MegaContradictions

Copyright infringement is allegedly theft – so how come state agencies and corporates advertise on pirate sites?

by Greg Adamson

Over the past year or so I have occasionally used online “free TV” websites to stream television shows. During this time the Kim Dotcom saga began to unfold, and I learned that many of these sites were deemed to be illegal. While this was disappointing, my real surprise stemmed from many of the ads that were shown on, and ultimately sponsored, these ostensibly illegal enterprises. Rather than just the ubiquitous advertisements for Russian brides and penis enlargement, I was presented with a multitude of ads from New Zealand, for banking, travel, education, and government services. This immediately struck me as odd, for while Kim Dotcom and co. were fighting extradition to the US, local companies and the government were continuing to fund their supposedly illegal competitors, and no-one was battering an eyelid. I felt the advertising, and the silence, were worth investigating.

The arrest of Kim Dotcom and co. attests that profiting from the online exchange of copyright media is considered illegal. However, this profit includes advertising revenue, as the US Justice Department clearly recognises. In its indictment against Megaupload, the Justice Department states that when someone downloads a file from a media piracy site, the link “contains online advertisements provided by the Conspiracy, which means that every download on Megaupload.com provides a financial gain to the Conspiracy that is directly tied to the download” [my emphasis].[1] There could hardly be a clearer account of the direct link between advertising revenue (financial gain) and copyright infringement. However, even though the Justice Department recognises that advertising provides the revenue that drives the “Mega Conspiracy”, for some reason the relationship is only perceived as unidirectional. Even though companies pay to advertise on websites to make money, to increase sales, to make a profit, they appear to be somehow immune from the law.

Given that the US Justice Department clearly recognises the industry’s reliance on advertising, it is perplexing that the advertisers are not implicated in the crime. What is more, the primary charges against Kim Dotcom and co. are not for copyright infringement per se, but for the conspiracy to profit from the illegal exchange of copyright material. As the profit is from advertising, and they are not charged with defrauding the advertising companies, then why is no-one accusing the advertisers of funding illegal organisations? Given that advertising is an investment for future returns, how come the advertisers are not charged with the conspiracy to profit from copyright infringement? The more we look into the relationship between advertising and online file sharing, the more questions such as these arise. However, while this is of interest in itself, what is possibly more revealing is the silence surrounding advertising’s direct relationship with online “piracy”. This silence suggests that advertising has much to tell us about this whole messy affair, especially in regard to copyright law and the battle to control the Internet.

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Unlike what many assume, the so-called “Mega Conspiracy” pirate media industry hasn’t gone into hiding following Kim Dotcom’s spectacular arrest, quite the opposite; the industry has simply filled the void of Megaupload’s absence.[2] To keep things clear, this industry provides a platform that enables individual’s to distribute copyright media via online storage, downloading, and streaming. The interesting thing is that while Megaupload is alleged to have facilitated the exchange of copyright material, many of the current websites now explicitly market the intents of Kim Dotcom and co.’s alleged conspiracies. That is, they openly advertise the ability to stream or download obviously copyright media online for free, and they go by names like TvLinks, IChannel, and ProjectFreeTv.

Despite their explicit intent, and the fact the US government clearly considers them to be illegal, linking websites such as these continue to attract major advertising sponsorship. In fact, as these sites offer users free access, the advertisers are the only ones who actually contribute any money to the exchange of copyright media.

According to the Federation Against Copyright Theft (FACT):

“Sites such as TvLinks contribute to and profit from copyright infringement by identifying, posting, organizing, and indexing links to infringing content found on the Internet that users can then view on demand by visiting these illegal sites”.[3]


Image from ProjectFreeTV priate linking site, 17/11/12.

Recently, I visited TvLinks’ latest incarnation and continuously reloaded the homepage. The website must get a lot of visitors from New Zealand, because it displays a lot of New Zealand ads. I found the same on ProjectFreeTv, and a number of other similar websites. In addition to ads for Asian brides and online casinos, and Microsoft and Apple, I encountered ads from the BNZ, ANZ, Subway NZ, Farmers. I found ads for the New Zealand Herald, Flip, and Vodafone, who obviously aren’t too concerned about copyright infringement. Even Sky Television sponsors online file sharing.

