Compulsory Licenses Discussion on Pho

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John Parres:

“Speaking as a former VP of an SDMI-participating watermarking ‘solutions’ company I can testify that a watermark is the wrong tool for the job.

In terms of identification for auditing purposes, audio ‘fingerprints’ are a
far superior technology.”

Ernest Miller (responding to Derek):

I think your assumption that there will be a relatively weak urge to
game the system is highly questionable.  We’re not really sure what the
market will look like for music if P2P is fully legitimate.  If music is
entirely freely available (except for the bandwidth – and anyone who is
paying a flat fee has some they aren’t using, many with significant
amounts) for unrestricted distribution, it is not clear to me that the
costs of gaming the system will be particularly high.  If the costs of
gaming the system aren’t high, then a relatively weak urge to game the
system will be enough to get people to game the system.

Furthermore, until you actually provide specific details of the proposed
system to be implemented, various weaknesses will not be able to be
identified and gaming strategies developed.  Talking in the abstract is
fairly meaningless in this case.  There will be an incentive to game any
system, the question is simply whether gaming it will be cost
effective.  We can’t make that call until we have details on the
proposed system.

Here are a few incentives for gaming the system:

How much money would the artist/publisher/whoever get per download?
$0.05, $0.01, $0.005?  Does it really matter? No, because then I will
pay people less than what I recoup to download my song.  In the above
case, I’ll pay people either $0.02, $0.005 or $0.0025 everytime they
download my song.  People will gladly join such systems when they have
flat fee connections.  What do I care if my computer spends all night
downloading songs and subsequently deleting them from my hard drive, if
I can get a few bucks a month taken off my “licensing fee” or however
the powers-that-be derive money from me?

Think such a system would be easy to stop?  There is a serious incentive
to figure out ways to do the above.  Heck, perhaps you could get a
“payola” law passed that would keep record industry types or artists
from paying people to download for pay (P2Payola?).  The original payola law sure worked wonders, until “independent promoters” filled the gap.

Or perhaps you would have clever algorithms that would try to figure out
when people are trying to game the system under such a P2Payola scheme. 
Design one, and someone clever will shortly figure out a way around it. 
Perhaps people will develop sharing programs for this purpose. Instead
of SETI@home, we’ll have I would also like to extend this to any other pho posters on the subject. As you can see here, there are many copyfight bloggers who have discussed Fisher’s plan previously, and I’m sure they’d be quite interested in your insights.”

Mikael Pawlo (responding to Derek):

Just for the record, I am still worried about the potential for extensive tracking capabilities and single entity monitoring in Professor Fisher’s system and nothing said this far or in Professor Fisher’s actual proposal (as opposed to the Cnet opinion piece) has closed the ‘Red Eye’ (… ). Reading your exchange with Mr Miller just makes me more concerned.

If your assumptions are right regarding a panelist system, then why should the tagging be introduced at all? Nielsen ratings would make the tagging unnecessary. You just have to go through the data logs of the Nielsen families. It will – as observed by Mr Miller – be major invasion of the privacy of the Nielsen families, but it will be limited (thus also far from perfect). Should all files also be tagged – for everyone – then all the privacy concerns raised by Mr Miller are valid. Add NGSCB  (it’s not called Palladium anymore!) to the mix and things look troublesome.

Your consumption of intellectual property very much defines you as an individual. This is not your groceries we’re talking about – this is what you put into your mind.”

Fred von Lohmann (responding to Ernest):

And they call me a radical! 😉

Ernie makes a number of excellent points. There are days when he may even persuade me. I do think his solutions are the more radical. Perhaps the
better for it.

> I think Fred is postulating a false dichotomy … it’s compulsory
> licensing or a parade of horribles.

Moi?! I’m shocked, shocked, to find a parade of horribles going on in here!

> Fred is essentially proposing that we replace the existing copyright
> scheme with a mandatory government tax that will be shared with artists
> and publishers.

Now let’s not be hasty. I’m not advocating that *all* of copyright be
supplanted — this would be a compulsory license for noncommercial online
file sharing [Ed.: I think he’s talking about Netanel’s plan rather than Fisher’s. See here]. For god’s sake, that supplants less of Title 17 than the DMCA’s anti-circumvention provisions did. And whether it would be a
mandatory tax, or a voluntary one, is not at all clear. To the extent it is
voluntary, it suffers from the continuing need to police violators. But to
the extent it is mandatory, it is both over and under inclusive. Hard

> I completely disagree.  The MSFT Darknet paper sees legal
> countermeasures as being effective against wide spread public
> distribution, but ineffective against closed private distribution.

That is not how I read it. The MSFT engineers conclude that small worlds
networking is essentially an equivalent replacement for unitary public
networks. See, e.g., AOL IM, which I understand is the best file sharing

> Perhaps.  But if a compulsory licensing scheme is to be taken seriously,
> it must be clear how it will work.  Could be that compulsory licensing
> will make things worse.

