April 19, 2024

Voluntary Collective Licensing and Extortion

Reihan Salam has a new piece at Slate about voluntary collective licensing of music (which was also the topic of an online symposium organized by our center at Princeton). I’m generally a fan of Reihan’s work, but this time I think he got it wrong. His piece starts like this:

What would you do if a bully—let’s call him “Joey Giggles”—kept snatching your ice-cream cone? OK, now what if Joey Giggles then told you, “If you pay me five bucks a month, I’ll stop snatching your ice cream.” Depending on how much you hate getting beaten up, and how much you love ice-cream cones, you might decide that caving in is the way to go. This is what’s called a protection racket. It’s also potentially the new model for how we’ll buy and listen to music.


Now Big Music is mulling the Joey Giggles approach. Warner Music Group is trying to rally the rest of the industry behind a plan to charge Internet service providers $5 per customer per month, an amount that would be added to your Internet bill. In exchange, music lovers would get all the online tunes they want, meaning that anyone who spends more than $60 a year on music will come out way ahead. Download whatever you want and pay nothing! No more DRM! Swap files to your heart’s content—we promise, we won’t sue you (or snatch your ice-cream cone)!

This idea, that collective licenses amount to extortion – pay us or we’ll sue you – is often heard, but I don’t think it’s a valid criticism of collective licenses. The reason is pretty simple: if this is extortion, then all of copyright is extortion. The basic mechanism of copyright is that the creator of a work gets certain exclusive rights in the work. Exclusive rights means that there are certain things that nobody else can do with the work, without the creator’s permission. “Nobody else can do X” is another way of saying that if somebody else does X, the creator can sue them. When you buy a licensed copy of a work instead of downloading it illegally, what you’re buying is an enforceable promise that you won’t be sued (plus the knowledge that you’re playing by the rules, but that is intimately connected to the lawsuit protection). So the basic mechanism of copyright involves people paying a copyright owner for a promise not to sue them.

To put it another way, if you accept our current copyright system at all – even if you accept only a streamlined, improved version of it – then you’ve already accepted the kind of “extortion” that would be used to sell voluntary collective licenses. The only alternative is a complete redesign of the system, more complete even than a voluntary collective license.

Reihan does recommend a redesign. He endorses Terry Fisher’s suggestion of a government tax on broadband access, with the revenue used to pay musicians based on the popularity of their songs. This system has its benefits (though on balance I don’t think it’s good policy). But if you start out worried about strong-arm extraction of money from citizens, a mandatory tax scheme is an odd place to end up.

This is the fundamental problem of copyright policy in the digital age. It’s easy for people to get copyrighted works without paying. So either you forgo payment entirely, or you give somebody the mandate to collect payment. Who would you prefer: record companies or the government?


  1. Any exact digital copy of a digital work will include any “authoright” seals, of course…regardless of the copy’s provenance.

    Smarter is for there to be a limited edition version on forgery-resistant media of some sort, with serial numbers and tracking. So for a song, there’s the ubiquitous mp3 version and there’s 100,000 (or however-many) CDs with funky holographic labels or some such (and no digital copy-protection crap!); people who want to support the artist buy one of these CDs, whose authenticity is checkable, instead of (or as well as) having the mp3 version. Artists make money selling the authenticatable media, and by other means such as concert tickets and memorabilia; the free mp3s actually serve to advertise all of the above.

  2. Anatoly Volynets suggests musicians add their seal of approval to their works. It signifies it’s original, not ripped off by others. If you buy it, it tells the world you bought it from the artist. If the “authoright” seal isn’t present, it means you buy it from a rip-off outfit. A record label pays the artist for the “authoright” seal. The arrangement can be exclusive, or non-exclusive. As the artist’s popularity grows, the price increases.

    I won’t buy RIAA/ASCAP/BMI music. I will buy “authoright” music. Why? Because I know the money is going to the artist, whether as a royalty payment, or pre-arranged contract between the source of the sale. It’s time the middlemen adopted Internet business models. It’s up to the artists to make it happen. It’s as easy as adding their personalized seal of approval, the “authoright” seal to their works.

  3. I’m a musician, and I just have to say that the collective license fee is bullshit. Let’s be frank here and mention that when it comes to music, large record labels are not really essential. It’s the musicians who are essential, right? Musician makes music = he should benefit from it. Right?

