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Loading ...Feels Like Free But Not “Free”
Filed Under: Business Models, Featured, Record Label, Technology
Five years ago this writer offered a plan, bravely titled Digital Manifesto, designed to insure the economic survival of record companies, artists, songwriters, publishers, producers, musicians and other creative members of the music industry. To be successful such a plan should be uncomplicated, require little or no enforcement and wholeheartedly embrace the consumer and technological development. It should also be economically feasible.
In the midst of the marketplace confusion the consumer has gotten used to the idea of getting music for free. An added benefit of the plan is that its compulsory license “feels” like free, but nevertheless intellectual property owners are fully compensated. The Digital Manifesto remains largely undiscovered, but it is a plan for the times.
THE PLAN—Operating Manual
1. All Internet traffic must pass through an ISP (Internet Service Provider; i.e. Comcast, Verizon, AOL) creating a natural toll booth or royalty collection point to gather copyright payments.
2. Under the plan Internet subscribers are required to pay a monthly “copyright fee” collected by the ISP, perhaps $6.50 mo. or $78 per year. It would appear as a line item on the bill. In return users enjoy an “all-you-can-eat” compulsory license for DRM-free digital downloads and streaming music.
3. There are approximately 150 million U.S. Internet subscribers, whose fee payments would create an annual copyright fund of $11.7 billion. (For perspective, the entire U.S. music industry is about a $12 billion industry including the cost of goods sold.) Result—the mandatory Internet royalty would double industry revenues in its first year. [Not a bad beginning!]
4. Web sites would be allowed to offer music under the compulsory license, since the use of that music would already be paid by Internet users. Music sites would be required to pay a minimal percentage of gross revenue to the copyright fund.
5. Blank recordable media would also be subject to a minimal copyright fee that would also contribute to the copyright fund.
DISTRIBUTING THE CASH
1. Under the plan there is one digital royalty. The concept of performance and/or mechanical becomes irrelevant in the digital domain.
2. Files will be monitored, surveyed and eventually tagged with IDs to accurately account for usage, not unlike the way ASCAP, BMI and SESAC currently determine payments.
3. Labels, artists, publishers and songwriters will have to decide, with the help of a mediator, how they will divide the fund.
THE VISION
1. A compulsory license brings labels and consumers together to share and introduce new music. Cumbersome online licensing and clearance roadblocks are eliminated.
2. Piracy disappears since all Internet users have already paid—on the way into the store. That is important considering that estimates of illegal to paid downloads are currently running about 20 to 1! It also respects the nature of the Internet which was designed to distribute information.
3. Technology to enhance the discovery, appreciation and sharing of new music is embraced and legal under the new system. Consumers are encouraged to enjoy music when they want it and how they want it.
4. Intellectual property owners are fully compensated for all copyright uses, from the mandatory Internet royalty fund collected from each user by the ISP.
TROUBLESHOOTING
1. How to get this plan adopted—It will likely need legislative help to be implemented and consensus from all copyright stakeholders.
2. What about movies, books and other intellectual property? Yes, these copyrights will also be ultimately paid from the fund.
3. Will the fund always be the same price? Probably not. A cost of living increase would make sense as movies and books are added.
4. I don’t download music why should I pay? Because it is for the greater good and the benefit of creators which are a necessary part of our society.
5. What about a bandwidth meter? It’s possible that some kind of metering approach would more equitably equate consumer use and cost in the same way that utilities like water and electricity measure and bill according use.
Biff Watson | Feb 14, 2008 | Reply
I could live with this arrangement, which requires a number of entities to cooperate and compromise. An alternative seems to be gaining traction -
the advertising model used by radio and TV - and the music of our sphere may soon be brought to you by Nike, Ford and Coca-Cola!
Biff Watson
Jon Walker | Feb 15, 2008 | Reply
Great post David!!!
Steve Weaver | Feb 16, 2008 | Reply
I think it is a great solution. We have discussed over lunch but this is my first read of the blog post laying out more details. My first thoughts were “yeah–the man in the river analogy!” If I am not a good swimmer (which I am not) and I am dropped in the middle of the river my natural tendency is to panic and flail and splash–and sink! However, I am told that if I relax and lie back, I will float — and perhaps survive. As I ponder our industry, from my perspective there seems to have been a lot of panic, flailing, splashing–and sinking (I refer you to the continuing plunge of CD sales). David’s approach is to quit fighting, lie back and go with the flow–then perhaps we will all survive. Thank you David.
