ICOMP

There is something missing from the title of this upbeat report. The Sky Is Rising catalogues the explosion in creativity across almost every sector. More albums are being released. More books published. More films made. More photographs taken.

It goes on to trumpet the growth in consumption. We are all listening to more music, watching more films and TV, reading more books, looking at more photos. Or at least we are downloading and streaming more content.

None of this is a surprise.

For a few hundred dollars, you can buy a laptop and some software which has more power and functionality than the mixing desks in Abbey Road Studios, the Leicas of David Hockney or the typewriters of Tolkein only a few decades ago. The barriers of production and distribution have come tumbling down. It is much cheaper to produce and it is cheaper still to distribute, or rather make available to a theoretical audience of billions.

What may surprise readers is the growth in revenues from all this activity.

Books, magazines, newspapers, film, TV, music and other entertainment have made money. More than ever. $745bn – thanks to the internet.

The Sky Is Rising then jumps to conclusions. ‘Content creators…are more able to make money off of their content than ever before,’ it says. The report assumes all that money, or a large part of it, goes to those who have produced this creative explosion.

It doesn’t. Any artist could have told you that.

The new money has gone to the new intermediaries, not the artists and not to those, new and old, who invest in them.

This report’s figure for total value of entertainment is similar to the estimate by AT Kearney of the internet economy. They calculated the global internet for consumers at $732bn. They noted that, although quality content is a major driver of the internet, a typical household ‘will spend most of its internet budget on the access device and the access connection.’ Filesharing, both legal and illegal generates over half of all internet traffic but accounts for only 2% of revenues.

So who gets this new-found wealth? Not the creators who produce it. The main beneficiaries are those providing access and devices.

The internet has brought about a transfer of wealth to the new intermediaries. Under the ‘rules’ of the internet it is now possible to build a business based on other people’s content without paying anything for that content. It is even possible to profit from the widespread availability of free illegal content, through advertising based on the traffic generated. In fact, the normal ‘rules’ of business are yet to be established online.

It is hardly surprising then that the biggest companies on the internet are those based on things that are harder to steal online, such as hardware and eyeballs – Google, Apple and Amazon. At a national level, the ISPs are often the largest internet business as a result of their broadband access revenues. These companies have created very successful businesses, but in a fully competitive market, with an established value chain, you would expect those revenues to be distributed to all who create value.

Yes. The sky is rising – for the ISPs, the hardware manufacturers and the search engine(s). But for the artists and their producers and investors, the golden age has been eclipsed by planet free.

Dominic McGonigal

Chairman of C8 Associates

The recent announcement by EU Commissioner for Digital Agenda Neelie Kroes about a consultation on the Internet of Things (IoT), has fairly reflected the wish of industry, consumers and all interested stakeholders, including the European Group on Ethics in Science and New Technologies (EGE),who have been looking forward to participate in such an initiative. At the same time though, it created confusion in the mind of the ordinary observer, given the plethora of different articles revolving around the issue.

So what is this Internet of Things? The concept is simple: everyday objects such as phones, cars, household appliances or even food are wirelessly connected to the Internet through smart chips and can collect and share data. The European Commission last week opened a consultation where it invited industry, stakeholders and the public at large to express their views on the positive and negative effects that the IoT can have on economy and society, especially in areas like privacy, security, ethics and liability. As Neelie Kroes said, “I want to promote an Internet of Things that serves our economic and societal goals, while preserving security, privacy and the respect of ethical values”.

It is true that the idea of the IoT is rather alluring, if one considers that it not only supports economic growth, but also addresses societal challenges, employment, sustainability, and innovation. However, even though the IoT holds the promise of significant progress, it poses some serious threats to privacy and personal security. Through connecting all devices that one owns and where all valuable personal information is stored, the IoT can become a dangerous and intrusive tool to people’s everyday lives, routine, choices and actions in the hands of the wrong people. In other words, the more things the Internet connects, the more valuable (and therefore more appealing) it renders people’s personal data, and therefore increases the possibility for misuse and attacks on embedded systems. Or even simply raises the technical question of how people’s data will be secure if, say, there was a failure in the system.

