Two Paths for Copyright Law

The picture Rasmus paints for the future of copyright seems grim. He’s right that technological change will make it increasingly difficult for the law to prevent individuals from sharing copyrighted materials from the privacy of their homes. Whether we like it or not, copyright law will have to adjust to this new technological reality. But it is important not to overstate the magnitude of the change. It is often supposed that giving individuals more freedom to share copyrighted materials with one another will amount to the abolition of copyright. But this is far from true.

The starkness with which the copyright debate is often framed reflects a misunderstanding of the function copyright served in the 20th century. Copyright is commonly conceived as a system of restrictions on the copying of creative works. But until recently, it would have been more accurate to describe copyright as governing the commercial exploitation of creative works. From this perspective, the inevitable legalization of non-commercial file sharing looks less like a radical departure from copyright’s past, and more like an incremental adjustment to technological change. It will require the rejection of some misguided policy developments of the last decade, to be sure, but in a sense it will simply restore the common-sense principles of 20th-century copyright law.

Before World War II, only large, capital-intensive organizations could afford the technologies for efficient copying of creative works. The equipment needed to copy a book, album, or movie was generally too expensive for ordinary consumers. The second half of the 20th century saw the emergence of new technologies — photocopiers, tape recorders, and VCRs — that brought copying to the masses. But these technologies were still sufficiently limited and cumbersome that they did not pose a significant threat to the incumbent content industries. By the 1960s, you could photocopy a book for personal use, but doing so was a lot more work — and not significantly cheaper — than buying a freshly printed book.

Hence, until the final decade of the 20th century, the legality of non-commercial home copying was almost entirely an academic question. Mix tapes and libraries of recorded movies may have been technically illegal, but Hollywood and the major labels recognized that they weren’t a big enough threat to their bottom line to be worth suing customers over.

But as the 21st century dawned, technological progress brought this latent ambiguity in copyright law into stark relief. Peer-to-peer file sharing transformed non-commercial home copying from a minor nuisance to an existential threat to the recording industry. The major labels (with some help from Hollywood) persuaded Congress to criminalize non-commercial copyright infringement and give content industries unprecedented legal authority to regulate the design of media devices. They used lawsuits to shut down numerous peer-to-peer sites. And in 2003, the recording industry began filing lawsuits against individual music fans caught using peer-to-peer file sharing networks.

It hasn’t worked. New file-sharing technologies pop up faster than the labels can take them down. Recent legislation has stunted the development of new media technologies, and the recording industry has created a PR problems for itself by threatening 12-year-olds, grandmothers, and grieving family members. But file sharing continues virtually unchecked. As Rasmus points out, things are only going to get worse if we continue down the path advocated by the copyright lobby.

The copyright policies of the last decade have been based on the idea that copyright is about controlling unauthorized copying. An alternative is to treat copyright as a limitation on commercial exploitation of creative works. Under this option, individuals could make any non-commercial use they liked of copyrighted works, including sharing them with strangers on the Internet, without fear of legal consequences. Copyright law would focus on commercial entities, who are both easier to regulate and better equipped to deal with copyright law’s complexities.

I contend that this would represent only a modest change from the principles of 20th-century copyright law, but many people will nevertheless view it as radical. It is commonly supposed that the decriminalization of non-commercial file sharing will doom the major content industries and impoverish the thousands of authors, musicians, and programmers who currently make their living producing creative works. These fears are unfounded. Creative industries do depend on copyright protection, but what they need most is not a total ban on unauthorized copying, but protection from the commercial exploitation of their works by rivals. If firms are ensured a monopoly on commercial exploitation of their works, there are many ways they can profit from their creative efforts even if they are unable to stop file sharing among their customers.

Consider the music industry, which has been hardest hit by peer-to-peer file sharing. Rasmus has already mentioned the growing trend toward giving away music in order to sell more concert tickets and merchandise. This is a trend that would likely continue even in the unlikely event that illicit file-sharing were brought under control. Most musicians would rather be famous than rich, and many new acts will choose to give away their music as a way to build their fan bases. The most successful will then be able to make a living touring and selling merchandise. The rest will have to keep their day jobs. Given that few musicians have ever been able to quit their day jobs, things won’t look much different from the perspective of the average musician.

For their part, the labels are beginning to acknowledge the inevitability of file sharing among their customers. Last December, a site called Imeem announced that it had negotiated revenue-sharing deals with all four major record labels. Imeem allows users to upload their favorite songs and share them with their friends without paying a dime. Imeem displays ads on the site and shares revenues with record labels based on the popularity of their music. It is only a slight exaggeration to say that the Imeem deals amounted to the de facto legalization of online file sharing, provided that the labels get a cut of any associated revenues. It will take time before deals of this type become commonplace. But by allowing users to share their music without paying a dime, the industry has conceded the principle and is now only haggling over the price.

