Piracy and Fair Use: Finding the Balance Between Copyright Owners And

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Piracy and Fair Use: Finding the Balance Between Copyright Owners and

Content Creators

Thesis

Narbekov Batyr-Zhantai

Submitted in Partial fulfillment

Of the Requirements for the degree of

Bachelor of Arts

Communication and Mass Media

State University of New York

Empire State College

2019

Reader: Todd Nesbitt Statutory Declaration / Čestné prohlášení

I, Narbekov Batyr-Zhantai, declare that the paper entitled:

Piracy and Fair Use, Finding the Balance Between Copyright Owners and Content Creators

was written by myself independently, using the sources and information listed in the list of references. I am aware that my work will be published in accordance with § 47b of Act No. 111/1998 Coll., On Higher Education Institutions, as amended, and in accordance with the valid publication guidelines for university graduate theses.

Prohlašuji, že jsem tuto práci vypracoval/a samostatně s použitím uvedené literatury a zdrojů informací. Jsem vědom/a, že moje práce bude zveřejněna v souladu s § 47b zákona č. 111/1998 Sb., o vysokých školách ve znění pozdějších předpisů, a v souladu s platnou Směrnicí o zveřejňování vysokoškolských závěrečných prací.

In Prague, 09.12.2019 Narbekov Batyr-Zhantai

Abstract

This paper focuses on the problem of digital piracy. It explores factors that contribute to it, and provides solutions based on the evidence found. Additionally, the paper discusses new media and copyright issues, particularly the application of the fair use doctrine. In order to find a balance between copyright owners and customers/content creators, the paper explores different dimensions of the problem and provides illustrations in the form of case studies. The paper concludes that possible tweaks in the current system could improve the situation drastically both for content creators and for the copyright owners.

Table of Contents

1. Introduction 5

2. Piracy 7

2.1 Brief History of Piracy 8

2.1.1 Early Attempts to Prevent Piracy 11

2.2 Piracy Today 12

2.3 Psychology Behind Piracy 12

2.4 Reasons for Piracy 14

2.4.1 Possible Solutions 15

2.4.1.1 Removing the Incentive 15

2.4.1.2 Subscription Service Model 16

3. Fair Use 18

3.1 YouTube 19

3.1.1 Let’s Plays 20

3.1.2 Nintendo’s Creators Program 22

3.2 Possible Solutions for Fair Use on YouTube 24

3.2.1 Lenz Case 24

3.2.2 Automatize Fair Use 25

4. Case Studies 27

4.1 Steam in Russia 27

4.2 Hosseinzadeh v. Klein Court Case 30

5. Conclusion 34

6. Bibliography 36

1. Introduction

The way we experience media has evolved quite a bit, especially in the past several years. As the technological progress goes further and further, the way we experience media changes with it.

However, even though the technological progress mostly benefits us in a positive way, some people are able to use the new technologies in order to abuse the law.

The word piracy in the modern age usually refers to an illegal action of copying a digitally distributed goods. Previously, it was “burning” movies/music/video games on the disc and then selling them, however with the development of technologies and internet piracy has evolved and came up to a different level. It became immensely hard to combat, and it is still growing with the newer technology such as VPN (Virtual Private Network). Some have noted that the laws that relate to media and intellectual property are quite outdated, as the new platforms such as

YouTube, Twitch etc. grow, perhaps this is the time where we need to take a second look at the current copyright laws and repurpose them in order to suit today’s media (Belleflamme & Peitz,

2014, p. 1).

Digital piracy is a major problem in today’s world and is one of the key things that hinder the development of the distribution of digital goods. Essentially, digital piracy, to be defined in an early chapter, is not an act of stealing as we know it, an act of digital piracy is a process during which a user creates a copy of a digital product e.g. software, music, video etc. and more often than not, uploads it to the internet. In order to properly understand the methods of digital piracy and the variety of tools that were created to fight it, it is quite important to look into the history of digital piracy. It is also important to follow the notions that were relevant during the early days of digital piracy and compare them to the modern ones, to see if there were any changes.

The psychology behind digital piracy, the possible reasons people would have that might force them to commit the act of piracy, are quite important to understand. The motivation of digital 5

pirates is useful to explore, in order to identify possible means to prevent those people from committing to piracy.

Fair use is a very large issue in the digital entertainment media as many major companies try to ignore fair use in an attempt to earn more money. For example, YouTube is notorious for its predatory practices that allow the copyright holders to claim the videos, essentially taking all the money from the creators, for using even the smallest sound effects/clips that are under their copyright, ignoring the fact that the creator is protected by the fair use doctrine.

This paper thus explores developments in information and communication technologies, which continue to impact the relevance and scope of copyright law in the United States. Some feel that businesses and organizations are profiting from content that could/should be protected by fair use policies. The aim of this paper is to examine how companies could protect their copyrighted materials without stifling the creative thought of people online.

To do this, the paper will look into the definitions of the important concepts that relate to the agenda of the research such as piracy, copyright and fair use. It will explore current media laws and try to find ways to adapt them to the modern age, explore the current existing tools to combat copyright infringements, and look into the problematic parts of the introduced concepts e.g. the effects and implications of piracy and reasons behind it etc.

2. Piracy

This chapter will explore the ever-changing world of piracy. It will look into the contemporary history of piracy and notions that were popular throughout time. Then the paper will explore the psychology behind piracy for the purpose of finding the reasons behind it. After identifying the reasons, the paper identifies possible solutions to the problem that are not involved with law.

Lastly the chapter explores how some of the larger companies adapted to the countries with a large piracy rate.

