Background: This was written to argue against the new Norwegian copyright law, which would implement the EUCD directive, essentially a European version of the DMCA. It is an attempt to sum up the market-based argument against protection of DRM technology, as it applies to Norway. It may have interest for other countries as well.

The original article appeared in Dagens Næringsliv (a Norwegian business paper) on April 22, 2005.

Guardians of markets past

Espen Andersen

Every year a veteran car race from London to Brighton is arranged to commemorate the 1896 abolishment of the “red flag” law. This law forced automobile drivers to have a man walking in front of the car, waving a red flag to warn pedestrians and horse carriages that something new and dangerous was approaching. The law came into being because the lawmakers were scared of a new technology – the automobile – and thought they could keep it at bay with a simple, technical barrier.

It didn’t help much.

The new copyright law, popularly referred to as the MP3-law, is on track to become this century’s version of the man with the red flag. It is promoted by the large music industry companies, who blame falling CD sales on Internet distribution and pirate copies. According to the industry spokesmen, it is curtains for music as we know it unless we get legally protected technical barriers to use and publicly sanctioned Internet wiretapping.

However, if you look a little bit closer at the music industry’s own statistics, and hold them up against developments in other markets, the picture changes. I have spent some time doing this (a longer, Norwegian-language report can be found at and have found that:

The Norwegian music records industry is interesting from an academic viewpoint because it is an excellent example of an industry being hit by a disruptive technology . This concept, coined by Harvard Business School professor Clayton Christensen, signifies a sneaking attack from a new technology. The new technology (in this case, MP3-files delivered over the Internet) has lower quality (MP3-files are not as good as CDs,) first attracts customers the traditional companies don’t care for (teenagers with little money,) and – most significantly – if the traditional companies were to switch to it, their profitability would fall (margins on Internet-sales are low, as are the costs.)

Even though it starts small, the new technology gradually eats into more and more attractive parts of the market, and the existing companies will gradually lose ground to something against which they really can't defend themselves.

The industry will say that pirate copying effectively will make music a free resource, and that locks and police protection is necessary for it to survive. It is impossible, says the industry, to sell something that people can get for free on their own.

In 2004, however, 19 million liters of still water was sold in Norway, an increase of 19% over 2003. This in a country rightly famous for its excellent water - which is available free of charge almost anywhere, including at restaurants. Still people buy bottled water, because it is convenient, chilled and has branding status. You buy the experience of the water, not the water itself. Moreover, you can refill the bottle, since the bottlers have not insisted on legally protected barriers to reuse.

Music distribution over the Internet, without technical barriers, will give customers more music, artists more money, and the society further culturally important musical development. Against this stand those whose interests are mainly in preserving an outdated business model. They demand a digital version of the man with the red flag. And since many legislators believe them, they might get what they want.

The rest of us will just have to watch how things evolve, and perhaps start to plan what kind of arrangement we should have when we, with much suppressed laughter and shaking of heads, abolish the law again.

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