Put a Dime in the Heavenly Jukebox

[Ramona_A_Stone]

Put a Dime in the Heavenly Jukebox: How To Make the Free Distribution of Content Profitable
by Devon Copley

(The article, in full)

One of the most compelling visions of the future of the Internet is that of the "Heavenly Jukebox," an electronic library containing every creative work ever published. Music, films, books, photos # anything that can be converted to a bitstream could be available to everyone, at any time, from anywhere. But that Utopian promise has given way to cold economic reality: until copyright holders can get paid for the use of their content, they will not willingly allow their material to be freely distributed. And nobody seems to be able to figure out how they can get paid.

The music industry, the first of the major content publishing businesses to be threatened by the Internet, is trying to solve this problem by keeping tight control over content distribution. This is proving a difficult task, given that the Internet was designed to make it easy to copy and distribute information. Many argue that content providers will be forced to fall back on indirect means of generating revenue. But early attempts at such "monetization" have failed miserably. The dream of the Heavenly Jukebox # with a working coin slot # remains far off.

I propose that there is another solution to this problem, one which will provide profits to publishers, incentive to creators, and value to consumers in an efficient and equitable manner. While radically different from current and previously proposed models, this solution requires only modest technological and legislative innovation. I will summarize this proposal later in this article; first, let's review the story so far.

Attempts to control distribution have failed

The major media publishers, with their very existence at stake, hope to retain the ability to charge directly for copyrighted content by maintaining control over distribution. They are fighting this battle on two fronts: technology and the courts. Their multifaceted and expensive technological defenses are still in development and at best unproven. But legions of lawyers have already been dispatched with a blank check and a hair trigger, targeting Napster, ISPs, hackers, and even private citizens with lawsuits alleging copyright infringement. While the publishers realize it is impossible to completely prevent piracy, they are betting that they can make illegal copying sufficiently difficult and risky that consumers will prefer to purchase content from them legally. In short, they believe they have enough money to put the Internet genie back in the bottle.

This strategy is likely to fail on both fronts.

On the technological side, copy protection has historically proven untenable. Motivated hackers have quickly cracked virtually every copy protection technology yet created. Microsoft's latest attempt, Windows Media 8, was hacked within days of its release last year. In October, a group of researchers from Princeton University, Rice University, and Xerox PARC undermined the music industry's own fledgling Secure Digital Music Initiative (SDMI). In a statement, the scientists offered this assessment of SDMI's viability:


"We believe their general security model is inherently vulnerable to a number of attacks no matter how sophisticated their watermarking technologies become. . . . To overhaul their system, SDMI may well have to overhaul their business model. . . . We would be deeply impressed if SDMI or anyone else developed a secure system for piracy prevention given the requirements of music listeners."

Not everyone agrees with this judgment. Law professor Lawrence Lessig, researcher Mark Stefik, and others have argued that this time, copy protection will work, through the wide deployment of "trusted systems." In a trusted systems architecture, copy protection support is built into the OS, the CPU, the hard drive # every component of the computer system. Such a scheme may be feasible, although it would require a massive investment in hardware and software. But this strategy will face major hurdles. The public has been consistently unwilling to accept cumbersome and intrusive copy protection schemes; witness the commercial failures of Digital Audio Tape and Divx. If the past is any guide, consumers will be strongly disinclined to "upgrade" their computer systems to support copy protection. What¹s more, any protected content must eventually be presented in a human-perceivable, analog form, and at that juncture copying will always be possible. It is clear that a working technological defense is a daunting task # perhaps an impossible one.

The legal strategy, despite some initial successes, is similarly doomed. Whatever the legal merits of their cases, the publishers face a fundamental problem: before long, they will have no one to sue. Napster may now be muzzled, but decentralized peer-to-peer file sharing technologies like Gnutella and Freenet will be ready for prime time within a very few years, if not months. These systems have no central organization and can maintain the anonymity of individual users, eliminating any possible targets for legal action.

It is reasonable to conclude that the publishers¹ attempt to retain control over distribution of content runs a very high risk of failure. Songwriter and visionary John Perry Barlow, along with many others, have suggested that publishers and creators should expect to derive revenue from their content only by indirect means. But that strategy looks problematic as well.

