A Collaborative Distribution Model for Music

The music industry, via Choruss, is shopping a new music licensing model around to universities in the United States. Like some before it, this one attempts to address the still rampant music piracy occurring via peer-to-peer networks by enforcing a pseudo-mandatory collective licensing agreement on every student attending a participating university. There were a number of very interesting parts to the proposal that we would like to work on improving with Choruss and any partner universities. There were also a few propositions that we think are harmful to the industry, artists and fans as a whole.

It should be no surprise that we think that any sort of mandatory collective licensing is a very bad idea, as is the “covenant not to sue” approach that Choruss is currently pursuing. Voluntary collective licensing, as proposed by organizations like the Electronic Frontier Foundation, is not a good alternative either.

The basic approach proposed via collective licensing is to allow the general public unfettered access to all types of intellectual property, such music, movies and books. One would be allowed to download copyrighted works via BitTorrent, Limewire, and YouTube without worrying about the copyright-owner filing a lawsuit. ISPs would include a collective licensing charge on your monthly Internet connectivity bill, say $10 for movies, $10 for books, and $10 for music, that would be distributed to copyright owners based on what one downloads.

While this may seem like a good idea at first, the approach is fatally flawed.

Collective Licensing is a Race to the Bottom

To understand why unlimited consumption via Collective Licensing is such a bad idea, try and imagine how many videos you watch for free on YouTube. Would you pay for most of them, some of them, or almost none of them? How much is a video of somebody’s kid kicking a soccer ball into their father’s crotch worth? Is it worth as much as an entire episode of Joss Whedon’s new show, Dollhouse? If it’s less, how much less should it be? Is the latest Britney Spears hit worth the same amount as Eleanor Rigby by The Beatles? The answer to all of these are dependent on the person that is making the purchasing decision – all of us value each of these things differently. Collective Licensing, however, removes us from making this value judgment. Money is divvied out by the number of listens and views that a particular song or video receives. We are never asked if we actually wanted to pay for anything.

Assume that Collective Licensing is successful and we have a world-wide rights authority that divvies out payment based on the number of video views. Now, let’s take two videos from YouTube as an example – the first is the Numa Numa song performed by Gary Brolsma (assume that he gets 40% of the royalties for his part in the song), and the other is Wake Up by The Arcade Fire. A Collective Licensing regime would assign a fixed price per video, let’s say it is $0.05 per view. Numa Numa has 27,484,008 views, while Wake Up only has around 1,055,192 views. This means that Gary Brolsma would take home roughly $549,680 for his performance while The Arcade Fire would take home $52,759.

Think about that for a second; it should disturb you. If you had Gary Brolsma and the The Arcade Fire standing in front of you, would you give Gary 10 times as much money to perform what he does than The Arcade Fire? On one hand, you have a guy that does a goofy dance in front of a web cam. On the other, you have a group of musicians that have worked very hard to get to where they are today, are quite talented and produce good albums that many people appreciate. What’s more notable, however, is that you were not given a choice to spend money – by viewing the content, it was assumed that you wanted to pay for the content.

There are two primary flaws that make Collective Licensing a bad idea:

  • Unlimited Collective Licensing divorces the purchasing decision from the person viewing the content.
  • Unlimited Collective Licensing assumes that one view is equivalent to one purchase.

These two flaws have deeper ramifications.

Rewarding the Creation of Cultural Works

Assume that there are two realities – one where the Gary Brolsma’s of the world are given 10 times more monetary compensation and the other where The Arcade Fire’s of the world are rewarded 10 times more. We know that compensation drives behavior to a large degree and so if there is a great expenditure of capital on the Gary Brolsma’s of the world – that will eventually be the pinnacle of cultural expression. Which reality is more culturally rich? Which one would you want to live in?

The point here is not only which one you would choose to compensate, but the idea that you should be given the choice in the first place. Collective Licensing takes the choice away from you and assumes that because you saw it, that you would like to pay for it.

Most rational people want to live in a world that is culturally rich, one that rewards good work with fair compensation. Finding the right amount of compensation is a delicate act that should not be overly-simplified to a one-view-one-purchase model that Collective Licensing proposes. We should be given the choice to spend, instead of it being legislated at us.

What we have mentioned to this point is an ideal scenario, which is not what Choruss is proposing. Choruss is composed of only a part of the total music, movie and book industries. Choruss currently represents Warner, EMI and Sony Music Entertainment. Their plan is not one where P2P becomes legalized, but one where their member companies agree to not sue the students that sign up for the service. This approach is called a “covenant not to sue” – which basically means that you are free to download content from 3 of the 4 major labels. Unfortunately, that doesn’t include anything else – no movies, no books, no software, no pictures. What is even worse is that students may start to think that the music industry approves of downloading any type of copyrighted content, which is not the case.

Under Choruss’ plan, a student could find themselves at the end of a lawsuit, even though they have paid the University’s P2P fee.

Collaborative Content Distribution

Why not create a DRM-free P2P network where it is nearly impossible to trade copyrighted works that haven’t been cleared for trading? Students could access this network and be assured that they are operating within the legal parameters set by the creators and owners of music, television, movies and books. In addition, the students could trade the music and videos with their friends and be financially rewarded for helping to distribute the digital content to their friends. This financial incentive would give them something that they don’t have through the other P2P networks – a revenue stream that they can then use to buy other music/movies or withdraw into their bank account to help pay for tuition or college text books.

Full disclosure: We’re biased, because this is exactly what Bitmunk was built to do. We wrote about the concept of Collaborative Content Distribution a few years ago. It was designed to address this digital distribution problem in exactly the way described above – in a fair and just manner that rewards content creators, publishers, distributors and music fans alike. Most attempts to address the P2P music piracy issue ignore the music fan – ours makes the music fan a fundamental part of the solution. When a song is downloaded from a student’s computer, they get a cut of the sale price.

Since Choruss has been proposing a $5-$10 monthly charge for unlimited access to music, that money could be placed into a student’s account and then the industry could agree on a blanket per-song price for music – $0.50 would effectively allow students to buy 2 albums per month (at the $10/month rate). They could also leave prices as they are ($0.85 per song) and depend on P2P purchases from the student’s computer, or the students using their debit cards, to create additional revenue for the purchase of additional music.

This approach has a few advantages over all Collective Licensing schemes:

  • Students are given the choice regarding which pieces of music they purchase.
  • Students are given a financial incentive to exchange music legally.
  • Everybody is financially rewarded for their part – artists, record labels, distributors and music fans.

The system described above has been in operation for almost 3 years now via the Bitmunk service. The part that is missing is large industry involvement, but mostly because we wanted to make sure the service was stable before approaching the larger music labels. We will be releasing the Bitmunk 3.0 peer-to-peer sales service in the coming months, which will enable peer-to-peer purchases of music from within a web browser and make it much easier to participate in this new approach to music distribution.

Our hope is that the music industry will finally understand that they don’t need to fight their fans on the issue of peer-to-peer music distribution. We have proven that the technology works, that there is a solid business model behind it, and that it is possible to reward everybody that takes part in such a system.

We have done our part to create the technology platform and business model for this new method of content distribution. It is now up to the RIAA, MPAA, and ultimately the artists and publishers, to acknowledge that a new approach is needed and to move forward with some form of collaborative content distribution.

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