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The Google Switch and +1: Search vs Social, Google vs Facebook

Today, according to the press releases now multiplying like bunnies across ‘online news sites’ and major newspapers of record around the world, Google added a social layer to its search functions.  It’s new “+1″ function is the online media behemoth’s response to Facebook’s ubiquitous “Like” function, although Google has been ‘going social’ for a while (e.g. Orkut, YouTube, Blogger).

Why does this matter anyway? For one, it gives us insight into two key functional characteristics of the Internet — search and social. It also sheds insight into Google itself, a subject that has gained increasing attention from academics such as Siva Vaidhyanathan (the Googlization of Everything), the media savvy journalist Ken Auletta (Googled) and staunch ‘new digital media’ sage and Google defender, Jeff Jarvis (What Would Google Do). Google is big business and what it does matters.

Google is increasingly competing for advertising revenue and Internet users’ time and attention with Facebook. Indeed, a shrinking number of digital media giants are battling for control the time that people spend online. This is especially important in Canada because Canadians, according to Comscore’s 2010 Canada Digital Year in Review, are the heaviest Internet users in the world spending, on average, 43.5 hours per month — greater than the 33 or 36 hours spent online per person in the U.S. and Korea, respectively (see p. 6).

In some ways, +1 is just another addition to Google’s ballooning suite of functions: search, gmail, Google Books,Blogger, Docs, browsers (Chrome), video (YouTube), operating systems (Android). The aim is to grab more of users’ time and to put more and more of the Internet ‘in the cloud’. In this case, it is Google’s cloud.

More services provides more reason for people to stick around with Google, rather than just the typical ‘search and run’ mode.  Moving more services off the desktop and in the cloud also keeps people connected more often, in more places, and for longer periods of time overall. This has largely worked from Google’s point of view.

This is why Google dominates online advertising markets and search — accounting for between 75 and 95 percent of all searches — in every country, except Russia, China, Taiwan, Japan and Korea. The power of search as a general utility, and Google’s role as the leading provider of this utility, is also growing in lockstep with the rapid growth in smart phones and the mobile Internet, as a recent Goldman Sach’s presentation shows. Overall, search dominates social in the ‘mobile Internet’ and Google’s grip with respect to search functionality is typically growing across the board.

There are a host of things that we should rightfully be concerned about by Google’s dominance of Internet search functionality and as things migrate from the devices and desktops in our own home’s to someone else’s cloud (read my earlier post on ‘social media and memory ownership‘).  Siva Vaidhyanathan has recently provided an extensive argument, in the Googlization of Everything, for why we should care. Some of his arguments are very thought-provoking. They go well beyond just the issue being discussed here. Here is a video clip of him responding to the question whether Google is a monopoly.

I don’t find Vaidhyanathan’s account quite as good as he seems to think it is, or quite as deserving of the praise showered upon it by some reviews. Some have trashed it, as the libertarian technophiles at the Technology Liberation Front did, but I definitely don’t think that their dismissal is right either.

Google is shaping the architecture of the Internet and the digitization of the media industries across the board. To think otherwise is to have one’s head buried in the sand. To think through why it’s important, however, is another matter.

Google so far has provided primarily utilitarian functions: search, scan, link, store. However, its not these functions, but rather the ‘social web’ and social networking sites — Facebook in particular — that are growing fast. Time spent on SNS sites overtook email in late-2007, according to the Goldman Sachs’ presentation referred to earlier. Will search be the next ‘killer app’ to fall?

The drift from search to social means that Google is increasingly competing with entities like Facebook — for users, for capital investment, for advertising revenues. In terms of the number of unique Internet page views per month, the yawning chasm that once stood between Google and Facebook has steadily closed (see here).

It is from within this context that we can understand why Google’s vast ambitions to colonize every nook and cranny of cyberspace/network media space now include adding “a thicker social layer” to its offerings. Always count on the tech-heads and marketing mavens to come up with a good line to summarize what’s going on. Here’s Dave Karnstedt, CEO of Efficient Frontier, in an March 30, 2011 Advertising Age article: “Injecting a social layer into the algorithmic search is key to relevance.” Translation: friends and family are key to Google’s bottom line.

Google’s ambitions have been seen as competing with and forcing traditional media to adopt new methods for the music, television, film and news industries for some time now. Now, competing with Facebook for the new coin of the realm — user attention — can be added to the list. There are several important dimensions of this.

