Critiquing Copyright Canards — Part Three of Five
Tuesday, December 2nd, 2008 by Patrick Ross
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You’re still with me? Remarkable. Okay, this is the third installment of my critique of common myths regarding copyright. In the first installment I focused on the canard that copyright stifles artists and that the purchaser of a work is the one with controlling rights. In the second I tackled the myth that copyright stifles innovation and addressed griping about creative industry business models. The series continues below.
5. “In the digital age, the marginal cost of reproduction and distribution of a creative work is zero, so that is the value of the work and should be its cost.”
Sigh. First of all, this argument is rarely made by economists; it is usually made by tech bloggers who double as wannabe economists. I shouldn’t have to point out that even when the marginal cost of reproduction or distribution approaches zero, there are fixed costs that led to that work being produced to begin with. Star-Kist isn’t going to give away tuna fish even if the cannery and the trucking companies and the retail stores all agree to work for free. They still have to catch a whole bunch of tuna.
There’s a larger factor at play here, however. Tuna is, in a way, a commodity, and it with commodity goods where you see prices driven down by marginal cost factors on the tail end of production and distribution. Some will buy Star-Kist, some (like Jessica Simpson) will by Chicken-of-the-Sea, but most just want to buy tuna fish. That’s fine.
But creative works are not commodities. A movie fan is generally not equally satisfied with either “Saw III” or “An Inconvenient Truth.” A music lover will not equally happily download either the Beatles or the Bee Gees as a rule. They may like both, but they are not perfect substitutes, and that is where marginal cost matters. Every creative work has its own market value, based on the value placed on it by consumers, and every creative work has a fixed cost involved in its development. When the creator offers a price that can potentially reimburse fixed costs and a consumer finds that price of value, a transaction occurs. This is called a market. Just because somebody wants something to be free doesn’t mean the creator of that work has an obligation to make it free.
6. “In the digital age, creative works should be part of a collective licensing regime. Everyone would pay a token amount, we could download all of the creative works that we want, and those creators and copyright owners would be paid proportionately from those funds.”
I think everyone should pay a monthly grocery tax based on the number of people in one’s household. Then we could all go to the grocery store whenever we wanted, take as much food as we wanted, and the producers of that food would be paid proportionately from those funds.
Critics of my statement will point out that groceries are finite products and digital reproductions of creative works are not. But the example still highlights some problems with collective licensing, and they all stem from one obvious fact – any collective licensing system takes away the primary right of a producer, the right to decide how his or her work is used.
One, even under a voluntary system, there would essentially be no chance for an alternative market system to thrive; consumers both individual and corporate would already be paying for the collective system, so there is no further incentive to pay beyond that. Every creator and copyright owner would be forced into the system, whether they wanted to enter it or not. Over time, that knowledge might dissuade future creators who would see little incentive to produce something only to see most of their rights to it immediately disappear.
Two, it is not surprising that this model is pushed by those who are the largest consumers of creative works. This is not a platform of the AARP, it is a platform of EFF and other groups supported by young people with a hunger for music and video and often a lack of funds to pay for as much as they’d like. This obviously puts people like my in-laws, who rely on broadband to keep in touch with relatives and monitor their (dwindling) market-invested retirement funds, in a position to subsidize the downloaders and uploaders who are choking cable systems. There’s an obvious inequity there.
Three, we often hear that this model would “decriminalize” millions of infringing downloaders. It would. But the cost would be not just the rights of creators but their potential for profit as well. Remember, there are fixed costs involved here, but the artist or copyright owner no longer has the ability to control any aspect of production or distribution, this making it more difficult to determine potential returns.
But the fourth point here is that, for the first time in history for most creators, they would be working under a ceiling that pitted one artist against another. For argument’s sake, we’ll pretend such a Byzantine system could be created. Let’s say there are a million broadband connections in this country, and let’s say a mandatory collective licensing system imposed a $5 monthly download fee for music. (My in-laws would be pretty upset, as noted above.) That is $6 billion annually, a ton of money. But remember, some will go to ISPs for transferring on the tax. Some will go to whatever organization is distributing funds, and that organization will have to be active in tracking download and upload activity across the increasingly decentralized Internet so artists could be paid accurately. So let’s say, based on models that exist currently, $4 billion is left for distribution to copyright owners, including performing artists and songwriters.
