A specter is haunting Europe—the specter of piracy. And on a typically gray day in Brussels, seventy-five executives from media trade associations all over the Continent have gathered in the headquarters of the Motion Picture Association (MPA) for a series of presentations on how to fight back. The MPA is the international affiliate of the American MPAA—it lobbies the European Union in Brussels, much as the MPAA works in Washington, D.C.—but this event is aimed at the operators in the trenches who try to prevent pirates from acquiring, distributing, and making money from their films. In modern Europe, where files and funds flow easily across borders, this work can be as painstakingly complicated as unraveling financial fraud.
The executives are listening to Pascal Hetzscholdt, a laid-back, tech-savvy Dutch guy with a mop of dark hair who runs the MPA’s online antipiracy efforts for Europe. Gesturing at a PowerPoint slide, Hetzscholdt reads a quotation from a science book about how predators and prey need to evolve along with each other in order to survive. For now, piracy still depends largely on file-sharing services, which can be monitored. But it’s increasingly moving to streaming sites like Megavideo, online locker services like Hotfile, and link farms that direct users to both. As piracy becomes more decentralized, the movie business has to adapt accordingly.
Unglamorous as it sounds, the executives in this beige conference room will help determine the future of the film business. No one expects them to stop piracy or reverse the slide in DVD sales that’s hitting various European countries at different rates. What they want to do is keep pirate Web sites less convenient than legal movie services so ventures like iTunes and UltraViolet can build an audience. They’ve declined to file mass lawsuits against ordinary individual uploaders in order to focus on taking down some of the larger commercial operations and keeping the rest too busy switching names and online addresses to build up a mass audience.
Hetzscholdt and the MPA have stronger laws on their side than their U.S. counterparts. In October 2009, the Constitutional Council of France approved the Creation and Internet Law—also known as the HADOPI law after the organization that will administer it—which could deny Internet access to repeat copyright infringers.1 In April 2010, the U.K. approved the Digital Economy Act, a more complicated piece of legislation that calls for repeat infringers to suffer consequences that would most likely consist of having their access slowed or suspended. (Both of these are called graduated-response laws, since users who infringe copyrights will receive a letter, then a warning, and eventually a limitation of service.) And in December 2010, the European Commission released a report that said online piracy in the European Union was “alarming” and stronger laws—perhaps requiring the cooperation of Internet service providers—might be needed to enforce intellectual property rights.2
It’s hard to tell how much of a difference the British and French laws will make, since they both call for monitoring file-sharing networks, but not online locker services or streaming sites. But they show that Europe is getting more serious about piracy and that it won’t hesitate to make Internet service providers play a role in limiting it. That could help more legal online services get the momentum they need to grow into sustainable businesses.
This is more important than it might seem, since Europe’s decisions on these matters affect the world. The first French copyright law states, “The most sacred, the most unassailable, and the most personal of all properties is the composition, the fruit of the writer’s thought.”3 This attitude, so different from that of the United States, has played a role in shaping international copyright treaties since the 1886 Berne Convention for the Protection of Literary and Artistic Works. Even now, when intellectual property is regulated by an alphabet soup of agencies and agreements—including the World Intellectual Property Organization (WIPO) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)—Europe still wields considerable influence.
Just as important, the European Union hasn’t been afraid to regulate U.S. technology companies in ways that have forced them to adjust their business worldwide: it penalized Microsoft and Intel for anticompetitive behavior, and it opened an antitrust inquiry into Google in November 2010. Perhaps because they aren’t homegrown, Europeans don’t see Google, Apple, and Amazon in the same soft light Americans do, especially when it comes to their power over culture. Germany prohibits the discounting of books in ways that have made it difficult for Amazon to launch its Kindle there.4 The French parliament considered, but rejected, a bill to mandate that iPods play music purchased from online stores other than iTunes.5 And the proposed Google Books settlement inspired the European Commission to create its own online culture archive and recommend that libraries limit Google’s exclusivity regarding the materials it scans.6 The Internet may be international, but Europeans tend to see Google as très américain—dynamic, but disinclined to bother about matters of international law.