    So, this collective license will not benefit musician one drop. It’ll all go to the record label. Basically it is a first step on the way to make large record labels so that they can sustain themselves without actually publishing any music at all. As for giving money due popularity… eh, who’s going to count what is popular and what is not over internet? If I say that 100 people have downloaded our album today (it’s free) is that good enough? If not, how can some goverment/private agency tell how many people have downloaded the album from my site since it’s private/protected data? If it is good enough, well, how you’re stopping abuse?

    More to the point; why do we want to save the damn record companies anyway? I have experience of several them ranging from annoying to straight out horrible. If they go belly up, so what? Let them. World will go on just fine without their extortion of musicians.

    I could lay down all the groundwork for my arguments and more criticism, but I think I’ll just cop out and mention that I’ll pretty much agree with most who are against this whole idea.

    And I am not really against copyright, but then again I am. I just think the whole system needs radical redoing. It isn’t working. On any level.

  4. Ben Finney says

    > This is the fundamental problem of copyright policy in the digital age. It’s easy for people to get copyrighted works without paying.

    Only once you actually release those works.

    > So either you forgo payment entirely, or you give somebody the mandate to collect payment.

    Or you collect some form of payment before releasing the work.

    Or you produce work of good quality such that people will pay without extortion.

    Or [insert your choice of scheme here].

    Painting a spectrum of possibilities as black-or-white doesn’t help.

  5. Define “when we have no choice”. As far as i’m concerned, worst case the riaa and labels go out of business. It’s not like the sun is going to go black, people aren’t going to starve because they cannot get music. A few thousand former “artists” may have to get a day job. The riaa may clog up the court system… In short, the world will not end. Therefore I see no requirement to ever go to a collective licensing model, ever.

  6. IMO when making public policy, there _must_ be some aspect of: “for the public good” present in the deliberations. Ensuring the continued profitability of some companies that are otherwise failing to compete in the market is _not_ necessarily “for the public good”.

    So far, the “for the public good” in this policy would be the presumed elimination of some extortionistic litigation against private citizens.

    I observe that we have _only_ see these lawsuits within US jurisdictions, yes? Perhaps there is a more fundamental issue, that being some aspects of US civil law?

    When establishing _new_ rights, especially for commercial interests, it is _very_ important to balance their benefits against their disadvantages.

  7. Haceldama,

    I haven’t come out in favor of any of these proposals. I have expressed skepticism about them in the past. I view them as something we might have to settle for, rather than something we should be eager to adopt. And I’m not convinced at this point that we have to settle for them — I think we should give the current system every chance to succeed, and only switch if we have no choice.

  8. Haceldama says

    actually, tax every american, since broadband access is not needed to share music, wifi, or dvdrs, usb sticks, portable hdds, all can be and are used to swap data.
    i imagine quite a few americans share music that way, let’s tax them as well.

    why not tax them for the air they are breathing,
    why not ?
    sure sounds sweet. get money for doing nothing.
    opportunism and capitalism at its finest.

    people are paying for the music they like, it’s just apple drying up the pond, no need to buy the whole cd if one itune does the trick.
    warner et al. made no effort to sell downloadable music in high quality and accessible, they experiment now, a decade later.

    (no need to pay companies sueing their very own customers, ruining lives on a daily basis)

    besides the world has evolved, there is more than music to keep you entertained nowadays.

  9. Exactly. Copyright is extortion. The whole concept of copyright to promote creation has no basis whatever. Time to bring back the patronage model.

  10. Haceldama says

    it’s really astonishing how you academics fall for such a trick.
    i figured you of all people researched the fallacies of such a proposal.
    the ramifications of this are a pain.

    in the end, don’t bill people for sharing, let them pay for music when they feel it right, as far as i know people actually still buy music, *gasp*
    apple, amazon.

    think about it, there is no reason no point whatsoever in the scare tactics other than to unrighteously gain money.

    added revenue is all any company is after, that is why you and soon we europeans have failing electricity networks, because companies do not care if their networks deteriorate, as long as it works it makes them money, preferably without maintenance, that is market efficiency applied.

