Why the Penguin Random House acquisition of Simon and Schuster would be a disaster for the book industry:

 

1) With close to 50% market share, the power PRHSS would have to fundamentally change the character of the book industry would be immense.

2) While the arguments in the court case in the US are focused on major authors and royalty advances, a more profound and revolutionary change could be quite possible.

3) The company could decide to bypass retail bookstores and sell exclusively online, direct to readers. Discounts to wholesalers and booksellers would be eliminated. The great majority of bookshops would disappear overnight. 

4) Specialist library suppliers would be an exception.

5) PRHSS could gain significant competitive advantages from such a radical move. By eliminating the costs of retail distribution (close to 45% of gross revenues) they would be able to lower book prices to consumers, pay higher author royalties, and add significantly to their profitability.   

6) Of course they would need to invest heavily in improved online customer search and ordering processes, and warehouse and delivery systems, in order to cope with the additional demand, but publishers are needing to do much of this now anyway. 

7)  For book buyers the major negative would be the elimination of the joy and advantage of browsing, attending launches and author events, and conversing with experienced booksellers. 

8) Even though the rapid growth of online shopping is effecting virtually all industries, giving power to one publisher to fundamentally undermine retail bookstores would be disastrous.  

The Australian Publishers Association's Response to the Exposure Draft Copyright Amendment Bill 2021

 

The APA has just publicly released its submission to the government's reform proposals.

All submissions were due by February 25 but only the APA's has been made public so far. 

It was written by Stuart Glover and the only good thing about it is that it is very lucid and accessible. Stuart has always been able to write.

Unfortunately however, its content is really, really, and so predictably, bad! 

I am reminded of the American author Upton Sinclair's famous observation: 'You cannot expect a man to understand something if his salary depends on his not understanding it'.

I am a living testament that deeper, balanced, and fact-based perspectives only rise to consciousness after a corporate has been freed from working for the Man! 

The submission is banal, whiny, timid in the extreme, and, importantly, it utterly refuses to engage at all with the concept of user rights. In fact its cynicism and contempt is laid bare. It refers to user rights as user 'rights'.

It just rejects every sensible and justifiable reform suggested by the government, no matter how minor and incidental. And it makes absolutely no attempt to quantify the financial losses publishers would suffer if they were enacted. 

Let me quote some words and phrases that are liberally sprinkled throughout: 

the drift in copyright law towards expanding 'rights' for users; interprets 'access' to mean free access; 'gifting' libraries new rights; substantial impact on educational publisher revenues; the government and schools may save 'nickels and dimes', but revenue cuts to publishers will eventually suppress the extent and diversity of the materials that are available; the 'reforms' as drafted do not appear to repair any real gaps of access; the draft threatens to undermine; unintended back-door access; libraries would be gifted a right which would see them act as a publisher; (The quotation marks, and there are many, are in the submission). 

The APA calls on 'the Minister and Government to 'park' this exposure draft and to involve creators and industry directly on redrafting...' (As if major consultation hasn't happened over the last decade or so, and as if the Australian Law Reform Commission, the Productivity Commission, and this long enquiry process itself hasn't given every entity and individual the ample opportunity to inform the government of their views). 

There is not one suggested reform, no matter how minor, that the APA doesn't oppose. It just wants nothing to change at all, just in case one dollar of revenue may be foregone. Frankly I find it shameful, not to say embarrassing. 

It also continually suggests that the user communities just don't live in the 'real world'! They know little about commercial operations and challenges. This palaver disguises the publishers' own ignorance of customer usage in the real world, and the pettifogging analogue restrictions that are now so cumbersome.

After reading this submission I re-read the government's Exposure Draft to see whether I'd missed stuff the APA was concerned about, but I found absolutely nothing. I was again impressed by how solid, sensible and fair it was. Sure, the Copyright Agency will suffer an annual revenue loss (probably around $12-15m), but in the scheme of things that would be a minor hit to individual publishers. The Agency's annual revenues are now around $150m. 

I can just imagine how the departmental staff who wrote the Draft will react to this submission. 'God, are they serious?' they will say. 'They're just bloodsuckers, and they have no idea about their customers, much less any care for them'. 