“The Google Books compromise in America, which was agreed upon with publishers because they had to give in, overlooks the fact that copyright is an international law,” says Michael Naumann, a German publishing executive who ran Henry Holt in the United States and subsequently served as his country’s culture minister from 1998 to 2001. “Google can lobby their butt off. We won’t bow to their commercial interest.”
The Internet is an irresistible force, but Europe is full of immovable governments. And anyone who believes countries there can’t regulate the online world should consider what happened when Yahoo! told a court in France it couldn’t follow laws there. In February 2000, after Nazi memorabilia was offered for sale on a Yahoo! auction site, the company was sued in France, where it is effectively illegal to sell such items. Yahoo! warned that limiting what it characterized as free speech would set a dangerous precedent for the online world. And like many technology companies before and since, it argued that it couldn’t exert any control over the Internet, in this case to block French users from its site.
At the time, according to Jack Goldsmith and Tim Wu’s Who Controls the Internet? Illusions of a Borderless World, it seemed entirely possible that France would give in. Internet utopians claimed such censorship was impossible anyway. “It’s not that laws aren’t relevant,” the MIT Media Lab’s cofounder Nicholas Negroponte said at the time, “it’s that the nation-state is not relevant.”7 France, this line of thinking implied, would just have to accept the new reality of a borderless world.
But France does not even fully accept the reality of Sunday shop openings. “It became clear,” Goldsmith and Wu write, “that the irrelevance of the nation-state would not go uncontested.”8 When Yahoo! claimed France could not impose its laws on a U.S. company, the advocacy groups that sued it argued back that the United States should not push its free speech laws on France. “Should we have to accept this barbarism?” asked Marc Knobel, one of the activists who organized the lawsuits. “In America they have the First Amendment, which makes legal action against such sites difficult. But in France, as in other countries, we have laws, and these laws must be respected.”9
The court agreed: in May 2000, Judge Jean-Jacques Gomez gave Yahoo! three months to figure out how to block its site from Internet users in France. Yahoo! said it would be impossible. But when Judge Gomez consulted a group of technology experts, they said it could be done—not perfectly, but pretty well—employing the same technology Yahoo! used to make sure French users saw ads in their own language. Judge Gomez ordered Yahoo! to do so. The company apparently got over its philosophical attachment to free speech: two years later, as Goldsmith and Wu pointed out, Yahoo! agreed to restrict its search results in order to do business in China.
For a variety of reasons and in a variety of ways, the culture of the Internet has come to resemble the United States in both its enthusiasm for capitalism and its resistance to regulation. Like U.S. law, online culture and the companies that dominate it value privacy less than an anything-goes approach to free speech. (Very few people in France would say their country lacks freedom of expression; they just define it differently.) The U.S. approach to copyright also dominates the Web: many online companies outside the United States respond to Digital Millennium Copyright Act takedown notices, and technology companies have adopted the U.S. view of copyright as a way to give creators an economic incentive, but not control over their work.
Since the Internet has global reach, technology executives worry their companies could be subject to the most onerous regulations of any country in which they operate—“a world of Singaporean free speech, American tort law, Russian commercial regulation, and Chinese civil rights,” as Goldsmith and Wu describe it.10 When Judge Gomez issued his Yahoo! decision, online activists worried it set a precedent that would allow any country to impose its laws on the online world. “We now risk a race to the bottom,” said Alan Davidson, an attorney with the Center for Democracy and Technology who has since become the top lobbyist at Google. “The most restrictive rules about Internet content—influenced by any country—could have an impact on people around the world.”11
This is certainly worth worrying about, but it could be seen as a very American view. In Western Europe, voters tend to see regulations on commerce as a way to protect their rights rather than limit them; generally speaking, they tend to want freedom from the market, rather than for it. So they worry about another kind of race to the bottom, where the least restrictive rules in the world undermine their laws—on hate speech, consumer protection, and especially privacy. And many European countries already support their culture businesses using the French idea of l’exception culturelle—the cultural exception—which protects culture from the free market by requiring companies to invest in new works and imposing quotas on the airing and distribution of French music and film.12 France has subsidized newspapers and considered a tax on search engines that would mainly affect Google.
