Author: Alain Rosset, UbicMedia SAS & INC President

February 16th, 2012

MegaUpload, UbicMedia and Authors right issues in regards to multimedia content

Article published in the Forum Athena Forum Newsletter on 02/18/2012 and freely translated by UbicMedia, errors and omissions are possible http://www.forumatena.org/?q=node/349#dossier1

As a good start to develop the following discussion around copyrights, you may want to read the following article. Indeed, we would like to address two subjects that a creator would not want done to his work: edit or transform it by copying (moral right) and selling or having it sold for him (copyright or patrimonial law) without having a say in the matter. This problem has always existed but was amplified by the advent of the Internet and Web which have enormously facilitated copying, visibility and the transfer of audiovisual content and digital content by anyone. The sudden stop of MegaUploads DNS and the announced destruction of private data on servers, coupled with the debates around planned anti-piracy laws SOPA, PIPA, ACTA, HADOPI brought forward incredible reaction from internet users, associations, industrial sectors and legislators. Some owner of industrial properties/products would have loved that one would have deployed as much readiness and legal force towards counterfeiters highlighted or relayed by the shopping services of the major search tools that everybody uses on the Internet but this issue is sensitive. The subject is complex and specialists may think the article is too basic or the author not qualified enough to broadly discuss about copyright. However, I only wish to begin the discussion and debate about specific aspects directly related to digital distribution of audiovisual and cinematic content (for an excellent detailed analysis, see: Sophie Boudet-Dalbins PHD Thesis 12/12/2011 http://bit.ly/rDE0Z8). Since this is a vast topic, I first want to demonstrate by using historical examples, how far-reaching past disruptive technologies (for example, scanning photography to a computer or sending digital files through wireless communication) have influenced current disruptive technology such as digital reproductions and open Internet. After reading the magazine dedicated to writing Les collections de lHistoire Oct-Dec 2005, we learn that the copy has always existed but the occurrence has been increased since the invention (popularization) of stenography in the late XI century in England. By this time, copy mostly meant to reenact famous plays in provincial towns. I believe a study on the socioeconomic behavior of media consumers would also be crucial: nowadays, a large part of the new generation often deals with poor quality content/viewing conditions but it may not only be due to the free nature of it. I am convinced that, to be consistent, any legislative development or new regulation would first need this preliminary research. For example, would Molire have been famous if he had not been copied? This question that drives us to many others: are unauthorized downloaders of movies not large buyers of DVD and movie tickets? Are they not part of the word of mouth and active bloggers community, of the well-known spray the

word concept being developed on the Internet by e-marketing specialists? Do we have any existing studies on these questions? Lets go back to the news; the MegaUpload + UbicMedia project could have contributed in getting some answers to these questions since millions of monthly users would have been testing a new distribution model. Emmanuel Gadaix from MegaUpload, said, while at the Senate on January 11, 2012: we will give them (UbicMedia) a try for the legal distribution of content with full control for the rights holders, so that they can use our platform as a hosting website and take advantage from our millions of users as well as our global presence and I would add, that will allow testing any socioeconomic models. A European study suggesting that upward of 10% of all unauthorized downloaders would pay for the files, which represents a potential revenue stream at least as large as worldwide box-office receipts Very briefly, the term Authors right came out (for the first time) in 1838 in France, but it became more international with the Bern convention signed by 10 countries in 1886 and about 180 countries in 2009. This convention gave a central position to the author (moral right), while the Anglo-Saxon copyright is committed to protecting the work itself (patrimonial law, economical right). Rights have been expanded and strengthened during the twentieth century with the emergence of new technologies. Copyrights issues are challenged by the digital economy that seems to lead to new behaviors from both actors and users to the detriment of intermediary industries. These industries have to face new challenges, in particular a concentration of their own players, including VoD sites (they actually only reproduce a past model using the Web application above the Internet), producers, international agents, local distributors, which are all juggle with the exclusivity clauses. Were in of the reign of web hypermarkets, of the extension of e-commerce to intangibles goods. These models usually ask the users to register (SVOD) rather than selling individual viewings of the content. The distribution of revenues tends to be nonexistent and even the distribution of advertising revenues is hard to control. In addition rights holders have to pay these intermediary sites for the promotion/ marketing of their content! In regards to material goods in North America, Netflix and other similar services took advantage from the First Sale Doctrine that allows people who legally buy a DVD, to rent it on the Internet to anyone with no restrictions. It is the same principle for Museums to resell DVDs, for library to loan them, etc. In Europe and other parts of the world this is not legal, and this has lead to debates around the private copy. When Netflix extended his service to VoD, the First Sale Doctrine could not be applied anymore, first because it is dedicated to physical goods only and also because it requires a unique simultaneous use of the purchased DVD. For that reason, this principle could obviously not fit VoD services: we cannot imagine how thousands of users could wait for those who have already purchased viewings. This situation requires to go back to an upfront licence (see article Les Echos des Finances, n 20990 august 8, 2011 ). It will be difficult to find a viable model out of the concentration mentionned above and its ad revenues. To get back to digital content distribution, the topic we decided to discuss in this article, we need to imagine an internet-friendly model. To do that, we must consider that the Internet is a new channel for a new market, in which case it is totally complementary to TV and movie theaters (in the same way that VHS, CD and DVD were, even though they needed specific housing equipments). In this case, if we go