That is a fixed amount. No more can be distributed. The music industry for years grew and grew because more artists attracted more fans. Now, no matter how many artists, living and dead, were competing out there, a sale for one is a loss for another. If I download “Kashmir” from Led Zeppelin, that is a wee bit less than Fountains of Wayne will earn that year for “Peace and Love.” Note I haven’t even mentioned new releases here. Who would want to enter an industry where you are not paid based on your own success, but rather your financial return is capped and is relative to the success of everyone who has ever recorded in your industry and is still under copyright?
Finally, let us remember that this model is mentioned for recorded music, presumably to “decriminalize” infringing file-sharers, but with increases in broadband speed, memory capacity and screen displays for CE goods, videos are under near-equal siege to sound recordings. If we fit motion pictures and broadcast shows under that $4 million, we have diminished those industries’ revenues by multitudes of magnitude.
It is extremely unreasonable to think “The Dark Knight” — which some bloggers this year cited as an example of how Hollywood can make money off of a well-made movie even when it is pirated — would ever be made, knowing its potential returns would likely fall vastly short of production costs under this capped regime? And what of video games? Business software? Books and magazines? All are copyrighted works, all involve creativity and expense, all are digitized. Why would we select a collective system for one entire creative industry and not others? International treaties intentionally do not extend more rights to one artistic group over another. We should not be tempted to do that either, whatever past precedents exist in any particular industry.
We’re in the home stretch now. Next up is Part Four of Five, in which I focus on copyright as a monopoly and a property right.
December 2nd, 2008 at 6:02 pm
[...] Critiquing Copyright Canards — Part One of Five Critiquing Copyright Canards — Part Three of Five » [...]
December 3rd, 2008 at 1:25 pm
“This obviously puts people like my in-laws, who rely on broadband to keep in touch with relatives and monitor their (dwindling) market-invested retirement funds, in a position to subsidize the downloaders and uploaders who are choking cable systems. There’s an obvious inequity there”
If you are seriously blaming downloaders for choking the systems, when the telecom companies like Comcast and AT&T have *repeatedly* admitted to throttling users, then you’re more delusional than I thought.
Not surprising since the copyright industry is in bed with the telecom industry anyway.
December 4th, 2008 at 3:57 pm
How is a a mandatory collective licensing system that imposes a $5 monthly download fee for music any different from a mandatory “copyright” tax on blank tapes and compact discs? We the people have been paying for years for the offenses of copyright infringers with our purchases of current media formats– why not extend this system to the internet and give it some sort of dignity to boot?
December 4th, 2008 at 4:10 pm
Maru, thank you for making my point. That CD/blank tape program was put in place years ago. It is easily circumvented and has done absolutely nothing for artists in terms of any revenue whatsoever. If it had worked even remotely well, EFF and others wouldn’t be arguing in favor of an ISP tax.
December 4th, 2008 at 5:14 pm
“That CD/blank tape program . . . has done absolutely nothing for artists in terms of any revenue whatsoever.”
Because the money sits in the bank accounts of your benefactors, the major record labels. But that’s not a copyright problem.
December 4th, 2008 at 10:29 pm
Patrick, you’ve hit it on the nose again. Thank you for your insight. I want to add more, but I’m on the way out the door.
I’ll say just one more thing: We need to fight those who want to dictate to us. It’s clear that you are already dong that. Thanks:)
December 5th, 2008 at 4:59 pm
Neal Wrote:
“If you are seriously blaming downloaders for choking the systems, when the telecom companies like Comcast and AT&T have *repeatedly* admitted to throttling users, then you’re more delusional than I thought.”
I think Neal from your remark that, is if I understood you correctly, he may have been talking about you…”infringing downloaders” This entire article
by Patrick is excellent. No one has the right to use an artist work. Steve Jobs and Bill Gates
have designed systems and software that have turned music into poor sounding compressed audio and forced all artist into the new digital world of music distribution. I for one as an artist would like the same respect and protection that we give to Jobs and Gates for their so-called creative efforts.
Patrick your series was a great read! Artist have always been subjected to others thinking they can just use their work in anyway they please. Perhaps those that believe it is their right to just literally steel someone’s artistic creation would not mind if I steel their weekly paycheck since they feel that the rewards for my work are not neccessary then their working reward is not neccessary either.
