All at sea in battle over online piracy

For many businesses, it is the flipside to the problem of trying to make money out of the internet. If they are struggling to retain ownership of their content, how can they monetise it?

It is clear that in most cases advertising alone cannot subsidise high-quality content. And, as Patrick McKenna, chief executive of private equity firm Ingenious Media, told the Government's Digital Britain inquiry: "You cannot build creative businesses... unless the intellectual property created by artists, writers and composers is capable of being commercially exploited for a profit that is then reinvested for future growth."

The global, sprawling nature of the digital world - and the libertarian free spirit of many web enthusiasts who indulge in so-called peer-to-peer illegal file-sharing - makes the idea of enforcing copyright seem daunting.

But, given the financial gravity of their predicament, creative leaders in music, film, TV, publishing and software have been willing to listen to Government.

Communications minister Lord Carter vowed to tackle the issue of copyright in his Digital Britain Report, which is due to be published on 16 June, and has come up with a series of proposals. Alas the reaction from creative industries has been decidedly mixed.

Carter's key suggestions were:

the creation of a pan-industry Digital Rights Agency to support copyright with incentives for legal users;

setting up a fund, using a "modest" levy from both distributors and rights-holders, which would help pay for enforcement;

legislation "requiring" ISPs (internet service providers) to notify individuals that they are using illegal content;

forcing ISPs to collect "anonymised" data from users, which could then be used against "repeat infringers", so that rights holders can take them to court.

Carter admitted that his ideas could be "torched, tolerated or a touchstone for the start point of constructive debate". Now, as even Whitehall insiders concede, the message has come back that some of the ideas should be, well, "torched". The Digital Rights Agency, in particular, looks like being heavily watered down, if not abandoned.

This is not to minimise the anger that most creatives feel about the issue of "digital theft", which is undermining so many businesses.

Some organisations such as the Motion Picture Association, representing film producers and distributors, have backed the idea of forcing ISPs to notify individuals about their illegal behaviour. They suggest that ISPs could also suspend or restrict individuals' internet browser services on a temporary basis, and block rogue sites.

But many creative leaders also make clear that they feel that strong state intervention could backfire - by stifling innovation, upsetting consumers and being economically unviable. More drastic measures, such as altering the law of copyright, would have to comply with European law.

As UK Music, an umbrella group representing the music industry, points out: "It is not the ambition of rights holders to sue their own consumers." Thousands of civil court cases would be highly impractical.

Lavinia Carey, director-general of the British Video Association, agrees that legal action should be a "last resort" and wants the onus to be on the ISPs to create "road humps" such as the graduated warning letters and squeezing bandwidth to deter offenders.

The media regulator Ofcom may be better placed to help, rather than a new quango such as the Digital Rights Agency.

Naturally, ISPs are not keen on greater regulation. They did agree last year on a memorandum with rights-owners to tackle illegal file-sharing - a voluntary code which means ISPs do write to persistent offenders. Umbrella body the Internet Services Providers' Association is strongly opposed to dramatic moves such as cutting off users.

To be fair to Carter, he has not demanded that Government should impose legislation, merely to offer a guiding hand. The apparent lack of unanimity about what action to take on piracy does not change his fundamental point that the status quo is unacceptable and that illegal file-sharing must be cut by 70%-80% within 2-3 years. Piracy remains a state of mind for many young web users - only 10% of young people are currently deterred by a fear of being caught, according to a University of Hertfordshire survey.

But there is also evidence that consumers are more aware of the differences between legal and illegal content. The Pirate Bay trial in Sweden last month, which saw the four founders of the illegal entertainment site jailed for a year, sent a message worldwide.

The Digital Britain team, which is keen to use education to change attitudes, points out: "'Inexpensive' (or apparently 'free') and easy and legal' can be an effective substitute for 'free and easy but unlawful'."

The good news is that the market is evolving and new business models are emerging - witness the rise of legal music websites such as Spotify and this week's belated deal between the Performing Rights Society and YouTube over the cost of showing premium videos belonging to record labels. Rights negotiations can be highly complex - for the BBC iPlayer, it took five years to agree terms with over 70 external parties before its 2007 launch.

However, technology is also allowing rights owners to protect their content better. Services such as iPlayer also show that it is increasingly possible to enforce strict limits, for example, only making content available for seven days or "geo-blocking" (making it impossible to view outside key geographical areas). The caveat is that hackers delight in finding ways around security measures such as digital rights management.

This brings us back to ISPs which, many feel, could do more. As the British Copyright Council says, it wants "a greater onus [put] onto ISPs to take responsibility for the content they carry".

These ISPs, such as BT, Virgin and AOL, are hardly small fry.

Those in the creative sector who have had contact with Lord Carter as recently as this week say they are now optimistic of movement on the ISP issue.

Plainly these problems are global and stretch over national boundaries. But as the Swedish Pirate Bay case and France's recent threat to prosecute over online copyright in the criminal courts show, the state does have clout.

Over to you, Lord Carter.