Moving Digital Britain Forward Without Leaving Creative Britain Behind

The paper is an economic insight paper and PRS for Music’s contribution to the debate on taking Digital Britain forward

What is the purpose of the paper released

The paper is an economic insight paper and PRS for Music’s contribution to the debate on taking Digital Britain forward with market based solutions, following the Digital Economy Act.  It also reflects the ongoing discussions on Net Neutrality stimulated by both Ofcom’s recent discussion paper and an EU consultation on the subject.

The question the paper poses is how do providers of next generation access, and music and video rightsholders, price their services, enabling a return on investment, to develop a properly functioning digital market place for creative content.

Explain the concept

Unauthorised use of online media is a problem, and with the advent of next generation internet access, that problem will not only get worse, but affect a broader range of media industries, including TV, Film and Gaming.
With the introduction of the Digital Economy Act, the harm caused by the problem of online copyright infringement has to be measured, and if a problem can be measured it can be priced.  

PRS for Music has engaged with the debate by appraising all of the options, and emphasising the importance of incentives so that all the stakeholders can work towards managing the problem down 

The desired endgame is an appropriate response to infringement that leads to a well-functioning marketplace for both internet services and creative content – Digital and Creative Britain.

As part of a briefing programme PRS for Music is now taking its ideas to the wider industry, consumers, government and regulators on how we might move this debate forward based on a partnership approach.  At this stage we are publishing the paper to stimulate the debate and set out the economic thinking underpinning it. 

Are you calling for a levy on broadband companies?

No, we are not calling for a levy on broadband companies. Compensation, licence and levy have been considered in different countries at different times.  We propose a framework to help the stakeholders think through all options in order to illuminate a debate as to how to achieve a market based solution to the problem of unlicensed content on the Internet, a problem which will become more pressing with the advent of Next Generation Networks.

Are you arguing either for the repeal of the Digital Economy Act or for new primary legislation?

Neither. We support the Digital Economy Act which already recognises that the distribution of unlicensed content over the Internet is a problem. It makes both ISPs and content owners parties to the problem and says the problem must be measured. It also provides that copyright infringers should be informed that they are infringing. Our question is “what next?” so have proposed some ideas that provide a possible framework for debate.

How specifically do you see incentives being introduced through compensation?

Firstly this debate is not new, nor is this proposal that radical. An excellent International Association of Entertainment Lawyers (IAEL) publication, titled ‘Collective Licensing at the ISP Level’ provides vital background to this debate by attempting to answer the following question: ‘if a collective licensing scheme were introduced to pay for uncompensated consumption of media on the internet, how would it work, and how would it be implemented on a worldwide basis?’  Secondly, it is important to remember that different countries face different problems, have different legal tools to solve these problems and are, therefore, opting for different solutions. Hence we should be wary of generalisations.

Several ideas have been mooted by many commentators and some are described in the Economic Insight Paper published by PRS for Music on 13th July 2010. In addition to this, another option would be similar to a carbon trading scheme, while another proposes a high-performance Content Delivery Network to sit alongside the present day Internet, offering a premium service for licensed media services.

All have their plus and minus points and new ideas are welcome; the important thing is for the parties to the Digital Economy Act to meet, to discuss and to find a market based solution that will enable Digital Britain to move forward without leaving Creative Britain behind. 

How does the compensation model sit alongside the control aspects envisaged by the Digital Economy Act?

Any incentive/compensation model can be arrived at only if unlicensed content on the Internet is recognised as a disrupting future investment and harming creators, if it can be measured (and therefore priced) and if both access providers and content owners are made parties to the problem.

These are among the key provisions of the Act. What we propose is that the stakeholders now share both their concerns and their ideas in pursuit of a market based solution to the problem.

Do you have an idea of the rate at which compensation should be set?

There are many options considered in the paper and all would require deeper analysis, and discussion, with all stakeholders to move forward. 

Your proposal seems to penalise ISPs - have you talked it through with them?

PRS for Music has been engaged with the ISP community since as far back as 2006, when it published the report ‘Is the price of recorded music heading towards zero?’ which offered a real economic insight into the problem of online copyright infringement. The particular proposal raised in this most recent report was first suggested as far back as October 2008 in a paper titled ‘Shadow Pricing P2Ps Economic Impact’. The basic premise of that paper was that there was a need for incentives so that the market can manage the problem down, and this hasn’t changed.  Since then, PRS for Music has participated in the Broadband Stakeholders Group and presented options to the ISP community at events like Telco 2.0.  The introduction of the Digital Economy Act has stated the need to measure the problem of unlicensed content, and the introduction of measurement allows us to revisit the need for incentives. This in turn allows new options to be considered, which is what PRS for Music is now proposing.

What specifically are you asking Ofcom / government to do?

We are asking both Ofcom and the government to facilitate a debate on the remaining shifts to provide a sustainable value chain for the creative industries, the broadband service providers and consumers. 

Do you have wider (music / creative) industry support

There is wide support in the music and creative industries at large to seek market-based solutions to the problem of online copyright infringement. Our purpose at this stage is not to propose one specific solution over another, but rather to frame the issue in terms of measurement and the development of market-based solutions.

We want to engage a debate with a broad range of stakeholders, and have already shared our initial thoughts with some in the ISP community; we look forward to broadening the discussion to a yet wider audience.

If the ISPs are being asked to contribute more through an incentive/compensation model, what costs will the music and creative industries incur?

Any costs incurred and benefits accrued by any parties to the eventual solution to the problem of online copyright infringement will depend upon the specific solution chosen as a result of the debate we are engaging.

Could this work in other countries/ outside the UK?

We are on the cusp of the delivery of Next Generation Networks, both fixed and mobile, in countries across the globe. It is vital that the costs and the benefits, the opportunities and the threats that these present now be considered.   

The Internet has come of age: to meet the expectations of users, provide a return for investors and support vibrant content creation industries across the globe, we need to take this opportunity to ensure that all stakeholder interests are aligned. There is inevitably an international dimension to the policy debate and that will play out most immediately for us in the consultation launched by the European Commission, on the subject of Net Neutrality, which lies at the heart of the debate.