The shifting balance between search and social needs to be seen in the context of competition for advertising revenues. Internet advertising growth is and has been explosive, growing globally from roughly $16b in 1998 to $66.2b in 2010. While online advertising has indeed grown very fast, we need to bear in mind several things.

First, recent trends will not not continue forever because, yes, like the ‘real world’, advertising spending online is subject to the ‘normal laws’ of capitalism.

Second, Internet advertising is tiny in comparison to Internet Access market, the pipes and ISPs that run the infrastructure that get content from one place to another: worldwide, the Internet access market in 2010 was worth $247.5b, or four times the size of online advertising market. It is smaller yet than the global television market: $351.3 billion in 2010.

Third, like the rest of the media economy, online advertising is also highly susceptible to swings in the macroeconomy. Like almost every other sector, except movies, Internet advertising fell in 2008 and 2009 amidst the global financial crisis attests.

Fourth, attention online has become more and more concentrated. According to figures cited by Wired, the top 10 websites in the US in 2001 accounted for by 31% of all page views. By 2006, the number had grown to 40 percent. In 2010, the top 10 accounted for roughly three quarters of all page views.

Online advertising is also very concentrated. With revenues of roughly $30 billion in 2010, 97 percent of which come from advertising, Google dominates the global online advertising revenue (e.g. accounting for 44% of the total $66.2 billion in online revenue in 2010).

In other words, while the galaxy of websites, blogs, information sources, uses, etc. continues to grow, Google and Facebook are becoming bigger constellations within the overall Internet universe. Growing concentration is sharpening the struggle between search and social, or between Google and Facebook — at least for the time being.

Google’s attempts to insert itself at the cross-roads of the emerging network media ecology have also upset many interests in the news business, book publishers and authors, as well as those in the television, film and music business. Many of these groups are pushing hard to leverage Google’s dominant position at the cross-roads of search as a major chokepoint for intercepting illicit downloads (see my earlier Rogues, Pirates and Bandits and Goliath vs. Goliath posts).

Cleavages between Google and the traditional media industries also means that its attempt to launch Google TV has met with mixed results. The fact that it has ruffled so many feathers is not unconnected to this.

The significant tensions between Google and other elements of the traditional media also plays into the competition between Google and Facebook.  This point was underscored last week when Time Warner chose Facebook to distribute  the latest Batman sequel, Dark Knight. For $3 a shot, Facebook subscribers can now download Dark Knight from the SNS. Does this mean that Facebook and other SNS will become significant new distribution channel for traditional media?

With its own ambitions for Google TV already having a hard time getting off the ground, Google now faces  the prospect of competing with Facebook for a role in the online television and movie distribution business, alongside AppleTV, Netflix and the incumbent media conglomerates’ own ‘over-the-top’ offerings such as Hulu. Add to this that search is a utility, while social networks function as the electronic watercooler of the digital network media, and we can see why Google is scrambling to make the shift from search to social.

Popular entertainment has always relied heavily on massive marketing and word of mouth, with the latter point being given ‘scientific heft’ by classic studies in communication by Lazarsfeld & Katz in the late-1940s and early-1950s. Today, the links in the two-step flow that they identified in ‘small town America’ have been digitized and commoditized writ large.

As Christian Fuchs, Mark Andrejevic, Elizabeth van Couvering, and a few others show, search and social functions are fundamentally intertwined in the production of the audience commodity and the organization of audience attention. They are also crucial to organizing the vast quantities of user created content (UCC) that underpins the digital media economy.

Together, these functions are crucial to the digital media economy and the sky high market capitalization of entities such as Google and Facebook. However, with social already putting the Internet’s first ‘killer app’ — email — in a downward spin, we can ask: is search (and Google) next? Or, will these two functions themselves converge?

The Canadian Pay-Per Internet Model — Update

This is a quick note summarizing a few recent adn ongoing developments over Usage Based Billing in Canada, or what I have called the transition to from the Open, User-Centric Internet to the Pay-Per Internet Model.