According to the Merriam-Webster dictionary, the definition of the word piracy is an

“unauthorized reproduction of another’s work” (“Piracy”, n.d.) With the development of technology, pirating has become an extremely simple way of obtaining a large variety of digital products, all you need is a working computer, an internet connection and, depending on the country you live in, a VPN (Virtual Private Network) service. Pirate services e.g. PirateBay,

Rutracker etc. use the peer-to-peer (P2P) technology in order to spread the downloaded goods in a fast and efficient manner using software such as BitTorrent, Gnutella, QBittorrent. P2P is a way to share files on a website without actually uploading anything on the website meaning that you do not waste server space, instead you allow other users to download the files directly from your device. As one could notice this is an extremely efficient way of sharing digital products and it is nearly impossible to track if users take proper means of precaution e.g. VPN. In the study conveyed by the Business Software Alliance (2016), around 40% of the software, installed on the computers around the world in 2015, was obtained through illegal means, or used without a proper license (Lee, Paek, Fenoff, 2018).

In order to properly assess the current state of digital piracy and understand it, it might be important to look through the contemporary history of piracy and the methods that are used during that period, in order to find any notions that were common throughout the history.

Intellectual Property

2.1 Brief History of Piracy

One of the earliest forms of piracy was Bootlegging. It was quite common even before personal computers were available. Bootlegs of records were widespread and would contain the recordings of live performances or compilations of music. People were releasing and selling counterfeit records, and when the open reel tape desks started to get more popular, even more people were starting to get involved in the record copying from radio to the tapes (Heylin, 2010).

With the development of technology personal computers slowly started to make their way onto the market in the late 1970s, the concept of software was very novel and nuanced, hence there was no established control nor legislation concerning it. Even though one could say that the protection of the software was quite similar to the protection of an intellectual property or a published entity (Craig, 2006).

When the cassette tape arrived on the market, it created a massive leap towards widespread piracy. Music now was easily copied on the tapes, and then distributed in the small format of the cassette tape. The early personal computers, such as Commodore64, Amstrad, the Commodore

Vic, used the cassettes as the storage device, which made pirating even easier. The pirate scene was flourishing as the cassettes were copied and swapped amongst people, mainly due to prices and the availability of the records in stores (De Beukelaer, 2016). The next big thing for the development of piracy was the floppy disk. Early on floppy disks would have 170KB of memory, but with the eventual development the storage would improve to a memory capacity of

1.44MB. Such development was followed by the new generation of personal computers, that would use floppy disks as its main storage standard. The most popular personal computer at that

time would be Amiga, in particular Amiga 500. Floppy disks were extremely widespread and were used to distribute copies of software and video games. (“What is a Floppy Disk? “, 2017)

In 1977 the VCR (Video Cassette Recorder) was released, and it was quite a major point in the history of piracy. People were predicting the end of the movie industry as it was due to the ease and availability of movie piracy. As in 1984 Sony won a landmark case, that established the fact that video recorder owners had the rights to tape film broadcasts on TV (SONY v. Universal City

Studios, 1984). On the other hand, the release of VCR helped to open a new market for sale and rental of films and videos, which was quite successful up until the late 2000s (“Video piracy was hardly a crime in 1982”, 2019).

As the technology developed further, the prices on computers and modems were going lower and lower. During those times something called BBS (Bulletin Board Systems) emerged. People on the BBSs would communicate, share and trade software and mail and trade floppy disks. BBSs would become a meeting place for young people, to exchange ideas. People were able to talk and find similar minded people in order to discuss unique and obscure topics. BBSs were extremely popular throughout the 80s, especially during the late part of the decade (Lee, n.d.)

As the computer piracy has reached extremely high levels, the music industry released a new system, the CD (Computer Disk). It had a much better quality than the cassette tapes, which were losing ground. However, early on copying on CDs was quite difficult due to the costs associated with it. CD writers were not widely available at the time. Pirated products were produced in large quantities and sold by the pirates who copied the popular titles. (De Beukelaer, 2016).

CDs were proven to be quite cost-effective and reliable, and were soon incorporated into the computer world. CDs had a massive advantage in storage over the floppy disks, and were replacing them in distribution of software. New personal computers rose in the markets, the

Macintosh and the PC. They were available on the market for quite some time, however were not

as popular up until the prices have gone down (“What is Piracy? Definition of Piracy, Piracy

Meaning.”, n.d.).

In the mid-90s, as the CDs were becoming more and more popular and the CD-writers were starting to appear in households, which led to another revolution in the world of piracy. The internet was finding a way to more and more households, and BSSs which were previously local meeting places started to shift to the internet and combine forces. Music and software was easily distributed through the inter net as at the time there were no real protection against piracy, there was no way to protect the contents of CDs from being copied and spread through the internet.

Software had some protection, however that did not stop people from breaking through, the so called “cracking groups” were appearing in order to “crack” the software’s protection (Craig,

2006). Internet had become more developed overtime and the groups of pirates were able to transfer larger amounts of data across the web, without relying on a physical object, and without need to mail or swap CDs of floppy disks (De Beukelaer, 2016).

Piracy at the time was extremely common and a large amount of people used pirated software on their computers without any repercussions. On the other hand, music piracy had another surge in its popularity, as a student named Shawn Fanning released Napster in July 1999. Napster was a program that allowed users to share music with each other. Napster was a huge phenomenon and was on the tip of everyone’s tongue, the amount of downloaded MP3’s was extremely high. In

February 2001, Napster peaked at 26.4 million users (Fusco, 2000). In fact, it became so large that the artist couldn’t ignore it, there were several lawsuits against it, a famous metal band

Metallica and a rap artist Dr. Dre filled a lawsuit against Napster, both of which were settled

(Metallica v. Napster, Inc., 2000). In 2000, American music recording company A&M Records along with several other recording companies sued Napster on grounds of contributory and vicarious copyright infringement under the US Digital Millennium Copyright Act (DMCA).