Attempts to "monetize" content have failed

"Content is King" was the rallying cry for the early years of the Web. But it¹s becoming increasingly clear that this king has no clothes. The dirty little secret of "content plays" is out: excluding pornographers, hardly anyone is making any money. A number of recent high-profile failures have shown the deficiencies in every revenue model yet attempted:


•Advertising doesn't work. Digital Entertainment Network burned through $65m trying to jump-start advertising revenues before going under early last year. Pseudo.com, arguably a much more professional outfit than DEN, fared no better and closed up shop in September. Salon.com, while still afloat, cut 20% of their workforce in December and is still losing money. APBNews, Pop.com Š the list of failed attempts to fund content with advertising goes on and on.
•Subscriptions don't work. Slate tried and abandoned the subscription model, and is now losing money with advertising instead. Same with TheStreet.com. The Wall Street Journal soldiers on as the only major subscription-based content site, but their "success" is arguable.
•Syndication doesn't work. Major Net syndicators like ScreamingMedia, and iSyndicate have yet to show any significant revenues from syndication deals. Even smaller-scale syndicators with proven offline track records, such as Mondo Media, are far from turning a profit with their Internet initiatives.
•Guilt doesn't work. Last year Stephen King published his novella "The Plant" in serial form online. A donation was "requested" from readers, and 120,000 paying readers downloaded the first segment. But by the time the fifth segment was released in November, only 40,000 downloaded it and many of them didn¹t pay. In December, King "suspended" the experiment.

Some argue that these efforts fell short due to poor management or low-quality content, but the fact remains that there have been many failures and virtually no successes. Despite the expenditure of vast sums of money and the honest efforts of thousands of intelligent and talented people, nobody has managed to make significant profits from content on the Net. It is reasonable to conclude that the current structure of the Net makes monetizing content extremely difficult, if not impossible.

We stand now at an impasse. The Internet offers the opportunity to enrich the lives of all mankind through the low-cost distribution of content, but we are unable to realize this promise because we can¹t guarantee an incentive for creators and publishers.

There is another way

I propose that there is another possible strategy, one which guarantees revenue for publishers and creators while also encouraging the unfettered distribution of content. This solution employs a usage metering system -- an old idea, but with a new twist. Simple in conception, the model promises immense benefits. Here's how it could work:

Use technological means to measure distribution of copyrighted material, not to control it. Build into the fabric of the Internet a metering system to tally the transfer of such material, in much the way bandwidth usage is already metered. Each digital file containing copyrighted content would contain a small "tag," indicating which specific work it is. Internet service providers (ISPs) would track these tags, and record which works were downloaded by their customers and how often. In aggregate, these records would indicate the total consumption of any given work by all individuals. For example, the data might show that the ISP¹s customers downloaded the new Eminem album twice as often as the new Britney Spears.

Once this metering technology is in place, require ISPs to pay royalties, on a statutory rate basis, to copyright holders for the aggregate usage of all copyrighted material that flows through their systems. The ISPs will simply pass that cost on to their consumers.

Why won¹t hackers undermine the metering technology, as they have undermined copy protection in the past? Because there will be no incentive to do so. This is the key to the entire system: ISPs must not be allowed to bill consumers on the basis of their individual usage of copyrighted material. Instead, they must pass on their licensing costs only in the form of a blanket surcharge on bandwidth. For the consumer, it won't matter if he downloads 50 megabytes of garbage or 50 megabytes of the latest Garbage album # he'll pay the same amount. Paradoxically, only by not directly charging the consumer can there be any hope of collecting significant revenue. Once downloaded, copyrighted content could be freely distributed among consumers, without unwieldy "rights management" overhead. Each time a given file is transferred or copied, the transfer would be metered and royalty monies would be generated # "viral marketing" at its most efficient and effective.

Once the licensing fees are collected from the ISP¹s, they must be distributed to the copyright holders. This is not a trivial problem, but at least it's one that has been solved before. In the realm of recorded music, the performing rights organizations # ASCAP, SESAC, and BMI # have distributed royalties from radio, television and film performances for more than 50 years. Similar rights organizations could handle distribution of the new Internet royalties for all other forms of copyrighted content.

