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Copyright talks

Last night, I chatted with Bryan Crump over at Radio New Zealand Nights about copyright. It seemed a timely topic with copyright being the most (to me) annoying part of the Trans-Pacific Partnership Agreement.

I’m agnostic about the overall benefits of the deal but lean toward that it’s better for New Zealand to be in, given that it exists, but perhaps even better if the U.S. Congress fails to ratify the deal if that could mean everybody else gets to strip out the copyright nonsense from it. That said, the deal on copyright could have been far worse and the deal we have is much better than I feared it could have been. Parallel importation remains; existing geolock circumvention provisions remain in place.

I typically write up some notes for myself prior to the chat and send them along to give a bit of background. There’s plenty of stuff we never got to chat about in our 18ish minutes. I will embed the audio stream when it is available. Former students of mine from Canterbury will recognise a lot of this.

Notes on Copyright for Nights with Bryan Crump, 2 February 2016.

The standard economic model of copyright pitches it as a trade-off between the costs of creating new works and the returns from creating new works. Copyright then isn’t an on/off thing but rather varies in duration and in the strength of the public domain.

When copyright is very strong – reaching far back into the past through long copyright terms and very wide-ranging with few fair use exemptions, it is harder to create new works. If every artist had to seek permission from and pay royalties to Pachelbel’s heirs for the chord sequence he used in the Canon in D, we would have fewer new works created – but each new work would earn its creator a lot more.

If copyright is very weak – expiring quickly and with many permitted unlicensed uses under fair use exemptions – then far more new works can be created, but each would not earn its owner that much through traditional distribution.

Consider further what infinite copyright would look like. There was a great sci fi short story in the 80s called Melancholy Elephants. In that copyright dystopia, all works have to be run through a plagiarism engine to make sure nobody is copying any prior ideas. And they’re considering making the duration of copyright infinite.

That latter part might sound nuts, but one Australian academic has suggested copyright should be infinite.

In the Melancholy Elephants story, a senator’s backing a bill that would extend copyright to being infinitely lived. Our protagonist warns him that this would mean the end of the creative world: the regime checking all works against anything that had been created within the copyright period had already killed new creation, because everything builds on everything and just about nothing is entirely novel. Extending it to infinity would mean that nothing could be new and, worse, nobody rediscovering things anew would have that joy: they’d quickly be told that somebody else had had the idea 40 years ago and that maybe they’d heard a snippet of the tune when they were a kid. Never forgetting would mean never feeling the thrill of (re)discovery.

Now that short story is fiction from the early 80s. But the lawsuit by Larrikin Music from a few years ago was not. There, Larrikin had bought the rights to an old Aussie folk tune. Men at Work payed homage to that piece of Australiana in Land Down Under in an 11-note flute sequence. And they got sued, and lost. And, subsequently, the suicide of one of the band members was attributed in part to his dismay at having been thought a plagiarist.

The point of copyright, in the standard model, is to ensure that the creators of new things are able to earn a return from their investment. Using that standard, a reasonable copyright regime has to balance the costs imposed on creators from too strict a regime against the benefits creators get from stronger protection. At the same time, the public’s interest in having access to created works suggests an optimal amount of protection might be a bit lighter than that which would yield the most produced new works.

And we can draw a few implications from that standard model: the first of which is that it is never a good idea to extend the duration of protection for works that have already been created, contra the perennial extensions of the duration of copyright.

Do we know whether current copyright regimes strike the right balance? Work by Paul Heald suggests that things are too strict. He looked through data on new editions of existing books and found huge increases in the number of editions of old works when those works come out of copyright. Books have a short half-life: most editions and sales happen in their first years, then they die off for a long time, then come back to life when new people can do new things with them. What does this mean in practice? There are tons of books that could be out in kindle e-book format if they hadn’t been orphaned. NYT best-sellers from 1913-1922 are hugely available as e-books: 94% of them were in print as of 2014. But only 27% of the bestsellers from 1923-1932 are out in e-book format and only 28% of that era’s best-sellers aren’t in any kind of print edition.

One estimate of the lost value caused by this was $740 million US; I think that’s a bit of a high-end estimate, but the losses are not small.

Turning to access to digital products in a digital world, we can start by looking at regional market segmentation.

The original basis for this made sense. Suppose that, once a work is created, making more DVDs is really cheap. But people in India will never pay as much for a DVD as will people in the US because of income differences. You might want to charge a lower price in India than in the US. But then you risk having those cheaper versions leak back into the US market. So what do you do? Use regional encoding.