The challenge here is to strike the right balance between allowing the Internet of Things to improve our daily lives and retaining the control over our personal life, the privacy of our own home, of our choices and in the end, of our self. The effects on our private and public space require that governments, business models, security, consumers, industry and academia get involved and debate the appropriate governance and management of the Internet of Things in the future. As with every stage of technological evolution, the future Internet of Things does have some associated risks, however with the right guidelines, users will be able to connect, trust and use it securely.

Regards,

The ICOMP Secretariat

With the Hargreaves Report still fresh in the minds of the digital community, the hornets’ nest was once again disturbed today by an article published by The Guardian on digital copyright practice.

Dominic Rushe, the author of the article, penned the argument that it was increasingly difficult to protect the digital intellectual property of artists, musicians publishers and other content creators, by boldly asserting that that “[the] established arguments for protecting the rights of content creators are almost impossible to apply to a digital world”.

The article continued to paint the picture that an ongoing battle is taking place between “15 million internet users v Hollywood”. Essentially that consumers are demanding free content and so the internet must acquiesce to these demands.  Dominic went on to say that, “A lot of what people want to do now is not legal but should be legal”, for example downloading music, or re-publishing it online as a part of a personal video.

Whilst the existing legislature may not be perfect, it does provide some sort of framework that serves to protect the livelihoods of content creators and owners from the cost of piracy. For example the photograph industry, which has traditionally been quick to embrace new technologies and indeed made the move online at a very early stage, is one of the prime victims of piracy. Speaking out as a member of the digital imaging industry, Sylvie Fodor executive director of CEPIC (federation of European picture agencies), an ICOMP member concurred, stating that “There are lots of criticisms of copyright, based on half-knowledge, if not complete disinformation, but so far I do not see any realistic alternatives.”

A direct implication, which Dominic arguable failed to address, is that without the protection that copyright and IP provides, innovation would be stifled. As Sylvie Fodor notes, “How do you reward creators if they retain no right to their copy? If only the first copy were to be paid for, it would become far too expensive for anybody to buy. The global licence, as proposed by a number of political parties, would cost a lot of money to set up, leaving little to distribute to the creators, especially if most content is to be free anyway.”

Whilst some may no longer care about the digital industry, content creators do and as Dominic Rushe noted in his article, we must certainly try to, “stop the march forward of this ridiculousness”, but by helping to better protect the work of our creative industries so they can actually make money from their rather than de-incentivising talent, which will surely happen if they are left with no other choice than to give it away for free.

Regards,

The ICOMP Secretariat

Since the appearance of FCC’s damning allegation that Google “deliberately impeded and delayed” a federal investigation, the press has been drawing some enlightening comparisons between what Silicon Valley company says and what it does. In the immediate wake of the FCC order, Google co-founder Sergey Brin appeared in an exclusive interview warning that the web freedom was now facing its gravest threat yet from, among others, the “restrictive” walled-gardens of Facebook and Apple.

The media, particularly in the UK, have not permitted this statement to go unchallenged and have, over the last couple of days, exposed the double-standards that it belies. Below are some examples:-

• Emily Bell in The Guardian’s “comment is free” section writes that Google’s “enthusiasm for openness is in direct contradiction to some of the company’s recent practices. Google has never been an “open” company: it is famously and fiercely protective of its own intellectual property in its algorithms; it routinely issues NDAs (non-disclosure agreements) to visitors to its labs and offices, and the level of control it exerts over both its own corporate destiny and the information of its users has recently caused disquiet.”
• The Guardian’s James Ball writes that “the scale of information Google has on its users is breathtaking” and that “Google’s evangelism for the power of open and linked data, while sincere and infectious, can be a risk too: its attempts to photograph every street across Europe for its Street View feature has met with opposition in many countries, and has stalled its efforts in some.” Finally he cautions that “owing to its sheer scale, Google has the ability to cause problems for the open internet – whether it intends to or not – and avoiding doing so may prove difficult.”
• Emma Barnett at The Telegraph writes that while Brin is “ completely correct to bemoan those governments, such as China, who try to control web access and digital communication by their citizens, he turns hypocrite when criticising major rivals Facebook and Apple” due to the emergence of Google+ which she characterises as Google’s own walled garden being “aggressively grown….to take out Facebook.”
• Techeye draws attention to the fact that Brin “said nothing about Google’s Search plus Your World (SPYW) feature, which mainly prioritises Google+ over other social networks, but he wouldn’t would he?”
• On a slightly different issue, Andrew Orlowski at The Register makes light of Google’s rather glib arguments against digital IP, saying: “Google fights every attempt [to attach ownership to digital things] with the response that it “breaks the internet”.