Napster lost the case (A&M Records, Inc v. Napster, Inc., 2001).

Napster would pave the way for many other similar programs, Napster was one of the first programs to use P2P (peer-to-peer) technology, which is still used by pirates to this day in software such as uTorrent, BitTorrent, AceStream Media etc.

The release of the DVD-writers (Digital Versatile Disk), opened a way to a new market of copying DVD-movies (“What is Piracy? Definition of Piracy, Piracy Meaning.”, n.d.).

2.1.1 Early Attempts to Prevent Piracy

During the late 1980’s and early 1990’s the main objective of anti-piracy movement was to inform people that piracy is wrong and committing the act of piracy was unlawful (SIIA, 2004).

Several software tried to spread the message by adding the slogan “piracy is theft” in the manual.

Video game publishing companies were adding the pamphlets in the video game packages, that informed people about possible legal consequences for copying and spreading the software illegally, and the detrimental influence of piracy on the whole industry. There were several campaigns whose aim was to raise awareness about the software piracy and the punishment for people that were caught. Some anti-piracy organization tried to introduce whistleblower systems, and get people to reveal the information about the people or organizations that were involved in mass piracy. They promised cash rewards if the pirates were caught (SIIA, 2004). Most of the arrests and prosecutions were against people who were selling pirated media and got caught. The internet has not yet evolved enough to be a good place to market yourself, so some pirates placed the adverts in the newspapers making them an easy target for the law enforcers.

2.2 Piracy Today

Piracy today mostly takes place on the internet, although in some countries people still sell bootleg DVDs with software, movies and music. As was mentioned previously, the most common way to pirate is to use the P2P technology, as it is the easiest, fastest and the safest way to download desirable media from the internet. As of right now there is no real way to prevent people from pirating, there were several attempts to ban the most popular torrent websites, but akin to hydra in Greek mythology, take down one site and it will be replaced by several others

(Russon, 2016). The biggest upside of the P2P technology for the pirates is that there is no way to completely destroy or takedown the shared media as it is not hosted on any server, but rather hosted on the user’s computer (Lee, Paek, Fenoff, 2018).

2.3 Psychology Behind Piracy

Piracy is a very interesting topic in terms of psychology behind it. In this subchapter the research will look through the motivations and possible negative or possible influences on pirates.

In a survey conducted by Microsoft (2008), a few teenagers were asked if they were less likely to obtain digital content through illegal means, if they were aware about the legal consequences that followed the act. The result Microsoft got was positive, teenagers were truly afraid of committing a crime. However, even though the survey results were positive, there are several other factors that need to be considered. Some argue that awareness of the risks that are connected to the digital piracy is enough to significantly reduce one’s likeliness to participate in digital piracy (Chiou, Cheng, & Huang, 2011). However, another study suggests that this method only works on people who pirate casually, and people who engage in a more serious forms of

piracy are not afraid as they do not believe that their actions could possibly result in a legal retaliation (Cox & Collins, 2014).

However, the survey does not represent the full picture, what is the relationship of morals and piracy. One’s moral attitude determines how likely they are to be involved in an unethical of criminal behavior. Generally, people who believe that piracy is unethical are less likely to participate in it (Alleyne, Soleyn, & Harris, 2015). However, a study suggests that even if a person holds a negative view towards piracy, they could still participate in it (Limayem, Khalifa,

& Chin, 2004). Often people defend themselves using neutralization, and saying that their action hold little harm towards the copyright owners (Hinduja, 2007; Ingram & Hinduja, 2008). They believe that their actions do not cause any significant damage, therefore there is no moral responsibility.

According to several studies conveyed by George Higgins having peers who participate in digital piracy, is directly connected with the person’s likeliness to participate in the act of piracy.

(Higgins, Fell, & Wilson, 2007; Higgins & Marcum, 2011; Marcum, Higgins, Wolfe, & Ricketts,

2011). For example, having peers who participate in digital piracy positively affects the likeliness of one’s participation in piracy, regardless of their view towards the actual act of piracy (Higgins et al., 2007; Marcum et al., 2011). The reason for these actions is simple, people who are engaged in digital piracy, share the knowledge about it through online and offline means of communication. (Hinduja & Ingram, 2009). A recent study suggests that interaction amongst peers is vitally important for one’s view on piracy and directly influences it, compared to other agents of socialization, e.g. parents, who only indirectly influence the likeliness of participation in digital piracy (Yang & Wang, 2015).

2.4 Reasons for Piracy

According to Gabe Newel in his interview on a conference in Seattle, there are three major and several minor reasons that make people pirate. First and the seemingly most important one is the lack of accessibility of a digital good. For example, making a service unavailable in a certain region e.g. Spotify in the post-Soviet countries, or making the purchase process unnecessarily overcomplicated (Bishop, 2011).

Another important reason is the pricing; some people simply cannot afford the digital product.

That is especially true when talking about third world countries, as the monthly income is terrifyingly low. Buying a product at the same price as people in the first world countries is not something most people can afford there.

Some people pirate because they see no value in a digital good. This is a large problem in the third world countries. Paying for something immaterial, that does not have an immediate value is quite a difficult concept to understand for some. The reason is simple, people are not used to pay for the product and not get a material object to possess. There is not much you can do about those type of people, as they are quite old fashioned and do not possess the technological knowledge required to reason a digital purchase .

A more minor reason is that some people want to try the product before purchasing it. To “test” it and see if they like it or not. This phenomenon mostly occurs in the video game industry and has been a major problem. The recent trend is that more and more companies start to offer a free demo of a game.

Some believe that giving their personal information to a digital store is not safe and refuse to buy products that require a user to log into the website (Larsson, Svensson, de Kaminski, 2012).