Any country that regulates DVD release dates in order to protect movie theaters, as France does, won’t hesitate to protect its film business from the Internet.13 So as soon as Nicolas Sarkozy became president of France in May 2007, he set out to do just that. He asked Denis Olivennes, then chief executive of the entertainment retailer Fnac, to prepare a report on the problem of piracy. Olivennes’s report recommended a “three strikes” policy of cutting off Internet access to repeat copyright infringers—an idea no other country had yet seriously contemplated—and French lawmakers put it into the HADOPI law.14
When the bill that would become the HADOPI law was first presented to the French Senate in June 2008, the reaction of online activists could be summarized as Quelle horreur! Several groups protested on the grounds that using the Internet was a fundamental right. There’s not much in French law to support this: it’s difficult to function without online access, but the same could be said of a car, and few would argue that the government can’t suspend one’s right to drive.
The possibility of false accusations raised more serious concerns. In June 2009, the French Constitutional Council declared this first version of the HADOPI law unconstitutional because it did not provide for proper due process. Around the same time, members of the European Parliament in Brussels tried to insert a passage into Europe-wide telecom legislation that would forbid countries to cut off Internet access for copyright infringement without allowing users to request an official hearing on the matter. (Companies would not, of course, need a proceeding to cut off users who did not pay their bills.) Although some members of the Parliament became uncomfortable with the idea of disconnections in general, the court approved a version of HADOPI that provided for judicial review.
In the U.K., momentum for similar regulation started building in October 2008, when the country launched its Digital Britain project, aimed at helping the country improve its online infrastructure. Among other recommendations, the resulting report suggested forcing Internet service providers to follow a code to deal with copyright infringement.15 But it also emphasized how important it was for copyright holders to make it easier for consumers to buy music and movies online.
The Digital Economy Act, which takes the graduated-response idea from HADOPI, was presented in March 2010 and voted on the next month—a rushed process that left members of Parliament on both sides of the issue complaining that they didn’t have enough time for debate. (The law doesn’t mandate a specific number of offenses or penalty; repeat infringers are subject to “technical measures,” which could include a limit on broadband speed.) The influence of lobbyists was obvious: the Guardian reported that an amendment that could block sites that repeatedly infringed copyright was taken nearly verbatim from a document from the British Phonographic Industry (BPI), the U.K. recording business trade group.16 As with HADOPI, the difficulty of matching the Internet protocol addresses used by computers that download pirated music with individual users raises the likelihood of false accusations—someone could use a neighbor’s open WiFi system to download illegal material—but the bill provides for an appeals process.
The music industry was conflicted, with some artists and their representatives protesting that the law’s penalties were too harsh. “I think a bunch of us were a bit anti the Digital Economy Act because it was more stick than carrot,” says Radiohead’s manager, Brian Message. Although Radiohead famously let fans name their own price for one of its albums, Message manages other acts on major labels, and he wants to make sure artists don’t get taken advantage of by them or technology companies. “I quite like the attention it put on the issues, and I’m definitely interested to see how it actually works,” he says. “But I do worry that we spend so much time on a negative slant where we’re not spending enough time necessarily working out how can we use this to our best advantage.”
Although online activists criticized these laws for strengthening copyright, they didn’t actually give creators any additional rights. As in the United States, it was already illegal in the U.K. and France to make copyrighted work available online without permission, and British and French copyright laws are generally more restrictive than those in the United States. (The U.K. has a “fair dealing” doctrine that’s similar but a bit stricter than fair use; French law contains specific “statutory exceptions” to copyright.) The problem was that these laws were difficult to enforce, since Internet service providers had little responsibility for copyright infringement, due to laws modeled on the Digital Millennium Copyright Act.
“You have a lot of perfectly good copyright legislation in a lot of areas, and what you need is new ways of managing copyright that go with the grain of technology rather than a last-ditch attempt to manage the status quo,” says James Murdoch, chief executive of News Corporation in Europe and Asia. “But you also need an enforcement agenda that works and doesn’t turn a blind eye to theft.”
Although scores of bloggers lambasted the bill, their feelings don’t seem typical of the British public. In June 2010, a survey by the research company Ipsos MORI found that 52 percent of respondents agreed that it was acceptable to limit the online access of repeat copyright infringers, while only 18 percent disagreed.17 Those results nearly matched a spring 2010 survey by the law firm Wiggin LLP (which works for media companies).18 And the law isn’t designed so much to get infringers off the Internet as to scare them straight.