As I’ve indicated in previous posts, the CRTC triggered a firestorm of protest with its now infamous UBB decision of January 25, 2011. Among other things, in quick order, the decision spawned an online ‘stop-the-meter’ campaign by Open Media.ca that soon garnered nearly half-a-million signatures, mostly by Canadians who seem to have mistakenly believed that the metered Internet was about to be imposed in Canada for the first time. A House of Commons Standing Commitee on Industry, Science and Technology was also called in early February to look into the matter.

The CRTC offered some hope that it might turn the tide when it stepped in on February 8 to announce that it would revisit the matter. Within a month, however, any hope for a far-ranging review were dashed.  The focus, the CRTC declared, would not be on the steps that it and the telecom and cable companies had implemented steadily, even if stealthily, over the past decade, and with much added momentum in the past five, that have led to the near universal adoption of the pay-per Internet model in Canada.

According to the CRTC, the Internet access market in Canada is competitive and just fine. Its review will be strictly limited to the wholesale markets that small ISPs depend upon for survival and the January 25th UBB decision. For Internet users, this meant that perhaps 5 percent might be affected; for the other 95 percent, this arcane process would be irrelevant.

This past Monday was the deadline for those wanting to participate in the upcoming hearings to file their interventions. Bell seemed to steal the show with its proposal to withdraw the UBB model for wholesale Internet access services that got us to this place to begin with. Instead, it would offer a new model, one that it called the Aggregate Volume Pricing Model, or AVP for short.

Michael Geist and Ian Marlow in the Globe & Mail have already offered good reviews of the new idea.  Geist has also published a new comparative international study on Internet user fees and bandwidth that shows, among other things, that Canada is pretty much alone “in the world where virtually all providers utilize some form of UBB” (Geist on UBB).  As I’ve indicated in earlier posts, Bell led the way by adopting bandwidth caps and so-called excess user fees in late-2006, and the rest of the ‘big six’ — Rogers, Shaw, Telus, Videotron and Cogeco — quickly followed suit. As Geist shows, some other providers in some other countries have adopted similar measures, but nowhere are such practices the norm.

Here’s the key things to note about Bell’s new proposal to replace the wholesale UBB model with what it calls the AVP model:

First, it does nothing to change the pricing or use of the pay-per model and bandwidth caps for 95 percent of Internet users in Canada. In other words, so-called excess usage charges of between $2 and $5 per GB remain intact for the overwhelming majority of Canadians.

Second, for small ISPs (Teksavvy, Primus, etc.) that serve the other 5 percent, and rely on Bell and the other big cable and telecom companies for ‘last mile’ access services, it does mark an advance. It reduces the rates for gateway access services to $200 per Terabit (TB), or about  .20 per GB. It also implements these charges on an ‘aggregate level’ versus a per user model, allowing smaller ISPs some room to carve out their own business models, ie. unlimited, preset caps and excess usage charges, etc.

Third, it retains the ‘excess usage charge’, but at roughly .30 per GB this is much lower than the prices indicated above and previous proposals. The idea that bandwidth is pooled allows the small ISPs to decide for themselves how to deal with ‘too much’ Internet use.

Overall, the proposal offers something. It is a reversal of sorts, but one that applies to a very small segment of Internet users. Together with the CRTC’s refusal to take a fulsome look at the issues, Bell’s proposal delivers a double blow to those who want a wide ranging review of measures and practices that have steadily tilted the open, user-centric model to the pay-per, provider controlled model in Canada.

The insistence on tightly focused remedial action by Bell and the regulator should also remind us that there are two basic problems standing in the way of a more open Internet. First, a profound lack of competition and highly concentrated media, telecom and Internet access markets in Canada relative to historical and global standards and, second, a compliant regulator that have sanctioned this state of affairs almost every step of the way.

Categories: Internet

4 Phases of Internet Development: From the Open to the Contested Internet

I’ve just come across what looks like a very interesting article by John Palfrey, a Harvard Law School Professor. You can find the article here.

Here’s the basic gist of the article, in his words:

The four phases of Internet regulation are the “open Internet” period, from the network’s formation through about 2000; “access denied,” through about 2005; “access controlled,” through the present day (2010); and “access contested,” the phase into which we are entering.

The paper draws on a decade of interdisciplinary work conducted by members of the Open Net Initiative, a group that consists of researchers who I have long thought have been doing some of the best work on the topic at the Citizen Lab at the Munk Centre, University of Toronto (Prof. Ron Deibert, principal investigator), the SecDev Group (Rafal Rohozinski), and the Berkman Center (Palfrey and Jonathan Zittrain).