Another idea is that copyright laws limit the freedom of information. People who hold such views, believe that copyright laws should exist at all (Siponen et al., 2012).

Lastly, censorship is one of the reasons people pirate. For example, “Rocketman” an auto biopic of Elton John has been heavily censored in Russia, which forced some people, who wanted to get the full experience, to pirate (Golubev, 2019).

2.4.1 Possible Solutions

In order to combat the issues presented above, without resorting to legal attacks, the research will explore possible steps that could be taken.

2.4.1.1 Removing the Incentive.

In order to prevent digital piracy, companies should remove the incentive for the customers to look for the pirated product. This solution is demonstrated in the case study #1 in chapter 4, where the research looks at Valve’s digital store Steam and analyzes the steps taken by Valve in order to ensure a better customer experience.

The first step in removing the incentive is applying regional pricing. One of the largest problems is that a large percentage of people around the world do not have sufficient funds, in order to purchase digital products. Regional pricing is a relatively recent concept in the digital sphere, however it has been proven to be effective by several successful digital stores, e.g. Steam (as seen in Case study #1) (Newell, 2011). Their success influenced the industry and many digital

stores are starting to apply this concept, for example Apple’s Music subscription costs 9.99$ in the US, compared to 150 Rubles in Russia, which equates to roughly 2.5$.

The second step would be to ensure that your service is properly localized in the countries where it is available. A large amount of people do not speak any language except for their native one, and those people would be immensely hesitant to use the product that does not support their language. Moreover, when you talk about video games, there are quite a lot of companies that do not bother to localize them at all. There are a lot of fan translated games, that is the only option for people who want to get the full experience of the game, and in most cases those fan translations only available on the pirated copies of the game due to difficulties connected with the integrity of the game files.

Lastly, design of the service is also important. A service needs to provide a simple way of viewing and purchasing the product. If the design of the store is unnecessarily overcomplicated, the user might feel overwhelmed and might decide against the purchase of the product. The basic information about the product needs to be available and properly communicated to the user

(Newell, 2011).

2.4.1.2 Subscription Service

Another possible solution to the problem of piracy is the subscription service model. It is an interesting way of combining the pricing issues and the value of the digital products, since when you are paying for a subscription you pay for more than just a movie/album, but for an access to a whole library of media. The model itself was first pioneered in the 17th century by the publishers of books and periodicals (Clapp, 1931, as taken from Wikipedia). Instead of selling the products individually a subscription service offers an access to a variety of products on a

fixed fee. As was mentioned previously it is by no means a new concept, it has been around for quite a while, and has been used by television, music industry and even opera companies.

In the modern age, the subscription service has become an extremely popular trend in the digital entertainment industry. Various companies have tried this model e.g. Spotify, Netflix, Apple and even WWE. Judging by its popularity, it is a very successful model to employ. That raises the question is it good enough to prevent piracy? After researching some forums dedicated to piracy, the answer is not particularly clear. While the general consensus is that subscription services are very comfortable to use and are much better than searching and downloading movies/games/music illegally, there are several major concerns that some people have. First and foremost, by far the largest concern of the pirates is the separation of content among the platforms. A few years ago, Netflix was the subscription service to have, it offered a large variety of movies and shows to the customers, however ironically its success was to its own detriment as companies that saw the success Netflix was having, started to pull its content from the website and try to create their own analog of Netflix. Nowadays, you have Amazon Prime,

Netflix, Hulu, HBO Now, AppleTV+, Disney Plus and several other, and that leads to the second problem the price. If you want to enjoy the full experience and have most of the movies and TV- series available, the total cost in the US would estimate to roughly 90.91$ and even more outside of the US. It is comparable to the price of cable television. This situation leads to the loss of the original comfort, cheapness and accessibility of the service and only encourages people to pirate.

Now it is important to note that music industry does not have such problems as the competitors mostly use features to attract customers, e.g. Tidal, a music subscription service owned by Jay-Z, allows users to listen to hi-fidelity audio.

3. Fair Use

In this chapter the research will look into the Fair Use doctrine and its application in the new media, as well as the new types of entertainment that might or might not be protected by it. The research will discuss the already happening abuse of content creators on the new entertainment platforms and search for a compromise between the creators and the copyright owners.

According to the US Code of Laws the definition of fair use is:

“The fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.”

(Limitations on exclusive rights: Fair Use, 1992).

The United States Supreme Court states that four of these factors must be considered together for the purposes of copyright law when determining whether the use of copyrighted material constitutes fair use doctrine. “[A]s we apply copyright law, and the fair use doctrine in particular, we bear in mind its purpose to encourage “creative activity” for the public good.” (Video

Pipeline, Inc. v. Buena Vista Home Entm’t, Inc., 2003). 18

3.1 YouTube

Designed to protect the content creators, fair use doctrine often gets overlooked by the owners of the intellectual properties. The worst offender of this in the new media is YouTube.

YouTube is the largest video hosting website in the world. It was created back in 2005 by three ex PayPal employees, Chad Hurley, Steve Chen and Jawed Karim. A year later the platform was bought by Google and now operates as one of Google’s subsidiaries. As of May 2019 over 500 hours of video content uploaded to YouTube every minute. (Alexa, n.d.)

Originally, YouTube was a place for content creators to share their works and express themselves, however many users feel that as the time went by YouTube became more about the mainstream personalities e.g. Jimmy Falon. Original content creators are at constant risk on

YouTube, because their videos can be claimed which would allow the copyright holder to claim the earnings that were made by the video or even to remove the video from the platform. A large portion of the time, it is near impossible to remove the claim and confirm that your video is under the protection of the fair use doctrine, and the copyright claims can come from people who do not even have the rights to the intellectual property, in fact there are companies that abuse this system for money e.g. CollabDRM.

