The European Parliament just voted in favor of a new bill, known as the Copyright Directive, that will make it harder for Europe to compete in the global digital economy.
It’s been a tumultuous journey, with the same bill being rejected in July. But now that’s it about to become law (even though many discussions are still to come), it’s being widely praised in the content industry as a way to redistribute value toward artists, creators, and journalists. Indeed the directive’s underlying idea is to make it easier for right holders to earn money when their content is shared on platforms such as YouTube, Google, Facebook, Snap and Twitter.
You may have seen articles saying that this directive will mean the end of the Internet as we know it. That’s because in the future, online platforms will have to somehow monitor uploaded content and take down anything that includes an extract of copyrighted work. That could include funny memes based on movie clips and famous characters, or amateur musicians who upload videos of themselves covering a song for which they don’t own the rights.
To be fair, the reality may not be that apocalyptic. Twenty years ago, when their main problem was peer-to-peer sharing, right holders learned their lesson: You can’t afford to sue users, who are often your work’s biggest fans, and you’d better not block their attempts to voice their enthusiasm for a movie or a song. So what will probably happen is that rather than taking down content, right holders will weigh on tech companies to make sure they pull in a significant part of those platforms’ profits. In the end, everything may remain as it is, only with profits distributed differently between tech platforms and right holders.
More problematic, however, will be the case of young startups. Many right holders like to think that they have a clear view of how content is distributed online. What they don’t realize is that in a digital economy driven by increasing returns to scale, no value proposition can last for decades. Rather, the economy is about successful tech companies being driven by exponential growth and reaching a dominant position, only to be made irrelevant by a new entrant using technology in a different way. This is the story of Myspace being toppled by Facebook, and Facebook now stumbling in favor of platforms such as Instagram (which is owned by Facebook), Snap and others such as Musical.ly.
The high frequency with which dominant players are replaced by new entrants with innovative models doesn’t please right holders. While they’re going to try to make deals with today’s dominant platforms, they’ll also be highly suspicious of anything new. And so the directive’s main consequence, apart from filling up the coffers of right holders, will be the established platforms quietly consolidating their position through a de facto alliance with right holders rather than fearing upstart entrepreneurs. Just as in the case of ending net neutrality in the US and implementing GDPR in Europe, “regulating the tech industry” is likely to be synonymous with entrenching the position of existing giants.
On a more fundamental level, this law is yet another testament to the feeble position of Europe in the digital economy. As opposed to the US and China, Europe never grew large tech companies operating global platforms—those same companies they’re now looking to regulate. If the equivalent of Google and Facebook existed in Europe, they would have had the lobbying firepower to make the case that the new directive was not only bad for their profits, but also irrelevant in the age of ubiquitous computing and networks. But since those companies are all American, it becomes all too natural for European lawmakers to enact adverse regulations that many welcome as actual protectionism.
In any case the new directive will also make it harder to grow tech startups in Europe. In an article published by the Kauffman Foundation in 2011, Harvard Law School’s Yochai Benkler made the compelling case that a tolerance for sharing copyrighted work online (a typically American approach known as “fair use”) was a major contribution to innovation in the online space. But Europe has no equivalent of the US’s fair use, and its new directive will only make it more difficult for innovative content-driven models to emerge. The result, alas, is well known: the fastest-growing companies will thrive elsewhere, and Europe will once again be lagging behind.
