Regulated online contracts would create exports to fill R50bn hole

All local content, data and copyright monetised outside SA could become an export and bring in revenue [Source: REUTERS] All local content, data and copyright monetised outside SA could become an export and bring in revenue [Source: REUTERS]

South Africans create and export content and data. But there is no accountability, disclosure or transparency about the trade and profits of this work to any local authority, copyright owner or app user.

When SA citizens use an internet service provider (ISP) or an app, they transfer their world rights to other countries — for iTunes to the Middle East, Facebook and Google to Ireland, Skype to Luxembourg, and Spotify to New York.

Facebook, Apple, Microsoft, Google and Amazon have a market share of $3.5-trillion. They use algorithms to understand their users, collect data on their consumer habits and find better ways to sell their services and products.

The data is also sold to advertising companies, data miners and other willing buyers. It is regarded by some as "the new gold".

SA’s copyright law contains no regulations on data. The Electronic Communications and Transactions Act 25 of 2002 as amended favours businesses that monetise data rather than people who create it. In online contracts the word "content" has largely replaced "copyright" and "user generated content" has replaced "copyright works".

The department of trade & industry is leading the process of copyright reform with the Copyright Amendment Bill. The chair of parliament’s portfolio committee on arts & culture, Xoliswa Tom, says they are engaged in conversations about how to represent the needs of all stakeholders.

"The department of arts & culture needs to come to the centre of this process because it is affecting their stakeholders," she says.

The Copyright Alliance, representing primary content management organisations, and Recreate ZA, "a coalition of SA creatives", are diametrically opposed on the issue of fair use but are both lobbying on the bill.

The EU, the US and Brazil have regulated online contracts but others have been slow to catch on. In SA online contracts are not regulated but are governed by the "One World" licence which "transcends geographic and national boundaries".

Online contracts used in SA grant rights on a global basis and have terms and conditions that cannot be amended, only accepted. It is a "perpetual, free and irrevocable grant of all content, data, copyright work rights", as the terms and conditions state.

"Making use of any online contract such as Facebook, Twitter and Instagram, an SA citizen is obliged to import their own content, data and copyright to use the apps," explains multijurisdictional copyright lawyer Graeme Gilfillan.

"SA citizens and the state are unable to participate in upside revenue streams from their content, data and copyrighted works and are debtors for their own content."

The monetisation of content, data and copyrights is enjoyed globally with not one cent flowing back to SA.

Unctad statistics show that in SA imports have risen 10-fold from R245m to R2.01bn in the past decades and exports over the same period have risen from R49m to R67m.

"The regulation of all online contracts would, in one short piece of legislation, effectively turn SA’s import splurge into exports with huge dividends to the state. This would see a complete reversal in the current import/export diametric spiral," says Gilfillan.

Regulated online contracts means the rights holders, global ISPs and apps would all have to do business in SA.

"This creates the greatest opportunity for black economic empowerment. Imagine if Facebook had to do a BEE deal in SA," Gilfillan says.

It is estimated $20bn is made annually from monetising SA content, data and copyright with third-party apps and internet or other digital service platforms. By regulating online contracts, all local content, data and copyright monetised outside SA would become an export and South Africans could participate in that revenue. The R50.8bn revenue hole in 2017-18 could be filled through regulation of online contracts.

Suppliers of local content, mainly collecting societies and multinational labels, collect an estimated $1bn from online copyright users outside SA.

SA content suppliers negotiate global user agreements with internationally based ISPs and apps from their legal jurisdictions outside SA. Labels, publishers, content management organisations and associations are conducting wholesale negotiations with local content, data and copyrights offshore.

"The multinationals Sony, Universal and Warner have head offices in New York and London. The SA Performing Rights Association is talking to the International Federation of the Phonographic Industry in London," says Gilfillan.

"The Southern African Music Rights Organisation is talking to the International Confederation of Societies of Authors and Composers; and the local Composers, Authors and Publishers Association to the international organisation for mechanical rights societies."

Copyright Alliance member Andre Myburgh, who has been appointed to the Copyright Bill subcommittee, is based in Switzerland. He refused to make comment.

SA Revenue Service (Sars) group executive for legislative research & development Franz Tomasek says Sars is working with an international task force on the digital economy that is considering the tax challenges of digitalisation, flowing from work done by the Group of 20 and Organisation for Economic Co-operation and Development base erosion and profit shifting project.

"No international consensus has been reached and the task force is working towards achieving such consensus and a final report by 2020," Tomasek says.




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