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Monday, Nov 9, 2009
"This Pew study reminds me of an anecdote," says Eric Garland. "It was 2001, just after the decision came down that finally shuttered Napster, and I was at South by Southwest," the music conference that takes place in Austin, Texas, every year. "There are all these record industry people there, and I'm an outside technologist -- I'm known as the Napster guy. And they're all toasting me and raising their glasses, expressing ironic but sincere sympathy because my business has gone away. I said, 'Guys I know we all need a reason to drink -- but have you heard of this thing called Morpheus?'
"The consensus was the tide has turned and we're all well on the way to winning the war. What was called Morpheus was not even a shadow of a threat, was a completely hollow threat. We needed something to celebrate, we needed to know that the seething was over and done with. It's a very difficult reality to internalize that file sharing has become fully ingrained in the culture."
Not everyone in the recording industry has yet fully internalized that reality. While there are probably many in the business who believe that they'll never beat peer-to-peer trading, a few harbor a lingering assumption, observers say, that eventually the combination of legal, legislative and technical brute force will deal a mortal blow to sharing. "They believe in the deus ex machina that comes in during the third act of the opera and saves the heroine from the flames," says Jim Griffin, the CEO of Cherry Lane Digital, a firm that consults in the delivery of digital art. "They think, 'If only we code better and add legislation and add a touch contract ...' The main hurdle for them is accepting that the status quo is disappearing. We cannot legislate or guilt or code or contract friction back into an increasingly friction-free world."
So what should we do instead? Ever since the threat of file sharing appeared on the horizon, experts have been pointing to the concept of a blanket license as a way to save the world a lot of economic and legal pain. The various proposals for such licenses differ greatly in their details, but they essentially work like this: Through a tax or a fee added to any number of goods or services (such as blank CDs, or CD burners, or portable music players, or Internet service) consumers would pay a flat fee for the right to download as many copyrighted tracks as they care to, with impunity. The users would have full rights to the songs -- people could burn them, share them, modify them and keep them forever, even after they've stopped paying the fee. The recording industry would divide the money based on accepted measurements of downloading. (Perhaps the most sophisticated proposal for a blanket license was recently put forward by Neil Netanel, a law professor at the University of Texas at Austin; the paper is to be published in the forthcoming issue of the Harvard Journal of Law & Technology.)
For proponents, blanket licenses would be digital music's nirvana. "ITunes is great, but iTunes is a pale shadow of what Napster was, and Napster was only a few months old," says Fred von Lohmann. "The catalog was better, deeper -- songs that had been out of print for decades that even the record labels didn't have were on there. I remember once there was an old Beth Orton record that was on there, and I don't think even she could get ahold of the master for that. And think of all the live concert footage -- and that's just what emerged in 12 months or so. Imagine if you'd poured $200 million in venture capital for it and you were funding the technology rather than paying all those lawyers." Imagine, in other words, if Napster were legal -- how much would you pay for that?
The music business is no stranger to collective licensing. Television and radio stations enjoy collective licenses for music they play on-air; the stations pay the artists' performing rights societies (such as ASCAP and BMI) some negotiated amount of money, and the societies dole out the money to their members. Stations that pay enjoy broad rights to play whatever they want to.
The EFF advocates some version of this license for everyone else. As von Lohmann envisions the plan, ISPs would negotiate the price of such a license with the recording industry -- something like $5 or $10 per user per month. Then ISPs would offer this license to their customers. "So you'd opt for the SBC all-you-can-eat music broadband account," von Lohmann explains. Von Lohmann believes that most customers would pay the money to be free from RIAA prosecution -- and even though there may be a few free riders, the problem won't be anything like the one the industry currently faces, he says.
If the EFF's vision seems a bit far-fetched -- why would an industry so bent on prosecution of copyright infringement ever grant so many broad rights to users? -- von Lohmann concedes that it is, right now. But he maintains that soon, the industry will have no choice but to offer such a plan. By the end of the year, "after more slumping revenues (not offset by iTunes sales) and more disaffected fans, I think the record labels will have to admit that they need a Plan B," he says. "After all, if things continue as they have, senior executives will be sacked, and new executives will have a mandate for change. When they start looking for more sensible alternatives, we'll have one ready."
This is not the story you'll hear if you ask the recording industry about blanket licenses. "A blanket license is a government license," Mitch Glazier says. "You would never do it unless there's complete marketplace failure. And we now have an existing marketplace, and my god it's exploding. [The EFF's position] I think is the opposite, is what is called for in this new marketplace."
There are other criticisms of blanket licenses. Stan Liebowitz, an economist at the University of Texas at Dallas, has questioned the plan's economic soundness. He says that it will be extremely difficult to set an optimal price for such a license. Under a blanket system, how will you know how big the music industry should be? If each download is free, then there'll be an enormous number of downloads -- many more than the number of songs purchased right now. Should the music industry be that big? "I think they are still naive in their belief that it will be possible to have a good grasp over what size it should be," he says. "Right now we know what the sales have been recently -- we know that zero is too low and 40 billion's too high. But 30 years from now how would we know where it should be?"
But observers of the music industry are convinced that the blanket license will come to seem, to all involved, like a pretty natural thing to do. "We accept that we can't control automobiles," says Jim Griffin. "They kill and maim people every year, there's a death rate and an injury rate associated with them. So what do we do? We say our safety system is 5 feet and a white line, so before you get on the road you should pay money into a fund. That's how we monetize the anarchy of the road." Making money from file sharing, Griffin says, is not that much different. You ask people to put money into a fund, "and that way you monetize the anarchy of human behavior."