The Political Economies of Media: New Book by Winseck and Jin

Well, here’s a little bit of shameless self-promotion.  It’s the front cover of a new co-edited collection that I’ve put together with Dal Yong Jin, an assistant professor at the School of Communication, Simon Fraser University in Vancouver, Canada as well as the College of Culture and Technology, Korea Advanced Institute of Science and Technology (KAIST).

The book is called The Political Economies of Media and will be published by Bloomsbury Academic — the academic publishing arm of the same company behind the Harry Potter series — in June.  I think the cover looks great. The authors that have contributed to this volume are exceptional as well: Bernard Miege, Susan Christopherson, Terry Flew, Amelia Arsenault, Guillermo Mastrini, Martín Becerra, Dwayne Winseck, Elizabeth van Couvering, Dal Yong Jin, Christian Fuchs, Aeron Davis, Peter Thompson, Marc-Andre Pigeon.

You can read sample chapters here by myself, Aeron Davis and Christian Fuchs here.

Secret Surveillance and Hereditary Kings: Putting a Check on Unlimited Network Surveillance

On Monday (March 23) a Second Circuit Court of Appeal in New York reinstated a lawsuit by civil liberties and human rights groups, journalists, media organizations, labour unions and others who argue that Internet, telephone and other electronic communication surveillance in the U.S. violates Constitutionally protected rights to privacy and freedom of expression.  The gist of the case is that the groups do have standing even though they are unable to prove whether or not their communications are actually under surveillance or not.

The case is a continuation of running attempts over the past five years to reign in claims that the President has unchecked powers to authorize the National Security Agency (NSA) to spy on the electronic communications of Americans.  The process was first brought into the light of the day in December 2005 by New York Times’ reporters James Risen and Eric Lichtenblau. However, even then Risen and Lichtenblau’s coverage had been held back for a year because of the NYT’s deference to Bush Administration assertions that publication threatened national security (see mea culpa by NYT public editor Byron Calame, Jan. 1, 2006).

Despite being found to run afoul of existing law and the Constitution (see below), nobody ever put a stake through the heart of the Bush Administration’s illegal warrantless surveillance program. Instead, it has been continued by the Obama administration and given a retroactive legal footing with the 2008 Foreign Intelligence Surveillance Amendments Act. Consequently, the electronic surveillance of communications of Americans making international phone calls and using the internet to correspond with others outside the country is likely still alive and well, complete with secret data rooms and dedicated network connections linking all of the major U.S. telecom companies main switching centres to the NSA.

For those interested in a fuller treatment of the issues involved up until late 2007, I published an article in the International Communication Gazette in 2008.  You can find it here.

In its original form, the NSA’s warrantless electronic surveillance programme was authorized by President Bush on the pretext that he could do so using the claim that wartime presidents have virtually unlimited powers to do whatever it takes to prosecute a war. And we must remember that the Bush Administration used 9/11 to unleash a global war on terror that knows no set limits either in terms of how long it will last or where it will take place. Putting the two together — unbound powers of Wartime Presidents and war without end — the Bush Administration made unbound claims that it could it could do as it pleased, including authorizing electronic surveillance outside the normal process established by law of judicial review by the Foreign Intelligence Review Courts.

Sometime shortly after 9/11, the NSA began tapping into the telecom networks and switching hubs of AT&T, Verizon and most other big US telecoms firms (except, to its credit, Qwest) to eavesdrops on telephone, email and Internet communications between people in the US and elsewhere in the world. The program targeted up to 500 people at any one time and thousands overall in a bid  to monitor the electronic communications of people suspected of having ties to Al-Qaeda and other terrorist groups, and thus to pre-empt terrorist plots.

The two major cases dealing with these issues — Hepting v. AT&T and ACLU v. NSA — are replete with sections of the government’s case ‘blacked out’ on account of unspecified claims of national security. The cases also take on a Kafkesque tone with the Government’s claims that it was impossible to proceed with the cases at all because doing so would reveal the existence of ‘state secrets’.  And without being able to discuss the matters, well, the people involved couldn’t prove anything.

