Tuesday, August 6, 2013

The Days of the Statutory License Are Numbered

Despite the key recommendation of the Australian Law Review Commission in its Discussion Paper, the Statutory License won't be repealed by a future parliament, but it may well fade away. User bodies will in all probability not sign up for further terms or exercise their right to terminate.

As the Copyright Agency correctly points out in its recent submission responding to the ALRC's paper, users, unlike owners, have always been able to opt out of the license and either seek permission for copies they make (beyond fair dealing exceptions) or sign voluntary licenses with individual publishers or even Copyright Agency itself.

For this reason, and also because politicians always melt in the face of concerted opposition from authors and publishers preaching culture and enlightenment, the statutory license will never be legislatively repealed.

But voluntary licenses are the future and the statutory license is coming to an end.

Publishers are antagonistic to the ALRC's recommendation to repeal it and this is understandable, but they invest it with too much significance.

The industry needs to take up the challenge of negotiating voluntary licenses with schools and universities, combining print and digital. This is clearly what the customers want. The statutory license is yesterday's business model based on yesterday's photocopying technology. 

In one real sense the demise of this license should be embraced by publishers, not resisted, because while ever it exists primary relationships with customers via contracts will never have the opportunity to take root and flourish. The more innovative and entrepreneurial publishers will welcome the more competitive landscape.

Despite the years of enriching revenue flows it's time for the industry to wean itself off this print-based one-size-fits-all license
. It's deadening it to the possibilities of the future. Sure, revenues will very likely drop in the short to medium term. That's a transitional cost that can't be avoided.

Textbooks are a dying business and everybody knows it. Within possibly five but certainly ten years print will no longer be a major delivery platform. Tertiary texts will die first, then Secondary, then most of the various types of print in Primary. So if over 90% of license revenues currently come from photocopying that is going to radically change.

The educational publishing industry is on the cusp of an extremely disruptive digital revolution that will dwarf what's happening in the trade sector with regard to ebooks. 

The next five or so years will see most educational publishers sign tailored subscription-based licenses with tertiary institutions and premium school customers. They will have the option of using newly developed Copyright Agency voluntary licenses for the rest if that makes sense.

Under these emerging business models publishers will have the freedom to offer comprehensive content offerings - primarily digital but inclusive of print. And the schools will demand liberal free use provisions as part of the deal, particularly involving content distribution in the classroom. Remunerable 'multiple copying' will be a thing of the past and the concept itself deemed quaint. 

Such arrangements are the mainstream future. As content goes digital, primary exploitations (formerly sales of books) and subsidiary 'bits and pieces' (eg photocopying) will collapse into comprehensive content offerings via licenses. 

Despite the claims of some publishers, it is simply not the case that voluntary licensing, either directly with individual publishers or via Copyright Agency, would be too burdensome and involve schools keeping onerous records of each and every copying instance. Sampling across sectors would still happen if parties agreed, and thus the schools' experience of Copyright Agency's voluntary license would be exactly that of the stat license. Of course direct licenses with publishers would require separate administration, but both parties would be aware of the need to keep it simple.

Only a handful of the publisher or author submissions to the ALRC  
intellectually grapple with the concept of a voluntary license and how it would work. (How ironic this is considering that when the stat license was first proposed in the mid 70's content owners and an embryonic CAL objected. They pushed for a voluntary licensing regime on the basis that content owners' property should not be expropriated by the state). Such licenses are the main game in the US, the UK, Canada, and many other jurisdictions.

You only have to read the very detailed submissions from the school and university sectors on their experience - highly frustrating - of the stat license in operation to appreciate where the customers are coming from. And customers should never be ignored. Copyright Agency accuses them of misunderstanding how the license works, which I find extraordinary given the nearly thirty years of experience they've had with it.

Publishers have far more to fear than the end of this license. On the horizon, if parliament enacts the ALRC's Fair Use recommendations, which they surely will, are future liberal judicial interpretations which could wipe out huge swathes of income from educational licenses. The stat licence now delivers close to $100 million per year to the industry. This will be more than halved. (Canada in comparison delivered $23 million in 2011  before the liberalisation of their copyright regime last year). No-one can argue that copyright owners haven't had it good in Australia over the last 30 years due to our unique statutory license and the huge success of a smart and aggressive collecting society, CAL.

But now the tide is now turning. Digital is upending everything. The best thing publishers can do is look to the future, not try to preserve the past. While revenues might decline profits will hold up as bookseller discounts and all the substantial costs associated with the legacy of print are eliminated. 

Such is the universal logic of digital.