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ONLINE COPYRIGHT INFRINGEMENT

FOXTEL RESPONSE TO AUSTRALIAN GOVERNMENT DISCUSSION PAPER

SEPTEMBER 2014

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INTRODUCTION 3

EXECUTIVE SUMMARY 4

SECTION 1: THE GROWING THREAT OF ONLINE COPYRIGHT INFRINGEMENT 6

The value of copyright industries to the Australian economy 6

The economic consequences of piracy and the cost to the Australian economy 7

Piracy affects subscription television jobs in Australia 8

Attitudes of Australians to piracy 11

Australia is a leading and growing territory in relation to online piracy 13

SECTION 2: INTERNATIONAL APPROACHES 17

Australia is falling behind other jurisdictions 17

Success of overseas models in changing behaviour 18

International graduated response schemes 18

United States 18

South Korea 20

New Zealand 20

International success with site blocking legislation 22

Injunctive relief in the United Kingdom 24

Injunctive relief in Ireland 26

SECTION 3: FOXTEL’S COMMERCIAL RESPONSE 27

An industry-wide response to availability 27

Availability of content on Foxtel 27

A dramatic change to Foxtel pricing 29

Legitimate content services in Australia 29

SECTION 4: RECOMMEDNED APPROACH TO SOLVING THE PROBLEM 31

ISPs have a role to play 31

Educating consumers 32

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SECTION 5: ISSUES AND QUESTIONS IN THE DISCUSSION PAPER 33

Proposal 1 – Extended authorisation liability 33

Foxtel’s concerns with Proposal 1 34

Foxtel’s suggested approach 34

Foxtel’s response to Questions 1–5 35

Proposal 2 – Extended injunctive relief 37

Foxtel’s concerns with Proposal 2 37

Proposal 3 – Extended safe harbour 39

Building the Evidence Base 39

Other Approaches 39

Regulation Impact Statement 39

SECTION 6: CONCLUSIONS 40

ATTACHMENT A 41

New Foxtel prices and packages 41

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INTRODUCTION

Foxtel welcomes the opportunity to make a submission in response to the Australian Government’s

Online Copyright Infringement Discussion Paper (the Discussion Paper), dated July 2014.

Foxtel is one of Australia’s most progressive and dynamic media companies, directly employing

around 2,500 people, and delivering a diverse subscription television (STV) service to both regional

and metropolitan areas over cable, satellite and broadband distribution.

Foxtel offers a better entertainment experience every day to each one of its 2.6 million subscribing

homes through delivery of new and inspiring programming across all genres, the world’s most popular

channel brands, and investment in high quality local content. As constant champions of innovation

Foxtel has brought customers the iQ personal digital recorder, Australia’s largest high definition

offering, the Foxtel Go app for tablets and mobile devices, the internet TV service, Foxtel Play, and

most recently, the online movie streaming service, Presto.

Furthermore, as announced late in 2013, Foxtel will also soon launch fixed-line broadband and

telephony services bundled with Foxtel’s television product.1

Foxtel’s ability to invest in content and technology is underpinned by a business model that requires

that people pay a subscription for the services they receive. Where content is widely and easily

distributed at no or minimal cost outside legitimate licensing arrangements the viability of Foxtel’s

business must inevitably come under threat.

Foxtel's submission is structured as follows:

The Executive Summary summarises Foxtel's key submissions.

Section 1 details the growing threat of online copyright infringement.

Section 2 provides an overview of international approaches to tackling online copyright

infringement, which can inform appropriate responses in Australia.

Section 3 outlines Foxtel’s commercial response to online copyright infringement.

Section 4 outlines Foxtel’s recommended approach to solving the problem of online copyright

infringement.

Section 5 contains detailed responses to the issues raised and questions asked in the

Discussion Paper.

Section 6 sets out Foxtel’s conclusions.

1 Foxtel Press Release, Foxtel to Launch Triple Play of Television, Broadband and Fixed-Line Telephony, 2 December 2013 –

available at http://www.foxtel.com.au/about-foxtel/communications/foxtel-to-launch-triple-play-of-television-broadband-and-fix-223504.htm.

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EXECUTIVE SUMMARY

Foxtel strongly agrees with the Government that there are good reasons why all Australians should be

concerned about online copyright infringement. It is critical that Australia takes action to ensure that

Australia has a legal framework that will provide a range of measures for addressing online copyright

infringement effectively.

Foxtel broadly supports the need for the two approaches suggested in the Discussion Paper.

However, it is important that these proposals are drafted to ensure they will achieve their goals and

not be the subject of many years of litigation. The Government must avoid establishing legislative

tests that will fail to provide the certainty required to achieve a real reduction in piracy. It is critical that

the legal framework encourages a change in the behaviour of many Australian consumers.

Acknowledging the importance of the creative industries—Foxtel welcomes the

Government’s clear recognition of the importance of the creative industries to the economy and

society. Foxtel is pleased that the Government recognises that the creators and distributors of

content deserve to be appropriately rewarded for their efforts. Failing to take action about online

piracy undermines these efforts and denies creators and distributors a fair return on their

investment.

Piracy has a big impact on the economy—a range of studies have shown the significant impact

of piracy on the Australian economy. When Australians download or stream unauthorised content

instead of obtaining it from legitimate sources they are adversely impacting Australian jobs.

Forgone consumer spending impacts content creators and distributors and ‘ripple effects’ are felt

across the economy. Taxes are also forgone, impacting the Government’s ability to invest in

services for Australians.

Australians do recognise that piracy is theft—research shows that a significant majority of

Australians do understand that piracy is theft, but social norms, which might be used to justify

unauthorised access, must be addressed by education (particularly for young people).

Importantly, research shows that young people and adults alike recognise the importance of

implementing stronger regulatory responses to online piracy.

Solving the problem of piracy—Australia is a leading and growing territory in relation to online

piracy. It is widely known that Australians have set records in relation to unauthorised access to

key programs, such as Game of Thrones, despite Foxtel legitimately offering them as soon as

they have been broadcast overseas and at discounted prices. However, piracy of Australian-

made programs, such as Foxtel’s Wentworth, is also very prevalent—with this theft having a

direct impact on the livelihoods of Australians creators. Foxtel understands that it will be difficult to

eliminate the problem of online piracy entirely, however considers that it can be reduced

significantly by taking steps in three areas:

Education—all parties have an obligation to educate consumers about the impact of piracy and where they can obtain legitimate content.

Availability—rights holders like Foxtel must make content widely available at appropriate price points, which are set at levels that support the ongoing production of the high quality Australian programming that audiences love and that reflects Australian culture.

Legislation—Government must put in place a stronger legislative framework that supports rights holders and internet service providers (ISPs) working cooperatively to stem piracy. To date the missing ingredient in Australian legislation has been the appropriate incentive for ISPs to take action to assist rights holders to give effect to the legislation. ISPs are best placed to reach online infringers.

Playing our part—Foxtel acknowledges that everyone has a part to play in reducing the

incidence of online copyright infringement. Foxtel has and will continue to provide ways to access

content quickly, conveniently and at reasonable prices. Foxtel has recently made an

announcement that the pricing of two of its services will significantly reduce—it is reducing the

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entry price for both its full cable and satellite service, and has already reduced the price of its

online movie service (Presto), by around half (see Section 3 below for more detail). Once Foxtel

launches its broadband services, it will take reasonable steps to prevent copyright infringement by

its subscribers.

Reducing price is not enough—reducing the price of legitimate content services is often held up

as a complete solution to the problem of online piracy, but recent experience in the United States

(US) has shown that illegitimate downloads persist even when premium programming is available

online at low price points. As set out in Section 3, recent reports suggest that Netflix’s own

production Orange is the New Black is the subject of significant piracy in the US even though it is

available legitimately online at a low price point. This would suggest that the broader adoption of

the Netflix-model of making a small number of premiere programs and a large library of much

older content available online will not in itself be the solution in Australia.

Australia is falling behind—graduated response programs are well established in many

overseas jurisdictions, as is legislation providing courts with a specific power to order ISPs to

block access to sites which infringe copyright. These measures are effective and must be urgently

introduced in Australia. Experience from overseas jurisdictions—particularly the US, United

Kingdom (UK) and Ireland—shows that both industry and regulatory solutions can be very

effective.

Proposal 1 – Extended authorisation liability—Foxtel welcomes an extension to authorisation

liability to clearly encompass ISPs, but it is concerned that Proposal 1 is broader than it needs to

be. Foxtel’s main concern is that ISPs and other service providers (for example, search engine

providers) are motivated and have an obligation to act. This can be achieved by ensuring that

authorisation liability will be established when an ISP fails to take ‘reasonable steps’ to prevent

copyright infringement. Foxtel suggests that the Copyright Alert System in the US is operating

very effectively and should be used as a model for an Australian graduated response scheme.

Education is critical in changing behaviour, but for the system to be effective it must include a

meaningful sanction. To be clear, Foxtel is not advocating account termination as a form of

sanction however Foxtel submits that shaping is an example of an appropriate mitigation measure

within a graduated scheme.

Proposal 2 – Extended injunctive relief—Foxtel is supportive of the introduction of extended

injunctive relief to block infringing overseas sites, but believes that the Australian regime should

be closely modelled on the UK and Irish provisions which have proven to be very effective. It is

also important to ensure it applies to all service providers.

Proposal 3 – Extended safe harbour—Following the iiNet decision it is unlikely that ‘service

providers’ can be found responsible for authorising copyright infringements, so Foxtel does not

believe Proposal 3 is necessary. However, Foxtel would not oppose Proposal 3 if it formed part of

a package of measures which clearly provided for ‘service providers’ to be liable for authorising

copyright infringement.

Engaging in a constructive dialogue—Foxtel looks forward to constructively engaging in the

discussions with the Government, ISPs and consumer representatives about how to give effect to

the principles that underpin the Government's position. Foxtel will be uniquely placed to contribute

to this discussion as both a producer and distributor of premium entertainment content and, soon,

a provider of broadband services.

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SECTION 1: THE GROWING THREAT OF ONLINE COPYRIGHT INFRINGEMENT

Online piracy of audio-visual content is a significant problem in Australia. Record levels of piracy are a

very serious concern, not a badge of honour. Online piracy must be addressed to protect the health of

Australian creative industries and the livelihoods of the thousands of Australians employed in them.

The prevalence of online piracy shows a basic lack of respect for creators of content or artistic work

wherever they may be. The simple truth is that the creator of a work, together with those who invest to

make that work possible, should be entitled, not only to be rewarded for their efforts and investment,

but also to control how it is disseminated.

Legitimate consumption of content services strengthens the businesses that make and distribute both

Australian and international content in Australia, and that export Australian productions to the world.

Stronger Australian creative and distribution businesses will be better resourced to invest in the

production and acquisition of content audiences want; including, importantly, Australian content that

tells our stories and reflects our unique culture.

This section puts in perspective the contribution of copyright industries to the Australian economy and

explains the adverse economic impacts of piracy. In providing an evidence base for action, this

section also sets out Australians’ attitudes to piracy and attempts to quantify the scale of the problem

in Australia.

The value of copyright industries to the Australian economy

As the Discussion Paper notes, a 2012 study from PricewaterhouseCoopers (PwC) for the Australian

Copyright Council reported that Australia’s copyright industries employ 900,000 people (around 8 per

cent of the Australian workforce) and generate more than $90 billion annually, including $7 billion in

exports (equal at that time to 2.9 per cent of total exports).2

The PwC study, which draws on data for 2010–11, captures a broad range of copyright industries

using a classification model identified by the World Intellectual Property Organisation (WIPO). The

study’s headline figures cover both ‘core’ industries—being those primarily involved in the creation,

manufacture, production, broadcast and distribution of copyrighted works—and industries that are

related to, inter-dependent with and that support core copyright industries.

