Solving the market supply failure of lawful digital content

TASK FORCE ON COPYRIGHT IN THE EU DIGITAL SINGLE MARKET

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 2

Agenda

›EVIDENCE OF MARKET SUPPLY FAILURE

›PUBLIC POLICY ISSUES

›CONCLUSIONS

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 3

The PROSPECT OF DSM?

Source: http://www.guardian.co.uk/film/2010/feb/17/european-cinemas-boycott-alice-in-wonderland

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 4

The prospect of DSM?

Downloaded movie prices are about 30% to 50% higher than buying an actual DVD. That's if you can find the film online … more than half of the UK top 50 films of all time were NOT available as downloads

Source: http://www.guardian.co.uk/technology/2011/nov/22/movie-fans-piracy-online

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 5

SWEDEN: Spotify covers 85% of all released recorded music, Netflix (5%) and Via-PLAY (12%) of Film released a Year ago

Theatrical Release

DVD

Release

Theatrical Release

DVD

Release

Netflix NetflixVia Play Via Play

Source: http://blogg.kritiker.se/sa-bra-utbud-har-netflix-och-viaplay-svart-pa-vitt/

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 6

The market supply failure of lawful digital content

Source PWC Global Entertainment Outlook 2012

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 7

BASE: Core 7 markets (US, UK, Sweden, Germany, Spain, China and Taiwan) (Showing those who consider the service worth paying for)Source: Ericsson ConsumerLab TV Video Consumer trends 2011, 2012

Drivers: On-demand content

MORE LAWFUL DIGITAL CHOICE

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 8

Barriers: On-demand Content

Source: Ericsson ConsumerLab TV Video Consumer trends 2012

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 9

Displace “free” with lawful digital services – address the root cause of the problem!

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 10

economists have researched and most would agree*

“copyright has a moral hazard effect on incumbent firms by encouraging them to rely on enforcement of the law rather than adopt new technologies and business models to deal with new technologies"

* Source: Ruth Towse, “what we know, what we don’t know and what policy makers would like us to know about the economics of copyright” Review of Economic Research on Copyright Issues, 2011, vol. 8(2), pp.101-120.

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 11

Agenda

›EVIDENCE OF MARKET SUPPLY FAILURE

›PUBLIC POLICY ISSUES

›CONCLUSIONS

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 12

Content ACCESS BARRIERS – copyright a barrier

› Access barriers are barriers to unhindered consumption of content, the presence of which often results in the personal consumption needs of consumers being unmet.

› WIPO identified following access barriers:– Consumer barriers (affordability)

– Content exclusivity and limited competition

– Deliberate non-availability of content (windowing, territoriality)

–Policy and regulatory barriers:

› Content regulation

World Intellectual Property Organization, Twentieth Session, Geneva June 21 to 24 2011, or access: http://www.wipo.int/edocs/mdocs/copyright/en/sccr_20/sccr_20_2_rev.pdf

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 13

But there are other barriers too - Film State AID Rules – how about other Member States ?

Source: http://www.regeringen.se/content/1/c6/20/16/74/111b3287.pdf

› The theatrical release requirement removed in Swedish Film State Aid Funding Rules

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 14

Copyright: root causes to market supply failure

1. Deliberate limited availability of digital content, facilitated by copyright

2. Technology specificity of copyright

3. Unreasonable transaction costs

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 15

Increase Availability

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 16

FIRST RELEASE WINDOW MUST TOO GO DIGITAL

CLOSING THE ANALOGUE CULUTRAL EXCLUSION

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 17

DIMENSIONS OF availability

› Territoriality > Timed availability across nations

› Territoriality and place shifting > Follow me › Territoriality and long tail – regional/global

niches› Time and Timing > windowing and exclusive

licensing› Time, place and format shifting – at home and

on the go› Range of choice > depth and width of

catalogue› A’ la carte > Freedom to choose (my content)

and timing (my time) and screen (my screen)

HOW ABOUT AN “AWATAD” RIGHT ?

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 18

Technology Neutral Copyright

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 19

Any screen – remuneration in digital world

› Remuneration based on actual, identifiable consumption based on ;

– Download to Own– On-demand (time limited)– One time view

› Irrespective of technology– Transmission Technologies– Delivery Networks– Devices– Screens It is unreasonable to potentially triple

the cost of identical content, over multiple screens for same user

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 20

The Overlap between reproduction right and right of communication to public

› A technology specific approach inevitably leads to inconsistencies and uncertainties as formerly distinct classes of works, rights or media types converge.

› The consequences of fragmentation of rights are disturbing in the digital age, as digital technology produces a breakdown and conflation of technology specific works/rights that were meaningful in the analogue era.

› The transmission of audiovisual content on the Internet now involves making reproductions and communications to the public

› These rights are strictly separated in most contracting situations and, add to the complexity of the system which leads to a gridlock of control that hinders development and frustrates business.

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 21

Ultimately we end up with the question of exhaustion

› Exhaustion principle applying only to physical media – "original of a work or copies") incorporating the protected work. Recitals 28 and 29 further explain that "the first sale principle of the original of a work or copies thereof by the right-holder or with his consent in the Community, exhausts the right to control the release in the Community of a work incorporated in a tangible tool".

› This wording limits the principle of exhaustion to tangible goods only, excluding on-line services and intangible goods that incorporate digital content

› The paradox of “tangible” exhaustions ; in a legislative measure such as the EU INFOSOC DIRECTIVE which was devoted to the online context, the only purpose of market integration was confined to the offline context.*

* Source: EU Study, Legal Analysis of a Single Market for the Information Society October 2009

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 22

Agenda

›EVIDENCE OF MARKET SUPPLY FAILURE

›PUBLIC POLICY ISSUES

›CONCLUSIONS

DIGITAL CONTENT PROMOTION | Public | © Ericsson AB 2012 | 2012-11-12 | Page 23

We think: Key Copyright reform objectives

Promote open and competitive markets in licensed digital content that promote service innovation.

With the aim to increase availability of more legitimate digital content at prices which appeal to consumers.

Decrease technology specificity of copyright, e.g. exhaustion, exceptions, safe harbor*.

Increase efficiency in licensing by decreasing transaction costs e.g. administrative complexity.

* Not an issue in the EU and the US