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Could Toutiao.com Achieve a Settlement with Traditional Media?

Toutiao and its investors would never have thought that a bomb from traditional media would come close on the heels of the Toutiao announcement that it had secured $100 million USD of Series C financing at a valuation of $500 million USD. The Beijing News made a comment “Toutiao.com: Whose headlines are they?” to attack the copyright infringement of Toutiao.com. Afterwards, Toutiao instantly replied, categorically denying infringement. However, just as the trees may wish to be still, the wind doesn’t stop, Toutiao may prefer the criticism to stop, but the traditional media will not subside. Soon, the copyright infringement of Toutiao soon became a public focus, being the subject of a variety of media’s collective enforcement on the grounds of copyright infringement.

I. The form of the attacks on Toutiao

In the attack of Toutiao, traditional media, portal websites and even some individuals jointly participated. Beijing News, other newspapers and some reporters increased criticism in many of their stories. Some portal websites such as Sohu.com and Tencent announced that they would cease cooperation with Toutiao. Dayoo.com, an affiliation of Guangzhou Daily, directly used a legal approach to protect its interests through the filing of a lawsuit on the grounds of copyright infringement against Toutiao, claiming that the court should request Toutiao delete all of its articles and news, by making a month-long apology on Toutiao’s mobile app, as well as asking for an according level of compensation.

Why did a variety of media file complaints and drop such a large bomb against Toutiao, an app concentrated on recommending news? It is inconsistent with a general tradition of tolerance towards new things. On the surface, the reasons are as follows:

1. Traditional media suffered fiercely from the Internet and lost many readers. With the growth of mobile Internet, traditional media could have been using mobile internet to reclaim their dominance but could only watch while more technically capable mobile apps, such as Toutiao, seized the market. Compared to some internet websites that are purchasing the copyright from traditional media, mobile Internet companies usually appear to proceed by both removing their ads and not purchasing copyright. Now that traditional media cannot reclaim their dominance, they can only prefer copyright disputes, in order to increase their income streams in this area, on the grounds that many mobile Internet companies did not purchase copyright from them, and accepted the corresponding legal risks. Portal websites such as Sohu.com and Tencent, as vested interest groups, have always faced the risks of losing their dominance, so they chose to gather with traditional media to file complaints against Toutiao, for the purpose of attacking their competitors.

2. Toutiao behaved outside the industry standards. In order to survive and develop as a rapid growing start-up company, Toutiao preferred using its design to attract readers by improving the reading experience, and appeared to fail the take into account the writing, distributions system and the interests of traditional media whose news were scraped. They not only failed to purchase copyright from the original media sources, but also walked at the edge of legality, reposted the contents of the original media via code transformation on its website, and removing the original ads during its display to users.

3. Since Toutiao had secured $100 million USD financing, the current attack could merely be laying the groundwork for copyright payment in the future. As a new recommendation app, Toutiao claimed its commercial mode was designed to accurately deliver ads based on a user’s interests. Due to the fact that Toutiao has gathered such large amounts of both users and news distribution, it would have been a risk if Toutiao did not purchase copyright from the writers and copyright holders. Since Toutiao had secured such an enormous amount of financing, if traditional media attacked Toutiao at this time, they obviously could take an initiative in copyright payment negotiation in the future.

Actually, similar to this public event starting from Toutiao, in recent years, the copyright contradiction is a prominent question that has caused several public incidents.

In the first half of 2011, Baidu produced and went online with Baidu Library and was subsequently the subject of filed complaints by about 50 writers, like JiaPingao, Han Han, and Li Chenpeng. Such complaints soon became a public event and resulted in Baidu issuing an apology and deleting thousands of documents.

In the first half of 2012, the State Copyright Office publicized the Draft of Copyright Law. Due to the illegitimate organization of both music covers and copyright collective management, the draft raised immediate skepticism in the whole music industry, and many famous musicians such as GaoXiaosong, Songke and Wang Feng unleashed withering criticism upon the draft, soon causing a public outcry. By virtue of the over-sized opposition from relevant interest groups, the legislative proceeding of the Copyright Law has suffered setbacks, being slow to develop in the past two years.

