The danger of the cost sharing narrative for changes to copyright enforcement

There is a popular theme when rightsholders talk about copyright enforcement that the current model doesn’t work because it puts the burden (and thus the cost) of identifying infringing content on the rightsholders instead of platforms hosting the content.

It is a compelling narrative if the only players are massive platforms. The reality is more complicated. To understand the danger of this narrative we have to look at startups.

First though, let’s dive into what the costs are. These can be sliced a few different ways, but here are the main components:

  • Identifying infringing content. Rightsholders must accept some of this cost because they are the only ones who know what content they own, but many are now arguing that once they’ve identified one instance of the content they should no longer have to bear this cost.
  • Verifying the content was identified correctly. Currently under a notice and takedown system this means both verifying that the sender of the notice is the rightsholder, and that the allegedly infringing content was identified correctly. Unfortunately many platforms don’t spend adequate resources on this which leads to false takedowns. Under a proactive filtering system this would merge somewhat with the first cost because the platforms would be identifying the infringing content and verification would be a function of quality assurance.
  • Handling disputes. When the user that uploaded the content believes it was identified incorrectly there has to be a dispute resolution process. The majority of this cost has to be handled by platforms, and rightsholders generally choose whether or not to respond to it and thus incur a cost.

As you can see the costs are already split, the argument of rightsholders is that the balance isn’t right and platforms should pay more of the cost. As mentioned this narrative leads to dangerous consequences for startups.

The main issue is how costs are applied. For creators they have an option whether or not to enforce their rights. There may be strong incentives to secure their income, but a creator can be successful without incurring copyright enforcement costs.

For platforms there is no choice. If they are forced to take on a greater share of the copyright enforcement cost, it is a cost of doing business. Compliance costs are not optional, and if they do not comply they could face a business ending lawsuit.

Large existing platforms can take on this additional cost without going out of business. Startups are less likely to be able to comply, or may accept the risks of non-compliance. This becomes more concerning when looking at the startup ecosystem. If compliance costs are a known burden and the risks of non-compliance may destroy the company then fundraising becomes extremely difficult. Startups raising money will need to ask for more to handle compliance costs, which increases the risk of the investment and decreases the number of successfully funded startups.

Changes in copyright law should consider the entire landscape. Shifting the costs to platforms by mandating a takedown and stay down system with proactive filtering is short sighted. It leads to marginally better outcomes for rightsholders in their dealings with large platforms, but also stamps out the very startups that might eventually compete with those large platforms. This in turn leads to worse outcomes for rightsholders of all types over time because they are dealing with increasingly powerful platforms. The very purpose of these proposed laws is to bring large platforms to the negotiating table and shift costs to them, but the long term effect leads to large platforms having even more leverage in any negotiation because there will be less competition.