June 13, 2024

Reflections on the Harvard Alternative Compensation Meeting

Yesterday I attended a daylong workshop at Harvard Law School about alternative compensation systems for digital media. It was a great meeting, with many interesting people saying interesting things. There was a high density of other bloggers, including Ernie Miller, John Palfrey, Derek Slater, Aaron Swartz, and Eugene Volokh, and I hope to read their reactions to the meeting. (Eugene has already posted a brief recap.)

The morning focused on mandatory license systems, such as those proposed by Fisher and Netanel. The conversation immediately turned to the core problem, which strategic behavior by users, intended to channel the system’s revenues to their friends. Examples include Eugene Volokh’s “Second Amendment Blues” scenario, in which the NRA releases a song and NRA members obsessively download and play it, and my scenario in which I play and play my brother’s off-key rendition of “Feelings”. The result is that tax money gets channeled to the NRA or my brother, rather than to real artists. Everybody agreed that this cannot be eliminated, but there are some things you can do to reduce the distortion it causes. (And don’t forget that the goal is only to be less inefficient than the current system.) Two issues remained largely unexplored. First, some have suggested that social norms will cause most people to avoid gaming the system, out of a feeling of obligation to artists. We don’t know how strong those norms will prove to be. Second, some people expressed concern that people will find other perverse ways to respond to the off-kilter incentives that a mandatory license creates. It seems to me that we can predict most of the first-order effects of a mandatory license, but we haven’t thought much about second- and third-order effects.

There was also some discussion about the “porn problem” – the fact that some of the media material consumed under the license will be pornographic, and there will be strong political opposition to any system that causes the government to send checks to porn publishers. (Excluding porn from the system raises other legal and practical problems.) One response is to propose a system in which each person gets to designate the destination of their own tax money. That helps the political problem somewhat, but I still think that some people would object to any system that treats porn as a legitimate kind of content.

At the end of the morning I was a bit less pessimistic than before about the advisability of adopting a mandatory license. But I’m still far from convinced that it’s the right course.

The afternoon discussion was about voluntary license schemes. And here an interesting thing happened. We talked for a while about how one might structure a system in which consumers can license a pool of copyrighted music contributed by artists, with the revenue being split up appropriately among the artists. Eventually it became clear that what we were really doing was setting up a record company! We were talking about how to recruit artists, what contract to sign with artists, which distribution channels to use, how to price the product, and what to do about P2P piracy of our works. Give us shiny suits, stubble, tiny earpiece phones, and obsequious personal assistants, and we could join the RIAA. This kind of voluntary scheme is not an alternative to the existing system, but just another entrant into it.

This is not to say that a few ISPs or universities can’t get together and cut a voluntary deal with the existing record companies (and other copyright owners). Such a deal would still be interesting, and it would lack some of the disadvantages of the more ambitious mandatory license schemes. Of all of the blanket license schemes, this would be both the least risky and the easiest to arrange. But it hasn’t happened yet. (Penn State’s deal with Napster doesn’t count, since it’s just a bulk purchase of subscriptions to a service, and not a blanket license that allows unrestricted use of music on the campus.)

All in all, it was a very instructive and fun meeting. Big thanks to the Harvard people for arranging it. And now, due to a big snowstorm, I get to spend an extra day or two in lovely Cambridge.


  1. Music Downloading Discussed at Harvard Law School

    Ed Felten has blogged an excellent summary of the discussion at HLS about alternative payment solutions to the whole music downloading mess. The recording industry and Congress are far from considering compulsory license or levy solutions (in which dow…

  2. Cyberpunk, I think trying to use p2p as a marketing channel is a big mistake. I think it should be limited to being an advertising medium only.

    Other mechanism are available to sell music over the net other than p2p. Not only is a one-to-one relationship (or close to that relationship) between buyer and seller possible using these mechanisms but also the technology to make redistribution difficult if not impossible is also in the pipeline if not already available.

    Demand can have full sway with respect to the eventual selling price of any particular piece of work (both the quality of a particular work and the quality across a body of work.) Quality can be author defined and tightly controlled and of course a graded premium could accompany higher quality. Higher selling prices can have their own disincentives to redistribution. I’ll be sent to hell first before giving away something I paid a premium for.