In the long run, the recording industry is likely to consist of a variety of free music-sharing sites that share advertising revenues with music publishers. Of course, some amount of illicit file sharing will continue to occur, but the market share of illicit file sharing services would plummet if they had real competition. Legitimate file-sharing sites will be able to raise the capital required to make their sites fast, comprehensive, and user-friendly. The music labels’ revenues are unlikely to rebound to their highs at the turn of the millennium, but there will continue to be profits to be earned from music publishing.

Space constraints prevent me from discussing other copyright-based industries in as much detail. Instead, allow me to offer a few guesses about how the legalization of non-commercial file sharing will affect the software, news, photography, and movie industries.

Many computer programmers do custom software development for business use, either as full-time employees or as consultants. Other programmers produce off-the-shelf business software such as Microsoft Office and Intuit’s Quickbooks. Still others produce software that is pre-loaded on computers or smart phones or embedded in everyday electronic devices. And a growing number produce web-based applications supported by subscriptions or advertising. None of these programmers would be seriously harmed by the legalization of non-commercial file sharing. As for the minority of the software industry that produces off-the-shelf software used primarily by consumers, it must be remembered that even software that is readily available online can still be sold at a profit. Red Hat, for example, has successfully sold copies of its Linux distribution in retail outlets, despite the fact that identical software can be downloaded online from Red Hat’s website. Evidently many consumers value the convenience, security, and technical support that comes with boxed software.

Newspapers and magazines are already transforming themselves into free, advertising-supported websites. The New York Times, for example, encourages its readers to email its articles to friends, print them out, and save them to their hard drives. File sharing poses no threat to them.

Likewise, the legalization of non-commercial file sharing would have little effect on photographers. Commercial publications would still be required to pay for the photographs they used. Photographers that cover events such as weddings can easily charge by the hour rather than by the photograph.

Finally, we come to Hollywood, which has been predicting its own demise at the hands of technological progress for a quarter century. Despite the proliferation of home video options and the growth of illicit file sharing, Americans spent a record $9.6 billion at the box office in 2007. Going to the movies is valued as a social experience as much as a form of entertainment, and it’s hard to imagine most Americans would stop going out to the movies simply because they could get the same movie on BitTorrent. In addition, much of Hollywood produces ad-supported television content, a business model that is already being adapted to the Internet.

Notice that while none of these business models require restrictions on non-commercial file sharing, most of them do depend on copyright. Bands’ ability to sell merchandise profitably depends on their ability to stop commercial knock-offs. Imeem would have had no incentive to share revenue with the major labels absent copyright law. And theaters would have little incentive to send their ticket proceeds to Hollywood without copyright law. The war on BitTorrent is probably hopeless, but copyright law remains eminently enforceable against commercial firms. That has always been where copyright mattered most, and it will continue to matter in the 21st century. The war on file sharing is hopeless, but that’s hardly a reason to abandon copyright law.

Timothy B. Lee is an adjunct scholar at the Cato Institute.

Also from This Issue

Lead Essay

  • The Future of Copyright by Rasmus Fleischer

    “How relevant is it to declare oneself to be ‘for’ or ‘against’ copyright? Neither the stabilization nor the abolition of the copyright system seems within reach. All we see is a seemingly endless assembly line of new extensions to the law being proposed and enacted,” writes Rasmus Fleischer in this month’s Cato Unbound lead essay. Meanwhile, digital copying technologies continue to grow exponentially in storage capacity, to the point where a handheld device may soon be able to carry all music ever recorded and released. This threatens to make a mockery of copyright law, and those who support the extensions of current regime are fighting back. “Every broken regulation brings a cry for at least one new regulation even more sweepingly worded than the last. Copyright law in the 21st century tends to be less concerned about concrete cases of infringement, and more about criminalizing entire technologies because of their potential uses,” writes Fleischer, who predicts “seriously chilling effects on innovation, as the legal status of new technologies will always be uncertain under ever more invasive rules.”

Response Essays

  • Nobody Puts Copyright in the Corner by Doug Lichtman

    Copyright law and copyright policy are both in the midst of enormous change. That doesn’t mean copyright is dying. The technologies available to facilitate the creation and distribution of creative work have themselves undergone enormous change. Copyright law is of course following suit, but as it does, we must make certain that those in the creative professions can still survive.

  • Towards a Copyriot Act — and Away from It, Again by Tom W. Bell

    Tom W. Bell raises a question: Copyright enforcement always has costs. How high are we willing to allow those costs to rise? How harsh, in other words, will we allow copyright law to become, as a counterweight to the ease with which people now can copy digital media? It is conceivable, he argues, that these costs might become too great, and that we will be forced to allow copyright to end, rather than bearing them.

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