Reforming the Digital Millennial Copyright Act

Reforming the Digital Millennial Copyright Act

Millennials are a disruptive generation. They are the first generation to abandon landline telephones in favor wireless smartphones, the first to cut the cord with pay-TV, and the first to turn to the Internet as their go-to source for music and video entertainment. These trends have many old school industries not just puzzled, but incensed that millennials do not respect the rights of those creating the content they consume.

In fact, the music industry sent a letter to Congress signed by a host of the industry’s biggest stars calling for reform of the Digital Millennial Copyright Act (DMCA), which was enacted to address online copyright issues. Piracy is a real concern, but any reforms need to acknowledge the realities of today’s markets — especially the fact that, in today’s world, content creators are everywhere and unnecessary restrictions favoring one specific business model can hamper creativity elsewhere.

The advent of the digital world clearly posed challenges for Hollywood and the music industry. Once in digital format, music and videos can be reproduced perfectly at virtually no cost. The costs of piracy are substantial and the content industries have been challenged to adapt. But the vertically integrated business models established in the 1950s appear ill-suited for today’s world of instant downloads.

Recognizing the problem, Congress passed the DMCA in 1998 to create a regime of digital rights management that criminalized technologies or services intended to circumvent copyright protections as well as the very act of circumvention, whether or not there was a copyright infringement. Yet the legislation also acknowledged that things work differently online and created a “safe harbor” for Internet service providers who would not be held liable for infringing content uploaded by their customers as long as they quickly identified and removed any copyright violations. A “notice and takedown” process was included in the act to provide copyright holders an avenue for pursuing unlawful use of content.

With over a billion websites online, more than a billion Facebook users, and another billion YouTube users, patrolling the Internet for copyright violations is a daunting task. The larger tech companies and Internet service providers have resorted to computer algorithms that constantly sift through online content in search of copyright violations. Google, for example, developed Content ID to monitor YouTube for violations. Likewise, Facebook created Rights Manager to identify offending materials, and Audible Magic is a third party tool that can be used for content recognition and copyright compliance. When a violation is found, the rights holder is offered various options, including removing the content, tracking the content’s statistics, or monetizing the content through ads.

Such systems are far from perfect, and the notice and takedown process has received criticisms from both sides. The recording industry, as made clear in its recent letter, considers the notice and takedown process ineffective, with far too much pirated content still available on the Internet. Others claim that notice and takedown bots mistakenly flag uses of copyrighted materials that are perfectly legal — either through the fair use doctrine or licensing permissions.

In any case, the world of content creators has fundamentally changed. The Internet has expanded the reach of smaller creators, allowing performers to find audiences without relying on the global entertainment industrial complex that creates the Taylor Swifts and Beyoncés of the world. To be sure, the creation of superstars is not cheap, and the recording industry evolved into a fine-tuned machine specializing in this task, assuming the risk and making significant investments in advances for artists, recording costs, promotion and distribution, tour support, and video production.

But for many, the Internet has unwound all that, eliminating a swathe of middlemen between the creator and the audience. This matters, because the Internet has introduced a new creative class, free from the need to sign with a major label, but utterly dependent on the Internet to survive. Kickstarter, Indiegogo and other online vehicles offer new ways to raise money, spreading risk across a much wider group of investors. Likewise, sales and promotion can be done through social media sites such as YouTube, Facebook, and Bandcamp, allowing bands and fans to connect with one another no matter how niche or obscure their tastes at a much lower cost. 

These changes have been unsettling for many, and a concerted push is underway to reform the DMCA to strengthen the music industry’s hand. Many are calling for a more draconian “notice and stay down” approach to replace the current process. Indeed, the recent letter claims that “the tech companies who benefit from the DMCA today were not the intended protectorate when it was signed into law nearly two decades ago.” This clearly echoes the concerns of lobbyists, not the general public.

Public laws are intended to enhance the general welfare of society, not to feather the nests of particular special interests. Accordingly, the DMCA must be viewed from a broader perspective, balancing the competing interests of all parties — creators (broadly defined to include the new class of Internet-based creators), consumers, and broadband providers — to maximize social welfare. Reasonable people may disagree in their assessments of how well the law works, but focus should be placed on the overall implications for social welfare, not whether one industry wins or loses.

Wayne T. Brough, Ph.D., is the Chief Economist and Vice President for Research at FreedomWorks.

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