October 25, 2004  ·  William Fisher

Several of the interesting and challenging responses to my original post focused on the merits and demerits of my contention that an alternative compensation system (ACS) would be superior to the copyright system as a way of compensating the creators of recorded entertainment that is distributed online. I had originally intended to save discussion of that topic for later in the week. But it�s understandable that people want to take it up now, so here goes�. I�ll begin with a very brief summary (taken from the Introduction to the book) of my variant of this idea, then address a few of the more serious objections to such a system.

First of all, it�s important to emphasize that I�m not the only person who has proposed an ACS. The pioneering treatment is Neil Netanel�s. Among academics, Jessica Litman, Raymond Ku, and Glynn Lunney have all contributed importantly to the project. The general idea has been in the air for at least a century. Certainly, several of the people who have gone before me would disagree with some of the comments set forth below. With that caveat, here�s the summary of my own version:

�The owner of the copyright in an audio or video recording who wished to be compensated when it was used by others would register it with the Copyright Office and would receive, in return, a unique file name, which then would be used to track its distribution, consumption, and modification. The government would raise the money necessary to compensate copyright owners through a tax � most likely, a tax on the devices and services that consumers use to gain access to digital entertainment. Using techniques pioneered by television rating services and performing rights organizations, a government agency would estimate the frequency with which each song and film was listened to or watched. The tax revenues would then be distributed to copyright owners in proportion to the rates with which their registered works were being consumed. Once this alternative regime were in place, copyright law would be reformed to eliminate most of the current prohibitions on the unauthorized reproduction and use of published recorded music and films. The social advantages of such a system, we will see, would be large: consumer convenience; radical expansion of the set of creators who could earn a livelihood from making their work available directly to the public; reduced transaction costs and associated cost savings; elimination of the economic inefficiency and social harms that result when intellectual products are priced above the costs of replicating them; reversal of the concentration of the entertainment industries; and a boost to consumer creativity caused by the abandonment of encryption. The system would certainly not be perfect. Some artists would try to manipulate it to their advantage, it would cause some distortions in consumer behavior, and the officials who administer it might abuse their power. But, on balance, it is the most promising solution [to the intensifying crisis in the entertainment industry].�

Here are five worries/objections often raised by skeptics of such a system � followed by efforts to address each:

(1) Does such a system �scale� internationally (see John Allsopp�s post)? This is definitely one of the weaknesses of an ACS. If adopted in only one country (say, the U.S.), it would �leak� across national boundaries � in the sense that French artists whose creations are downloaded in the U.S. would be paid portions of the tax revenues collected by the American government from American consumers, while French consumers would gain free access through the Internet to the creations of American artists, and American artists would not collect anything from French taxpayers. To be sure, American artists would be no worse off under such a regime than they are at present. Nevertheless, awareness of this aspect of the system would contribute to the already substantial resistance of Americans to the adoption of such a regime.

Is there any escape from this bind? Modification of the pertinent international treaties (most likely, the TRIPS Agreement) to force other nations to adopt similar regimes is extremely unlikely in the near future. Harmonization thus would have to occur through voluntary adoption of ACSs by other countries. Chapter 6 of my book explains: �The success of the system might prompt countries other than the United States to institute similar systems. Each would impose taxes on its own residents� ISP subscriptions and purchases of electronic equipment. Each would establish a registration system, permitting copyright owners from every country to register audio and video recordings. (Ultimately, these separate national offices might be superseded or supplemented by a global registry for digital works.) Using schemes like those outlined above, each country would estimate the relative frequency with which those recordings were consumed by its residents � and would then distribute its tax revenues accordingly, to both domestic and foreign registrants. An interlocking set of national regimes of this sort would cure the third of the three major disadvantages of a tax-and-royalty system noted in the previous section � namely its tendency to leak across national boundaries. All of the national regimes would continue to leak, of course. But the leaks would occur in both directions � and would fairly reflect the extent to which consumers within one country were relying for their entertainment on works created by artists in other countries.�

(2) Would artists really be compensated in proportion to the frequency with which their creations are consumed? Skepticism on this score takes two very different forms. Some people (like Jeremy Williams of Warner Bros.) worry that too much money would be channeled to minor contributors to the stew of entertainment products, leaving the studios with too little income to support high-cost modern productions. Others (like John Allsopp in his post) have the opposite concern � that the enormous number of artists whose works are downloaded in small numbers will not get their fair shares. The ability of the system to assuage both concerns depends on the quality of the sampling system used to count consumption rates. In Chapter 6, I devote a fair amount of space to a discussion of how one might design an effective sampling system. In brief, here are its essential features:

�[T]he Copyright Office [w]ould randomly select a set of entertainment consumers who were willing to allow the Office to monitor what they actually listen to and watch. The imperfections of the Nielsen model could be avoided (or at least mitigated) through the following [three] related adjustments. First, the process of gathering data concerning consumers� habits could and should be automated. Software � distributed as �plugins� for playback devices or bundled with peer-to-peer file-sharing applications � would automatically record the registration numbers of the songs and films that sample members heard and watched (all the way through) and periodically transmit that information to the Office. Sample members would thus experience no inconvenience and would have few opportunities to misreport their choices. Next, the size of the sample employed by the Copyright Office would have to be vastly larger than the sizes of the samples used by Nielsen. This would be essential to enable reasonably accurate estimates of the frequency with which each member of an enormous array of songs and films were being consumed. It would be feasible because of the low cost of the automated reporting system. [Third and finally, to] persuade a representative set of households to permit their consumption patterns to be monitored, one would have to provide them credible assurances of privacy. In other words, they would have to be persuaded that the data the Copyright Office gathered concerning the frequency with which they watched particular films or listened to particular songs would be aggregated when determining the amounts of money paid to artists, would be discarded after each monthly accounting, and would not be made available to any other public or private entity�.�

But the proof concerning the efficacy of such precautions is in the pudding. At the Berkman Center, we�re hoping to build a sampling system along these lines � and then to try it out in conjunction with a voluntary Entertainment Coop. One of our major goals is to address the legitimate anxiety that, under an ACS, artists of different sorts would be either underpaid or overpaid.

(3) Won�t unscrupulous artists and third parties �game� the system, artificially inflating the number of times their works are supposedly �consumed� and thus depriving deserving artists of their fair shares of the ACS fund? The primary answer to this serious source of concern is that, once again, a great deal depends upon the quality of the sampling system used to estimate consumption rates. A secondary response is that the �gaming� problem is most serious with respect to downloads and is much less worrisome with respect to streamed works. As we shift, increasingly, from a world in which people create permanent collections of audio and video recordings to a world in which people listen to �streamed� songs and watch �streamed� films, the �ballot-stuffing� problem will diminish.

(4) Shouldn�t ISPs, rather than individual consumers, pay the taxes necessary to run such a system? Yes, and/but they would undoubtedly pass a substantial portion of the tax on to their subscribers.

(5) Wouldn�t consumers end up paying just as much for access to entertainment under an ACS as they currently do under the copyright regime? If so, we will have accomplished nothing more than substitution of a creaky government bureaucracy for a creaky copyright system. This, in my view, is the objection most easily met. Even if the distribution of digital recordings over the Internet fully displaced the current mechanisms by which recordings are distributed, consumers would end up paying much less under an ACS than they currently do. Specifically, even using highly conservative assumptions, the average American household would end up paying no more than $250, roughly half of the $470 the average household currently pays for access to recorded entertainment, and would receive, in return unlimited amounts of ad-free music and movies. That seems a gain dramatic enough to warrant seeking solutions to the hazards and complications discussed above.

I�m hopeful that other aspects of the system will emerge in the course of the discussion, but those seem like enough for now.

  • http://www.turnstyle.com/bio.asp Scott Matthews

    Rather than focus on ACSes, my suggestion is that we should instead focus on building a common trustworthy registry of rightsinfo.

    Such a registry would be a prerequisite for ACSes anyway, but it could also help prevent the need for an ACS.

    I model the idea on the domain name system. Centralized, and yet also distributed and maintained through a variety of registrars. And the content itself is available to all.

    This architecture was crucial to the development of the Internet, and a similar architecture could have a powerful impact on creating new sites, services, and applications that deal with copyrighted work.

    I call it DRUMS, and I talk about it here.

  • Jardinero1

    What about porn? Most of the downloading, recording and redistributing on the net is porn. Are the porn distributors going to get their fair share once their “artistry” is all registered? How will the other content providers feel when the porn distributors hog all the proceeds? How will the rest of the consuming public feel?

  • Jardinero1

    Never mind, I figured it out. Sony and Viacom will become the world’s largest porn distributors and stop feeding us Britney Spears, Jessica Simpson and all the rest. Qualitatively, it would be a step up.