In the afore-mentioned copyright events writers and musicians used the intense speeches to express their anger (similar to the Beijing News), and would have preferred a stronger position and language, creating a considerable impact among the public. However, these attempts still failed. Even though Baidu Library deleted thousands of documents and only left hundreds of documents, users continued to upload their documents and thus immediately the amount of uploaded documents was far more than that that was deleted. As musicians slowed the legislative proceedings of the Copyright Law, it did not decrease the impact on the music industry and thus it is unlikely for musicians to reclaim their higher income in the 1980s. Similarly, even if traditional media could eliminate Toutiao, I am still wondering whether such attack would actually improve their situation. According to the laws of the market, competitors will quickly grab any vacant market space left by a potential demise of Toutiao, and users accustomed to smart phones will also unlikely to use the website of traditional media to read news.

II. Did copyright holder’s anger make no difference to the matter?

Why is the copyright holder angry? Why does their anger make no difference? Multiple factors determine the answers:

First, legislation and commercial models have not kept up with the development of technology.

Current legislation and commercial modes have not kept up with technology, as the commercial model of copyright industry has being taken mankind several hundred years to set up. This commercial business model shall refer, in short, to where writers distribute their contents to the public and charge th through distributing the copies. In this commercial model, there are three major subjects, i.e., the writer, the distributor and the user. Amongst the three major subjects, the writer plays the leading role in in controlling the distributors, through their authorization of reproductions and distribution. Corresponding to this commercial model, current Copyright Law aims to protect the right of reproduction and the right of distribution, and is designed to fight against unauthorized reproduction.

With rapid technological advances from the Internet, reproduction and broadcasting will be greatly simplified and thus technology attacks the writers from all sides. Every reader could share the contents and act as a distributer. Furthermore, technology allows commercial distributors to bypass the authorization, gaining a commercial advantage. For example, if a type of news app such as Toutiao could only recommend the news links of traditional media, no authorization is required. If the Maginot line of the right of reproduction and the right of distribution as regulated in the Copyright Law has been bypassed, such a bypass would push traditional media into extinction, relieve them from crucial monetary streams and shake their foundations. Technology would tip the scale towards the distributors and users.

As there has been rapid growth in technology and business models, as usual the law is slow to catch up. Considering that the Copyright Law aims to protect the right of reproduction and the right of distribution, it will be hard for the Copyright Law to protect writers in the internet environment. The copyright holder finds it hard to punish the large amount of small infringers who are unauthorized to publicize their contents, on the grounds that the law is not responsible for the public, furthermore with regards to the new big distributors such as Toutiao, whose commercial model questionably constitutes copyright infringement, it is difficult for the copyright holder to protect its rights and interests. Therefore, the copyright holder feels helpless to fight against smaller infringers as well as the big distributors. The feeling of helplessness is likely to a cause of copyright holder’s anger.

Secondly, intellectual property enforcement is constrained by China’s actual conditions.

Intellectual property protection corresponds with China’s actual condition. In the judicial system, there is a slogan that intellectual property protection shall be in accordance with China’s actual condition. The fact that China is at the primary stage of socialism is the true condition. Based on China’s actual condition, China sets a sufficiently low standard of compensation upon intellectual property protection and its judicial enforcement. Take traditional media filing lawsuits against Toutiao as an example. The compensation of copyright infringement generally is in accordance with a low payment of an article made in the last century. It is likely that a copyright holder spends so much on filing lawsuits against the infringer, that they will receive so little compensation from the infringer that it might be less than the cost of litigation.

Intellectual property legislation, enforcement and jurisprudence all attempt to create a uniform standard. As with the old saying that a single move indeed affects the whole system. If the compensation standard is increased in legislation, there will be some difficulties to the courts because so many infringing lawsuits will be flooding the courts which have limited judges and are already overburdened.