My response to the Copyright Modernisation Consultation Paper (rather wonkish I'm afraid)

The Department of Communications and the Arts has called for submissions from interested parties to inform its advice to the government on three major issues relating to the proposed reform of Australia's Copyright Act.

This is my submission:

    RESPONSE TO COPYRIGHT MODERNISATION CONSULTATION PAPER

FLEXIBLE EXCEPTIONS – QUESTIONS 1, 2.

I am in favour of Fair Use.

However, I recognise that there is considerable opposition to this option in local content creation industries, which may unfortunately mean that Australia will be denied the benefits of this long overdue reform to our copyright regime.

If all we end up getting is the second best option of a further evolution in our list of Fair Dealing exceptions, then I support the inclusion of the seven new prescribed purposes outlined in the Consultation Paper (page 10):

      

quotation, non-commercial private use, incidental or technical use, text and data mining, library and archive use, certain educational uses, certain government uses.

The problem with a more comprehensive list of prescribed exceptions is that the issues surrounding interpretation and definition are significantly magnified. Factors of fairness and reasonableness in specific cases take a back seat. What, for example, does ‘substantial’ mean when it comes to a quotation? Would the Down Under four bar homage to Kookaburra Sits in the Old Gum Tree still be judged an infringement? Would ‘certain educational uses’ clearly define acceptable and unacceptable uses in this complex, dynamic and always developing sphere? 

For instance, an educational exception should not include the substance of our current statutory license provisions, but simply the downloading/uploading copying that enables content to be displayed and shared in a classroom. This would presumably be covered by the ‘incidental or technical’ exception in any case.

Obviously the display, distribution and enjoyment of otherwise freely available online material should also be included in the exception.

As for library and archive use, I wholeheartedly endorse this plea from Jessica Coates, Copyright Advisor, Australian Libraries Copyright Committee on the IFLA blog, 23 April 2018:

And so librarians have pushed for balance and… reasonable exceptions to let them do their job. Exceptions for preservation, for the provision of material to researchers, to make older and inaccessible material available online, to run exhibitions. Or flexible exceptions broad enough to cover all these activities.

But exceptions for libraries only do half the job. What is the point in libraries spending millions of dollars getting their collections online, if those collections can be used for little other than passive reading? This is why librarians have also long been strong advocates for the rights of others – researchers, teachers, their clients, creators – to be able to make reasonable use of the materials they provide them. Australia’s amazing Trove resource makes over 18.5 million pages from the national collection of newspapers from the first newspaper published in 1803 to selected titles from the 1980s available online for anyone to see. But at the moment it’s illegal for the public to do much beyond reading these – family historians can’t legally use snippets of them in blog posts, academics can’t reproduce them in published papers, and authors can’t quote them in books – without the author’s permission.

Librarians of course love creators and want to support them to achieve as much financial success as they can – librarians and creators are part of the same eco system which facilitates access to knowledge and ideas…. But they also recognise that an academic quoting 3 lines from a letter to a famous figure is not going to cause financial hardship to a creator or rights holder. They see that the rights of authors, important though they are, need to be balanced against the public goods of free speech and access to knowledge. And yes, even the rights of other creators, so that future authors can build on the past, and our cultural lives aren’t smothered by laws that only look at part of the picture.

The option of Fair Use is flexible and muscular enough to deal more robustly and sensibly with all the complexities and competing interests embedded in this 

terrain, which is why it is far more preferable.

The Consultation Paper is very even-handed in its discussion of the Fair Dealing and Fair Use options. But the two options are far from being on the same plane.

The recently released Deloitte Access Economics report, Copyright in theDigital Age, lays out the case clearly, comprehensively and persuasively, and summarises all the recommendations of previous reports by the CLRC, the ALRC, the PC, and Ernst & Young. The case for introducing Fair Use into Australia has emphatically been made. Tinkering is no longer a credible option. What is required now is substance. We have a once in a generation opportunity to do the right thing by the economy, industry, our education systems, and our arts sector.

The government should not be intimidated by the apocalyptic visions of doom and destruction coming from the usual suspects in the content creation industries and their associations. These tirades reflect little more than brazen self-interest. Any potential revenue loss, no matter how minor or justified, is always aggressively resisted.

