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Netflix Would Have Never Been Successful in Europe.

Vice-Chair of the Greens/EFA Group Julia Reda

On how the EU needs to adapt to enable a European Digital Market to grow with the help of European SMEs, because the internet knows no borders.

Interview by Dominik Kirchdorfer. Photos: Dominik Kirchdorfer & Public Domain

Dominik Kirchdorfer (DK): Recently you have gained quite a bit of publicity with the debate around the copyright reform. Could tell us a bit about your work in the European Parliament?

Julia Reda (JR): Certainly. I am Julia Reda, the only representative of the Pirate Party in the European Parliament. I am the Vice-President of the Greens/EFA Group and work on digital issues in the broader sense for the group. Copyright is my speciality, because I believe it is not possible to have a digital market without harmonising copyright law and making it fit for the digital age.

The copyright laws we are dealing with today were largely designed in a digital-free age and so the fundamental logic underlying copyright law quite often clashes with digital technology and the last update of copyright law was made in 2001, at a time when people were not carrying around smartphones in their pockets; which are basically little copyright infringement machines. Wikipedia was just starting out, there was no Facebook; a completely different world.

I think one of the big fundamental challenges we have with copyright and digital technology is that digital technology always makes copies, regardless of what you do. Take the example of emerging technology like Artificial Intelligence algorithms. If you have an image recognition algorithm, they need to process a huge amount of images in order to recognise patterns. All of these learning processes create copies.

All of this is regulated by copyright law, even though the purpose of copyright law was originally about controlling the dissemination of culture. If someone has 20.000 copies of a book in their basement, you can be pretty sure that the intention is to sell them or to give them away in some form and that is why copyright law forbids the copying as such. With computers it is completely different. An algorithm that looks at one million cat pictures in order to know what a cat looks like doesn’t enjoy the work and there doesn’t necessarily need to be a remuneration of the photographer. So, the entire logic of copyright law doesn’t really work with digital technology.

DK: Is there not also a problem with different kinds of interpretation of copyright law in different countries internationally? There is this very interesting example of a programmer that creates an AI that then creates an artwork based on, let’s say Rembrandt. Then the question is posed who the copyright belongs to. The investors of the company that employs the programmer, the company, the programmer, or is it the AI or even Rembrandt himself?

JR: There are definitely different interpretations of this. I would say the traditional continental European copyright system would probably say that there is no copyright, because the work was not created by a “creator” [meaning AI is not classified as a creator], so it is not original and therefore not protected by copyright. But the UK copyright system would probably consider the software programmer to be the copyright owner. So, there are fundamentally different approaches and I think for the online environment that is doubly difficult, because copyright applies on a territorial basis. That means if copyrighted content is accessible online from a particular country, then the right holder can sue you in that country. It is different from a lot of other areas of the law where you only have to worry about complying with the law in your own country, but if you are active online you basically have to comply with the law in 28 different countries.

DK: So that is where geo-blocking comes in.

JR: Yeah, it does. I think the European Commission was right in the beginning of this legislature, when they said: “We need this Digital Single Market to allow European digital companies to compete.”
A company like Netflix could have never been founded in the EU. Because buying all these rights for all these individual countries is just too cumbersome and the only reason why Netflix is successful in the EU now, is because they had a huge single market in the US that allowed them to grow and to be able to heavily invest in Europe and run at a loss for a while, while they were buying up all these rights. Now they are also making their own productions and of course they don’t have these problems anymore. But if we want European companies to be able to compete in the tech sector, then we have to do something about this.

DK: So we have to complete the Digital Single Market, otherwise, we will leave the field to other players.

JR: Yes, absolutely. The European approach to copyright has been to try and punish existing large technology companies, instead of actually allowing the competition for them to grow. It is almost as if European technology policy has given up on ever having successful tech companies growing in the EU. Instead they try to put in place laws that will somehow magically force Google or Facebook to share some of their profits with European entertainment companies. But what they often do not realise is that they actually entrench the positions of these big players. For example, on the discussion around upload filters, the position of the Council is that a platform like YouTube would have to either get licenses from all right holders in Europe or employ state-of-the-art upload filters. I think from the perspective of YouTube, the choice is very clear. They will employ upload filters, because they are building the state-of-the-art. Any European company that might not have the capacity to build their own content-ID might end up buying licenses where they can, and where they cannot, they will probably have to buy those filters from the American technology companies. It is really counterproductive.

 DK: The filters seem quite hard to implement. It seems like it would be impossible for a smaller company and still very hard for even the biggest companies to create these filters, simply because they have to parse through a lot of existing copyrighted material in order to be able to recognise what is copyrighted and what isn’t.

