Piracy, Cyberlockers, and Free Content

On September 18, 2014, the Digital Citizens Alliance (DCA) published their report, “Behind the Cyberlocker Door: A Report on How Shadowy Cyberlocker Businesses Use Credit Card Companies to Make Millions.” The report claims that several file-hosting services, also known as cyberlockers, are running exceptionally profitable businesses that are essentially dealing in unlicensed content such as music, movies, and television shows. The content is uploaded to the cyberlockers by users, who then share the content with each other. Links to the content are usually shared via message boards and forums. Anyone who’s downloaded unlicensed content has probably gone through these steps—basically engaging in digital piracy.

DCA’s report examines both direct download and streaming cyberlockers (15 sites each) and shows that total revenue generated by these cyberlockers is about $96.2 million per year. DCA’s conclusion is that these services are not motivated by an ideology of free access to content, but instead by the enormous profits to be made in selling advertisements and, to a lesser extent, premium subscription services.

It’s difficult to argue against this reasoning. I’m certain these business models are built around exploiting the abundance of unlicensed content that are traded worldwide by these sites. I also agree that whomever is running these businesses are not ideological pioneers that are fighting bravely for freedom of access and freedom of information (with some exceptions).

Ok, so what do we do about this?

To the credit of DCA, their report is asking for major credit cards to stop doing business with these cyberlockers, and not asking for additional legislation against cyberlockers. However, I highly suspect that DCA would be a major advocate of such laws. In addition to accusations by TechDirt and Consumers International that DCA is a lobbying group posing as a grassroots organization, a look at their website will show that DCA will easily use fear as a means to advocate for policy.

DCA Banner

A banner from DCA’s website

“Help us take our online neighborhood back from the criminals and predators.” The phrase implies that the internet is overrun with the worst elements of humanity. Anyone who regularly uses the internet knows this is simply untrue. Yes, there are bad things going on there, but to claim that it needs to be “taken back” from criminals is ridiculous. While I have no explicit reason to doubt the claims made by DCA in their report on cyberlockers, their actions and reputation lead me to believe seriously question anything the organization does.

As DCA’s report claims, the cyberlockers in included in the study are generating about $96.2 million every year in revenue, and in 2013 “The largest 596 ad-supported content theft sites reaped nearly a quarter of a billion dollars ($227 million) in ad revenue.” That is certainly a lot of money, but when placed into the context of all global media revenue it is virtually nothing. PricewaterhouseCoopers reported last June that in 2012, global media and entertainment created about $1.6 trillion dollars in revenue, and that this is expected to grow to over $2 trillion by 2017. The revenue of the reported cyberlockers account for .0064% of current global media revenue—that’s 1/6400 of each penny. When one considers the $227 million reported by DCA, that amount grows to .014% of global media revenue. So these amounts are almost nothing when considered against the mass of money generated worldwide.

Of course, the amount of money these cyberlockers make are not a measure of the damage that is cause by the distribution of unlicensed content. The monetary damage is probably best understood in terms of the monetary value of the unlicensed content. Unfortunately solid figures for the value of unlicensed content stored in cyberlockers simply do not exist, but in 2011 Frontier Economics released a study that claimed that, “Digitally pirated music, movies and software accounts for between $30 billion and $75 billion” in 2008 and estimated that would increase to between $80 billion and $240 billion by 2015. Based upon these figures, the value of unlicensed content will account for up to 10% of all global media revenue.

Even though DCA isn’t advocating for new regulation of file-hosting services, I highly suspect this is part of their agenda, and this creates a serious problem. Sure, some of these cyberlockers are unscrupulous opportunists who are using unlicensed content to sell internet advertisements, but how do we distinguish between them and other file-hosting services? Someone can just as easily use Dropbox to distribute unlicensed content. If we increase regulation and monitoring, will this undermine confidence in all file-hosting services because no one will feel their personal files will be secure, safe, and private? Is undermining the credibility in all companies providing file hosting services for the sake of 10% of global media revenue acceptable? Or do we acknowledge that the vast majority of global media revenue is legitimate?

This isn’t to say that some people are not harmed by the use of unlicensed content, and that we shouldn’t do something about their predicament. The career of photographer Alex Wild has been terribly harmed by the unlicensed use of his photographs. The pirating of his photographs by everyone from greeting card companies to governments has threatened to transform his business model into pursuing infringement, rather than taking photographs—something hardly worth the time or effort.

The US copyright office estimates the median cost of litigating an infringement to a conclusion is $350,000. Since the typical infringement only costs me a few hundred to a few thousand dollars’ of lost revenue, why would I risk bankruptcy on the hopes of a distant payout? The math doesn’t add up. – Alex Wild

This brings us back to the question: What do we do about this? How do we create systems to protect the livelihood of people like Alex Wild? Certainly we can agree that he should be able to derive benefit from his handiwork. However, the United States Copyright Office estimates of $350,000* for litigating a case means that enforcement of the current laws is only available to those with lots of money. Can we create laws that can and do prevent his photographs from being distributed and used without his consent, and at the same time allows him reasonably pursue infringement claims?