Publishers' participation in the system could be optional; if they feel they can generate more profit by protecting their content with proprietary technological schemes, they have every right to try. Content that is expensive to create but targeted at a small audience, like industry research reports, will continue to require copy protection to maintain profitibility. But for most categories of content, higher revenues will lie with the larger audiences provided by the proposed metering system.

A full examination of the economics of this proposal would be very lengthy, but suffice to say that the costs to the consumer could be quite low. Publishers will no longer need to recoup the costs of physical manufacturing and distribution, and will be able to make a profit at a much lower price point. Advertisers would lower the licensing surcharge further by paying ISP's for access to consumers' eyeballs. Certainly government or private charities could subsidize access for schools and libraries. The Heavenly Jukebox might even be free.

The concept of the system is simple. It imposes minimal restrictions on consumers, provides sufficient profit incentive for copyright owners, and sidesteps the wasteful expense of a copy protection "arms race." Under this proposal, consumers could have inexpensive and nearly-instantaneous access to any content. The system for collecting royalties would be totally transparent to users but would ensure that an incentive for creators and publishers can be maintained in the Internet age.

Realizing the Promise

Clearly, deploying the proposed solution would involve many challenges. How can such a system be deployed? Would it require a top-down, legislative solution, or can market pressures bring it about? How much of a surcharge will the public accept? Who will set the statutory rates, and how? Who will bear the cost for designing and implementing the metering system? How can we ensure ISP's report usage honestly? How to ensure privacy for individual consumers of content? Addressing these issues (and a great many others) is beyond the scope of this article, but solutions can be found. If we can meet the challenge, the reward will be substantial.

Just imagine what will happen when the system is finally switched on: original content on the Internet will flower and bloom, in an ever-expanding process without parallel in human history. With a revenue model in place and barriers to entry lower than ever, artists, writers, and publishers will stampede onto the Net. News organizations will no longer be beholden to advertisers. Creators will no longer be beholden to publishers' distribution machinery. The Constitutional goal of copyright law, to "provide for the progress of the useful arts and sciences," will be satisfied more fully than ever before.

There is nothing magical about this proposal; the technology is feasible, the system is in keeping with existing legal precedent. The promise of the Heavenly Jukebox can yet be realized, if only we have the determination to make it happen.

© 2000-2001 Devon Copley

[mike4947]

A few disjointed thoughts for RM

1) Hackers don't need incentive, they hack because it is there

B) Looking at the Jupiter hit list, music downloads still range as a small minority of the total, why should a majority pay for the minority

III) I for one don't want my ISP logging what kind of music I download and selling the results to the highest bidder.

4) How's this, do like what TV will be doing shortly, and music city has done for a local example, Don't try and fix the playing field so you can't play unless they want you to; Move to a new playground. HDTV will be for years complatable with regular brocasting, BUT, sooner or later you'll have to get an HDTV to watch reruns of Bonanza cause regular broadcast will be gone. Rumours abound about wanting to hitch things to an HDTV set to do all kinds of nasty things.

E) A blanket "tax" on recording media has been in place for some time, BUT, look closely only "music" quality media gets the tax, "data" quality media is without the tax. Seems the only quality difference according to reports is in the labeling. :
My ISP has already replied to requests for sanctions against copyright violators by saying they won't monitor user usage without a court order. So now we're in the legal field and with the length of time it looks like will be involved, you are creating a legacy for your great,great, grandchildren.

Let's just agree advertising doesn't work to pay for the mess, another system has to be found for fairness. But they still have to block the "free" channels.:ND

Okay, this guy paints an accurate portrait of history in the first half of his article, but the second half is pure fantasy. (Sounds to me like one of those guys who started smoking pot when he turned 40.)

Each digital file containing copyrighted content would contain a small "tag," indicating which specific work it is.

