Chairman of TONO and professor of Music Business Management at UiA, Bendik Hofseth, has an editorial in print in Dagens Næringsliv today. Read the editorial here.
/ 07/03/2016 / codexPhoto above: © WIPO 2015. Photo: Emmanuel Berrod.
Text: Composer, musician, professor at HiA and chairman of TONO, Bendik Hofseth (Reprinted in DN, March 7, 2016)
The cold and static fiber optic cables have almost become a new nervous system that carries warm and friendly impulses between us. It is not just bits and bytes that are packaged and processed from one machine to another, but messages from heart to heart. We feel safer, comforted, freer and more open after being intertwined through the Internet.
Technology is not the only prerequisite for this to happen. We need softer and more human common factors to become, and remain, attracted. International brands and celebrities help, they have become part of our global mythology and our shared narrative. But the most useful thing is still the special language that we humans have developed over thousands of years to seep into each other's minds, to penetrate behind defense mechanisms with maximum effect and speed: We can use art.
Around 52% of Facebook's advertising revenue is directly related to artistic material. Yet they pay nothing to artists in compensation.
A piece of music avoids the limitations of spoken language, and removes cultural barriers by drawing us into our shared fascination with rhythm, pattern and sound. A picture can tell many stories in its playful and quirky way, and goes straight to the heart of the viewer. Literature can describe moments in such a scalable way that there is room for everyone to interpret their own experience into the text. Art tickles, titillates, excites and excites our curiosity about each other and ourselves. These are our most effective means of communication to establish trust, open minds and hearts and build a relationship.
GESAC, the lobbying body of the European copyright societies, has recently released a report on the role of intermediaries in the online space. The report is highly credible and thoroughly documented, conducted by the analysis agency Roland Berger (link at the bottom of the article). It deals with the relationship between copyrighted material and platform services. Platform services are typically search engines, social media or others involved in content aggregation. Facebook, Soundcloud, Twitter, Tune In, Dropbox; none of these services currently have a license from copyright societies because they are exempt from European legislation. The question is simple: How much should these services have paid if we compare their use of protected material with legally licensed services?
Spotify and Netflix typically spend around 70% of their revenue on rights clearance – a natural fraction when 100% of the value they create is based on distributing other people’s creativity. If we look at Facebook, research from Europe shows that around 62% of the content on their newsfeed is links to protected material, and that around 52% of their advertising revenue is directly related to artistic material. Yet they pay nothing to artists in compensation.
The report from Gesac states that it direct The effect of cultural content on the turnover of platform companies is on average 23%. If we include the indirect effect of cultural content, the report calculates it to about 62%. 23% would normally mean about 48 billion NOK or 5 billion € to the arts sector in Europe. The search engine Google alone accounts for 3 billion € of this because their revenues and market position are so enormous. (Note that these are 2014 figures, both Google and Facebook had enormous growth in 2015, Google ended up with a profit of 23.42 billion $.)
We sometimes hear that the creative community should be grateful for the opportunities offered by a digital distribution system. But this is not sustainable, and it is not only artists who face a challenge when there is no longer a financial incentive to create something new. Distortion of competition for legal and licensed services such as Spotify, Netflix and Tidal is an obstacle to the development of a healthy and sustainable cultural industry. The ethical argument is obvious and self-explanatory: no one should be able to put billions of kroner in their own pockets based on the value creation of others.
Artists contribute, we bring irreplaceable social, moral and cultural value to platform services. We make them sexy and fun, our works are the stars of search engines. It is the effort of the creative community over hundreds of years that creates the glue between consumers and services and that allows business development to take place with reasonable predictability. Isn't Facebook as much a repository for artworks with metadata as a pure "technical facilitator"? Is it just because Google has good engineers that they have a profit of 200 billion NOK last year?
What can I do about this as a songwriter and composer? Can I stop my works from being available on the Internet? Not really, not as long as we have such different systems and attitudes towards artists' moral rights in different countries. Besides, I write music so that it will be heard. Can I ask Facebook and Google to share their profits with us? We have tried several times, but they are clearly not in a hurry to respond to that request. Can I ask TONO or GRAMO to license for me? The answer from the platform services of these companies is that they do not need any agreement and that they are not doing anything illegal.
Distortion of competition for legal and licensed services such as Spotify, Netflix and Tidal is an obstacle to the development of a healthy and sustainable cultural industry.
We have had a long and controversial history of combating piracy in the music industry. We have often received unnecessary bad press considering that we have had to bear the cost of being the first line to face disruptive digitalization. Historically, it was privateering that took over from piracy. An authorized privateer was a pirate with a license to occupy and plunder other states' ships in war. I think legalized piracy is a good analogy. Today, it is no longer states that plunder each other's assets, but there are some sectors of the economy that are allowed to grow at the expense of others. The technical term is "transfer of value".
Politicians allow platform services to grow into enormous and almost monopolistic entities that disrespectfully source works of art without permission and fail to compensate the creators. This is an obstacle to business innovation based on legal and respectful models, it is a distortion of competition. In contrast to licensed services such as Tidal and Spotify, Facebook and Google continue to offer unlicensed material and avoid paying or underpay the artists on whom they are completely dependent and who they make a living by presenting. This is the single biggest challenge to a healthy digital art market: that free services are still active in the market. This double standard is made possible by an obsolete clause in the EU's e-commerce directive (2001) by offering safe harbor commission to technical intermediaries. No one could have foreseen the enormous dominance and the essential role that the infrastructure and platform services would gain.
Historically, the distinction between pirates and privateers has always been blurred. Sometimes the permission to engage in privateering was mostly a thinly veiled excuse for plundering and pillaging. Both privateers and pirates often sailed under false flags to confuse and spread fear. The contract between platform services and the public was originally based on openness, freedom of expression and transparency. It has turned out that in practice, completely different success criteria count for these companies. The false flag they use today is one that we artists originally believed in but which we now see as hollow and meaningless. The false flag that Facebook and the others are now sailing under has proven to be the most deceitful and unreliable of all: Internet Freedom.