The French anti-piracy framework known as Hadopi began as tragedy and soon turned into farce. It was tragic that so much energy was wasted on putting together a system that was designed to throw ordinary users off the Internet — the infamous “three strikes and you’re out” approach — rather than encouraging better legal offerings. Four years after the Hadopi system was created in 2009, it descended into farce when the French government struck down the signature three strikes punishment because it had failed to bring the promised benefits to the copyright world. Indeed, Hadopi had failed to do anything much: its first and only suspension was suspended, and a detailed study of the three strikes approach showed it was a failure from just about every viewpoint. Nonetheless, Hadopi has staggered on, sending out its largely ignored warnings to people for allegedly downloading unauthorized copies of material, and imposing a few fines on those unlucky enough to get caught repeatedly.
As TorrentFreak reports, Hadopi has published its annual report, which contains some fascinating details of what exactly it has achieved during the ten years of its existence. In 2019, the copyright industry referred 9 million cases to Hadopi for further investigation, down from 14 million the year before. However, referral does not mean a warning was necessarily sent. In fact, since 2010, Hadopi has only sent out 12.7 million warnings in total, which means that most people accused of piracy don’t even see a warning.
Those figures are a little abstract; what’s important is how effective Hadopi has been, and whether the entire project has been worth all the time and money it has consumed. Figures put together by Next INpact, quoted by TorrentFreak, indicate that during the decade of its existence, Hadopi has imposed the grand sum of €87,000 in fines, but cost French taxpayers nearly a thousand times more — €82 million. Against that background of staggering inefficiency and inefficacy, the following words in the introduction to Hadopi’s annual report (pdf), written by the organization’s president, Denis Rapone, ring rather hollow:
Hadopi remains, ten years later and despite the pitfalls in its path in the past, the major player in the protection of copyright, so that creation can flourish unhindered.
Creation could have flourished rather more had those €82 million been spent supporting struggling artists directly, rather than wasting them on the bureaucrats running this pointless joke of an organization. Time to bring the curtain down on the Hadopi farce for good.
Hollywood’s efforts to win political clout have always stretched across the country, from glitzy campaign fundraisers in Beverly Hills to cocktail parties with power brokers in Washington.
Last year, the film industry staked out another zone of influence: U.S. embassies. Its lobbying arm paid to renovate screening rooms in at least four overseas outposts, hoping the new theaters would help ambassadors and their foreign guests “keep U.S. cultural interests top of mind,” according to an internal email.
That was the same year that the Motion Picture Association of America, which represents the six biggest studios, reported it was lobbying the State Department on issues including piracy and online content distribution. Hollywood’s interests – including its push for tougher copyright rules in the Trans-Pacific Partnership trade pact – often put the industry at odds with Silicon Valley.
The only public indication of the embassy-theater initiative was a February 2015 press release from American officials in Madrid, titled “U.S. Embassy Launches State-of-the-Art Screening Room.” It credited “a generous donation” from the MPAA.
Asked about its gifts to the State Department, the lobby group declined to say how many embassies got donations or how much they were worth.
“Because film is a great ambassador for U.S. culture around the world, MPAA assisted with the upgrade of some embassy theater facilities,” said spokeswoman Kate Bedingfield. “All gifts complied with the law as well as with State Department ethics guidelines.”
Nicole Thompson, a State Department spokeswoman, said at least three embassies besides Madrid received between $20,000 and $50,000 in entertainment upgrades last year – London, Paris and Rome. The revamped screening rooms, she said, aren’t intended to entertain U.S. officials, but rather to help them host screenings to promote an American industry and sow goodwill.
Thompson said the donations were proper and that all gifts to the department are reviewed to avoid even the appearance of a conflict of interest. “The department has explicit authorities to accept gifts made for its benefit or for carrying out any of its functions,” she said.
The State Department routinely accepts gifts from outside groups, Thompson said. She couldn’t provide any other examples of major gifts from groups that simultaneously lobby the agency. Thompson declined to list the items given by the MPAA or their total value, and wouldn’t say whether the group had made similar gifts in the past.
There was at least one precedent. A spokesman for Warner Bros. Entertainment said the studio helped pay for the refurbishment of the screening room at the U.S. ambassador’s home in Paris in 2011. “This donation was coordinated with the State Department and complied with all appropriate rules and regulations,” the spokesman said.