JR: Certainly. I would say it is impossible to build filters that accurately distinguish between copyrighted material and legal material. For some sectors, maybe music, they may be able to reliably catch a large number of infringements, but they will also catch a lot of legal content in the process.

DK: I guess also because derivatives are often actually legal. You are allowed to remix content.

JR: Exactly, but the incentives are very much tilted to one side. If the platform deletes too much, the worst that will happen to it is cause some reputational damage, but if they delete too little, they are directly liable for copyright infringement. The incentive is clearly there to block more.

But there are two different approaches to this topic. On the one hand you have the Council that basically says you are liable, unless you use filters to the state-of-the-art and then of course the filters do not have to be perfect. They just have to approach what is doable technologically.

This is perhaps nicer for the platforms, but still terrible for users, because their legal content gets caught in it. It is also bad for creators, because they simply will no longer get any money if platforms like YouTube decide they are just going to use filters now.
On the other side, you have the position of the Parliament that says you are liable for everything no matter what you do. This of course puts the platforms in an impossible situation, because of course they cannot get licences from every right holder in the entire world.

DK: How did that position come to be?

JR: I think there is a fundamental lack of understanding of what it means. Basically if the Parliament adopts a position that forces platforms to do something that is impossible, either they don’t want platforms to operate in Europe or they have not understood what they have adopted.
I can only judge the position by what it is, which is a direct liability for platforms for all copyright infringements of their users. Even if they do use filters, as soon as the filter makes one mistake, they are still liable. There is no way out.

DK: It sounds almost like a modern type of censorship.

JR: I think under the Parliament position it simply is not possible to run a platform in Europe legally. So, I think the question of censorship comes up more in the Council position, where the platforms are basically driven to use filters, whereas in the Parliament position, the platforms are stuck between two impossible scenarios. They have to use upload filters that don’t make mistakes, which just don’t exist, or they have to buy licences for everything. Basically, the law says: You cannot run a platform in Europe.

DK: Which also means that content creators have no place to distribute their content.

JR: Yes, in a way it is giving up. It is saying: “This is not a sector where Europe is successful, so we are going to try and destroy it completely.”

DK: Do you think it is a conscious “surrender”, or do you think it just has to do with the fact that legislators don’t know enough about technology, mainly because most of them are older and not as familiar with it as newer generations?

JR: I think there is a lot of different elements that come together. Some politicians do realise that it is unworkable, but they may support it anyway, out of a kind of political expediency, because they hope this problem will ultimately be solved by the Court. Of course, this will take time and we will have a lot of legal uncertainty, but it is politically costly to openly oppose the entertainment industry. They are very powerful in Europe and they have a lot of control over election coverage and things like that, so it is not a comfortable political position to be in. That is why a lot of politicians avoid dealing with copyright infringement.

DK: Perhaps you have some insights into why the entertainment complex is so interested in implementing upload filters in the first place? They must be aware that, yes, they will be able to enforce copyright law, but they are also limiting their own ability to distribute.

JR: I think there are differences in the interests of the different parts of the entertainment industry. For example, the music industry is more interested in negotiating licences with the platforms. They probably think that if the platform has a choice between an overly expensive filter and a license, they will be more likely to negotiate the license. Unlike for other copyrighted material, for music you have relatively strong collection societies that can negotiate a deal. YouTube, for example, already pays the collection societies for music in Germany. It is just that they consider that they do not pay them enough for it. They want to have a bigger stick given to them by the law, in order to change the dynamics in the negotiation. I think their goal is not for platforms to actually use upload filters. However, if we end up with the text that the Council ended up adopting, that would be on the contrary to what the music industry originally wanted. The Council text confirms that, as long as you can use a filter, you don’t have to pay. So, it is really counterproductive.
I think the reason for this may be, because in some ways the film industry is even more powerful and the film industry generally does want upload filters, because they don’t want YouTube to pay them. They want to ensure that especially blockbuster films are not uploaded in the first place. They want to protect their cinema market etc.
Of course, when it comes to upload filters there are also interests from outside copyright law. Copyright law is usually the first step to establishing such filters. Especially in areas like Ministries of Interior there is a lot of interest in establishing this infrastructure for other purposes, such as terrorism prevention.

DK: Leaving terrorist content aside for now, if I surmise this correctly, would you be willing to say that this whole debate around upload filters boils down to the digital side of this new struggle we face between openness vs. protectionism in society?