I completely agree that critical evaluation is necessary. But I stand by my
view that much of the argument must begin by examining assumptions
(especially whether you think unregulated P2P can be meaningfully

(Second Edition starts here)

Brian Zisk:

“This is one of the reasons I advocate a per song payment, split
amongst the songwriters, the performers, their representatives, and
the PROs.

If you only distribute a percentage of what’s actually collected to
each rights holder, it’s impossible to game the system, as you’d
never receive more than is paid into the system for each transaction.”

Kevin Marks (responding to Brian):

But that is the exact problem with the Fisher/Sobell/Netanel/Griffin et
al schemes. There are no transactions. There are nebulous taxes,
nebulous payouts and a nebulous monitoring scheme that will make
everything all right. Allegedly.

Per-song payment (perpetual license, NOT per play) is far more sensible
and tractable as the transaction size can be big enough to support the
processing overhead.”

Fred von Lohmann (responding to Derek re: Netanel v. Fisher plan):

“I stand corrected. Once again, I can’t believe they call *me* the radical. And Terry looks so much the part of reasonable law professor. ;-)”

Dan Krimm (responding to Kevin and Brian):

But how can you guarantee that there will be “transactions” per se in the face of P2P networks?

I think you can’t.  The atomized transactional paradigm is itself no longer operative unless you impose unacceptably strict user-control-restricting DRM on the process.  That’s the whole problem with intellectual work on the network.  Transactions require containers, and containers are obsolete on the net for such content.

The two options that make sense in the absence of transactions are service models, either distributed or centralized.  If you don’t like the “nebulous” character of distributed models (I admit that I still would like to see the details of any such system before I sign off on my endorsement), then the centralized model is ready to work just fine, and the measurement of use need not be nebulous at all, though it can still be sufficiently anonymous to protect privacy.

Both of these options require blanket licensing schemes to be properly enabled.  But also, in both cases the transaction is being unbundled while the service is being bundled.  Customer no longer pay for specific content per se, but for general access and integration services (i.e., you don’t “pay for the music” so much as you “pay for control over the music”).  But royalties are paid according to use which is measured either directly or statistically.

I think it’s high time to unbundle the transactions and to bundle the services.  In this domain of intellectual works, atomistic transactions are increasingly obsolete on the network.”

Kevin Marks (responding to Krimm):

> But how can you guarantee that there will be “transactions” per se in
> the face of P2P networks?

Transactions continue. CD sales have not disappeared. iTunes store is
making plenty of transactions

> I think you can’t.  The atomized transactional paradigm is itself no
> longer operative unless you impose unacceptably strict
> user-control-restricting DRM on the process.  That’s the whole problem
> with intellectual work on the network.  Transactions require
> containers, and containers are obsolete on the net for such content.

No, assuming that transactions require containers and DRM is obsolete.
Here’s  Kottke’s parable of the donuts:

Dan Krimm (responding to Kevin):

“>Transactions continue. CD sales have not disappeared. iTunes store is making plenty of transactions

** Straw horses.  This is a transitional time, not a benchmark for the future.  CD sales are irrelevant, because we’re only talking about online issues (copyright and transactions can stay the same offline where physical product is concerned).  It remains to be seen how iTunes will endure — my guess is that if it survives a while it will only be by radically changing its business format as the broadband wireless penetration curve proceeds over time, and iPods turn into WiPods.

>No, assuming that transactions require containers and DRM is obsolete. Here’s  Kottke’s parable of the donuts:

** Donuts are no more intellectual works than cars or clothing.

This metaphor doesn’t map to the online domain.  The point is that online transactions for recorded music are not guaranteed to survive the technological transition.  My guess is that they are most likely not to.

Transactions will probably endure online only for physical goods and services, not intellectual works.  Trying to make intellectual works into a counterpart of physical goods is embodied in the ill-advised DRM route.  My advice is to give it up.  No good can come of this.”

John Schuch:

“I, too, think that answering Derek’s specific questions about the magnitude and effect of gaming a compulsory license scheme is tricky, but I do know one thing:  Under such a scheme there would be much more incentive for gaming to occur.  Why?  Because the size of the pie would be transformed from one with an unlimited upside to one circumscribed by the amount of tax revenues collected.  With such uncertainty about the prospective bottom line inserted into the music business, gaming becomes an obvious mechanism to get an edge.”

“Ernest Miller wrote:

“What will this mean for innovation?”

It’s entirely possible that it will mean that there will be less of it, since the rewards to innovators in the music space, artists as well as cutting-edge entrepreneurs, will be limited to percentages of a finite pie of revenues, rather than the current potential for extraordinary economicrents unbounded by such a limitation.

Of course, the argument on the other side is that the pie, however finite it
may be, will grow far beyond the current one.  That, however, is in the
theoretical realm, and probably incapable of proof before implementation.