State Department policies posted online specifically permit gifts from individuals, groups or corporations for “embassy refurbishment, ” provided that the donors are vetted to ensure there’s no conflict or possible “embarrassment or harm” to the agency. The posted policies include no caps on the value of donations, nor any requirements for public disclosure of foreign or American donors. The rules also say that the donations can’t come with a promise or expectation of “any advantage or preference from the U.S. Government.”
Obtaining an advantage, albeit a nonspecific one, sounded like the goal when a Sony Pictures Entertainment official wrote to the studio’s chief executive officer, Michael Lynton, to relay a request to fund the screening rooms from Chris Dodd, the former U.S. senator who heads the MPAA. The executive writing the note – Keith Weaver – sought to assure the CEO that such a donation wouldn’t be improper.
“The rationale being that key Ambassadors will keep U.S. cultural interests top of mind, as they screen American movies for high level officials where they are stationed,” reads the message, included in a cache of emails hacked from Sony and which were posted online by the website WikiLeaks.
“The cost implication is estimated to be $165k (aggregate of $$$/in-kind) per embassy/per studio. Apparently, donations of this kind are permissible.”
Besides Sony, the MPAA represents Disney, Paramount, Twentieth Century Fox, Universal Studios and Warner Bros. Entertainment. The e-mails suggest that Sony executives decided against contributing to the project for budget reasons.
The MPAA has long been a powerful presence in the nation’s capital, spending $1.34 million on federal lobbying last year, according to data compiled by the Center for Responsive Politics. One of its flashier tools has been to host exclusive gatherings at its Washington screening room, two blocks from the White House, where lawmakers get to watch blockbuster films, rub elbows with celebrities, and up until several years ago, enjoy dinner – a perk scuttled because of stricter rules on congressional lobbying.
Hollywood studios depend on foreign markets for much of their profit but the MPAA’s interests don’t always align with those of other major American constituencies. For example, Hollywood studios have moved some film production to Canada to cut costs. American film workers have tried to get the federal government to stop the outsourcing of jobs, but have been met with resistance from the MPAA.
The trade group has also pushed federal officials to pressure foreign governments into adopting stricter copyright laws. An MPAA-funded study found that in 2005 worldwide piracy cost American studios $6.1 billion in revenue. That number has been disputed by digital rights advocates.
For the TPP trade deal, the MPAA has discouraged the American government from exporting “fair use” protections to other countries. In a hacked message from Dodd to the U.S. Trade Representative, the MPAA chief warned that including such provisions, which in American law allow limited use of copyrighted materials without permission, would be “extremely controversial and divisive.” Digital rights activists have characterized the efforts as overzealous.
“They’re basically encouraging other countries to adopt the most draconian parts of U.S. copyright law and even to reinterpret U.S. copyright law to make it more stringent,” said Mitch Stoltz, an attorney for the Electronic Frontier Foundation. “Broadly speaking broadening copyright law harms free speech in many cases by creating a mechanism for censorship.”
The state-of-the-art screening rooms are a relatively minimal investment by Hollywood as it works to strengthen connections abroad.
This spring, the U.S. ambassador to Spain, James Costos, brought a group of foreign officials to Los Angeles for a meeting hosted by the MPAA. Among them were representatives from the Canary Islands, who came prepared to discuss filming opportunities and tax incentives for American studios in the Spanish territory. The State Department touted the trip as an opportunity to “expand bilateral trade and investment, including through ties between the entertainment industries.”
It’s not known whether the path to that particular meeting was eased by the new screening room in Madrid. At the theater’s debut in February, the ambassador’s guests were treated to a dark tale of corruption, lobbying and double-dealing in Washington – the Netflix series “House of Cards.”
Over the last couple of weeks, we’ve seen a bunch of folks on all sides of the debates about file sharing point us to two studies that have come out, one of which supporters of greater copyright enforcement insist prove their point, and another which seems to show (yet again) that file sharing has little impact on buying habits. I wanted to take the time to look through both studies before writing about them, and since they came out so close together, we might as well do one post looking at both. As I started to write up a single post about it all, it got really, really long. So I’m breaking it into three separate posts. One about the first study, which argues that file sharing hurts sales, one that looks at the second study, which argues that file sharing does not hurt sales (and may actually increase sales), and then a third post, which tries to reconcile the findings of the two studies, while also responding to some of the criticism.
