Earlier
this year police swooped on Megaupload founder Kim Dotcom and his buddies in a
sleepy suburb north of Auckland. The high profile raid elevated Dotcom from
obscurity to a celebrity status within New Zealand normally reserved for
professional athletes, teleprompted news readers and reality television
personalities.
Kim
Dotcom and his cohorts were operating what they called a
“cyberlocker” site, a private data storage provider. What they were
actually doing is a little unclear. His legal team would say he’s operating
some sort of safety deposit box. Prosecutors would say he’s operating a digital
crack house. The truth is probably somewhere in between.
A Grand
Jury indictment filed in February claims that the Megaupload site had 66.6
million registered users as of January 2012. Just under ten percent of these users had
ever uploaded a single file. This suggests that most people used the site only
to download material.
Current
media headlines on this case appear to be dominated by an inquiry into unlawful
surveillance by the Government Communications Security Bureau (GSCB) and the
legal twists and turns inherent in extraditing Dotcom to the United States to
face the music there.
Mega rumour
There
are rumours of yet another file sharing site that will allow content owners to
monetise digital content. In an article on weblog TorrentFreak last year, Kim Dotcom
referred to his new music venture “Megabox.com, a site that will soon allow
artists to sell their creations direct to consumers and allowing artists to
keep 90 percent of earnings”.
Details
of the new service are still a little sketchy. Will it provide the benefits to New
Zealand artists that the hype would suggest? Will it face the same legal
challenges as Megaupload? There are a few issues artists need to consider
before signing up for the service.
Putting
the dinosaurs out of business
This
model claims to take a different approach to major record labels like Universal
Music Group (UMG), Sony Music Entertainment, Warner Music Group and EMI Group.
According
to Dotcom associate Swizz Beatz, the
“[music]labels wouldn’t be taking the lion’s share of the revenue as they do
now – Megabox would take ten percent and the remaining 90 percent would go to the artists.
That leaves zero percent for the suited middle men and as the theory goes, they were very
unhappy about that.”
The
plan is to give consumers free access to music, financed through the use of an
advertising browser plug-in. Dotcom spoke of a “Megakey that will allow artists
to earn income from users who download music for free. Yes that’s right, we
will pay artists even for free downloads.”
http://www.youtube.com/watch?v=Kw04ckfO-yARevenue
will come from the Megakey application that users have to install. The Megakey will
work like an advertisement blocker. Instead of blocking ads it will replace some
of these ads with advertising content selected by Megabox. Some users will not
want to download the Megakey application. It is anticipated that those users
will have the option to buy the music instead.
This
year we have seen many announcements about Dotcom and his associates. Megabox
appears to have taken a backseat. Its would-be founder has had almost all his
assets frozen while he defends extradition to the United States to face copyright
infringement, racketeering and money laundering charges.
Despite
all the events that have occurred this year, there still seems to be a plan to
bring Megabox to life . Earlier this year, Megaupload founder Kim Dotcom
announced that “The major Record Labels thought Megabox is dead. Artists
rejoice. It is coming and it will unchain you”.
Back to
basics
The
property rights involved in these transactions are fairly straightforward. Copyright
is a property right that exists in original works. A
typical music file in a WAV, AIFF or MP3 file format will include not one but
three different copyright works. The New Zealand Copyright Act 1994 recognises
the music as a musical work, the lyrics as a literary work and the recording
itself as a sound recording.
It is
generally up to the copyright owner (the artist or the record label) to take
action against unauthorised copying, issuing of works to the public or
performance in public.
Learning
from others
It is
good to learn from your own mistakes. It is perhaps even better to learn from
the mistakes of others. There
are many file sharing sites that allow content owners to monetise digital
content. These include SoundCloud,
Spotify,
Rhapsody and Pandora. Without exception they
come with terms of use. With few exceptions, these terms of use are not read by
their users.
Artists
signing up for a file sharing site like MegaBox should look carefully at the
rights they are giving up. For example, the Terms of Use for SoundCloud have the artist granting a worldwide, non-exclusive and royalty
free licence to SoundCloud and other users of SoundCloud. The licence also
extends to users of any other websites, apps and/or platforms to which the
artist’s content has been shared or embedded.
There
is a risk that it is the owners of the file sharing site themselves that are
carrying out unauthorised acts. In the case of Megaupload for example, a Grand
Jury Indictment filed Jan 5, 2012, alleges that members of the “Mega
Conspiracy” themselves wilfully reproduced and distributed infringing
copies of copyrighted works using computer servers controlled by the
Conspiracy. Artists should be aware of this before authorising such activity.
Another
trap for the unwary is to place too much reliance on a file sharing site
keeping content safe. There are legitimate users who have lost content that did
not infringe copyright. There is the
case of the high school sports reporter and Megaupload customer who is taking
court action to get his content back.
Honest users are sometimes penalised for the actions of other users.
While
court action is always available, it is more prudent for artists to keep
backups of their content. It is certainly more cost-effective, particularly
when a New Zealand artist is faced with the prospect of litigation in the
United States to retrieve content.
File
sharing sites are best treated as file sharing sites rather than archives.
SoundCloud in its Terms and Conditions warns that the content of users whose account has been terminated or cancelled
will be deleted. In fact, SoundCloud reserves the right to block, remove or
delete content at any time for any reason and without liability.
Watch
this space
New
Zealand artists may welcome another platform on which to promote their work.
Let’s hope that those signing up for the service are better off for the
experience. Time will tell. Or rather, as Swizz Beatz puts it: “But my thing is
like, time will tell everything, you know what I’m saying? People will see
what’s what, who’s who.”
- Matt
Adams is a partner at AJ Park
