion that one is genuine and another is not is irrelevant. There is also a school of thought that the counterfeit market in luxury goods helps drive legitimate sales. It certainly garners plenty of publicity which can’t hurt the balance sheet. Companies such as LVMH (Louis Vuitton, Moet, Hennessey) and PPR which owns Gucci, Yves St Laurent and much, much more, have deep pockets and stardust glamour (not unlike the film, TV and music industries) with which to leverage long-term protectionism. Each will argue they spend/waste fortunes combating piracy but one has to wonder what would happen if all aggrieved parties simply gave up. If you’re in the market for a Louis Vuitton bag and have the money, why would you buy a fake? It’s knowing you can afford to spend the necessary cash that’s part of the appeal of all luxury goods. Buy counterfeit and you will feel cheap; buy genuine and you will feel rich – probably because you are. If you don’t have the money to buy legitimate product whether you then go and buy a knock-off is sort-of irrelevant. It could be argued that a market awash with fakes devalues the currency of the genuine article but in what is supposed to be a world-wide recession purveyors of luxury goods seem to be doing pretty well, even though investors are reported to be getting twitchy. “LVMH has reported a big jump in profits as demand for luxury goods shows no signs of slowing despite concerns over the strength of the global economy,” says the BBC website. “Net profit for the first half of the year came in at 1.31bn Euros ($1.9bn; £1.16bn), up 25% on a year earlier. Revenue rose 13% to 10.3bn Euros.” Mrs Fogey was recently in an Hermes store in London. The queues for the tills were long and supplies of Hermes’ iconic Birkin bag, which starts at £5,000, non-existent. The company can’t make enough of them because, apparently, they can’t source sufficient high-quality leather. Tough times indeed.

The model for the future consumption of music, movies and TV has to be one that operates along the lines of Spotify. This is a music service, accessed via the Internet, that allows users to listen to pretty much any song by any artist; a global jukebox if you will. There are a few exceptions – AC/DC and Metallica aren’t even available on iTunes, let alone Spotify and The Beatles back catalogue debuting on iTunes in 2010 made worldwide headlines. Spotify has two main levels; the first lets people listen to music of their choice in exchange for also being fed advertisements. Pay a subscription, though (typically around £10 a month) and there are no ads. You can just listen, create playlists on a PC or smartphone and then listen off-line (although I’ve never managed to fathom how to achieve this…)  or buy those same tracks. The artists don’t get much in return but they get more than nothing. It’s a wonderful way of discovering new music. And Spotify conforms to the ‘any time, any place, anywhere’ ethos. Not in the US, yet, because copyright owners there are still clinging to the wreckage of their doomed business models, but sooner rather than later paying for instant and universal access to movies, music and TV – whether via subscription or pay-as-you-go – will be the norm. And since everyone who retails on-line can already make suggestions (Like that? Maybe you also like this.) it’s not as though any artistic or cultural sensibility will not be catered for.

Alternatively Internet Service Providers could offer an ‘all-you-can-eat’ subscription option which, effectively, gives users licence to download as much as they like for a fixed price. Considering what you get for it, the cost of a broadband connection is absurdly cheap – less that £10 a month is not uncommon – whereas many Sky subscribers pay upwards of £50 a month for their TV packages, which in turn suggests consumers will pay for a quality experience such as live Premiership footie in HD. In the same way the Performing Rights Society collects royalties, so ISPs could do the same for content that users download. There would still be those who wouldn’t or couldn’t afford the higher cost but I’m not one of them and I’d have to hope I’m not alone. This Utopian vision would only be spoiled by the wailing protests of advertisers but since they, with the connivance of Google, are now expert at targeting consumers they would be dealt an even stronger hand. All they’d need do is learn how best to play it.

But there is a problem with the ‘all-you-can-eat’ business model: bandwidth.

For some years now there has been a move towards non-physical, digital media. CDs and DVDs are in decline whereas streaming via the Internet and downloading music and movies is on the up. But two things have happened recently that could put this trend into reverse: Internet service providers (ISPs) in the US have begun to phase out ‘all-you-can-eat’ price plans whereby customers paid a flat monthly rate for their Internet connection and could download or stream as much content as they liked; and Netflix, the major player in movie streaming and DVD rentals in the US, is in big trouble.

