Digital music: flat fee futures
Terry Fisher reviews the year
2004 was the year that discussions of alternative licensing models for digital music finally reached the mainstream. At the start of the year we interviewed two of the leading proponents, Professor William "Terry" Fisher of Harvard's Berkman Center think tank, and Jim Griffin; in September - thanks to Factory Records' Tony Wilson - your reporter took these ideas to the biggest music convention in the UK; and Fisher's long-anticipated book Promises To Keep, which discusses several of the alternatives in detail, appeared in the fall. So it's fitting to close the year with Fisher's views on the state of the landscape.
But first, we must commend the book: it's very good indeed. It's rare to find an academic lawyer writing for a general audience without a polemic slant. The backbone of Promises To Keep is a detailed discussion of the many ways a digital pool, or flat fee system, may take shape; it is also a lucid introduction to copyright in general and the specific, Byzantine peculiarities of the US compensation system.
Fisher sketches three versions of the future. In one (Chapter Three), rights holders ally to technology companies to build rights management technology into as broad a range as products as they can. It's the vision shared by Steve Jobs and Bill Gates, and Fisher calls this "a manifestly bad idea - one to be avoided at all costs". It would stifle opportunities for artists and limit the choice of art available to the public; it would allow rights holders to indulge in price discrimination: once they know you're a Sopranos fan, they'd be able to charge you more for the next episode, for example; and it places limits on technological innovation. This, Fisher admits, is the one more likely to happen, but it comes at a tremendous cost to society.
In another scenario, (Chapter Five) art is recognized as a public good too valuable to be left unsupervised in private hands, and like accommodation, which is subject to rent control and building codes, is therefore subject to public oversight. Entertainment is already heavily regulated, Fisher points out, from the government-sanctioned monopoly we call "copyright", on up. "Chapter Five is more of a thought piece, based on the assumption that if we don't move to compulsory licenses, are there analogies to curb the unfortunate effects of market power?" he says.
Such a model would promote competition, he writes, and ensure price discrimination capers were illegal. He sees private collective-rights agencies performing the royalty collection, much as now. "The availability of clean, authorized copies of audio and video recordings would increase dramatically [and] many more musicians would be able to make their music available directly to the public". However, the costs of oversight would be high, the existing players wouldn't necessarily outlaw DRM.
This is not especially practicable after the recent elections, given the tide of anti-regulatory sentiment, Fisher acknowledges.
His third scenario offers the most tantalizing future: one where music and movies can be freely exchanged in the knowledge that the rights holders get paid. Such scenarios are discussed under several names: "digital pool", "flat fee" or Fisher's blanket acronym, ACS (alternative compensation system). All involve extending the compulsory license model that currently applies to public performance and radio to digital media. We benefit by being allowed to exchange cultural goods - there would be no more 'piracy'. Such a model offers a cheaper, more profitable route for rights holders too. As he explains,
"Let skeptical musicians and filmmakers continue to restrict access to their creations - and let them continue to call upon the aid of the legal system to protect those measures from hackers. If the new regime is as efficient as we have argued, the skeptics will soon discover that it is simpler, cheaper, and more profitable to register their recordings with the Copyright Office and rely upon distribution of royalties from the government for their source of income."
So we began by asking, was this vision more or less likely to materialize than when we last spoke ten months ago?
The Kazaa case had provided a surprise, he said: "The fights I discuss in Chapter Three have not gone in the favor of the intermediaries as consistently as one might have expected; they have escaped charges contributory and vicarious copyright infringement."
"On the other hand legal reform is perhaps less necessary than I suggested in the book. We are seeing the emergence of small scale legitimate online music services. And their usage has been enhanced by a modest suppressive effect of the [RIAA] lawsuits."
Those lawsuits had a short term effect on illicit downloads, but usage of the P2P networks has now rebounded.
"It's most likely not as high now as it might have been without the initiation of the suits; but it's up substantially since Fall of 2003. I don't agree with Fred Von Lohmann who says the litigation has had no impact, but nor do I think the intermediaries' spokespersons are correct in proclaiming them a success."
This has led the recording rights holders to push harder for technical mandates such as the Induce Act, and the ongoing efforts to plug the analog hole.
But a practical ACS is already approaching, Fisher points out: "In Brazil, a coalition is building the software to run the system, and compiling a national music database."
There are opportunities too, he says, in China, where the local music industry has collapsed, and where it could be rebuilt on the basis of an alternative compensation system. But in the United States it's most likely to proceed on a voluntary basis. Almost everyone in the world seems to be working on a digital watermark system, including the Berkman Center, where Professor Fisher is director.