*Alex Wild’s claims of $350,000 as the median cost of litigating infringement is based upon a 2011 email survey of 2,577 members of the American Intellectual Property Law Association. This survey was then cited in a 2013 report to Congress by the Copyright Office entitled, “Copyright Small Claims: A Report on the Register of Copyrights”.

Unfortunately, the debate about unlicensed content and digital piracy ignores the elephant in the room: that technology has made content such as video, photographs, and recordings virtually free for anyone to copy and distribute. To actually prevent the distribution of content we would need to remove the ability to copy and paste files, and to upload those files to the internet. Are we willing to do that? Do we really want to remove such a basic function of computing in order to diminish 10% of all global media revenue and protect individuals like Alex Wild? (Who, by the way, couldn’t do what he does without access to these technologies.)

We need to acknowledge that technology has caused a virtually limitless supply of some forms of content. Content creators need to acknowledge that fact when they take photos, write songs, and make movies. We also need to recognize that the very thing allowing us to make these works in our homes is the same thing that allows our creations to be distributed so widely for virtually nothing. It is simply unrealistic to enforce one’s copyrights unless one is willing in invest lots of money in legal challenges, which still ultimately won’t prevent the unlicensed distribution.

The demand for music, photographs, and music will probably never decrease. Humans consume more new movies, more new songs, and more images than ever before, and the access provided by technology has done nothing but enable this demand. Additionally, technology has created the ability to freely copy and distribute works of art and eliminated scarcity for these works of art. Demand is higher than ever, but supply is also higher than ever. Since this is the case, why should people be realistically expected to pay money for the experiences these works of art provide?

To appeal to an analogy: If apple trees grew everywhere, and picking and eating apples did not affect the supply of apples, why should people be expected to pay money for apples?

Obviously there are some glaring weaknesses in this analogy, but those weaknesses aside, someone is spending time and treasure to make content—or in this case apples—so shouldn’t that person be allowed to recover the cost of creating that work? Sure, that’s a good thought. But in the case of my apple analogy, if someone is growing those apples, is it realistic for that person to demand any price for consumption of apples? There are no limits on the supply of apples, so almost any price whatsoever is ridiculous. The common answer would be, “Well don’t grow apples for your profession.”

If that’s the case, why should people make art at all? There is so much of it everywhere. The supply of music and movies and photographs is almost mind boggling. But yet despite this enormous supply, we keep making more and more and more. The answer is simple: the value is not the money, but rather the experience.

To some, of course, the value is the money. I’m sure the producers of Captain America: The Winter Soldier were motivated by a desire for money. Someone paid lots of money to make that film, and someone made lots of money from that film, but the value of the film for consumers was the experience of watching the story unfold. This is the value of poems, music, films, and visual arts: the aesthetic experience.

When someone listens to a song or watches a movie, they invest their time in the experience. That time is something they will never get back—it’s lost forever. Hopefully, the experience of the music or movie or whatever was worth it. Otherwise, that person could have done something else with their time, something more valuable. This commitment of time is too often undervalued and measured secondarily to the money someone exchanges for the experience.

Since a great deal of art cannot generate monetary profit due to non-experiential factors such as market saturation, distribution deficiencies, or resource availability, judging the value of those works by their profitability pays no regard to the real value of the art. And if market forces are to be the primary factor driving the creation of art, then saying a work of art doesn’t have a valuable exchange rate is tantamount to questioning the work’s right to exist. If exchange rate is the primary measurement of value, then Alex Wild’s photographs don’t deserve to exist. Due to the realities of digital images and copyright litigation costs, it’s unlikely that Alex Wild will ever claim the money copyright law entitles him for his work. But does his work deserve to exist? Are his photographs compelling and beautiful? Of course they are, and of course they deserve to exist. That’s because the value of the photographs is known by looking at them, not by paying for them.

Any systems we create to defend the rights of artists and content creators must starkly acknowledge the realities of technology, and that experiencing art is the primary value of art. If we do not face these issues head on, anything we do will fail to actually help artists. The solution may very well have nothing to to with copyright, it may be that society as a whole will need to find new and completely different ways to protect the rights and creations of its individual members. As technology continues to advance, it will only be cheaper and easier to distribute these kinds of content, which will further drive the price down. This creates a problem if monetary reward, rather than experience, is the primary incentive for the creation of content, because if society judges the worthiness of art primarily upon the money it makes, instead of its experiential value, then creating those experiences will become a secondary concern for virtually all artists; which is a terrifying prospect for the future of the arts.

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