Internet connections require bandwidth but so do many other types of transmission from mobile phone calls to satellite TV broadcasts. The usual analogy is of cars on a motorway. There are three ways to reduce congestion: reduce the number of cars, slow the traffic down or widen the road. Or do all three. Bandwidth is a valuable commodity of which there is not an infinite supply. Most existing infrastructures, whether they be based on existing copper cables or satellites can only carry just so much digital data. High definition TV is all well and good but the digital file a typical HD movie represents will be many times larger than its standard definition equivalent; more definition = more information = bigger file. Small armies of clever people are beavering away trying to help solve this issue by finding new and more efficient ways of compressing large files so they can be sent without clogging up the bandwidth arteries but there’s only so much squeezing that can be done before quality is compromised. In the UK, companies such as BT and Virgin are laying more and more fibre-optic cable which has a theoretically infinite bandwidth capacity. In Korea, home of Samsung and LG, their broadband infrastructure was fibre-optic from the beginning; one advantage of being a late developer. BT claims to have over 75 million miles of copper cable in ducts and up poles in the UK and that to replace it all with fibre-optic would cost £20 billion. But that needn’t be a problem as this post by Tim Worstall from Forbes.com shows. All it would take is time. A long, long time.

American ISP Comcast has decided to do away with unlimited access pricing and charge customers for what they use. This is fine if your demands on bandwidth are modest – if all you use the Internet for is to send emails and check your status on Facebook – but not so fine if you subscribe to a movie streaming service such as Netflix and so use a huge chunk of precious bandwidth in the process. Now Comcast limits customers to 250 gigabytes (GB) of data download per month. Netflix streams their HD at 4800 Kbps, which is 600 kilobytes per second, or 2.06GB per hour, which is just over 120 hours per month or four hours a day. To the uninitiated this might sound like a lot but it’s still a limit and Americans don’t like being told they can have less of something for the same money. And it doesn’t take into account any other Internet-based downloading that a customer might want to do. Comcast won’t suffer too much but Netflix will.

Netflix has now arrived in the UK.  They charge £6 a month to watch unlimited whatever.  But to take advantage of the service you would need to know how to get the Internet up on your TV.  This can be done via a laptop or games console but some cabling jiggery-pokery will be required and what are the odds that all the necessary wires and plugs will be compatible?  I know how to use my TV as a supplementary monitor to a laptop but setting up all the necessary is a pain in the bum. Currently Netflix has around 14 million subscribers in the US who typically pay around $10 a month for both unlimited DVD rentals (by post) and unlimited movie streaming (via the Internet). But the adage ‘content is king’ has never been more apt for Netflix. $10 a month isn’t much if you watch a ton of movies, and multiplied by 14 million it’s a tidy sum and one that movie studios thought they weren’t getting enough of. So the studios began to charge more for their content, Netflix put up their prices, customers left, the share price fell by over 60 per cent and there is a real possibility that Netflix won’t be able to generate sufficient user revenue to pay for the content deals they have committed to. Some commentators think Netflix wanted to sell its streaming business to Amazon but it would be much cheaper for Amazon to let Netflix go to the wall than take on the millions of dollars of debt that Netflix is saddled with. But even if that happens, Amazon, or anyone else, is likely to face the same issues as Netflix – getting the right content at the right price. Unless, of course, you already own the content.

In the US, Universal hoped to release the new Eddie Murphy movie, Tower Heist, via its premium video-on-demand (VoD) service just 21 days after its initial cinema release (usually VoD comes 120 days after theatrical release). The cinema chains weren’t happy and threatened a boycott. Eventually Universal backed down and ditched the idea.   But since theywere planning on charging a select buch of consumers $59.99 for the dubious privilege of watching an old has-been ham it up in the comfort of their own homes you have to wonder how successful such an initiative would have been.  And Universal is part of NBC-Universal which is controlled by…. Comcast.

A cynic might say that by discouraging consumption of digital media via the Internet the movie and music industries will be returning us to the days of cosy, controllable, hugely profitable business models and thus reversing their decline, allegedly at the hands of illegal file-sharers and other naughty pirate-types.

As I write, season 4 of Breaking Bad (made by Sony Pictures TV) has just finished its run in the US. It won’t be shown in the UK until who knows when? It is brilliant. I’ve watched all three previous seasons on DVD boxed sets. And I know that I can go online and download all of series 4, this afternoon, in 720p HD, with all the ads stripped out, for nothing. I would happily pay but there is no option to do so. If I lived in the US I could have downloaded episodes the day after they’d aired, via iTunes, for $2.99 each but that’s not an option if you live in the UK. Channel 5 showed series 1 and 2 on its 5US off-shoot but doesn’t have the rights to series 3 or 4. It looks like satellite channel FX is taking up some of the slack but there’s no news regarding season 4. If any network airs either series, the amount they will have paid for it, or the package of which it is a part, will depend, to some extent, on the projected ad revenue the show can hope to generate, which in turn depends on viewing figures, which will be affected somewhat if everyone with a broadband connection, a bit of tech gumption and flexible morality has already seen it. The thing to remember here is that anyone illegally downloading this show is a fan. Surely there must be a way for content creators to capitalise on that? Whichever platform Breaking Bad subsequently appears on you will have needed to have bought a TV licence or satellite/cable subscription to watch it. And since both are paid for or committed to via a contract in advance doesn’t that entitle a person to not only watch what is on and has been on but also what will be on? Or is part of what you’re paying for a commitment to be exposed to TV advertisements which, via Sky+ or simply going to make a cup of tea, are very easy to avoid? In the case of Sky and its ilk you get the double whammy of paying to watch and having to endure a mess of advertisements. While we’re on the subject of TV ads I recall watching American TV for the first time in America and being gob-smacked at how every show was interrupted incessantly by ads. Far more so than was the norm in the UK. Here, viewers used to be able to rely on ad-breaks at 15, 30 and 45 minutes past the hour, with each lasting two minutes. From February this year ITV, Channel 4 and Channel 5 were given the green light by OFCOM to increase the amount of ads shown per 30 minutes from three minutes and thirty seconds to six minutes for one-off film and drama. Without advertising revenue there would be no commercial TV but likewise, without sufficiently popular programming there would be no market for the ads. There are now more TV channels than ever – all vying for a slice of an adverstising pie that hasn’t changed much in size. The Internet has created a bigger, infinitely broader, outlet for advertisements and so diluted the market even more. This article from Reuters.com shows how money that used to be spent on TV advertising is now being spent in new ways, not least advertisers’ own websites.