In order to comply with the Digital Millennium Copyright Act (DMCA), and avoid possible copyright liability, YouTube implemented “Content ID”, an automatic system that allow the copyright owner to remove, demonetize, or take the revenue from videos that allegedly contain the infringing material. A potential case of copyright infringement noticed by the Content ID triggers a copyright strike on behalf of the copyright owner. YouTube suspends the revenue that the uploader was earning from the infringing video. The uploader does not get a chance to defend themselves, regardless of how legitimate their claim is (“YouTube”, 2010). The ease of abuse of this system combined with the popularity of the Let’s plays, made the Let’s plays an 19

easy target for copyright owners to aggressively implement the Content ID system. As a result, thousands of LP videos fell victim to Content ID claims. (Tassi, 2013)

3.1.1 Let’s Plays and Fair Use

An example of the fair use doctrine is the let’s plays. Let’s plays are one of the ways to get to experience a video game without purchasing, it is an act of watching someone play through it for you. Completing a video game on YouTube is a relatively new trend that has risen in popularity during the past few years that is obviously particular to the gaming industry. There are several types of them, for example Speedrunning where the person playing the game tries to complete the game in the fastest way possible, eSports a more competitive environment where people watch players compete against each other, traditional Let’s plays etc.

Regardless of what type of let’s play are you watching, the basic concept is that a person posts or live streams the game on a video sharing platform such as YouTube or Twitch, where their followers can watch them play through the game and experience the game without paying for it.

That is not considered to be piracy per se and it is quite hard to define where does this concept falls in terms of legality, since if a developer wants to remove the full gameplay footage of their product they have the power to do so. Generally, most video game companies do not interfere in the livelihood of the content creators, however there are several large organizations that often try and prevent people from recording and posting full completion of their games, for example

Atlus. Such companies put restrictions on content that is allowed to be streamed and put up on

YouTube, “Simply put, we don’t want the experience to be spoiled for people who haven’t played the game. Our fans have waited years for the game to come out and we really want to make sure they can experience it fully as a totally new adventure.” (Advincula, Stebel, Nahin

2017). Or alternatively they force the content creators to give up a portion of the income they 20

make from the video to the company, which is not an ideal situation for the content creators. As was mentioned previously however, most companies in the video game industry are fine with this concept and some even encourage it by providing specific features to make streaming more comfortable and even sponsoring content creators on YouTube and Twitch to play their games, even the ones that previously used to be quite upset over their content being posted online. They do that because there are some benefits from it, essentially most developers look at this concept as a way to raise awareness about their game and build up anticipation for it, games released by smaller companies benefit from being featured on a large YouTube channel that is dedicated to video games.

A very recent example of the abuse of Content ID system happened to two users Kenzo and

ObbyRaidz, whose channels are dedicated to making videos about Minecraft (an extremely popular video game). Their YouTube channels are relatively small. Both of their channels received two copyright claims from a user named VengefulFlame. If a channel receives three copyright claims in three months it might be subject to termination (“An introduction to

YouTube policies”, n.d.). VengefulFlame contacted both users and told them that they have to pay him 150$ in order to get rid of the claims or else their channels will receive third claim and be terminated. ObbyRaidz went public on Twitter about the blackmail, which resulted in him getting the following message "Hey, we saw you tweet about us, not sure why you thought that was a good idea or if you thought you would remotely get any help, but this has violated any potential deal. Enjoy your third copyright strike." (Katowitz, 2019) User Kenzo also said that he received similar messages, and was asked to pay 600$ worth of bitcoin, and was told by

VengefulFlame that he was asked to put the claims by someone else. However, this time

YouTube decided to step in and resolved the strike, and terminated the channel, “These takedown notices were abusive, we have zero tolerance for the submission of fraudulent legal requests, so we also terminated the channels that submitted these,” tweeted from the official

YouTube Twitter account. This whole situation demonstrates just how flawed the currently implemented system is. (Katzowitz, 2019)

Moreover, the current environment of YouTube allows the companies to manipulate and even censor the opinions shared on YouTube. There have been several cases where a popular game review channel would be forced to take down a video, that contains a critique of a game, because they received a copyright strike from the company. The most recent example would be the

Batwoman Series, as many reviewers that gave the show negative ratings were hit with a copyright strike from the Warner Bros (Parker, 2019). This gives the companies that hold copyright a very large power over the discussions and opinions that are shared on the internet and might represent a future where the views that do not please the companies are completely curbed. The system allows companies to control content and skew the perception on their products.

Not only does this system endorse censorship, it also is a way for companies to directly profit from the content creators as was mentioned previously. This is detrimental to the creative though and could potentially prevent people from creating content in fear of possible copyright strike.

The current system is designed to appease to the copyright owners and does not comply with the fair use doctrine. An interesting example of the abuse of this system is the Nintendo’s Creators

Program.

3.1.2 Nintendo’s Creators Program

Previously, Nintendo was extremely against the idea of people posting videos that contained their games, and most of the time the user that posted such video would get demonetized or taken down, which is quite discouraging for the content creators. However, in order to appeal to

content creators Nintendo came up with the solution that in their opinion was fair to both their interests and the content creator’s interest, which was the creators program. Nintendo’s Creators

Program was an affiliate program for content creators on YouTube, that allowed people to put advertisements on videos that contained gameplay from Nintendo games (Nintendo Creators

Program, n.d.). Basically, it would work like this, a person who uploads a video containing footage of Nintendo games, must register the video on YouTube, alternatively they could register their entire channel. Both of those options do not seem bad from the first glance, however if one was to register their video in order to comply with this program, they would give up 40% of their advertising revenue from the video, if one was to register their whole channel they would give up

30% of their advertising revenue from the videos. If the creators do not comply with the rules, they are bound to face repercussions in copyright claims and even possible lawsuits. On top of that, according to Nintendo the rate might be changed abruptly, implying that they can manipulate the advertising revenue whenever they wanted (Nintendo Creators Program, n.d.).