Over and against the administration, stood those representing journalists, academics, writers and lawyers who argued that they had been illegally caught up in the electronic drag-net because of their work involving Muslims living abroad. The president lacked authority, they stated, under the AUMF, the Constitution or any law to create the secret programme. Carolyn Jewel, a writer of futuristic action and romance novels, claimed that the surveillance programme made it impossible for her to talk ‘openly about Islam or US foreign policy in emails to a Muslim individual in Indonesia and that she could no longer use the Internet as part of her research.

In the ACLU v. NSA case, Judge Anna Diggs Taylor was blunt in her decision: the surveillance program was illegal and unconstitutional. She further argued that the claims before the court were not speculative and general, but ‘distinct, palpable, and substantial’ (ACLU et al. v. NSA et al., 2006: 22). The activities, she stated, crippled plaintiffs’ ‘ability to report the news and … to effectively represent their clients’ (ACLU et al. v. NSA et al., 2006: 20).

In exceptionally strong language, she disparaged Bush’s claims that his authority stemmed from the ‘inherent powers’ clause of the Constitution or the Authorization of Use of Military Force — a law hastily passed within days of 9/11 (ACLU et al. v. NSA et al., 2006: 33–41). To these claims of unfettered authority, Taylor sharply retorted: ‘There are no hereditary Kings in America’ (ACLU et al. v. NSA et al., 2006: 40).

The administration withdrew for the next six months, but in January 2007 it announced that the surveillance project would continue, but only after warrants were obtained according to the rules of the Foreign Intelligence Surveillance Act and the Foreign Intelligence Review Court. In other words, the Bush Administration would follow the law.

Even that, however, was not enough. On July 10 2008, the Foreign Intelligence Surveillance Act was changed to, essentially, make legal what was previously illegal. Just as importantly, the new law granted telecoms companies such as AT&T, Verizon, Sprint, etc. immunity from prosecution, either for their activities in the past or in the future.  In other words, U.S. telecoms companies got a free pass despite the fact that they were, by court decision, acting in concert with the government in ways that were beyond the pale of either the Constitution or the law.

The decision on March 21, 2011 by the NY Second Circuit of Appeals is the next phase in this process. In many ways it was a rehash of issues that have already played out in the past, but with the crucial distinction that the ACLU and the others involved now have the new Foreign Intelligence Surveillance Act in their sights. If successful, the sections of the Act granting extensive actions to the Executive to authorize surveillance and for such activities to be conducted outside of formal processes of judicial review could fall on the grounds that they are unconstitutional.

One of the travesty’s of the current case is that the Obama Administration has simply carried through with the precedents set by Bush.  This is another major blemish on the Obama Admin’s original claims to establish some clear blue water between itself and its predecessor.

Thus, in the current case, many of the same players are involved, with the Executive, NSA and telecoms companies lined up on one side against journalists, media organizations, minority (e.g. read Muslim) groups, and civil rights groups, on the other. And again, claims are offered by the former that to even discuss the matter would be to reveal ‘State Secrets’ — a catch-all maneouvre that seeks to stop things dead in their tracks before they even get started by ruling that any kind of discussion of the matter is, simply, off-limits because of the wide ranging powers of the President that are in dispute.

And similar, too, are comments by journalists such as Noami Klein and media organizations such as the  leftish magazine that has been around since the 1865, The Nation — the oldest weekly magazine in the U.S. – that the spectre of unbound surveillance has a ‘chilling effect’ on free speech and freedom of the press.

As Naomi Klein stated in the Globe & Mail piece today, “The issue is that we think that the activities that we do could fall under these broad definitions”. When asked whether she herself was the target of such surveillance, Klein responded, “I have no idea whether they are or they aren’t”.

And that’s the point: the extraordinary powers and secrecy granted to ‘wartime presidents’ makes it impossible to penetrate the veil of ‘State Secrets’ and to know just where one stands. As a result, speech is chilled, the free press trumped by unchecked powers of the State, and privacy turned into a poor shadow of itself.

The decision on Monday by the New York Appeals Court is to be applauded. As the decision to go ahead with this legal challenge states, those pressing the case do not have to show that they are actually under surveillance, because given the broad claims of the national security agencies and the President this would be impossible to prove. It is enough, as the court state, that “allowing the executive branch sweeping and virtually unregulated authority to monitor the international communications . . . of law-abiding U.S. citizens and residents”, at least on the surface, appear to be an affront to the Constitutional protections of free speech and the free press, privacy as  well as the restraints that aim to prevent presidents, whether Bush or Obama, from acting like, to use Judge Anna Diggs Taylor’s words, “hereditary kings”.

