Transfer of Value
In 2014, our Chief Executive, Robert Ashcroft and economist Dr George Barker co-authored a paper entitled, "Is copyright law fit for purpose in the Internet era?". The paper examined the extent to which the loss of rightholders consent to the use of their works online was having a negative impact on the economy as a whole. In its conclusions, the paper found that legal uncertainty in the liability of platforms which host user-uploaded content, without the consent of the creators and with little or no remuneration to those creators, was creating parasitic growth, where one part of the market was growing at the direct expense of another.
The economics paper established the foundations of “Transfer of Value”, which has been at the very heart of the global debate about the relationship between platforms and creators in recent years.
What is the Transfer of Value?
“Transfer of Value” is a term used to describe the way in which the value of creative works (music, images, audio-visual) has transferred away from the creators of those works to the platforms which host and monetise them. These platforms, the services which host user-uploaded content, are significant market players who have built multi-billion dollar businesses by providing access to creators’ works, while paying little or no royalties. At the same time, they are also harming those licensed streaming providers who do pay royalties to creators are forced to compete with free (ad-funded) services,. The net effect is a devaluation of creative works online.
The reason for this, is the lack of clarity in the safe harbour rules, enshrined in US and European legislation, and by association in UK law. These provisions create an exception to copyright for ‘host providers’, which is being misappropriated by services.
The Hosting Defence: Safe Harbour
The ‘hosting defence’ was introduced by the E-Commerce Directive 2000 and is often referred to as ‘safe harbour’
Songwriters and composers, the music creators behind the songs, are the fuel of creativity and rely upon royalties to continue creating. Without the flow of royalties, the future of creators is uncertain, which is why it is essential they are fairly remunerated by those services who use their works.
European Union’s proposed solutions
In September 2016, the EU Commission published its Digital Single Market (DSM) copyright reform package including a new Directive on copyright which set out proposals to modernise its framework.
In short, the Commission has proposed to:
- Provide clarity that online service providers providing access to the public are “going beyond just the storage of works and performing an act of communication to the public”; and
- Establish that online service providers, which are performing an ‘active’ role, including the promotion and optimisation for presentation, cannot claim the hosting defence for those works.
- Place an obligation on platforms to use content recognition technology to allow for tracking of usage and blocking.
The copyright proposals represent the opportunity to address the “Transfer of Value”.