Another detail is that people who register their videos under this program, would have to wait for up to three days for confirmation, which is quite a long time in the world of new media

(Nintendo Creators Program, n.d.). This could lead to a massive loss in views and revenue for example, if one was to upload a review of a game, in order to get the most views, they would want to be amongst the first ones to publish the video, with this program however, there is no guarantee that your video would be approved in time, which puts the uploader into jeopardy

(Hernandez, 2015).

The program was discontinued in December 2018 but, the fact that it was even allowed in the first place, highlights that the current policies employed by YouTube do not protect the creators and pander towards the copyright owners, even if the creators are protected by the fair use doctrine (Nintendo Creators Program, n.d.).

3.2 Possible Solutions for Fair Use on YouTube

The largest problem and the reason that the content creators feel threatened on the platform, is that there is no clear indication of how does fair use applies to the YouTube videos. There were cases in the past when a very short audio clip resulted in the whole video being demonetized.

YouTube needs to update their guidelines for creators and clear the possible misunderstandings that could happen between the service and the user.

3.2.1 Lenz

YouTube needs to communicate to the copyright owners to consider fair use. Example, the case of Lenz v. Universal Music Corp., Stephanie Lenz posted a short 29 second clip of her child dancing to Prince’s song “Let’s Go Crazy”, on YouTube. Universal Music Corporation sent

YouTube a notice to the video, claiming that the video infringed the copyright under the DMCA.

Stephanie argued that Universal abused the DMCA’s procedures by not considering that the video was protected by fair use. At that point Universal and Prince wanted to take down all the content that involved Prince from the internet. The district court stated that a copyright owner must consider fair use before issuing a DMCA take down notice, and denied Universal’s attempt to dismiss Lenz’s claims and declined to dismiss Lenz’s misrepresentation claim as a matter of law. (Lenz v. Universal Music Corp., 2015) The United States Court of Appeals for the Ninth

Circuit upheld fair use in this case asserting that copyright holders have a "duty to consider—in good faith and prior to sending a takedown notification—whether allegedly infringing material constitutes fair use" and "Because 17 U.S.C. § 107 created a type of non-infringing use, fair use is 'authorized by the law' and a copyright holder must consider the existence of fair use before

sending a takedown notification under § 512(c)." (Lenz v. Universal Music Corp., 2015) If a copyright owner does not consider such details before asserting ownership of the video, then they might be liable for nominal damages.

This case shows us that the copyright owners must at least consider fair use before issuing a claim of ownership on supposedly infringing video. By automatically assuming the ownership of the video, the Content ID system and previously Nintendo Creators Program, override judicial precedent set in the Lenz case. As of right now the copyright owners do not have to consider fair use before issuing a claim. YouTube needs to comply with the law and force copyright owners to consider fair use. On top of that, as was mentioned in the Lenz’s case malicious or frivolous copyright claims should carry a risk of punishment of damages. With such system, the risk of someone abusing the Contend ID system is much lower (Marfo, n.d.).

3.2.2 Automatize Fair-Use

Even though the Content ID system is not a fair system, it is somewhat of a necessary evil, as it helps YouTube to control content that breaches copyrights. However, the system in its current state is imperfect and is unbalanced in to the side of the copyright owners. A possible way of resolving this imbalance, is to include fair use into the system. As of right now the system does not take fair use into its functions. However, as the new media outlets continue to develop further and further, the amount of fair use cases will only increase, hence why the system needs to adapt as soon as possible. While a complete identification of the four fair use factors might be impossible, as it would be quite hard for it to identify context, some means would certainly improve the current situation on YouTube.

Automatizing fair use is a troublesome but important step as it would help a lot of creators with their content. The algorithms YouTube employs right now could be used in order to gather data and automatically analyze videos on whether or not they are protected by fair use. First and foremost, commercialization, YouTube algorithms can easily identify whether a video is monetized or not (Pietrobruno, 2018). Additionally, YouTube could allow the content makers to provide additional information during the upload of the video, for example allowing users to apply a fair use claim preemptively, or to add nuances, whether the video is a review, or a commentary etc. Such means would encourage users to create more content, and would motivate copyright owners to consider fair use, as was mentioned previously. Another possible way of using algorithms, is to analyze and identify the substantiality of the used material (Pietrobruno,

2018). Compiling such data would help YouTube establish proper denominations of exactly how much content is considered substantial and decide what amount of copyrighted content would be eligible for fair use protection. Lastly, YouTube already scans the audio part of the videos, they could scan the video and determine just how much original content is there compared to the copyrighted content. While such means are obviously imperfect, they would go a long way for the trust the content creators would have right now (Marfo, n.d.).

4. Case Studies

In order to demonstrate some of the solutions that were presented in this research, as well as to provide an example of a fair use case in the new media and the current precedent of the law on the matter.

Case study #1 Steam in Russia

Russia is a very interesting case when it comes to distribution of digital goods. While it is an extremely large country with the population of 144.5 millions of people, not many companies are willing to explore this market even to this day. That is mostly due to the fact that Russia is known for the rampant piracy. If you were to visit Russia in early 2000s you would see just how extreme the piracy was there, the kiosks that would sell bootleg DVDs and CDs, were everywhere, they would distribute videogames, films, music and software absolutely scot-free.