In my search, I also observed ads from state funded institutions such as Canterbury and Auckland Universities, and a state owned enterprise, Air New Zealand. However, to suggest this means the New Zealand government is indirectly funding purported internet piracy would only be half right. The New Zealand government has been directly funding what the FBI and FACT consider to be criminal enterprises, as Study Link, the Health Department, and Sorted are frequent advertisers on TvLinks, ProjectFreeTv, and other linking sites. I also remember seeing ads from the Electoral Commission and the IRD, which means that New Zealand government agencies have been advertising on, and therefore directly funding, pirate media sites for at least the past twelve months. This also means they are quite likely to have advertised on Kim Dotcom’s Megaupload or Megavideo websites, though this is incidental really.

Given the amount and duration of the advertising, government or otherwise, on these purportedly illegal media piracy websites, this cannot be passed off as a “mistake”, like the Canadian government did when it recently advertised its economic austerity plan on Pirate Bay.[4] Given that on-line storage sites are expected to scrutinise all their content for copyrighted material, the very question of due diligence in this regard has long expired.

The real interest in this apparent hypocrisy is what it says about the whole copyright saga. For one, the nature and role of advertising makes the question of criminality far murkier than the “would you steal a handbag” argument suggests. That the government has and continues to fund pirate media sites should be enough to render the whole question of criminality obsolete. But neither is the commercial funding of the industry evidence of corporate corruption, capitalism has no more “ethics” than Darwinian evolution. And this is what the online file sharing phenomena is, a broad evolutionary change in the global media environment that is the Internet. The real problem lies, as many are saying, with the dinosaur that is struggling to stay alive, the Motion Picture Association of America (MPAA).


Image from Watchseries.eu linking site on 17/11/12

The new phenomenon of free internet media file sharing obviously poses a challenge for conventional property law. The problem largely lies with the fact there are two different dimensions to the process: the copyright infringers who don’t make or exchange any money, and the money exchangers who don’t infringe copyright. To a large extent, the first dimension, those who exchange media files, share an interest in certain types of music, films, television etc. This is reflected in the fact that little actual monetary exchange takes place between the people who link to online media and either download or stream them for free, and the file uploaders, who mostly receive nothing for their posting or a discount on their “premium membership”. In relatively very few cases, and only on specific websites, an uploader may receive a token sum if their link receives many thousands of hits.

That the actual exchange of “pirate” media is more akin to sharing than theft, and many many millions of songs, movies, and television shows have been freely exchanged in this manner, has meant that only an infinitesimal percentage of users have actually been prosecuted for copyright infringement. The fact the actual exchange of media is conducted mostly without money changing hands or any direct financial gain on behalf of the exchangers also suggests that this phenomenon is representative of public demand and a changing media environment, rather than many millions of individual acts of unprosecuted criminality.

The second dimension of online media file sharing involves the website developers and owners, and their source of revenue. The aim of the website developers is mostly to provide the infrastructure that enables files to be stored, catalogued, and shared. This takes a lot of money and time, and while Megaupload made a lot of money from subscriptions, the bulk of the industry’s income and growth potential is derived from advertising. In this respect, the pirate websites are no different than other traditional forms of media, such as newspapers, radio, and television, in that they provide a form of “free-to-air” media distribution. Most of the sites currently operating explicitly advertise “free movies” or “free tv online now”. Like “free-to-air” television, these internet platforms enable users to access online media for free by exploiting the medium’s potential to host advertising.

The “free-to-air” nature of online file sharing offers a far more useful model to understand this phenomenon than the physical metaphors that many still use to characterise copyright infringement as a form of theft. In commenting on the Dotcom case in the New Zealand Herald, for example, intellectual property lawyer Clive Eliot stated that:

“The issue of principle here is purely about property rights. If I prefer your house to mine, does that give me the right to squat in it without paying rent? If I prefer your car to mine, should I be able to get in it and drive away without hiring it? Extending the analogy to creative assets, should I be able to listen to a CD without buying it, or read a book without buying it or paying to download it on my Kindle?”[5]

This is a rather unfortunate analogy, for the simple and correct answer is yes, I should be able to listen to music without paying for it, and I am readily able to; I can turn on the radio, just as I can watch film and drama on television, borrow books from the library, and read a newspaper at a café, or online, without paying and without stealing. The licensing of broadcast music was introduced in response to the recording industry’s fear that radio provided a platform for music piracy; so you are not stealing when you listen to the radio or dealing in stolen goods if you turn the volume up.

