James Murdoch Lectures On Copyright, But Still Seems Confused

Copyright

from the copyright-is-designed-to-protect-james-murdoch dept

A few months back, we noted that James Murdoch had a rather funny view of copyright — and, by funny, we meant “wrong.” He pulled out the common refrain of someone who doesn’t actually understand the issue at all, claiming that infringement is no different than stealing a physical good, and that copyright should be treated exactly like owning a house. I’m not sure how such a total misunderstanding of copyright law resulted in him being asked to address University College London’s new Centre for Digital Humanities on the anniversary of the Statute of Anne (the first copyright law), but apparently it did, as many, many of you sent in.

Paid Content has the full transcript, and I’ll say that while he still gets a lot wrong, it becomes clear that he’s at least aware of views on the other side — though, he takes many of those views out of context or totally misrepresents them to knock down strawmen. Apparently, he’s unfamiliar with the idea of (a) properly applying liability, (b) due process, or (c) privacy. But, you know… maybe he’ll learn those next. There are some serious problems throughout his speech, most of which have to do with his confusion on basic economics, his insistence that price and value are the same thing and that there’s such a thing as a “fair price.”

Let’s highlight some key points:

I make these remarks at a time of great debate about the future of journalism. Many voices predict its demise as it goes through a transition from being a medium that is predominantly physical to one that is predominantly digital. It is in this context of real consequence that The Times and The Sunday Times will soon become among the first papers in the world to assert a fair value for their online editions.

I love the wording here: “assert a fair value.” As if implying that everyone else in the business is not asserting a fair value. But, again, we can see what the market thinks of his notion of “fair value,” but I warn him that the market tends to price things not on “fair value” (a made up concept) but on supply and demand. I’d like to see how his notion of “fair value” stands up to the notion of “widespread free competition.”

I want also to try to put into context the prevailing consensus about the digital world and the way in which it works — the consensus that the free flow of information not only can, but must, literally, be free.

This is a strawman. Cory Doctorow recently wrote up a wonderful piece about how the only people who seem to quote, “information wants to be free” are those setting up a strawman they’re trying to knock down. Even the original quote, from Stewart Brand, wasn’t just “information wants to be free.” The context was much more involved and explained why information is both free and has tremendous value. So Murdoch is setting up a total strawman to knock down, because most people aren’t claiming “information wants to be free.” Information doesn’t want anything. What we’re saying is that the market has already priced certain kinds of information… and they’re pricing it based on supply and demand. But, that’s harder to counter, so Murdoch has to pretend there are people out there insisting that information “wants” to be free.

I want to inquire — as dispassionately and factually as I can — into what drives that consensus … because I believe that the digital consensus is flawed. Although expressed in terms of high principle and morality, it is more revealing to study the economics of the thing — to find out what’s really going on.

There is no consensus. You took a quote out of context and assigned it to a group of people who didn’t make it. That you find it flawed is fine. Because it is. But you’re not arguing the point that people are actually making, you’re arguing against a strawman.

But, yes, it is much more revealing to study the economics of thing. Let’s look at the economics of supply and demand, and what happens in a market where supply is infinite, competition is much higher than before — and, most importantly, distribution, promotion and content creation costs plummet. Or are those not the economics you wish to discuss?

I want to show you that restoring the balance between creators and the means of distribution would be a huge spur to creative growth … and that an approach based on experience — on a proven approach to protecting creative vision — is the key to a thriving creative sector and a rich and continuing tradition of these digital humanities.

Forgive me. “Restore” the balance to copyright? In the last 300 years, copyright has expanded in one direction and one direction only: towards greater and greater and greater levels of protectionism for copyright holders, and against the public and the public domain. And, when I read “an approach based on experience,” I hear “please set up barriers to block out competition so I can have my old business model back.” Murdoch is basically saying, “stomp out innovation, ’cause I don’t know how to deal with it.”

First, it has a firm belief that the old rules relating to physical things like books and music are simply irrelevant to the digital world, so there is no point in looking back.

No. No one has said the old rules relating to physical things are “irrelevant.” In fact, we’re arguing that they’re very, very relevant. The issue is that the “rules” include supply and demand, and things like marginal cost. You’re the one trying to pretend those old rules shouldn’t apply in the digital world.