  11. Haceldama says

    an agency in germany, called gema does just this.
    we germans have to pay ludicrous sums in order to buy cd-rs dvd-rs printers, fax machines, copying machines and so on, it basically amounts to extortion.
    it is not a fair system either, musicians in germany quiten often joke about on how to scam the system.

    record companies are not interested in offering people music, they only want money, nothing else. if they get away doing nothing for earning money, they will push and push until more than just internet is billed.

    mp3 players, computers anything you could conceiveably use to play music on.

    it’s a can of worms since other copyright users will want a cut.

    mr felten, i do respect your opinion most of the time, but this time, you are wrong, please see reason.

  12. Remind me, which amendment was it that made SoundExchange a part of the U.S. government?

  13. The other Chris says:

    “The assumption isn’t actually that you a breaking the rules so we’re taxing you $5. It’s a more complex “the net public benefit is maximized by taxing a related service $5 than by leaving it to the status quo”. The status quo seems to be paying lawyers better than it pays musicians, and that’s a problem.”

    And having everyone pay $5 to the RIAA will help the *artists*… how, exactly?

    “It’s akin to the levy on CDs – not all of them are being used for music, but the levy is better than bearing the high cost of trying to figure out which ones are for music and which ones are not.”

    Sure, sure. We could save a lot of money by just getting rid of the entire justice system. Courts are an expensive public service (not to mention paying lawers and all that), after all — why not just assume that everyone’s guilty and be done with it?

    You use the word “better” here, when you really mean “easier.” I don’t see how it’s “better” to assume that all CDs will be used to infringe someone’s copyright.

    Oh, wait, you said “for music.” Does that mean that if I want to record anything from my Yamaha Clavinova to CD I should be paying RIAA, too?

    “This isn’t the only place we do this. You pay education taxes because society benefits overall from basic education, not because you have kids. Even if you deliberately choose not to have children out of principle, you’re still going to pay education taxes.”

    Here, you have a point. I have a personal interest in having other people’s kids invested. I don’t have kids yet, but I’m married and once my wife finishes her doctorate… anyway. I entirely agree that society benefits overall from basic education. At the risk of getting too far into the politics of public education, I even think that its problems can be fixed without resorting to the drastic measures of privatization.

    About this $5. The proposal is that we should pay money to some institution, government or RIAA, which is somehow tasked with distributing money to the artists. Let’s see… census.gov currently says 303,936,378 people in the U.S., 2.57 people per household, let’s be generous and say 75% of households have internet access (because the most recent numbers I can find are from 2003 saying just over half) gives us about 89 million households with internet access, times $5 a month… is about $443 million.

    You don’t suppose $5.3 *billion* a year is a little presumptuous of them? The net income of the RIAA is currently $11.5 billion.

    So yeah, let’s compare the overall benefit to society of giving that $5.3 billion per year to education as opposed to trusting the RIAA, shall we?

  14. The main problems I have with the “ISP Music Tax” is:

    1 – It doesn’t seem to be opt-in. Thus it would charge people who don’t illegally download music either because they want to be honest and people who don’t because they can’t hear the music (the deaf). Why should a deaf person pay $5 a month to a music company for music that they are incapable of hearing? If I’m forced to pay $5 a month, does that mean I can pirate all I want? (You can be sure that I’ll start pirating like crazy if I’m charged against my will.)

    2 – It leads to other content providers instituting other charges. Why not have a $5 for the movie industry? A $5 for the TV industry? A $5 charge for the software industry? Etc. Pretty soon, your ISP bill is prohibitively expensive because you are being charged as if you are a pirate of the worst sort.

    3 – It doesn’t even cover all music. Who is Warner to speak for other artists? Will that $5 cover all major record labels? Or will I need to pay $5 to each of the other major record labels? And what about Indie labels? Even if point #2 is avoided, will our ISP bills grow to huge proportions simply to cover all possible record labels?

    Side point: If each record label gets to charge each user $5 a month, I’d like to announce the opening of the Jason Record Label. It only features music by me (of me singing badly in the shower), but to prevent piracy, I’ll take my $5 a month from each user in the USA. (I figure that in a month or two I can retire and shut down the record label.) 😉

  15. Self Appointed Genius says

    Salam is right, the ISP tax is outlandish. The all-you-can-download model has a lot of potential as a store with a flat, monthly subscription. It’s worthless as a solution to the piracy problem. Essentially, the proposal is a bribe. “I’ll pay you $5 for each of my customers so that you’ll leave them alone.”