Unlike squatting in a house, or stealing a car or CD, the unlicensed reproduction of media and other weightless commodities does not deprive anyone of their possessions. Digital media take this even further, as how can you steal something that can be reproduced with virtually no privation and no cost; I take your car, but now we both have one. The problem here, then, is not one of theft; it concerns revenue and distribution. The history of the media shows that media have long been distributed without the need for individual acts of monetary exchange. For good or bad, when not funded by the state or pay per view, the production and distribution of journalism, radio, and television have all been supported by advertising. This is fundamental to the media, it’s also fundamental to capitalism and commodity exchange. Advertising has been able to support broadcast media because the two are mutually complementary. Each new media technology, from the penny press in the nineteenth century to radio and television has enabled advertising itself to adapt and expand in keeping with commodity distribution, and geographic change. In all, newspapers and broadcast media have enabled manufacturers and retailers to market their goods to an increasingly urban and atomised populace, while enabling the distribution and production of “cultural” commodities.

The Internet and internet file sharing are no different in that they also have coevolved with advertising. It appears that through developing the capacity to store and share media files, Kim Dotcom and co. serendipitously realised the potential for a global, instant form of media distribution that is driven almost exclusively by user demand. While the popularity of this service has clear commercial value in itself, it has required a complementary form of advertising. It is here that companies like Megaupload have also led the way in developing the capacity for advertising to become increasingly targeted, such that we are now exposed to “local” advertising regardless of where a website is based.

Again, whether for good or bad, advertising is part of the medium of the Internet, just like television and radio. As with television and radio in the past, the music, film, and television industries clearly have the potential to draw revenue from this new broadcasting environment by, for instance, adapting how they license their material.


Image from Gorillavid.in, an India-based hosting site, 26/11/12

Another factor complicating the illegality of online file sharing lies with what the US Justice Department refers to as the “Mega Conspiracy business model”. According to this model, individuals upload copyright media to cloud storage servers (Megaupload) and these media are then distributed through corresponding file linking sites (Megavideo). This business model has now become the industry standard, and is reified in a series of dedicated complementary businesses, such as the linking sites ProjectFreeTv, TvLinks, 1Channel.ch, and Watchseries, and the upload sites Gorillavid, Sockshare, Vidbux, and Allmyvideos etc. etc.

This model has further added to the legal ambiguity of internet file sharing because it further distances the website operators from the actual exchange of copyrighted material. Storage sites, like Megaupload, simply enable people to upload media or other files to cloud storage facilities. Each file is assigned an URL (an address) that enables anyone who links to that address to access the file. The only service that these websites offer is storage, and all display disclaimers along the lines of “we are not responsible for the content stored on our computers”. The “exchange” of the copyrighted media is, in turn, facilitated by the linking sites that provide search facilities that enable users to find the URLs on the various storage servers. As the US Justice Department succinctly states, “Instead of hosting a search function on its own site, the Mega Conspiracy business model purposefully relies on thousands of third party “linking” sites, which contain user-generated postings of links created by [the storage sites]”. As the Justice Department rightly observes, these linking services “are usually well organized and easy to use”.[6] Like the storage sites, the linking sites invariably post disclaimers indicating that they “do not host any content on their servers”, “are not responsible for any content linked to”, and “do not accept responsibility for content hosted on third party websites”.

Nevertheless, the US Justice Department, the FBI, and FACT are actively seeking to have these sites shut down, and their owners sent to prison. Apart from the ambiguity in the law, the primary reasons they have been unable to stop, or even restrict the industry, are to do with legal jurisdiction and advertising. On the one hand, aside from having some protection from safe harbour laws, most “pirate” sites use servers situated in countries that have a favourable legal environment, and are not likely to extradite to the US. On the other hand, regardless of what the Hollywood studios and their more zealous champions say, capitalism (and the NZ government) loves internet piracy, and is willing to sponsor it with vast sums of advertising revenue.

In cases where state and industry agencies have taken legal action against online file sharing companies in the past, the website owners distance from the actual exchange of copyrighted media, and the fact no money changes hands in the exchange, has made the prosecution’s task rather difficult. While the Kim Dotcom case may be new news for most, especially those in New Zealand, a number of strikingly similar legal battles have taken place in the UK over the past five years or so. In 2007, in one of the first cases of its kind, Gloucestershire County Council trading standards, in conjunction with investigators from FACT and the Gloucestershire Police, raided the home of David Rock, a co-owner of the UK linking site TvLinks.[7] While Rock wasn’t man-handled, the authorities (it’s not clear exactly which) arrested him, seized his computer equipment, and shut down the site. FACT claimed that Rock was detained for “offenses relating to the facilitation of copyright infringement on the Internet”. However, it turns out there is no criminal offence of “facilitation of copyright infringement” under English law.[8]