The original creators of the work would be responsible for attaching those tags because the Joe Shmoe who rips his CDs isn't gonna do it for them. The tags would have to remain whenever the content is transfered from one medium to an other (CD to MP3, DVD to DivX) which means that it would have to be embeded as a watermark. Tracking watermarks can't be done the same way as tracking bandwidth. And there's nothing stopping users from removing tags and filtering watermarks.

Once this metering technology is in place, require ISPs to pay royalties, on a statutory rate basis, to copyright holders for the aggregate usage of all copyrighted material that flows through their systems.

The one redeeming trait of the Digital Milennium Copyright Act is that ISP's cannot be charged or sued for their users' activity on the internet.

Why won't hackers undermine the metering technology, as they have undermined copy protection in the past? Because there will be no incentive to do so.

Hackers are a strange sort. They hack when there is no incentive and they are idealists. They usually care about freedom more than money. But in this case there would be incentive because people would still have to pay for content, except this time they don't have the piece of mind that comes with buying a product from a trusted retailer with an actual name.

ISPs must not be allowed to bill consumers on the basis of their individual usage of copyrighted material. Instead, they must pass on their licensing costs only in the form of a blanket surcharge on bandwidth.

Smacks of communism to me. I don't want to pay for other people's use of the internet and I don't want them to pay for mine either. Besides, the flow of content on different ISP's will never be constant. As more content is distributed through ISP's their connection fees will fluctuate and they won't be able to control how competetive their prices are. It's unfair to both consumers and ISP's.

Advertisers would lower the licensing surcharge further by paying ISP's for access to consumers' eyeballs.

Some ISP's alredy do this and they are universally despised by consumers.

Certainly government or private charities could subsidize access for schools and libraries.

What do schools and libraries need this system for anyway? Libraries are protected and don't need permission to distribute copyrighted material. And school administrators don't want their students downloading music with their computers.

How can such a system be deployed? Would it require a top-down, legislative solution, or can market pressures bring it about? How much of a surcharge will the public accept? Who will set the statutory rates, and how? Who will bear the cost for designing and implementing the metering system? How can we ensure ISP's report usage honestly? How to ensure privacy for individual consumers of content?

The system would take months to deploy, that's a dozen lifetimes on the internet. The public won't accept any kind of surcharge. The industry lawyers will set the rates by calculating their losses from "piracy" and multiplying that number by 10. Consumers will bear the cost of the system in the end. There's no way for the ISP's to ensure that they can monitor every copyrighted item in their system, and there's plenty of reason to lie about their statistics. There's no need for costumer security with this system, if you can monitor their internet connections why not sell their information?

© 2000-2001 Devon Copley

Pffft.

i'd use a hack just to keep my isp from logging my downloads, even IF the content was "free" (i use one now - adaware). there is no way in hell i'd willingly support a system that monitored me and my familly.
christ, it never fails to amaze me how easilly people give up their hard won freedoms and anonymity. also isps would figure out a way in about a minute to penalize big downloaders - they'd offer "discounts" or such to people who keep the d/ls low, thus jacking up the price for everyone else.

que'lle bonehead.

there is no business model that covers this now. we're at a historical shift.

it was a brief technological accident that allowed a troubador to perform once and get paid forever. for all time prior to edison, performances couldn't be stored. to get paid each time you had to perform... each time.

that brief accident is over now.

you can still record if you want, and it may make sense to do it in order to expose people to your work and get them in the door at concerts. artists have done that for years. armstrong said his records were nothing but commercials for his live shows - he hated the record company and his dependence on it.

well now you don't need the record company and that alone makes the internet the artists' best friend.

but to get paid, you'll have to perform...each time.

just like everyone else on the planet.

[TankGirl]

First of all, thanks Ramona for an interesting article which has already inspired some excellent responses.

I agree that the proposed system with lump charging from ISPs and copyright tagging / transfer metering technology is not realistic for the various reasons pointed out by mike, Mazer and Jack.

Mazer:
Okay, this guy paints an accurate portrait of history in the first half of his article, but the second half is pure fantasy. (Sounds to me like one of those guys who started smoking pot when he turned 40.)