As many people put it, we have a new paradigm: we all own everything, so no-one owns anything. The internet — and everything on it, it is said — wants to be free.

Please point to a single person who has made this “we all own everything, so no-one owns anything” argument. We’ll be waiting. This is a false call to smear people who actually understand the economics of digital goods as “socialists.” But it’s wrong. It’s not about owning everything or that no one owns anything. In fact, quite the opposite. It’s about noting that when supply is abundant, or infinite, you can make more of anything at no cost, and thus individuals actually can own more.

Second, digital networks are depicted as forces of nature. The idea that anyone might try to shape the future, to influence events, to innovate with an outcome, is seen as foolish — or indeed out-of-touch.

No, not digital networks. But basic economics.

You can see why this vision appeals. It feels radical and new.

Well, since you’re describing a vision that almost no one subscribes to, I don’t see it actually appealing to people. But if you’re talking about those who discuss the economics of information, the reason it appeals to us has nothing to do with it being “radical and new.” It appeals to us because it’s right.

Yet there are some immediate concerns. We cannot just assume that greater connectivity is a force for good in and of itself. It might be easy to assert that if everyone, everywhere, can access anything with a browser and a broadband connection, then our society — all societies — are going to be wiser, better informed and more democratic.

Another strawman, and notice how he shifts the topic a little. There are two separate arguments here: one about the economics of content, and the other about the impact of the free flow of information on democracy. Those are two different things. There certainly is some overlap in people who talk about both of those things, but many people feel strongly about one, but not the other. But, if you’re going to make up people to tear down, you might as well lump different groups together and assume they’re all the same.

We certainly have easier, faster, cheaper ways to share with each other. But we have to face the fact that a huge amount of the capacity now available is used to distribute things without the permission of their creators, let alone any payment to them. In the first quarter of this year alone, there were 190 million downloads of Hollywood content in just 20 countries. You can add to that substantial illegal web streaming, where viewers watch without downloading. This is not the stuff of a few students outwitting the system. It is deliberate and on an industrial scale.

Yes, people share lots of unauthorized files on the internet. And so?

I am struck by the number of commentators who switch seamlessly from one strongly moral argument in favour of free content as being good for society: to another which seems to me to be completely immoral: saying that we can’t stop people distributing content without permission, so we may as well give everyone the right to do so.

Who, exactly, is making that argument? According to Murdoch, it’s basically everyone in every other part of the industry. Google and the Consumer Electronics Association are really the instigators. He doesn’t name them by name, but he makes it pretty clear. But, then, of course there are also libraries (libraries!) seeking to undermine his business. And, of course, the government. That darn BBC. It’s too good, apparently.

Take the search business. It depends on an ability to index and search other people’s material, and present the results of those searches to its users surrounded by advertising. Search is a highly profitable business, because the raw material presented to customers can be indexed at essentially zero incremental cost. Therefore, information that might only be searched or indexed with a fair price paid to the producer undermines that model.

What is this “fair price” you speak of? A fair price to point people to your business? Do you charge people to tell their friends where your store is? Of course not. You want people pointing your business out to others. It’s called free advertising, and that’s what search engines provide. It’s why there’s an entire industry called “search engine optimization.”

What is often absent from the public’s understanding and commentators’ calculation, is that without investment in original content in the first place, there will be little to index, search, and aggregate.

And… here we go with yet another strawman. No one denies that investment in original content is needed. What Murdoch is ignoring — either on purpose or through ignorance — is that we believe there are many other business models, often better business models, that don’t require locking stuff down and charging people to advertise your business. This is a huge myth that folks like Murdoch like to claim: without stronger copyright laws there are no business models. Perhaps Murdoch can’t think of those business models, but plenty of others seem to have no problem.

I’m not going to quote the next bit, but he goes on to blame pretty much every other industry, and then actually does accurately set up what my response would be:

‘So what?’ you might say. That’s competition. And in large part I would agree with you.

Except, it turns out that “large part” of agreement, isn’t so large, because he immediately qualifies it down to nothing.

But I would urge you to bear two things in mind.

First, cultural content has a social importance different from, say, the automobile or energy markets, and beyond its economic contribution — because it is the sphere of ideas, imagination, accountability and communication.

You see, says young Murdoch, my industry is more special than any of those other industries. My industry deserves protectionist policies that shrink the market and allow me to thrive with less competition.