The system then lets the movie’s producers earn more from each released movie, which lets them spend more on producing each movie, resulting in more and better movies. But, strangely, the NZ price of DVDs often winds up being rather higher than the comparable US price, even though NZ incomes are lower than US incomes.

And so, in practice, parallel importation winds up ensuring that the price difference between US-issued and NZ-issued DVDs doesn’t get too large. It puts bounds on how big those price differences can be. And NZ legislators have recognised that it’s in Kiwis’ interest that they have access to those products: that’s why parallel importation is allowed and why there is specific protection for using region-free DVD players and the like.

While breaking digital locks on things can be illegal in other contexts, breaking one that was set up solely to maintain geographical restrictions is allowed.

The same regional segmentation happens with streaming services. Companies like Netflix, or Lightbox, buy the rights to stream content to particular markets. When I stream from Netflix NZ, I can access the films for which they bought the NZ streaming rights. But that’s only a small subset of the available content: about a third.

Now, not all of this is due to licensing, but we’ll come to the other reason later. Let’s stick with geoblocking for now.

If I use a VPN to pretend that I’m in the US, or the UK, I get access to the Netflix content licensed for streaming to those countries. It breaches the terms of the license I have purchased from Netflix: Netflix doesn’t allow you to do this, and can penalise you if they catch you at it. If you read your terms and conditions, they can cancel your account.

But that’s a civil matter between you and your provider in exactly the same way as parallel importing DVDs. A store shipping DVDs to New Zealand from the US may be breaching the terms of its licensing arrangement with its distributor. And so too is a Hong Kong wholesaler who sells a container load of branded product for parallel importation to New Zealand where the brand has an exclusive distribution arrangement with a local retailer.

New Zealand law has been pretty specific in allowing parallel importation, recognising the benefits to competition in small markets by allowing this kind of thing, or at least not making it criminal or forbidden. If a brand wants to get in a fight with its Hong Kong distributor over where it’s supposed to be selling its product, that’s up to the brand. But as far as the NZ government is concerned, it’s not NZ’s problem.

Netflix now is starting to check a little more closely into VPN use – as its content providers would likely be demanding. It is totally fair for them to do this, just as it would be fair for, say, Nike to stop shipping to a distributor who they found was breaking some of their regional licensing arrangements, if they have them. What wouldn’t be fair would be for the NZ government to decide that they should be involved in this policing process. Again, the parallel is to parallel importation.

Under the TPP, things that were legal in geounblocking prior to the TPP remain legal after the TPP. MFAIT’s summary document when the text was released was pretty clear on this point: parallel importation is not threatened, and existing protections for breaking regional locks on DVDs is unaffected. What is less clear is the legal standing of geounblocking things like Netflix for streaming. Had the ISP offering global mode gone through to court, we might have had some clarity here.

The other thing holding back access to digital content, or at least legitimate digital content, is the NZ censor’s office. Every DVD sold and every movie streamed to a NZ customer must have a NZ censor’s rating on it. When Netflix NZ opened, the Censor’s Office made a big deal about how they were able to quickly produce ratings and how they worked with the Film and Video Labelling Body to get things done. By their report, the total regulatory cost to Netflix was less than $150,000.

But when you think about it, that’s over a thousand customer-years of subscriptions if each customer generates $120/year in revenues for Netflix. And OFLC cites classification costs of over a thousand dollars per title (lots of titles offered by Netflix would already have been classified).

There are tons of strange foreign small market films on Netflix that are available in the US that aren’t available here. For a lot of them, the issue seems pretty unlikely to be that Sky or anybody else has locked up the rights for NZ distribution. There’s a long tail of films where total viewership from a streaming provider won’t give them more than a thousand bucks in extra expected subscriptions, and where things are being locked up instead because you’d have to get a NZ certification on anything that’s been given an R-rating in Australia or the UK. Why do we really need this? Can a small NZ-based startup really bear these kinds of costs?

We can note difference to broadcast regulations where industry self-certifies the ratings and has incentive not to annoy parents by giving porn a G rating. Can’t we trust streaming providers to be similarly diligent? While foreign ratings differ from NZ ones, streaming providers could easily link to a document explaining the differences in ratings and what a US R rating means as compared to a NZ rating. We really seem to simply be imposing stupid unnecessary ridiculous costs on Kiwis here.

And, for parents most concerned about things, they can subscribe to Family First’s streaming offerings that have loads of ratings and parent explanations and a very filtered experience.

Hopefully the coming copyright review will bring some sanity, albeit constrained by that which we’re allowed to do under the new trade agreement.

Hit the copyright tag over at Offsetting Behaviour for more….


About Eric Crampton (88 Articles)
I'm Head of Research with the New Zealand Initiative.

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