Return to the era of rule-making

In 1996, I started to write a book about the political evolution of the internet. In retrospect, this year served as the peak of excitement regarding everything the internet was going to be. Most commentators were understandably focused on the future of this wildly disruptive technology, but I chose to look at the past. Not of the internet itself, but in fact, a much older story. It’s a story of what I saw as repeated cycles of technological change and communications revolutions, and a picture that began around 1450, with the invention of the printing press. Despite all the hoopla surrounding it, the internet was part of a long chain of communications technologies that began with the printing press and its development needed to be seen as part of this broader historical evolution. In Ruling the Waves: Cycles of Invention, Chaos, and Wealth from the Compass to the Internet, I argued that the internet—like the printing press, the telegraph, and the radio—was destined to go through four major stages of political and commercial evolution. The first stage—the one we were witnessing in mid-1990s—is one of “innovation,” the phase of tinkerers and inventors, a stage marked by laborious exploration and the thrill of discovery. There were no rules during this phase, because none were needed. Innovation hadn’t developed to the point where commerce was widespread, or property rights needed. The second stage is dominated by “commercialization,” and a rush by both pirates and pioneers to build their fortunes with the technology that the innovators have created. During this period, the rules were inherently ill-defined. If there are no rules, after all, no one can break them. During third phase, however, which I call “creative anarchy,” problems begin to burst out along the frontier. As the technology matures and markets widen, a demand for property rights is liable to emerge. Having carved out positions along the frontier, the more established pioneers no longer want to work in chaos or cavort with pirates. In other words, they want property rights and some means of enforcement. Lastly, there is the final, inevitable phase of the reassertion of “rules” and enforcement that only government can provide. Chief among these rules are copyright considerations, since no mature industry can thrive in a capitalist system without them. In the 1980s and early 1990s, new technologies emerged that made music digital, and created new ways of recording and distributing sound. This was the phase of innovation. It was followed rapidly by a bevy of pirates and pioneers, each hoping to jump into this new space and transform the music industry. Some of these pioneers were aiming to create new models of commercialization. Most, however, were pirates at heart, hoping to use digital technologies to free artists from the financial chains of the record labels and give audiences new channels for finding and listening to the songs they loved. “This is beginning,” Chuck D prophesized at the time, “of the end of domination.” But shortly thereafter, the industry was convulsed by the forces of creative anarchy. By 1998, there were 26,000 illicit music sites online, offering more than 200,000 songs (with 3,462 sites devoted to Nirvana alone). By 2000, Napster, arguably the most successful of the pirate sites, had more than 38 million users. But no one was making money. Not the artists, certainly. Not the labels. And not the pirates or the would-be pioneers. And so, the music industry began to demand rules and means of enforcing them. Most crucially, it began to create and uphold systems of property rights. The big mover in this moment was Apple, whose iTunes platform used evolving technologies to distribute music in new formats that listeners loved—and were willing to pay for. Following in Apple’s lead, new services, led by Pandora and Spotify, innovated beyond iTunes, capturing the anarchic spirit that Napster and Chuck D had once proclaimed, but preserving the property rights and financial streams that the industry and artists were always going to need in order to survive. By 2017, streaming (supported either by advertising or subscription) had become the primary source of music industry revenues in both the United States and Canada. The line between piracy and business has thus been set; property rights have been established; and the powerful players in what was once a new market have rules that support and sustain their interests Artists, meanwhile, became the industry’s most vocal advocates for property rights, as their income has noticeably declined over the last decade. They have demanded that the music industry needed to pay them for their creative content, and that the government needed to enforce these payment systems and the philosophy that underpins them. Both these developments are now well underway. At the industry level, streaming services charge for their music and enforce copyright laws. They track usage and compensate artists. Buying music has also become a norm, with consumers opting for paid streaming subscriptions and digital downloads. Digital revenues from these services aren’t huge, of course, but the principle of paying for music seems once again established. Governments everywhere have taken on the task of enforcing intellectual property rights in cyberspace. What seemed far-fetched and even impossible in 1995 is now commonplace. Canada is going through its own rule-making stage. The 2012 Copyright Modernization Act was the first comprehensive reform of copyright legislation in 15 years, and contained several key achievements that extended protections into the digital realm. Ottawa is in the midst of review of the Copyright Act, with the goal of fostering a marketplace that is transparent, promotes innovation, and access for users, and which supports creators in getting fair market value for their copyrighted content. What happens from here? Less excitement. Over the next few years, the formats and channels of distribution will certainly evolve again. But the underlying commitment to property rights and their enforcement is now firmly in place, until we see another truly radical shift in communications technology. The record labels haven’t been dismantled—for better or worse—and artists haven’t been able to claim a meaningfully larger chunk of the industry that one could argue is rightfully theirs. But those sorts of changes rarely happen, even during what feels like radical times. The online music industry will likely be regulated by a combination of private and public forces. Firms will set industry standards; governments will enforce them. This isn’t the future that Chuck D touted; it isn’t a world where music is free and artists are rich and record labels fade into commercial oblivion. It is, however, a world that aligns with what the political history of technology suggests. Markets need rules if they are to survive, and power flows to those who make the rules. Debora Spar is an author of numerous books, including 2001’s Ruling the Waves: Cycles of Invention, Chaos, and Wealth from the Compass to the Internet, and current Baker Foundation professor at Harvard Business School. The Hill Times

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Return to the era of rule-making

Amidst calls for regulation and enforcement, governments worldwide are reforming their copyright legislation to address the growing impact of digital-based services like Spotify and internet platforms like YouTube.

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