  • http://www.turnstyle.com/bio.asp Scott Matthews

    “What about porn? Most of the downloading, recording and redistributing on the net is porn. Are the porn distributors going to get their fair share once their ‘artistry’ is all registered?”

    Funny, I asked a similar question in an article for Salon.com over a year ago. (click for the “free day pass”)


    Under these alternative systems, compensation for cultural expression is shifted to governmental control — the government collects the tax, divides it up, and pays the artists. But this is also the same government that has a long record of denying public funding for “offensive” art.

    As a simple example, consider that pornography makes up as much as 40 percent of file-sharing traffic. Are we to believe that those copyright holders would receive their proportionate share of the P2P tax? It seems far more likely that the government will instead decide to exclude “adult” works, drawing a line between art and offense.

    This isn’t just about porn. The FCC regularly censors the infamous “seven dirty words” from public airwaves, and it’s a safe bet that the trend will continue with P2P payouts — certain works will be deemed not worthy of compensation by public funds.

  • Anonymous

    It seems to me that insufficient attention is paid to the path problem with ACS proposals. How do we get from here to there?

    ACS schemes would require sweeping changes. They have clear, acknowledged and potentially fatal problems (gaming, accuracy, explosion of beaurocracy, and others mentioned above). And while their authors are confident that these issues can be solved or mitigated, others are more skeptical. Given these uncertainties, taking the leap of faith required for such radical restructuring of America’s IP regime is, rightfully, a hard sell. It would be a wildly unpredictable nationwide experiment, with no safety net. Anyone who thinks she can predict how it would play out is surely guilty of hubris.

    Is there a path to an ACS through gradualism, instead of abrupt, titanic change? One proposal in the book chapter is an “Entertainment Coop,” where members pay a monthly sum for access to a large library of licensed works. But is this idea that different from existing subscription services like Rhapsody?

    One potentially decisive difference: Rhapsody has DRM, whereas subscribing to the hypothetical coop would give members the legal right to access and distribute versions of content un-encumbered by such limitations (e.g. via p2p networks). Is this a sufficient advantage that a coop could gain wide popularity where Rhapsody and others have not?

    That seems to be a crucial question. If the only way to get to ACS is all at once, I suspect we are unlikely to get there at all.

  • http://www.turnstyle.com/bio.asp Scott Matthews

    Sorry, one more point regarding “gaming” the system.

    Rather than expect the gaming issue to hinge on “the quality of the sampling system” I think the real question is whether the system is anonymously tracking usage patterns.

    (most ACSes seem to talk in terms of an anonymized approach)

    I don’t really see how sampling could detect gaming in the face of a truly anonymized sample.

  • http://pobox.com/~joehall/nqb2/ joe

    Prof. Fisher, I was wondering what your biggest are about your own system… I think the “path problem” as metioned above in the comments seems the most serious. If we can’t fing a good “way there” than will the p2p wars continue until the p2p side creates an “ubernapster” and no longer needs to fight so hard (modulo DRM and INDUCE)? -Joe

  • http://www.turnstyle.com/bio.asp Scott Matthews

    Regarding the “path problem” — that’s one of the advantages of my suggestion: that we start with a registry (DRUMS from above). It doesn’t set out to change the way copyright is compensated, but it’s a prerequisite should an ACS become necessary.

  • http://tfisher.org Terry Fisher

    I agree that the �path� problem, highlighted by several of the posts, is serious. One step, as was mentioned above, would be to launch a voluntary version of the plan, based on subscriptions. It would not have to be enormous in scale; it might be limited, for example, to a particular genre of music. The critical thing would be to use it as a testbed, developing the software, accounting systems, etc. that, if successful, would make the launch of a comprehensive governmental version seem less hazardous.

    We�re beginning work along these lines at the Berkman Center. But, to be frank, I�m not optimistic that even complete success in launching a small-scale entertainment coop would be enough to persuade Congress, in the face of continued opposition from the record companies and film studios, to adopt the plan in the near term. Real hope lies in countries that either are more desperate for a workable system (e.g., China) or have a less deeply rooted tradition of suspicion of �big government� (e.g., Brazil) or both. Demonstrated success in such a venue might then prompt Congress to follow suit. That, anyway, is my hope.

  • Anonymous

    Wow, thanks all for the fast reply! And esp. to Prof. Fisher for the thought-provoking suggestions re foreign adoption of an ACS. Thinking now for the first time about such a proposal in a foreign context, a couple further questions on the politics:

    If China or Brazil adopted such a system (and it seemed to work), would that seen as evidence that it’s a good idea for the US? Or would adoption by China or Brazil (regardless of the success of the system) be seen within the U.S. as further evidence that copyright reform = infocommunism?