Obviously, now things somewhat changed, people selling bootlegs are not as brazen, and most of the piracy is happening online, as the internet has been steadily becoming more and more available. With the growth of the internet in Russia, digital piracy has been steadily growing, and while Russian government tried to combat it, for example they banned the larges torrent website

RuTracker, there is still no evidence of it working, as the supporters of the free net united and launched a campaign called “Битва за Рунет” which translates as battle for runet or Russian internet (“Битва за Рунет», n.d.). There is also a group of people who do not even realize that piracy is illegal, that group is mostly represented by the older generations that had no exposure to newer technologies and do not understand the concept of a digital product. Which is the reason why many try to avoid Russian market.

Steam is one of the largest digital video game stores in the world, it is developed by Valve. It was relatively successful when it first launched in 2003 in order to support and update Valve’s own games, however it grew larger as with time it became a hub for people to buy games, chat, share their achievements, play together and stream their progress. When Steam came to Russia everyone though that Valve were mad and that their business is not going to go well there,

Russia is notorious for the large amount of pirate content that gets shared there, as there is no real legal threat to people pirating. However, everyone was astonished to see Steam flourishing in Russia, so what was the reason for its success?

In an interview given to the website GeekWire, Gabe Newell the CEO of Valve confirmed that

Russia became one of the largest markets for Steam, and the second largest in Europe, “Russia now outside of Germany is our largest continental European market.” says Newell. While the interview is quite dated, it was published on October 23 2011, there is very little reason to believe that something would change negatively (Bishop, 2011).

First of all, Steam is a very accessible store, easy to download and install, it is well designed so that anyone can understand the interface and be able to use it. It is designed to encourage the customer to buy the newest releases, or games that went on sale. It is also a great place to discuss the games with other users and even talk with the developers of the said games. Steam is so well designed that some people create discussion forums for the games that are not distributed through Steam, but through some other services (e.g. Origins, Epic, Battle.net), since the said services do not provide the functional that steam has.

Secondly, localization – this is a very important and delicate detail that often gets overlooked by service providers, for example Netflix. "We are opposed when someone, with the help of the state's repressive machine, closes sites on which people spent years selecting and translating film

- often better than commercial translations that copyright owners offer us," Pavel Rassudov, chairman of the Piracy Party of Russia said (Rzhevkina, 2017). While the English

comprehension is not bad in Russia, it is still important to make sure that people are able to understand the basic functions of your service. Newell said “the people who are telling you that

Russians pirate everything are the people who wait six months to localize their product into

Russia” (Bishop 2011).

Thirdly, Steam uses regional pricing, what a lot of companies do not understand is that there is a drastic difference in the income between CIS and the Western countries, the salary of an average

Russian person in a period from 1990 to 2019 is about 13500 Rubles or if you were to convert it to the US dollar would be 211$ (“Russia Average Monthly Wages”, n.d.). According to Pavel

Rassudov companies often charge "unrealistic sums for digital copies." (Rzhevkina, 2017).

Trying to force the premium prices for the goods is not going to work in a region like that, people simply do not have enough money to buy a 60$ game as it is almost a quarter of their income. What Steam did is they converted the currency to the Russian Rubles and adjusted the prices to the Russian market, so a 60$ game would cost something about 2000 Rubles which is around 30$. This might sound unconvincing at the end of the day they are paying what essentially is half the price of the game. However, companies face a choice here, either they go through with the full price and get a small amount of sales in Russia, and most people will just pirate the game, or they can adjust the price and get more sales and incentivize people to purchase games in the future. This is what Gabe Newell had to say on pricing “Now we did something where we decided to look at price elasticity. Without making announcements, we varied the price of one of our products. We have Steam so we can watch user behavior in real time. That gives us a useful tool for making experiments which you can’t really do through a lot of other distribution mechanisms. What we saw was that pricing was perfectly elastic. In other words, our gross revenue would remain constant.” (Bishop 2011).

Another solution to the pricing issue were sales. Steam Sale is a very exciting part of the year for people who play video games on their computers, because an immensely large amount of games goes on sale. While this might not seem profitable, when Valve originally experimented with 29

sales they found that even though their game had a 75 percent price reduction, the gross revenue would increase by a factor of 40, which was completely unpredicted by them (Bishop 2011).

Lastly here is another quote from Gabe Newell, which sums up the issue quite well:

"We think there is a fundamental misconception about piracy. Piracy is almost always a service problem and not a pricing problem," he said. "If a pirate offers a product anywhere in the world,

24 x 7, purchasable from the convenience of your personal computer, and the legal provider says the product is region-locked, will come to your country 3 months after the US release, and can only be purchased at a brick and mortar store, then the pirate's service is more valuable." (Bishop

2011).

That way Steam ensured that people are able to understand what their service does and that people can afford to make purchases, which resulted in the massive success not only for Valve but for the industry as a whole.

Case Study #2

Ethan and Hila Klein versus Matt Hosseinzadeh (Fair Use case)

This particular case study is quite important for the future cases that will be based on the fair use application in the internet media.

This case is first of a kind, where the plaintiff Matt Hosseinzadeh went to court on the basis of copyright infringement on YouTube. This case could serve as an example of how the future possible cases would go down in court, as well as provide a precedent that if the content shared on YouTube abides by the fair use doctrine, it will get a favorable result in the court

(Hosseinzadeh v. Klein, 2017).

Ethan and Hilla Klein of H3H3 Productions are YouTubers, whose channel provides commentary over videos uploaded to YouTube or popular trends. Often their commentaries contain criticism or humor. Judging by the comments in their community most of their humor on the show is in good faith, however sometimes could cross the line. Matt Hosseinzadeh the owner of the channel Matt Hoss Zone, made a video called “Bold Guy vs Parkour Girl” back in 2013

(Hosseinzadeh, 2013). Several years later Ethan Klein featured that video on his show and provided critique and commentary over it, and Matt Hosseinzadeh was not happy with that.

