Blog Post

What's Coming In 2012: The Content Industry Strikes Back

This is the fourth in a series of posts this week that will highlight key people, companies and trends to watch in 2012 in the sectors we cover most, from publishing to legal, and from mobile to advertising.

Every so often, a major rule change alters how a game is played — think of basketball’s introduction of the shot clock or MLB’s decision to lower the pitcher’s mound. Next year, content owners will keep pushing to obtain a game-changing rule of their own, one they hope will shift the laws governing the digital economy in their favor. Here’s an overview plus more of what’s happening on the legal front in 2012.

SOPA and the Siege on Safe Harbors

The online content industry is shaped by a 1998 set of rules called the DMCA that is supposed to strike a balance between protecting intellectual property and encouraging online commerce and creativity. But content owners say the balance has become unfair and that other players in the digital space — web hosts, search companies, payment processors, etc — should assume more responsibility in protecting brands and IP rights.

In 2011, content owners took a double-barreled approach to changing the balance. This involved pursuing court appeals to erode so-called ‘safe harbors’ while at the same time attempting to push through a new law called the Stop Online Piracy Act that would effectively tear up the 1998 rules. The content owners came up short this December after opponents bottled SOPA up in committee and a California court confirmed that video-sharing site Veoh did not have to actively police its users.

But 2011 was just the opening act. Content owners are also placing their hopes on the ongoing YouTube-Viacom (NYSE: VIA) appeal (a decision is expected any day) that has the potential to tee up an eventual Supreme Court review of how different businesses must police unauthorized online content. As for SOPA, the bill’s bipartisan backing is eroding quickly in response to warnings from both liberal and conservative thought leaders about its potential consequences. But SOPA supporters have vowed they will pass it all the same in early 2012.

The bottom line is that content owners appear determined to deploy major dollars both in Congress and in the courts this year until they can bend existing safe harbor rules in their favor.

Content Owners Get the Upper Hand in the File-Sharing Fight

Consumers’ desire to share content over the internet has already produced more than a decade of bitter and largely futile lawsuits. In 2011, however, content owners made a number of tactical shifts that has allowed them to sue more people and extract more settlements.

A key turning point was the quiet decision by internet service providers last summer to begin cooperating with studios and publishers in identifying file-sharers. This coincided with some ISPs sending $10 legal settlement offers on behalf of music companies. The process has been aided by the growing role of companies that supply right holders with automated enforcement services.

Content owners have also been using more “John Doe” suits to sue dozens or hundreds of defendants at the same time. The cases, which list “John Doe” as the defendant, permit plaintiffs to file a single lawsuit and then extract settlements from numerous people. The lawsuits are especially popular with the pornography industry which has led critics to say the suits are a form of blackmail (ie ‘pay up or we’ll put your name on the porn complaint’) and some judges to reject them. But other industries, including book publishers, are embracing the John Doe tactic and the number of these suits appears to be increasing.

These technical and legal tactics mean 2012 is likely to produce fewer headline grabbing lawsuits a la Jammie Thomas and a growing number of smaller, behind the scenes settlement agreements. (This doesn’t mean that the country’s copyright laws are any less dysfunctional — just that the file-sharing fight has taken on a different timbre.)

The Year America Gets Serious about Privacy?

The United States is unlike nearly every other Western company in that it doesn’t have cohesive national laws for protecting citizens’ personal data. There are two reasons this may start to change in 2012.

The first is Facebook’s impending IPO. The planned $10 billion event will bring not just investor hoopla but new scrutiny of how the company makes its money — selling ads based on knowledge of its users’ personal lives. At the same time, the company will likely face more court rulings like the one this month that suggested Facebook can’t used its customers to endorse products without obtaining their permission. Although Facebook is hardly the only company to use such marketing tactics, its prominence means its IPO will have a symbolic importance in the privacy debate.

The other turning point for privacy could come in the form of the Federal Trade Commission. The agency became unusually assertive over privacy in 2011, slapping 20-year audits on both Facebook and Google (NSDQ: GOOG). Even though the FTC is not designed to address privacy issues (its power are based on the ability to stop “unfair and deceptive” trade practices), the agency’s high profile activities are leading it to resemble the national privacy organizations like those found in other countries.

Read the rest of the posts in our Coming in 2012 archives.