“For us, what’s always been more important about the technical measures is not the imposition of them but the threat of them,” says Richard Mollet, the BPI’s former director of public affairs. (He became chief executive of the U.K. Publishers Association in October 2010.) It’s not in the interests of copyright holders to actually cut off people’s Internet access, if only for selfish reasons: it limits their access to online stores. Mollet thinks most consumers will stop downloading illegally once they receive a letter that says they’ve been caught, while others will have a stern talk with their kids.
The debate about piracy in Europe has a depressing familiarity. Just as they do in the United States, media companies cite studies that exaggerate the effects of file sharing, while online activists point to the flawed Oberholzer-Gee and Strumpf study that said it’s harmless, even though the authors themselves have since concluded otherwise. Copyright holders talk about theft, while technology companies hide behind the public interest. The only difference is that everyone has more rights—artists to their work and individuals to their privacy—in a way that makes it difficult to enforce laws online.
In France, this conflict set the Socialists, the country’s major left-wing party, against themselves. During the debate over HADOPI, Le Monde published a letter from four prominent French artists defending the traditional French view of copyright as a human right, one the Left had often defended.19 But the French Socialist deputy Christian Paul instead spoke out to praise the ideas of Jean Zay, the late-1930s leftist French minister of national education and fine arts, who promoted the idea of artists as travailleurs intellectuels—“intellectual workers”—who would entrust some of their rights to the government.20 “Then, there was a great debate on the future of creative production and the future of the artist in a society in the midst of transformation,” Paul said at a National Assembly hearing. “But that debate, you won’t have it after HADOPI, which opens the way to a society of repression, whereas we wish for a society of freedom for artists and the public.” Of course, the public’s freedom to access a work can interfere with an artist’s freedom to sell it.
“Zay supported the access of people to culture,” says Catherine Trautmann, the former French culture minister who now serves as a Socialist member of the European Parliament. “I think we are in a new period of rights—cultural rights. First there were individual rights, then social rights, now cultural rights.”
A more cynical view would be that the Socialists got caught in a classic left-wing dilemma: Defend the rights of a few or offer their stuff to the many? “There is a tradition of the Socialists defending the ‘cultural exception’—the right for the cultural product to escape the usual market law,” says Denis Olivennes, now chief executive of Europe 1 Radio. “But now they are siding with young people against what they call ‘the artist lobbies.’ They think they are defending consumers, but they are the advocates of international corporations with huge profit, like the telecom operators and Google. How can the Socialists, who are in favor of regulation for everything—for finance, for the workforce—want to totally deregulate culture?”
Meanwhile, as file sharing grows more popular in Spain and Scandinavia, music and movie sales in those countries have suffered more than elsewhere in Europe. Courts rarely hold anyone liable for file sharing in Spain, which is quickly becoming the worst-case scenario for the future of the entertainment business.21 The country’s recorded music business is only a third the size it was a decade ago, and no new Spanish artist had a Top 50 album during 2010.22 DVD sales have fallen so much that the chairman of Sony Pictures Entertainment, Michael Lynton, has said Spain is “on the brink of no longer being a viable home entertainment market for us.”23
Scandinavia, especially Sweden, has seen a backlash against creators’ rights that stems from a May 2006 police raid on the offices of the Pirate Bay, a major file-sharing service based in Stockholm. In Sweden, where fast Internet connections made illegal downloading popular before it took off elsewhere, many people had a hard time believing copyright infringement justified such a severe response. When the Pirate Bay’s four founders faced criminal charges for contributory copyright infringement, the trial that followed drew hundreds of new members to the Pirate Party, a previously obscure Swedish political party that wants to severely limit copyright and patent protections and to expand privacy rights.24
The four Pirate Bay founders charged in the case—Peter Sunde, Gottfrid Svartholm, Fredrik Neij, and Carl Lundström—saw the controversy as a growth opportunity. Instead of acting on takedown notices from music and movie companies, they posted them on the site and mocked them. Unlike other file-sharing services, they didn’t bother to talk about their respect for copyright; they just said it had run its course as a useful policy. Asked about his ideas on copying in November 2007, Sunde, who acted as spokesman for the group, told a BBC reporter, “If I want it, I take it, ’cause I can. It might be [im]moral to some people but I think it’s up to me to decide.”25
As with European Internet regulations, what happens to the Pirate Bay could have a profound effect on the U.S. media business. Although the Pirate Bay operates in Sweden, it attracts users and illegally distributes work from every country with Internet access. Allowing such a service to operate legally in Sweden wouldn’t only undermine copyright there; it would do so all over the world. This, too, is a race to the bottom.
