The Big Online Rip-Off

29/08/2012

In the face of the burgeoning power and influence of internet venture capital, and illegal filesharing sites, Danuta Kean rallies writers to bring their fighting skills up to date.

You have to hand it to the editors of Wikipedia – half of whom are under 28 - youthful rebellion never looked like this. By instigating a 24-hour blackout of the service in January, they became the first generation in history whose rebellion left corporations and venture capitalists clapping their hands in glee.

Glee, because the protest made it harder for democratically elected governments to pass legislation strong enough to protect ripped-off writers, musicians and other artists from those who profit from stolen intellectual property. Why? Because the blackout, which shut down the online encyclopaedia, was in protest against two bills before the US Congress: Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA). The publicity it generated shook politicians so hard they quietly dropped the proposed legislation.

And that sets a disturbing precedent for any government that acts against online piracy. Because it shows the enormous power wielded by the 1,800 editors consulted about the blackout, even though not all of them are based in the USA. These editors have effectively mobilised a mass protest and media coverage (an estimated 115,000 websites supported the protest) that made politicians look like advocates for internet censorship.

Welcome to the age of the online oligarch: as rich and powerful as Enron, but with a better media profile. "What has come out of this is the power of these organisations to get legislation they disapprove of shelved," ALCS deputy chief executive Barbara Hayes comments. "Where is this freedom they’re all talking about, if they can pull the plug on their service when they can’t get what they want for free?"

The rallying cry of Wiki and its supporters – including Google (2011 annual revenue: $37.9bn), Facebook (latest quarterly revenue: $1.8bn) and eBay (2011 revenue: $11bn) – was free speech.  These and other organisations that came out against the legislation – including illegal filesharing sites like iFile.it (which with Library.nu is said to have made $11m from ebook downloads)  - ran banners urging users: "Tell Congress: please don’t censor the web!"

The SOPA and PIPA bills included two key proposals. One had widespread support within the creative economy, including the Motion Picture Association of America, Recording Industry Association of America and Entertainment Software Association. More on that later. The other was more controversial. It was a plan to reroute users from filesharing sites like Rapidshare and Megaupload by altering the domain name system that enables computers to locate each other on the internet. Critics – not all of whom support the Open Rights Movement – warned this risked damaging the architecture of the internet and would be hard to enact. Rerouted users would find themselves looking not at a site with unlimited free stuff to download, but with a US government message stating why the site was blocked.

The risk was that filesharers would circumnavigate the technology, and crash the net because trafficking in stolen IP is now very big business. BitTorrent – the technology of choice for illegal filesharing – is estimated to account for 18% of global internet traffic. If downloaders found "safe" alternative routes to ripped-off stuff, huge numbers would descend down those narrower highways. It would be as if the residents of Springfield were offered free beer on certain roads. Homer Simpson wouldn’t be the only one stuck in a jam waiting for a freebie.

The Authors Guild of America (AGA) for one, chose not to support the second proposal because of this provision. AGA executive director Paul Aitken explains: "It was problematic on a number of levels, not least that it handed the other side this easy rallying cry of 'stop online censorship'." The AGA did, however, back the first less controversial SOPA and PIPA proposal aimed at hurting traffickers where it matters: their bank accounts. Access would be denied to US-based payment services such as Paypal and credit cards, so copyright infringing sites could not collect subscription payments or advertising revenue. This money is essential to fund the technology needed to run a site and the lavish lifestyles of many owners (more of that later, too). The thinking was simple: kill the money, kill the site.

Contrary to popular belief, illegal filesharing sites are not shoestring operations run by penniless kids. They require vast servers to host stolen content. They also require huge bandwidth to handle the illegal downloads. Even start-ups – let’s call them small town dealers – need computer equipment, software and broadband services that cost considerable amounts of money. To pay for their operations, traffickers use two revenue models: paid-for premium subscriptions that enable faster downloading; and display advertising – often supplied through Google Ads – which appears as content downloads.

The revenue raised is eye-watering. When the executives behind file-sharing site Megaupload were indicted for copyright violations, racketeering and money-laundering, the indictment left many authors (average income £7,000 and falling) slack-jawed at the money involved. The FBI accused the seven executives, including CEO Kim Dotcom (yes, seriously, that is his name) of amassing $175m since the site launched in 2005. In 2010 Dotcom took home $42m; another executive earned $9m. Among seized assets were a Lamborghini, a Maserati and 15 Mercedes cars with personalised number plates including the legends "STONED", "GOOD", "BAD", "EVIL" and "GUILTY". Oh, and a Rolls-Royce Phantom (list price £250,000 to £300,000) bearing the number plate "GOD".

Not surprisingly, this apparent bravura display of Megaupload’s economic power is not among propaganda spouted when the Open Rights Movement (ORM) – as the loosely affiliated group of internet activists and online corporate interests who backed the Wiki blackout style themselves - lobbies governments, and that includes our own and the EU. Instead, they prefer to put about the myth that traditional creative businesses – film companies, book publishers and record company executives – are the greedy exploiters in this market.

The "poor victim" in this myth is not the who writer can’t earn enough to buy food after being dropped by their publisher because illegal downloading has destroyed their market. No, the victim of these greedy exploiters is the “lonely pioneer”, seeking new ways to spread culture, ideas and innovation to a hungry world. It’s powerful propaganda – just look at the outcome of the review of IP and culture by Ian Hargreaves for the government (Digital Opportunities, 2011), which seemed to fall hook, line and sinker for the claims made in the ORM’s submissions that copyright stymies innovation.

