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Has online piracy reached a tipping point?

Across the globe, copyright owners are on the offensive and say jobs and the future of intellectual property is at stake. Can they do anything about it?

For years, digital technology and the Internet have provided a virtual buffet of digital content from which millions have feasted for free.

Whether it be downloading movies illegally found with the help of the Pirate Bay, ripping a movie rental from Netlix to a computer hard drive, republishing an unauthorized copy of a news photograph to the Web, or sharing music on peer-to-peer services, the people who create this content have begun to send a message: "no more free lunches."

"You take out the Pirate Bay and people will still make copies of movies. People will continue to share music online...It's been five years since Grokster. How has that helped the music industry?"
--Danny O'Brien, International activist, Electronic Frontier Foundation

Copyright owners around the globe have gone on the attack. They're backing antipiracy legislation in France and Sweden. They're lobbying Internet service providers in the United States to crack down on customers who download files illegally. They're pressuring hardware and software companies to prevent their products from being used as "pirate toolboxes." They're threatening legal action against Google and other sites that aggregate news without permission.

Perhaps the most dramatic example of the new resolve of copyright owners came on Friday, when a court in Sweden found the operators of the Pirate Bay, likely the best known hub for file sharing on the Web, guilty of violating copyright law. In a case that is sure to be appealed, the four men were sentenced to a year in jail and fined the equivalent of $3.6 million.

"There might be just a point here where the culture is changing on what's legitimate behavior online," said Mike McCurry, the former White House press secretary under President Bill Clinton and co-chairman of Arts+Labs, a collaborative group of technology and media companies. "I think perhaps something of a tipping point has been reached where people are finally saying that activity we thought was just okay or skirting around the edge has tipped over into something both dangerous, criminal, and unfair."

The outcome of all the antipiracy efforts may be that jobs are spared and investor value is preserved. It might also mean information and digital entertainment becomes more expensive and less accessible. What the content creators have yet to prove is whether these moves will make any difference. They have little to show for previous efforts.

"It's not that they might not obtain their short term aims," said Danny O'Brien, International outreach coordinator for the Electronic Frontier Foundation, a group that advocates for Internet users and technology companies. "But what is the long-term goal? What is the end game? You take out The Pirate Bay and people will still make copies of movies. People will continue to share music online...It's been five years since Grokster. How has that helped the music industry?"

The $3.6 million the Pirate Bay was fined is only a fraction of what copyright owners say they are losing each year as a result of copyright infringement. Mats Lewan/CNET

O'Brien is referring to the U.S. Supreme Court decision that peer-to-peer file-sharing services Grokster and Streamcast could be sued for encouraging copyright infringement. The decision effectively forced Grokster out of business and set a legal precedent against peer-to-peer services. Yet, such services continue to operate and illegal file sharing, at least by most measures, has only grown.

Nonetheless, copyright owners aren't waving any white flags.

Layoffs, ISPs, and Kindle
There aren't supposed to be any free lunches, say executives from media and entertainment companies who spoke with CNET News. The tab for all that so-called free content is being picked up by stunt men, makeup artists, secretaries, sound engineers, editors, truck drivers, and lots of other people who work for media and entertainment companies, according to the executives. They maintain that at a time of massive corporate cutbacks and layoffs, media and entertainment firms have to cut a little deeper because of piracy.

So, the stakes are higher now for content creators. They say they will prevail for that reason and because they understand technology better, are marshaling more resources and enjoy more support among International lawmakers than ever before. The most recent endorsement came Friday, when British Prime Minister Gordon Brown told a gathering of techies in London that his government "will support the legal framework that enables the private sector to create content."

Copyright owners also point to other important, if hard-won, victories.

•  YouTube once swelled with pirated clips of movies, TV shows, and music videos. In the last year, however, the site has begun filtering out illegal content. The move came after media conglomerate Viacom filed a $1 billion copyright lawsuit and as YouTube began partnering with Hollywood in a bid to offer premium TV shows and films.

•  Amazon handed over control of the Kindle 2's text-to-speech application when the Authors Guild claimed the function violated copyright law and could cut into sales of audio books.

•  In cooperation with the film and music industries, AT&T has begun testing an escalating system of warnings or graduated response. The ISP says it would never terminate service without a court order. Apparently, not all ISPs are as squeamish (go here to see a copy of a warning letter from Charter Communications).

One important finding from AT&T's test is that the company said it sees a drop in illegal downloading from people who have received a warning. With more experience, copyright owners and ISPs will only get better at discouraging illegal file sharing, said Rick Cotton, NBC Universal's general counsel.

"What's important is all the creators of the broadband Internet be working together to reduce pirating activity," Cotton said. "What needs to be clear is that accessing copyright content illegally is simply not acceptable. We need strong messaging, in the form of technology barriers and speed bumps that make it difficult to access pirate sites. There does at some point need to be some consequence (in graduated response by ISPs). My expectation is that there will continue to be dialogue but ultimately the test is effectiveness."

The end of free?
As for the motivations of media and entertainment companies, there is perhaps one more reason for drawing a line in the sand against piracy now. So far, free hasn't turned out to be a very profitable business model.

The decimated newspaper industry, which has given away stories on the Web for years, is talking about charging for content--again. Digital music services that depended on advertising sales to support themselves, such as SpiralFrog and Ruckus have gone bust. Imeem, an online social network that focuses on music, has staggered recently and has asked financial backers for more support.

Even YouTube, with its 100 million users, has struggled to generate cash. Google CEO Eric Schmidt said last week that he expected the site to one day charge for some content. The statement is a startling revelation coming from the chief of the world's mightiest advertising company, and seems to underscore YouTube's struggles to squeeze profits out of ads alone.

This is not the first ad-market crunch the tech sector has seen. During the dot-com bust in the early part of this decade, ad-supported companies scrambled to charge for services that they once gave away free. Most of those companies disappeared.

Jonathan Zittrain, professor of Internet law at Harvard Law School and author of the book "The Future of the Internet and How to Stop It," says it's too early for free services to be written off.

"I wouldn't say (this is) the end of free yet," Zittrain said. "There is a vibrant set of activities to occupy people's leisure time that isn't fee-for-product. Whether blogging, video making, tweeting, or interacting on social networks, the number of things to do while staring at a screen that require no monetary investment at all has climbed significantly.

"In a down economy," Zittrain continued, "one might surf for an hour rather than spend $15 at a multiplex."

Author's note: I recently asked a public relations executive at a major entertainment conglomerate why, if piracy is hurting everyone, more celebrities aren't speaking out against it. "I've got two words for you," he said. "Lars Ulrich." Apparently comedian Jack Black was willing to risk condemnation from cyber-groovies. The video above is an antipiracy message he made two years ago.