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Dirty 30 Demonstrates the Synergy Between the Internet and the Entertainment Industry

by Jonathan Band on September 23, 2016

Today’s opening of the film Dirty 30 provides the latest example of the Internet helping grow the entertainment industry by providing new talent, distribution channels, and marketing opportunities. The film stars what has been called YouTube’s “Holy Trinity,” Mamrie Hart, Grace Helbig, and Hannah Hart, and it is being released through streaming sites as well as movie theatres.

Hannah Hart first entered the public eye through her YouTube series My Drunk Kitchen. The series began in 2011 when Hart recorded herself talking to a friend by webcam while drinking a glass of wine and making a grilled cheese sandwich without any cheese. She uploaded the video to YouTube, and within a few days it accumulated over 100,000 hits.

The popularity of that initial video led to the series My Drunk Kitchen, which parodies cooking shows. She has hosted celebrity guests (including real chefs), and received a Streamy Award in 2013 for the best female performance in an online comedy. Her channel MyHarto has over 2.3 million subscribers and 200 million views.

Android, iOS and Market Power – What Does Mobile Platform Competition Really Look Like?

by Jakob Kucharczyk on September 21, 2016

The European Commission’s competition investigation into Google’s Android mobile operating system (OS) has unsurprisingly raised a lot of attention and commentary. It’s fair to say that so far most comments focused on the ‘abuse part’ of that investigation. That is the part which deals with the question whether certain provisions in the Mobile Application Distribution Agreement (MADA) relating to the bundling of Google apps and the anti-fragmentation agreement (AFA) constitute an abuse under Article 102 TFEU. In fact, the trade association I work for has addressed a letter to Commissioner Vestager explaining why the MADA and the AFA are key to the functioning of the Android ecosystem, spurring innovation and competition.

It goes without saying that readers who are more familiar with the details of competition law will know that the abuse part of any Article 102 investigation formally is the last step competition enforcers take (while arguably being the most interesting). Before one gets to the question of whether a company abused a dominant position, one has to find whether the company actually has a ‘dominant position’. After all, a company can only abuse a dominant position if it has one. This post will discuss this issue in the context of the Android investigation.

But first, let’s continue with competition law basics: how does one find ‘dominance’? Conceptually, a finding of dominance involves a two-stage assessment. First, one has to define the relevant market. While that definition can involve complex economic assessments, it is essentially a matter of substitutability. Where goods or services can be regarded as substitutes or interchangeable by the consumer, they are within the same product market. Second, competition authorities look at whether a given company has a ‘dominant position’ on the relevant market. For economists, companies with a dominant position are companies that have substantial market power. In the often recurring words of the Court of Justice of the EU (CJEU), a dominant position:

“relates to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers”. (Case 27/76 United Brands v Commission, para. 65)

Importantly, the Commission explains in its Guidance on Article 102 Enforcement Priorities that the notion of ‘independence’ “is related to the degree of competitive constraint exerted on the undertaking in question” and where competitive constraints are ineffective, the “undertaking’s decisions are largely insensitive to the actions and reactions of competitors, customers and, ultimately, consumers” (para. 10).

With this in mind, let’s turn to the ongoing Android investigation. To most people, competition experts and non-experts alike, one aspect of the Commission’s investigation stands out: the market definition. When the Commission announced the Statement of Objections (SO) it sent to Google, it held that the company has a market share of more than 90% in the market for licensable smart mobile operating systems. The word ‘licensable’ is key because it means that Apple’s iOS which powers all iPhones and iPads is outside the scope of the relevant market. So are iPhones really not competing with Android-powered smartphones? (Leaving aside the question of whether tablets should be included in the market definition for now).

The European Commission’s Telecoms Proposals: More Fragmentation, Less Choice, Lower Speeds?

by James Waterworth on September 13, 2016

At this week’s ‘State of the Union’ address in Strasbourg, President Juncker is expected to try to re-inject energy and purpose into the troubled European project. The arguments among the European family of nations show no sign of abating and he will want to show leadership and purpose.