Michael Cooper | Feb 17, 2008 | Reply
I think this plan would be a difficult (maybe impossible) sell to legislators, who will be sensitive to the fact that such a system will raise the cost of Internet access for some dial-up users as much as 40%. I’m afraid the U.S. government, which rightly wants to broaden Internet access for the disenfranchised, will never go for a plan that penalizes poor folk who don’t have the ability to pay for even moderate increases in their ISP’s bill.
To be equitable and avoid large loopholes, corporations and institutions — which have large user bases — would also have to pay more than the single-user fee, but they will scream bloody murder when confronted with covering each of their many employees.
This plan also opens up a can of worms by setting a precedent that owners of all threatened forms of intellectual property — be it music, films, videos, books, blogs, magazine content, or photographs, to name a few — will want equal treatment, raising the cost of Internet access further. (Sharing payouts from the same limited fund with other IP owners would result in ever-diminishing returns as new types of technology-enabled content are developed and introduced.)
With all due respect, I think the energy put into pursuing such a plan might be better spent attempting to legislate ISPs’ responsibility to cut off Internet access to those who use illegal peer-to-peer networks. Europe may be starting to move (at glacial speed) in this direction. Perhaps the RIAA, NMPA and others in our industry should join forces with the film industry to put combined pressure on Congress to act.
David Ross | Feb 18, 2008 | Reply
Michael-Asking the ISPs to censor the Internet is mostly impossible. Illegal sites would play a game of cat and mouse by changing URLs and always leaving the ISPs one step behind.
Michael Cooper | Feb 18, 2008 | Reply
David, you make a valid point. However, I don’t propose policing illegal P2P sites. Rather, by flagging those accounts of individual users who upload or download very large blocks of data to/from a private account on more than rare occasion, I believe ISPs can probably detect which end users are routinely using illegal P2Ps. The ISPs could then terminate these worst offenders’ accounts and register their IP addresses with a national or international registry to prevent them from obtaining service from another ISP.
I believe the threat of losing one’s precious Internet access would quickly stem the tide of P2P usage at the grassroots level. Companies that move large amounts of data across the Internet as part of their daily business operations can apply for a permit of sorts that would vet their high-bandwidth uploads and downloads in advance and shield them from unwarranted legal scrutiny.
I believe that this type of approach is where the RIAA, NMPA and other industry organizations should put their lobbying energy.
David Ross | Feb 20, 2008 | Reply
The Canadian Songwriters Association has a plan very much like the one above.
http://www.thestar.com/entertainment/article/305082
Paul King | Feb 24, 2008 | Reply
Good Lord what a mess. Back in mid to late 2001 these same suggestions, from David’s ‘all you can eat’ model to Michael’s ‘go after the people’ communistic approach (with all due respect) … simply amazing that 7 years later, here we are - same talk, same ideas, no closer to a solution. I talked this over with Michael Robertson, Jim Griffin, Mark Cuban, and many others and it hasn’t really changed. I say talked, I really mean argued ferociously.
Instead of Napster (the topic de’jour then), there’s BitTorrent/Pirate Bay… no real model and the shiny plastic model is running dryer by the day —
I see that most post have a comment or 2, this has 7 — there’s still passion there, on both sides… and a real willingness for SOMEONE to solve the problem… but, like then, it simply isn’t going to happen. There simply is no ‘easy’ way anymore. As if there ever was… but there might’ve been had bull headed men would’ve left their ego’s at the door and hammered out a real solution (sometimes that was a real possibility… sometimes, not)
Feels free is a great idea, except for people like me who don’t download anything, anytime (I don’t even own an IPOD, I know, some are wondering how I’ve ever lived without it… trust me, it’s been easy). I don’t wanna pay the same as the bandwidth hogs.
And Communism (mostly) failed. The attack on the people and the freedoms they have has won the RIAA a few battles, all the while completely losing it the war. Trust me, it’s bitter now - making customers enemies is never the optimal path to growth and endearment. Quite the opposite.