Even when only focusing on the ‘core’ copyright industries, the report notes a significant contribution

of:

more than 600,000 people employed;

more than $67 billion value added annually; and

more than $1.8 billion in copyright exports. While it is acknowledged that not all sectors within the ‘core’ copyright industries are susceptible to online copyright infringement, many are—including those listed under the headings Motion Picture and Video, Radio and Television, Photography and Software and Databases. In this regard, it is clear that online piracy is a threat to a significant part of our economy. Looking internationally, the report notes that:

[i]n comparison with a number of other country studies that have employed the WIPO framework, Australia’s economy appears to be relatively more dependent upon copyright industries as a generator of value add and gross domestic product.

3

2 PricewaterhouseCoopers, The Economic Contribution of Australia’s Copyright Industries – 1996–97 to 2010–11, 2012 (PwC

Report) – available at http://www.copyright.org.au/pdf/PwC-Report-2012.pdf.

3 PwC Report, page 17.

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Furthermore, noting that ‘copyright industries have traditionally been seen as employment intensive, reflecting the personal contribution required to generate the intellectual property’,

4 the report notes

that employment in Australian copyright industries has in fact grown over the past 15 years. Further information about employment in the Australian STV industry, and at Foxtel in particular, is set out below.

The economic consequences of piracy and the cost to the Australian economy

A January 2011 report by Ipsos and Oxford Economics for the Australian Screen Association (the

Ipsos/Oxford Report), which assessed the scale of harm caused by movie piracy alone, provides a

good demonstration of the broad economic impact of piracy on the Australian economy.5 Drafted to

offer a conservative view, it found that in the 12 months up to the third quarter of 2010:

6,100 Full Time Equivalent jobs were forgone across the entire economy as a result of movie

piracy;

allowing for effects on other industries, some $1.37 billion in Gross Output (Sales)—equal to over

$63 for every man, woman and child in Australia at that time—was lost across the entire

Australian economy (equivalent to a loss of GDP of $551 million across the Australian economy);

and

tax losses of $193 million were suffered as a result of movie piracy.

As the Ipsos/Oxford report was prepared a number of years ago, and given the widely acknowledged

acceleration of online copyright infringement in Australia in recent years, it is reasonable to assume

that this study now significantly underplays the adverse impact of movie piracy on the Australian

economy, let alone the impact of unauthorised downloading of other types of audio-visual content.

Nonetheless, the study helps in understanding the types and breadth of losses that stem from

unauthorised downloading. It refers to both:

direct consumer spending losses to the movie industry and retailers—this includes losses in

relation to cinema exhibitors’ revenue, film and video production and distribution, DVD/Blu-ray

rentals and sales, TV Video on Demand, downloads and streaming video; and

the ‘ripple effects’ of the consumer spending loss, which occur as losses flow through from the

film industry to other industries (for example, the film industry’s reduced use of Australian

accountancy, legal and banking services).

The report also notes that both employment and taxes will also fall as film industry revenues decline.

As employment falls, workers’ own consumption of goods and services falls with impacts on the wider

economy; and, as taxes are forgone, the Government has reduced capacity to spend on social

services and infrastructure.6

Australian writer, film critic and former editor, Rochelle Siemienowicz, offers a local perspective on

these impacts in her 2013 assessment of the impacts of piracy on the Australian film and television

industries. Building on the findings of the Ipsos/Oxford Economics Report, Siemienowicz asks:

Who does it hurt? Well, your local cinema operator for a start, and they’re the ones who need

to run a business that makes a profit and spreads risk so they can take a punt on that plucky

4 PwC Report, page 23.

5 Ipsos and Oxford Economics, Economic consequences of movie piracy – Australia, January 2011 – available at

http://www.screenassociation.com.au/uploads/reports/IPSOS_Economic_Consequences_of_Movie_Piracy_-_Australia.pdf.

6 On the issue of tax, see recent commentary in Crikey from John Ferris who notes that overseas-based internet search

engines derive revenue from Australian searches for unauthorised content, but are reported to pay very little tax in Australia. See John Ferris, ‘No place for artists in online copyright debate’, Crikey, 4 August 2014 – available at http://www.crikey.com.au/2014/08/04/no-place-for-artists-in-online-copyright-debate/.

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little Australian feature or documentary that needs a theatrical release to break through into

public consciousness.7

Indeed, while the analysis above has been focused on the film industry, the same impacts can also be

attributed to the STV sector in which Foxtel operates. The reference to spreading risk in order to

pursue creation of niche content is also particularly pertinent to the STV environment, where the

monetisation of more popular ‘blockbuster’ content helps to fund the development of niche

documentary and drama programming which makes an important Australian cultural contribution.8

Piracy affects subscription television jobs in Australia

Foxtel has for some time made the point that illegal downloading is not just an issue for businesses; it

affects the livelihoods of actors, writers, directors, set designers, carpenters, caterers and everyone

else involved in the production of these programs. In this regard it is important to note the contribution

that Foxtel’s own sector makes to the Australian creative landscape and economy.

In 2012–13 the Australian STV sector invested $707 million in Australian content, supporting a record

267,391 hours of Australian programming, and employed 6,600 people.9 The sector is estimated by

Deloitte Access Economics to have made an overall direct contribution to the Australian economy of

$1.6 billion. The STV industry—comprised of over 30 organisations, including Foxtel—also exports an

increasing amount of Australian programming internationally with programs like Tim Winton’s

cloudstreet, Top of the Lake, Grand Designs Australia, Wentworth and Killing Time being seen across

the world. The investments Foxtel and its production partners make help develop Australian

production, acting and writing talent—building capacity to tell Australian stories and developing skills

and experience that attracts international production to Australia.10

It is also critical to understand that the creative sector is an interdependent ecosystem. If one part of it

is damaged there will be flow on effects to others. For example, if there is insufficient money to invest

in Australian feature films there will be less work for, and skills development among writers, directors,

editors and special effects creators. This will have an impact on television production. Similarly, if the

STV industry is adversely affected, this will reduce the talent pool available to free-to-air television or

the feature film industry.

7 Rochelle Siemienowicz, 'Who Does it Hurt?': How Piracy Affects Australian Film and TV, 18 September 2013 – available at

http://wheelercentre.com/dailies/post/8b8ed27f82ba/.

8 Recently-announced Foxtel productions such as the two-part documentary series Westbrook and the upcoming drama The

Kettering Incident are good examples of Australian content that is perfectly suited to subscription television, but may not be viable in an advertiser-funded free-to-air television environment that relies on mainstream content to attract large audiences for advertisers:

In August 2014, Foxtel’s Crime & Investigation Network premiered Westbrook, a two-part documentary series which tells the harrowing true story of the infamous Westbrook boys’ home in Toowoomba, Queensland.

The Kettering Incident is an eight episode mystery drama which is currently being made for Foxtel in Tasmania. The story follows a doctor who finds herself linked to the cases of two girls who have mysteriously disappeared in identical circumstances in the wilds of Tasmania 15 years apart. It is being produced by Porchlight Films in association with Sweet Potato Films.

9 Australian Subscription Television and Radio Association Media Release, Subscription TV invests record $707 million in

Australian content, 7 October 2013 – available at http://www.astra.org.au/ArticleDocuments/116/Australian%20investment%20media%20release.pdf.aspx.

10 When Australian media companies like Foxtel provide training and experience to Australian creatives, or commission

productions from independent Australian production companies, they are helping build the sector to attract large international projects to Australia. For example, although it may not be considered ‘Australian content’ in the traditional sense, the blockbuster film The Great Gatsby was filmed in Australia, as is the current production of Mad Max: Fury Road. In 2013, the Attorney General noted that ‘[i]nternational feature films in development and production are expected to inject $170 million directly into the Australian economy and will generate more than 2000 jobs for Australian cast and crew’ – see the Joint press release from Senator The Hon George Brandis QC and The Hon Ian Walker MP, Australia: a world-class filming destination, 18 December 2013 – available at http://www.attorneygeneral.gov.au/Mediareleases/Pages/2013/Fourth%20quarter/18December2013-AustraliaAWorldClassFilmingDestination.aspx.

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Appropriately protecting copyright, including by taking action against piracy, is an important element of building Australia’s digital economy. Foxtel directly addressed its role in the digital economy in a 2012 submission to the Australian Law Reform Commission’s (ALRC’s) Copyright and the Digital Economy Inquiry. In the Issues Paper for that Inquiry the ALRC had observed that:

[f]or some time the Australian economy has been recognised as increasingly relying on

moving from low-efficiency, labour-intensive industries to high-efficiency knowledge-intensive

industries involving cultural goods and services.11

Noting that cultural goods and services are Foxtel’s stock in trade, Foxtel offered its strongly held view

that its substantial investments in these goods and services must be appropriately protected by

copyright law. Foxtel must be able to monetise the content it creates, protect the content it acquires

and take action against individuals and other corporations who seek a free ride on its investments.

A snapshot of Foxtel and its partners In understanding why Foxtel holds strong views about online copyright infringement, it is important to appreciate who Foxtel is and who is impacted when Foxtel’s content and the content it acquires for Australian audiences is accessed unlawfully. Who Foxtel employs

Foxtel’s 2,500 staff work in three main centres in Queensland, New South Wales and Victoria, but it also has a number of smaller offices around Australia. It is a national company.

Of the more than 90 STV channels we broadcast, Foxtel owns and operates 30 channels which provide five genres of programming—general entertainment (including scripted drama), factual, movies, music and lifestyle.

Staff in Foxtel’s television department work on everything from production and promo creation to scheduling and broadcasting across its many platforms.

More than 1,000 Foxtel staff take calls in Foxtel’s customer centres—they are the face of Foxtel for its subscribers. They help new customers to get Foxtel and help existing customers to get the best from the Foxtel service. They are strong advocates for Foxtel’s content, especially its Australian content. Foxtel is currently in the process of recruiting close to 400 new customer centre staff.

Foxtel’s Technology teams—including IT, Broadcast Technology and Product Development—keep Foxtel on air 24x7 and help deliver great content on television, mobile devices and more.

Foxtel’s supporting cast includes teams from Legal, Finance, Marketing and People and Culture—they help bring its technology, service and entertainment together.

These are the jobs Australians support when they purchase content legitimately from Foxtel.

Who Foxtel partners with to supply its services

Foxtel acquires a wide range of programming from third party suppliers such as BBC Worldwide, HBO, Showtime, AETN, NBC Universal, Paramount, Disney, CBS, Sony, Village Roadshow, Warner Bros and 20

th Century Fox. Many of those companies have

offices in Australia, employing Australians and contributing to the Australian economy.

Foxtel also partners with organisations such as Telstra and Optus to provide Foxtel entertainment services to their customers (for example, through the Telstra T-Box). Australians support jobs in these companies when they buy Foxtel services through its partners.

11 Australian Law Reform Commission, Issues Paper, Copyright and the Digital Economy, August 2012, page 11 – available at

http://www.alrc.gov.au/sites/default/files/pdfs/publications/whole_ip_42_4.pdf.

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What Foxtel makes and who it works with to make and acquire great television

The depth and diversity of Foxtel’s programming remains the primary attraction for its viewers.

Foxtel produces a slate of Australian dramas to premiere on Australian screens (such as Wentworth,

12 Devil’s Playground

13 and Deadline Gallipoli

14), as well as very popular

Australian programs in the lifestyle and reality genres (such as River Cottage Australia15

and Australia’s Next Top Model

16).

Foxtel works with a wide range of independent production companies to produce its Australian content, and in so doing supports creative experts who also work across the Australian free-to-air television and film sectors.