    Also, what exactly would the system look like in these countries? Would foreign (i.e. American) artists be eligible for compensation? If so, won’t the proposal be seen within the country as simply a way to tax Brazilians or Chinese and send the money straight into American pockets? If not, could it ever be seen by American legislators as a model, or would it be seen simply as an attempt by foreign governments to legitimize ever greater piracy of American creativity?

  • Jardinero1

    One other thing about the tax or user-fee or whatever you want to call it: It is likely to be quite regressive or just plain unfair to impose it at the hardware or ISP level.

    There is a large plurality of users, like my dad, who buy the hardware subscribe to an ISP like AOL and then use it for no more than e-mail and checking the weather. There are also corporate and business desktops whose content is filtered and can’t possibly download anything to their harddrives. Should these people pay the same tax as the college student downloading 50 songs, 1000 jpegs, and 100 mpegs a day from his dorm room or campus computing center? I don’t think so.

  • http://n8o.r30.net/ Nato Welch

    I’m looking for good comments on The Sharing License.

    Summary: Instead of watching their revenues walk away in the pockets of lawyers, publishers license file sharers with a license to share unlimited copies of copyrighted content from one device only for a (negotiable, possibly subscription) fee. Licensees are required to share using IPSEC or SSL with an anonymous digital certificate they register with the publisher at the time of the license purchase. Publishers employ network scanning infrastructure to insure that no cert is used simultaneously on more than one host.

    1) Publishers get to take home more profits, rather than having to pay lawyers. They have to pay instead for network scanning infrastructure, but this will cost far less than the combined costs of trial lawyers and distribution infrastructure (both traditional as well as Internet bandwidth, which can be provided by the consumer peer to peer networks).
    2) Sharers can continue to share without getting sued. They also get to keep all their fair use rights under traditional copyright law. Licensing fees amount to a kind of “legal insurance”.
    3) Technologists can continue to innovate new hardware, new software (open or closed), new protocols, and new file formats can be created without needing to be encumbered by patents or restrictive DRM. Developers can help by building in SSL certificate support into their applications as a feature, but IPSEC implementations make such features optional.
    4) ISPs (as well as consumers) will be much more likely to cooperate with requests to license their customers’ shares for reasonable fees than they would to expose them to lawsuits or privacy intrusions (The results of DMCA subpoenas can go to the sales department, rather than to legal).

    Problems avoided:
    No government involvement or legislation is necessary. No rights organizations, no corruptible public officials or insecure popularity metric architectures. Prices are negotiated privately among consumers and publishers using market-driven mechanisms. “Popularity” need not represent the end-all be-all of content value. Collective licensing is possible, but optional; content can be share-licensed on any scale from entire catalogs to individual artists or even tracks. The same scheme can apply to any copyrightable work: music, movies, books, software.

    More here.

  • http://mooseyard.com/Jens Jens Alfke

    I have an objection that doesn’t fall into one of the above categories, which surprises me, since it seems like it would be common.

    I would object to my usage fees going predominantly to the most popular artists. I don’t like mainstream music, so why should most of my money go to artists I dislike rather than those I like, who generally need the money more? To be specific, I don’t want to give any money to millionaires like Britney Spears, Limp Bizkit and Celine Dion, whose music you could not pay me to listen to, rather than to indie artists I really like (and who could surely use the bucks) like Stars Of The Lid, Dealership and Godspeed You Black Emperor.

    This seems to combine the worst aspects the NEA and American Idol — no control over where my tax dollars go, plus lowest-common-denominator artistic choices. It also seems vulnerable to the same kind of political firestorms that periodically engulf the NEA: just wait till the fundamentalists discover what fraction of their money goes to Marilyn Manson.

    I think some form of alternative compensation is a great idea; just not this one.

  • Victor

    I agree with Alfke, and will take it a step further: this proposal has a gigantic flaw in that it seems “everyone will pay the same” regardless of consumption (a well-known recipe for economic disaster). If, as proposed, we impose broad taxes on ISP’s, computers, radio receivers, etc., then those of us who don’t listen to music a lot will have to pay as much as those who do. Why should I pay a stiff music tax to listen to talk radio in my car, or read economics blogs on my PC, just because some other folks are listening to Top 40 or playing their MP3 collections on their PC’s? This is the inverse of a free-rider problem, of course, so the people who do consume a lot of music will consume even more, leading for calls to increase the general taxes going into the royalty fund. It’s the same as the folks who’ll order lobster and a bottle of Pol Roger when the restaurant bill is to be divided equally.

