Major Record Labels Sues ISP to Turn Them Into Copyright Cops

Major record labels operating in the US have sued another ISP in an effort to turn them into copyright cops. It’s the latest in an effort to cut off more subscribers from the Internet.

There’s been another push in the US to get ISPs to play copyright cop when it comes to filesharing. The target ISP this time appears to be Texas ISP Grande Communications.

The general legal idea in the US is that ISPs are common carriers. ISP’s merely transmit the data and have little to no control over what gets transmitted. As a result, as per the long controversial Digital Millennium Copyright Act (DMCA), ISP’s cannot be held liable for copyright infringement. This is because it is the users who can commit acts of copyright infringement, not the ISP. This is what is known as the Safe Harbour provisions.

Since the early 10’s, however, major record labels have been trying to push the narrative that the only way ISP can qualify for those Safe Harbour provisions is that ISP’s have to terminate repeat copyright infringers. All this was happening in an environment where governments in other countries were being lobbied to institute their own so-called three strikes law.

The general idea of the controversial three strikes law is that if someone is accused of copyright infringement three times, they would have their access to the Internet cut off. In some countries, this is also followed up by a fine. In other cases, not so much. It doesn’t matter if your network got hacked through war driving or if the evidence is wrong or flimsy. The only thing that really matters is that the subscriber gets three accusations.

After some legal back and forth, the idea in the US was worked down to a six strike policy. What happens after the sixth strike ended up being rather vague. Sometimes, disconnections happen, other times, there isn’t a disconnection. Regardless, the six strike rule in the US was passed in 2013. All this in spite of the major controversies surrounding it including it being a security disaster for users.

regardless of which side of the debate you were on at the time, one of the general ideas of the six strike rule is that record labels are responsible for the enforcement. This didn’t sit well with the labels, but that’s the way it was.

Now record labels are trying to work the DMCA in a way that forces ISPs to play the enforcement roll instead. The labels have a very big motive for doing so: money. According to tax filings in 2010, the RIAA spent $17 million just to recoup $391,000. Constantly shelling out money just for the sake of randomly accusing people of infringement doesn’t come cheap after a while. While there are likely other reasons for the RIAA’s push to do so, money is probably a big reason why they are pushing for this.

In this lawsuit against Grande, the RIAA alleges that because the ISP offers high speed Internet, music pirates flock to it because the only reason people would pay for high speed Internet is to download music illegally. This has been a long-standing argument by major record labels dating back to at least the mid 2000’s. While so much has changed between then and now, the argument hasn’t changed.

The problem with this argument is the fact that there are so many other uses for high speed Internet. One use is to stream music legally. According to an article in Variety last month, music revenue for the RIAA came from streaming services more than anywhere else for the first time in 2016. From the article:

Streaming music services were for the first time ever responsible for more than 50% of all U.S. music industry revenue in 2016, according to new numbers released by the Recording Industry Association of America (RIAA) Thursday.

Paid and ad-supported streaming together generated 51% of music revenue last year, to be precise, bringing in a total of $3.9 billion. In 2015, streaming music was responsible for 34% of the music industry’s annual revenue.

Much of that increase can be attributed to a strong growth of paid subscriptions to services like Spotify and Apple Music. Revenue from paid subscription plans more than doubled in 2016, bringing in $2.5 billion, with an average of 22.6 million U.S. consumers subscribing to streaming services last year. The year before, subscription services had an average of 10.8 million paying subscribers.

Another reason for high speed Internet is to legally stream movies. Back in January, streaming revenue eclipsed revenue from Disc media for the first time. From Variety:

Two unprecedented trends emerged in the annual numbers reported by the Digital Entertainment Group, a trade org that collects the numbers from studios and retailers on a quarterly basis, that cast a dark cloud over the future of ownership of packaged video content, both physical and digital.

The first is that disc sales were eclipsed by subscription streaming numbers for the first time ever. The $5.4 billion in disc sales fell well short of the $6.2 billion tabulated from SVOD providers like Netflix.

The high margins of disc sales, which are traditionally the biggest revenue stream for what the DEG describes as “U.S. home entertainment spending,” had been a big but rapidly declining contributor to studios’ bottom lines.