When Foxtel acquires the Australian rights for international event drama series like Game of Thrones, Breaking Bad, Mad Men and True Blood—programs frequently subject to significant piracy—Foxtel is supporting creators such as HBO and AMC who are widely credited for the advent of the current ‘golden age of television’.

17 With programs such as

Game of Thrones reported to cost, on average, around US$6 million per episode (and up to US$8 million per episode), Australians who buy these programs legitimately are contributing to the ongoing production of this premium content (as well as underwriting the ability of producers like HBO to make more niche programs such as Girls and Looking).

18

Foxtel also broadcasts a wide range of dedicated sports channels offering customers the best in Australian and international sports coverage, news and programming.

By buying rights to expansive sporting coverage Foxtel and its channel partners make a substantial financial commitment which flows through to the funding of grass-roots sports. This investment, together with the exposure of lesser-known events that only Foxtel’s broadcasts helps to lift the profile and viability of niche sports in the Australian community.

12 Wentworth is an internationally acclaimed Australian drama produced for Foxtel by FremantleMedia Australia. Set in a

women’s prison, Wentworth draws on characters and elements of the iconic Prisoner series as it builds its own brave and bold, contemporary story. Wentworth has been sold to more than 20 territories, a Dutch version is currently airing and a German version of Wentworth is in production.

13 Devil’s Playground is a psychological thriller series set in the churches, schools and upper echelons of power in the

Australian Catholic Church at a time of change in the late 1980s—due to premiere on Foxtel in September 2014. Devil’s Playground is set 35 years after the events of Fred Schepisi’s classic film. The series is being directed by Rachel Ward (The Straits, Beautiful Kate) and Tony Krawitz (Dead Europe).

14 Deadline Gallipoli, currently in production, explores the origin of the Gallipoli legend from the point of view of war

correspondents Charles Bean, Ellis Ashmead-Bartlett, Phillip Schuler and Keith Murdoch. Sam Worthington plays Australian photographer Phillip Schuler and is an executive producer on the four part drama. Matchbox Pictures is producing the mini-series with Full Clip, the production company formed by Worthington.

15 River Cottage Australia is a lifestyle program with a sustainability focus which is produced outside and within the community

of the village of Tilba Tilba on the New South Wales far south coast. River Cottage Australia is co-produced exclusively for The LifeStyle Channel (a Foxtel-owned channel) by ITV Studios Australia and Keo Films.

16 Australia's Next Top Model is a reality television series which finds and develops fashion models. It is produced for Foxtel’s

FOX8 channel by Shine Australia. Season 9 is currently in production for broadcast in 2015.

17 In his 2013 article The golden age of TV is dead; long live the golden age of TV, Todd VanDerWerff refers to the ‘golden age

of television’ as the ‘recent decade-plus of dark, cable antiheroes and intricate serialization and laugh-a-second comedies’ – available at http://www.avclub.com/article/the-golden-age-of-tv-is-dead-long-live-the-golden--103129. In a 2013 article in The Atlantic, Hope Reese notes that ‘[s]ince the late 1990s, a wave of hour-long dramas had been scrapping the rules of traditional TV by introducing complicated characters and raising the quality—in terms of production, writing, and visuals—to a cinematic level’ (see Why Is the Golden Age of TV So Dark? – available at http://www.theatlantic.com/entertainment/archive/2013/07/why-is-the-golden-age-of-tv-so-dark/277696/).

18 Frank Pallotta, ‘How 'Game Of Thrones' Producers Convinced HBO To Let Them Make An $US8 Million Episode’, Business

Insider Australia, 8 April 2014 – available at http://www.businessinsider.com.au/game-of-thrones-how-blackwater-help-make-the-series-one-of-the-most-popular-on-tv-2014-4.

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Attitudes of Australians to piracy Product, educational and regulatory responses to piracy must be informed by robust evidence of consumer attitudes. The Intellectual Property Awareness Foundation (IPAF) has commissioned a time series of important research looking at the attitudes and actions of Australians in relation to piracy of film and television shows by way of illegal downloads. Findings from IPAF’s 2012 study by Sycamore Research and Marketing noted that just over one quarter of Australians (27 per cent) were active illegal downloaders at that time (classified by the researchers as either ‘persistent’ or ‘casual’ downloaders). Importantly, that research found that:

71 per cent of respondents believed that piracy is stealing or theft; and

most respondents believed they are responsible for preventing piracy—67 per cent nominated

individuals as being responsible for taking action, followed by ISPs (45 per cent), the movie and

TV industry (40 per cent) and Government (39 per cent).19

IPAF’s 2013 research provided differentiated findings for those aged 12–17 years and for adults. In relation to young people the research provides some useful background that can assist with designing educational responses to piracy. In relation to the incidence of, and attitudes to tackling piracy, the research notes that:

despite anecdotal evidence that piracy is rife among young people, most 12–17 year olds say

they do not pirate movies and TV shows (76 per cent were classified as ‘non active’); and

almost half (49 per cent) agreed that the internet should be more regulated to prevent piracy.20

To the extent that young people do download unauthorised content the 2013 IPAF research found that this may be because they incorrectly believe it is the social norm, because they mistakenly believe that it does no real harm and because nobody is stopping them. For example, the report notes that:

[i]f it’s there [unauthorised content], teens assume it must be OK otherwise it would be shut down by the government, police or the industry; and [t]he lack of intervention reinforces the belief that it is not really important enough to act on.

21

These results are promising in that they show that while online piracy is assumed to be legitimate by young people, with appropriate education and regulatory responses there is an opportunity to reduce piracy among this age group. In relation to adults, the 2013 IPAF research found the rate of active unauthorised downloading had dropped slightly compared with the preceding year, but remained significant—25 per cent of survey respondents indicated that there were ‘active pirates’.

22 However, Foxtel is aware that IPAF’s 2014

research will soon be released and, alarmingly, shows that there has been another spike with 29 per cent of respondents now identifying as active pirates of movies and TV shows.

19 Intellectual Property Awareness Foundation, Sycamore research 2012 – available at

http://www.ipawareness.com.au/research/2012.

20 Intellectual Property Awareness Foundation, Research into the online behaviour and attitudes of Australians in relation to

movie and TV piracy – IPAF Research Summary 2013 (2013 IPAF Research), pages 1and 5 – available at http://www.ipawareness.com.au/research/2013.

21 2013 IPAF Research, page 2.

22 2013 IPAF Research, page 6.

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It is also of concern that there has been a decrease over the last three year IPAF research cycle in the proportion of adults who agree that downloading or streaming pirated content is stealing or theft. Whereas, in 2012, 71 per cent agreed with this statement, this proportion dropped to 67 per cent in 2013 and 64 per cent in 2014. This trend highlights the need to further educate adults, not just children, about the impact of piracy. Promising findings from the 2013 IPAF research included that:

74 per cent of adults agreed that there is an increasing number of legal alternatives for watching

movies and TV shows (see Section 3 below for more information about the steps Foxtel has

taken); and

in relation to legal responses, the majority of adults agree that courts should have the authority to

decide to block overseas websites that solely profit from pirated content (55 per cent).23

The findings of IPAF’s 2013 research are supported by more recent research conducted in April 2014 by UMR Research, which found that:

while 45 per cent of Australians download or stream creative content, nearly half (21 per cent)

admit to doing it in an unauthorised manner;24

and

the greatest proportion of unauthorised use occurs on unauthorised torrent or streaming sites (12

per cent of those surveyed had downloaded movies and 11 per cent had downloaded TV shows

from these sites).25

While the IPAF and UMR research shows that between 21 and 29 per cent of Australians admit to unauthorised access to content online—a significant and unacceptably high proportion—the UMR Research also reinforces that, when prompted, Australians largely understand the impact of piracy. The UMR findings reveal that:

65 per cent of Australians surveyed believe that producers of creative content should be paid for

their work regardless of how it is accessed;26

72 per cent believe artists and those who invest in them should have their work respected and

protected online;27

and

63 per cent believe that unauthorised downloading or streaming hurts Australian musicians and

our film industry.28

In relation to regulatory responses to piracy, the UMR research showed strong support for a scheme in which ISPs send education notices—this was supported by 65 per cent of respondents. Even among those who identified themselves as unauthorised downloaders, there is majority support for a notice scheme (51 per cent).

29

In relation to regulatory responses to piracy, the UMR research showed strong support for a scheme in which ISPs send education notices—this was supported by 65 per cent of respondents. Even

23 2013 IPAF Research, page 6.

24 UMR Research, Content Industry – Understanding the Scope of Internet Downloading (UMR Research), April 2014, slide 6.

– available at http://umr.com.au/.

25 UMR Research, slide 4.

26 UMR Research, slide 10.

27 UMR Research, slide 13.

28 UMR Research, slide 14.

29 UMR Research, slide 19.

Page 13 of 41

among those who identified themselves as unauthorised downloaders, there is majority support for a notice scheme (51 per cent).

Australia is a leading and growing territory in relation to online piracy

The Discussion Paper notes that ‘[o]nline copyright infringement remains relatively strong in Australia

but is falling internationally’.30

The online publication TorrentFreak, which focuses on filesharing, is frequently cited in news reports

as a source of information about online copyright infringement around the world. While TorrentFreak

often publishes ‘top 10 most pirated lists’ in relation to movies,31

it also reports Australian rates of

piracy in relation to particular television programs.

For example, in October 2013 the ABC used TorrentFreak statistics to compile the following

infographic relating to the final episode of the drama Breaking Bad. Whereas the episode was

watched by around 150,000 viewers on Foxtel,32

the TorrentFreak statistics suggest that around

90,000 Australians downloaded it illegally (18 per cent of the reported 500,000 who downloaded it

illegally). As reported by the ABC, unauthorised downloads in Australia exceeded those in the US and

UK:33

Similarly, TorrentFreak reported on piracy of the most recent series of Game of Thrones (season 4),

which was available in Australia first on Foxtel.

In April 2014, TorrentFreak reported on the premiere episode, which it noted was widely available

through dozens of torrent sites soon after the episode was aired. Looking at the countries people

were sharing from, the article notes that:

30 Australian Government, Online Copyright Infringement – Discussion Paper (Discussion Paper), July 2014, page 1.

31 For example, see Top 10 Most Pirated Movies of the Week – 08/18/14 – available at http://torrentfreak.com/top-10-most-

pirated-movies-of-the-week-140818/.

32 OzTAM, National STV, Total Individuals, Consolidated, Showcase Total, 30/9/2013–3/10/2013, Breaking Bad season 5,

episode 16. This figure is the total cumulative average audience for the episode with live and all playback included on Showcase and Showcase +2 for the first airings in the date period above. It does not include catch-up and later broadcasts.

33 ABC News online, Breaking Bad finale draws record ratings as Australia tops illegal downloads, 1 October 2013 – available

at http://www.abc.net.au/news/2013-10-01/breaking-bad-finale-draws-record-ratings-as-australia-tops-ille/4990252.

Page 14 of 41

A sample of 18,333 IP-addresses collected over the day shows that Australia takes the crown

with 11.6% of the total. The United States is a good second with 9.3%, followed by the United

Kingdom with 5.8%.

The number one spot for Australia is all the more impressive since it has a population of just

over 22 million people, relatively small compared to the other two countries.34

The following indicative table, which sets out the top 10 territories and cities where the unauthorised

downloads were most prevalent, was included in the article. Australia was number one and four of the

top 10 cities were in Australia.

