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The Crux of the Google Book Settlement

The crux of the Google Book settlement will be whether the Court effectively sanctions the creation of one de facto world digital book library, or whether it will facilitate the continued proliferation of many libraries of digital books throughout the world. 

  • Put differently, will the legal settlement of the greatest alleged book theft in world history -- de facto concentrate control over access to digital books into the hands of only one entity -- Google (the alleged copyright violator)...
  • Or will the settlement preserve the current longstanding competitive/cooperative system of  public, private, and academic libraries where control over access to books is dispersed among many independent and diverse organizations around the country and the world?  

The Internet Archive, a "non-profit library," recently petitioned the Court to try and ensure the diverse latter outcome and not the concentrated former outcome.

An Internet Content Inflection Point? Abundant Blowback in Favor of Scarcity Economics

Anyone watching the Internet content marketplace closely is witnessing the formation of a critical mass of high-powered opposition to the Internet Free Culture ethos that no one should be required to ask for permission or payment to use content on the Internet.

  • Something big is afoot.
  • Powerful forces in the traditional scarcity economy, i.e. Big Media, are no longer rolling over anymore, but are finally pushing back against the abundance ecommony ethos that asserts that content on the Internet is common property that anyone should be able to use as they wish without permission or payment.  

 

The possible tipping point here is the newspaper industry's belated realization that giving away their content for free online, in return for traffic, has been an unmitigated disaster because it is not an economic or sustainable business model. 

Lessons from Sweden's Illegal File-Sharing Crackdown

Wow. Daily Internet traffic in Sweden immediately fell more than 40% after a new Swedish law went into force cracking down on illegal file-sharing. The new law obligates ISPs to to report the IP-addresses of suspected copyright violators to copyright owners.

  • Per an AP story: "Statistics from the Netnod Internet Exchange, an organization measuring Internet traffic, suggest that daily online activity dropped more than 40 percent after the law took effect on Wednesday. Henrik Ponten of the Swedish Anti-Piracy Bureau welcomed the plunge in Internet traffic as a sign that file-swappers are reducing their activity for fear of getting caught. "There's no other explanation for it," he said."

 

Seldom is there such glaring evidence of direct cause and effect between a policy-change and behavior-change on the Internet. To the extent that this initial effect is lasting and proves applicable to other nation's circumstances, what can we learn from this Swedish precursor/example?

Lesson 1: It proves people act more responsibly on the Internet when there is an increased liklihood of getting caught and prosecuted for illegal behavior. More accountability equals more deterrence.  

Lesson 2: It may turn out to be much cheaper and more effective for the U.S. to simply enforce copyright law than to continue overbuilding bandwidth capacity in order to keep pace with the near bottomless bandwidth appetites of the very small minority of users that are serious illegal file-sharers.

The Cloudy Future of Digital Knowledge

The proposed seminal book settlement of the publishers/authors class action suit against Google, if ratified by Federal Court this June, has the potential to de facto legislate for the U.S. and much of the world, both the monetization mechanism and competitive trajectory of much of the digital books market -- a highly strategic segment of the world's digital knowledge base.

  • The competitive stakes are high because books represent some of the highest quality searchable content available in the world.
  • Moreover, the seven million books digitized by Google and covered by the settlement dwarf any other digital library in the world.
  • Furthermore, the settlement would de facto grant Google exclusive control over the "orphan works" covered by the settlement, which comprise the vast majority of the seven million digitized books.

 

As an expert analyst on the future of Internet competition, the central question I ponder is whether the mechanism and trajectory that the Google book settlement would entrench -- is competitive or anti-competitive?

  • More simply, is antitrust pertinent to the Federal court's disposition of this proposed copyright-infringement settlement?
  • The facts and analysis show antitrust is highly relevant to this potential supra-constitutional, court-created, digital book marketplace.

First, the core facts suggest antitrust concerns are relevant to the ratification process of the proposed digital book settlement. 

Will History be a Casualty of an "Ecommony"? If info is free who will pay to archive it for posterity?

Kudos to Eric Auchard's Reuters column for triggering a whole new line of thinking in his brilliant piece: "The Black Hole, how the web devours history." His column is a must read for anyone who cares about history and historical archives, because it brings to life the real-world problems of ensuring that key historical information is permanently archived and retrievable via the Internet.