    Problem is, the ISP has no incentive to do this. It’s protected as a safe harbor and has no obligation to stop piracy, as the RIAA likes to imply. Consumers who download music might be individually interested in a $5/month insurance policy that would place them on a blacklist where they won’t be sued, but in that case, the more logical move would be to start a legal, subscription based p2p network.

  16. If this $5/month fee to the music industry goes into effect, there will be a long line of other industries wanting their own fees tacked on to everyone’s Internet bill: The movie industry will want a fee for movie downloading. The television industry for television program downloading. The software industry for software downloading. The publishing industry for redistribution of magazine and journal articles (copied from magazine and journal websites) and books (as from google’s book-digitizing program). And everyone else with any sort of copyright (even some bloggers). And why only U.S. companies; U.S. citizens can just as easily download stuff from Europe, so why shouldn’t European companies also be able to collect fees from us. And how about an Internet porn fee?

    So this $5 fee could easily balloon to a $50 or $100 monthly fee, divvied up among many different industries and copyright holders.

    And I don’t for a second believe that any of these fees will actually entitle users to download anything. The fees will be pitched as being merely partial, grossly inadequate compensation for all the revenues being lost to illegal copying.

  17. ASCAP/BMI practices “voluntary collective licensing” every day. You may not like extortion, but when you have a beer at a bar that hosts a karaoke night… part of the cost of that beer goes to the copyright holders even if you hate karaoke. It’s considered part of the cost of doing business.

  18. Chris S says: …You pay education taxes because society benefits overall from basic education, not because you have kids. Even if you deliberately choose not to have children out of principle, you’re still going to pay education taxes.

    Then by that theory, music would now be deemed public, and copyright becomes obsolete. A form of socialism thus triumphs.

    This $5.00 crackpot idea (pun intended) is not the solution. Now, if the so-called “smart” lawyers trying to figure out a way to jury-rig gaffing the entire populous for an outdated business model could get together and figure out a way to induce fair compensation for copyright, then I’ll sign on and give it a whirl.

  19. Other Chris sez: “Now here’s this proposal that I’m going to be taxed $5 on the bill from my ISP on the mere assumption that I’m breaking the rules. Where’s that money going? The very institution I’ve been deliberately not supporting out of principle.”

    The assumption isn’t actually that you a breaking the rules so we’re taxing you $5. It’s a more complex “the net public benefit is maximized by taxing a related service $5 than by leaving it to the status quo”. The status quo seems to be paying lawyers better than it pays musicians, and that’s a problem. It’s akin to the levy on CDs – not all of them are being used for music, but the levy is better than bearing the high cost of trying to figure out which ones are for music and which ones are not.

    This isn’t the only place we do this. You pay education taxes because society benefits overall from basic education, not because you have kids. Even if you deliberately choose not to have children out of principle, you’re still going to pay education taxes.

  20. “Charles, it’s not a new approach to licensing, but to sale of intellectual property.”

    Yes, I see. I should have read your links more carefully (sorry ’bout that). That is quite different from what I was thinking about. I’ll have to keep an eye on that, and I’m still glad that people are leveraging our technologies to really rethink what is possible when it comes to IP markets. There probably is not one solution to fit all situations, and thank goodness for that.

  21. Charles, it’s not a new approach to licensing, but to sale of intellectual property.

    The idea is that the artist sells their work directly to their audience. That’s then the end of the matter, the seller’s IP now belongs to the audience and they can do what they want with it, share it, build upon it, and sell it (barring plagiarism of course). Free copying promotes the artist to build up a larger audience who’ll commission their next work. The trick is proving a mechanism that enables millions of punters to do en masse deals with digital artists.

  22. I’ve chosen to spend my entertainment budget elsewhere, partly because of how the musicians get treated by the recording industry. I feel that if I don’t put my money where my mouth is, then my opinions aren’t worth much – I either respect copyright and buy the songs and albums I listen to, or I don’t attempt to obtain the music. I’m a lot more willing to support an artist directly than I am to give money to the recording industry that actively harms them. I’m playing by the rules – out of principle. This has caused me to buy a lot less music than I used to, but I’ve been spending my entertainment budget elsewhere as a result, and I don’t feel my quality of life is any worse. Similarly, if I care about how a company treats its customers and employees, I need to consider whether my own purchasing decisions are helping or hurting those people. So I shop accordingly.

