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.