# Country % City %

1 Australia 11.6% Melbourne 3.2%

2 United States 9.3% Athens 2.9%

3 United Kingdom 5.8% Sydney 2.0%

4 Canada 5.2% London 1.9%

5 The Netherlands 4.7% Stockholm 1.7%

6 Philippines 4.6% Amsterdam 1.7%

7 India 4.2% Madrid 1.5%

8 Greece 3.6% Warsaw 1.4%

9 Poland 3.0% Brisbane 1.4%

10 Sweden 2.7% Perth 1.3%

In June 2014, looking at the whole season, TorrentFreak reported that:

the fourth season of Game of Thrones was the most-viewed so far, both through official channels

and among pirates;

the season finale resulted in the largest BitTorrent swarm ever—never before had so many

people gathered to share a single file on the internet;

a few hours after the first torrent of the show appeared on torrent sites, the Demonii tracker

reported that 254,114 people were sharing one single torrent at the same time;

in 12 hours, the season finale had been downloaded an estimated 1.5 million times; and

34 TorrentFreak, Game of Thrones Premiere Triggers Piracy Crazy, 7 April 2014 – available at http://torrentfreak.com/game-of-

thrones-premiere-triggers-piracy-craze-140407/. Indeed, a year earlier, in April 2013, the then US Ambassador to Australia, Jeffrey Bleich, had been moved to comment publicly on the rate of piracy of Game of Thrones in Australia. On a public Facebook post he noted that ‘[a]s the Ambassador here in Australia, it was especially troubling to find out that Australian fans were some of the worst offenders with among the highest piracy rates of Game of Thrones in the world’ – available at https://www.facebook.com/notes/ambassador-bleich/stopping-the-game-of-clones/542850132425361.

Page 15 of 41

while Game of Thrones pirates come from all over the world, the program is particularly popular in

Australia, the US, the UK and Canada.35

Foxtel’s own programs are also the subject of significant unauthorised downloading. Monitoring

conducted for Foxtel shows that some of Foxtel’s most popular locally-produced programs are

downloaded on an unauthorised basis at alarming rates, even when they are not currently airing. For

example, during a recent 10 day period (19–28 August 2014), the following unauthorised downloading

via peer-to-peer (P2P) was detected:

Wentworth—30,414 downloads;

The Real Housewives of Melbourne—6,388 downloads;

The Recruit—1,889 downloads; and

Australia’s Next Top Model—750 downloads.36

That is nearly 40,000 downloads of just four programs, made for Foxtel and over just 10 days,

during a period in which only one of these four programs was airing. Over longer monitoring periods,

and looking at a broader range of programs, the number of unauthorised downloads of Foxtel’s

content would obviously increase dramatically.

While this monitoring shows that the majority (57 per cent) of these unauthorised downloads occurred

in Australia, 15 per cent of this activity originated in the UK (primarily due to downloads of

Wenthworth). When Foxtel’s programs are pirated overseas this reduces Australian creators’

opportunities to obtain revenues from selling Australian programs to other territories.

Screen Australia statistics show that premium programs such as telemovies cost, on average, $1.8

million per hour of broadcast material to make.37

As noted earlier, when Australian-produced

programming—in particular, premium drama such as Wentworth—is pirated this undermines large

investments in the Australian production industry. It also denies those who fund Australian

productions a fair return on their investment.

Finally, in assessing the rise of the problem of piracy in Australia it can be instructive to consider

Google search trends, which show the popularity of certain search terms over time. As set out in

Chart 1 below, there has been a significant increase in Australian searches for the unauthorised

website The Pirate Bay since 2010. Even more dramatic is the rise in the number of searches for the

more generic term ‘torrent’ as depicted in Chart 2.

35 TorrentFreak, Game of Thrones Season Finale Sets New Piracy Record, 16 June 2014 – available at

http://torrentfreak.com/game-thrones-season-finale-sets-piracy-record-140616/.

36 See footnotes to Section 1 for descriptions of Wentworth and Australia’s Next Top Model. The Real Housewives of

Melbourne is a hit ‘soap-doc’ series made for Foxtel by Matchbox Pictures. In addition to being shown on Foxtel in Australia, season 1 has also been acquired and broadcast on Bravo in the US. Foxtel has recently announced that it has been commissioned for a second season. The Recruit is a 10-part reality television series focused on AFL football, made exclusively for Foxtel by McGuire Media in association with The Media Tribe. In partnership with the AFL it features a global search and will provide a player with the opportunity to become an overnight sensation at an AFL club. The AFL has agreed to convene an officially constituted AFL Draft as part of the program.

37 Screen Australia reports that the ‘[c]ost per hour for Australian telemovies averaged $1.66 million over the 10-year period

2000/01-2009/10. In 2012/13, the average cost per hour for Australian telemovies was $1.80 million’. See Australian TV drama hours produced and costs per hour by format, 2000/01–2012/13 – available at http://www.screenaustralia.gov.au/research/statistics/mptvdramahoursxformat.aspx. Drama produced as a series with a greater number of episodes can be made at a slightly lower hourly cost (because, for example, sets can be re-used and the cast is employed over a longer period), but such programs typically still cost at least $1 million per hour.

Page 16 of 41

Google search trends

Chart 1

Chart 1 tracks the popularity of the terms ‘Foxtel’, ‘Netflix’, ‘Pirate Bay’, ‘Hulu’ and ‘Quickflix’ over

the last 10 years. Among other things, it suggests:

Among these search terms, ‘Foxtel’ was a relatively dominant search term between 2004 and 2009.

‘Pirate Bay’ became mainstream in 2010 and overtook ‘Foxtel’ as a search term in 2011.

Chart 2

Chart 2 tracks the popularity of the terms ‘Foxtel’, ‘Netflix’, ‘Pirate Bay’, ‘Hulu’ and ‘Torrent’ over the

last 10 years. It shows that:

Among these terms interest in the term ‘Torrent’ overtook ‘Foxtel’ in 2004.

While interest in the term ‘Torrent’ peaked across 2010 it remains a more dominant search term than ‘Foxtel’, ‘Netflix’ and ‘Hulu’.

Source: Google Trends – available at http://www.google.com.au/trends/.

Page 17 of 41

SECTION 2: INTERNATIONAL APPROACHES

Australia is falling behind other jurisdictions

There is no doubt that Australia is falling well behind its overseas counterparts with respect to the

introduction of measures to curb online piracy. Foxtel agrees with the Government’s observation in

the Discussion Paper that ‘there is much to be learned from overseas experience, particularly in the

United States, the United Kingdom and New Zealand’.38

While there is currently no mechanism in Australia to apply for a court order for ISPs to limit access to

sites that are making available unauthorised content or to require ISPs to introduce graduated

response type programs, a graduated response to dealing with online copyright infringement has

been introduced by agreement or legislatively implemented in a number of key foreign jurisdictions,

including the US, France, the UK, New Zealand and Korea. In addition to this, effective legislation

providing injunctive relief has been introduced in jurisdictions including the UK, Ireland, Belgium and,

most recently, Singapore.

The table below provides a summary of major international graduated response programs and site

blocking legislation as at August 2014.

INTERNATIONAL GRADUATED RESPONSE PROGRAMS As at August 2014

Country Model Costs borne by each party

Notices Sanctions imposed by ISPs

Sanctions imposed by content owners

Canada Legislation (not yet in force)

ISP can charge content owner a fee where Minister determines; otherwise, parties bear own costs

France Legislation

Ireland Agreement

NZ Legislation ISP can claim back cost from content owners (capped)

South Korea Legislation (on order from Minister)

(on order from Minister)

UK (from July 2014)

Agreement 39

US Agreement

INTERNATIONAL SITE BLOCKING LEGISLATION As at August 2014

Legislation to block access to websites that illegally stream content is present in: Austria, Belgium, Denmark, Finland, France, Germany, Greece, India, Ireland, Italy, Malaysia, the

Netherlands, Singapore, the US and the UK.

38 Discussion Paper, page 1.

39 The UK alerts program is co-funded by ISPs and content creators.

Page 18 of 41

Success of overseas models in changing behaviour

Foxtel believes that certain overseas models, such as the graduated response program in the US and

the injunctive relief legislation in the UK and Ireland, are working very effectively in changing

behaviour and should be influential in the development of Australia’s response.

Some international cases studies of both graduated response schemes and injunctive relief provisions

are considered below.

International graduated response schemes Foxtel submits that there is clear evidence from overseas jurisdictions that graduated response schemes can be an effective tool in the fight against online copyright infringement.

United States

As noted in the discussion paper, a graduated response program has recently formed the subject of a

commercial agreement between ISPs and the music and film industries in the United States.40

The

Centre for Copyright Information (CCI) administers the Copyright Alert System (CAS), which

commenced in February 2013. The CAS is a system of up to six notices culminating in the ISP

imposing a mitigation measure (such as temporary reduced internet speeds, redirection to an

education landing page or restriction of internet access).

Foxtel believes that the United States’ CAS is a good example of a model that has been created

through the agreement of key stakeholders and which includes the potential for a repercussion if the

particular behavior continues.

The CCI also believes that the system is working. In this respect, the CCI released a report on 28 May

2014 on the first 10 months of the CAS. The CCI acknowledges that the data it has on the success of

the CAS is limited by the short time the program has been running. However, the CCI believes that

the results they do have are encouraging and:

support the view that an educational program like the CAS can make a material difference in

influencing the behavior of digital content consumers once the possibility of copyright

infringement on their account is bought to their attention.41

Key points from the CCI’s report include that:

More than 2 million notices of alleged infringement were sent to ISPs and more than 1.3 million

alerts were sent to 722,820 customer accounts.42

Only 265 challenges were filed to these alerts. 47 challenges were successful; however, the vast

majority of those were based on an unauthorised use of an account. 43

The majority of alerts (72 per cent) were educational alerts. Only 8 per cent were mitigation alerts,

and less than 3 per cent were at the second mitigation level.44

40 See an October 2012 update on the Copyright Alert System from the Centre for Copyright Information – available at

http://www.copyrightinformation.org/node/709.

41 Center for Copyright Information, The Copyright Alert System: Phase One and Beyond (2014 CCI Report), 28 May 2014,

page 10 – available at http://www.copyrightinformation.org/wp-content/uploads/2014/05/Phase-One-And_Beyond.pdf.

42 2014 CCI Report, page 8.

43 2014 CCI Report, page 2.

44 2014 CCI Report, page 8.

Page 19 of 41

Foxtel submits that the extract below from the CCI’s report clearly demonstrates the effectiveness of the alert system, in that the number of alerts reduces significantly at each stage of the alert process:

45

The CCI report also notes that the CCI had engaged in qualitative and quantitative customer research into consumer awareness in relation to online piracy and found that:

57 per cent of users surveyed by CCI would stop engaging in copyright infringement immediately

upon receiving an alert;46

79 per cent of respondents said that knowing someone who got into trouble for copyright

infringement would be ‘somewhat to very’ influential on their own behaviour;47

and

consumers would like more guidance about how to engage online legally. 48

As clearly demonstrated by the US example, Foxtel believes that education is the key to a successful graduated response programme in giving effect to a change in behaviour.

45 2014 CCI Report, page 9.

46 2014 CCI Report, page 3.

47 2014 CCI Report, page 6.

48 2014 CCI Report, page 5.

Page 20 of 41

South Korea

South Korea is another jurisdiction that has introduced a successful graduated response scheme.

The South Korean model allows the Minister to order ISPs to take a number of measures, including

issuing warnings. However, as the South Korean model allows for account suspensions for repeat

infringements without any warnings and account terminations, Foxtel does not support all aspects of

the South Korean example.

While Foxtel does not support account terminations and suspensions as sanctions, it is worth noting

that these have been a relatively rare occurrence in South Korea and that the educational aspect of

the program appears to be operating effectively.