Disc sales were down nearly 10% versus 2015 while subscription streaming surged almost 23%. Interestingly, however, the latter figure represents a cooling off from back-to-back 25% levels of growth in this category going back to 2014. While that might represent a maturation of SVOD consumption in the U.S., the reporting of this category by the DEG is likely dramatically undercounting considering the figures do not include what is probably the second biggest revenue contributor to subscription streaming, Amazon Prime.

Another possible reason for high speed Internet is services like Netflix. Millions of users subscribe to the service. From Z business:

Netflix Inc made a bullish forecast for subscriber additions by mid-year, a positive sign for its push to expand around the world that sent its shares towards an all-time high.

The streaming video company pushed back the next season of its smash-hit “House of Cards,” and other programming to the second quarter, meaning it lured in fewer new subscribers in the first quarter than expected, but will likely make it up from April through June.

Subscriber rolls, the most closely watched measure of Netflix’s growth, rose by just under 5 million globally in the first quarter, behind analysts` projection of 5.18 million, according to FactSet StreetAccount.

Another reason for using high speed Internet is communication. According to Windowsreport, Skype has over 300 million active monthly users. From the report:

Microsoft also announced that Skype has finally reached the 300 million monthly users mark, a great milestone for the program. In addition to the new Cortana and Bots-related feature to be built right inside Skype, Microsoft has worked quite hard to integrate Skype deeper inside Windows after acquiring it.

With this number of monthly users, Skype has entered the league of some of the most used instant messaging and VoIP apps even if its numbers are still lower than the number of WhatsApp and Facebook Messenger users. Apart from this, Microsoft made several other announcements related to Cortana as well as HoloLens, which you should definitely check out.

WhatsApp, meanwhile, boasts an even larger userbase with over 1.2 billion according to Statista.

Of course, there’s the huge video game streaming market. Twitch.tv, according to Wikipedia, has over 100 million visitors per month:

The popularity of Twitch would eclipse that of its general-interest counterpart; in October 2013, the website had 45 million unique viewers,[3]:38 and by February 2014, it was considered the fourth largest source of peak Internet traffic in the United States. At the same time, Justin.tv’s parent company was re-branded as Twitch Interactive to represent the shift in focus – Justin.tv was shut down in August 2014.[4][5] The site has also branched out into music-related streams and content. In 2015, Twitch announced it had more than 1.5 million broadcasters and 100 million visitors per month.

Suffice to say, with the growth of all sorts of different services, it’s a very hard argument to make that high speed Internet is primarily used for infringement purposes. These are just a few numbers that we were able to find with a few minutes of research.

For this case, the EFF says they are monitoring the situation:

The lawsuit they filed against Texas broadband provider Grande Communications suffers from many of the same due process problems as the BMG Music Publishing v. Cox Communications case, which is on appeal.

The issue in both cases is whether and when a home broadband provider should cut off a customer’s Internet service when someone using that service is accused of copyright infringement. The legal hook for this controversy is the Digital Millennium Copyright Act, Section 512, which protects ISPs and other Internet intermediaries against the risk of massive copyright penalties stemming from a customer’s copyright infringement. But to get the protection of Section 512, an ISP has to terminate “subscribers and account holders … who are repeat infringers” in “appropriate circumstances.”

The courts haven’t yet said much about when and how it’s “appropriate” to terminate ISP subscribers. Most of the cases decided so far involved subscription-based websites, not ISPs that provide a person’s main (or only) link to the entire Internet. As EFF and Public Knowledge told the Court of Appeals for the Fourth Circuit in the BMG v. Cox case, the circumstances where it’s appropriate to cut off a home Internet subscription entirely are few and far between.

One of the main purposes of DMCA Section 512 is to make clear that Internet service providers aren’t required to be copyright police. And that legal protection is the reason we have the multitude of Internet services we have as we know it today. The courts have generally rejected this perennial argument of the music and film industries, but the suit against Grande shows that they haven’t abandoned it yet.

There are many ways this new lawsuit could go. But whatever deals are struck along the way, and whatever facts come to light, the court should keep the importance of Internet access in mind, and reject the tired and dangerous argument that Internet services should act as copyright police.

One thing worth noting is that if the courts don’t ultimately rule in the record labels favour, the labels still have their long standing tradition of lobbying. Whether that is through the government or whatever trade negotiations are left remains to be seen. So, it’s not like the arsenal to force ISPs to become copyright cops is empty should this latest attempt fail. So, in the end, this is just one moment in a long battle the labels are waging right now.

Drew Wilson on Twitter: @icecube85 and Google+.

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