Michael Cooper | Feb 24, 2008 | Reply
Paul, I don’t see how combatting theft is somehow akin to communism. Indeed, the protection of intellectual property is one of the bedrocks of capitalism. Institutionalizing the deprivation of content creators’ ownership of their intellectual properties, on the other hand, IS one of the tenets of communism.
The solution I’m suggesting (detailed above) would not affect honest, law-abiding people who pay for their downloads from legal sites. The only “customers” who will become enemies, as Paul put it, are those thieves who lose their Internet access as penalty for their illegal downloads. In fact, they are already our enemies. (What else would you call someone who steals 95% of your potential paycheck?) I am not concerned with “endearing” them; I want their shifty hands out of my pocket.
People who steal on the Internet are no different than those who shoplift at brick-and-mortar sites. Shall we let thieves run wild at all retail outlets in the name of “freedom,” as Paul casts it? That’s basically what’s happening online.
Europe is already taking action:
http://www.reuters.com/article/technologyNews/idUSL2233689520080222?feedType=nl&feedName=ustechnology
It’s high time that the U.S. government, too, takes action to restore law and order to the Internet and stops the rampant stealing from hard-working people in the music industry. This is the promise of capitalism: you work, you get paid.
Jim Murphy | Feb 26, 2008 | Reply
As always, a well-written and thoughtful piece, David.
I don’t view your proposal as significantly different from the way PROs now collect and distribute money to songwriters. Monies collected from performance licensees go into a big pool, and it’s distributed based on usage calculations. So the model is in place already. And by tagging songs the internet actually makes the process of tracking easier. It’s still not perfect, but it’s less imperfect than the sampling method now accepted as the norm.
You’re right in saying that this issue will need legislative help. Actually, nothing will happen unless Congress acts, and they will act only if the music industry (and the larger creative community) makes this their A-1 top priority. To make this initiative more palatable to legislators, I might suggest a “little old lady exemption” where the ISP tax only kicks in at (say) over 5 Mb/month of downloaded material. That way, minimal dial-up users and people who only use the internet to check email, exchange a photo or pay a bill would be protected. That exception may eliminate the need for a “bandwidth meter” scheme. Also, there’s probably no need for an additional tax on blank discs, since there are many other uses for this storage media that are not music-related and the tax will have already been paid via the ISP. But these are small points intended to improve an otherwise solid concept.
I think this is a sound plan, David. Let’s hope the music industry recognizes it that way too, while there still IS a music industry.
Troy McConnell | Feb 26, 2008 | Reply
Good idea, all.
If I may join this lively discussion: it seems to me that whatever solution we come up with for getting paid for the digital distribution of our intellectual property, the only way to force lawmakers to enforce it, is for the various copyright creating industries to join forces and present a united financial and political front.
I am proposing a “Cross Industry Pro-Copyright Conference” to be held at the Gaylord Opry Hotel, that will bring together the various Music, Film & TV, Software, Gaming, Book publishing industries to discuss combining our resources and political might.
There are technical solutions already available to us. I believe it to be largely a question of collective will and determination. As a united front, we could force P2P software to programmatically filter out any data file that has a digital watermark. I think it could be successfully argued that with such a mark, the P2P have been put on notice that sharing this file is copyright infringement.
We should also pass legislation that makes the copyright laws work like the drug seizure laws: if you are caught facilitating the illegal distribution of intellectual property, everything you own will be seized, sold, with the proceeds going to finance pro-copyright efforts. (I’m speaking of the piracy facilitators, not the single moms)
Stopping the blood-letting and going after the piracy facilitators isn’t impossible, there are things we can do on a technical level that would make a dent immediately. 1) Flood the illegal download market with bogus downloads that display a “Don’t Steal Copyrights” message with played or installed. 2) Start collecting the names of hackers, pirates, pirate groups, and illegal download websites into a central database. Create an network of cyber bounty hunters and offer cash rewards for the identity of posted profiles. And when the laws finally do catch up we will already have the necessary data.
I would be open to correspondence. My website is in the mock-up stage and (for the most part) non-functional, but you can see where we’re heading at http://www.socp-usa.com We hope to launch mid year. Thanks. Troy