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Is The EU Copyright Directive A Bad Idea?

Michael O'Dwyer| November 12 2018

| IT insights, Compliance, News


The EU Copyright Directive has been labeled a bad deal for all parties and threatens the Internet as we know it. If it's approved, how are businesses going to respond?

We’re all familiar with basic copyright terms such as the Berne Convention, duration of copyright (typically for the life of the creator plus 25 or 50 years depending on jurisdiction) and the fact that a creator’s work is automatically copyrighted on creation. We’re also aware that it is supposed to cover the use of works on the internet.

Unfortunately, piracy and unauthorized reproduction remains a problem for many creative activities in film, TV, software, music and photography. In addition, creators are not receiving due financial rewards for their presence online.

The EU Copyright Directive (aka Copyright in the Digital Single Market) is supposed to improve online copyright enforcement and rightholder payment rates. It is currently in a proposal stage with September amendments pending review. After negotiations between the Parliament, the Council of the European Union, and the European Commission and a parliamentary vote, it will become law in early 2019 if approved. Like the GDPR, it will have an impact on all sites that cite or include European creators or publishers, including those outside the EU.

So, what’s the issue? Creators are not getting enough money…

When I first considered this topic, I was swayed by the media hype. Headlines claimed this new legislation will break the internet, or hinted at the demise of smaller publishers, death of the meme and of course that the tech giants are essentially making sweet love to all content creators by denying them ethical rates for the use of their work. The truth, as always, is not black or white but a shade of grey.

Let’s look at an overview of the directive, and see just how much creators/rightholders benefit from this proposed law.

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The EU Copyright Directive 101

The current proposed text with amendments is not a riveting read, is 64 pages long with 86 amendments referring to recitals (apparently this is legalese for ‘whereas’ clauses) and articles (which I understand as rules). Rather than list all the articles, let’s look at the ones that have generated the most debate in the media, namely articles 11, 13 and 14-16 (the ‘transparency triangle’).

  1. Article 11–Referred to as the ‘link tax’, this is intended to give publishers and newspapers a way to make money when companies such as Google link to their work, with paid licenses necessary to do so without penalty. Individuals and companies with less than 50 employees are currently exempt.
  2. Article 13–Referred to as the ‘upload filter’, this rule makes video/audio sharing and social media platforms such as YouTube, Facebook and I’m assuming even link aggregators such as StumbleUpon, Digg etc. responsible for ensuring users do not post copyrighted material. How is this achieved… who knows?
  3. Article 14-16–Rightholders retain the right to receive notification of any exploitation of their work at least once every year. Again, exceptions apply but I’m not going down that rabbit hole.

Obviously, based on the above rules, there is a case for both sides. Why shouldn’t creators get paid for use of their work? On the other hand, why should companies pay for the privilege of directing traffic to publishers?

For demonstration purposes, let’s discuss a few industries, namely media (TV and film), music, and publishing, as I know little of the specific online problems facing painters and other creative professionals.

Big Business Is The Problem?

One of the arguments put forward by advocates of the directive is that big tech companies attract the lion’s share of global online advertising revenue but fail to share the revenue ethically with rightholders. This is certainly true as Google and Facebook accounted for 61% of global online advertising revenue in 2017.

In the 2017 e-book publishing world, Amazon was the dominant player (45% market share) and it continues to be the case as indie publishing grows. In traditional publishing, five companies dominate, Penguin Random House, Hachette, HarperCollins, Simon & Schuster and Macmillan are responsible for 60% of English-language books. For this Big 5, e-book sales are about 20% of revenue.

In music in 2017, large companies dominated once again, with the top three responsible for half of the global music publishing market. The number one spot went to Universal Music Group (22.47%).

The film industry shows a similar trend with the top three responsible for more than half of box-office earning. Ditto for the TV industry, which is dominated by four companies.

Clearly, the EU directive will benefit big business for the most part, when each industry is dominated by a few companies who take the lion’s share of revenue.

As for the tech companies in question, they are advertising platforms and they in their turn have expanded (with vast data centers and large numbers of employees) to become desired venues for those seeking new clients. They leverage user data and visitors to promote their clients according to their respective business models.

However, all of this is Big Picture, what about the content creators. Is the online world so hard on them? Is the traditional offline model much better?

Ebook Creators And Online Royalties

As a content creator and journalist, I know only too well that there are plenty out there that are willing to take advantage, seeking rates that would make flipping burgers a better career choice. If I write a book in the future, would I go to a traditional publisher? Amazon? A vanity press?  

It’s worth knowing what’s ahead of you, if you are considering publishing a book. Let’s say I publish a book on Amazon.com and I obtain the 70% of revenue of a book priced at $10. Is the seven dollars mine? – nope – Uncle Sam takes 30% (even if you are outside the U.S.). If your country does not have a tax treaty with the U.S. your taxman will take an additional cut of the proceeds (15-30% depending on jurisdiction), leaving a maximum amount of $4.90 (less additional tax where required) out of the original sale price of $10. Admittedly $10 is high for an ebook but you get the idea, approximately half of the sale price is yours, assuming the initial deal is 70% of the sale price. If you start at 35%, other calculations are necessary.

