Part III: The Implications of New Technologies and Consumer Preferences for Parallel-Importing Bans
| Part III briefly outlines the ways in which new technologies and changes in consumer preferences could impact on the effectiveness of parallel-importing bans. |
3.1 The Significance of New Technologies and Changing Consumer Preferences
198. New technologies and changes in consumer preferences have the potential to profoundly change the way in which consumer goods are packaged, distributed and enjoyed. So it is important that the effects of these are taken into account in an examination of the likely effectiveness of parallel-importing bans. This is particularly true of the creative industries, where new formats for recording and presenting works and new methods of distribution are constantly being developed to meet consumer demands for improved quality and increased convenience.
199. New technologies and changing consumer preferences are particularly relevant to consideration of parallel-importing bans. The reasons for this are:
- Parallel-importing bans can only effectively restrict the importation of goods for retail sale. They cannot restrict private and domestic use (such as mail order or personal imports by overseas travellers).
- Parallel-importing bans cannot effectively restrict the importation of copyright goods via telecommunications systems - for example, digital distribution over the Internet.
200. As the take-up to date of these new means of selling and distributing copyright works is limited, some of the implications and effects outlined below might be some way off. The purpose of this section, however, is to provide a context in which to invite views on how existing trends, future developments, and changes in consumer behaviour are likely to affect attempts to restrict parallel imports.
3.2 The Potential Effects of Internet Mail Ordering
201. New Zealanders have always been able to mail-order goods from overseas stores. 34
With increased access to the Internet and the rapid growth in home-shopping opportunities offered by businesses going "on-line", more New Zealanders are purchasing goods over the Internet for mail delivery from overseas-based Internet retailers. A large proportion of these goods are creative-industries goods such as books, motion picture DVDs, and music recordings. This change in purchasing methods will affect the ability of parallel-importing bans to restrict intra-brand competition in New Zealand.
202. Under a parallel-importing ban, overseas titles not yet released in New Zealand by local distributors would still be available from other countries via the Internet. Cost is not likely to be a deterrent here, in that some consumers will choose to order several titles at once and so take advantage of free or reduced freight costs. Shopping on the Internet can also be cheaper because many Internet retailers cross-subsidise their retail prices through advertising revenues. It can also offer consumers special or customised goods and services not available in New Zealand because of the small size of our market. These factors mean that, of the total amountof overseas copyright goods that come into this country, the proportion imported by local distributors is likely to diminish. This will reduce the potential coverage of parallel-importing bans.
203. It is not proposed to prevent the parallel importation of creative-industries goods for private and domestic use. As noted above, it would be almost impossible to police such a ban. Restrictions on parallel importing any of the creative-industries goods under review will therefore only prevent those New Zealanders who do not have access to the Internet from gaining the benefits of a greater range of titles and added specialist services.
204. People on low incomes are likely to have the most limited access to the Internet. There is, therefore, potential for a ban on parallel imports to disproportionately restrict this group's access to the range of consumer goods available to Internet shoppers.
3.3 Electronic Distribution
205. A further reason why parallel-importing bans could be increasingly ineffectual in restricting the distribution of creative-industries goods in the future is the use of the Internet to distribute electronic copies of titles.
206. Software companies and developers have offered the direct downloading of programmes for some time, particularly freeware and shareware. With increases in bandwidth, many companies are likely to offer a greater number of products for purchase and downloading via the Internet.
207. The music industry is rapidly developing infrastructure that will allow it to offer electronic copies of copyright music via the Internet. The development of compression technologies (such as MP3 35 ), the popularity of file-sharing services such as the infamous Napster and Gnutella, and concerns about digital music piracy have all hastened the speed with which the major international record companies are developing electronic distribution services. The recent announcement of an alliance between one of the world's biggest record companies (BMG) and Napster to develop a secure on-line music distribution service, and the on-line music distribution trial by another major record company (Universal), demonstrate the music industry's awareness that the demand for electronic music distribution is increasing.
208. Motion picture distributors also acknowledge that new technologies are likely to have an effect on the distribution of motion pictures in the future. With improvements in compression technologies, high-speed Internet connections and increased bandwidth, Internet "pay-per-view on demand" might become an alternative to rental shops as a means of motion picture distribution. A number of motion picture producers and distributors are reportedly working on Internet delivery initiatives. 36
Some film and video distributors spoken to by the Ministry contended that this might result in the video/DVD rental "window" diminishing in importance, and the pay-per-view "window" becoming a more important revenue earner.
209. The net result is likely to be the reduced importance of traditional methods of distributing creative-industries goods as producers, distributors, and consumers develop and utilise electronic distribution. Parallel-importing bans are therefore likely to be of less effect in allowing copyright owners to control the distribution of their goods into different markets.
210. Copyright owners' primary concern in this area is the potential that digital and Internet technologies have for facilitating piracy. The Ministry is currently drafting a discussion paper on the implications of new digital and Internet technologies for the Copyright Act - including looking at ways to ensure that appropriate copyright protection is available in the digital age. 37
3.4 New Formats
211. New formats for recording and storing creative works also need to be taken into consideration when considering arguments about parallel-import bans. An example highlighted by film stakeholders is the DVD format. The improved quality of recording and additional features offered by DVD has led to it being in high demand by a growing purchaser group that consists of both motion picture and music enthusiasts. As a result,specialist parallel importers and Internet retailers - based both locally and overseas - have expanded what was previously a limited range of DVD titles offered by authorised distributors.
212. Film and video distributors also told the Ministry that they expect the DVD format to become increasingly popular as more titles become officially available for release in New Zealand, and as the price of DVD players becomes more affordable. Distributors added that the length between theatrical and video/DVD windows in the United States is expected to reduce as the popularity of the DVD format increases. The Ministry has interpreted this to mean that in the future there will be less opportunity for new-release titles to be parallel-imported before local release.
213. The increasing availability of CD-ROM as a format for the supply of educational materials such as journals and multi-media works is another example of a new format that needs to considered in the parallel-importing context. If efficient local supply lines have not been established, a parallel-importing ban might affect the ability of libraries and educational institutions to access information.
214. The impending arrival of new formats that are currently being developed also needs to be considered. One example, which is particularly relevant to film distributors' arguments about the potential effects of parallel importing on provincial cinemas, is the development of "digital projection" technology. This technology is likely to use motion pictures on DVD or a similar digital format instead of bulky and expensive film prints. This will greatly reduce the cost of copies for projection in cinemas and will remove problems associated with the supply of copies of new releases to theatres. Some film industry stakeholders suggested that this technology will be ready for release not too far in the future. So concerns about the cost of copies of new films and the potential effects on provincial cinemas of distributors' decisions to bring release dates forward may soon be addressed by the new formats being developed.
| Request for Information 3 The Ministry requests information on the impact that new technologies and changing consumer preferences (including Internet ordering, new methods of distribution, and new formats) will have on the effectiveness of parallel-importing bans. |
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37 This paper will consider what changes to the Copyright Act might be required to ensure that the balance between the rights of copyright owners and copyright users in the print world is not inconsistent with that in the digital on-line environment. Along with a separate discussion document on performers' rights, it will also consider what changes to New Zealand copyright law would need to be made to implement the requirements of the World Intellectual Property Organisation (WIPO) Copyright Treaty, Performances and Phonograms Treaty, and a new agreement on the rights of performers in audiovisual performances due to be negotiated in December 2000. The Ministry hopes to have this discussion document ready for public release in 2001.
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