In this respect, from July 2009 to the end of 2012:

the Minister issued 916 warnings and suspended 28 accounts; and

the Korea Copyright Commission issued 240,022 warnings, requested the deletion or ceasing of

transmission of allegedly infringing materials in respect of 226,840 users’ accounts and requested

that 380 accounts be shut down.49

The International Federation of the Phonographic Industry (IFPI) has declared that a significant growth in digital music sales in 2009 in Korea was due to the legislative amendments addressing online privacy (although it is noted that these amendments were not limited to the graduated response scheme).

50 In March 2013, IFPI noted that:

since the introduction of the regime piracy rates have steadily declined and many legitimate

digital music downloading services were launched by content service providers/OSPs [online

service providers] and are now successfully operating in the market.51

The IFPI also emphasised the important role the graduated response scheme plays in educating the

public.

New Zealand

New Zealand’s graduated response program is referred to by the Government in the Discussion Paper. Foxtel submits that the New Zealand model has significant problems and should not be adopted in Australia without major amendments.

The New Zealand scheme commenced operation in September 2011 and is a legislative three strikes system whereby ISPs issue a detection notice, a warning notice and then an enforcement notice. Once an enforcement notice is issued, the content owner (at its costs) is responsible for bringing proceedings against the individual in the New Zealand Copyright Tribunal. A financial penalty of up to NZ$15,000 is available, however the highest penalty awarded to date is just over NZ$900.

52

Provisions allowing for internet disconnection are currently dormant.

49 OPENNET, COPYRIGHT REFORM – Abolishing Three-Strikes-Out Rule from Copyright Law – available at

http://reformcopyright.opennet.or.kr/.

50 International Federation of the Phonographic Industry, Comments on the Amendment of the Copyright Act in relation to the

Graduated Response Regime in the Republic of Korea (IFPI Report), March 2013, page 1 – available at http://opennet.or.kr/wp-content/uploads/2013/04/IFPI-Comments-on-Amendment-of-Copyright-Act-in-relation-to-GR-inSouth-Korea.pdf.

51 IFPI Report, page 3.

52 lillyweb, Skynet Strikes Again, 13 August 2014 – available at http://www.lillyweb.co.nz/news.html.

Page 21 of 41

As noted in the Discussion Paper, an ISP may charge a rights holder up to NZ$25 for each notice that it processes.

53 This cost imposition is out of step with other international graduated response

programs, which generally provide for each party to bear their own costs (with the exception of Canada where ordered by the Minister). It also appears to be excessive, in that NZ$25 would far exceed the administrative costs incurred by an ISP in sending each notice. The imposition of the NZ$25 fee has been labelled by the Chairman of Recorded Music NZ (RMNZ) as ‘disastrous’:

…one poorly judged decision in the implementation of the [NZ legislation] has effectively handicapped the legislation. That decision (over the level of the fee payable by rights holders) instantly rendered the legislation expensive rather than the promised inexpensive solution. The imposition of an unjustifiable “fee”….can only be described as disastrous. In one fell swoop this had the effect of making the legislation unaffordable for many rights holders.

54

Because of the expense of the scheme, film and television rights holders, have boycotted the scheme due to the fees they would have to pay ISPs to issue the notices and all the cases brought to the Copyright Tribunal so far have been brought on behalf of music rights holders.

55

The Copyright Tribunal has determined just 18 matters since the scheme was introduced, with an average penalty across these matters of approximately NZ$500 (around AUD$450).

56 While rights

holders in the music industry have used the scheme, in December 2013 the General Counsel of RMNZ said that it had decided to take a break from bringing cases before the New Zealand Copyright Tribunal, citing the high cost of bringing cases to the Tribunal and frustration over the insufficient penalties handed down to offenders.

57 However, RMNZ has very recently decided to bring further

cases, declaring that music piracy is still a problem and it does not have other tools to address it.58

In addition to the costs imposed on rights holders in respect of each notice, Foxtel believes that the New Zealand model is also flawed in that it requires right holders to go to the time and expense of Copyright Tribunal proceedings only to find that the average fine imposed is NZ$500. Although alleged infringers have the right to defend themselves in front of the New Zealand Copyright Tribunal, it appears that no-one has taken up that option as yet, the cases being decided on ‘often scant paperwork’.

59 The process is not quick either; as at November 2013, 14 cases had been decided by

the Copyright Tribunal with an average time from filing to a decision of 5 months.60

Foxtel submits that appropriate ISP-imposed sanctions would avoid this unnecessary waste of resources.

53 Discussion Paper, page 2.

54 Chris Caddick, ‘Three Strikes and You’re Out: How Effective are the Infringing File Sharing Provisions in the Copyright Act

1994? – The Argument For’, New Zealand Intellectual Property Journal, November 2013, page 35.

55 Chris Caddick, ‘Three Strikes and You’re Out: How Effective are the Infringing File Sharing Provisions in the Copyright Act

1994? – The Argument For’, New Zealand Intellectual Property Journal, November 2013, page 35.

56 As at August 2014, 47 proceedings had been instituted in the New Zealand Copyright Tribunal; 23 proceedings were

withdrawn, 18 proceedings have been determined and 6 proceedings are ongoing.

57 lillyweb, Skynet Strikes Again, 13 August 2014 – available at http://www.lillyweb.co.nz/news.html.

58 Tom Pullar-Strecker, ‘Another alleged music pirate pinged under New Zealand's 'Skynet', The Sydney Morning Herald, 13

August 2014 – available at http://www.smh.com.au/digital-life/digital-life-news/another-alleged-music-pirate-pinged-under-new-zealands-skynet-20140813-103o3w.html.

59 lillyweb, Skynet Strikes Again, 13 August 2014 – available at http://www.lillyweb.co.nz/news.html.

60 Chris Caddick, ‘Three Strikes and You’re Out: How Effective are the Infringing File Sharing Provisions in the Copyright Act

1994? – The Argument For’, New Zealand Intellectual Property Journal, November 2013, page 35..

Page 22 of 41

Why the New Zealand costs model should be avoided in Australia A stark demonstration of the excessive costs of issuing notices in New Zealand can be seen when you apply the per-notice cost to the rate of piracy of Foxtel programs mentioned above. As mentioned, during 10 days in August monitoring for Foxtel detected around 40,000 unauthorised downloads of just four Foxtel programs. Fifty-seven per cent of these, or around 22,800 downloads, occurred in Australia. Assuming that the amount per notice was set at AUD$25, even if only one notice was sent in relation to each of these 22,800 downloads this would cost Foxtel $570,000 in respect of four programs over ten days. If three notices were required in relation to these downloaders, this would balloon to $1.71 million. This is clearly excessive. To set such a high fee would render the scheme inoperable due to prohibitive cost. It would be much more effective for content owners and ISPs to bear their own costs so there is an incentive for the scheme to be run as cost-efficiently as possible.

International success with injunctive relief

As noted in the Discussion Paper, a number of overseas jurisdictions have introduced specific

legislation that enables a court to order ISPs to block access to infringing sites.

Foxtel is aware that access to a number of infringing sites, including The Pirate Bay, has been

blocked across multiple jurisdictions since the introduction of specific injunctive relief for large-scale

copyright infringement. The table below sets out the infringing sites that Foxtel is aware of that have

been blocked pursuant to international legislation.

Country Blocked Sites

UK The Pirate Bay

Newzbin2

Kick Ass Torrents

H33T

Fenopy

First Row Sports

Movie2K

Download4all

EZTV

Rapidlibrary

Newalbumreleases

Mp3skull

Mp3raid

Mp3lemon

Mp3juices

Filestube

Filecrop

Eemp3world

Bomb-mp3

Beemp3

Ambp3

Torrentz

Torrenreactor

Torrenthound

Torrentdownloads

Torrentcrazy

Monova

Extratorrent

Bitsnoop

1337x

Page 23 of 41

Yify-Torrents

Project-Free TV

Watchfreemovies

Vodly

Primewire

Tube+

Solarmovie

Zmovie

Watch32

Megashare

Viooz

Belgium The Pirate Bay

Italy The Pirate Bay

BT Junkie

TorrentReactor

Torrents.net

Denmark The Pirate Bay

Grooveshark

Allofmp3.com

Austria The Pirate Bay

kino.to

Germany The Private Bay (based on duty of care)

Greece ellinadiko.com

Ireland The Pirate Bay (ISP agreed to injunction, which was later approved by the court)

Kickass Torrents

Finland The Pirate Bay

Malaysia The Pirate Bay

warez-bb.org

movie2k.to

megavideo.com

putlocker.com

depositfiles.com

duckload.com

fileserve.com

.filetube.com

megaupload.com

Kickass.to

India BTjunkie

Megaupload

Filesonic

219 websites blocked in July 2014 in lead up to the FIFA World Cup

Page 24 of 41

Injunctive relief in the United Kingdom

Foxtel submits that the injunctive relief power in the UK under section 97A of the Copyright Designs

and Patents Act 1988 has proved to be extremely effective and efficient in limiting access to websites

that offer access to infringing content.

The first injunction under section 97A was made in July 2011, when British Telecom was ordered to

block access to the ‘Newzbin2’ website.61

Similar orders were subsequently made against other

ISPs.62

As demonstrated in the graph below, Newzbin2 lost two-thirds of its visitors within 12 months of the

blocking orders being put into effect, despite changes in IP address and domain name:63

As a further example of the effectiveness of these orders, pursuant to section 97A several UK ISPs

were ordered to block access to The Pirate Bay on 2 May 2012.64

The graph below clearly illustrates

that the imposition of this injunction resulted in a significant reduction in visitors to The Pirate Bay

website:65

61 Twentieth Century Fox Film Corp & Ors v British Telecommunications Plc [2011] EWHC 1981 (Ch).

62 See EMI Records Ltd & Ors v British Sky Broadcasting Limited & Ors (EMI Records) [2013] EWHC 379 (Ch) at [6].

63 NetNames, January 2013.

64 Dramatico Entertainment Ltd v British Sky Broadcasting Ltd (No 2) [2012] EWHC 1152 (Ch).

65 NetNames, January 2013.

Page 25 of 41

English Courts have accepted that injunctions blocking access to sites are reasonably effective. In the

2013 proceeding EMI Records Ltd & Ors v British Sky Broadcasting Limited & Ors (EMI Records), in

which Justice Arnold made orders to block access to the KAT, H33T and Fenopy websites, Justice

Arnold identified the effectiveness of the orders as his third reason for holding that the injunction

sought was proportional to the infringements taking place:

…the evidence indicates that blocking orders are reasonably effective. The effect of the order made in Italy with regard to [The Pirate Bay]…[w]as a 73% reduction in audience accessing [The Pirate Bay] in Italy and a 96% reduction in page views. The blocking order made in Italy in relation to KAT has had a similar effect. As for the effect of the orders made in England in relation to [The Pirate Bay], as at 19 December 2011, [The Pirate Bay] was ranked by Alexa as number 43 in the UK, while as at 21 November 2012, its UK ranking had dropped to number 293.

66

The legislation is also operating effectively in that ISPs are cooperating with rights holders in clear

cases and not opposing applications, as has been noted in the Discussion Paper. By way of example,

in the EMI Records proceeding, each of the 10 ISP defendants agreed the terms of the claimants’

order and none of the 10 ISPs opposed the grant of the those orders. This enabled the application to

be considered on the papers, without a hearing.67

Consistent with this, in the recent decision of

Paramount Home Entertainment International Limited & Ors v British Sky Broadcasting Limited & Ors,

Justice Henderson noted that ‘[m]ost of the recent decisions in this line of cases have been dealt with

on paper by Arnold J, or other judges of this Division…’.68

Not only are ISPs cooperating with rights holders, these orders can also be used in a positive way by

ISPs. The note below was issued by Sky Broadband following its blocking of The Pirate Bay website

in May 2012:

66 EMI Records at [106].

67 EMI Records at [9]–[10].

68 Paramount Home Entertainment & Ors v British Sky Broadcasting & Ors [2014] EWHC 937 (Ch) (Paramount Home

Entertainment) at [28].

