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An epidemic is haunting our creative economy: an online epidemic of theft-based businesses. It is an epidemic that, in many ways, both undermines our creative economy and impoverishes our culture. The goal of this paper is to explore how industry can help lay the groundwork to confront this epidemic.
This paper begins by reviewing recent data on the Internet’s impact, both positive and negative, on artists, performers, and other creators. It then considers the key business models of distributors of stolen online content and examines how these illegal distributors often take advantage of legitimate intermediary services such as search engines, online advertising networks, and payment processors to “profit from free”–that is, to make money from stolen works. The paper then examines both law- based and market-led efforts to combat online infringement and concludes with a list of principles intended to help advance consensus-based, industry-led efforts to eradicate online theft. This analysis leads to three core conclusions:
- Effective action requires collaboration. Online intermediaries such as advertising networks, payment processors, search engines and social networks play a valuable role in driving innovation and commerce on the Internet, and they directly benefit from the broad availability of high- quality, legal online content. At the same time, many infringing sites rely on these same services to sustain their illegal operations. Because content theft imposes tremendous harms on the economy and society, content owners and online intermediaries have a shared long-term interest in working collaboratively to combat online piracy.
- The law is not enough. While existing laws provide a solid baseline for allocating the rights and responsibilities of content owners and intermediaries in the online environment, they alone have not proven sufficient to substantially curtail online infringement. Given the rapid pace of technological change and the important commercial and social interests impacted by the flow of data across networks, crafting sufficiently flexible but effective changes to laws has proven increasingly difficult. Far preferable at this stage are voluntary mechanisms and industry best practices designed to discourage online piracy.
- Competition matters. The fact that a single company, Google, dominates several key markets that are used to facilitate infringements – including online search, video, and advertising – impedes effective voluntary mechanisms. This is a significant problem because Google not only faces an absence of market pressure to change its ways, but may actually have incentives to perpetuate the status quo. Smaller competitors cannot shoulder additional burdens if Google refuses to take them on, and the lack of competition may also thwart the emergence of innovative new technologies, practices, or business models that could be more effective in combatting online piracy.
Recent market-led initiatives that bring together creators and online intermediaries are beginning to show promise in addressing the scourge of online theft. Although it is too early to know which of these will succeed, it is not too soon to draw lessons from them. This paper proposes the following principles as guideposts for further work on developing effective market-led responses to online theft:
- Copyright owners and online intermediaries have a shared, long-term interest in promoting consumer access to legitimate sources of content and combating online theft.
- Solutions should be implemented in ways that are consistent with applicable law and respect fair use, privacy, robust competition, free expression, and due process.
- Copyright owners and online intermediaries should seek solutions that facilitate transparency and enable meaningful, cost-effective action.
- Graduated responses can increase effectiveness while preserving consumer interests.
- Market leaders need to lead the charge.