Yet journalism — print and digital — faces trouble. In the last year in the U.S. alone, 109 newspapers shut down or stopped publishing a print edition, leaving many cities without a single paper.

The reasons are not hard to understand. Search companies and aggregators skim content from a thousand sources, sell it to clients, scoop up advertising revenues and put little or nothing back into professional newsgathering.

This is so wrong it’s laughable. Search engines and aggregators advertise your content and send you more traffic for free. They’re not taking away your ad revenue. At all.

Second, many of the pressures on content — journalism included — are caused by governments. Frankly, states provide a level of subsidised news that is: incredibly high; comprehensive; and well funded.

Okay, so let me get this straight. We’re discussing the decline of the journalism industry and your first two culprits are Google and the BBC? You leave out things like the fact that newspapers survived by basically having near-monopolies for many years, and now they have competition from many more sources? You leave out the fact that newspapers never made money from subscription fees, but always from advertising, and the advertising market has become more diverse and more difficult for newspapers to master? You leave out the fact that the newspapers took on ridiculous debt loads because of bad management decisions, and most of the newspapers that have shut down did so due to inability to pay back debt? I think your list needs to be restructured.

He then goes on to appeal to the history of The Statute of Anne, not recognizing that it was a protectionist policy for printers, not unlike protectionist policies for other monopolies in the United Kingdom. Yet, less than a century later, Adam Smith explained why such protectionism actually shrunk markets, and we started to move away from gov’t granted monopolies towards a free market. Not surprisingly, Murdoch leaves out that part of the history.

He moves on to talk about the movie business, with this nugget:

The workprint of one film, Wolverine, was stolen and posted on the internet and then downloaded 14 million times prior to theatrical release. It has now been downloaded more than 25 million times — with five European countries accounting for much of the total. This shows that great damage can be done at lightning speed.

Wait, what damage? Wolverine made a ton of money and a comparison with other movies that had a lot of similarities and had much better reviews showed that Wolverine actually made a lot more money than those other, similar films. In other words, there’s no evidence, whatsoever, that there was any damage at all. If anything, it suggests (though, does not prove) that the massive press coverage about the leak may have made more people interested in the movie.

The principles set out in the Statute of Anne represented a major step forward in the free flow of ideas.

It recognised that piracy would have led to a long-term decline in the distribution of books.

Except that this is wrong. As many studies have shown, as “piracy” has increased in both the music and movie business, so has output of music and movies. As for book piracy, the common example is Charles Dickens’ complaints about how US law actually ignored UK copyrights for many years. But it actually boosted Dickens’ reputation in America that magazines published his works, and his books and his own public lecture tours did quite well in the US. And, even though they didn’t need to, US publishers paid him royalties, because there were benefits to doing so. When Dickens came to the US, despite his complaints about “piracy” of his books, he did hundreds of paid readings that brought in a lot of money. Not bad for someone who’s career was being “destroyed.” So why is Murdoch making assertions not supported by the facts? Are the facts too inconvenient?

This is a significant sector. In 2008 it represented some 7% of the total wealth created annually in the European Union — some £743.38 (£743.38 (£743.38 (€860))) billion — and provided some 14 million people with jobs. Yet billions annually are lost to piracy and a cumulative total not far short of 200,000 jobs have already gone.

These numbers are made up. They’re from the same bogus numbers that assume that any business that touches on copyright (furniture? copyright!) only exists because of copyright.

Do not be misled by claims of high principle in this debate. When someone tells you content wants to be free, what you should hear is ‘I want your content for free’ — and that is not the same thing at all.

Sure, if you want to close off all logic and reason. Perhaps, first, after finding these mythical beasts who shout “all content wants to be free,” you should study the basic economics of information, and look for smarter business models.

We must rediscover something that should be very obvious: the importance of placing a proper value on creative endeavour.

Aha. No longer “fair value,” but “proper value.” But, here’s the thing: value is not the same thing as price. If something is valuable, people will buy it only if the price is lower than that value. But, of course, he’s not really talking about value. He’s talking about price, and making sure that the market doesn’t set the price. What “the importance of placing a proper value on creative endeavour” really means is “the government needs to help me set a higher price than the market would.” It’s a call for protectionism.

Just look at the newspaper business. For years, many newspapers have put no value at all on the work they place online.

