Intellectual Property Rights: 6 charts to help you enter into the discussion

How have streaming and downloads whirled up the music industry? Which countries block Youtube videos? Is filesharing outdated? Here are some numbers.

By Katrin Nussmayr (Austria) | European Forum Alpbach |

According to the European Commission, the creative industries accounted for three per cent of employment in the EU in 2008 and contribute (dependent on the state) 5.4 to 5.9 per cent of the GDP. And while the digital economy creates a whole world of opportunities for writers, musicians, artists, filmmakers, etc., it also poses a huge challenge: How do we strike a balance between protecting intellectual property rights and the public’s access to art and knowledge in the digital age?

Here is one example of how digitalisation has transformed a whole market: In 2014, 46 per cent of the recording industry’s global revenues came from digital sales — five years earlier, it was only 27 per cent. In 2003, the number was “negligible”, according to IFPI, the International Federation of the Phonographic Industry.

In the book market, things are growing more slowly. According to Forbes, e-books make up approximately 30 per cent of all book sales. Amazon has a 65 per cent share of e-book sales. With the number of printed book sales declining, PricewaterhouseCoopers estimates that US e-book sales will surpass printed book sales by 2017.

Copyright levies
Making private copies of copyrighted works has become easier during the last decades. From the 70s on, anyone with a cassette recorder could make copies of their music collection; the advent of CDs and filesharing took this to a new level. To compensate rightsholders for the supposed harm they suffered by people copying their works for private purposes, several EU member states have introduced copyright levies, a sort of tax charged on recording material and equipment.

In 1965, Germany was the first European state to do so; the levy was charged on audio equipment and later extended to photocopying machines. Today, most European countries have a media levy system: In Denmark and Portugal, for example, levies are charged on blank media such as blank CDs and memory cards, in other countries they are also applied to hard drives or computers. In most countries, a percentage of the money collected that way is used for social and cultural funds (e.g. to promote young artists). Cyprus, Ireland, Luxembourg, Malta and the UK do not have a compensation system at all; Finland has recently decided to replace copyright levies with a government fund that compensates artists.
In a non-binding resolution, the European parliament has recently stressed that “digital levies should be made more transparent and optimised to safeguard rightsholder and consumer rights”.

Indeed, copyright levies are a controversial topic: Rightsholders argue that the compensation is needed to keep the arts alive. Others (e.g. the tech industry, internet activists) criticise that the system is opaque and dysfunctional, that the levies are so different in different member states and that private copying has become obsolete anyway in the digital age: In times of cloud storage, Netflix and Spotify, who still burns CDs?

Speaking of streaming: This is another controversial topic. While paid streaming services like Spotify did help the recording industry escape a downward trend of revenue, many artists complain the services refuse to pay fair prices for the music they offer. In November 2014, “The Trichordist”, a website that supports artists’ rights, aggregated the pay rates per stream for several services. According to their data, Spotify pays particularly low prices: 0.48 cents (!) per stream. For Spotify to pay 100 euros to the master and publishing owners of a song, it must have been played 21,000 times. Of course, this is not what artists get — their payment depends on royalty rates and their individual contracts. Especially small, local artists hardly ever see a cent for their streamed music.

Different rights for different countries
Here is another challenge the digital era brings: When buying creative work was mostly about buying physical products such as a CD, a book or a DVD, different states could have different copyright systems and the consumer would not even notice. With the advent of online services and the possibility to access these works in digital formats, you could buy your music online from an Italian store, stream movies from a British provider and buy e-books in Greece. In theory. Because, according to a study for the Committee on the Internal Market and Consumer Protection of the European Parliament, “the EU is struggling to provide its citizens with a genuine Digital Single Market. The European commercial offer is, in general, strongly fragmented along national borders.”

This means that providers of digital content use different technological barriers to offer their products only for single countries. They have to because licensing schemes are different in every country. The study suggests that copyrighted content, which is distributed online, should not be excluded from the principles of free movement of goods and services.

Still, with different licensing systems and agreements for each country, the movies on your Netflix account differ from the ones your European neighbor can access. The situation is particularly visible when looking at the Youtube videos available in each country: In Germany, where the performance rights organization GEMA has been fighting an ongoing dispute with Google’s video platform, many music videos of major label artists are blocked. A study by OpenDataCity sponsored by the video hosting website MyVideo showed that of the 1,000 most viewed Youtube clips, 61.5 per cent are blocked in Germany. In Austria, the number is 1.1 per cent.

When talking about creative content in the digital age, one cannot omit the topic of filesharing and piracy. The frontiers are clear: “Copy kills music” vs. “Sharing is caring”. While filesharing advocates argue that it fosters creativity and makes music more available to people who would have otherwise not found out about it, artists worry about the economic harm. According to a study by the Institute for Policy Innovation, the annual economic losses in the music industry reach 12.5 billion dollars and 70,000 jobs are lost because of music piracy.

Norway seems to have found a way to tackle music piracy: Between 2009 and 2014, the percentage of people admitting to illegally downloading files dropped from 80 to four per cent, as a survey by IFO Norge shows. The miracle is believed to have happened thanks to streaming services such as Spotify, which account for 65 per cent of Norway’s music market.

The same cannot be said for other countries: In North America, the monthly amount of data shared via filesharing services has increased by 44 per cent between 2008 and 2014 (Cisco Visual Networking Index), while in Europe traffic due to filesharing is declining.

Renowned experts will discuss the future of Intellectual Property Rights at the Alpbach Legal Symposium (Austria) from August 26 to 27, 2015.

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