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Day April 20, 2011

Entries 2 Total

Third worst?

Apr 20, 11 6:19 PM

Apparently, UK copyright law is the “third worst” in the world, from the point of view of consumers. A gleeful press release from an organisation called Consumer Focus highlights this, based on some rather subjective research and assumptions, and in particular points to the fact that some kinds of format shifting and backing up are technically illegal.

What they don’t mention is the actual consequences for consumers. I am not aware of a slew of lawsuits against people copying their CDs to their iPods, for example. Nor do they mention the benefits to consumers of a strong creative sector, or the costs of piracy.

Consumer Focus is a state funded body in the UK. It’s role is as “statutory consumer champion” and its aim is “persuading businesses… to put consumers at the heart of what they do“. (As a consumer, and in fact as a businessman, this is the first I had heard of them. Perhaps that’s why they’re being abolished).

What I don’t quite understand is how this sort of thing fits with their remit. Surely for businesses to put consumers at the heart of what they do they need to actually be in business, and have something to sell to consumers. Generally speaking the best outcomes for consumers are driven by well functioning markets rather than legislation.

Sometimes, and this is a sign that the market is working well, things happen on their own without any law demanding it. Many DVDs now come with a digital copy to download onto a portable device. For free! Apps bought from the iTunes store can be installed on all your devices not just one. No extra cost! There’s a reason for this and it is because businesses generally, as a matter of good business sense rather than legal obligation, put consumers at their heart.

If this isn’t happening as much as Consumer Focus would like – although it’s an increasing trend for businesses to choose this sort of approach because it’s good for business – it doesn’t necessarily make sense to either blame the law or look to it for a solution.

There are lots of “consumer unfriendly” things that are allowed by law, if you believe that consumer unfriendliness is defined as being anything which stops consumers doing whatever they want. It’s perfectly legal, for example, to charge a lot of money for something rather than a small amount. Rolex can, legally, sell watches for thousands of pounds while Casio, equally legally, can sell them for about a tenner. I’d quite like to be able to buy a Rolex for ten pounds but I can’t. How unfriendly!

It’s also perfectly legal to not sell something at all, and instead rent it to people who turn up in person to experience it. And it’s also legal, in the field of creativity, simply not to create something at all in the first place, to keep it inside your head and deny anyone else the pleasure or enlightenment they might otherwise get from it.

In fact copyright law itself, which is essentially a law which bans doing something (copying), could be argued using the same logic that Consumer Focus applies, to be inherently consumer unfriendly because it makes it illegal to do things which “most people consider to be harmless”.

I wasn’t previously aware that the test for good law was whether or not most people consider something to be harmless. Surely the test of good law is whether or not it produces generally positive outcomes, and incentives, for society as a whole rather than whether a self-selecting group of “most people” consider it to be harmless.

The reason the things that Consumer Focus complains about  do or don’t happen is mostly to do with the incentives the law creates (or fails to) rather than legal obligations or exceptions. On the whole, businesses which are wilfully unfriendly to their customers aren’t very good businesses. Writing a law forcing creators or anyone else to do something which they perceive to be harmful to them is a risky business if at the same time you destroy incentives or create unintended consequences.

Perhaps Consumer Focus should have a look at James Gannon’s article (previously linked) before they put out another press release containing the words “Nobody supports large scale copying but …”

And in the meantime they should consider that the “third worst” copyright regime in the world supports more than 2m jobs, 182,000 businesses, £17bn of exports and about 8% of the economy, in the UK alone. Despite the challenges of the internet. This results in enormous, inestimable diversity and choice for UK consumers alongside the huge economic benefits. Who exactly would benefit from further damaging that?

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Who needs payment? There’s always advertising…

Apr 20, 11 8:23 AM

I suppose the central dilemma for creators on the internet is how hard it is to get paid. Becoming popular, unfortunately, doesn’t often equate to becoming rich. This is a bit odd, and one of the key differences between “old media” and the internet, and I think it’s also the central challenge.

I mentioned previously that one of the oft-suggested ways of addressing this dilemma is to use creative output as the loss leader for something else. People who download your tracks might come to a live performance. People who read your blog might book you to make a keynote speech.

The other way, far more common on the internet, is to sell advertising. Use your popularity to serve up more pages, more pages equals more ads, more ads equals more money.

Sounds fine in theory, but works less well in practice. There is a detailed financial analysis to be done by someone more that way inclined. If I find it I’ll link to it.

But my view on this is quite simple and based on experience and logic.

Experience is that ad revenues don’t grow, in reality, anything like as quickly as traffic. The actual amounts of money to be made are quite pitiful when viewed against the amount of consumption.

Logic says that if everyone relies on advertising to fund their creativity then there isn’t going to be enough money to go round.

Both of these lead to the same outcome: the winners in the ad-funded content game are those who pay little or nothing for content. The investment has to be scaled down to match the size of the opportunity – and when the opportunity is only marginally above zero, the winning model will be the cheapest.

We all know who those winners are – endless sites serving up scraped or “farmed” content, with more investment going into SEO than anything else to maximise traffic. Or the big search and advertising giant itself, Google.

There’s plenty of analysis and de-constructing of this to be done, and doubtless I’ll do more of it at some stage, but actually the simple logic doesn’t require any understanding of the internet at all.

Traditionally creativity, and the huge success of the creative industries, has been funded by a combination of advertising and other revenue sources – principally from actual customers paying for the creative output.

If it is now going to be just advertising, and given that the advertising market is by-and-large static in overall size (or at least doesn’t grow in line with audience and consumption), it means less money is going to be available to invest in creativity.

In my view, more investment in creativity is a good thing. More opportunity for creative people is a good thing. Popularity leading to success is a good thing. So a shrinking opportunity is a bad thing and this is the dilemma which needs to be solved.

For this reason, I think anyone who believes that an ad-funded model leads to good outcomes for creators (and therefore for users) is a mite delusional. Of course, it has its place and always has.

But even if you choose ad funding, rather than having it forced upon you, it’s a pretty tough market. When ad spending moves from offline media to online, a whole load of it gets swallowed by Google and other intermediaries. The bit that’s left is competed for by thousands of new, zero cost, competitors who ae mainly gaming search algorithms to acquire traffic.

But media overall has always thrived on having other sources of revenue too, often direct from the consumer. Some form of cover price. For the most part, and for the time being, these are simply unavailable online.

Charging for content is still a controversial idea, and conflicts with the desire to reach a large audience. This is seen by many as a good thing – cheap is better than expensive, free is better than cheap.

I don’t agree with that, and I think the outcome is the obvious one – you get what you pay for.

How we can move the internet away from the obsession with free is for another post (another few hundred posts). But this much I know: advertising isn’t a viable way to fund creativity online. It wouldn’t be even if every penny of ad revenue went straight to creators.

But with pathetic dribble of revenue which remains after the scalpers and middle men have taken their disproportionate cut, the idea that it can sustain serious enterprise is ridiculous.

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