  • http://k.lenz.name/LB Karl-Friedrich Lenz

    You write:

    “The success of the system might prompt countries other than the United States to institute similar systems.”

    Would the levy system already in place in most European countries qualify as a “similar system”?

  • Greg Dennis

    Have you read about and could you comment on Dean Baker’s proposal for an Artistic Freedom Voucher?

  • http://kowitz.blogspot.com/ Braden Kowitz

    “As we shift, increasingly, from a world in which people create permanent collections of audio and video recordings to a world in which people listen to �streamed� songs…”

    I don’t quite understand where this trend is coming from.

    1) One reason to stream is that the end device can’t hold all of the data. Take for example on-demand TV with digital cable. But, storage devices are getting cheaper and larger. Expect people to store more.

    2) Another reason we stream is that the network connection is not fast enough to deliver all of the content instantaneously. QuickTime’s “Quick Start” does stream. But it also downloads as fast as possible to anticipate user actions. With networks getting faster we’ll stream less.

    3) Another reason we stream is worries about piracy. With ACS, this major force to stream will be dissolved.

    4) You can’t stream everywhere. This country is huge. It will be a long while before every acre is covered with enough wireless networking to stream your personalized digital content. Sure, it’ll work in the cities, but what about Howes, South Dakota? When I’m driving through Howes, why not have my whole music catalog with me if it fits on cheep music player.

    So, are we really moving towards a streaming culture? I’m open to arguments, I just don’t see it.

  • Larisa Mann

    I agree with Jens to some extent as far as where my money goes.

    Is it possible that there are differences in kind as well as degree between small/niche/underground artists and the most popular ones?

    It seems like they are very differently affected by the current copyright system. I would want a new system of compensation to not be as blind or unresponsive to these differences.

    However, unlike Jens, I think a lot of pop is valuable, if not necessarily to listen to unfiltered or unsampled.

    this leads to another issue – what about the multiple uses of acquired music? Will the system differentiate? Many people use music (popular or not) as a building block to make more music.

    Current technology allows us to ‘tag’ music so we can identify samples of it, while earlier methods of sampling and reference are relatively harder to track. But the practice is productive, right? Also current technology allows more people to make and distribute music (using samples or otherwise).

  • Ben Curtis

    The key problem I see from this brief overview, is that it lacks a mechanism for market forces to come into play. That is, if the tax were applied to hardware, then the cost to me would be as if I bought all my future DVDs up front when I purchase my DVD player — which means I wouldn’t buy the player. Instead, I would go to a friend’s house, I suppose, since he gets unlimited movies now that he’s bought the hardware. The inconsequential cost of the movie becomes too much to bear, and so it never gets paid. Subsequently, those who can bear the cost will suffer no penalty for “wasteful” consumption. Without a penalty, the notion that the best or most deserving material will be the most consumed is false; when I had an unlimited free movie pass one summer, I joyfully watched a dozen movies a day, most times only the first fifteen minutes before I wandered into another theater.

    The solution to both issues also solves the gaming issue: if you are going to sample which files are consumed, sample who is consuming them. The tax then applies only to the actual consumption, and the meager penalty will cause people to qualify their choices, improving the distribution. Since any given consumption fee would be returned to those trying to game the system minus the administrative costs, gaming becomes a losing proposition.

    The issue this raises, though, is whether people really make better decisions when under threat of a penalty. They make less random decisions, but if movie A is heavily promoted, and movie B is more “deserving” of being consumed, experience tells us the consumer tends to choose A. So this system I’m offering does little to return creative control to the little guy.

    A small note on the path issue: a voluntary registration by creators of their work solves everything, so long as the system they sign up for is truly better than the one they are leaving. There is no single path problem for, say, ecommerce. Each company or creator takes the problem by the horns and wrestles with it himself. No need to solve it — just make a better system, and allow people to use it, and each one of them will solve it.

