What New EU Copyright Law Will Mean for Media, Tech Companies and Users

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Supporters of the Copyright Directive, which the European Parliament passed last week, claim it will force online giants like Google and Facebook to share revenues with content creators.

For internet activists, media industry wonks and copyright legislation fans (if such a species exists), these are heady days.

On Sept. 12, the European Parliament approved a major overhaul of copyright law that, if its supporters are believed, will update copyright for the digital age and force online giants like Google and Facebook to share revenues with content creators. Or, according to critics of the European Union Copyright Directive, it will destroy the internet as users know it, blocking free speech, stifling competition and reinforcing the entrenched power of media conglomerates.

The reality, as always, is somewhere in the middle.

The EU Copyright Directive is big and broad and covers wide swaths of activity online, from data mining to the sharing of photos, music and video clips. But the two biggest changes proposed by the legislation are contained in articles 11 and 13.

Article 11, which critics have dubbed a “link tax”, would force news aggregation and search sites such as Google and Facebook to pay publishers (Germany's Der Spiegel, say, or The Guardian) for showing news snippets or linking to news stories on other sites. Its impact on the news media, in Europe and elsewhere, could be substantial.

But for the film, television and music industries, most of the focus has been on article 13.

Article 13 would make platforms such as YouTube obtain licenses for copyright-protected content, such as music videos or film and television clips, which users post on their sites, compensating artists and rights holders.

This is a big deal. Article 13 could translate into billions in payouts for music companies, filmmakers and media publishers should Facebook and Google be forced to share more of the revenue they earn for ads posted alongside copyright-protected content. It could also result in upload filters, tech companies proactively blocking users from posting suspect material, which would amount to de facto government-imposed censorship.

But at its core, the EU Copyright Directive is a political battle.

“What is really happening here is a political judgement, that Europe wants to be different than the United States and have a European copyright approach different from the United States,” says Christopher Beall, a partner at New York-based Fox Rothschild and an expert in copyright law. “It's essentially a different ethos. The EU is saying: 'We don't like the way the Americans handle the internet — and we want to recapture some kind of control over how the internet works.'”

From the perspective of much of European media industry, the current set-up has allowed American online giants to “plunder” their copyright by taking advantage of a loophole in the law, designed in a pre-internet age, to profit from their users' piracy. While online viewing of music videos, TV and media content has skyrocketed in the past years, they argue, digital license revenue by online platforms to copyright holders, has not kept pace.

In its upcoming report on global licensing revenue, CISAC, a French-based group that represents more than 4 million creators worldwide, found that digital licensing made up just 13 percent of overall royalties worldwide. Furthermore, the bulk of that revenue comes from platforms like Spotify, which have licensing agreements for all the content they stream, and not from user-uploaded content platforms like YouTube. The survey found YouTube and similar services pay between four and 17 times less for streaming content than services such as Spotify.

YouTube, with an estimated 1.3 billion users worldwide who regularly watch music videos, paid out $856 million last year in royalties to music companies, or an estimated 67 cents per user annually. Meanwhile ad-supported and subscription services like Spotify generated $5.6 billion in royalties from 272 million music fans, or close to $20 per user annually.

“This new law, if enacted as proposed by the European Parliament, will stop these big platforms from hiding behind outdated laws and force them to sit down with rights holders, wherever they are, and pay them fairly,” says CISAC Director General Gadi Oron.

Most creative types seem to agree. The likes of Paul McCartney, Placido Domingo, Adele and European film luminaries such as Mike Leigh, Paolo Sorrentino and Margarethe von Trotta have backed the Copyright Directive. Haitian rapper Wyclef Jean is one of the few high-profile exceptions, arguing that European politicians should try and “embrace and improve the internet, rather than attempt to block and hinder it.”

Blocking, critics of the Copyright Directive say, will be the result if the legislation becomes law. By making the platforms liable for their users posting copyright-protected material, the argument goes, online giants will be forced to introduce automatic “content filters” that screen and censor material before it goes up.

“It's true that article 13 might not make specific reference to filtering technology, but practically, the only way to comply with the law will be to put filtering technology in place,” says Siada El Ramly, director general of EdiMA, a corporate lobby group whose members include Google, Facebook, Apple and Amazon.

Or, as Gus Rossi, global policy director at Washington-based think tank Public Knowledge puts it, “Saying the law doesn't require content filters is like saying: 'You can have any soda you want but has be sweet, has to have caffeine, has to be sparkling and it has to be manufactured in Atlanta.' For most platforms, the only solution will be to apply automatic filters.”

And automatic filters, the law's critics argue, will mean widespread censorship.

“The technology is very imperfect, to figure out which kinds of content are allowed under free speech grounds and which are not. There is a very high likelihood that there will be a over-takedown of content,” says Siada El Ramly.

The most extreme version of this argument envisions a draconian future, where any attempts by European citizens to post political commentary, email photos to one another or spoof a music video online will be blocked by these mandatory filter algorithms.

But Ron Moscona, a partner at London-based international law firm Dorsey & Whitney, argues that the Copyright Directive “is much more nuanced than that and clearly seeks to put in place safeguards against over-protection ... The main emphasis in the draft directive is on reinforcing copyright and helping rightholders protect their works against unauthorized exploitation.”

Christopher Beall says both sides of are guilty of “taking their arguments to the extreme” when it comes to the impact of Copyright Directive and the dreaded article 13. YouTube and Google, he notes, already have a content licensing system in place, with filters that identify content and share ad revenue for content owners who register with them. The main change with the Copyright Directive, he says, would be to shift this system from an “opt-in” model to an “opt-out,” putting a government-run regime in place of what is now a voluntary corporate-run system.

“So it's not true, as opponents of article 13 claim, that it's impossible to do,” says Beall. “It is true that it is very expensive to do.”

The real danger from article 13, he says, beyond it being “far too broad” is that it will make it too expensive for new players to effectively compete with Google, Facebook and Co. “It will lock in the major players — so that will be little to no competition around those kinds of platforms,” says Beall. “It's ironic that the internet giants have been lobbying against it because, really, it's a form of protectionism for them.”

The EU Copyright Directive is still a long way from becoming law. The European Parliament will now take its draft proposal to the European Council, which represents the 28 countries of the EU, and the EU's executive body, the European Commission, to hammer out a final, binding version of the directive. That will go back to Parliament, who are scheduled to vote on it this January. If approved, it then goes to each member state, each of whom have the right to implement the directive as it sees fit.

Lobbying on both sides will ratchet up again in the coming months as pro- and anti-Copyright Directive forces argue over every legal term, phrase and definition.

Siada El Ramly of EdiMA is hopeful the pro-platform Digital 9 Group of nations, which include the Nordic, Benelux and Baltic states, as well as Ireland, will push to tone down or minimize the “worst aspects” of the legislation. Others are pushing for national governments to defang the Directive so it has little real-world impact.

“Being realistic – this Directive leaves us in a situation where the best we can hope is that it will be ineffective, that the damage will be minimal,” says Gus Rossi of Public Knowledge. “But it's a sad state of affairs when the best case scenario is that government is ineffective.”