As the service that TvLinks provided wasn’t illegal under UK law, the police and the trading standards authority weren’t actually able to press charges. The only UK copyright laws applicable to this case were drawn up in the 1970’s in response to the perceived threat posed by video recorders, and it appears that FACT had wrongly led the authorities to believe Rock possessed some form of DVD copying equipment. Nevertheless, FACT continued to pursue Rock in the courts over allegations of Conspiracy to Defraud and breaches of the Copyright Designs and Patents Act.[9] Despite having limited financial resources, Rock was eventually found not guilty on both charges, with the Crown Court judge ruling that Section 17 of the European Commerce Directive 2000 afforded TvLinks a complete defence in criminal proceedings in England and Wales for their linking to other web sites, and that the allegations under the Copyright Designs and Patents Act failed because there was no evidence that TvLinks made available to the public the films and shows they linked to.[10]

. . . . .

Recently, however, FACT has been more successful, and aggressive, in pursuing similar charges of conspiracy in the UK, which must be worrying for Kim Dotcom and his colleagues. What is more, two of the websites in question, TvShack and Surf the Channel, operated the same type of linking service as David Rock’s TvLinks.

The first case appears as a sort of trial run of the Mega Conspiracy. In 2011, the UK courts upheld a US extradition order against UK student Richard O’Dwyer, who operated a linking site called TvShack. TvShack offered the same service as TvLinks, which did not break UK law, and neither website made much money; O’Dwyer ran his site while studying at University. Moreover, TvShack’s servers were not based in the US. Nonetheless, the UK judiciary and the Home Secretary have agreed he should be extradited to the US to face charges under US criminal copyright law.[11] O’Dwyer, like Dotcom and co., is currently fighting extradition, and has attracted a large group of supporters, including Wikipedia founder Jimmy Wales.

More recently, on 14 August this year, in a case that had dragged on since 2007, Anton Vickerman, the co-owner of the UK linking site Surf the Channel, was found guilty of conspiracy to commit copyright fraud, and sentenced to four years in prison. Again, Surf the Channel provided a linking service, and neither provided nor stored copyrighted media. This exact same service was earlier deemed to not break any UK laws, as it was seen to act as merely a “conduit of information”.[12] The difference in this case appears to be that Surf the Channel was popular, and Vickerman made a bit of money; though nothing remotely comparable to Dotcom’s Megaprofits. According to the sentencing summary, “in the two years 2009 through to 2011 [Surf the Channel] produced a profit of £250,000 from a turnover of just under £1m”.[13] This million in turnover, however, is but a fraction of the Movie Picture Association’s reported loss in revenue on which the trial judge also bases his sentencing of Vickerman.

The judge’s summary of this case, which is conveniently available online, is an interesting document in itself; not least for it could be mistaken as a media statement from FACT. Surprisingly, the judge explicitly refers to the TvLinks case, stating that:

“TvLinks had already engaged in a similar operation but you [Vickerman] believed you could do better. You pressed on knowing that TvLinks had been taken down following the intervention of FACT on the basis that what it had been doing was unlawful”.[14]

Yes, taken down by an organisation funded by and acting on behalf of the MPAA, and deemed to have not broken UK law! The only difference in this case, aside from being a jury trial, is money: Vickerman’s modest revenue and the MPAA’s estimated loss of earnings. Despite the judge acknowledging that calculating such a sum is “highly speculative”, “in reality somewhat speculative”, “very difficult to calculate”, and “an all but impossible task”, all in the same paragraph, he still announces the MPAA’s estimated losses of “between £52 and £198 million”. The same all but impossible speculative calculation of course has estimated that Megaupload deprived the film industry of over $500,000,000.

Assuming that Surf the Channel deprived the MPAA of untold millions in revenue, the judge repeats the claim of “a Hollywood executive” that the lost revenue had resulted in less films being made and even goes on to state that “fraud of this kind impacts upon everyone”: from the directors, and producers, to the key grips and best boys, the cinemas and film rental companies, to the service industries and high street shops. While this might be true if Surf the Channel had deprived the industry of any revenue, as the judge makes clear there is simply no way of verifying the industry’s estimated losses. In the end, the entire case for fraud rests on the judge’s own assumption that, even if they were less than the industry claimed, the losses to the industry must have been significant. The supposed “research” on which the MPAA’s estimated losses are based simply speculates:

“… that 55% of those who accessed the films for free would, had they been unable to watch them for free, have paid either through the box office to watch the film or rented a DVD. Others would have purchased the film on the High Street and others would have viewed it on pay TV or downloaded it from an official site”.[15]

This, of course, is where the true “creative content” lies, for this claim has absolutely no empirical foundation.