  • Anonymous


    the concern raised by Jens Alfke regarding those of us who download very little paying for others to download much is fairly easily solved under current ISP billing trends (at least in Australia). the big local ISP companies (all two of them) offer packages based on download limits. it would be very easy to distribute the ‘tax’ along these lines, raising the relative cost as download limit is extended. as such, the bottom-end offerings (suitable for general browsing and email only) would remain much as they are, while the top-end (download 100 movies per month) would see their costs increase substantially. also, it should be noted that protecting smaller artists from bigger ones needs to be addressed in the sampling scheme, not the billing.

    it is a very bad idea to tax hardware. there is a delicate balancing act that keeps things racing along at Moore’s Law speed. push the expense of bleeding-edge hardware up and either sales will drop or hardware manufacturers will shoulder the cost. it is likely that the the ‘old’ hardware of yester-month will be used to recoup the losses. while the big money is made within the first few months of a release companies will certainly continue to strive for a major release every six months. corroding their motivation to do this is surely going to adversely effect the ferocious rate of innovation. i don’t think anyone would want this (with the possible exception of M$, who’s release cycle is way to slow to keep up (do they have AMD64 support yet?). i am joking, of course). i am not suggesting that a hardware tax would necessarily have this effect, but the possibility is clear enough, and that makes it a bad idea.

    with regard to the sampling sytem, (as much as i detest it) “treacherous computing” would probably implement this aspect of the proposal very effectively. it could be used to verify that a given file is what it claims to be (i.e. protect against “gaming”) and could update a central server anonomously. of course, treacherous computing in its current form is completely unacceptable – and will remain that way until its ability to dictate market share (among other things) is removed – but with some re-working so that it can meet minimum ethical requirements it would facilitate precisely the kind of sampling system needed here.

    i must agree with Braden Kowitz’s comments on streaming media. personally, i think streaming media is a little like offering a hungry man offal: he may not like it, but he’ll eat it anyway. :p

    one last thing. the “music industry” is fast becoming redundant. the only point to including them in any ACS scheme is that they are loud about their parasitic rights. until very recently they were needed for the recording, distribution and marketing of music, but no more. the costs of creating musical recordings are low enough that the garage band of even a decade ago can be a polished, professional recording outfit with nothing more than a few pieces of inexpensive hardware and a token ‘geek friend’. the cost of distribution is next to nothing. and marketing, well, i admit that the boy/girl band thing will die with the industry that keeps spitting them out at us, but the saturation marketing responsible for the success of such performers has done nothing but harm to our culture (why choose? the record labels will do it for you!). otherwise, let google do it. :)

    . ant

  • http://www.futureofmusic.org Kristin

    one last thing. the �music industry� is fast becoming redundant. the only point to including them in any ACS scheme is that they are loud about their parasitic rights. until very recently they were needed for the recording, distribution and marketing of music, but no more.

    While .ant’s comments about the utility of the music industry in the future are true, remember that their strength lies in their historic control over vast amounts of copyrighted material from bands and artists that they have signed to contracts over the years. So folks may think that the labels will be redundant in the future, but they are very much a part of this ACS conversation since it is they that would have to agree to a license, whether it be compulsory or voluntary, in order for the system to even be tested.

    I applaud Professor Fisher for his thoughtful work on this idea. I think the “path” problem and issues of regressive taxation are excellent points, so while I’m tying I’ll throw two more topics out:

    1. is it possible to do a census count instead of a sampling count? This, of course, is a lot of data to manage, but doesn’t seem impossible. This means that all artists are paid based on an accurate count of music shared, so the indie artists of the world get their fair share based on usage. Being one myself, I can tell you that my BMI checks for $4.20 of sampled college radio play are pretty silly. SoundExchange runs on a census model, and ASCAP is moving towards census with its use of Mediaguide. Is it possible and what are the pitfalls of a census model?

    2. Professor Fisher has heard this from me before, but instead of paying the “copyright owner” (which is usually the label) how about we split the payment among three groups; the performer, the songwriter and the label? The major labels have a terrible track record of paying their artists their proper royalties, and counting on them to act as a conduit for royalties is dangerous. If this system gets built, let’s take this opportunity to create a better payment system where the primary interested parties — performer, songwriter, label — are paid directly and simultaneously.

    I know ACS has a long way to go, both technologicallly and politically, before it gets to the details of who gets paid and how, but I can’t see songwriters or musicians — indie or major — embracing a system where payments are not made directly to them, especially when the SoundExchange model of simultaneous payments to copyright owner and performer has been accepted by the major labels. And, since musicians and songwriters are primary stakeholders in this debate, making adjustments to the developing idea would be important in getting them behind it.

