Category Archives: fair use

Remixed Revenues

After reading Josiah’s post about the philosophical and cultural implications of strict internet publishing laws, I decided to write my own response rather than a long comment. The reason being that his thoughts really got me thinking.

Originally, I was going to comment, saying that I agreed with his post at a fundamental level, but that a) restrictive copyright laws affect not only the youth but any artist who wants to express their creativity using the internet as a platform and b) that I thought the reason the government was so restrictive and uptight about remixes of copyrighted work was because they would make less of a profit from tax revenues on royalties. But did I actually know that? How much is the government actually making under the current system?

To summarize my brief and not-so-in-depth research, the government loses money for individual pieces of work published on the internet because individuals don’t make much money from it, and the hosting sites (while they do generate a huge profit) do not get much revenue from individual works– they rely on the volume of the content that they host.

You can read my process under the cut.

Let’s take three scenarios into account:

  • An artist produces a piece of work, gets a copyright on it with the government, and publishes that work through a publishing company, keeping the rights to his work.
  • An artist produces a piece of work, gets a copyright on it with the government, but forfeits the rights to his work to his publishing company.
  • An artist produces a piece of work, does not copyright it, and publishes the work online with a site that gives a minimal income based on ad revenue.

In the first scenario, the artist receives a royalty for his work, in addition to any advances the publishing company has given him in order to produce the work. The government can tax a standard income tax (contingent on his income bracket) (1) on his advance, and then an additional 0-30% on the royalties (2) if the royalties are not considered a part of his income– the percentage of the royalty tax depends on the type of work that’s produced (3). The government also taxes the publishing company, with the income tax depending on the income bracket of the company or special deals with the government(4). However, the publishing company is subject to a tax deduction for all its royalties as a business expense deduction (5). The second scenario is the same, except the artist only receives the advance and whatever the company pays him for his copyright. Thus, the total tax comes to the income taxes for both parties (with no tax deduction for the publishing company), in addition to a capital gains tax  of either 15% or 5% (depending on the seller’s income bracket) on the sold copyright (5).

In the third scenario, the artist gets no royalty, but does receive taxable income from the site. The site itself pays an income tax to the government.

In either case, there are quite a few factors that play into how much the government actually makes via taxes. These factors are:

  • How popular the piece becomes
  • The medium of the piece (i.e. whether it’s a book, piece of music, photograph, etc.)
  • Whether the IRS considers the artist’s work to be his job, i.e. his primary source of income
  • How much the author makes from other sources of income and other factors with how he files his taxes
  • How much the publishing company or internet publishing platform makes
  • How much all parties receive in tax deductions

And this is assuming that we’re in America when considering all this.

So, let’s assume that the artist in question is publishing a book. In one year, the book sells 20,000 copies at $15 per copy OR makes $13000 in ad revenue. The artist himself makes $35,000 a year outside of the profits from his book, for which he receives a $10,000 advance plus any royalties, which, if he receives them, will equal 10% of total profit (royalties can range from 7.5 to 15% (3)). Additionally, we know that the artist files his taxes singly and does not write professionally. For the second scenario, we will assume that the copyright of the book is valued at $5000 and can be taxed at 15%. For the third, we’ll assume he’s working under a similar setup as a standard blog with advertising, giving him around $500 a month, with the remainder going to the hosting site. The publishing company makes close to $10 milli0n a year, and we’ll say that he published online on a site that makes about $30 million annually.

To determine how much money the government makes, we can crunch the numbers for each scenario:

  • In scenario one, the government makes about $13k from the artist, and about $100k from the publishing company
  • In scenario two, the government makes about $8k from the artist, and about $105k from the publishing company
  • In scenario three, the government makes about $8.5k from the artist, and about $2.5K from the online site.

This isn’t accounting for any money that they end up giving back as a result of tax deductions. As you can see, there’s a significantly higher profit margin for either of the publishing scenarios.

Obviously, I am not an economist and my knowledge of this subject is superficial at best. My calculation’s aren’t even close to being solid, and a lot of them are based upon assumption and guesswork rather than facts. But I would venture a guess that online publishing, whether it be an original work or not, is costing the government money. People don’t have to pay as much to get access to art, and a lot of content can be hosted cheaply and effectively. The rise of internet hosting sites as big businesses have resulted in higher incomes on the whole for those companies, but the profit for each individual work is minimal simply because of the total volume of content hosted by the site.

A Dissection of Internet Piracy

At the beginning of the week, Paul posted a TED talk and commentary about fair use. He asks: “Does the fight against piracy end up, in some ways, encouraging it? I wonder how the general public’s view of piracy has changed over the last decade or so. I’d be interested to hear what the class has to say about that.”

There are three kinds of people that use the internet. The “casuals” who don’t do much on the internet aside from checking their facebook and email, and maybe repinning things on pinterest every so often; the people who are slightly more invested in the internet, who maybe know a little bit of code, are consistent online gamers, or run a blog in addition to the daily activities of the casuals; and the people who build their lives off the internet i.e. web developers, internet celebrities, etc.