When it first emerged that Google had surreptitiously collected sensitive personal data in its quest to map neighbourhood for its Streetview service in 2010, the company claimed to have been “mortified by what happened” and pledged to institute internal control mechanisms. Nearly 2 years on, however, the United States Federal Communications Commission (FCC) is preparing to fine the internet giant $25,000 for “deliberately imped[ing] and delay[ing]” an investigation into whether its practices contravened anti-eavesdropping legislation.

In its 25 page order, the FCC explains that Google impeded the investigation “by failing to respond to requests for material information and to provide certifications and verifications of its responses” and alleges that Google “repeatedly violated commission orders to produce certain information and documents.” The order goes on to say, in rather frustrated a tone: “although a world leader in digital search capability, Google took the position that searching its employees’ e-mail ‘would be a time-consuming and burdensome task’ ” and also revealed that the company’s main architect behind the data collection project had invoked his Fifth Amendment right against self-incrimination.

All this would seem to be unusually evasive behaviour for a company which has merely made a mistake. Moreover, Google’s response to the FCC’s allegations was perhaps even more baffling. “We are pleased that they have concluded that we have complied with the law,” stated a Google representative.

Much of the coverage around this announcement has predictably centered on the apparent futility of levying a $25,000 fine on a company which announced a $2.89 billion profit in Q1 alone but this misses the point.

In September 2011, Google was fined in South Korea for impeding an antitrust investigation. In March, Google ploughed ahead with privacy policy changes against the express request of EU regulators and as recently as this month, a federal court in Australia found Google guilty of conduct that was misleading or deceptive after an appeal from the Australian Competition and Consumer Commission. Read against this backdrop, the FCC’s allegations that Google deliberately impeded a federal investigation serves as yet another demonstration of the disregard, not to say contempt, in which the company holds the concerns of regulators and, by implication, the marketplace.

Google’s bewilderingly wrong-headed response only serves to underline this impression and lead one to wonder if they even read the report. For only $25,000, the Mountain View giant may well have considered it “a time-consuming and burdensome task”.

Regards,

The ICOMP Secretariat

On the back of a 61 percent leap in profits, Google yesterday announced a contentious stock split which all but gifts co-founders Larry Page and Sergey Brin lifetime control of the company, reports ICOMP member One News Page.

The internet giant proposes to double the number of shares in issue, attracting smaller investors by lowering the price per share while at the same time giving the company’s valuation a welcome boost. At first glance, this would appear to be a win-win move.

As ever at Mountain View, however, a closer inspection shows that things are not quite as they seem since unusually, the new shares will not carry with them any voting rights. This will effectively grant Page and Brin lifetime control of the firm. More controversial still is the fact that, since the triumvirate of Page, Brin and Chairman Eric Schmidt between them already control two-thirds of the company’s voting power, the measure is likely to pass regardless of any objections among the remaining shareholders.

Commenting on this measure, CEO Larry Page said: “investors have always taken a big bet on Sergey and me. This bet will last longer as a result of these changes.”

Granting this type of almost dynastic control is an unusual move for a public company though coming from a firm which appears to operate in accordance with the doctrine that might is right, perhaps this latest ploy should come as little surprise.

Last week Tripadvisor joined voices with a number of other businesses around Europe by publicly filling “a complaint with the European Commission to address anti-competitive and unfair practices by Google”.

This in fact closely followed in the footsteps of a complaint from another OTA (Online Travel Agency). Expedia’s complaint, according to Reuters and Bloomberg, was said to offer “evidence of how Google’s conduct harms not only competition, but consumers”.

Businesses are clearly feeling the effects of this behaviour.

Expedia were once quoted in an official Google blog, as an example of a successful online business that “typically rank high in Google’s results” in order to illustrate the support given by the search engine to vertical search engines. That Expedia has now publicly voiced their opinion clearly shows the degree of widespread concern in the online marketplace at Google’s behaviour.

ICOMP welcomes these new voices seeking to restore balance to the online marketplace and to promote fairness and transparency in search.

Regards,

The ICOMP Secretariat