  • http://b-dog.blogspot.com Brian Hunt

    It didn’t work in Russia, it doesn’t work in Canada, what makes you think it’ll work in the USA? Experience speaks volumes: a government is far worse at estimating and compensating than the marketplace, and substantially more susceptible to collusion and corruption. Marketplaces were intended to compensate a reflection of value, and are more naturally resistent to corruption and collusion. Governments were not so intended, and it reflects.

    Governments are good at subsidizing or stabilizing economic bases such as electricity and water, not entertainment commodities such as music, movies or video games. Government compensation has traditionally been a very naive approach; I strongly suggest looking to the ubiquitious failures (as far as I know) of the rest of the world before imposing this view on Americans. A counterexample, among the many failures, of successful government compensation systems for artistic value, would go a long way to supporting this argument.

    Substantial arguments against include:
    1. There is no adequate way to estimate the “value” of an artistic work. Is it relative to production cost? To some mechanism of estimation of consumption?
    2. Wherein then do the incentives lie? They are not with production of quality marketable products (one might argue that Hollywood and the recording industry do not have this incentive, now), but rather with the metric of estimation. In other words, put money into the value estimation, not the quality.
    3. The incentive to create is symied by the capacity to be estimated; the monetary incentive is to share in a zero-sum pool of government money with conglomerates dedicated to taking as much of that pool as possible. It leaves little room for entry. Though the current marketplace isn’t easy to enter, the internet has created new ways to create and distribute that make the barrier to entry far less than it has previously been.
    4. A taxation of any other industry effectively subsidizes artistic works at the expense of another marketplace. A high cost, with questionable benefit.

    See, eg. 28 C.P.R. (4th) 417.

  • http://www.infocommune.net/CLS/ Sim, WooMin

    Thank you for your article. I read this post very interestingly. I live in S.Korea. Your idea is available in S.Korea, I think.

    Nevertheless, I can’t understand your explanation about the first problem, ‘International Scale’. I think that your view in this problem can increase inequality between advanced countries and underdeveloped countries in the sense of economy.

    Can you explain about this? Thank you for your reading.

    p.s. I’m not good at English. I’m sorry about this.

  • Rob Myers

    Governments are good at subsidizing or stabilizing economic bases such as electricity and water, not entertainment commodities such as music, movies or video games.

    Governments subsidise movies with tax breaks for production, treaties for distribution, and with DMCA/INDUCE they’re throwing in free investigation and enforcement.

    1. There is no adequate way to estimate the ?value? of an artistic work.

    There isn’t anyway.

    2. Wherein then do the incentives lie?

    The more downloads you get, the more money you get.

    3. [...] Though the current marketplace isn?t easy to enter, the internet has created new ways to create and distribute that make the barrier to entry far less than it has previously been.

    Since the marketplace would be all-internet, this holds.

    4. A taxation of any other industry effectively subsidizes artistic works at the expense of another marketplace. A high cost, with questionable benefit.

    Broadband is driven by media use. If media production is harmed by broadband, both marketplaces will suffer. This is the world of the RIAA as well as ACSes.

  • http://b-dog.blogspot.com Brian Hunt

    1. There is no adequate way to estimate the ?value? of an artistic work.
    There isn�t anyway.

    Marketplaces assign value, by definition, as a function of supply and demand. Copyright, by being a monopoly, is subject to alternative pricing models, but still adheres to the laws.

    The more downloads you get, the more money you get.

    Downloads from where? By whom? Who pays? Who verifies? How much? When does the value change? How does it change? Who decides? What influences the decision maker? Can the consumer appeal changes? Can the consumer stop paying? Who is exempt? (Non profits? Elderly? Corporations?) Does that exemption create a loophole? It’s nice in principle, but when you have multi-billion dollar companies acting in their own interest against the system, simplicity goes out the window.

    4. A taxation of any other industry effectively subsidizes artistic works at the expense of another marketplace. A high cost, with questionable benefit.

    Broadband is driven by media use. If media production is harmed by broadband, both marketplaces will suffer. This is the world of the RIAA as well as ACSes.

    I don’t think broadband being driven by media is a good excuse to intrinsically tie these two together. The value of broadband is not inherent in access to commercial media (eg. wikipedia, Lessig’s blog, etc.), and any such tying would be too strong a relationship, inherently harming both the broadband marketplace by making it more expensive without inherent value increase, and worse, with substantial harm to the incentives of the media industry to adapt to a new and superior internet based market model.

  • Jardinero1

    I enjoy these discussions, really I do. But, after a while, I realize again that this “problem” is nothing more than a property dispute between a handful of giant corporations peddling really shitty music and a cohort of mostly male adolescents and post-adolescents ripping them off. Why not let them fight it out? Why should we change society to insure that these youths pay these corporations?