Page 26 of 41

We have invested billions of pounds in high-quality entertainment for our customers because we know how much our customers value it. It’s therefore important that companies like ours do what they can, alongside the Government and the rest of the media and technology industries, to help protect their copyright.

69

It is also worth noting that the English Courts have recognised that the costs to ISPs of compliance

with a section 97A order are modest and proportional. In EMI Records, Arnold J observed that:

[s]o far as the cost of complying with a blocking order is concerned, this is a factor in the

proportionality of the order as between the [rights holders] and the [ISPs]. The blocking orders

which this Court has made require use by the [ISPs] of technical measures which they

already have available, and therefore the cost of compliance is modest.70

Injunctive relief in Ireland

The evidence set out above clearly establishes the effectiveness of the UK injunctive relief provisions.

However, Foxtel submits that one aspect of the Australian legislation should be modelled on the Irish

provision rather than its UK counterpart. This is the absence of a requirement to establish actual

knowledge of the infringements on the part of ISPs—as noted in the Discussion Paper, ‘[u]nlike the

United Kingdom’s legislation, Irish law does not require the court to consider whether the ISP had

knowledge of the infringing conduct’.71

Foxtel believes that adopting the Irish model with respect to knowledge would be beneficial because it

would enable the injunctive relief to be a ‘no-fault’ provision. Following the Irish precedent rather than

the UK model in this respect should have no impact upon the effectiveness of the orders—in fact, as

ISPs would not have to admit actual knowledge, it should facilitate increased cooperation between

ISPs and rights holders and generally contribute to the smooth running of the legislation in Australia.

69 BBC News, Sky blocks access to The Pirate Bay file-sharing site, 30 May 2012 – available at

http://www.bbc.com/news/technology-18270343.

70 EMI Records at [102].

71 Discussion Paper, page 5.

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SECTION 3: FOXTEL’S COMMERCIAL RESPONSE

The Discussion Paper suggests that rights holders should ensure that content is easily accessible at

reasonable prices. As far as availability goes, Australia has an abundance of legal means by which to

watch, listen to and play great content in a flexible manner and on a range of devices.

An industry-wide response to availability

The range of legitimate content available in Australia was highlighted with the recent launch of the

Digital Content Guide,72

a web portal developed by an assembly of Australia’s creative content

associations, creators and distributors. The Guide enables Australians to access licensed online

entertainment services—including TV shows, movies, music, eBooks, video games and sport—and

helps distinguish between sites that offer legal access and those that illegally monetise the hard work

of all who contribute to the creative industry. The site directs visitors to information about different

services, with links through to each service for users to directly explore and enjoy content.

Availability of content on Foxtel

For Foxtel’s part, it goes to great lengths through its ‘Express from the US’ effort to bring key

international content to subscribers as soon as possible—the most popular example, Game of

Thrones, was available to Foxtel subscribers within two hours after each episode aired in the US.73

Express from the US on Foxtel Foxtel’s Express from the US strategy seeks to fulfil the demand of customers who might otherwise seek content illegally by bringing popular US television series to Australia very quickly after the US premiere (with similar arrangements for key content from the UK). The strategy is a major initiative to deliver television series to Foxtel customers within seven days of the episode screening in the US, and in many cases within hours. By way of example, all of the following series were screened as soon as the US West Coast broadcasts were complete (the earliest Foxtel is able to broadcast them in Australia). The delay is typically limited to two hours or less depending on when the programming is received. As well as Game of Thrones, other recent ‘Express’ programs on Foxtel include:

House of Cards (seasons 1 and 2)74

True Detective

Sons of Anarchy

Breaking Bad

Dexter

Girls

True Blood

The Walking Dead

Boardwalk Empire

Pretty Little Liars Despite Foxtel’s efforts to bring these programs to Australians as soon as possible, it is noteworthy that these are among the most frequently pirated programs online. See Section 1 of this submission in relation to Australian illegal downloads of Game of Thrones and Breaking Bad.

72 Available at http://digitalcontentguide.com.au/. The Digital Content Guide is a joint effort by APRA AMCOS, The Australian

Recording Industry Association (ARIA), The Australian Screen Association (ASA), Copyright Agency Ltd., News Corp Limited, Foxtel and Village Roadshow Limited.

73 It is also worth noting the efforts being made by the Australian cinema industry to align release times with the US, and in

some case screen premiere movies ahead of the first US screening. For example, in his 17 August 2014 article in online publication Reckoner, Peter Wells notes that of a selection of movies seven of 10 were actually released in Australia cinemas before the US. See ‘Sorry EFA, You Can Legally Purchase 8 of the 10 Most Pirated Movies This Week’ – available at http://reckoner.com.au/2014/08/sorry-efa-you-can-legally-purchase-8-of-the-10-most-pirated-movies-this-week/.

74 As well as broadcasting House of Cards week-by-week, in February 2014 Foxtel also offered all 13 episodes for download

and binge-watching for subscribers with internet connected set-top-boxes and on mobile devices through Foxtel Go.

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Foxtel has also made a massive investment to maximise the number of ways in which its subscribers can enjoy content by making it available on tablets, mobile phones and other popular devices—as well as through its leading set-top-boxes, the iQ and MyStar. Known for innovation, Foxtel is constantly looking for ways to enhance its customers’ viewing experience, with a step change in functionality due to be made available shortly with the launch of Foxtel’s world-class iQ3 box.

75 The

following sets out the ways in which Foxtel’s customers can access great content on Foxtel:

Set-top-box viewing – linear, catch-up and rental on-demand With content delivered via cable and satellite, as well as over the internet (for internet-connected iQ boxes), subscribers to Foxtel’s full service can, among other things:

pause, rewind and replay live TV;

set their box to record an entire season at the touch of a button; and

record a program on their box when not at home, using their PC, tablet or mobile.

Foxtel’s internet TV service Foxtel Play streams TV over the internet—both live and catch-up TV and movies on demand.

It is available on PCs and Macs, Xbox 360, Sony PlayStation 3 and 4, a selection of Samsung Smart TVs and Blu-Ray players and LG Smart TVs (subject to model compatibility).

Users can register up to three devices and watch on two devices at the same time.

Subscriptions are available on a month-to-month basis, with no lock-in contract.

Complementary tablet and smart phone app Foxtel Go is a companion app provided at no extra charge to residential (cable and satellite) and Foxtel Play (IPTV) account holders, providing both live and catch-up content. It is available on selected iPads, iPhones, PCs and Macs, and

selected Android devices.

Users can register up to three devices and watch on two devices at the same time.

On-demand access to movies via IP Presto is Foxtel’s stand-alone on-demand movie experience, delivered across PC, Mac, iPad, Android and Google Chromecast.

76 Presto includes recent box office hits and unforgettable movie

favourites, as well as critic reviews.

Users can register up to three devices and watch on two devices at once.

Subscriptions are month-to-month, with no lock-in contract.

75 Foxtel will soon launch the iQ3, which will be a quantum leap forward from its previous set-top-boxes. Using wi-fi technology

it will offer significantly more opportunities for internet delivery and a vastly improved TV Guide that has been streamlined to help customers discover the best programming for them. With combined live, recorded and on-demand programs, this box will customise the TV experience and take the viewing experience to the next level.

76 Google Chromecast is a thumb-sized media streaming device that plugs into the HDMI port on a TV. It is set up with a mobile

app, and allows users to send their favourite online shows, movies, music and more to their TV using their smartphone, tablet or laptop. Presto was a launch partner of Google Chromecast in Australia.

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A dramatic change to Foxtel pricing

The Discussion Paper notes the affordability of lawful content as a factor that contributes to online copyright infringement in Australia. Foxtel is doing everything it can to make its services as affordable and accessible as possible and it recently announced two significant reductions in the price of its services. On 4 September 2014, Foxtel announced that it would introduce new packaging and pricing from 3 November 2014 for its main cable and satellite broadcast product, which will offer consumers more choice and a dramatically lower entry price, with no reduction in its innovative technology. From 3 November 2014 the price of Foxtel’s entry level package will be reduced by almost half, from $49 per month to just $25 per month (on a 12 month plan). After purchasing the $25 entry pack, customers will be able to pick and choose genre additional packs of their interest, including:

sport for an extra $25 a month;

movies for an extra $20 a month; and/or

a premium drama pack (which will include showcase, BBC First, FX, 13th Street and a new

BoxSets channel) for an extra $20 a month.

Detail of Foxtel’s new packaging and pricing is set out in Attachment A to this submission. At the same time as launching its new packaging and pricing, Foxtel is adding more value to the packages of its existing customers, with all customers who remain on their current packaging receiving some bonus content at no additional charge. In order to introduce this radical new packaging and pricing, and the provision of bonus content, Foxtel has had to renegotiate almost all of its major content supply arrangements. This is not an isolated example as, on 17 August 2014, Foxtel announced that it was halving the price of Presto, Foxtel’s ‘all-you-can-eat’ subscription movie service, from $19.99 per month, to just $9.99. This has resulted in a significant increase in traffic to the Presto site along with a spike in Presto subscriptions.

Legitimate content services in Australia Foxtel is operating in an environment of increasingly competitive legitimate content services in Australia. This is great for consumers and underscores the opportunity for policy settings that seek to divert users of unauthorised content services to a wide range of legitimate domestic content services.

As illustrated by the indicative chart below, the range of sources of legitimate content—providing content both for a fee and using advertiser-funded models—has grown massively in Australia, especially over the last five years. Australian operators have seen noticeable competition from very strong multi-national brands such as Apple’s iTunes. This trend is set to continue, particularly in relation to online services.

As reflected in the chart, there has been persistent media commentary suggesting that Netflix will launch an Australian operation within the coming year. Reports suggest that Netflix already has a very large Australian subscriber base for its US service, even though accessing the US Netflix service from Australia may be a breach of the service’s terms and conditions and would not be consistent with licensing arrangements the service has in place with content suppliers.

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Whether it is the impending launch of Netflix, the operation of the existing Quickflix service, or the launch of Nine Entertainment Co.’s and Fairfax’s ‘Stream Co’ and the Dendy cinema chain’s online steaming service, it is clear that competition for film and television content rights in Australia will continue to increase.

However, despite this increasing competition it would appear probable based on overseas experience that without taking regulatory and educative steps, and effecting change to social norms, piracy will remain a problem. For example, it has been reported that even despite its large subscriber base piracy remains a problem for Netflix.

As recently reported in The Washington Post, Netflix’s own production, Orange is the New Black has been the subject of significant unauthorised downloading. On 24 August 2014 it was reported that:

[a]s recently as last week, “Orange Is the New Black,” Netflix’s hit series about a women’s prison, was the second-most-pirated TV show in the world on a daily basis after HBO’s “Game of Thrones,” according to CEG TEK, a data service that tracks online piracy.

The show, nominated in the best comedy series category at the Emmys, was downloaded—mostly illegally—about 60 million times in the first six months of this year, more than the number of Netflix’s total users, according to a separate report last week by Internet data research firm Tru Optik.

Just about every Emmy-nominated show ranks high among stolen videos online, including CBS’s “The Big Bang Theory,” HBO’s “True Detective” and AMC’s “Breaking Bad.” Online viewers are rampantly sharing files of the stolen videos, bypassing payments to cable firms and broadcast networks that rely on viewers to watch ads.

77

The article notes that even in the US, where Orange is the New Black is available legitimately via the Netflix service, the series is subject to significant unauthorised downloading. In the week preceding the article, the series was third in pirated titles, with nearly 5,000 illegal downloads a day in the US.