Ditto. It is a dream of regaining global control over copyrights in the post-p2p Internet. We are already beyond that point both technologically and socially. The perception has already changed: from today's p2p user's viewpoint Devon Copley is effectively proposing spyware designed to serve the interests of existing copyright industry. It will never fly.

mike4947:
I for one don't want my ISP logging what kind of music I download and selling the results to the highest bidder.

Privacy and security are key issues in the development of new p2p technology. Applications like Groove are already empowering corporate users to establish arbitrary p2p peer groups and transfer whatever they wish between each other. There are no peepholes or reporting facilities for outsiders, copyright holders or not - expect the same to happen in consumer applications in a year or two.

JackSpratts:
i'd use a hack just to keep my isp from logging my downloads, even IF the content was "free" (i use one now - adaware). there is no way in hell i'd willingly support a system that monitored me and my familly.
christ, it never fails to amaze me how easilly people give up their hard won freedoms and anonymity. also isps would figure out a way in about a minute to penalize big downloaders - they'd offer "discounts" or such to people who keep the d/ls low, thus jacking up the price for everyone else.

que'lle bonehead.

there is no business model that covers this now. we're at a historical shift.

it was a brief technological accident that allowed a troubador to perform once and get paid forever. for all time prior to edison, performances couldn't be stored. to get paid each time you had to perform... each time.

that brief accident is over now.

you can still record if you want, and it may make sense to do it in order to expose people to your work and get them in the door at concerts. artists have done that for years. armstrong said his records were nothing but commercials for his live shows - he hated the record company and his dependence on it.

well now you don't need the record company and that alone makes the internet the artists' best friend.

but to get paid, you'll have to perform...each time.

just like everyone else on the planet.

What a damned good piece of writing, Jack - right on the money!

The idea of performing is closely linked to the ideas of uniqueness, originality and authenticity - all of which I see highly relevant for the new economies to emerge from p2p technology. A live performance represents maximal authenticity in music: by buying a ticket to a live show you are buying a moment of shared physical presence with the artist and an unique one-time presentation of his/her art. There is nothing in the new p2p technology to threaten this source of income for the artists - on the contrary. The popularity of mechanical copies will just make live performances more popular and valuable. Dedicated fans would also surely be willing to pay for personalized deluxe album editions from their favorite artists even if they could get the public content from p2p networks for free. If signed albums sound too old-fashioned just think about a personalized video clip attached to the album where the artist dedicates the album to you. Here again we have the idea of a real performance - even if a brief one - as a basis for payment.

- tg

Originally posted by TankGirl

Dedicated fans would also surely be willing to pay for personalized deluxe album editions from their favorite artists even if they could get the public content from p2p networks for free. If signed albums sound too old-fashioned just think about a personalized video clip attached to the album where the artist dedicates the album to you. Here again we have the idea of a real performance - even if a brief one - as a basis for payment.

- tg

this is a point that's becoming more and more relevent tg, the entire issue of "value added" copies remains unexplored on the whole but could present a real opportunity for artists to regain some of the potentially lost income that may occur in a p2p world.
this can of course "include" the record company but will probably ignore it ultimately.

it can't be repeated enough: the content creators have nothing to fear from the internet. it provides more opportunities than it eliminates. it's another matter for the distributers. unless the courts grant them a unique and enforcable monopoly on distribution - a possibility - it'll soon be over for them unless they quickly evolve.

- js.

The artists have been poor and starving historically. And thanks to the internet and digital copying, that trend will continue in the future too.

The attempt to compensate artists is nice, but not practical as 4947 pointed out.

Who says that being an artist or a writer is a career? I thought it was a labor of love, done regardless of whether one is reimbursed. I wouldn't call greedy Lars Ulrich an "artist". An artist pours his heart into his work, kind of like the bedridden writer in Stephen King's "Misery".

Tankgirl was on to something by pointing out that buying an original work will always have some kind of advantage over a downloaded or copied one. They would be for the artist's real fans (the minority) rather than the freeloaders (the majority). An artist will always have this paradox of losing a lot to gain a little; that is, the artist will have to give a lot of content out for free in order to make a few significant sales. Perhaps artists shouldn't view it as a money making pursuit, but rather as a pursuit that will give them a couple of extra bucks and a lot of prestige.