Perhaps the crown jewel of the European project is the single market. This common set of rules makes it easier for companies to buy and sell across borders and for consumers to access more offers at better prices. It makes us all richer. So successful is it that the Commission has been seeking to update it for the digital age by building a digital single market.

It is therefore both peculiar and worrying that the European Commission may soon propose new telecoms rules that could fragment the European market yet further, thus going in the opposite direction to its declared strategic objective of building a digital single market.

Readers well-versed in EU telecoms policy know that it covers areas as broad as spectrum, regulation of telecoms networks and services. Readers will also know that telecoms markets have traditionally been national markets and that it has long been a wish of the EU to stimulate cross-border markets. So why would the Commission propose something that fragments the Digital Single Market rather than completing it?

My Internet: Ryan Heath’s Politics, Policy, Politico Journey

by Frances Robinson on September 12, 2016

Everyone who’s anyone in Brussels has woken up with Ryan. His daily Playbook sets the tone for discussion, clues people in to the big issues around town and has a delightful side order of snark. An email, it obviously wouldn’t exist without the internet, but Mr Heath’s enthusiasm for online disruption has been a leitmotif throughout his career, both as a journalist and a civil servant. Prior to his role at Politico, he was spokesman for EU Commissioner for the Digital Agenda Neelie Kroes, and before that, he used the Internet as an activist in Australian student politics.^[1]

After a cursory introduction to the internet — along with the CD version of Microsoft Encarta — in the computer room of his high school, he set up a Hotmail account, and, “by the time I arrived at university at 17, I was a fully-fledged little internet user.” As well as using it for academic assignments, he worked for the republican movement — the “no monarchy for Australia” one, not the GOP. That introduced him to Malcolm Turnbull, now Australia’s Prime Minister, but also an early backer of Ozemail, an ISP and the first Australian tech stock ever to list on the NASDAQ, in 1996.

“I remember him talking to me about the future of the world, and how it was going to be internet driven; this was in the beginning of 1998,” recalls Ryan. Travelling with Turnbull to promote the republican cause in Australia, they discussed email, the world wide web, and the possibilities for the future. “In the course of those train trips, we’d talk about the internet, so I was a convert from that point onwards.”

Hyperlinks Under Attack in Europe (or “When You Thought It Could Not Get Worse”…)

by Maud Sacquet on September 9, 2016

DisCo readers may remember that, last February, my colleagues Matt Schruers and Jakob Kucharczyk explained that Europe’s highest court, the Court of Justice of the European Union (CJEU), would have to rule on a case about hyperlinks that could decide the fate of the World Wide Web in Europe. They were not joking around.

Well, yesterday the CJEU published its ruling on GS Media (C-160/15) – and it’s as bad as we feared it could be. But let’s take a step back first.

Under EU copyright law, the “communication to the public” of a work (comprised of two cumulative criteria, an “act of communication” to “a public”) is an exclusive right of the rights holder. Therefore, over the past few years, the CJEU tried painfully to answer the question of whether posting a link violates copyright law.

To sum up quickly, the CJEU ruled several years ago in a case called Svensson that links – i.e., the single most important feature of the Internet – were within the scope of copyright protection, as they were “acts of communication”. However, the case dealt with a situation where a website was linking to legal content, freely accessible and posted with the authorisation of the rights holder. Therefore, the Court concluded logically that no copyright infringement had taken place as linking to this content did not communicate it to “a new public”. (For more details, please see our detailed analysis here and here). But one crucial question was left open – what about linking to content posted online without the authorisation of the rights holder?

Musicians File Brief in Blurred Lines Case, Supporting Limits to Copyright

by Ali Sternburg on August 31, 2016

Yesterday several hundred musicians filed an amicus brief with the Ninth Circuit in support of plaintiff-appellants Pharrell Williams, Robin Thicke, and T.I. in the Blurred Lines appeal, Williams et al. v. Gaye et al. (They were initially plaintiffs because they had filed a declaratory judgment, as I explained in this post.)