77 Cecilia Kang, ‘“Orange Is the New Black” is now the second-most pirated TV show in the world’, The Washington Post, 24

August 2014 – available at http://www.washingtonpost.com/business/technology/orange-is-the-new-black-is-now-the-second-most-pirated-tv-show-in-the-world/2014/08/24/4b9a4bf2-2977-11e4-8593-da634b334390_story.html.

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SECTION 4: RECOMMEDNED APPROACH TO SOLVING THE PROBLEM

Foxtel agrees with the Government that everybody has a role to play in reducing the rate of online piracy in Australia, and increasing the use of legitimate domestic content services that return value to the Australian economy and creative industries. This includes:

rights holders, who must make content easily accessible at reasonable prices—as set out

above, there is clear evidence that Foxtel is doing this;

ISPs, who must take reasonable steps to ensure their systems and services are not used to

infringe copyright—ISPs are the only ones who can efficiently enforce measures to curb online

piracy and cannot be seen as ‘innocent bystanders’ when their networks and carriage services

are being used for economically harmful illegitimate downloading; and

consumers, who must access content lawfully; and, as set out below, must be educated about

the benefits of doing so.

Foxtel believes that the Government also has a role to play in creating the policy settings required to

reduce online copyright infringement. While the Discussion Paper notes that workable approaches to

dealing with online copyright are most likely to come from the market, it is appropriate that the

Government acknowledges that it has a role in providing a legal framework that facilitates

cooperation. Foxtel’s detailed views on the Government’s legislative proposals are set out below in

Section 5.

As noted above, research shows that, young people in particular, assume that the availability of

illegitimate content online without any corresponding visible regulatory response means that it must

be acceptable to pirate content. It is important that the Government assists to reverse the perception

that online copyright infringement is not serious or important enough to act on.

ISPs have a role to play

Foxtel is pleased that Australian ISPs acknowledge that piracy is a problem. For example, in June 2014, iiNet noted online that:

[j]ust in case there is some confusion—let us state, once and for all, that we do not condone piracy in any way, shape or form.

Online piracy, apart from being a breach of copyright, affects the income of the artists and violates numerous trade agreements. Musicians, authors, film makers or game creators might be hesitant to create new content if they know that the end product will simply be stolen. How would the public feel if producers like HBO decided not to finish George R.R Martin’s Song of Fire and Ice series due to the actions of those who simply downloaded his compelling series instead of paying for it? The outcry would be deafening.

78

However, iiNet has been critical of content owners for seeking to tackle how customers are pirating content (that is by targeting P2P downloads and unauthorised streaming). Instead, it suggests the focus should be on why consumers are pirating.

While research reveals that there are a range of reasons that consumers may be accessing unauthorised content online—including because they do not understand what is and is not legitimate content—iiNet places some focus on the perceived lack of timely delivery of international content to Australia. But, as set out above, with key Foxtel programs being delivered from overseas in a very timely fashion under the ‘Express from the US’ strategy, and with Foxtel also taking major steps to increase availability across platforms, and significantly reducing prices, Foxtel believes it remains for ISPs to also do their part by joining a cooperative scheme to manage P2P piracy and by supporting and complying with court orders in relation to unauthorised streaming services.

ISPs are best placed to assist in managing this problem and they should:

78 Blog post from Steve Dalby, iiNet Chief Regulatory Officer, What’s the issue with Piracy in Australia? – available at

http://blog.iinet.net.au/issue-piracy-australia/.

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assist by mitigating, to the extent they can, use of their networks for unauthorised purposes; and

recognise the importance of protecting the rights of content owners and take the effort to restrict

access to illegitimate sites so as to remove the source of illegal content in the first place.

Educating consumers

In Foxtel’s view, all parties have an obligation to ensure that consumers are educated about the

implications of unauthorised use of content and how to get access to legitimate sources of content. A

graduated response scheme, for example, provides a good opportunity to provide education to users

in the environment in which they have infringed (for example, by way of diversion to a copyright

education website or in an email notice received on the same device they have used to access the

content itself).

As detailed above, recent research for IPAF shows that young people, in particular, may be

downloading unauthorised content because they incorrectly believe it is the social norm or because

they mistakenly believe that it does no real harm.

As Foxtel submitted to the ALRC during its copyright inquiry, social norms which condone illegitimate

use of copyright material should not be allowed to outweigh rights holders’ legitimate interests in

protecting their intellectual property. To do this would undermine rights holders’ ability to make

increasingly valuable contributions to the digital economy. Instead, it is important to focus education

efforts on explaining the value of the content industry in the digital economy and to explaining what is

legitimate content and where to find it.

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SECTION 5: ISSUES AND QUESTIONS IN THE DISCUSSION PAPER

Set out below are Foxtel’s specific comments in relation to the Government’s proposals in the

Discussion Paper regarding extended authorisation liability (Proposal 1), extended injunctive relief

(Proposal 2) and extended safe harbour scheme (Proposal 3).

Proposal 1 – Extended authorisation liability

Proposal 1 – Extended authorisation liability

The Copyright Act would be amended to clarify the application of authorisation liability under sections 36 and 101 to ISPs.

In determining whether a person has authorised an infringing act, a court would still be required to consider the nature of the relationship between the person authorising the infringement and the person who did the infringing act, and whether the person took any reasonable steps to prevent or avoid the infringing act (as currently required).

In making an assessment of the ‘reasonable steps’ element, a court must have regard to:

(a) the extent (if any) of the person’s power to prevent the doing of the act concerned; (b) whether the person or entity was complying with any relevant industry schemes or

commercial arrangements entered into by relevant parties; (c) whether the person or entity complied with any prescribed measures in the Copyright

Regulations 1969; and (d) any other relevant factors.

The ‘power to prevent’ the infringing act would no longer be a separate element, but would be only one of a number of relevant factors in determining whether ‘reasonable steps’ were taken to prevent or avoid the infringement. The amendments would clarify that the absence of a direct power to prevent a particular infringement would not, of itself, preclude a person from taking reasonable steps to prevent or avoid an infringing act.

Foxtel endorses the statement in the Discussion Paper that ‘extending authorisation liability is

essential to ensuring the existence of an effective legal framework that encourages industry

cooperation and functions as originally intended, and is consistent with Australia’s international

obligations’.79

The current authorisation liability provisions under section 101(1A) of the Copyright Act 1968 (the Act)

were introduced via the Copyright Amendment (Digital Agenda) Bill 1999 (the Bill). It is worth noting

that the current authorisation liability provisions were in fact intended to apply to ISPs—among other

matters, the Explanatory Memorandum to the Bill noted that one of the objectives of the Bill was to

‘ensure that copyright law provides carriers and carriage service providers (including ISPs) with

reasonable certainty about liability for infringements that occur on their facilities or infrastructure’.80

However, the key case on point in relation to ISPs and the issue of authorisation is the High Court’s

decision in Roadshow Films Pty Ltd & Ors v iiNet Ltd81

(the iiNet case). As is well known, in the iiNet

case the High Court found that iiNet was not liable for authorising the infringement of its users, for

reasons including that there were no reasonable steps that could have been taken by iiNet. The

Discussion Paper itself notes that ‘the effect of the decision is to severely limit the circumstances in

which an ISP can be found liable for authorising an act by a subscriber that infringes copyright’.82

79 Discussion Paper, page 3.

80 Explanatory Memorandum to Bill, page 7.

81 [2012] HCA 16 (20 April 2012).

82 Discussion Paper, page 3.

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Foxtel submits that this ‘severe limitation’ must be corrected. Foxtel endorses the Government’s

comments that ‘even where an ISP does not have a direct power to prevent a person from doing a

particular infringing act, there may still be reasonable steps that can be taken by the ISP to

discourage or reduce online copyright infringement’.83

Foxtel’s concerns with Proposal 1

While Foxtel welcomes an extension to authorisation liability to clearly encompass ISPs, it has a

number of concerns in relation to Proposal 1.

First, Foxtel is concerned that the proposed extension of authorisation liability as set out in Proposal 1

is not limited to online services and therefore is broader than necessary to address online copyright

infringement. Authorisation liability is one of the most contested areas of copyright law and extending

it in an untargeted way to any acts of copyright infringement will likely be highly controversial. This is

likely to be of particular concern as the safe harbour provisions are currently limited to online services.

Moreover, even if the amendments only applied to online services, Foxtel believes Proposal 1 will

potentially lead to further test cases on liability. For example, it is proposed that the element of

‘reasonable steps’ as set out in Proposal 1 includes a number of factors that the court must have

regard to, including the extent (if any) of the person’s power to prevent the doing of the act concerned.

This was exactly the issue that was the subject of much debate in the various iiNet cases. On the

facts in that case, it is highly doubtful that the High Court would decide the matter differently if

Proposal 1 was implemented given the majority of the High Court did not think it was reasonable for

iiNet to send warnings or terminate accounts—as, on the facts in that case, it had limited powers to

prevent a customer’s primary infringement.

Foxtel’s suggested approach

Foxtel’s main concern is to ensure that ISPs and other service providers (for example, search engine

providers) have an obligation to act and that this is established through clear drafting. Liability for

authorisation could be established where an ISP fails to take reasonable steps to act to prevent

infringing activity, with those reasonable steps set out in an industry code. This type of amendment

would then provide the incentive required for ISPs to co-operate with copyright owners in the

development of an industry code and also ensure that ISPs are motivated to comply with the code.

In this respect, Foxtel believes that the US CAS is the best example of a current graduated response

model that could be adopted for Australia. This model was developed through the co-operation of the

parties to the memorandum of understanding and requires the ISP to send a number of notices to a

customer before it is required to impose some form of mitigation measure. The initial notices are

educational and increase to a minimum of four notices being sent before the ISP moves to the stage

of imposing a mitigation measure. As discussed in Section 2 above, the CIC report of the first year of

operation of the US CAS clearly illustrates its effectiveness.

Foxtel strongly believes that the Australian scheme must have some mitigation measures as is the

case in the US CAS. The CAS provides the carriage service provider with the discretion to implement

one of a number of mitigation measures including:

significantly slowing down subscribers’ internet speed for a prescribed period;

restricting the web pages on the internet that are accessible using the subscriber’s account for a

prescribed period;

implementing redirection of the subscriber’s internet account to an information page for a

prescribed period or for such time until the subscriber undertakes an activity to acknowledge

receipt of the notice; and/or

83 Discussion Paper, page 3.

Page 35 of 41

such other technological measure which will have an equivalent impact on the subscriber’s

access to full internet capabilities, but which will not result in termination of the subscriber’s

access to the internet and emergency services.

As previously mentioned, Foxtel is not advocating for termination of accounts as a mitigation measure

and accepts that a mitigation measure must not disable an account holder’s voice telephone service

(including 000), email, security or health service.

Foxtel submits that all effective international models, such as those in the US and Korea, involve

some form of mitigation measure. Without some form of end point, such as those suggested above,

the reforms are unlikely to succeed in changing behaviour.

Foxtel welcomes the comment in the Discussion Paper that the Government would have the power to

prescribe measures in the Copyright Regulations 1969 if effective industry schemes or commercial

arrangements are not developed. However, Foxtel submits that it is critical that a short time frame is

specified in the legislation to ensure that the relevant stakeholders are motivated to engage quickly

with a view to reaching agreement on an industry code.

Finally, Foxtel submits that the costs associated with implementing such schemes or arrangements

must be borne by each party to ensure that each party operates as efficiently as possible. There are

many difficulties with trying to allocate costs between parties in this context, in particular, verifying

appropriate costs to be included in each category. As outlined in Section 2 above, Foxtel notes that

many of the international gradated response programs, including the US, French, Irish, South Korean

and Taiwanese models, all provide for the costs to be borne by each party.