By the fall of 2008, the Pirate Bay had twenty-five million users and represented a tenth of all Internet traffic.26 As the Swedish prosecutor prepared the case against them, Sunde, Svartholm, and Neij continued to present themselves as forward-thinking champions of free speech. (Lundström, who had provided funding for the venture, was older and acted it.) A 2008 article in Condé Nast Portfolio presented Sunde, the group’s spokesman, as “a bit of a philosopher when it comes to what his site does.” “We’re not even a company,” Sunde told the magazine.27 Elsewhere, he said the service had made just $80,000 in profit in three years because “there’s no good way to monetize something which is political.”28
Sunde, Svartholm, and Neij deliberately turned their February 2009 trial into a media circus—a “spectrial,” in their words. In a pretrial press conference at the Swedish National Museum of Science and Technology (from which publications that had been critical of the Pirate Bay were barred), Sunde claimed that the BitTorrent protocol accounted for 80 percent of all Internet traffic and 40 percent of that came from the Pirate Bay—figures that were probably exaggerated. Sunde, who did most of the speaking for the group, compared the Pirate Bay to Google, since it merely helped users search for files to download.
In April 2009, the four founders each received a year in jail and a collective fine of about $3.5 million. They requested a retrial after Swedish Radio reported that a judge in the case, Tomas Norström, belonged to the Swedish Copyright Association, but the Swedish Court of Appeals took the case instead. The Pirate Bay remained online, and interest in its cause only grew.
Fueled by controversy surrounding the Pirate Bay, the Swedish Pirate Party gradually grew into an international movement. In June 2009, it won two seats in the European Parliament in Brussels. (It has no seats in the Swedish parliament.) The German Pirate Party won enough of a following to make the Green Party address the issue of copyright, and Pirate Parties International was founded in April 2010 to coordinate the activities of more than thirty national organizations. But the movement never got much traction outside northern Europe.
The Pirate Party’s main argument is that governments face a choice between protecting copyright or privacy, an important right in most of Europe. Since people wouldn’t tolerate the government opening their mail, why would they allow it to examine what they download? But there are ways to compensate copyright holders that don’t involve looking at every work acquired: cable television companies don’t need to monitor what customers watch, since a single fee covers all the programming they want. And the fact that governments don’t open letters sent from within the country doesn’t mean they have no authority over large packages sent from outside it.
Perhaps most important, the technology companies that lobby against enforcing copyright laws are the same ones that collect information about users themselves. “With the Internet community, whatever you do to protect the interests of artists, they argue that intellectual property protection leads to a surveillance culture,” says Helga Trüpel, a member of the German Green Party who serves as the vice-chair of the Committee on Culture and Education in the European Parliament. “But when Google is watching them, it’s okay.”
According to the Pirate Bay e-mails found on computers seized as evidence by the Swedish police in 2006, none of the founders were nearly as interested in any of these issues as they were in building a profitable business that happened to be illegal.29 Initial funding came from Lundström, the heir to a crisp-bread fortune, who financed several right-wing nationalist organizations, according to the Swedish newsweekly Veckans Affärer.30 (There is no evidence that the other three founders share his political ideas or that the Pirate Bay ever promoted them.) “We’ll make some sort of offshore company of it,” Lundström wrote in a March 2005 e-mail that Neij was copied on. He said the Pirate Bay was already making money, with much less traffic than it eventually attracted.31 A few days later, he copied Neij and Svartholm on an e-mail in which he said, “We’re attacking the international market now, which means even more ad revenue.”32
The Pirate Bay gradually built up a serious ad sales operation. It hired Random Media, a consulting company based in Israel and run by a man named Daniel Oded, to sell most of its advertising. In May 2006, Oded e-mailed Lundström and Svartholm to say that he and Sunde had met with a company that wanted to buy $100,000 worth of advertising.33 According to a 2006 article in the Swedish daily Svenska Dagbladet, another company that worked with the Pirate Bay, Eastpoint Media, brought in SKR600,000 ($94,000) a month just selling advertising in Scandinavia.34
No one knows how much money the Pirate Bay made on advertising: Swedish prosecutors haven’t been able to find the money, and the founders either say they don’t remember or give a number close to $80,000. “Pirate Bay maintain that all the revenue went back into the site, but that’s highly unlikely,” says Anders Rydell, author of Piraterna (The Pirates).