This is a topic that, for Canadians, we also need to examine. This because are own Prime Minister Harper often appears to have torn a page from the Bush Administration’s playbook and sets himself up as an authoritative leader. As a wartime Prime Minister, just what kind of electronic network surveillance has been authorized in Canada?  And to what extent have the telecoms companies gone along with them?

From WWI onwards, the fact that trans-Atlantic cables linking not just Canada, but the U.S. as well, to Europe and the rest of the world have run too and from Nova Scotia and Newfoundland have made them an integral part of the Euro-American surveillance system. It is unlikely that this is still not the case today, although someone needs to take up the challenge of doing the digging to find out.

CRTC Just Says No

Last week I asked a few contacts at the CRTC if they could get me invited to the Industry-Regulator Conflab this coming Thursday (March 24).  You know, the behind-closed door, by-invitation-only meeting organized by the CRTC to talk with the industry about how it should deal with evolving media markets and the major players with a stake in the game. The digital media universe is all topsy turvy and the regulator’s on a search for what to do.

Sounds interesting. I know some people, experts, are coming in from NY to talk to the hand-picked few allowed to attend. Luckily, OpenMedia.ca was able to wrangle an invite too.  Certain officials, notably Industry Minister Clement, appear to be being particularly solicitous towards the organization as of late, with their 500,000 ‘stop the meter’ petition opening the Minister’s eyes — even if opportunistically and for the briefest of moments.

For me, no such lucks.  Can’t go, no room said my contacts.

The industry folk will be there too, mostly from the telecoms and broadcasting sectors, but there’ll no doubt be some ‘new kids’ on the block there, too: Neflix, the Google guys, Apple TV. They’ve been playing a more significant role in telecom and media affairs lately (See, for example, interventions by Google and Apple TV). They’ve been picking off a few regulatory bodies, too, for their own team. The CRTC is also juicing its own ranks with a few people pilfered from private consultancies.

I’ll speak more on this in a day or two, preferably before the meeting itself is held.  But here’s a copy of the ‘invitational document’ sent by the CRTC to participants.  CRTCRegForum_2011

The point that I want to close with now, however, is that up until 1976 in Canada, the primary criteria for inclusion in a regulatory proceeding was that one had to have a business or economic stake in the game. That criteria, however, was thrown out as an affront to democracy and the public interest, just like it was ten years earlier in the United States. Today it is back.

Last week the CRTC made it clear that on key issues such as Usage Based Billing, it is not willing to open up the long path that got us to bandwidth caps and the pay-per Internet model. Nope, it’ll be a narrow review of the January 25th UBB decision. Note, too, the conspicuous silence of Tony Clement on this issue. After grandstanding during the initial swell of outrage and throwing a few bones to the crowd and burnishing some egos, he’s gone silent.  After all, letting the market rip leads to just such an outcome.

This Thursday’s conflab will not change the current direction of events. That is unfortunate.

Cassandra’s and Copyright: Creative Destruction and Digital Media Industries

A new study released yesterday on peer-to-peer content sharing and copyright in the United Kingdom, Creative Destruction and Copyright Protection, provides a further challenge to those who claim that strong new measures are needed to make sure that swapping digital content online does not damage the bottom line of the media and entertainment industries. The study was co-authored by London School of Economics and Political Science Professors Bart Cammaerts and Bingchun Meng.

It is a part of several steps being taken in the U.K. that challenge last year’s hastily passed Digital Economy Act. The bill became law after only two hours of debate in the House of Commons and is a real gift to the media and  entertainment industries and the various lobby groups that represent them: e.g. the International Federation of the Phonographic Industry (IFPI), its British counterpart, the British Phonographic Industry Association, the Recording Industry Association of America (RIAA), Motion Picture Association (MPA), and so on.

Among other things, the Act turns Internet Service Providers into agents of the media and entertainment industries. Upon notification, ISPs must send a warning notice to suspected copyright infringers and if that does not work they can be directed by the Secretary of State to disconnect the offending user.