For that reason, among others that Ernest has eloquently enumerated, I’m
unwilling to sign on as well, until someone draws a more detailed roadmap
than the ones I’ve seen so far.”


I don’t think weighing in on the efficacy of a compulsory license solution
resolves to a zero-sum game.

I agree with the premises you listed, but contained therein is the almost
throwaway parenthetical:

“we can argue just how high the incentive should be, and how much public freedom bargained away….”

These are important issues and, in my view, need to be front and center in
the compulsory debate, and not merely incidental to it.  The answers may
determine whether or not such a solution is workable at all.

So, I don’t believe it’s an “either/or” situation at all.”

John Parres (responding to Schuch, but also adding to Fred’s theme):

“Should we then also discard the current regime because it’s possible to game radio, retail and artist royalties?  ALL systems are subject to gaming. The key is to minimize it’s impact so everyone has an equal and fair shot at their slice of the pie.”

John Schuch (responding to Parres)

” I’m not saying that at all, John.  Just that there’s more incentive for
players to game the system when price is regulated.”

John Parres (responding to Schuch)

More* incentive?  I don’t see any proof of that.

Seems to me the ability to game is the motivating factor.  If we sample
thoroughly and sufficiently to make gaming the survey difficult and
inconsequential then we have done a good thing for everyone but the gamers.”

Ernest Miller, after questioning whether what Parres said can actually occur, responds:

“First, gaming in the current context is a battle between businesses. 
Incentives are relatively balanced.  I want to sell dear, you want to
buy cheap.  We try to game each other and eventually come to an
agreement … that is how the market works.  In the proposed system,
everyone wants to game the government tax distribution, and the
government doesn’t have real good incentives to make sure the
distribution is fair.

Second, in the current context, gaming the system costs serious money. 
People can’t really game the system for free.  In the online context,
gaming would likely be quite cheap, free even.

Thus, although I agree the current system is flawed, the proposed system
is (in my belief) even worse.”

Joshua Wattles (responding to Ernest):

“I must be uncharacteristically missing something.  A compensable download
would be a compensable download.  The download is taking place and the
survey (or if you think gaming is a factor or consequence, then you must
think there would be a census) will pick it up like all the other downloads
and pay the owner.  The only arguable “false” download would be to the ip of the owner.  In the record business, many a chieftain sent his troops to the field to buy singles and albums at retail which had been sold by the same chieftain at wholesale in order to enhance future sales. If people build
auto downloaders to fake-out the survey, the same techies who built the
survey tool can build snifters or add to the survey an audit component
tracing back to users.  There are much larger issues than cheaters and
fakers.  There will always be part of the music world as they are in almost
every other business, industry, enterprise or institution.”

Bennett Lincoff (responding to Joshua):

“Years ago, ASCAP faced a ballot-box stuffing problem with respect to how it distributed royalties for TV performances.  This is a non-Internet example that may (or may not) be useful int he P2P context, but here goes:

ASCAP pays royalties essentially on a per-performance basis; the more
performance of your works that are disclosed in the ASCAP survey, the more royalty monies you receive.  However, in doing this, ASCAP treats some performances as having a greater value than others.

For example, royalties for “feature performances” (where the music is the
focus of audience attention, as when a band is shown playing the music or a singer is shown signing it) are paid at a higher rate than are royalties for
performances of background music or themes songs.  (And please, before I receive the usual amount of off-list hate mail whenever I reference anything about ASCAP: I’m not offering any view as to whether this system is good, bad or indifferent.)

Each time a feature performance occurred in a television show the entitled
parties (composer and publisher) each received a payment for that performance calculated at the highest possible value under the ASCAP system; and this whether the entire work was played or only a few bars of it.  A show with one feature performance received one such payment; a show with 100 feature performances received 100 such payments.  (Other than currently-employed ASCAP lurkers, Ron Gertz probably knows more about this area than anyone else on the list.)

The gaming, the ballot box stuffing, arose in connection with payments for
feature performances on the Tonight Show during Carson’s reign and when Mitch Miller led the band.  Miller gamed the ASCAP system by causing his band to play his own compositions on camera (thus making a feature performance under the ASCAP rules) both before and after every single commercial on the Tonight Show. 
Lots of commercials; lots of features performances of Miller’s music; lots of royalties for Miller and his publisher (perhaps even a closely held publisher
at that).

This was not the way the royalty distribution system was intended to work.

To overcome this gaming, ASCAP changed its distribution rules to limit the absolute number of feature performances which will be recognized in any given hour of a television show’s broadcast.  Thus, after the maximum recognized number of feature performances of his music, Miller lost any direct financial incentive to game the system further.  Of course, playing his music on the Tonight Show gave further wide exposure to his own work, but that’s a different matter than manipulated the distribution system.”

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