Judging from their e-mail, one cause the Pirate Bay founders did feel very strongly about was avoiding taxes. According to Svenska Dagbladet, the Pirate Bay had advertisers send money to a company in Switzerland that shared an address with a firm that offered advice on how to avoid taxes.35 A February 2006 e-mail from Neij to Svartholm referenced a company Lundström set up to launder money,36 while another asked if it was smart to wire money into a Swedish account since “the taxman has big eyes and a long crooked nose.”37 Although these e-mails are openly available, and those sent to and by Oded are in English, the Pirate Bay’s tax planning hasn’t received nearly as much media attention as its professed politics.
The Pirate Bay has proved very difficult to shut down. Sunde has said the founders no longer own it, but a series of shell companies makes it difficult to find out who does. In 2009 and 2010, injunctions prevented two hosting services from keeping the site on their servers. But the Swedish Pirate Party started hosting it in May 2010, and Sunde suggested that shutting it down now would be seen as political censorship.38
More than a year after the first Pirate Bay trial, in November 2010, the Swedish Court of Appeals upheld the district court’s guilty verdict. Neij, Sunde, and Lundström all got jail time—ten, eight, and four months, respectively—and were ordered to pay about $7 million in damages. (Svartholm did not appear in court, due to illness, and will have a separate trial in appeals court.) Neij, Sunde, and Lundström immediately filed an appeal to the Swedish Supreme Court, as did the music and movie business groups suing them, which are seeking a higher penalty.
According to the Swedish Court of Appeals verdict in the Pirate Bay case, Sunde had a previous conviction. In February 2009, according to Swedish court records, he was convicted for accounting fraud in connection with not declaring income of a business he controlled, High Availability Intelligence Quality Sweden.39 Sunde said in court that he had given the company’s payment records to its accountant, who did not file them. (Sunde did not respond to interview requests.) In February 2010, Sunde, who had left the Pirate Bay in August 2009, announced that he was founding Flattr, an online payment system that would let users make “micropayments” to artists they wanted to support by clicking on their Web pages.
In the United States, as piracy lowers the value of media, technology companies have essentially managed to set the price of music and video, and tried to do the same for books. No matter what something costs to make, Amazon and iTunes try to sell it for as little as possible, since they make money in other ways. This can be beneficial for consumers—but in the same way Walmart is, and with the same kind of long-term cost. In this digital version of Walmart capitalism, retailers set prices and conditions, and suppliers meet them by cutting costs however they can.
That’s exactly the kind of outcome European countries try to avoid. Consider the book business in Germany, which sees publishing the way France views film: as a business it invented, developed, and needs to protect. Gutenberg invented modern printing in what is now Germany, and the first incarnation of the Frankfurt Book Fair started nearby soon after. For more than a century, the Buchpreisbindung—Book Pricing Law—has forced retailers to sell books for list prices to prevent chains from dominating the business through aggressive discounting.40 “You don’t have this [situation in the United States] where bookstores like Barnes & Noble and Borders sell $25.00 books for $9.99,” says Michael Naumann, the publishing executive.
As Naumann sees it, the law keeps the country’s book business healthy. The lack of price competition means books cost more than they otherwise would, but many Germans credit it with preserving independent bookstores, small publishers, and the diversity of German-language writing; Germany has more bookstores and releases more books per capita than the United States.41 (France, Italy, and Spain all have similar regulations, albeit with less tradition attached.) When Naumann was culture minister, he prevented the European Commission from overruling the pricing law. “It was a long and hard fight,” he says. “The German book business is a sacred cow.”