Foxtel’s response to Questions 1–5

QUESTION 1: What could constitute ‘reasonable steps’ for ISPs to prevent or avoid copyright infringement?

Foxtel believes that the US CAS provides the best model for the ‘reasonable steps’ that ISPs should

take to prevent or avoid copyright infringement. This includes the sending of escalating educational

notices, and culminating in the ISP implementing one of a number of mitigation measures. Foxtel is

not advocating for account termination as the final step in this type of scheme but believes shaping

would be a very effective final step.

QUESTION 2: How should the costs of any ‘reasonable steps’ be shared between industry participants?

Rights holders and ISPs should each bear their own costs. This is consistent with the vast majority of

international graduated response schemes, including the US, UK, French, Irish, South Korean and

Taiwanese models.

QUESTION 3: Should the legislation provide further guidance on what would constitute ‘reasonable steps’?

Foxtel submits that the legislation should include the elements to be included in an industry code

which must be complied with if an ISP is to have satisfied the test of having taken ‘reasonable steps’.

Those elements should include:

a notice procedure for copyright owners to notify ISPs of alleged infringements and ISPs to send

account holders notices, which would commence with educational notices and proceed to

acknowledgment notices and then mitigation notices;

the information which is to be included in each notice;

a requirement for ISPs to implement a mitigation measure once it has sent an account holder at

least 3 notices;

Page 36 of 41

a review mechanism for account holders; and

that each party will bear its own costs.

QUESTION 4: Should different ISPs be able to adopt different ‘reasonable steps’ and, if so, what would be required within a legislative framework to accommodate this?

Foxtel strongly believes that any model must create a level playing field and should not unfairly

discriminate between ISPs.

As with the CAS, ISPs could have flexibility to choose which mitigation measure they impose. The

legislative framework could allow for this by including each of the various mitigation measures as

elements of what constitutes ‘reasonable steps’.

QUESTION 5: What rights should consumers have in response to any scheme or ‘reasonable steps’ taken by ISPs or rights holders? Does the legislative framework need to provide for these rights?

Foxtel agrees that consumers should have rights in response to the graduated response scheme and

any ‘reasonable steps’ taken. Foxtel believes that for the scheme to operate effectively, it is important

that accounts are correctly matched to infringing activity, that appropriate safeguards are built into the

scheme so that mitigation measures are not imposed in error, and that consumer personal information

is not disclosed unnecessarily.

Consumer advocacy groups had input into the development of the US CAS, which has been designed

to address each of these concerns. The personal information of account holders who receive a CAS

notice is not provided to rights holders and there is an ‘easy-to-access’ independent review process

which is available to account holders who believe they have received the alert in error.84

There is a

nominal $35 fee to submit an appeal (which is refunded if the appeal is successful) and consumers

who cannot afford to pay the $35 can apply for a fee-waiver.85

Foxtel submits that a similar model is

appropriate to adopt for Australia.

84 2014 CCI Report, page 2.

85 2014 CCI Report, page 8.

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Proposal 2 – Extended injunctive relief

Proposal 2 – Extended injunctive relief

The Copyright Act would be amended to enable rights holders to apply to a court for an order against ISPs to block access to an internet site operated outside Australia, the dominant purpose of which is to infringe copyright.

Rights holders would be required to meet any reasonable costs associated with an ISP giving effect to an order and to indemnify the ISP against any damages claimed by a third party.

Foxtel submits that it is critical that the Act is amended to introduce a right to seek injunctive relief to

block websites that make available content that infringes copyright.

As is clear from Section 2 of Foxtel’s submission, Australia has fallen behind international precedent

and this must be part of the reason why Australia ranks as one of the highest countries in the world in

relation to online piracy.

Foxtel believes that the Australian model should be a blend of the successful UK and Irish models. As

outlined in Section 2 above, Ireland does not require a finding of actual knowledge by an ISP which

reflects the ‘no fault’ aspect of the provision. Actual knowledge by an ISP is required under the UK

law, but this has generally been easy to establish—for example, in EMI Records, just one paragraph

of the judgment relates to whether the defendant ISPs had actual knowledge that the websites in

question were being used by their customers to infringe copyright.86

In any event, Foxtel submits that

the Australian legislation should include a ‘no-fault’ provision which does not require an applicant to

prove that the ISP had actual knowledge of the relevant infringements.

Using a combination of UK and Irish precedent would have the benefit of enabling Australian courts to

refer to the growing body of UK and Irish precedent referred to in Section 2 above. In granting the

injunction, the court would be required to consider the reasonable steps that an ISP should take to

disable access. In addition, provided the ISP was complying with the order, then the ISP would not be

liable for any action that maybe brought against them in relation to that compliance.

It is also important that the legislation is drafted sufficiently broadly such that it captures all other key

service providers (e.g. search engine providers).

Foxtel’s concerns with Proposal 2

However, Foxtel is concerned by a number of the elements of the proposed extended injunctive relief

proposal, including the following:

the limitation to internet sites operated outside of Australia. Foxtel submits that greater

consideration should be given as to whether this limitation is required, particularly given

approaches taken elsewhere, including in Singapore, are not so limited;

the requirement that the rights holder satisfy the test that the internet site is operated for ‘a

dominant purpose’ of infringing copyright. Foxtel is concerned that this could create practical

difficulties in terms of the evidence required to satisfy the test and uncertainty as to how a court

will apply it. If it was considered necessary to include a threshold test, then the amendment

should articulate relevant factual matters to be taken into account in assessing the 'dominant

purpose' of a site (for example, the type of content made available and its use); and

the requirement that the court consider factors such as the rights of any person likely to be

affected by the grant of an injunction, whether an injunction is a proportionate response and the

importance of freedom of expression. Foxtel is concerned that these elements will potentially lead

to ex parte applications intended to frustrate and delay the process.

86 EMI Records at [89].

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Foxtel notes the Government’s proposal that rights holders be required to meet any reasonable costs

associated with an ISP giving effect to an order and to indemnify the ISP against any damages

claimed by a third party. Foxtel has significant concerns in relation to this point.

Firstly it is unnecessary, as the costs that will be incurred by the ISP in complying with the order

should be minimal. In this respect, it is accepted internationally that the cost to an ISP of complying

with a blocking order will be modest. In EMI Records, Justice Arnold found that ‘…blocking

orders…require use by the [ISPs] of technical measures which they already have available, and

therefore the cost of compliance is modest’.87

A similar finding was made by Justice Arnold in an

earlier proceeding when British Telecom was ordered to block access to the ‘Newzbin2’ website88

and

in one of the most recent decisions, where Justice Henderson held that the costs to ISPs of complying

with the injunction ‘will…be relatively modest and will not cause them any particular difficulty’.89

Requiring rights holders to indemnify ISPs is out of step with international precedent and unjustified.

As such, Foxtel strongly believes that rights holders should not be required to meet any costs

associated with an ISP giving effect to an order.

QUESTION 6: What matters should the Court consider when determining whether to grant an injunction to block access to a particular website?

In the UK, courts have discretion as to whether to grant an injunction to block access to a particular

site, which requires the court to consider the appropriateness of the orders sought. Foxtel would be

happy for a similar discretion to apply under Australian law.

Foxtel also believes it is appropriate that the court have due regard to the rights of any person likely to

be affected by the injunction and give such directions as the court considers appropriate (including,

where appropriate, a direction requiring a person to be notified of the application). This is consistent

with section 40(5A)(b) of the Copyright and Related Rights Act 2000 (Ireland) which has been the

subject of a number of proceedings.

However, for the reasons explained above, Australian courts should not be required to have regard to

whether the website in question is operated for ‘a dominant purpose’ of infringing copyright, or

freedom of expression. A consideration of such matters would be unique to Australia and Foxtel is

concerned that a requirement to consider such matters would undermine the intent of the legislation.

As per the Irish model, there should also be no requirement that an ISP have actual knowledge of the

infringements. Foxtel submits that this is consistent with the proposal that Australian injunctive relief

would not require an applicant to establish that an ISP has authorised an infringement. Excluding a

requirement of actual knowledge is also likely to foster cooperation between ISPs and rights holders

in clear cases.

87 EMI Records at [102]

88 Twentieth Century Fox Film Corp & Ors v British Telecommunications Plc [2011] EWHC 1981 (Ch).

89 Paramount Home Entertainment at [43]

Page 39 of 41

Proposal 3 – Extended safe harbour

Proposal 3 – Extended safe harbour scheme

The Copyright Act would be amended to extend the application of the safe harbour scheme to entities engaged in the activities set out in sections 116AC to 116AF. This would be achieved by removing the reference to carriage service provider and replacing it with a definition of ‘service provider’, being any person who engages in activities defined in sections 116AC to 116AF.

QUESTION 7: Would the proposed definition adequately and appropriately expand the safe harbour scheme?

Foxtel does not support Proposal 3.

In particular, Foxtel does not agree with the extension of the safe harbour scheme in circumstances

where it is unclear as to whether ‘service providers’ can actually be found responsible for

authorisation of those various activities.

However, if Proposal 3 were to be introduced as part of a package of measures which clearly

provided for ‘service providers’ to be liable for the authorisation of copyright infringement, Foxtel

would not oppose Proposal 3.

Building the Evidence Base

QUESTION 8: How can the impact of any measures to address online copyright infringement best be measured?

As a general comment, Foxtel supports the monitoring and evaluation of any measures that are

introduced, to ensure that they are effective. However, until the details of the measures that will be

introduced are finalised, it is difficult to respond in a meaningful way to this question.

Foxtel notes that the US CAS includes a review and evaluation component for the express purpose of

assessing the effectiveness of the program.

Other Approaches

QUESTION 9: Are there alternative measures to reduce online copyright infringement that may be

more effective?

Subject to its comments and concerns outlined above, Foxtel supports modified versions of Proposal

1 and Proposal 2 as effective measures to reduce online copyright infringement.

For the reasons explained in Section 1 above, it is critical that measures to reduce online copyright

infringement are introduced into Australia law as a matter of urgency. As also noted above, legislative

action must be coupled with measures to educate consumers, as well as ongoing initiatives to

improve the availability of legitimate content.

Regulation Impact Statement

Foxtel makes no comment in response to questions 10 and 11 of the Discussion Paper.

Page 40 of 41

SECTION 6: CONCLUSIONS

Foxtel has always had to deal with issues of theft and piracy. It used to be isolated to those who

would steal the smartcards that protect set-top-boxes. Today’s pirates hail from across the socio-

economic spectrum and can include anyone with a reasonable broadband connection.

Online piracy hurts everyone in the entertainment ecosystem—from creators of content, to producers,

to buyers and distributors. It hurts actors, writers, Foxtel installers, the people who shoot or edit a TV

show and those who sells tickets at the movies. Consumers are also hurt by online piracy where it

undermines the ability of creators and their investors to monetise content, and so produce content in

the first place.

Online copyright infringement requires strong Government action and, subject to Foxtel’s specific

comments and suggestions above, Foxtel is pleased the Government is proposing to take action,

including by encouraging the content and ISP sectors to work together on solutions.

Foxtel has actively engaged in the debate about online piracy to date and will continue to do so. As

noted above, Foxtel will soon be an ISP and it is prepared to play its part both as a content supplier

and carriage provider.

Australia has fallen behind almost all comparable countries in relation to regulatory responses to

online copyright infringement. Together with ensuring that Foxtel provides speedy, affordable and

legal ways for people to get access to content, Foxtel supports the implementation of a strong

regulatory framework that will help protect Australia’s developing digital economy.

Page 41 of 41

ATTACHMENT A

New Foxtel prices and packages

The following are new Foxtel packs that offer a lower entry price with more choice. These prices will

be available on a 12 month plan from 3 November 2014.