JR: I do think there is a big element of this in the discussion, because I think it is fashionable to be on the side of openness and the entertainment companies have been able to succeed at presenting this reform as a means of countering monopolisation. They are saying this is a measure against Google and Facebook, therefore you should be thrilled. When in reality, Facebook and Google are quite fine with upload filters, as long as they don’t have to buy licenses. I think the outcome will very much be that this reform will lead to the internet being more like cable TV, where a smaller number of distributors has control over what information gets disseminated. Quite ironically, this is being propagated by people in the security sector, who want to use these tools to protect an open society against Islamist terrorism, or whatever threat of the day. But we have observed for decades now that in this way terrorist tactics are quite successful, as they cause liberal democracies to attack themselves.

DK: Do you think there will be a kind of countermovement or backlash from citizens that will eventually jump off the internet and turn to other alternatives, like a new darknet or something similar? Or do you think that people will simply accept these changes and continue with the internet, because it is convenient?

JR: This change has not been adopted yet and I am always more of a proponent of trying to find political solutions rather than trying to find technical solutions. The experience of the last twenty years or so, since the development of the internet, have shown that sometimes measures to close down the internet are successfully stopped. For example, in the early days there was no net neutrality regulation, because it was not needed and as the threat to net neutrality grew, increasingly countries started putting forward legislation to protect net neutrality.
At the same time, you have this monopolisation of access to the internet with wall gardens and people only experiencing the internet through Facebook etc.

So I think it is a struggle, but it should primarily be a political struggle. Of course, it is possible that if these fights are lost politically and also lost legally, because there is always the possibility of stopping these proposals in the Court of Human Rights, then as a last resort, it is possible that people will try to find a way around the internet and use different communication infrastructures. Of course, I also think that that would be pushing back the development quite a bit. The open internet has accelerated progress in quite a lot of ways and it would certainly be a dampener to it if it worked in a  more centralised way.

DK: We have talked a bit about scenarios for how things could develop realistically, I would like to know what you personally would like to see if it was up to you, taken out of context from our current situation. How would you picture the development of the internet? What would you like to see?

JR: I think we really need to focus on measures that will increase competition and that break down the barriers of competitive advantages of some of the very large companies. For example, if I was the music industry, I would lobby for banning upload filters, because when you think about it, their problem with YouTube is that they have come up with a system for content ID that allows YouTube to break the negotiating power of the collecting societies. By using this filter, they can have every right holder one by one agree to the monetisation. So, the right answer for them would probably be the opposite of what they are currently doing. If you ban upload filters, then YouTube will be forced to either pay or remove the content upon request, neither of which they want to do.

If you translate this to broader questions, I think measures such as the intra-operability provisions that we have in the GDPR are a really good idea, as they allow users to switch more easily between offers. If you want to counter the kind of network effects that you have with large social networks, it is very important to interconnect them, so that you are not too locked into one company or one system and then it becomes easier for people to switch, when something better comes along. Enforcing net neutrality is extremely important. In the EU we have a net neutrality regulation, but it is not sufficiently applied to mobile applications. There is something called a zero rating, where basically mobile providers allow you to use certain applications without using up your data. These kinds of practices need to be clearly banned, in order to allow for competition from smaller players and free and open-source software. That way it is possible to more effectively address the power of large companies. I am also in favour of some of the transparency proposals that have been submitted by the European Commission. They have suggested some transparency obligations on online platforms, mostly in the business sector, for example, when platforms discriminate against companies, such as app stores, or platforms that sell; where they function as gatekeepers. I think transparency is often a kind of regulation that can be quite effective, as it levels the playing field between different players. I would go more in that direction and try to punish the big players in a way.

DK: I gather that European SMEs would need a lot more support from the European level to be able to grow. Is there any other specific policy you would suggest to empower European SMEs and do you also see a role to play for European SMEs in the digital sphere going forward in the establishment of the European digital market?

JR: Harmonizing European rules is often an important precondition, in order to be able to grow your business. Usually, when you start a business, you are familiar with one legal system and the more different the legal conditions are in another country, the harder it will be for you to go online. I think that an opportunity was lost with the GDPR, by putting so many options for member states to an end where you don’t really have one system for all of Europe at the end of the day. It is getting more common than it was before, but I think having one European copyright law, one European data protection law etc. will make the lives of businesses easier, as well as the lives of citizens, as they would know that the same rights that they enjoy in their own country are also applied abroad.

A lot of large companies often have a large influence on policy processes and so often things are just seen from their perspective. Politicians often pay a lot of lip service to SMEs and say: “Oh, yes, they are the backbone of our economy.” But when you look at proposals like the copyright directive, they have completely forgotten that small companies exist in the platform sector. They make assumptions such as if there is a platform that has a large number of uploads, it must be a large company, when this is not the case at all. When you look at revenues of some of the platforms with millions of users, you notice a lot of these companies are actually quite small. We should really look for real life examples of SMEs in the digital sector, when developing policies and make sure that they are feasible in fact.