Whether this amounts to savvy protection or silly protectionism, it certainly conflicts with Amazon’s strategy of distributing books in ways that are more efficient for readers but less profitable for authors and publishers. Amazon does not discount German-language books in Germany, and as of early 2011 it hadn’t announced plans to market the Kindle there. The trade organization Börsenverein des Deutschen Buchhandels—the German Publishers and Booksellers Association—has declared that the book price law would apply to digital books, and so far no one has challenged it.
To fend off Amazon and Google, the Börsenverein has also created its own online publishing platform. Launched in 2007, the online platform libreka! lets publishers and retailers sell digital books for publishers’ prices, either in shops or through online storefronts they run. It represents a plan to maintain the traditional structure of the publishing business, including physical stores, in a new world that seems to have little use for them. By all available evidence, it is failing. Lower prices are one of the main advantages of e-books, and Germans have shown little interest in the service, which sells only 31,000 titles, compared with the 810,000 available for the Kindle.42 The weekly newsmagazine Der Spiegel called it a “platform to prevent e-book sales.”43 It certainly seems to be stalling them.
“I’m not sure we have the power to speed it up or slow it down,” says Ronald Schild, who runs libreka! “The power of libreka! is to maintain the position of publishers in the value chain. Apple and Amazon can make [the spread of e-books] faster, but publishers don’t want to have to accept Amazon’s terms.” Like Hulu, libreka! is essentially run by the business whose products it sells, which gives the participating companies control over pricing. “We go all over the world to talk about it,” Schild says, “and publishers in other countries are jealous.”
If Germany is wary of Amazon, imagine what a country so conscious of its literary heritage thinks of Google’s plan to archive all the world’s books. An amicus brief the country submitted about the proposed Google Books settlement called it “a privately-negotiated document that is shrouded in secrecy, formulated behind closed doors by three interested parties, the Authors Guild, the Association of American Publishers and Google, Inc., resulting in a commercially driven document that is contrary to established international treaties and laws.”44 Although the settlement could help U.S. publishers, it certainly goes against several copyright treaties, and German law does not have the concept of fair use on which Google’s legal argument would rest. The Börsenverein des Deutschen Buchhandels has already said it does not want its out-of-print books to be covered by the settlement. In 2011 the German National Library plans to launch a Web site with books and artifacts from thirty thousand institutions, which it will then integrate with the European Commission’s project Europeana.
Germany has also debated defending its print culture by passing an “ancillary copyright” law to protect newspapers and magazines. According to a draft leaked to the free culture Web site iRights.info, the publishing giants Hubert Burda Media and Axel Springer AG are lobbying for a law that would essentially require online aggregators and search engines to pay a licensing fee in order to excerpt their news articles. This could be easier than it sounds, since the concept of fair use that Google News relies on to index content in the United States has no basis in German law. (Germany, like other countries in Continental Europe, has specific exceptions to copyright law.) And if Google is selling ads against this information, why shouldn’t it pay?
Whatever happens to the law, it shows how Germany, like France, may be more willing to defend its culture businesses than the United States. “The German government has a clear position,” said Chancellor Angela Merkel in an address before the 2009 Frankfurt Book Fair. “Copyrights have to be protected on the Internet.”
By sheer force of its market size and willingness to regulate the Internet, Europe’s decisions about technology and culture will exert a pull on the rest of the world, however they play out. But this might not help media companies as much as they’d like. As of early 2011, the Pirate Bay was still operating, the HADOPI law hadn’t had an impact, and the Digital Economy Act was stuck in a process of reviews.
In France, a University of Rennes survey conducted just after the HADOPI law came into effect found that file sharing had actually grown.45 As of early 2011, HADOPI had yet to issue a single penalty; it wasn’t even allowed to start sending second notices until January 2011. “These policies are destined to fail,” says Jérémie Zimmermann, a spokesman for La Quadrature du Net, a French online activist group. “The fact that they stuck a judge in there [when the Constitutional Council forced a change in the law] killed HADOPI. There will never be a conviction.” If the law does cut file sharing, it might just push users toward online locker services like RapidShare.