This brief was noteworthy, in that it’s an important—and somewhat rare—example of rightsholder constituencies pointing out the costs of overbroad rights. While scholars say this frequently, it is not as commonly heard from artists. (Prof. Peter Jaszi has often said that with intellectual property, sometimes “you can have too much of a good thing.” [1] [2] [3]) On Twitter, Brandon Butler characterized the filing as saying “everything is a remix,” alluding to an ongoing video series from Kirby Ferguson about creativity, originality, and copyright. As the brief put it:

From time immemorial, every songwriter, composer, and musician has been inspired by music that came before him or her. . . . Virtually no music can be said to be 100% new and original.

The filing is also reminiscent of Judge Kozinski’s famous dissent in White v. Samsung, also in the Ninth Circuit:

Overprotecting intellectual property is as harmful as underprotecting it. Creativity is impossible without a rich public domain. Nothing today, likely nothing since we tamed fire, is genuinely new: Culture, like science and technology, grows by accretion, each new creator building on the works of those who came before. Overprotection stifles the very creative forces it’s supposed to nurture. . . . All creators draw in part on the work of those who came before, referring to it, building on it, poking fun at it; we call this creativity, not piracy.

An unfortunately typical French initiative (Plus Ca Change, Plus C’est la Même Chose)

by Maud Sacquet on August 26, 2016

Among intense weather considerations about the wettest spring on record for the past century and shock over Brexit, the French Parliament adopted at the end of June a little-noticed measure in the Freedom of Creation Act… with a very big potential impact: a new royalty for the indexing of images on the Internet in France.

Senators lobbied strongly for this measure, presented as a way to ensure the remuneration of plastic art, graphic art and photographic works’ rightsholders for images “used and communicated to the public without authorisation” by search engines and indexing services – while conveniently forgetting that search engines do not publish anything and that it is technologically easy to ensure that an image is not indexed.

How would this work? When an image is published online, the reproduction right and the right of communication to the public of this image shall be transferred to one or more collecting societies appointed by the French government. Online communication services “reproducing and communicating to the public images for search and indexing purposes” shall have to obtain a license from those collecting societies to index images legally. The license fee will either be based on the revenue accruing from the exploitation of the service or be a lump sum fee.

It is still too early to understand the full impact of this measure. However, it is quite clear that “many online services and mobile apps, from search engines to creative commons models and Europeana” will be impacted, as stated by several digital associations, including CCIA. “Basic, everyday activities of online users such as posting, linking and embedding photos online, [will] be subject to a cloud of legal uncertainty”.

Shot on an iPhone 6: Everyone’s the Competition

by Jonathan Band on August 19, 2016

Apple’s “Shot on an iPhone 6” ad campaign has filled magazines, billboards, and public transit with stunning images of landscapes and people shot primarily by amateur photographers. Apple also has been running commercials during the Olympics consisting of videos and images shot on iPhone 6s. The long-running and highly successful Shot on an iPhone campaign demonstrates the enormous creativity of ordinary people enabled by digital technology. At the same time, it suggests that competition, rather than copyright infringement, is the chief threat to the livelihoods of many professional artists.

In the copyright policy wars, the associations representing professional photographers frequently assert that rampant infringement is eviscerating the income of professional photographers. These associations have been among the groups most in favor of sweeping changes to the Digital Millennium Copyright Act’s notice-and-takedown regime and adoption of a small claims court for copyright enforcement. They also are among the groups most opposed to orphan works legislation and other reforms favoring users.