UK Publishers Association chief executive Richard Mollett feels angry at these claims. "It is completely bogus to say that supporting the rights of creators and the companies who invest in them is dangerous to innovation," he fumes. "Any innovation in publishing, be that publishing into new genres or new businesses like Nosy Crow, are paid for by the ownership of intellectual property that allows investors to recoup their investment."

The facts simply do not support the myth that copyright stifles innovation. Take iFile.it. It shut down alongside Library.nu following an injunction that claimed the two offered 400,000 ebooks, and had made more than $11m in revenue. Earlier this year, AGA president Scott Turow cited a blog written by iFile.it’s owner in testimony to a US Senate judiciary committee on copyright. The voice that comes through isn’t that of a man desperate to spread culture. It isn’t that of a man eager to empower creativity. He doesn’t rhapsodise about the thousands of children’s books available illegally from his site. Instead he enthuses about iFile.it’s rapid growth and ability to put more free stuff quickly into the hands of downloaders. And he carps, like a wannabe on The Apprentice, about his rivals, especially Rapidshare (which in January scored three million unique users). Within two years, iFile.it had a million users and required 45 servers to provide high speed data connections through ISPs. All this was paid for by advertising – just as it is with free newspapers. But there is a huge difference: newspapers pay the people who write their content. The only people paid by iFile.it were the technology companies needed to provide users with access to the books, music and films illegally stored on the site.

Which brings us back to the other beneficiaries of the trafficking in illegal content. Whatever the ORM says, it isn’t individual creators who benefit from the billions of pounds that change hands in the online black economy. Nor is it solely traffickers. It is also global corporations – computer manufacturers and service providers and venture capitalists – because users of stolen content need hardware, mp3 players, ebook readers, computers, and broadband services to download and use stolen books, music and films. Financial sector corporations benefit too because traffickers have to pay for servers and bandwidth. And for that they need revenue raised through advertising or subscriptions, and to process that revenue they need payment services. None of these corporations may actively target trafficking sites for revenue, but they do profit from them.

"You can see this as a fight between Northern Californian venture capitalists and Southern Californian venture capitalists and who’s going to have the higher return on their investment," the AGAs Paul Aitken observes wryly. Aitken sees the battle as about the value of content. North Californian suppliers of information like Facebook and Google need to provide a return on investment for their backers. In an online economy built on the supply of free content, much of it created by South Californian industries, notably film, music and television, this creates an immediate conflict between the two. "The more Northern Californian VCs can drive down the value of content the higher the return on their investment in things that deliver content in one way or another."

So much for youthful revolution.

But all is not lost for artists and writers facing financial ruin as a result of illegal downloading. Authors and their supporters can fight back and should. Musician David Lowery showed how in an open letter posted on The Trichordist (http://thetrichordist.wordpress.com/), a community blog by artists campaigning for an ethical internet. The letter was addressed to Emily White, a 21-year-old intern at a US National Public Radio website All Songs Considered, who admitted that of 11,000 tracks in her music library she had only paid for 15 CDs.

Though the letter addresses specific issues faced by musicians, there is much that applies to writers– including Lowery’s utter bemusement at a generation happy to shell out money for hardware and gadgets or for Fair Trade coffee, but not to pay the artists whose work they profess to love.

Lowery also suggests taking action of our own to raise awareness and challenge the accepted wisdom that the battle is lost. So let’s move on. Here are six things you can do too:

  • Contact: Companies whose advertising or services benefit trafficking sites. When you find ads for companies on filesharing sites contact those companies through the "investor relations" pages on their website and point to the specific places in which their advertising revenue is being used to support illegal sites. Ads are usually supplied by services such as Google; again use the investor relations page to contact the provider and point out that its service is helping fund a trafficker.

  • Note: Every time you search for a piece of music, book or film and the first result page that appears is illegal downloads, inform the copyright holder and the search engine. One of the issues faced by copyright holders is the ease with which illegal sites get their content to the top of search results, making it easier to entice punters into stealing.

  • Lobby: The Open Rights Movement has massive lobbying power. They put their case to MPs and MEPs through lobbyists based in London and Brussels. Counter their arguments and contact your MP, MEP and relevant ministers to show how copyright infringement is undermining creativity, not feeding it.

  • Join: Organisations like ALCS, the Publishers Association and the Society of Authors can keep you updated on what is needed, such as changes to search engine protocols to stop traffickers ranking top in searches.

  • Publicise: No company wants bad publicity. Use shareholders' meetings, blogs and articles to point out how specific businesses are profiting from the Big Rip Off of Writers.

  • Argue: A recent study of BitTorrent traffic showed that 35.8% was pornographic. Ask these businesses if they know they are making money from sites that include the exchange of child pornography. Ask filesharing friends about the company they keep.


This is not an easy fight, but writers and other artists should not assume they cannot fight back. We can. We know we can, because we have been in a world where ripping off writers was endemic before. It was the active and vocal campaigns of writers in the 19th Century that established copyright in the first place. It’s time we brought our fighting skills up to date.


Danuta Kean is books editor of Mslexia and a freelance journalist whose work appears widely.  She is also a publishing analyst, public speaker and teaches publishing skills to writers. Her website is www.danutakean.com. You can follow her on Twitter @Danoosha

© Danuta Kean