    Now here’s this proposal that I’m going to be taxed $5 on the bill from my ISP on the mere assumption that I’m breaking the rules. Where’s that money going? The very institution I’ve been deliberately not supporting out of principle.

    If, after carefully making my purchasing decisions on the basis of how those decisions will influence the world, I am then required by law to financially support the very institution I see harming so many artists then my purchasing decisions no longer carry any weight in conveying my principles.

    How should a reasonable person in my position behave? I’ve just been told that it doesn’t matter whether I’ve played by the rules of copyright, that it doesn’t matter that I’ve changed my buying habits, that I am presumed to be an infringer and that I will be taxed $5 a month because I use email and other perfectly legal and legitimate services on the internet…

    If I’m going to be presumed guilty *anyway*, and if I’m going to be punished for the actions of others *anyway*, and that my purchasing decisions are made moot by being required to finance an inhumane institution *anyway*… why shouldn’t I just pay the $5 a month and start downloading all the copyrighted music I can find on the internet, just because it clearly won’t make any difference what I do?

  23. One of the major fallacies in collective copyright systems become transparent if you make the following, simple observations.

    1. Music is under copyright, so is software.
    2. People download music without license, same with software.
    3. Music makes want to get paid, same for software.
    The solution
    4. A collective license to download music with proceeds distributed by popularity, same for… um, what?

    Well, today people downloaded 98 copies of The Sims and only two copies of Oracle, so The Sims get 98% of the revenue.

    Implying that all music is equal and should be priced equally is ridiculous. Determining payout by popularity (as the collective licensing system does) is pricing all music exactly equally.

  24. “This is the fundamental problem of copyright policy in the digital age. It’s easy for people to get copyrighted works without paying. So either you forgo payment entirely, or you give somebody the mandate to collect payment. Who would you prefer: record companies or the government?”

    Perhaps I’m putting too fine a point on this last paragraph (and perhaps I’m misreading it and you meant “forgo payment entirely for illegal copies”), but I don’t see this is an either-or situation at all. There aren’t just two choice: collective payment or no payment whatsoever. There is what we currently have: voluntary payment.

    I don’t illegally share copyrighted works, and when I do buy music, I like to have the choice of distribution channels (iTunes/Amazon/CD Baby/Direct from the artist). I also listen to a lot of music that isn’t represented by the RIAA and their associated licensing cartels. So any $5 fee is not doing me (or the artists I listen to) a favor. I don’t really feel like paying even a $5/month fine for other people’s misbehavior. I do not feel a responsibility for the collective misbehavior of some of my fellow citizens.

    Mr. Fitch, I’m glad to see somebody working on some new approaches to licensing. I’ve often wondered about the possibility of creating a web based market approach to licensing for broadcast and streaming so that all musicians could participate in royalty payments and not just the corporations represented by Sound Exchange.

  25. “Who would you prefer: record companies or the government?”

    Neither. Shouldn’t narrow choices between a rock and a hard place help us see that we need to take a look at the broader picture of copyright reform?

    The choice between the record companies and the government not a choice because they are essentially the same thing… Big Media dictates copyright policy in congress through lobbying… DCMA, Sonny Bono Copyright Term Extension Act, etc. If anyone thinks the government is going to be an impartial player in all of this, they need to take a look at history (that means you, Reihan Salam).

    As for Salam’s idea, it’s bound to fail. Massive government monitoring and database administration, a variety of powerful, interested parties (ISPs, Big Media, Apple, etc.) each trying to get their own way, taxes on citizens, rewarding raw popularity of artists… what could possibly go wrong?

  26. Tony, that ideal world is upon us. All we need are the markets to enable the exchange of digital artworks for money.

    I wrote about http://www.digitalartauction.com years ago, and with prototypes along the way such as http://www.quidmusic.com I’m now working on such a market mechanism to enable them and others, i.e. http://www.contingencymarket.com

    A lot of work for one person to do in their garage, but I’m getting there.

  27. Tony Lauck says

    In an ideal world, artists would be supported by voluntary contributions from fans or patrons of the arts. There would be no need to extract money from people who don’t listen to music or who can not afford to pay.

