No doubt about it – revolutions are truly scary. Whether you think of the French one, the ones that freed Eastern Europe, or the digital revolution that is currently changing much of the transactional structure of our economies, and in particular the music industry. But contrary to most people, I do pity major label executives who never even stood a chance of understanding just what happened to them. After all, this is an industry where the average person?s desk had not seen a computer in 1996, as some insider once said.
As late as Summer 2000, I asked a business developer at EMI Germany about her thoughts with respect to mp3, file sharing and the future of her industry. At a time when mp3.com had already gone public, when the Napster battle was about to become nasty, a business developer at EMI Germany told me that the Internet was not yet a prominent part of their strategy. She was right, of course. The internet was only a big deal for their lobbying and legal departments. Despite some laudable efforts to change this ? for major labels, the most important answer to the strategic challenges of digital distribution is still the law.
Certainly, even if the internet is not ?one giant, out of control copying mashine?, as Hal Varian and Carl Shapiro wrote in ?Information Rules?, its technological nature does trigger changes at the axiomatic core of economics. Brad DeLong and Michael Froomkin have laid this out in a paper called ?Speculative Microeconomics for tomorrow?s economy? ? I quote ?
?This reciprocity-driven revenue stream may well be large enough that producers cover their costs and earn a healthy profit. Reciprocity is a basic mode of human behavior. People in the large do feel a moral obligation to tip cabdrivers and waiters. People do contribute to National Public Radio. But without excludability the belief that the market economy produces the optimal quantity of any commodity is hard to justify. Other forms of provision – public support funded by taxes that are not voluntary, for example – that had fatal disadvantages vis-a-vis the competitive market when excludability reigned may well deserve reexamination.?
In other words, we may enter a world in which Adam Smith?s prediction about the invisible hand might no longer hold true. Clearly that?s an earth-shattering thought, particularly given that economic history has taught us about the incentive nurturing nature of private property. And since we live in a world in which intellectual property is very likely more important than physical property, a reduced level of excludability is certainly not easy to even understand, much less to welcome. But welcome or not – information age societies will have to find a way to reconcile the advantages of internet driven ?semiotic democratisation?, as Harvard?s William Fisher has called the slow digital lowering of entry barriers to cultural interchange, with a producer?s need to live from what they do. ?Mass amateurisation?, blogs, open source, are a great way to socially benefit from positive external effects provided by volunteering human capital. But the same Human capital is usually also toiling in a day job to provide for the food for thought.
Don?t get me wrong. I very much welcome the end of the music industry?s ?winner take all? market structure that reduced excludability is bringing about. I think it is great that the reduced expected return of any brand name piece of music distributed in the ?classic? way is now opening up the market for labels that do a far better job at matching artists with people who love their music. But it must, in my opinion, also be clear that rights holders do have some legitimate concerns, which have to be addressed.
Unfortunately, the conventional, socialised, and certainly codified concept of property is not helping lawmakers to strike the new balance needed. However, it does help the music industry to protect their acquired position in the market. Telepolis? Stefan Krempl (in German) may well be right to predict that last Monday was the day when an all-out copyright war was declared on Europe.
Not that the EU Parliament?s fast tracking of the Intellectual Property (IP) Enforcement Directive last Monday would have usually received much attention, but the events in Madrid that shocked Europe and the world certainly led to a complete premature burial of the subject in the major news outlets (see the list at the bottom of this wiki page for a press survey)
For the moment, the final amended version of the directive as agreed on in the first reading by the EU Parliament last Monday and accepted by the Council last Wednesday does not appear to be online ? all I could find was an empty pdf-file
The most controversial issue regarding the content of the new directive is that is does not explicitly renounce to the criminal prosecution of non-commercial intellectual property rights infringements, like downloading songs from a p2p network for personal use. In fact, the directive leaves it open to national governments to hunt down file-sharers as they see fit. Adrian McMenamin, press officer for the European Parliamentary Labour Party states that ?scare-tactics? have been used by the opponents of the directive ? and he is certainly right that many of the most vocal opponents appear to not see the point of intellectual property protection at all – but I think it is rather na?ve to claim that the directive does not create rather problematic incentives for national lawmakers. This directive certainly won?t make it easier to stand up for consumer rights in the face of a concerted right-holding effort. It seems, unfortunately, this directive will become another case study for ?The Logic Of Collective Action?.
The most controversial formal issue regarding the directive is the Parliament?s rapporteur, the French UDF deputy Janelly Fourtou, the wife of Jean-Ren? Fourtou, the current PDG of Vivendi Universal. While she is declaring ?no financial interests? on her website, according to a vast variety of critics, she should have recused herself as rapporteur.
She should have, indeed. Just as she did in 1999, according to LeMonde , when she chose not to chair the environmental committee while her husband was CEO of the pharmaceutical company Aventis.
But it seems that this time the stakes were to high.
Frits Bolkestein, the commissioner in charge, may repeat as often as he wants that the intention of the directive is only to criminalise commercial infringements of intellectual property rights. But the ambiguity introduced into the directive by failing to clarify just that is certainly sufficient reason for concern when it comes to the true political intentions.
No doubt about it, revolutions are truly scary. And for just that reason, there are very few non-violent ones. After last Wednesday, chances of a socially problematic turn of the ongoing digital revolution have risen considerably for Europe.