The first study is called Gone in 60 Seconds: The Impact of the Megaupload Shutdown on Movie Sales and is by Brett Danaher and Michael Smith. Smith, especially, has a long history of producing reports that copyright maximalists love. For example, both he and Danaher were responsible for a study last year claiming that the Hadopi 3 strikes program had increased iTunes sales. Unfortunately, a quick review of that report raised serious questions about the basis for those claims, as an alternative hypothesis (related to the sale of new iPhones) showed much more compelling data. I see his name on a lot of research sent around by the maximalists. It’s worth noting, as well, that the study was effectively funded by the MPAA, since it was a project of a program run by Smith and funded by the MPAA. Oddly, the paper fails to disclose this tidbit.
This new study seeks to answer a question we’ve been asking over and over again: do any of these enforcement efforts actually increase sales? There has been evidence that greater enforcement has a small, but temporary, impact on decreasing infringement, but there was not that much data concerning actual sales. In fact, we’ve pointed to data (contradicting Smith’s other report) that suggested Hadopi had done little, if anything, to increase sales. However, the data here has been limited, in part because there are so many other variables at play, so it’s difficult to separate out the actual impact. Smith and Danaher try to use data from various studios to look at the impact on movie sales following the Megaupload shutdown.
To try to determine the impact of the shutdown of Megaupload, Danaher and Smith basically compare movie sales before and after the shutdown date in a few different countries that had very different Megaupload usage. For example, they (using Google Adwords data) suggest that Megaupload had 2% penetration in the US, but 17% in Spain. Then they look at what the impact was in terms of digital movie sales and rentals compared across the different countries, and whether or not there were more sales in countries that had more Megaupload usage. They use this to argue that the key difference is Megaupload usage. The end result is that countries that had more Megaupload penetration saw a greater increase in digital movie sales and rentals following the shutdown than the countries that had lower Megaupload penetration. As they note:
This difference is both statistically and economically significant. Our findings indicate that digital movie revenues for two studios were 6-10% higher over the 18 weeks following the shutdown (across 12 countries) than they would have been if not for the shutdown.
This chart highlights the basics:
As you can see, the countries that had higher Megaupload penetration (Mexico, Belgium, France and Spain) all also showed distinctly more sales relative to the other countries, which had relatively lower Megaupload penetration. There’s a similar chart for rental data as well, in which you see a similar pattern, though not nearly as strong a correlation.
While I’ve seen some criticism online of these findings, I actually think the basic research and methodology is fairly solid. Those who have jumped up and said “correlation is not causation” are ignoring the various methods that the researchers used to isolate the shutdown. However, I’m not sure that the conclusions are quite as meaningful as some have suggested. First off, we’ve seen very similar data when it came to decreases in file sharing after enforcement increases — but the impact has always been shown to be temporary, until people settle in on a new method for infringement. It would make sense that some users of such a service, who don’t want to go hunting for a new free option, will switch to an authorized service if it’s available. But if they become aware of other services, they might also switch back. The amount of time the impact lasts will be a key thing to watch.
Of course, the other key thing that is left out of the picture in this study is the role of authorized services in all of this. Part of the reason for the growth of infringement on Megaupload in the first place was the dearth of compelling, simple, non-annoying, authorized services. The industry has, finally, been trying to increase those, and so it could be that people who couldn’t find any legit services before looked around again after the shutdown and found newer, better services. While the authors of the report say the findings suggest that Megaupload usage decreases sales, a possible alternative explanation would be that the slow pace with which the industry rolled out authorized services was equally, if not more, responsible. Either way, this report is a useful contribution in understanding the impact.
In our next post, we’ll explore the second study that came out even more recently, which appears to come to a very different conclusion.
The negotiations behind closed doors of major treaties like ACTA and TPP, and the refusal of participants to release official drafts or to engage in any kind of substantive dialog, has meant that activists and observers have been obliged to seize upon even the smallest signs and hints emerging from those talks in an attempt to guess what is going on. In a way, we are witnessing the birth of a new form of Kremlinology, which Wikipedia explains as follows:
During the Cold War, lack of reliable information about the country forced Western analysts to “read between the lines” and to use the tiniest tidbits, such as the removal of portraits, the rearranging of chairs, positions at the reviewing stand for parades in Red Square, the choice of capital or small initial letters in phrases such as “First Secretary”, the arrangement of articles on the pages of the party newspaper “Pravda” and other indirect signs to try to understand what was happening in internal Soviet politics.
