Business Matters: Who Pays for Antipiracy Enforcement?
Business Matters: Who Pays for Antipiracy Enforcement?

Who Pays for Antipiracy Enforcement?
-- Here's a good question: should ISPs in New Zealand pay the enforcement costs of three strikes? It's more than an academic question. A stakeholder that bears no direct costs in fighting piracy has an incentive to fight piracy as actively as possible. But one party or another -- the costs are sometimes shared -- must deal with the actual administrative, legal and customer service costs.

Recall that New Zealand legislators passed a bill in April that allows copyright holders to send notices to ISPs that will generate up to three notices to subscribers. The bill will take effect this September, so there is some time to work out the issue.

If copyright holders want action, they may have to bear the brunt of the costs. New Zealand has set a fee of NZ$25 ($21.10) for every time a copyright holder wants to deal with an infringer. The fee is NZ$200 ($168.84) when the claim is taken to the Copyright Tribunal. The Australian Federation Against Copyright Theft has called the fee "out of step with the more common and preferred practice in other jurisdictions where right holders and ISPs bear their own respective costs."

In the United States, the cost of both establishing and administering the Independent Review Program, the dispute resolution program, are split evenly, according to the Memorandum of Understanding. Participating copyright holders will bear 50% of the costs and the participating ISPs will pay the other 50%. In addition, the two groups are sharing the cost of the Center for Copyright Information, a resource aimed at educating the public and allowing ISPs to share information about individual actions and learn lessons that can lead to better enforcement.
(ZDNet, via Future of Copyright)

EMI Sale Will Likely Attract All Major Players
-- BMG Rights will "of course" have a look at EMI when Citigroup begins the sale process, Bertelsmann CEO Hartmut Ostrowski told the Financial Times. "The EMI auction will attract at least as many bidders as Warner, if not more," he added.

Expect all the major players to have a look at EMI -- sales like this don't come along every year. It wouldn't be a surprise if Access Industries owner Len Blavatnik wanted a part of EMI to add to Warner Music Group. Universal Music Group may express interest, although its market shares in recorded music and publishing are already so large that antitrust issues would be expected. Tom Gores' Platinum Equity and Alec Gore's The Gores Group were in the chase for Warner and should also have an interest in EMI. And given its interest in Warner, Ron Burkle's Yucaipa Cos. is another likely candidate.

So in a nutshell, get ready for the second big acquisition of 2011 and the media frenzy that is sure to come with it. Citigroup is seeking first-round bids for EMI by the end of this month or early August, according to a July 6 Bloomberg report. And because many of the bidders are based in the United States and the company on the block (EMI) is based in London, there will be double the number of media coverage, unnamed sources, occasional ridiculous reports and all-around gossiping than a U.S.-only process would generate.
(Financial Times)

BigChampagne CEO: Netflix CEO Intends To 'Kill the DVD'
-- How does one speed the transition to digital formats from physical formats? If you're Netflix, you raise rates for DVD rentals and push the digital stragglers to the unlimited streaming option, BigChampagne CEO Eric Garland says. As Billboard noted last week, Netflix is eliminating the plan that combines streaming and DVD rentals and offering each on its own.

"[Netflix CEO] Reed Hastings has an unfair advantage and that is near-perfect access to near-perfect customer data. Not to be cute about it but what he sees is everything, and what you and I and everybody else are seeing is very little… He can say authoritatively, a year from now, three years from now, five years from now, this is the way you will enjoy filmed entertainment. He can say this because there are already elements of his marketplace that are enjoying the entertainment that way today. So he really can see the future. Specifically, what he can see is that increasingly the younger Netflix customer is watching on the little screen, on the mobile device, on the laptop and that they are watching on the Netflix streaming service and not the DVD… To be blunt, make no mistake this announcement signifies Reed Hastings' intent to kill the DVD."

As Garland notes in the excellent Q&A with CNET's Greg Sandoval, that strategy works only if Netflix can use its leverage to improve the catalog for which it has streaming rights. The company can do this because it has the largest number of active movie consumers in the country and, basically, the movie and TV industries cannot stand to lose a young generation.

With video rental stores having gone the way of the '80s video arcade, Netflix's DVD customers would naturally have a strong incentive to switch to the streaming option. Yet some fans of the DVD format are sure to hold on just as some music consumers prefer to sell CDs and LPs. These consumers may become marginalized and underserved, but it will be difficult to kill off the DVD for good.

Any film or television studio loses significant bargaining power to Netflix if the DVD dies and all video content is streaming, so one should expect them to hold onto the format for dear life. Instead, it may be likely that Netflix will simply abandon the format to Redbox, a few major e-commerce sites and those mass merchants whose DVD sections still have as much square footage as the CD sections of yore.