Low compensation is just not good. However, the standard for intellectual property crimes is actually low in China. The Interpretation (II) of the Supreme People’s Court and the Supreme People’s Procuratorate on Certain Issues Concerning the Specific Application of Law in Hearing Criminal Cases of Intellectual Property Rights Infringement stipulates that the crime of selling pirated goods, such as selling pirated DVDs, will amount to a serious crime of copyright infringment, stipulating that whoever reproduces and distributes the copyright owner’s works more than 500 times in total shall fall within the crime of copyright infringement, close to that of developing countries. In this way, a seller of pirated DVDs shall be committed a crime. However, actually, there are not many sellers of pirated goods being caught, so that less than one percent of the sellers will be sentenced for committing a crime. If the violation will not be punished, this not only reduces the legal credibility, but is also detrimental to law enforcement.

Thirdly, the Internet industry is more competitive than traditional media.

Under the normal circumstances of fair competition, traditional media is less competitive than Internet media in the news cycle, interaction and media experience. Traditional media have the advantages of content creation and habits of readers, but Internet media can create contents, hire more staff, and learn the creation model. With regard to the habits of readers, most readers may change their reading habits, and some readers who are unwilling to change their reading habits are getting older and older, thus the advantage of traditional media is gradually being swept away.

Considering unfair competition, the advantages and disadvantages of internet media and traditional media clearly show up. Traditional media is further restricted with regard to taboo topics, governance and other constraints compared to Internet media. Content creation takes, despite being the advantage of traditional media, more effort and money. Most of the time internet media does not spend any money of receiving contents from traditional media, instead using the help of technology. For example, Toutiao could transcode the contents of traditional media to control access to the original content. The approach of using links is permitted in China, but if the linking page has been changed, it will damage the interests of traditional media. Initially, Toutiao linked in such a way as it changed into its website for reader’s reading, with no more linking to the original website. After being criticized, Toutiao put a link jumping to original website, rather than just scraping the contents. However, whether displaying the article on its website or the original website, news in Toutiao’s mobile app are all transcoded pages, removing ads from the original websites, which damages the interests of traditional media.

Internet companies have taken many similar opportunities with the excuse of putting the user first. Except for just linking, Internet media also steals the content of traditional media and then remakes an article, far from being real original content creation. Actually, Chinese internet companies carry on wars against the copyright holder in the industry of copyright, similar to that of Toutiao. 

III. Traditional media and Internet media could work together toward a win-win situation.

However, most Internet companies which attempt to reuse original content and removing their ads, do so because they have fewer resources and are subject to fierce competition. Internet companies have had no choice but to adopt this approach for its development. Most Internet companies that have their intact individual vision are likely to take a step toward making major changes in world affairs. For example, CEO Chen Tianqiao producing EZ Station brings the Internet into sitting room, and Xiami.com used P2P networks to sell music helping the recording industry out of trouble. At the initial establishment of Shanda Corporation and Xiami.com, they were also troubled by issues of copyright.

Traditional media hopes to achieve a win-win situation in line with the law of the Internet within the commercial model of new copyright. It is likely that their hope is conceived in start-up Internet companies such as Toutiao, which make the utmost use of their technology, grasping information, analyzing the habits of readers and the user directional push, which traditional media just does not have. According some reports, Toutiao plans to send ads personalized ads, similar to what Google and Facebook implement. If Toutiao can deal with this dispute, pay attention on further cooperation and establish a win-win situation. Toutiao is likely to become a company which helps traditional media out of trouble and causes a sea-change in news-reading.

Finally, copyright holders encounter this problem all around the world. Even in the U.S, New York Times and the Wall Street Journal are still stuck in bottleneck. Therefore, anger arising from traditional media cannot change the situation. It takes time to change the situation. Most importantly, the traditional media need to push forward towards a practical cooperation with new internet companies and technologies and explore a new commercial model, despite the risk and length of time this may entail.