In contrast to the industry’s claims, there are compelling reasons to suggest that downloading films either has no effect on, or actually increases box-office takings. The simplest supporting evidence for this is that the most illegally downloaded films tend to have the highest box office takings and DVD sales. Moreover, what little research there is that hasn’t been funded by the MPAA indicates that downloading may actually be positively associated with sales.[16] This also concurs with the nature of the contemporary blockbuster industry, which increasingly uses digital and other visual effects that are designed specifically for the big screen. As the Hobbit will undoubtedly attest, the spectacular imagery of this I-Max style film can only be watched at the cinema or in some high-definition equivalent. It is just as plausible then that sites like Surf the Channel have a positive marketing effect, driving people to the cinema to see the digital special effects that can’t be appreciated on a copy filmed on a hand-held video camera and watched on an IPad. In this sense, the million pounds that Surf the Channel received in revenue, or a part thereof, could just as effectively be an indirect payment for the marketing of blockbuster films.

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The MPAA’s assault on online file sharing also tends to mask that much of the illegally shared content is what is usually referred to as “television”; that is, shows that have been traditionally broadcast free-to-air, and are often produced by free-to-air networks, or state broadcasting companies. The website names, TvLinks, TvShack, Surf the Channel, ProjectFreeTv, Onlineseries.tk, 1Channel …, themselves indicate that this is really about “free-to-stream” television, and is far more mundane than the rampant “online piracy” touted by FACT. As the free-to-air model shows, media content is usually broadcast for very little cost. The licensing fees for radio and television content often equate to a few cents, or less per listener or viewer. There is no reason why “on-line” broadcasting cannot be the same, especially given the minimal costs of replicating and distributing digital content. Nor would this kill “content”, as the MPAA suggests, the history of television and radio attest to that.

The problem with free-to-air broadcasting, however, is that it is unidirectional, and the programming largely immobile. The interactional nature of the Internet has, of course, completely changed this, and has created the possibility for “free-to-stream” models that enable users to access and exchange content anytime and anywhere. Like free-to-air broadcasting, free online file sharing has evolved in tandem with advertising. The Mega Conspiracy business model’s use of locally targeted advertising has made a “free-to-stream” platform financially viable, for the website owners and the content producers. For instance, the fact such advertising targets the users locality means that media content can be released globally and “locally” at once. And, as the Mega Conspiracy business model also shows, there is plenty of revenue to go around for the owners to make a profit and pay for content. In fact, the Mega Conspirators’ new “Megabox” apparently aims to achieve this, by providing dedicated free music and film distribution sites that by-pass the “middle-men” (not themselves of course) and direct advertising revenue to the content producers.

The problem is that this new legal form of broadcasting could (or at least is perceived to) undermine the monopoly of the large Hollywood studios. In this sense, internet “piracy” is akin to nineteen-sixty’s pirate radio, where stations like Radio Hauraki in New Zealand and Radio Caroline in the UK mounted a challenge to the government monopoly of radio by broadcasting from sea outside the territorial limit. Although the broadcasts were illegal, they also were funded by advertising, usually from local nightclubs. While the advertising revenue was limited, largely because of the far more conservative commercial environment and the limited range of radio broadcasting, in both cases it was enough to sustain an extended, ostensibly illegal campaign. While the legacy of Radio Hauraki may be somewhat “middle of the road”, the original pirate station eventually broke the government monopoly on radio and opened the spectrum to commercial, community, iwi, and student radio.

However, unlike pirate radio, internet piracy is challenging a far more insidious and powerful opposition than government. Whereas pirate radio challenged a clearly defined government body from clearly defined legal and national boundaries, online piracy is facing a world where there is less and less space outside the reach of the law, and where commercial and legal boundaries are becoming increasingly blurred. The TPPA is clear evidence of the both these tendencies, but the actions of FACT and the US Justice Department are just as much cause for concern.