In his excellent book The Pirate’s DilemmaMatt Mason wrestles with the many moral and practical arguments thrown up by file-sharing. The dilemma of the title is that, while most Internet piracy occurs because people like something and want to share it (the fundamental tenet of all social networking sites), their actions might damage the film/TV/music industries to the extent that, eventually, there will be precious little worth sharing because content creators can’t make their efforts pay. You also have to wonder why anyone would bother making TV shows available on torrent sites unless there was money involved but it seems that many do it for the kudos alone. Robin Hood recast as a reclusive nerd. A ‘torrent’ – of which BitTorrent is the most familiar variant – breaks up a large digital file into manageable morsels. It’s a bit like a game of pass-the-parcel with jigsaw pieces. Downloading is known as ‘leeching’ and uploading ‘seeding’. Small digital snippets arrive on your PC and are gradually assembled into the complete file. At the same time, those snippets are being passed on by your PC to others around the globe. Millions of tiny bits of data criss-crossing cyberspace. The reason files are sent this way is that sending large individual files clogs up bandwidth. If you’ve ever tried to email large photo files you’ll appreciate that it can take a while for the images to get sent or that email providers limit the size of the files you can send. Getting an entire elephant through your letterbox would be problematic. Cutting it up into tiny chunks, less so. Bram Cohen, who created the BitTorrent protocol in 2001 and still runs the company of the same name, probably didn’t envisage the trouble his baby would cause but while BitTorrent is used to distribute copyright-infringing material it is also used by pretty much every legitimate online entity that needs to send lots of data to lots of people quickly; Facebook, Twitter – even the UK government.

Industry lobbying bodies can quote any numbers they like when it comes to quantifying the effect of digital file-sharing on their balance sheets. It is true that sales of DVDs and CDs are in decline but that’s partly because having physical copies of media is becoming less and less relevant. Access has become the watchword; not ownership. Prior to recorded sound how did musicians make a living? They performed. A performance can be recorded but the actual experience cannot be copied. So bands and singers can no longer spend their days ensconced behind a mixing desk or swanning about in the Caribbean. At last; an upside for the consumer – the fan. Play your music and if it doesn’t pay, do something else. Stop whingeing because you can’t make millions any more having a blast and doing what you love. And movie makers – produce decent quality product and stop being so greedy. Movies aren’t high art; they’re entertainment. So show me a ‘transport of delights’ and not tedious, pretentious shite like The American (our most recent, jaw-dropping waste of £17.99 for the DVD) or dreary, middle-class angst-guff such as Archipelago.

There are many more peripheral elements to the file-sharing debate. Nobodies can become Internet sensations and make small fortunes overnight via exposure on-line. Inspired bloggers can become world authorities feted by the objects of their opinions and insights. The digital universe will make new stars and break old ones. Established industry platforms will become redundant and die as new models emerge. Change is inevitable. But there will always be an appetite and a paying market for great songs by fantastic singers, engrossing movies by talented performers and addictive TV from inspired storytellers. Perhaps the main thing the creative industries are afraid of is that file-sharing shows how very rare true quality is and we’ll soon come to realise we’ve been fed on a diet of overpriced, overhyped garbage for far too long. It may be argued that file-sharing will only ensure there is even less good stuff for us to enjoy in the future and that the dreaded ‘user generated content’ or endless re-hashes of Big Brother will becomes staples of the TV genre, but I have a hunch that excellence will out and not only survive but thrive. There may be a substantial audience that is happy to be fed a diet of reality bollocks and grindingly predictable soaps but there will also be room for watchers of The Wire and The Killing and The West Wing. Consumers are not the enemy whether they get their fix legally or not and respect is a two-way street. You don’t want consumers to take the creative industries for granted? Then stop taking your audience for granted.