What does that have to do with piracy? Well I think that each of these kinds of people have different prerogatives when it comes to illegal uploading and downloading. Casual internet users are probably the most likely to download movies, music, and other entertainment media. They don’t have much use for software programs and aren’t at much risk for legal action if they steal or reproduce that kind of data. The middle group is probably more likely to download software programs in addition to entertainment files. They’re also more likely to have the know-how to perform more complex acts of piracy like creating torrents and streaming files. The third and final group is probably the least likely to steal or reproduce data simply because they are at the highest risk for getting caught, and have greater access to certain kinds of files and programs because of their work– not because they don’t know how to do it. However, they are still likely to pirate media that they only intend to use privately. The only exception to this group would be the people who make a living out of internet piracy.

The common denominator between these groups is that they will most likely illegally download entertainment media, whether that be movies, TV shows, or the entire discography of The Mountain Goats. Everyone knows that it’s illegal to get these kinds of files without paying for them, but because sites like the iTunes store, Google Play, and Amazon Media offer individual tracks, entire seasons of TV shows, and movies for a much lower cost than buying them at the store, people think that downloading won’t be stealing much from anyone. In that sense, I think that the “methods to protect against piracy” have encouraged people to pirate data.

Otherwise, I think a majority of piracy occurs simply because people don’t really care. Internet piracy has become a widely accepted part of our culture, which is pretty well represented by our reactions to anti-piracy warnings:

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Because there’s so little risk involved with internet piracy, unless you’re operating a large-scale pirated movie business, I think people generally don’t worry much about stealing. If the internet were a different kind of platform where file sharing could be controlled, I think that attempts at stopping piracy would have been more effective. But as it is, the attitude about piracy has always been either “whatever” or “I think it’s probably wrong, but I’m going to do it anyway.”

 

Is streaming technology saving the music industry?

Streaming technology on websites such as Spotify, Napster and others are legal, but that doesn’t mean that there are not many complains about them from the original authors of the work being streamed. Often the complaint is that these websites do not pay enough in royalties back to the original creator. Streaming, and streaming music in particular, has become even more popular as the years have passed. While paid downloads of music have gone down, streaming of music has gone up, and now through these websites, users can listen to the music that they want to through a stream, and if they like it, they can get a direct link to the authors website, were they can purchase the music directly from the people that made it, without another company such as Spotify getting a cut of the profit. It has become a one stop shop for information regarding bands and a place to purchase as well as listen to music. With things such as illegal downloading picking up, streaming music through a website helps the music industry because the artists get paid their respective royalties that way. In the end, the author points out that streaming really has helped the music industry evolve so it did not die out.

Intellectual Property and Fair Use article 2: How Your Data Are Being Deeply Mined

This article talks about the passive collection of data by private corporations and the response the owner has to that data being collected. For the most part, the collection of data that the private corporations does is in order to build a portfolio about the user. The author gave an example of visiting an L.L. Bean website and looking at some winter boots. Then, a few days later, one of the ads the author got on their phone was an ad for L.L Bean. It is this tracking of websites and collection of data that scares people, because they do not want to have this data collected about them. Then, the people that collect this data from the users can sell the data to large corporations who can use it to advertise to those users. In all, collecting this data is legal most of the time due to the wavers that a user signs before using a website that might collect the users data. The author did say that The Federal Trade Commission and the Senate Committee are calling for more transparency in the companies collection of data.

Intellectual Property and Fair Use article 1: Will the 2014 World Cup Be Remembered For Being The Most Illegally Streamed Tournament In History?

This article talks about the ownership of intellectual property and how it can be inferred that users of the internet care less and less about it. People that use the internet today usually either know someone that streams movies, television shows or similar materials or does it themselves. With the price of paying for access to watch sporting events such as The World Cup as high as it is, it is not surprising that people would try to find a work-around rather than pay to see The World Cup through their internet or cable provider. With more people providing links to watch events, movies and television shows popping up every day, it gets harder for the Government to shut down the illegal links. This means, that while some links will be shut down, if a person would really like to watch The World Cup for free online, they could. This article mentions several people that talked to the author about their streaming websites. The owners of the streaming sites often said the same thing. For people who just sit down and do this from their computer, they get a lot of followers on their stream. So in all, yes, streaming things such as sporting events without the owner of said sporting events permission is illegal, but it still gets done a lot and it is really hard to stop.

Creation and Consumption Book 2: Sharing

Chapter 3: The value of non-market sharing

In this chapter, the concept of sharing is introduced. For the most part, Mr. Aigrain talks about Peer to Peer sharing, also known as P2P sharing for short. This is a type of sharing where users connect, either through a website or directly, to share files. This can be done in multiple ways. A popular way for many people would be the use of USB keys. These are portable devices capable of storing a lot of data. If one wanted to share a file with his or her friends, they could simply store the file on the USB key and  then hand the key to their friends. That friend could then insert the USB key into their computer and have immediate access to the files in which their friend had imparted to them. There are other ways of sharing files, one of which was brought up in the book. That example was Napster. Napster was an online service that allowed users to share their music library with others. This was Peer to Peer sharing on a massive scale. The author also brings up BitTorrent, which is another example of Peer to Peer sharing in which the user obtains different parts of the file from several or potentially many users, which are then spliced back together once the file transfer is complete. Another point brought up is the media industry’s distaste of Peer to Peer or file sharing. When a file is shared without the consent of the owner, which belongs to the media industry, the owner looses out on some profits, because that owner could make some money selling their work to you instead of the file being shared with you for free. This is why the media industry does not want to allow Peer to Peer or file sharing. If it is allowed, the industries profits would sink, causing less money for the owners of the work.