It’s couched in an apparently interminable sequence of deadly dull clauses beginning “having regard to…” and “whereas…”, before launching into a long list of mostly reasonable ideas for making more cross-border digital content available in the EU. But hidden away amongst these are some breathtaking suggestions.
Here, for instance, is Section 39:
Calls on the Commission to afford internet users legal certainty when they are using streamed services and to consider, in particular, ways to prevent the use of payment systems and the funding of such services through advertising on pay platforms offering unauthorised downloading and streaming services;
That may sound familiar, since it’s identical to one of the core ideas of SOPA: cutting off all funding to sites accused of permitting unauthorized downloads.
Here’s Section 42:
Recognises that, where legal alternatives do exist, online copyright infringement remains an issue and therefore the legal online availability of copyrighted cultural material needs to be supplemented with smarter online enforcement of copyright while fully respecting fundamental rights, notably freedom of information and of speech, protection of personal data and the right to privacy, along with the ‘mere conduit’ principle;
This, by contrast, is straight out of ACTA, where Section 27 says:
Each Party shall endeavour to promote cooperative efforts within the business community to effectively address trademark and copyright or related rights infringement while preserving legitimate competition and, consistent with that Party’s law, preserving fundamental principles such as freedom of expression, fair process, and privacy.
Note the same empty promise to respect various rights that is completely undermined by the other part requiring copyright enforcement that ignores them. The only real change is that “effective” has been upgraded to “smarter”.
This trick of mixing contradictory demands is repeated in Section 59 of the EU report:
Calls on the Commission to consider ways to encourage network operators to standardise their technical tools and reverse the current trend of removing responsibility from these operators regarding consumer protection, implementation of intellectual property rights and ensuring Internet privacy;
So, on the one hand, network operators are supposed to protect consumers and maintain their privacy, while on the other, they will be forced to become responsible for enforcing intellectual monopolies — losing that “mere conduit” status that was invoked in Section 42 above — and turn in accused customers to the authorities.
All-in-all, this is an extraordinary document, in part because of its repeated call for contradictory actions, but mostly for the way it asks the European Commission to bring back some of the worst ideas in SOPA and ACTA. New Kremlinologists will obviously need to keep a close eye on missing portraits or the re-arrangement chairs in order to glean further information about the secretive plans that are being discussed deep within the bowels of the EU machine.
As promised, below is what I filed today with the White House in their request for comment on the upcoming “Joint Strategic Plan on Intellectual Property Enforcement.” After talking it over with a number of top entrepreneurs and venture capitalists, we decided to file the comment jointly, as a group. Among those signing on to this statement are Evan Williams (Founder of Twitter), Dennis Crowley (Co-founder and CEO of Foursquare) Erik Martin (General Manager of Reddit), Alexis Ohanian (Founder of Reddit & Breadpig), Ian Rogers (CEO of TopSpin), David Ulevitch (Founder & CEO of OpenDNS), Ben Huh (CEO of Cheezburger), Drew Curtis (CEO of Fark) and many others.
The key to our filing is to point out that if the White House really wants to deal with infringement, the absolute best way to do so is to encourage and enable greater innovation. Innovation to provide new ways to create, to promote, to distribute and to monetize content has time and time again been shown to be the only consistently successful path to reducing infringement. Legal enforcement has never been shown to be a successful long-term strategy. And that’s because infringement is, almost always, a situation where the business models and the services have not yet caught up to what the technology allows, and what the public would like to be able to do. Encouraging new tools and services to close this gap takes away the incentives for infringement.
Unfortunately, most of the focus to date, instead, has been on increasing the power of law enforcement, which actually is counterproductive in that it tends to have massive collateral damage in terms of both potential attacks on free speech, but more importantly by creating chilling effects on the very innovation that is needed to respond to widespread infringement. Similarly, we are equally worried about the nature of attempts at regulatory change (SOPA/PIPA, ACTA, TPP) developed in backrooms with little to no input from the innovation community, which will again lead to stifling of innovation.
If you have not yet filed your own comments with the White House, please do so today before they close comments (either 5pm ET or midnight ET depending on which page you believe — so I’d assume 5pm to be safe). You just need to go to this form, where you can file a short (2,000 character) comment directly, or you can upload a longer filing if you have more to say. If you want another example beyond what we filed, also check out this detailed filing from CDT. Once all the filings are in, we’ll look at highlighting a few of the more interesting ones if we get the chance next week.