Digital Media in Asia Blog

New regulations go into effect July 1 in China targeting distributors of unauthorized content online. The regulations, which carry a maximum administrative fine of approximately US$12,000, target search engines like Baidu, which are the backbone of online file sharing in China, as millions of users can search the various Chinese search engines for links to thousands of unauthorized copies of songs and movies.

Bloomberg.com quotes one analyst as saying that “Baidu will be under a lot of pressure to stop offering links to illegal MP3 files and may have to stop their MP3 search service.” Stop offering links to illegal MP3 files? I don’t see it. Providing links to unauthorized content is a cornerstone of Chinese search engine revenue–not just for Baidu, but for all the Chinese search engines. A $12,000 fine is not going to intimidate any search engine; they’ll just chalk it up to the cost of doing business.

But they’re painted into a corner, and effectively, copyright owners have forced their hand. These search engines want to go legit and play ball with copyright owners. But if Baidu were to give up its MP3 links, as the analyst quoted above suggests, they’d be committing suicide. The other Chinese search engines would gladly take Baidu’s share of the music search traffic, administrative fines and all. Copyright owners are not going to win a shoving match with search engines.

But, in the words of Obi Wan Kenobi, “You can’t win. But there are alternatives to fighting.” For example, search engines have offered to give copyright owners a portion of their ad revenue in return for licensing the content, but the major entertainment companies will have none of it. Some Chinese record companies–like Taihe Rye, a successful domestic Chinese label–recognize that online piracy is a fact of life and business, so Taihe has made special arrangements with Baidu to clamp down on pirate links for the first two weeks after a new release. This allows Taihe to capture the majority of its expected revenue from a release while not eviscerating Baidu’s revenue or market share. $12,000 fines won’t do it. Frankly, even bigger penalties are unlikely to have much effect. But copyright owners have alternatives.

A teenager was arrested in Hong Kong for hosting 600 songs for download on his computer, and a court sided with the movie industry, requiring internet service providers to turn over the names of users sharing movies online.

Speaking privately to people in the Hong Kong entertainment industry last week, there is pessimism that these tactics will yield results. The fact is, they acknowledge, that young people view the likelihood of getting sued or arrested on par with the likelihood of winning the lottery.

At least one blogger and a group of English football fans seem to think that the answer is China. A Chinese company called PPLive (English site) appears to have beat AOL and BBC, both of whom are still trial-testing their Kontiki-powered
P2P TV Streaming software, to the commercial release of a service that
provides Web users with live streaming TV through P2P technology.

P2P streaming is a breakthrough because it allows content providers to
broadcast video to a potentially limitless audience without the need to
pay for server space or bandwidth. As I understand it, PPLive’s
technology is similar to Bittorrent
in that it allows a single source to quickly spread data to a large
number of recipients by turning downloaders into sources for other
downloaders.

The developers of Sopcast, another
P2P streaming software, claim that their product allows any individual
to broadcast his own video. Though I have not tried this myself, the
implication is that a generous soul could broadcast his paid cable
connection, his DVD collection, or his collection of digital video
files to the world at no charge to himself or his audience.

I would appreciate comments on the following questions:

How will media companies respond? Is this new threat to copyright
holders easily defeated by technological measures or international IP
treaties?

How do PPLive and Sopcast technology compare to Kontiki’s commercial product in terms of video quality and network efficiency?

If copyright holders successfully attack PPLive, will PPLive still have
a viable business model? Are PPLive and Kontiki competitors, or are
their software packages capable of completely different applications?

In the first-ever bittorrent file sharing criminal prosecution, a Hong Kong man, Chan Nai-Ming, was sentenced to three months in jail November 7 for making available online copies of the movies “Miss Congeniality”, “Daredevil” and “Red Planet” without the owners’ authorization.

In the ruling, the judge acknowledged the man did not gain financially from making the files available, but said that fact and the high prices of legitimate DVDs are no justification for infringing copyright and do not allow him to escape liability. The judge also indicated that future convictions could lead to even stiffer penalties.

Customs officials claim that bittorrent use in Hong Kong has dropped by 80 percent since Chan’s arrest.

The ruling did not extend liability to downloading files, only uploading them–a fact that upset the entertainment industry, which wanted liability for both.

But that distinction does not seem applicable to bittorrent. From the South China Morning Post:

“Kevin Pun Kwok-hung, associate professor of computer science and law at the University of Hong Kong, pointed out that BT technology works with the downloaders also automatically becoming uploaders, and questioned the wisdom of launching criminal prosecutions against users of such technology instead of leaving it to businesses to take civil action. ‘If you say by placing something on the internet, you are committing a crime, you are saying all BT downloaders are criminals because their computers are downloading and uploading,’ he said.”

“‘The key issue is whether placing something on the internet amounts to distribution, but I personally don’t find the legal argument convincing — it amounts to authorisation but not distribution.'”

According to China Tech News, the Internet Society of China has announced it’s establishing a Broadband P2P Application Promotion Alliance to “encourage[] the development of intellectual property containing P2P network application core technologies, and … regulate the technology’s application and promotion based on intellectual property rights. It will also bridge the government’s supervisory role in this area.” The article goes on to say that “ISC plans to help regulate Chinese companies’ activities to ensure that illegal activities are not spawned by P2P in China.”

This is an interesting move, and the fact that it comes immediately on the heels of stepped-up US pressure concerning intellectual property protection is surely not a coincidence. The ISC, which is made up of the biggest Chinese media and internet players and governed by the Ministry of Information Industry, is sending a message that it means to get serious about cleaning up Internet piracy by regulating P2P. The move also parallels the Chinese government’s recent efforts to regulate blogs, as efforts to tighten control over online behavior increase.

It appears the ISC (and thus the government) envisions reigning in and controlling the unrulier, open aspects of P2P technology while promoting its development in officially sanctioned ways to further P2P’s “commercial application in China.” While I’m sure China would love to be a leader in the development (and patenting) of P2P technologies, it’s difficult to know just how effectively P2P systems–which have historically developed freely (though at times in response to stricter copyright enforcement)–can develop under ostensibly tight government supervision and in what will probably be proprietary formats.

Another question is, how might China’s regulation of P2P technology–assuming it is able to regulate it effectively–impact the technology elsewhere in the world? The article intimates that the government’s intention now is to regulate only Chinese companies’ use of P2P. But it does not seem like a quantum leap to imagine the government claiming jurisdiction to regulate any P2P network that crosses its borders. To what extent will China redefine P2P on its terms, for the world, with soft censorship baked into the next generation of P2P technology (to borrow a phrase from Rebecca MacKinnon)?

Though this announcement seems innocuous enough (and perhaps it is more harmless than I fear), I cannot help but feel it smacks of further official tightening of control over the Web in the name of IPR protection and economic/social development. Could this be another step toward a more subservient Web, envisioned by Prof. Tim Wu, who argues: “China’s long-term vision is clear: an Internet that feels free and acts as an engine of economic progress yet in no way threatens the Communist Party’s monopoly on power. With every passing day the Chinese Internet reflects that vision more closely. It portends a future for the Web that we’re only beginning to understand—one in which powerful countries refashion the global network to suit themselves.”