They certainly do not represent the views of the more cool-headed artists, musicians, authors, publishers, film makers and others, including company owners and executives, who support the long overdue need for a legal framework that better encourages innovation and risk-taking in a rapidly changing technological environment.

It is beyond time for Australian governments to recognise and indeed celebrate the digital revolution that currently defines our personal and social lives, and our workplaces.

ACCESS TO ORPHAN WORKS - QUESTIONS 5, 6, 7.

I agree it is imperative that a reasonably diligent search be undertaken before any use of a work whose ownership details are not immediately apparent.

If such a search, whether undertaken directly by an individual, an institution such as a library, or another professional entity such as Copyright Agency, finds the owner or their licensed representative, such as a publisher, untraceable then the user must be allowed under law to copy or access the work as if it were in the public domain.

The presumption should be that, if the work is verified as an orphan work, then it has effectively been gifted to the public domain. If the author emerges subsequently and reclaims copyright ownership of the work then the work from that date resumes its status as privately owned and protected by copyright, and permission would be required for any copying from that date onwards.

My position is that there should be no upfront payment for the copying of orphan works nor any subsequent penalty if the rightful owner emerges. In other words, the principle should be 'no payment; no penalty' in all circumstances.

This would considerably simplify the orphan works issue, and simplification is desperately needed.

The ALRC report disagrees, as does the Productivity Commission report. They both support 'reasonable' or 'adequate' compensation, and submit that whatever would have been charged as a license or permission fee had the work not been orphaned be deemed appropriate. 

My view is that this position shows a misplaced reverence for copyright ownership under extreme circumstances. The original diligent search should be sufficient to isolate 'real' orphan works - those with actually untraceable owners who have in effect abandoned their works - from those whose ownership details have been incidentally lost or not adequately recorded in subsequent copies or transmissions - photographs being the prime example. The search would in those cases be reasonably successful in identifying those owners, denying the work an orphan classification.

Under the current terms of the Statutory License, Copyright Agency collects a fee for copying what turn out to be orphan works, holds those funds in trust for four years, then distributes the remuneration to known copyright holders in the same genre class. The Agency also submits that any diligent search be solely carried out by copyright owners or their representative bodies.

All parts of this policy position must be rejected. Although the license payments to the Agency are calculated on a flat fee basis across all categories of works - orphan works are not isolated - the volume of all copying (15% being orphan works according to the Ernst & Young report, page 58) is a key factor in the calculation of the fee. Accordingly, the Agency has over the last few years collected, upfront, approximately $9 million annually for orphan works. Only a fraction of the amount collected is subsequently remitted to identified owners after a rigorous search process is completed. 

In my view the remaining money should be credited to the educational and government institutions in the next annual invoice. There is no justifiable reason for a four year wait. And there is absolutely no justification for distributing the money to other rights holders. As both the ALRC and the PC agree, such a practice is not consistent with copyright's essential purpose.

Copyright Agency in its submission to the ALRC enquiry justifies treating orphan works similarly to other works as a necessary mechanism to protect commercial markets from being undermined. Free orphan works would attract more usage, skewering the market in their favour.  

There is little logic to this position. Most creative works are unique and non-replaceable. The existence of the public domain similarly does not essentially undermine vigorous commercial markets for in-copyright works.

CONTRACTING OUT - QUESTIONS 3, 4.

As shown by the different recommendations in the ALRC and PC reports, what exceptions should be protected from legal enforceability of contractual terms is a highly contested field.

Personally I am not persuaded by the ALRC's more conservative approach that not all of our current fair dealing exceptions should be unenforceable. And I am not in favour at all of their total exclusion under a fair use regime, if enacted in Australia. The ALRC agrees with the rationale underpinning US law, which countenances unenforceability only in the 'most egregious or obviously overreaching of cases' (page 443).

The ALRC argues that exceptions can be of differing importance. It quotes favourably a UK scholarly paper (page 452) distinguishing between exceptions that safeguard 'fundamental freedoms' or 'reflect public policy norms' and those that affect 'less fundamental principles' like market failure. It contends that 'unnecessary limitations on freedom to contract may reduce the flexibility and adaptiveness to new technologies of the copyright regime' (453).

