October 27, 2004 · William Fisher
From the last set of interesting reactions to my proposal for an Alternative Compensation System, I�ve culled a few especially sharp-edged objections. After trying to address them, I turn to the difficult question of what sort of regime is likely to emerge in the entertainment industry if we don�t move toward an ACS.
Valuation Problems Excellent question by Cory, echoed by Erik: �It doesn�t seem that this system addresses variation of value to the consumer. The Economist, for example, can charge a significantly higher yearly subscription fee than Entertainment Weekly, because its relative value to its (I suspect) smaller subscriber base is much higher. How does this system support niche items of high value to their niche?� It�s quite right that my proposal contains a mechanism for incorporating only one of the many variables that give rise to differences among recordings in terms of their value to consumers � namely, duration. (Click here for the relevant portion of Chapter 6.) But that seems to me acceptable with respect to music and film, where differences in value are not very great � as reflected in the fact that, in the current, market-based system, CDs and DVDs of all types sell for very similar prices, and the cost of admission to theatres varies little with the content of what�s shown on the screen. The same cannot be said (as Cory�s example notes) for print media, software, or games � which partly explains why I haven�t proposed incorporating such materials in my plan.
Why not rely on voluntary contributions? Ian�s post, and the FairShare proposal to which he directs our attention, presents this common argument in a novel and unusually attractive form. My response: Your efforts to reinforce, by creating opportunities to invest in promising artists, the willingness of music consumers to donate money to their favorite musicians is commendable, but I see two problems. The first is the notorious reluctance of consumers to make voluntary contributions to creators. People tip waiters partly because it�s a well-established social custom and partly because they are in face-to-face contact with the waiters and would feel ashamed to snub them. Neither constraint operates on the Internet. The unfortunate result is the failure of PayPal etc. to generate significant revenues for artists. The second worry is that, if current trends continue, it will be less and less feasible for musicians to make money through sales of their recordings. (Some observers � including, for example, Jens in her thoughtful post � celebrate or at least accept that outcome; others lament it. But it seems hard to deny.) The result is that, in the absence of an ACS or some other substantial reform initiative [more on this below], over time fewer and fewer investors in your system will recover any money, which will make it resemble ever more closely a pure busking regime, which hasn�t worked thus far.
Big Government Several posts emphasize the hazards of letting a government set up and run such a system. I agree that the dangers are serious � and are discussed in some detail in Chapter 6. Awareness of those risks partly underlies the proposal made at the end of the chapter for a voluntary Entertainment Coop, which would resemble a government-run ACS, but would rely upon subscriptions, rather than taxes. (If you�re curious concerning how such a system might be constructed and what might prompt people to sign up for it, check out this summary.) But, as by now should be apparent, I am less despairing concerning the ability of a responsible government agency to manage such a regime than are several people who have participated in this last round of discussion. Government-run collecting societies in Europe and judicially supervised private collecting organizations in the U.S. (ASCAP and BMI) are far from perfect, but they are not disastrous either. Certainly, composers are better off in their presence that they would be in their absence. I�ve tried, in my book, to identify their defects and suggest ways in which they could be corrected. In the end, I find efforts of that sort more promising than any of the alternatives.
Other Options Speaking of alternatives, if we don�t move toward an ACS or an Entertainment Coop, what is likely to happen? Most likely, one of three things:
1. Unauthorized copying continues to increase, and consumers increasingly rely up materials obtained (free) online for their entertainment needs. The film industry, in its current form, collapses � perhaps replaced by small, independent studios, financed by donations from corporations, foundations, and government agencies. Musicians continue to make recordings (inexpensively, using the rapidly improving digital recording technologies) but don�t earn any money from them, treating them instead as advertising for their performances.
2. The record companies and film studios, dismayed by the prospect of #1, persuade Congress to reinforce the copyright system substantially � for example, by adopting the INDUCE Act and sharply increasing criminal penalties for unauthorized reproduction of digital recordings. We see a protracted �war on piracy� very similar to the longstanding �war on drugs.�
3. Alternatively, the record companies and film studios persuade Congress to adopt some version of the Consumer Broadband and Digital Television Promotion Act � which requires the manufacturers of all consumer electronic equipment to embed in their products technology that recognizes and respects watermarks, and to remove from their devices all analog ports.
I�ve already explained in prior posts why I think #1 is an unattractive outcome � though plainly I have not persuaded everyone. That said, #1 is the least probable of the scenarios. The record and film industries are sufficiently powerful, and the majority of Congressmen are sufficiently sympathetic to them, that, if the fundamental transformation contemplated by #1 seems imminent, we will see legislation of type #2 or type #3. The merits and demerits of those routes are explored in Chapter 4 of my book. Before addressing them, I�d be curious concerning whether anyone has a different forecast.