Now consider traditional publishing. Forget about approaching any of the big publishers yourself. You will need an agent to do so on your behalf, who commands 15% of your future earnings. If fortunate enough to be offered a contract, you will lose control of your work and receive 5-15% of the sale price on printed books and a measly 10-25% on ebooks and audiobooks (considering that printing, delivery etc. are unnecessary). Then take away your agent’s commission and tax deductions. If you are fortunate enough to get an advance, then remember that this advance is based on future royalties. You will not receive anything further until your pending royalties exceed the advance amount. In other words, publishers take little risk. To add insult to injury, expect to market your own book as well. After all you would not expect a minimum of 75% of the profit to include marketing? Come on, the poor publishers must make money too.

I’m of the opinion that independent or even self-publishing is a better option and market figures seem to bear this out, with low-cost ebooks taking market share from the big publishers each year.

Music and Media

Other industries behave in a similar manner towards creators. In traditional publishing, it is only when you are successful that you can obtain higher rates or indeed sell directly to a waiting audience.

The music business (and indeed journalism) is a little more organized and for the most there are industry organizations to collect royalties. Rates vary widely according to jurisdiction.

Record labels pay two royalties one to artists (10-15% per CD after packaging costs are removed) Composers and publishers receive 30% or more. Royalties are also available for online streaming, radio plays, live performances and merchandising. Any royalties received initially will be used to repay the record label for studio time when recording the song or album.

It is fair to say that these industries take little risk and make sure that they are paid back for any expense incurred. Amazingly, small studios can record an album for around $15,000 but larger labels charge the artist around $100,000. Better equipment, famous musicians and backing singers?

Will the royalty rates for content creators increase if the EU directive is passed? I doubt it. The smallest piece of the pie always goes to the creators.

Clearly, large companies are leveraging creative talent to generate large profits, with a label’s revenue surpassing the artist’s by a large amount.

You will notice that the previous two paragraphs have no links to validate statistics or rates. Is this the future of publishing, when companies with more than 50 employees (and Ipswitch is certainly one of those) are reluctant to cite sources in case costs are incurred? Do you like this approach? Neither do I.

We Are All To Blame.

Google, YouTube and Facebook are the top three most visited sites in the world and we gave them their power by adding our sites to search engines and using social media to generate traffic to our own sites rather than bringing traffic directly to them ourselves. Other popular sites… ditto. We made them popular and any free service makes its money by advertising. As they own and manage the platforms, they are free to dictate terms and if the EU Copyright Directive becomes law, expect simple content filtering to take place, blocking all links and reference to European sites. Alternatively, perhaps these platforms will be willing to share some of their revenue.

Let the big music, TV and movie production companies manage their own marketing on their own sites if they cannot see the traffic benefits of the larger platforms. Forcing companies to manage some sort of Content ID system is not feasible when even YouTube cannot do it properly, even after investing some $60 million. How are companies with 50+ employees supposed to handle it?

As for monitoring user generated content on a platform like Facebook – impossible. I say ban it all and limit all posts to text only – no links, no photos and certainly no videos. Chat groups served us well in the 90s, they can do so again.

As for level playing fields, consider them a long-lost fantasy. As soon as AdWords came along, where you can pay to increase search engine rankings for specific keywords, the fairness of a Google search was called into question. AdSense is the poor cousin of this, allowing sites to receive money from Google if ads are clicked or in some cases purchases are made.

In conclusion, monetization of everything (and without risk or expense) is the trend and I hate it. I can honestly say that I rarely click on ads so no-one is making money from my online activities. I have several adblockers installed and Ghostery allows me to see and block whoever is attempting to harvest my browsing behavior. I regularly change VPN servers to skew targeted advertising as well.

It’s amazing to me that some industries can claim unfairness and end up introducing legislation to force compliance when the core issue is that all of these are business decisions. They claim to be championing the rights of content creators, who only receive a small cut of the revenue. Shouldn’t the copyright holders enforce copyright and be responsible for the corresponding expense? This legislation, if passed, will not benefit creators, publishers or businesses, apart from the big players. The rest of us will just avoid citing European sources.

In fact, I believe the business world should hit back, where possible. For example, any European news and publishing organizations that embraces the directive should in turn be targeted by companies in all sectors. Let’s say every Fortune 1000 company sent out a press release informing offending European news publishers that they are prohibited from mentioning their companies or activities in future stories, in any section of the paper or indeed online.

OR, we could just continue as we are, with global users sending traffic to websites from advertising platforms such as Facebook and YouTube. Sure, you can negotiate rates for views on YouTube (like radio plays perhaps rather than only when an intrusive ad is clicked) but come on, a link tax for companies with more than 50 employees. It’s not as if a link with a preview infringes copyright (unless the link is to an actual copyright infringement).

It’d be funny if it wasn’t a threat to freedom of speech online. This directive is nothing but a way to increase business costs globally, costs that only large enterprises can afford. What do you think? Will your company play ball or simply avoid European sources?

Topics: IT insights, Compliance, News

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An Irishman based in Hong Kong, Michael O’Dwyer is a business & technology journalist, independent consultant and writer who specializes in writing for enterprise, small business and IT audiences. With 20+ years of experience in everything from IT and electronic component-level failure analysis to process improvement and supply chains (and an in-depth knowledge of Klingon,) Michael is a sought-after writer whose quality sources, deep research and quirky sense of humor ensures he’s welcome in high-profile publications such as The Street and Fortune 100 IT portals.

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