The PC is not so concerned. It recommends all exceptions, including under a possible and more open-ended fair use regime, be protected from contractual limitations.

I agree with this position for the following reasons:

- Protecting only a limited number of exceptions would introduce a great deal of confusion and hesitancy into the decision-making processes of individual users and user institutions at the coalface. Inevitably a default position of caution and risk aversion would become the norm.

- Under a possible fair use regime one major benefit of a total disallowance legal framework would be that a fair use mindset would be gradually cemented into customer thinking and practice. There would be clarity across the board, and very importantly, at the front end. The fear of litigation at the back end would be considerably reduced, especially if universally applying protocols were developed by institutions to define allowable user behaviour, as they surely would be.  

- It would also go a long way to ending system access to digital content governed by the particularities of individual contracts. The user/content interface would be liberated from frequent and oftentimes constant denials, and end any institutional obligations to tailor interfaces to particular contracts. This would also solve the TPM issue. 

- Content owners would not be negatively affected by a universal statutory limitation on enforceability. Their focus would continue to be offering useful and quality content with distinct functionalities that defined their competitiveness. As in the analogue non-contract world customers would opt for value. Limiting fair and rational user behaviour around the margins would cease to be an obsession that makes any competitive sense.

Thank you for the opportunity to make this submission.

Peter Donoughue

Managing Director, John Wiley and Sons Australia Ltd, 1993-2008

President, Australian Publishers Association, 1996-1998

Director, Copyright Agency Limited, 1993-2005

(4 June, 2018)

Copyright Agency's Ignorant and Shameful Campaign Against Fair Use

A few months ago the book industry in Australia became aware of the fact that Copyright Agency had set aside $15 million or so to be spent fighting the Australian Law Reform Commission's and the Productivity Commission's recommendations to government to introduce 'fair use' reforms into our Copyright Act.

We now know precisely how that money is being spent. A 'Free Is Not Fair' campaign has been rolled out with no expense spared. Here's a taste:

https://freeisnotfair.org/whats-happening/

https://twitter.com/CopyrightAgency

What you see here is absolute rubbish in its purest form. Not one fact is true. Not one prediction credible. They would have you think the very concept of copyright is about to be abolished, and that Australian authors, performers, musicians, visual artists and all other creatives will die of hunger in the streets.

I haven't read one intelligent, well informed, conceptually coherent, fact-based piece against introducing fair use to Australia. NOT ONE! Because they don't exist. All we get are melodramatic visions of catastrophe and apocalypse.

Copyright Agency's argument is a grasping, self-interested, reactionary stance. An entirely political campaign, with not one iota of policy substance or intelligence to it.

As a former publisher, and in fact President of the Australian Publishers Association, what annoys me more than anything about this dishonest campaign is that the APA has joined it, and evidently supports it lock, stock and barrel. (As have the authors and booksellers). What a complete failure of leadership.

What they are doing is allowing Copyright Agency to construct a grossly false narrative around this issue, believing this cashed-up heavyweight to be the authoritative voice on copyright matters. Nothing could be further from the truth.

Here is the truth: as calculated by Ernst and Young in their 'Cost/Benefit Analysis of Changes to the Copyright Act 1968' (here) released in January by the Department of Communications and the Arts, Copyright Agency's annual revenues will likely decline from $140 million to $100 million. And that's all that will happen to the income of the Agency's 43,000 members.

But the critical point is this: that $30 million decline is revenue that the Agency should never have been collecting in the first place. It's always been illegitimate - a massive overreach, in fact a heist on the public purse. It's collected from what in a fair universe would be considered harmless acts - quotations, non-commercial private uses, incidental/technical copying, data and text mining, library and archive needs, the copying of 10% or less of orphan works (works with no traceable owners), and the classroom display and distribution of otherwise freely available online material.

The one issue that excites the Agency more than any other is 'Big Tech'. Big Tech is the bogey man who will 'steal our content'. In their own words: 'The Australian government is considering changes to water down copyright that would allow Big Tech to get a free ride off creators - a $1 billion hit.'

I can understand why authors are so anti Google. It's because of Google's huge book scanning project, done without any author's permission, which was judged to be fair use by a US court in 2013. The US Authors Guild were so angered by this eminently sensible decision that they appealed it, not once, but twice, and lost both times. The anger still festers today, despite the fact all experts agree the project has had no negative effect whatsoever on author incomes since its inception.

