The Global Digital Content Market

June 28, 2016

Alan Willaert  -  AFM Vice President from Canada

Being a newbie, sliding into my seat to listen to presentations on the global digital market in the main conference hall at WIPO headquarters in Geneva was like revisiting a university lecture hall. Except that, unlike a campus lecture, there were more than 1,000 registrations from 144 countries.

Now, on to what was learned. The creative industry represents more than 30 million jobs worldwide. The global music recording industry is worth US $15 billion. Revenue from digital sources grew to $6.8 billion and is now equal to those from physical sources, averaged across all markets. Yet, music is still in a state of flux as it struggles to adapt to the online era. Digital delivery decreases the cost of creating, distributing, and storing music, yet the remuneration to artists in this medium has not made up the difference from losses in physical sales.

The reason, according to Jaron Lanier, a noted computer scientist, composer, artist, and author, is that musicians were the “canary in the coal mine” as the Internet exploded. Music files were the first to be readily available online, sourced for free, and shared. Lanier admits to being an early supporter of “free” music and software, as landmarks of a utopian society. He then watched in despair as, one after another, his musician friends were forced to leave the music business because they could no longer extract enough profit (from CD sales) to earn a modest living—a direct result of the Internet.

Music is not the only example of the undermining of the market economy in all areas. Another is online translation. Groups of translators got together and developed the necessary algorithms, and store sufficient samples to create online translation for practically every language, which effectively put those same translators out of work. Sound familiar? Luckily, machines don’t think (despite claims to the contrary); they must reference stored data. We haven’t created a society where machines rule, but rather a society that requires more highly educated people to keep up with them.

A new economy has emerged. It’s no longer about the upper class 5% who used to control 95% of the wealth. The money is now with whichever company owns the largest computer, and who can expropriate/store the most content and then sell it to the consumer. Some of those users, ironically, are the same people who provided the content and now are being forced to pay for access. Indeed, whoever has the biggest computer can virtually control society.

A perfect example of this was the recent US government versus Apple controversy, with the latter refusing to unlock an iPhone. Younger folks today, ironically, are more apt to trust a large tech company than government, but large tech companies would never allow access into their computers, and the secrets they contain. Who is to say the tech company is honest and not accessing everyone’s images and personal information? Who, indeed, is the gatekeeper?

And the wealth keeps flowing upwards to the big computer. How many people, especially musicians, spend hours and hours posting to Facebook and Twitter? In the end, all they have done is generate more revenue for the big computers in California. Another big computer—YouTube—does pay musicians for their content, but similar to Spotify and other such providers, the revenue graph is no longer a bell curve, but rather a zip curve. Only the top performers receive anything significant, or anything at all.

The music industry has therefore developed into an unsustainable culture, where the social contract between the artists/creators and the users is broken. But it doesn’t have to stay that way. Free music is not the problem; the problem is not recognizing and compensating the artists/creators. The technology (the aforementioned algorithms, which are a correlation of data) is available to trace access/views and distribute the money accurately. Any pattern of bits can be tracked. Digital rights management, combined with expanded and updated copyright laws and universally adopted regulation are the cornerstones for the future. Paper documents are unwieldy in a world where the music is accessed or used thousands or millions of times. We must take the value of intellectual property more seriously, and expand it to a level it’s never been at before.

Some artists are experimenting with Blockchain, a public ledger of Bitcoin transactions and digital wallet, as well as transparent transactions utilizing “smart contracts,” which automatically distribute income to the musicians, publisher, composer, and label. Other artists have adopted the movie release methodology (theatres first, then DVD, Netflix, and other platforms). They allow distribution of only the physical copy first and tour to support sales, with digital platforms following later, when the physical demand has been exhausted.

As for online piracy, this is still a problem. The solution lies with each country reviewing “safe harbour” provisions in their copyright laws. Nonpassive entities should be subject to significant penalties, if they monetize or benefit from such activities, which include tighter regulation for the Internet service providers.

With the five-year review of the Canadian Copyright Act coming in 2017, the opportunity arises once again to level the playing field.

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