In many ways, the UK cases against Rock, O’Dwyer, and Vickerman appear to have been something of a dress rehearsal to the Kim Dotcom debacle. The similarity between the cases is not simply due to the nature of the alleged crime. Because the relationship between the online file sharing industry and current copyright law is so ambiguous, FACT has had to employ a lot of creative license in their use and interpretation of the law, which is inseparable from the industry’s wider media campaign against online file sharing. One obvious and immediate sign of this is that there is no such thing as “copyright theft”; you can’t steal a law, just as you can’t wage war on “terror”. Theft, of course, is something “criminals” do, so it’s a useful moniker for getting the law on your side, and this has clearly worked. The presumption that theft is involved has clearly influenced the UK judiciary, the FBI, and the New Zealand Police. Why else would the New Zealand Police act on a US extradition order for copyright infringement by sending armed troops to arrest and imprison someone, illegally impound their property, shut down their company, and freeze their assets? In the UK a great deal of license has also been used in the application of the law, except in this case FACT has been far more centre stage.

The concerning thing about the UK piracy cases is that FACT, an industry body funded by the MPAA, has been able to freely operate with the authority of a crown prosecution and investigation service. UK law has allowed FACT to pursue Vickerman in the criminal courts, which is frightening enough. What’s more, like with Kim Dotcom, the police allowed FACT to seize Vickerman and Rock’s computer equipment when they raided their respective homes, which in both cases FACT sent off for “forensic analysis”. Again, like with the TvLinks case, the Crown Prosecution Service declined to prosecute Vickerman, stating that:

“At present it appears uncertain if in fact what the suspect has done does infringe this particular legislation. Certainly on the evidence thus far provided it is impossible for me to determine if this is the case and therefore I cannot advise any prosecution on the evidence presented. … His ‘crime’ is to make it easier for others to find what is already there. This begs the rather obvious question of why he is being pursued rather than those who actually breach the copyright by displaying the material”.[17]

Nonetheless, Vickerman had to go to court to get FACT to return his computer equipment, and his wife’s mobile phone. He initially won, but lost on appeal, as the Appeals Court ruled that FACT had not contravened UK search and seizure laws, as they were pursuing a criminal case against Vickerman. Chillingly, the judge states that it:

“… is in the public interest that other bodies [i.e. FACT, which is compared in law to the RSPCA!] should be able to investigate and prosecute because of the strain that the CPS would otherwise face. … In my judgment, there is no basis either in the statutory framework, the authorities or policy to justify the proposition that a decision by the CPS not to prosecute conclusively determines that a prosecution is not in the public interest”.[18]

Which, in other words, means that the UK judiciary has sanctioned this MPAA funded industry body to operate as a private police and prosecution service.

What is more, the Appeals Court ruling details that FACT actually had Vickerman’s home raided on fabricated charges. To quote from the Appeals Court ruling again:

“In the light of what it learned, in July 2008, FACT made a complaint to the Northumbria police as a result of which, on 28th July 2008, an information was laid before Gateshead Magistrates in support of an application to search Mr and Mrs Vickerman’s home for ‘Internet server equipment and paraphernalia [sic] associated with this’ on the ground that extensive investigation by FACT had revealed that Mr Vickerman was ‘…hosting two internet torrent sites from which copyright material is downloaded. The sites are hosted on servers at his home address…’. This included a request for authorisation for ‘representatives from FACT’ to accompany the police”.[19]

Just as David Rock did not have DVD copying equipment (and Kim Dotcom did not have some doomsday device), the Vickerman’s did not have servers, did not host torrent sites, and did not store or make available copyright material. FACT did however run an “extensive investigation”, one that involved illegal surveillance and undercover officers. This means that FACT’s initial search and seizure application can only have been a fabrication; as it is blatantly apparent that Surf the Channel was a linking site and nothing more. That these sites weren’t actually breaking any law obviously meant FACT had to bend the law to fit their purposes. They also had to convince a judge and a jury that Vickerman had defrauded Hollywood. They had great success on both counts, as Vickerman is currently serving the first of a four year prison sentence.

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What is perplexing about these cases is that, because they did not directly infringe copyright, Rock and Vickerman faced charges of conspiracy to defraud and money laundering; the same charges laid against Kim Dotcom and co. The “fraud” of course isn’t direct, it is not the same as when a finance company missuses its customers’ deposits. The fraud relates to estimated loss of earnings. Again, these estimated losses are clearly based on conjecture, and are impossible to verify. Moreover, the proceeds of crime that are the direct object of the fraud and money laundering charges come directly from advertising. Again, this is openly acknowledged by the prosecuting authorities. As the US Justice Department points out in the Mega indictment:

“… the more users that find their way to a Megaupload.com download page; the access of these additional users, in turn, makes the Mega Conspiracy more money. Because only a small percentage of Megaupload.com users pay for their use of the systems, MegaConspiracy’s business strategy for advertising requires maximizing the number of online downloads. (Emphasis mine)[20]

The interesting thing here is that the fundamental commercial impetus of traditional media broadcasting, to increase viewership, is presented as part of the Conspiracy, while the revenue provided by the co-conspirators is ignored in the crime.