There is no doubt that some businesses make unauthorized uses of images they find on the web rather than hire photographers. But the competition enabled by digital photography is the true cause of photographers’ diminishing income. For many situations where in the past firms would have hired a photographer, they now rely on an employee with a smartphone or a relatively inexpensive digital camera. For example, headshots of employees or photographs of regular corporate events were once lucrative assignments for professional photographers that now in-house amateurs often perform. Similarly, newspapers have increasingly replaced photojournalists with their print reporters or “citizen journalists” to capture images of newsworthy events. The quality of images produced by digital cameras combined with the ability to take a large number of images at no extra cost means that an amateur photographer is able to create one image that is good enough for the intended purpose. Companies still hire professional photographers for special events or ad campaigns, but the overall demand for them is lower.

At the same time, digital photography has lowered the barriers to entry, resulting in an increase in the supply of professional photographers (or people who want to be professional photographers). Photographers no longer need dark rooms and expensive developing equipment, nor extensive training on development techniques. They just need to teach themselves to use Photoshop. They also don’t need to invest large sums of money in buying film to learn their craft. Established photographers find themselves competing with new entrants more familiar with the latest software and with lower overhead.

Modifications to copyright law will not address the disruption digital technology has caused to professional photographers. Although one can sympathize with the professional photographers’ predicament, the “Shot on an iPhone 6” campaign proves that the art of photography is thriving.

The Real Challenges Facing the Television Industry

by Jonathan Band on August 12, 2016

The Hollywood Reporter recently hosted a roundtable with five “TV Titans” concerning the challenges facing the television industry. Copyright infringement was not mentioned even once. Nor was the FCC’s proposed rule opening up the standards for cable set-top boxes. Listening to the narrative in Washington DC, however, would lead you to think these are TV’s greatest challenges.

Instead, the television executives focused on the challenge of adapting to an increasingly competitive landscape with evolving technology and consumer demand. They acknowledge that streaming technology has led to what the industry refers to as Peak TV, the current boom of 400-plus scripted series discussed in my DisCo post here. Netflix’s Ted Sarandos described this as a “golden age of TV.”

But all these programs mean that TV producers need to figure out “how to stand out in that cluttered TV universe.” As Sarandos explained, “everything exists in perpetuity now, so every time we put on a new show, we are competing with everything ever made.”

DOJ Decision on Consent Decrees and Fractional Licensing Good News for Competitive Music Marketplace

by Ali Sternburg on August 4, 2016

Today the Department of Justice announced it would make no changes to the antitrust consent decrees that govern coordinated action by the music performing rights organizations (PROs) known as ASCAP and BMI. In addition, the Department has concluded that the existing language of the decrees requires “full-work” licensing, and consequently prohibits so-called “fractional licensing.” This means that for songs with multiple songwriters (which are increasingly prevalent in popular recorded music) any individual songwriter or rightsholder can license the song, as long as they distribute royalties to the other rightsholders. In a “fractional licensing” system, PROs would purport to issue blanket licenses only to fractions of songs, thus requiring licensees to license the remaining fractions from other rightsholders. DOJ’s conclusion will maintain important protections in the ASCAP and BMI consent decrees. This news confirms leaks from the end of June, when Billboard had reported that the Department of Justice was moving toward denying requests to amend the ASCAP and BMI consent decrees.

Until now, the Department of Justice had maintained that the review was still ongoing. The DOJ had been examining the ASCAP and BMI consent decrees for several years, coinciding with a federal appellate court’s finding of “troubling coordination” in the music publishing sector. DOJ solicited one round of comments in August 2014 on several competition issues, followed by a second round of comments in November 2015 specifically on jointly owned works and fractional licensing. CCIA filed comments in response to both of these requests, as did a wide variety of stakeholders.

As DisCo has discussed before [1] [2], the consent decree review process has provided an important opportunity for discussing the need for transparency in the music marketplace and ways to resolve music licensing gridlock.

Today’s news is good news for a competitive music marketplace, as the consent decrees are an important mechanism for protecting competition in the music industry. Preserving the consent decrees and explicitly prohibiting fractional licensing will also help alleviate the “weaponized uncertainty” problem, because it will prevent rightsholders from saying “no” as frequently, and will facilitate more transactions that make more music available on more lawful services.

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