Introduction:Making ISP Responsibilitya Reality in 2008
In 2007 ISP responsibility started to become an accepted principleIn 2008 it must become a realityBy John Kennedy, Chairman and CEO
An incredible revolution is sweeping the musicindustry and in the pages o this report you willread how record companies are adapting theirbusiness to the dramatic changes broughtabout by the digital age. In the US, only veyears ater the commercial music downloadbusiness rst emerged, 30 per cent o allrecorded music sold is online or mobile.Record labels are becoming broad-basedentertainment companies, developing newrevenue streams. The consumer has betterchoice, availability and fexibility in enjoyingmusic than ever beore.Our digital revenues are growing and diversiyingas our business model changes rom onedominant ormat to hundreds o channelsand products. Yet behind the innovation, experimentation anddiversication o the digital music market in 2007,another change has happened – o possibly evengreater importance to the long term uture o ourbusiness. The last year has nally seen the windo change blowing through old assumptionsabout the role internet service providers (ISPs)should play in protecting copyrighted content.ISP responsibility is becoming an accepted idea.This is a critical development, because untilnow ISPs have played no such role. Copyrightthet has been allowed to run rampant on theirnetworks under the guise o technologicaladvancement. Some estimates say no lessthan 80 per cent o all internet trac comprisescopyright-inringing les on peer-to-peer (P2P)networks. ISPs have largely stood by, allowing amassive devaluation o copyrighted music. Thisin turn – and despite all the positives about ourdigital growth – has prompted a crisis in recordedmusic that has wide implications or the wholedigital market place and all those businessesto whom music is an important ingredient.Today, however, a sea-change is happening.The whole music sector, governments andeven some ISPs themselves are beginning toaccept that the carriers o digital content mustplay a responsible role in curbing the systemicpiracy that is threatening the uture o all digitalcommerce. Ater years o discussing anddebating, I am convinced it is no longer aquestion o whether the ISPs act – thequestion is when and how.More than anyone else in 2007, our industryhas to thank French President Nicolas Sarkozyand the Chairman o FNAC Denis Olivennes orthe change o mood. The Sarkozy Agreement,announced in November, is the most signicantmilestone yet in the task o curbing piracy on theinternet. It sets up a groundbreaking three-waypartnership between the creative sector, ISPs andgovernment. It takes the protection o intellectualproperty online into new territory, requiring ISPsto disconnect copyright inringers on a large-scale, using an automated system and totest ltering technologies.Not every detail o the French plan will beexportable to other countries but the overridingprinciple behind the plan – the undamental rolethat ISPs play in stopping piracy – sets an excitingexample internationally. President Sarkozysummed it up: the internet must not be allowedto become a Wild West; it must be a mediumwhere we protect our culture.There has been progress elsewhere too. Anextremely important court decision came in theorm o the Sabam-Tiscali judgment in Belgium inJune. The court not only conrmed that the ISPmust take responsibility or curbing inringementon its networks – it reerred to no ewer than sixpossible technological solutions or blockingthe trac o unlicensed music.Similar movements have happened in dierentparts o the world: new legislation engagingISPs in Taiwan and Korea; a hard-hitting messagerom the Swedish government’s Renors Report;and intensiying intra-industry discussions inother countries. In the UK, with talks proceedingagainst the ticking clock o the government-commissioned Gowers Review, ISPs need toprove that they can deliver action that will havea real impact on piracy. In the US, AT&T hasshown cautious leadership, acknowledgingISPs’ responsibility to protect content andworking on ltering technologies with themusic and lm industries.
Introduction: Making ISP responsibility a reality in 2008page 03
O course, one key reason or this apparentsea-change is the commercial sel-interest oISPs. Unlicensed trac has always been hoggingtheir bandwidth, but now, as ISPs get urtherinvested into the business o digital content,it poses an increasing danger to theiruture revenues. A turning tide o opinion is one thing – a concreteprogramme o action is another. There is onlyone acceptable moment or ISPs to start takingresponsibility or protecting content – and thatmoment is now. Ater years o prevarication in thisdiscussion, the French government’s decision to“seize the day” is deeply rereshing. It shows anurgency o approach that is badly needed inevery market where music is today beingmassively devalued by piracy.In Europe, we look to the European Unionto capitalise on the momentum created bythe Sarkozy Agreement. The moment or EUlegislation to be drawn up has already arrived.There must be obligations on the ISPs to warn,suspend and eventually disconnect inringingusers and to apply ltering measures. This shouldbe achieved by agreements, backed by legislationwhere necessary. At the same time, we as anindustry will not be shy to use legal action to orceISPs to act when dialogue ails but I would like tothink that they now understand that meaningulvoluntary action is a more attractive option thancoercion – we have always advocated that!This report refects revolution and innovationin the music business. Music is more advancedalong the digital road than almost any othercontent business. As the table on page sixrefects, we have transormed our landscapein the last ve years. I am hopeul that in 2008the online subscriptions business, hithertoheld back by a range o problems, will nallyrealise its huge potential as a revenue stream.Revolution and innovation, however, are notgoing to be enough to secure a healthy utureor the music industry. The third corner o thetriangle is responsibility. 2007 was the year ISPresponsibility started to become an acceptedprinciple. 2008 must be the year it becomesa reality.