In the Surf the Channel case, the sentencing judge states that Vickerman presented:

“STC as a very attractive proposition for advertisers who were unquestionably more than willing to enter contracts for the deployment of their advertisements on STC knowing that the adverts would reach huge audiences logging on to the site”.[21]

More than willing; the entire case is built around the idea that Vickerman knowingly operated an unashamedly illegal business. Therefore, the advertisers could just as easily be seen to have been willing to fund internet piracy. But what is really perplexing is that the advertisers are completely invisible in the exchange. In the judge’s mind, Vickerman might have well been selling crack, in both cases the proceeds of the crimes come from an illegal exchange. While it may be a half-correct analogy (for there are no analogies for copyright theft), what crack deal is only half illegal, the buyer gets arrested and the dealer gets off scott-free? “I sold the crack officer, it’s got nothing to do with me”.

Advertising comprised the sole source of revenue for both TvLinks and Surf the Channel, just as it continues to do for the current TvLinks, and ProjectFreeTv, 1Channel etc. The reality is that advertising has and does fund so-called media “piracy” and it has gone on for so long and to such an extent that it is pointless to try and stop it, or vilify the advertisers (except for the government of course). More importantly, that advertising is invisible, even in the court process, and is and isn’t directly implicated in media piracy, can only undermine the illegality of the so-called “Mega Conspiracy”; in perception and in law. The only “just” outcome if there were any legal justification for pursuing the matter would be for both sides of the “conspiracy” to be equally charged, as the advertisers have profited from online piracy just as much as the alleged conspirators, if not more. But that will never happen.

What advertising’s invisibility in this affair does show is that, despite what the industry says, commerce does not disapprove of online file sharing, on the contrary, it actively supports it. Capitalism has no ethics other than returning a profit, and advertising simply can’t avoid the potential for a return. What the advertising funded free online sharing industry ultimately reveals is that a new media platform has emerged. This platform has revolutionised broadcasting in that it enables users to share and distribute content among themselves; the next task is to complete the link with the content producers. This, however, requires a revision of copyright law. Unlike what FACT and its supporters would lead us to believe, there is no natural law underlying copyright. There is no “theft”, and few would admonish someone for wanting to listen to the radio for free. The real battle underlying the “war on copyright” is between the Hollywood monopoly and a changing technological world, in which FACT has a frontline role.

Funded by the MPAA, FACT has a lot of resources, and a broad reach. Documents leaked to the British media, for instance, relate the MPAA’s desire for FACT to play an active role in conducting a media campaign to turn popular opinion against TvShack’s Richard O’Dwyer.[22] The leaked memo is testament that this is a propaganda war.[23] And it is fairly likely the same is happening here, as FACT has branches throughout the world, including New Zealand. While NZFACT has kept a low profile in the Kim Dotcom case, it has still been quietly exerting its influence over popular and industry opinion.

One example of this is the recent report on the scale of the New Zealand film and television industry commissioned from Pricewaterhouse Coopers.[24] What is striking about the report and the figures, are the lengths that are required to inflate the industry’s importance.[25] Film and television (which John Key and much of the popular media conveniently conflate to “film”, or in other words Peter Jackson and James Cameron) we are told is a $3 billion industry that accounts for 1.7% of GDP. From this perspective, Kim Dotcom can easily be portrayed as an enemy of the New Zealand, as he is destroying this important industry and depriving the entire New Zealand economy of export revenue. This figure, however, other than requiring the use of “multipliers” and double accounting, includes the contribution of free to air television broadcasting, i.e. TV One, TV3, MaoriTV etc.[26] While pundits may exclaim the enormity and growth potential of this supposed $3 billion industry, you could just as easily marvel at just how little television “contributes” to GDP. According to the report, free to air television, including “multipliers” for the number of jobs created by Rick Ellis’s salary, made up around 0.5% of GDP in 2010. That is, the industry that occupies the most time outside of sleep and work of a large majority of the population accounts for barely half a per cent of the country’s economic activity.