Wrong. They put no price on it. I imagine they value it quite a lot. Of course, the same is true of most newspapers. Most newspapers, even the ones in Murdoch’s own stable, charge less for a subscription than the printing and delivery costs. By Murdoch’s own claim, he does not value his own newspapers. But, of course, that’s wrong, and it’s disingenuous as well. We all know (though Murdoch totally ignores) that the reason newspapers make money is because of advertising. The customers are the advertisers, and I imagine the newspapers have put quite a lot of value on that ad space.

In contrast, at News International here in the UK, we are proud of the quality of our journalism and the contribution we make to life around the country, and indeed for our readers around the world.

How obnoxious. Because others have a better business model than you, it means they don’t care about the quality of their journalism? Does he really think this convinces anyone?

Shouldn’t we welcome a revolution in journalism that answers the needs of readers — and provides the means for sustained further investment? Without some simple common sense — like this — the alternative we face is a grim one: to have news that is produced only by the wealthy, the amateur, or the government.

Yes, of course, we should welcome a revolution that answers the needs of readers. But you are suggesting the only way to do that is with a paywall. And when your paywall fails, then where will you be? And, must I point out the irony of James Murdoch, one of the wealthiest people around, who helps run a company that contains many properties for generating amateur content, and is giving a talk in which he’s asking for more government protection, complaining that if he doesn’t get it, journalism will only come from the wealthy, the amateur or the government? And that he makes that claim with not a shred of evidence?

Asserting a fair value for digital journalism is a starting point. I don’t think we will be alone in taking this kind of action. And although these steps have provoked some alarmist comment, no-one who really cares about the humanities of tomorrow should be either shocked or affronted by what we are doing.

Ah, now we’re back to “fair value” rather than “proper value.” And, no, you won’t be alone. But, the thing is, while others may follow you down that road, most won’t. And so you’ll have free competition, providing content equally good to that for which you’re trying to charge. How is that going to work out? I’m not “alarmed” at your company making a move destined to fail. I’m just wondering how you can’t see what’s going to happen.

Can we agree that preserving and rewarding creativity is in the long-term interest of our society?

No one would disagree with that. They only disagree with the method. Relying on gov’t granted monopolies and bad business models is the opposite of preserving and rewarding creativity.

This problem will not be solved by the creative sector alone. Governments should enforce basic property rights — even in this digital environment. Some have started. In some quarters this has caused alarm. But what is really alarming is that it is controversial at all to shut down vast pirate sites or disconnect repeat offenders who have no regard for creators’ rights.

What is alarming is the lack of due process. What is alarming is the lack of privacy rights. What is alarming is the disproportionate response to an infraction that you can’t even prove cost you any money. What is alarming is your belief that the internet is just for your business. What is alarming is your unwillingness to adapt to a changing market. What is alarming is your calling to the government to protect your business model. All of that is quite alarming. That people are worried about these things? No, that’s not alarming.

According to a detailed study by Tera Consultants, if we continue down the path we’re on, piracy could inflict a cumulative 1.2 million job losses in the European Union by 2015.

No, not a detailed study at all. The “study” by Tera Consultants was paid for by the industries looking to use it to support their demands for greater gov’t protectionism of their business and was full of easily debunked false assumptions — such as the claim that there is a correlation between internet traffic and lost jobs. Nowhere does it count the jobs aided by cheaper creation, distribution and promotion.

Is it, moreover, unreasonable to suggest that companies that make a living out of indexing and sharing the creativity of others might make a fair contribution to those who create the material they need for their businesses?

Yes. It’s not just unreasonable, but ridiculous to suggest that companies that give you free advertising should have to pay you to do that. These companies do not make a living from indexing and sharing. They make a living by providing a useful service that you failed to offer yourself… and they do so by promoting your work. That you fail to use that to your advantage and then demand they just give you money speaks to your own failures in business.

Should it be controversial to suggest that public bodies are prevented from endlessly extending their remits, profiting from work they do not create, or dampening innovation and investment?

Should it be controversial to suggest that private bodies are prevented from endlessly extending copyright, profiting from work they do not create, dampening innovation and investment in new works?

Oh, and one final point. Near the beginning of the talk, he quotes Bilbo Baggins. I’m curious, did he pay for the rights to do so? Did he pay a fair price?

Filed Under: copyright, james murdoch