As the IFPI noted in its latest Digital Music Report, it has been pushing for such measures around the world in the past couple of years. Indeed, this push supersedes the emphasis earlier in the decade for DRM (digital rights management technologies).  The IFPI has chalked up several ‘wins’ for this approach in the UK, France, Sweden, South Korea, Taiwan, and a few others (see pp. 25-27).

Two of the biggest ISPs — BT and Talk Talk — in the UK have not taken these requirements lying down. They have launched a legal challenge that will be heard this week by the UK High Court of Justice on the ground that the Digital Economy Act’s requirements amount to overkill.

Cammeart and Meng are clear that P2P technologies should be encouraged rather than discouraged. In contrast, the Digital Economy Act stifles innovation and attempts to shore up faltering traditional business models. The message of this report, in other words, is that governments are not in the ‘business model’ protection racket. However, as I have written in earlier posts, that they are in just such a business is also evident in Canada, where Usage Based Billing is clearly linked with attempts to protect the cable and telephone companies forays into the online video business by hamstringing would-be rivals such as Netflix, Apple TV, even Youtube.

In contrast to the current approach, the authors and various people interviewed for the study suggest a significantly different approach. Thus, as one of the report’s authors, Bart Cammaerts states,

“The music industry and artists should innovate and actively reconnect with their sharing fans rather than treat them as criminals. They should acknowledge that there are also other reasons for its relative decline beyond the sharing of copyright protected content, not least the rising costs of live performances and other leisure services to the detriment of leisure goods. Alternative sources of income generation for artists should be considered instead of actively monitoring the online behaviour of UK citizens.”

Early in the report, they also quote from Ed O’Brian from the band Radiohead, who had the following to say:

“We disagree with the industry on what should be done with the persistent file-sharers. The industry has said we will suspend their internet accounts. But you can’t just do that, it isn’t possible and neither feasible. The kind of technical measures that are required to implement this get you into dodgy areas such as civil liberties, tracker software and the second thing is that it costs a lot of money to do this, and even if you do it, you are going to drive a lot of people underground into darknets. Our problem is how do you differentiate between a serial infringer and someone who does it in the spirit of discovery” (Ed O’Brian from Radiohead on BBC, 22/09/2009).
My only real criticism of this report is that the authors take the IPFI’s data on the drastic decline in sale of recorded music at face value, but attempt to offset it by pointing to changing patterns of music consumption, falling disposable household income and the rise of online digital platforms. Their points are well-taken.
Indeed, income levels in western capitalist democracies, including Canada, have largely stagnated for the past 30 years, while wealth has concentrated at the top. To this, we can also had the decline in ‘liesure time’ over the same period, as the historical tendency for the workday to shorten was reversed, resulting in people spending greater and greater amounts of time at work. It doesn’t take a genius to understand that less time and money erodes media consumption.
Such trends run exactly counter to the massive rise in both income and ‘liesure time’ that gave rise to the media and entertainment industries between 1870 and 1945, as Gerben Bakker exhaustively illustrates in his 2009 book Entertainment Industrialized.
These points are indeed important, but I would add another that I think is even more important: namely, that taking into account all sources of income, the music industry has not contracted, but expanded greatly since the late-1990s, precisely alongside the massive popularization of the Internet. In order to understand that, we need to focus not just on the sale of ‘recorded music’ and ‘online revenues’, but also publishing royalties and, crucially, live entertainment. When we do that, as I showed in another post last week, the music industries have expanded greatly.
Here’s the data showing, first, the drastic decline in the sale of recorded music, followed by the full picture:
Figure 1: Worldwide ‘Recorded Music Industry’ Revenues, 1998 – 2010 (US$ Mill.)


Source: Source: PWC (2010; 2009; 2003), Global Entertainment and Media Outlook

Clearly, just on the basis of recorded music sales, the music industry is in dire shape indeed. However, things look decidedly different once we take a look at the full picture, as the following figure does.

Figure 2: Worldwide ‘Total Music Industry’ Revenues, 1998 – 2010 (US$ Mill.)


Sources: PWC (2010; 2009; 2003), Global Entertainment and Media Outlook and IDATE (2009). DigiWorld Yearbook.

The top line shows the picture: a sharp increase in total revenues. Against declining revenues for recorded music, each of the other segments has risen considerably: Internet/mobile; publishing and concerts. Cammaerts and Meng do an excellent job showing the rise of digital revene
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