As some of you may know, I again will be moderating the Global Forum at Canadian Music Week this year. They keynote speakers I will introduce will be Chris Ruen, author of Freeloading: How our insatiable hunger for free content starves creativity, and David Lowery, the founder of Cracker and Camper Van Beethovan and editor of The Trichordist. The topic of the keynotes as well as the famous structured table discussions among the 200+ worldwide industry leaders will be brand sponsored piracy.
The New York Times coverage today of how brands sponsor piracy is timely, largely on target and will provide us with further supporting documentation for answering what I perceive to be one of the central questions in the corrupt “unholy alliance” among brands, ad agencies, ad networks, search engines and thieves:
If the brands don’t stop funneling money to sites they know are unauthorized, should artists assume that’s because the brand wants to associate their brands with theft?
The Google Hot 1000 Piracy Chart
The Times does an excellent job of pointing out that the issue is not whether these pirate sites are adjudicated infringers, the point is that brands are buying advertising inventory from sites that score high on Google’s own “transparency report”–you know, the Google report that (a) Google says itself is 97% accurate, (b) does not include YouTube or Blogger, the cyberlocker mirror link site haven, and (c) does not include the bottom 10,000+ small pirate sites that Google lets sign up for ad syndication without verifying their identity.
In order to score high on the Transparency Report–not to mention the USTR’s List of Notorious Market websites–the bad guy has to be pretty bad and attract tens of thousands of DMCA notices on a weekly basis–remember, Google gets three million notices a week for search alone. And before the organized wailing swells up, remember that Google acknowledges that these notices are 97% accurate.
And of course these notices don’t count the artists who don’t know, can’t afford them, or have submitted to Google justice also known as the ennui of learned helplessness.
It’s Only Whack A Mole if It’s Not Your Mole
So one point that the Times did not make quite forcefully enough is that when it comes to brand sponsored piracy, the old “whack a mole” argument doesn’t really work very well. Those present at a Beverly Hills Bar Association lunch in 2006 will remember the despicably memorable quote from Google’s Zahava Levine–do you want to play whack a mole with DMCA notices on YouTube or make some money? The old notice and shakedown game.
That line of thinking doesn’t work with brand sponsored piracy nearly as well as it does with user generated content (and only works well there if you don’t question how the UGC got into the hybrid economy in the first place). No, you can’t really talk about whacking a mole when you control the mole.
The issue here is not that pirate sites kind of spring up and disappear. Many of the worst offenders have been the worst offenders for years. That’s why they have a high Alexa ranking. And the reason these worst offenders sell their advertising inventory to major brands is because they have a high Alexa ranking and offer the same–albeit illegal–product to their users as the legitimate sites who struggle to find an audience.
It’s not hard to compete with free, it’s hard to compete with free that’s backed by Madison Avenue
The one point that not even Google is willing to lie about is that the brands do fund pirate sites. Google may dance around this issue, but they don’t deny it. I’d suggest that’s because they know they can’t, and since they’re not even willing to lie about it, it’s because the proof is in their servers to such a great extent that they can’t destroy it or they risk bringing down their entire system. Which suggests to me that the proof to prosecute Google is generated every second of every day.
So when you take into account the vastness of this financial support for theft–and the Times does a good job of conveying this excuse–it leads to the conclusion that someone has something to hide. Something big.
Because what they have wanted you to believe all these years is that the problem that the music business has is that we can’t compete with free. We were never competing with free and still aren’t. We are competing with Madison Avenue who is backing the bad guys.
Google Hides in the Cracks
“To grossly overcalculate our network, you’re also grossly overcalculating how many of these sites we are funding,” said Andrea Faville, a Google spokeswoman. Mitch Stoltz, a staff lawyer at the [Google backed] Electronic Frontier Foundation, was more aggressive, calling the U.S.C. report “a little bit of analysis resting on false premises.”
Note–the Google rep says “grossly overcalculating how many of these sites we are funding.” That’s a big difference from saying we don’t fund any. (David Lowery has an excellent analysis of Google’s obfuscation tactics here.) And of course, EFF says “Me, too!”
If you remember Google’s now famous sophistry in response to the first of the monthly reports from USC-Annenberg:
“To the extent [the study] suggests that Google ads are a major source of funds for major pirate sites, we believe it is mistaken,” a Google spokesperson said.
Ah…kind of like “grossly overcalculating how many of these sites we are funding”. It’s not that they aren’t funding any, it’s that the Annenberg folks counted too many. So if they are not a major source of funding for major pirate sites, are they a minor source of funding for major pirate sites or a major source of funding for minor pirate sites? Don’t think this is an overly legalistic parsing of the language because trust me, these statements must have been picked over by Google’s lawyers–like every other public statement of the company.
Yahoo’s statement is even better:
“[Yahoo! ad exchange] Right Media has long standing policies of prohibiting certain types of content and behavior from our Exchange, as part of our commitment to creating a safe and healthy marketplace for our customers and their end users. Our customers are contractually obligated to comply with our Exchange policies, which specifically prohibit introducing content that appears to promote unauthorized use or reproduction of material that is covered by copyright law. We take several active steps to enforce this policy using a combination of targeting technology and human intervention to locate, isolate and eliminate suspect sites. Once we detect sites that violate Exchange Policies, we block them from receiving ads via the Exchange immediately. When we are notified about ads serving via the Right Media Exchange on sites that violate laws or Exchange Policies, we investigate and block the sites as appropriate.”
Which boils down to the usual “catch me if you can”. And if they are caught they have policies and contracts. But what does Yahoo! actually do to stop ads appearing where Yahoo! are not authorized to put them before Yahoo! is caught?
My bet? Nothing whatsoever. Aside from bank the money, of course.
What Does Brand Supported Piracy Have to Do With Unfunded Pension Liability?
How much money are we talking about here? That’s of course instantly knowable by reviewing the relevant IRS Form 1099s that these ad exchanges send out to the pirate sites. But since that little piece of information does not appear to be forthcoming, here’s a guess. MTP readers will remember the $500 million that Google paid to keep its executives from being indicted in Rhode Island for violations of the Controlled Substances Act. That’s one relatively small category of illegal advertising–it boggles the mind to think how much money these ad exchanges make from selling ads on illegal sites.
What isn’t quite so obvious is that the State of Rhode Island got $230 million of that settlement. Remember–it was not the Justice Department in Washington that brought the case against Google–it was the US Attorney for Rhode Island, and the money was paid in large part to the State of Rhode Island. That goes a long way to giving the state and cities involved some relief from expenses and helps to offset their liabilities in defined benefit pension plans.
So we have to commend the New York Times for shedding light on this important story and helping to get the word out that not only the federal government but the states also benefit when brands are forced to pay the piper.
Let the Market Work
The one point that I think the Times needs to rethink is this business about a blacklist. You can bet that anything the advertising groups suggest is designed to create a rabbit hole, and a “black list” is just such a rabbit hole. The fact is that everyone involved–as you can see from Yahoo!’s statement–has contracts that prohibit the behavior.
All that needs to be done is that the contracts be enforced. Private agreements, no government action required–although the government may find other crimes being committed as did the US Attorney for Rhode Island in the Google drugs case. Money laundering and human trafficking come to mind, not to mention potential RICO claims.
But what is happening now is that the market is producing information that brands are getting sucked into the role of the paymaster of criminals.
What the brands do with that information will tell us a lot about who they are.