    Spare me the platitudes about art and the free exchange of ideas; that’s not really in danger(this blog and the whole internet is proof positive). What this boils down to is money for a very small group of players.

  • ErikT

    These points might be discussed in the book. I have unfortunatly not had time to read it. However, I thought I would throw in a few comments despite my lack of research.

    Has there been any financial analysis, I saw the reference to the descreased cost per household but I am looking for a more indepth discovery of the benefits and pitfalls.

    As many have pointed out the devil is in the details. IMHO gaming the system will be a huge problem if complete anonymity is used. Some type of registration mechanism will have to be implemented. This will most likely require and incentive for users to register. If consumers are concerned that a single agency can�t be trusted to only use the results as an aggregated sample; then possibly a 3rd party should be created that works with the evaluation engine. A trusted 3rd party registration system could provide a buffer that allows tallying anonymously and provides the added ability to discover fraud. The transmission of information back to the evaluation system must be secure and meet certain security considerations including non-repudiation.

    I don�t think you can conscientiously destroy the aggregated results at the end of each month. You must have an audit trail to provide support for prior decisions and to defend against musician/producer protests of each allotment. Another reason the information couldn�t be destroyed some people would contend this system would directly affect the financial viability of a corporation; therefore it would most likely need to conform to portions of Sarbanes-Oxley Act.

    Even if this system was put into effect, I don�t think it would remove the need DRM or encryption. DRM is going to have to be used to help track copying, file renaming, and derivative works. The registration of a song will most likely have to be based on some form of DRM and a certificate authority.

    Thanks for guest staring this week, it has been an incitful discussion thus far.


  • Raoul

    What about a donation system? A mechanism that will allow users to easily compensate the artist directly for the work in any amount that the consumer sees fit?

    We all tip our waitresses 15% to 25% after our meals. There is no governmental enforcement mechanism that makes us do that. We do it because of social enforcement mechanisms.

    Furthermore, I was in and around numerous rock bands in the 80s. You should see some of the things fans are ready, willing and able to do for their entertainers. Fans desperately want to compensate the artists. They just are being denied the opportunity to do so, in an efficient manner, by the corporate greed heads who no longer serve any purpose.

  • Andrew Boysen

    No scale is needed at all to make this work. We don’t even need to start with a database, or anything like that. An artist, producer, or whatever can put up a link on their site that says, “Pay us $20 – or whatever – and you can do whatever you want with our music without paying any more and we won’t sue you.” Lawsuits are already the enforcement mechanism in place. Universities are paying for site licensing of music so they don’t get sued – this can happen on the individual level as well. People can keep doing what they’re doing right now, but for a small fee they can eliminate the risk. Media companies can do the same thing they’re doing now, except they’ll have to sue fewer people who are breaking the law.

    Owners are getting compensation, and users can do what they do now while avoiding all risk. The downside is that this benefits the big owners who are most likely to sue, but it gets the ball rolling in the right direction, and the costs of implementing this is near 0.

  • John Goodwin

    It seems to me that “Intellectual Property” as a discussion topic is doomed to recapitulate the entire history of economics.

    Congratulations. You have reinvented “Social Credit” for intangible products.

  • http://html John C. Morgan

    Several record companies have used my performances and picture for profit. I have not signed any contracts denying my access to performing royalties. How do I go about recouping my performer’s royalties? John C. Morgan

  • http://www.kortexplores.com/node/174 kort

    This discussion is probably stale, but maybe someone can benefit from this late addition…

    File sharing is only a problem because the release of recorded performances to the public domain has been delayed. Shortening the period of time required for creators to recover fair value for their recorded performances would allow music to be released to public domain sooner, eliminating the problem of piracy – and along with it all of the related costs and alleged need to infringe on the rights of citizens in the name of enforcing copyrights.

    The last piece of the puzzle is a mechanism for artists to be fairly compensated for contributing their recorded performances to the public domain. Propagate Ltd (www.propagateltd.com) has developed a unique form of dutch auction designed to solve this last piece of the puzzle. A Propagate auction allows an artist to receive the fair value for a recorded performance as an up-front lump-sum in return for releasing certain of their rights to the public domain.

    For a more complete exploration of this issue – including an historical perspective of how we got where we are today, and a way to achieve a workable solution – check out: http://www.kortexplores.com/node/174