  28. Reinout Heeck says

    If I buy a car I won’t be paying for some book’s copyright; if I buy groceries I’m not paying towards the copyright of some song.

    However you are saying that if I use an IP connection exclusively for VoIP and I would be forced to pay towards music copyrights that it would be the same thing.

    Logical fallacy!

  29. The basic mechanism of copyright is not that someone ‘gets exclusive rights’, but that the natural right to freely exchange and build upon published works is suspended in order to grant this as a transferable privilege to the author/their assigns.

    Copyright is fundamentally unethical and tantamount to extortion in that if you don’t respect the state’s suspension of your cultural liberty and infringe copyright you are liable to prosecution. “Unless you pay me $X for copies/derivatives of my published works instead of making your own I will sue you for $millions or have you imprisoned for N years”.

    Supposedly, this suspension of our cultural liberty is to promote culture for the public benefit (instead of the publishers’ benefit – and disproportionate expense to the public).

    Instead of any compulsion whether by taxation or state enforced monopoly, works of art should be bought and sold in a free market just as any other works – however easily reproducible they may be.

    The value is in the art, not the copy.

  30. Another Kevn says

    In an ideal world, a voluntary collective license could be a very good deal. My belief, however, is that the proposal will not prove to be a voluntary collective license, but a sham.

    It is unlikely to be implemented as ‘voluntary’ for the subscribers. It will be presented to ISP’s as ‘make your users pay us or face nuisance litigation about their alleged behavior.” It therefore will simply show up as a surcharge on everyone’s bill.

    It is unlikely to be ‘collective’ for the artists; it will be a license only to Big Four material. Independents will have no way to participate in the revenues.

    It is unlikely even to be a license in any meaningful sense of the word. It will be carefully crafted so as to cover the ISP but not its subscribers (if the ISP is the license collector), or cover only certain titles (precisely the ones that nobody wants to download), or cover only a narrowly defined single machine (Oh, the license only covers your network firewall! If you want to move the files to a computer with speakers, that’s an additional $0.99 per track!) or otherwise set up so that only the act of downloading is protected, but any actual use of the music is not. Or it will require otherwise unconscionable terms. (Your law office gives us the right to inspect any and all files residing on any and all of its computers, at any time and without notice.)

    It’s also virtually certain to be implemented with positive DRM – phone home to the server every time you want to play a track, and mobile devices be damned. As soon as it becomes popular enough that the servers become overloaded, the service bureau will go chapter 7 and its chosen replacement will switch to pay-per-play. (And – just because we’re nice guys – we’ll give you a full six months’ unlimited use of the tracks you downloaded from the bankrupt shell company!)

    I’m sorry, but I don’t see any way that it’s going to fly, giving who is at the other end of the deal. It’ll be a $5-a-month tax on all the subscribers that buys precisely nothing. Can you honestly say that, given the labels’ past behavior, that they won’t simply use their power of asymmetric litigation to read all of the above into the contracts?

  31. On second thought, the collective licensing thing is more like

    Joe Giggles’ ice cream shop puts up the tollbooth outside the shop and allows everyone in to come in and get as much ice cream as they want, but they have to pay to go through the toll booth, even if they prefer ice cream from down the street or are diabetic.

  32. I don’t think collective licensing is equivalent to copyright, extortionwise.

    Copyright applies to a specific work. I can choose to pay or not copy.

    Collective licensing is essentially applied to all work available through the provider (I can’t access any work unless I pay the provider the fee), regardless of whether a work’s owner owner would be willing to allow me to copy it with no licensing fee.

    Copyright is like Joey Giggles being the ice cream vendor. It would be perfectly reasonable (if a bit pricey) for him to demand $5 for the ice cream cone.

    On the other hand, if Joey Giggles demands $5 for a cone that he had no hand in producing, and I’ve already paid for, that is extortion.

    Actually, to take the Joey Giggles thing a bit farther…it’s more like:
    Suppose there’s an ice cream shop who hands cones over to customers before they pay, and a certain number of customers walk out without paying. Would anybody consider it reasonable to for the owners to set up a toll booth on the street outside the shop demanding a toll for people to walk by, in order to make up for the revenues lost through non-paying customers?

  33. Unless I can opt out and not pay then it is extortion. I do not download music, my 79 year old Mother does not download music, so why should my Mother and I be paying $5 each for a server we do not need or want.