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