December 10th, 2008 at 11:26 am
[...] have been wasted. It is this type of program that gives weight to arguments that we should not force creative industries into a collective licensing regime. But there is eminent logic in the notion that if schools are receiving federal aid in gaining [...]
December 15th, 2008 at 2:33 pm
Really great post, Patrick.
I think what some folks aren’t seeing in this entire debate is that blanket voluntary licensing will probably be more successful when applied when and if the subscription access model teks off.
I envision a future where broadband access will be wireless and ubiquitous — in your car, your portable device, every room in your house — which will make the idea of owning a discrete audio or visual file irrelevant. With proper economics of scale, subscription access would result in more money than the entire content industry currently takes in from the sale of individual files and physical items. Of course, real-world tokens will still exist, they just won’t be mass-produced, which means premium prices and another revenue stream for content producers.
The only thing the content industry stands to lose in this vision is possibly on the branding side. But there is plenty of opportunity to inject value into this system through artist pages, and things we haven’t even thought of yet. Maybe a Princess Leia-style hologram?!?
Alas, the technology isn’t there yet, and consumers aren’t wuite able to make that logical leap from “ownership” to “access.”
I do agree, Patrick, that losing the ability to price art based on perceived market value, but something’s gotta give here. It’s clear that the old way of selling creative content isn’t working out; new ideas must be entertained. Better to bring in the widest possible range of paying consumers than to permanently lose any means through which to monetize music/film.
FYI, this is my personal take on things, and doesn’t necessarily represent the views of my employer, Future of Music Coalition. I’m just a high volume, 100% legal musician/consumer who wants his celestial jukebox!
December 15th, 2008 at 3:01 pm
Hi Casey,
Thanks for those articulate comments. A celestial jukebox certainly is compelling. We are moving in that direction on different fronts. You mention subscription services and I have been a Napster to Go subscriber from the first month they launched. Increasingly we’ll see Internet radio in cars via WiFi and WiMax, and that gives you a lot of listening flexibility.
The key is to make sure the songwriters and performing artists don’t get shafted. You mention the content industry, and as they are members I obviously have a focus on them, but we also have individual members and that is where the focus is for this series. I’m told that my Napster service doesn’t pay artists that much, and in fact there are some that don’t participate. I wonder how a celestial jukebox could possibly return reasonable value for creators. If it were truly voluntary, however, there would clearly be many who would find it valuable and they could join it, and others (The Beatles, perhaps?) could opt not to and sell in other ways. There we get close to my focus on making sure copyright owners get market value.
You obviously have focused on music and are a musician yourself. But I am serious when I point out that any precedent set for music would be applied to other industries. Do we want a celestial book jukebox? Would that just include inexpensive paperbacks or would it also have extremely expensive textbooks? The price varies dramatically on those because of (1) the resources required to produce them and (2) the size of the potential audience. A flat-price all-you-could-eat jukebox approach would kill a lot of the publishing industry. And would Amazon have invented the amazing Kindle reader if it knew it couldn’t sell e-books for the device? And we haven’t mentioned video games, photography, TV and motion pictures, graphic arts, even needlepoint and cross-stitch patterns.
Our current system is complicated, but so-called “simple solutions” such as blanket licensing introduce many new problems, and they have to be addressed BEFORE we create such a system because it will be too late once it’s up and running.
I’d be curious to read a more official reaction from FMC on this series.
December 16th, 2008 at 8:39 pm
Certainly we must work to ensure that any structures implemented in the digital/online/wireless space reward artists and creators and not just technologists and copyright holders.
A one-size-fits all scheme is likely unrealistic, but I think we’d be wise to pay heed to consumer trends and new models for of access/distribution — particularly when up-and-coming generations know no product scarcity and have largely abandoned lawful avenues of media acquisition.
The finer points of any such solution is above my pay grade. For the moment anyway.
March 12th, 2009 at 10:21 am
[...] It is the notion of treating a unique creative work as a utility that leads to the intellectually vacant argument that creative works should be priced at the marginal cost of distribution, i.e., near zero. See that balloon punctured in my Canard #5. [...]
May 11th, 2009 at 8:57 am
[...] is, of course, a derivation on my Copyright Canard on marginal cost, Canard # 5 of 10. But some would say that we need to throw out entirely the notion of return on fixed cost through [...]