back to the two main issues enunciated in the introduction, today an author or producer could consider the following options: (a) Regarding the reproduction of his work, I accept to have my digital file edited in order to reach a large population (reproduction right) and I keep total control over the quality (moral right). (b) With respect to my income on the sale and resale of viewings in a sense that respects the creativity of my work (b.1) either I set a price expensive enough to accept that anyone who buys it can resell or loan it without need to ask me but I still control the frames (moral right), my copyright (reproduction right) and the audiences (extension of the First Sale Doctrine); (b.2) or I determine an Internet-friendly price (necessarily less than a movie ticket that offers the seat, a large screen and other services in a social environment), but I still have my enforceable right (right to follow) over any revenues resulting from any form of resale of or royalties granted to the dealer or internet prescriber or even in exchange for marketing campaigns (Spray the word for instance). Internet becomes a universal movie theater where every movie will have its own screen and where its visibility will depend on the internet users themselves: for example the fans on social networks, bloggers, referrers, prescribers, self-distributors, hosting sites or P2P users, or digital communication agencies . This market truly potentially exists in terms of internet users behavior: various studies tend to say that 2/3 of internet buyer or seller would be even more active if they could both buy and sell and on the other hand between and 2/3 of them would be very open to buy on the recommendation of their social network friends. Lets keep in mind that fans are the only reason cinema exists says Sophie Boudet-Dalbin, op.cit.1) To stick with the analogy to the movie theater audience, the access to the movie would thus be a movie ticket to a virtual screening room open 24 hours and accessible from any available internet connection. These single use tickets can be purchased in batches and resoldhere creativity will be the key of success. The creator can request that a ticket shall be valid for a set number of viewings like multiple tear-off portions of a ticket. A ticket may also be an invitation to a private screening with total from the rights holder. Finally, the purchased viewings or granted invitations could be consumed by anyone no matter the speed of the Internet connection they have access to: if the users connection is greater than the encoding rate defined by the creator (when the file was encoded), then the user can watch it instantly, if it is lower, the user will have to wait accordingly to start the viewing but will always experience the quality that was defined by the creator (moral right). If the film is distributed on a hardware device (USB stick, HDD, DVD), the film can be watched immediately. This system meets the right to follow of any creator or its representatives (rights holder) and can be in perspective of the First Sale Doctrine extended to the sale of digital content over Internet ecommerce sites. Indeed, architectural technologies (security system) can help to ensure the sustainability of the quadruple bond (work security) between the right holder, the digital media, the internet user (even anonymous) and, if any, the reseller(s)/ prescriber(s), no matter where the content is and whatever display device is used (application security).

To conclude but with the hope for a next article to continue this debate (that is obviously not complete nor totally objective) highly inspired by the news, I would like to mention a quote from Spedidam, a company involved in the collection and distribution of artists/interpreters rights, who wrote the following (01/29/2012) while concluding its 2011 final report: Platforms for delivering music over the Internet, such as those labeled in 2011 by Hadopi, are legal but discriminatory. With this approach of Web e-Commerce, rights are surely complex to delineate when talking about audiovisual and cinema, inequitability would become the rule and legality would be out of control. (see ElectronLibre.info Newsletter 02/06/2012) This would be particularly regrettable since the Internet, which has been pinned as being the source of all trouble by many people issued from the movie industry, has and can provide the solution to a level never before reach in favor of the Authors and Rights holders. The PUMit technology, which was developed by my company UbicMedia, offers this type of solution. PUMit is the result of 4 years of research strictly oriented towards the Internet Creators and Right holders with the aim of a great viewing experience for the users. This solution is intended, in North America and BRIC-IND-NIG countries, for the sharing and publishing sites (partnership with BOX, among the leaders in the US), for the production and distribution studios (partnership signed with Starz Media and in negotiation with the Majors), for Post-Production houses, e-marketing companies (agreement signed with CrowdStarter) and for hosting sites such as Amazon, Akama, EMC and of course MegaUpload who has contacted us in this context to become the world largest completely legal and fair movie theater, because of the fact that it would be controlled by the rights holders themselves. Already by early 2012, UbicMedia could have taken advantage of this opportunity, with some Starz Media, web series using the PUMit system and leveraging the MegaUpload millions of monthly potential users. In this MegaUpload case using the PUMit system, the Creators have lost a perfect solution to market their work, probably the largest screening they could have dreamed of. VoD websites won by getting rid of a competitor and will certainly lure its audience. In addition, that might be a proof that users of illegal sharing sites would be willing to pay if they can find what they are looking forin a good quality. Obviously, their motivation or the fact that they were using those sites was not only about the content being free. So why? I believe the answer to this question will help to determine the new socioeconomical model of the Internet. Alain Rosset, UbicMedia SAS & INC President, February 16th, 2012