October 26, 2004 · William Fisher
A sufficient number of interesting responses have been made to my original post on Alternative Compensation Systems that I thought I�d start a new thread. I can�t hope to address all of the themes that have been raised, but here are a few:
(1) Porn. Lots of people currently pay for access to pornographic films. If an ACS were instituted, some of the money raised through taxes would also end up in the pockets of the creators of pornographic films distributed for free online. Should we be troubled by this outcome? In my view, no. Arguably, we should be troubled by the fact that porn is so popular. But channeling money to pornographers through an ACS doesn�t seem any worse than channeling money to pornographers through the market.
A possible retort: �I may not be entitled to object if my neighbor buys porn, but I certainly don�t want any of my tax dollars going to porn.� The response: If you consume an average amount of recorded music and film, and if the sampling system used to manage an ACS accurately estimated the frequency with which specific recordings were consumed, then your tax dollars would go only to the artists you patronize. In other words, you would help pay for porn only if you watched porn. (For the same reason, your tax dollars will go to Britney only if you listen to Britney.) Admittedly, for this argument to hold, it would be crucial for the sampling system to work well, but we�ve already addressed this issue.
A final (and more powerful) retort: �The problem is not that my tax dollars would go to pornographers, it�s that legislators would refuse to establish a system in which any tax dollars went to pornographers. In other words, when instituting an ACS, they would insist on excluding from its coverage all pornography. We would thus start down a very dangerous road � in which government officials made judgments concerning which artistic works are meritorious and which are not.� I agree that this is a serious hazard. It�s not inherent in an ACS. But it highlights how an ACS might be distorted in the course of legislative implementation.
(2) Cross-subsidies. In an ACS, people who consume little or no recorded entertainment would pay the same amount as people who consume a great deal. It�s frequently argued that that�s both unfair and will lead to various economic distortions. This argument has a good deal of bite; such cross-subsidies definitely constitute one of the drawbacks of the system. The problem is mitigated by the fact that (under my version of the idea, anyway) only broadband accounts are taxed. (Thus someone who truly uses the Internet only for email and to check the weather can avoid paying the most substantial of the taxes.) The problem could be mitigated further if we used �Ramsey pricing� to set the tax rates (an issue discussed in more detail in Chapter 6). Finally, it could be reduced sharply if, as �.ant� suggest in his or her post) the ISPs upon whom the tax is levied charged high-volume subscribers more than low-volume subscribers. But the problem cannot be made to disappear altogether. Is it a fatal objection? In my view, no. The amounts of the taxes are modest. (The largest of them is the (indirect) tax on broadband subscriptions � which, in the first year in which the system were in operation, would be roughly $5 per month.) We tolerate vastly larger degrees of inequality in many other domains. (Think, for example, of public schooling, which is funded in the U.S. primarily by property taxes, borne in equal amounts by homeowners with no children and homeowners with many.) Bottom line: the overall savings of the system seem sufficient to justify a modest degree of inequality in the distribution of its burdens.
(3) Derivative Works. One of the greatest advantages of an ACS, in my view, is that it creates a sensible mechanism for dealing with composite recordings � rap songs that include samples of other recordings, modified or expurgated films, mash-ups. In sharp contrast to copyright law, an ACS regime would authorize persons to rework existing recordings, refashioning them into new products � provided they complied with two conditions: (a) they identified the owners of the copyrights in the original works when they registered their new works; and (b) they gave credit where credit is due. When a modified work were downloaded or streamed, both the creator of the original work and the modifier would get a share of the resultant revenue. (For considerably more detail concerning how such a system would work in practice, see Chapter 6.) The net result would be to liberate the transformative cultural activities the potential for which is perhaps the most important of the many benefits of the Internet, while continuing to compensate fairly creators of various sorts.
(4) Who Gets Paid? There are very good reasons, suggested by Kristin in her post, for requiring that at least some portion of the payments from an ACS be distributed directly to artists, rather than paid to the intermediaries (e.g., record companies) to whom the artists have assigned their copyrights. (Those reasons are explored in more detail in Chapter 5.) But there are two related catches: moving in this direction further decreases the already small probability that the major intermediaries would support the plan; and it would also increase the likelihood that the system would be challenged successfully as an unconstitutional �taking� of private property without just compensation.
For yet more objections to ACSs � and responses to those objections � check out the pertinent portions of Andrew Orlowski�s recent speech at the �In the City� Convention � available at http://www.theregister.co.uk/2004/09/23/orlowski_interactive_keynote/page7.html.
That�s probably enough on this issue. Tomorrow, I�ll venture some comments on an equally divisive topic: price discrimination. Thursday or Friday, if all goes well, I hope to veer in a different direction, discussing the current crisis involving the distribution of drugs in developing countries.
Thanks to everyone for your comments thus far.