The more I noodled on Mr. Auchard's thought-provoking premise, I concluded that the origin of this devoured-history problem is not technology, which many might prematurely conclude, but the "information wants to be free" ethos of the digital commons.

An Internet Economy or "Ecommony?" Growing pushback against "Information wants to be free"

The recession has created new urgency for multiple content industries to find a better way to protect and monetize their property/content in the digital world.  The dotcom bubble ethos that “information wants to be free” is like a gross mold destroying the incentives to create and distribute valuable content digitally. (Be sure not to miss the shocking analysis at the end of this post comparing revenue generation per user in the digital "ecommony" versus the real economy.)  

 

The first point of this post is to connect-the-dots why several content industries are currently in the news actively pushing back against the "ecommony" anti-business model, where content owners are expected to effectively give away their valuable content to the open Internet/digital commons without the requirement of permission or payment.

 

The first broad and serious counter-movement by business may be in the offing to ensure that valuable content is indeed paid for when distributed digitally. Serious financial and business risk is driving creative thinking about how to better protect and monetize valuable content digitally.

 

Google's CEO: "Do you believe we have good values?" -- or could they be sub-prime values?

Google's CEO Eric Schmidt met with the New York Times Editorial Board last week, most likely on a charm offensive in response to the Rosenkranz Foundation oxford-style debate about whether or not "Google violates its 'Don't be evil' motto." 

  • David Carr, a columnist for the New York Times who attended the Schmidt meeting and who wrote "Google seduces with utility", asked Mr. Schmidt if he should "be worried that I am putting all my digital eggs in in one multi-colored, goofy lettered basket,  he said. That depends on what you think of our company and our values. Do you believe we have good values?"

Once again, Google is truly its own worst enemy.

Why Google lost the formal debate over its ethics -- And a compendium of Google's ethical lapses

Google effectively lost its first formal debate over whether "Google violates its own 'Don't Be Evil" motto" at the Rosenkranz Foundation's Oxford-style debate in New York City, November 18. (Transcript here).

  • Before the debate the audience was polled and voted 21% against Google and 31% for Google and 48% undecided; after the debate and learning more, 47% voted against Google and 47% voted for Google, and 6% undecided.
  • Apparently, most all of the undecideds voted against Google -- that Google violated their own 'don't be evil' motto. 

What does this mean?

Century Foundation asks Google to pay for content

Kudos to Peter Osnos of The Century Foundation for connecting the dots in his piece: "The Platform: make Google pay."

  • Mr. Osnos asks the pertinent question: Now that Google has conceded the principle that infomation is not free in its $125m settlement with authors/publishers, why don't newspapers and magazines insist on getting paid for their content?
  • It's a thought-provoking piece read -- I recommend it. 

Mr. Osnos' central thesis becomes even more important when you consider that Mr. Schmidt recently suggested to advertising executives that they should consider if the business model for journalism should become a not-for-profit model!

What many in the journalism industry do not appreciate is that Google is quietly cheering on the demise of modern journalism and Big Media so that it can be replaced by citizen journalists that will of course use their platform predominantly through, Blogger, YouTube, and Google Knol.

  • Google believes it can provide anyone and everyone a more efficient digital content platform than anyone else.
  • Apparently Google's real mission is to organize all the producers of the world's information -- to work for Google!

More on Google extending its monopoly to books

Google's $125m settlement with authors/publishers is an excellent window into how Google intends to anti-competitively extend its de facto search advertising monopoly market power to other content markets.

  • Think about it; if Google only has to pay a penalty of less than a penny on the book-selling dollar, why wouldn't Google be emboldened to steal all the entertainment property of others, and just settle for less than a penny on the dollar like it has with books? 
  • What a cheap and easy way to extend and cement one's monopoly market power in search advertising into other content markets.    

Kudos to Professor James Gibson and his op-ed in the Washington Post today, "Google's New Monopoly" where he spotlights the anti-competitive effects of the Google-book settlement because a deal cut with no competition can embed barriers to entry so that competition can never emerge to compete with Google going forward in digitized books. 

  • I made a similar point in my post "Google proves crime does pay -- if you have enough market power." 

More on Google extending its monopoly market power:

Google claims the settlement is not an extension of market power because Google is not requiring an exclusive arrangement from authors or publishers. This is brilliant misdirection. Google doesn't need a formal exclusive because their Machiavellian scheme grants them a practical exclusive arrangement.

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