I can also understand why the current management of the Copyright Agency is so anti Big Tech. They are former News Corp, Murdoch men. Enough said.

The fact is that Google does not and has never granted access to any protected or pay-walled content in its search results. Fact. The content owner allows free access - Google allows it. The content owner doesn't allow free access - Google doesn't allow it.  Fact.

As for the '$1 billion hit', this ludicrous claim comes from a work of fantasy penned by the giant accounting firm PWC which was commissioned by.... wait for it......Copyright Agency and other rights management organisations. No one else takes it seriously. It's been thoroughly discredited by independent experts (see here).

The other frequently quoted bogeyman is 'large organisations' who want to get stuff free too. Is it the hated banks, the grasping mining companies and other big end of town monsters? No, these happen to be universities and schools, or otherwise known as the Agency's customers. CUSTOMERS. Yes, horrible robber barons all of them. Here's an example of the thievery these customers are proposing: 'Australian schools are not asking for a free ride - simply a fair ride....Schools would continue to pay the more than $700 million they currently spend each year purchasing educational content for students, and an additional tens of millions of dollars licensing uses like copying material into coursepacks'. (www.faircopyright.org.au, May 28, 2017). (See a good summary of the customer case here).

Finally, this sort of unadulterated rubbish from the Copyright Agency has to be condemned. It's a gratuitous intellectual insult to all of us:

Our kids should be able to grow up inspired by musicians like Jessica Mauboy and Jimmy Barnes, artists like Tracey Moffatt and Brett Whiteley, movies like Mad Maxand Lion, TV shows like Home and Away and Offspring, stories in our bookshops like Possum Magic and Diary of a Wombat and learning from Australian materials like Mathletics and Reading Eggs.

That’s why creator member organisations across the visual arts, literature, music and publishing are united in their opposition to the changes. That’s why leading Aboriginal and Torres Strait Islander artists, musicians, performers, filmmakers and writers oppose the changes. That’s why Australia’s leading playwrights and screenwriters oppose the changes. (freeisnotfair.org)

It's vomitous.

Ernst & Young's Cost/Benefit Analysis of Introducing Fair Use into Australia's Copyright Act

The Department of Communications and the Arts released last week the Cost/Benefit Analysis (CBA) on the possible introduction of Fair Use into our copyright act that it commissioned Ernst & Young Australia (EY) to undertake a year or so ago.

The Australian Law Reform Commission's (ALRC) report Copyright and the Digital Economy was submitted to the government in November 2013, and the Productivity Commission's final report late last year. Both bodies recommended that a US-style open-ended and flexible fair use regime replace our current closed and prescriptive 'fair dealing' provisions.

A fierce debate has been raging in the book industry for the last four years, most of it seriously misinformed.

The EY analysis attempts to grapple with the numbers and bring a measure of sobriety to the various claims and counterclaims. It does that well. It's measured, well researched and persuasive, standing in stark contrast to an earlier, and now widely discredited, PWC report commissioned by industry bodies that argued against fair use. (See an expert demolition here).

Basically the report's assessment is that the costs of introducing fair use are pretty minimal (about $20-30 million annually) but these are greatly outweighed by the benefits to the economy at large. 

Unfortunately the report has a couple of major flaws however. Firstly it doesn't even address, let alone calculate, the effect on industry revenues if multiple copying for classroom use, and coursepack inclusion, of chapters of textbooks and other resources were suddenly deemed fair use. Such copying is now remunerable under the statutory license administered by the Copyright Agency. The industry would lose about $70 million or so a year, a sizeable whack especially considering that more than half of that goes straight to the bottom line).

Secondly, the report barely addresses any issues specifically relating to the higher education sector. Its prime, and in fact sole, focus is the primary and secondary school sector. 

The issue now for the industry is how to respond. If the past few years have been any guide it could get very ugly. The opposition to any reform has been absolute and unrelenting. 

I would urge the industry to seriously reconsider. It should accept changes that make sense in order to gain credibility in arguing against those that don't.