    Chris, granted you do not have time to listen, rate and reimburse but maybe two or three hundred song per year. But consider 10M consumers buying two or three hundred song per year at maybe a 600% markup to start with (which could easily be less than $1 per work.) Of course market saturation will have a depressing effect on selling price. I’m not sure what the lead time would be before clean stuff got out on the internet but, I suspect an artist could get two to four months of marketing time before too many of that particular work was available for free on the net. What is important here is to make the effort to put pirated material on the internet as difficult as possible to take advantage of lead time.

    A side benefit would be that artists would have to actually work for a living producing better quality works. We get the best they have to offer and they’re rewarded for their efforts. Rent seeking behavior would be depressed. Finally, the author gets most of any pofits made not the record companies. Just a thought.

  3. The one aspect of alternative compensation that I don’t recall anyone ever mentioning is how to deal with the international issues.

    What is to stop someone from setting up a music sharing service in some country that does not care about protecting the US recording industry?

    As I see it, in order for an alternative compensation scheme to be effective, there would have to be an international agreement which essentially all countries agree to implement. I would have to guess that this would be difficult to achieve and enforce. Obviously no other government would openly condone illegal music downloading in the face of US disapproval, and most would probably make official moves to crack down on it. But let me point out…international drug traffic (not to mention software and music piracy) continues, despite our best efforts at control. And I believe that a music tax would create a financial incentive for black market downloading sites, both in the US and abroad.

    Is that a wave of spam advertising *FRE M-U-S-1-C* I see bearing down on me?

  4. Yes, PhilTR, artists do have the ability to cost effectively produce and distribute their material to millions of consumers.

    Unfortunately, I as a consumer do not have the time to listen, rate, and usefully reimburse the millions of artists who have shipped stuff to me. So, everyone can record and distribute, but nobody is going to get paid.

    Is it Socialized Music? Maybe. But what nobody has yet answered is – does a perfect market system for music actually exist, that we can also afford? Many such systems envisioned would collapse under the weight of infrastructure costs. Note the goal, included above: “be less inefficient than the current system”. Artists will be happy with Socialized Music if the efficiency actually pays them more than a perfect market that chews up everything they make with transaction costs.

  5. Cypherpunk says

    PhilTR – You’re right, artists can produce, record and distribute their own music now, without the need for record companies. What they can’t do is get paid for their efforts. Once they’ve sold it to one person, everyone else in the world gets it for free. It’s a classic public good.

  6. Cypherpunk says

    That comment about porn really hit the spot. What you are doing is setting up Socialized Music. You’d be turning the whole process over to the government. It would lay the taxes and disburse the receipts. This is how it has to be done, as only government has the power to tax.

    Once you have put things into the hands of government, politics will determine how the system works, not a bunch of ivory tower academics. You’re right, they certainly won’t fund porn. And they probably won’t fund gangsta rap either. Anything that wouldn’t be on the shelves of Walmart today would be cut.

    You’re inviting censorship on the widest possible scale. Please, kill this idea before it goes any farther.

  7. Hi, PhilTR: I second that notion!!!

    The Gutenburg Press empowered the People. The computer empowered the individual. Musicians make recordings on their laptops to equal the finest analog recording studios in the world. They edit them, produce them, distribute them, write off the Internet downloading to marketing, create elaborate Internet Fan Clubs that act as performance enforcers, and generate unbelievable recording merchandise inventories, rivaling the best the RIAA has ever produced. How much does this cost? A laptop, some Open Source software, a hosting service, and picking out one cause-related marketing strategy. About $1000 a year, for the first year. $1300 a year, thereafter.

    Nice, eh? It’s happening. And, we’ll help. http://www.studioforrecording.org, and all our services are free.

  8. Why is it that folks are having such a hard time getting their heads around the idea that artists now have the ability to cost effectively produce and distribute their material to millions of consumers? Why is this notion so unfathomable?

    With p2p as an advertising medium and the telephone (even VoIP) and a credit card as a means of monetary transfer, why does this have to be so difficult?

    Please, let the record companies assume their rightful place in history. Stop buying buggies when horsless carriages are readily available!