This might make it easier for Pascal Hetzscholdt and the antipiracy executives he works with, however, since link farms and online lockers are easier to shut down than file-sharing services. As Hetzscholdt points out, pirate sites depend on hosting companies, domain registrars, and either ad networks or firms that process credit card payments, and this web of relationships makes them vulnerable. Legitimate businesses all respond to pressure, and they’re easy to find. “You can go to the registrar, the hosting providers, the ad broker, or the payment processor,” Hetzscholdt says. “In most cases that’s sufficient.” The idea isn’t to eliminate piracy—just keep it inconvenient enough that most people will buy or rent from legitimate retailers.
In the U.K., the Digital Economy Act handles online lockers by calling for the government to order Internet service providers to block sites that persist in infringing copyrights. This saves U.K. copyright holders the considerable expense of suing online services located in other countries and allows the U.K. to enforce the law within its borders, which, after all, is the whole point of having a country. “Site blocking is far better for us because we are able to go after the commercial infringers,” says Oliver Weingarten, commercial solicitor for the English Premier League. “We’d be able to have an effective remedy against the problem with live sites.”
Like the HADOPI law, however, the Digital Economy Act isn’t exactly moving at Internet speed. Some of this is due to the nature of the law itself: so much is left to the discretion of the U.K. Office of Communications—popularly known as Ofcom—that it almost seems as though Parliament passed a bill before it decided what it would do. The law defines obligations and limits, then leaves it to Ofcom to produce a regulatory code, as well as progress reports.
That should provide controversy for years to come. After Ofcom released the first draft of its enforcement guidelines in May 2010, the U.K. Internet service provider TalkTalk said that “copyright owners are the only ones that will benefit from this system, so unless the government decides that these companies should fully reimburse ISPs’ costs, broadband customers will in effect be forced to subsidize the profits of large music and film companies.”46 TalkTalk didn’t seem to be bothered by the fact that music and film had been subsidizing its profits for years. In July 2010, TalkTalk and the Internet service provider BT successfully requested a judicial review of the law, on the grounds that it wasn’t consistent with privacy law or European Union telecom regulations. In February 2011, the U.K.’s culture secretary, Jeremy Hunt, asked Ofcom to look into the feasibility of actually blocking sites that were almost entirely devoted to providing pirated material.
All of this is taking place at a time when Prime Minister David Cameron seems even more entranced by Google than President Obama is. In February 2009, Cameron appointed Eric Schmidt as an adviser on the Conservative Party’s economic policy. In November 2010, Schmidt cowrote a Daily Telegraph opinion piece with George Osborne, the chancellor of the Exchequer, which concluded that the Internet would fuel an increasing amount of economic growth—according to a report by Google.47 (The Internet is obviously a crucial source of growth, but surely there’s another study that says so.) And Cameron’s director of strategy, Steve Hilton, is married to Rachel Whetstone, a vice president for public policy and communications at Google.
Cameron seems especially interested in Google’s opinions on U.K. copyright law. In November 2010, when Cameron announced a “tech city” for start-ups in London, he mentioned that the U.K. would also review its intellectual property laws, “to see if we can make them fit for the internet age.”48 Cameron was frank about his motivations: he mentioned that the founders of Google “feel our copyright system is not as friendly to this sort of innovation as it is in the United States.” The science and universities minister, David Willetts, also spoke, stating that he would look into making it easier to patent software—an issue that represents a potentially serious block to innovation in a way copyright hardly ever does.
In late 2010, the government announced that an independent review of intellectual property would be led by the former Financial Times editor Ian Hargreaves. More upsetting for copyright holders, the panel will include James Boyle, a law professor at Duke who is a former chairman of Creative Commons. To convey his views on intellectual property, Boyle wrote a comic book on the subject that portrays Lawrence Lessig as the Statue of Liberty.49
Whatever happens with U.K. copyright law—and Hargreaves’s panel will only deliver recommendations—changing the poisoned relationship between media companies and Internet service providers will require new ideas. One of the most promising is the concept of a blanket license, which would add a fee to Internet connections, allow file sharing or other forms of downloading, and divide up the money to compensate copyright holders for the use of their work. And it will be difficult to make progress on that idea until technology companies face more pressure to negotiate.
This would help European economies more than any ideas that come out of Hargreaves’s panel. Copyright-based businesses generate a significant number of jobs in Europe, just as they do in the United States. Ultimately, says Tim Renner, former chief executive of Universal Music Germany, “for Europe and the United States, it’s in our mutual interest that there is some value behind ideas.”