The fair use recommendations that publishers should accept relate to quotations, non-commercial private uses, incidental/technical copying, data and text mining, library and archive needs, and access to orphan works.

The contentious ground will be education. For instance, the EY report calculates that the Copyright Agency currently collects around $9 million per year for classroom usage that the schools argue is manifestly unfair - the display and distribution of otherwise freely available online material being the main one. 

There should be no publisher resistance to allowing these uses to be deemed fair and therefore non-remunerable. 

Publishers should focus their energies on the reproduction of what the report labels 'education-specific' materials - 10% or a chapter of texts produced for curriculum and classroom purposes.

The EY report frequently and favourably refers to Canada which liberalised, via a Supreme Court decision in 2012, the interpretation of their fair dealing provision for education. Multiple copying for classroom distribution became allowable and free, including copying 10% or a chapter of a text for students. But EY refuses to tease out the consequences of similar reforms in Australia. There are stark differences.

The hit to Canadian publishers was about $C10 million, no where near as much as would be the hit to Australian publishers given our different copying history and practices.

The way forward for the industry now is to narrow its focus to this critical issue and lobby accordingly. It will be deemed intelligent and forward-thinking (which would be a refreshing change!) 

It would also be far better placed to forge a united front with the school and university authorities in arguing for sensible and acceptable reform.

My appearance before the Public Hearing: Productivity Commission's IP Arrangements Inquiry

   Public Hearing: PC’s IP Arrangements Inquiry

   (24 June 2016)

                                       

   Talking Points:

I fully support all the PC’s recommendations in its draft report, but wish to focus today only on the recommendation to repeal the current Parallel Importation Restrictions.


The commission would be well aware of the antipathy this proposal has once again aroused in the book industry.


I would urge the commission, in its final report due in a few months, to address the precise reason the industry is so negative. Unfortunately this did not happen in the draft report.


That issue is the industry’s universal and passionate belief that the commission wishes to abolish Australia’s ‘territorial copyright’ status which the PIRs ‘make possible’. The industry constantly conflates these two quite separate concepts and realities. This misunderstanding needs to be vigorously countered, a stake driven through the heart of it, or as in 2009 the government will be frightened off by proclamations of Armageddon.


Australia is a rights territory naturally, due to its geography (an isolated island with no porous borders and oceans away from the major publishing centres of New York and London), its population size (which can sustain economic print runs), its high literacy levels, that fact we speak English, and its mature and efficient book trade infrastructure (retailers, wholesalers, freight systems, multiple publicity platforms, etc).


Australian publishers can therefore confidently purchase by contract exclusive Australian rights and publish Australian versions of overseas titles. They are willing buyers and there will always be willing sellers.


Despite claims to the contrary the PIRs don’t grant, enable, construct or make possible this exclusivity. All they do is protect those publishers who abuse their contractual exclusivity by over-pricing and/or under-servicing. Booksellers cannot parallel import to offer their customers a better deal.


Provided the local publisher prices in accordance with the going rate of the Australian dollar, has invested in or contracted efficient distribution, and offers trading terms that are deemed acceptable by booksellers and others, then exclusivity can be guaranteed. Operational excellence will invariably secure close to 99% of local demand. It would not be a sound commercial proposition for retailers to buy around.


Without the PIRs the possibility will exist of parallel importation but in today's real world not the probability. But at least the competitive threat will still be there as it should be.


We're at a sweet spot now, where prices and the exchange rate are aligned. The PIRs are neutered. They are benign. They have no effect either way on importation patterns.


It may well be decades, if at all, before the PIRs are a factor again in industry behaviour. Online and global realities have stunned them.


Now therefore is the right time to remove them in case they rise like zombies in a quite different future. Obviously no transitional arrangements are necessary.


Another good reason for their removal is that this awful, ignorant and entirely emotional debate in the industry would end for good. Its recycling every seven years or so is tiresome in the extreme.


Finally, I would urge the commission to undertake another pricing analysis to establish the current state of play in the industry. It could be a truncated version of the excellent 2009 analysis. Today’s industry, under competitive pressure mainly from Amazon, has come a long way from the outrageous pricing practices that analysis showed. This would help confirm or otherwise the widely held belief, which I share, that removing the PIRs would have minimal effect on prices today.