This is where the likes of Kim Dotcom are fighting the good fight. Streaming should be free, just like television. Companies like Surf the Channel and Megaupload are undoubtedly the impetus behind developments like Hulu in the US and TV On Demand in New Zealand, but they are only responses to the competition. The Megaupload successors are capable of realising the Internet’s free to air potential, and possibly of redistributing revenue to the content producers in a more equitable manner. But Dotcom is no Robin Hood, as some proclaim, he is more a new age Robber Baron. Like Carnegie, Rothschild, J.P. Morgan, Stanford, Duke and co., he’s showing that capitalism is a battleground, one where right and the “law” are on the side of the victor. Nonetheless, he and other media “pirates” need political, legal, industry, and popular support, because the likes of internet piracy are part of a wider battle against another Internet age possibility, one where the law has universal reach, all media “consumption” is monetised, and a global Big 4 or so control all content. This possibility is the one FACT and the MPAA appear to be pursuing, The enemy definitely is us.

Greg Adamson is a Dunedin-based writer.


Kim Dotcom in 1996

[1] http://www.scribd.com/doc/78786408/Mega-Indictment, General Allegations

[2] For instance, “After Megaupload Bust, Putlocker and RapidShare Pick Up Slack” http://www.wired.com/wiredenterprise/2012/03/after-megaupload/

[3] http://www.zeropaid.com/news/9066/tvlinks_shut_down_owner_arrested/

[4] http://blogs.ottawacitizen.com/2012/09/26/feds-pull-yahoo-ads-after-eap-banner-shows-up-on-the-pirate-bay/

[5] http://www.nzherald.co.nz/auckland-region/news/article.cfm?l_id=117&objectid=10784190

[6] http://www.scribd.com/doc/78786408/Mega-Indictment, General Allegations, 10.

[7] http://www.guardian.co.uk/business/2007/oct/19/digitalmedia.media

[8] http://torrentfreak.com/busted-tv-show-site-in-limbo-as-authorities-back-off-081121/

[9] http://torrentfreak.com/tv-links-triumphs-with-landmark-e-commerce-directive-ruling-100212/

[10] http://torrentfreak.com/tv-links-triumphs-with-landmark-e-commerce-directive-ruling-100212/

[11] Mike Masnick, UK Decides Hollywood, US Gov’t's Interests More Important Than Own Citizens; Extradites Student For Linking. http://www.techdirt.com/articles/20120313/10132918091/uk-govt-agrees-to-extradite-richard-odwyer-to-us-linking-to-possibly-infringing-stuff.shtml

[12] http://torrentfreak.com/tv-links-triumphs-with-landmark-e-commerce-directive-ruling-100212/

[13] Sentencing Remarks of His Honour Judge John Evans R -v- Anton Benjamin Vickerman, Newcastle upon Tyne Crown Court. Indictment No. T2009 7188. 14 August 2012. www.judiciary.gov.uk/Resources/JCO/Documents/Judgments/anton-vickerman-sentencing-remarks-14082012.pdf

[14] www.judiciary.gov.uk/Resources/JCO/Documents/Judgments/anton-vickerman-sentencing-remarks-14082012.pdf

[15] www.judiciary.gov.uk/Resources/JCO/Documents/Judgments/anton-vickerman-sentencing-remarks-14082012.pdf

[16] e.g. https://www.eff.org/deeplinks/2009/12/most-pirated-movie-makes-heaps-money

[17] http://www.techdirt.com/articles/20120820/01553920095/horrifying-surfthechannel-criminal-conviction-driven-hollywood-money-not-government.shtml

[18] http://www.bailii.org/ew/cases/EWCA/Civ/2009/1156.html

[19] http://www.bailii.org/ew/cases/EWCA/Civ/2009/1156.html

[20] http://www.scribd.com/doc/78786408/Mega-Indictment, General Allegations, 8.

[21] www.judiciary.gov.uk/Resources/JCO/Documents/Judgments/anton-vickerman-sentencing-remarks-14082012.pdf

[22] http://www.guardian.co.uk/technology/2012/aug/08/richard-odwyer-leaked-memo-hollywood-lobbying

[23] “TVShack Draft Communications Plan” http://www.scribd.com/fullscreen/102147824?access_key=key-1q8mvok7eq9s6487ysh5
https://www.youtube.com/watch?v=MTMIz0_Iij8

[24] http://www.nzfact.co.nz/reports/NZFACT_Economic_contribution_of_NZ.pdf

[25] There is a good discussion of this on National Radio’s “Mediawatch” 4 Nov 2012 http://www.radionz.co.nz/national/programmes/mediawatch

[26] http://www.radionz.co.nz/national/programmes/mediawatch

http://www.med.govt.nz/about-us/publications/publications-by-topic/evaluation-of-government-programmes/Economic%20study%20of%20the%20NZ%20film%20industry.pdf

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