Hosseinzadeh claimed that Klein’s video, which uses clips from his original video, is copyright infringing (Klein, 2017).

Before the case started, Hosseinzadeh’s lawyer sent the couple a message listing their demands.

Essentially, Hosseinzadeh wanted the video removed, a signed paper and a confidential agreement that confirmed that the couple will never infringe on his works and that they were to pay 3,750$ in legal fees.

The Kleins, refused to proceed with the demands, as they did not want to set a precedent for future cases where people like Hosseinzadeh are able to threaten content creators in such manner.

According to the video in which they announced that they are entering a legal battle with

Hosseinzadeh, they received a second offer saying they would not have to pay the fees if they apologized for infringing on Hosseinzadeh’s copyrights in a video, promote him on their social media for a couple of months, and share some of his videos (Klein, 2016).

In their video, the Kleins specified that during their good faith negotiations, Hosseinzadeh put a copyright claim on the video which had previously been privatized causing the Kleins to deal with the consequences of a copyright claim on their channel. According to the couple, the lawsuit could cost them to $100,000 and they could potentially lose since it will be left to a decision of the jury on whether or not they have infringed on the copyright of the video (Klein,

2016).

The video that infringed on the copyrights of Hosseinzadeh was shared on Reddit, one of the largest online communities. An interesting detail about this situation is that the first Reddit post with the video was deleted. The video was later reposted, however an interesting thing happened, where the user that uploaded the video was contacted and offered Bitcoins in exchange for the removal of the video. However, the account that offered the deal was later deleted, after claiming that the messages were fake. Interestingly enough, other uploads of the infringing video are up, but have not faced any repercussions (Klein, 2017).

Their community voiced several concerns and even offered to st art a fundraiser for the lawsuit in order to help Kleins with the costs. In their video Kleins thank the fans for the enthusiasm and support, but state that they are not interested in doing fundraisers at the moment (Klein, 2016).

Fortunately for Kleins, the judge decided in their favor. The basic legal question was whether the

Kleins’ creation of a reaction video that included clips of Hosseinzadeh’s content counts as fair use. In this case, Judge Katherine B. Forrest ruled that it does (Hosseinzadeh v. Klein, 2017).

“The key evidence in the record consists of the Klein and Hoss videos themselves,” Forrest wrote.

“Any review of the Klein video leaves no doubt that it constitutes critical commentary of the Hoss video; there is also no doubt that the Klein video is decidedly not a market substitute for the Hoss video. For these and the other reasons set forth below, defendants’ use of clips from the Hoss video constitutes fair use as a matter of law.” (Hosseinzadeh v. Klein, 2017).

Additionally, Forrest emphasized that this is not to be a default defense for all reaction videos. She noted that while some of these videos do contain commentary over the clips of someone else’s work, “others are more akin to a group viewing session without commentary.” “Accordingly, the

Court is not ruling here that all ‘reaction videos’ constitute fair use,” she stated (Hosseinzadeh v.

Klein, 2017).

Forrest also sided with the Kleins on Hosseinzadeh’s subsequent claim that they defamed him in a video about the lawsuit — she writes, “It is clear that defendants’ comments regarding the lawsuit are either non-actionable opinions or substantially true as a matter of law.” (Hosseinzadeh v. Klein,

2017).

5. Conclusion

The development of technology provides the human civilization with great benefits and means to improve and ease our lives. Unfortunately, that also means that some people will abuse the new technologies in order to break the law. While developing protective means against piracy has had some results in the past, it always comes with some downsides for example Denuvo, an anti- tamper technology used in video games, sometimes forces the user to be online in order to launch the game, which can lead to some inconveniences. (Hoffman, 2018) Most of the time, however such means are easily overcome by pirates, at best preventing them from “cracking” the game in the first few weeks, and that is in the best case scenario. Even the director of the company behind

Denuvo admits it, "Our goal, and it's still the goal, is to protect initial sales," says Fischer. "Of course we would like to have it uncracked forever, but that just doesn't happen in the games industry." (Taylor, 2018). Such examples might show us that maybe entertainment companies should try to employ some alternative strategies, examples of which were presented in this research.

In my personal opinion, the issue of piracy will never truly be solved, meaning that even in the best possible scenario there will still be people who pirate their media. While looking through the forums dedicated for piracy (e.g. reddit.com/r/piracy) in the purposes of this research, I have found that there are quite a few people who enjoy the process of piracy, others simply find it easier to access if the product is downloaded on their device and is constantly available for their use. There is a belief that a pirated copy is a loss of a sale amongst the companies which is not necessarily true. If one was to pirate a video game, but the game was not available for pirating due to protection (e.g. Denuvo), that does not mean that one will buy it, most probably the person in the example will ignore the game and download another one that is available for pirating. I base this example on my own experiences and the feedback I saw on the forums. I believe that focusing on the protection against piracy is not the right way as at the moment it is impossible to fully protect a

product against pirates. What companies should focus on, is the quality of their services, their business models, pricing and the availability of their services.

Additionally, the laws need to catch up to the speed of the new media and its development. The current state of fair use on the new media platforms such as YouTube and Twitch, is in a questionable position, and is unfair to both the content creators and the copyright owners. There are few serious steps that were discussed in this research that could provide a temporary solution and improve the current situation. In my opinion, any major video hosting website needs to set the rules straight, both for the creators and the copyright owners. The current system suffers too much because of how vague the rules are, especially on YouTube. The result is that both sides suffer, the content creators get copyright claims to their content, and the copyright owners’ content is often used without fair use protection but, never detected by YouTube. The situation needs to change, as many people get their careers ruined because of the wrong copyright claims.

The solutions discussed in this research is just a start of the conversation.

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