"On the technical front we're constructing a plug-in that could operate as a counting mechanism. The sampling [ACS] system I describe has to be built and navigate between the shoals of, on the one hand vulnerability to ballot stuffing, and on the other invasion of privacy. On the business front we have to identify a subset of music that's small in size, cohesive, autonomous and congenial to the idea to make it work," he says. "We couldn't take on the whole music industry."
What does Fisher make of Shawn Fanning's latest venture, Snocap, also a watermarking scheme?
"I have a suspicion that it's a publicity move rather than a serious business move," he says. "It's conceivable that it may be used to undermine the claims of the Groksters that they're unable to differentiate legitimate from illegitimate services on their networks. In other words, more of a litigation tool than a device to build a business model."
The early publicity given to alternative compensation systems has seen the RIAA preparing their ammunition. When Steve Gorden, a flat fee proponent and former Sony attorney, made his case on NPR recently the RIAA stepped up to the plate, asking "Do you want Government to set the price for music - for Beethoven?" This absurd claim was left unchallenged by the producers, but it was typical of objections left during Fisher's stint as a guest on Lawrence Lessig's weblog. Not only did this bring out the usual array of bedroom hopefuls, touting their own software, but the objection to state involvement in the market for cultural goods. This gets short shrift from Fisher.
"These objections have a lot of rhetorical power, but they're wrong headed. I point out in the book that the entire music industry is already shot through with government involvement: copyright confers power on producers insulating them from market forces, the entire intellectual property regime requires a major involvement of the government; and the past shows that the industry is full of devices such as compulsory licenses which required government involvement. The idea that an ACS for digital music represents a new involvement by government is entirely wrong".
That said, Fisher notes, some objections seem quite legitimate and a successful ACS must address them.
"There are really two kinds of objections. One is the practicability of the idea - can you really design a system that reliably estimates the ways music works are consumed, without compromising privacy or succumbing to widespread fraud. People want to know will money end up in the pockets of genuine distributors, rather than being absorbed by middlemen. And they want to know if the system is susceptible to government capture by officials who want to prevent artists they consider pernicious from getting their fair share." An example of the latter would be evangelicals leaning on intermediaries to cut penalize "immoral" art.
"If you can't answer these questions," says Fisher, "it would be a bad idea to launch an alternative compensation system. You have to build a system that demonstrates that it's feasible."
Fisher has addressed conservative talk radio audiences with the proposition that an ACS doesn't extend government involvement and preserves what he calls "the fundamentally capitalist principle of consumer sovereignty. It's very different to the French subsidizing their cinema."
Under the ACS models that win the most widespread support, an artist who wasn't listened to or whose music wasn't exchanged wouldn't receive a cent.
Is there an opportunity for working through the WTO's TRIPS agreement, which already acknowledges that individual states can impose a compulsory license? Fisher doesn't think so. Articles 30 and 31 of the TRIPS agreement only allow compulsories in a specific context: "in the case of a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use," which doesn't' seem to leave would-be breakaway nations much wiggle room. In fact he thinks that the Berne Convention would need to be modified, at the very least for movies, for an ACS to work.
How do we get there from here?
Fisher's figures have been revised slightly, but remind us how cheap a digital pool would be. Assuming an ACS compensated the movie and music rights holders 20 per cent of lost revenue in the first year, as Fisher's proposal does, the burden on each US household would be 50 cents a week. At a time when US citizens are nickel and dimed to death on their utility bills (not to mention health insurance) this might be the most popular "tax" in history. It's certainly a progressive alternative to what Jobs, Gates and the RIAA propose, which essentially entails charging citizens for rights that they already enjoy for free. And it's hard to envisage a more dramatic or transforming use of technology than to walk down the street, collecting music as you go.
Many proposals over the years have lost because lobby groups played upon people's fears. The task facing proponents of flat fees for digital music persuading a wider public of the truth: that this is not only the most rational of all possible alternatives, it's also the most beneficial for everyone.
There's another reason why Promises To Keep is important, too. In a very understated manner, Fisher has also provided a most valuable argument for preserving the internet as an open "end to end" communications medium. It hasn't quite turned out as promised. The vibrant marketplace resolved into an oligopoly of eBay, Amazon and Google. The platform for innovation became a haven for spam, viruses and frauds. And as a communication mechanism that was supposed to promote a new discourse, speech without consequences flourishes; the only legacy maybe the addition of the words "troll" and "flame war" to the dictionary. At the same time, closed networks provide people with much of what the internet fails to do: simple, reliable messaging such as SMS, and cheap and ubiquitous services like finding out when the next bus will arrive, or AQA.
There are certainly enough vested interests keen to close the internet. If the end to end 'net is to prosper, or even survive, it needs to deliver utility, and there can't be a greater argument for it than the vision Fisher describes here. ®
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