Fun and profit with The Digital Economy Bill

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Thanks to the efforts of people at the BPI such as Labour party prospective parliamentary candidate and director of public affairs Richard Mollett we are likely to have the Digital Economy Bill passed in this session of parliament.

Digital Economy Bill001

I have been reading a lot about the bill as it has developed and the post is speculation about some of the commercial opportunities that the bill provides:

  • A recent TalkTalk survey cited by the BPI disclosed that 71% of those 18-34 years old would continue to file share, using “undetectable means.” It is likely that the methods used will be VPNs which encrypt any and all data packets providing the internet user with a ‘secure tunnel’ to the net and possibly proxy services. As the Chinese government has found, VPN services are effective ways of breaking through the sternest of firewalls. These may require correspondence addresses and intermediary payment services if the absolute powers granted are used to kibosh straight credit card payments for these services. In addition to copyright infringers these services are likely to be used by people who have concerns about their privacy due to their ISP looking at every packet of data that they send or receive from their internet connection. VPNs are also used by businesses and teleworkers to provide a secure and safe connection business computer systems. Banning personal or business VPNs would quickly put the UK into the rank of developing nations as the knowledge economy would flee the country
  • Depending how the bill ends up, either ISPs or record companies will have to pay for the surveillance, chances are they will be contracted out to a few organisations that can handle the data processing and analysis. This requires a massive amount of data-mining and collection. Information and insight derived from this information would be invaluable to health insurance companies looking for personal information on clients such as their number of likely sexual partners to marketers looking for high-quality behavioural marketing campaigns. There is no guidelines on who owns the data or how it will be kept – I am not sure if the data protection act would cover it. Guilt seems to be presumed for Digital Economy Bill infringers by the amount of complaints of suspicious activity they receive rather than proof of activity; so consumers worried about their data can easily be coerced to put up and shut up
  • The apparent reduced burden of proof against consumers and websites would be an ideal vehicle for reputation management specialists who could proactively enforce super-injunctions by making enough suspicious complaints against sites and organisations to remove or block them in the UK. Whilst sites could try to fight them, the process would be expensive and time intensive. This could be deployed against a wide range of targets including: negative product reviews on sites, unflattering-yet-not illegal blog posts, campaigning NGOs such as Greenpeace & Amnesty International or American websites that have content which could be in breach of ASA rules
  • Out of all the options I think that the field of combating brand piracy offers the biggest opportunities. Brands can lose a lot of money if they are seen to have the wrong type of customer or portrayed in an inappropriate way. Let me give you an example, if you have a music company publishing and profiting from songs that mention your drinks brand being consumed in an irresponsible manner, or those lyrics associated your brand with people involved in criminal activity they are making money of your good name and destroying brand value that you may have put into your brand. Or if you are a well-known brand of pain medication and you have songs which talk in graphic detail of substance abuse which tarnishes your drugs reputation and encourages addicts to seek it out. Whilst you may not be able to stop it you could disrupt music company digital marketing campaigns sufficiently for them to compensate you on a revenue (not profit) share basis, say 50 per cent. I think a cage fight in a courtroom between music lawyers and luxury good or pharma lawyers would be a battle-royale.  You can kiss most urban music and its associated profits goodbye

I am not so sure that the regulations will provide an ongoing material benefit to the record companies and film companies it was meant to help.  One thing that Amazon and iTunes have taught us is that the bulk of the media revenue is in the long-tail, yet music companies have progressively slashed artist rosters to focus on the head of mainstream customer demand. So they will be leaving most of the money on the table.

Secondly, regardless of the bill’s effectiveness the economics of the music industry have changed. For many artists there is little to no benefit being on a record label. It is a similar situation in a lot of respects for the film industry, though this is changed a bit by the project and freelancer ethic of the the way projects come together.

Finally media companies just don’t seem to have management teams of sufficient quality to take advantage and adapt to change fully. For example EMI is bleeding like a stuck pig and likely to be dismembered. Warner Music at the time of writing trades at just over a fifth of its high-line share price of 29.46 USD (end of June 2006) – a massive destruction of shareholder value whichever way you look at it.