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Promises to Keep: Technology, Law, and the Future of Entertainment William Fisher July 2, 2003. Outline. I. Potential Benefits of New Technologies II. Background: Copyright Law circa 1990 III. Cycles of Innovation and Resistance DAT Recorders / AHRA

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promises to keep technology law and the future of entertainment william fisher july 2 2003
Promises to Keep:Technology, Law, and the Future of EntertainmentWilliam FisherJuly 2, 2003
outline
Outline

I. Potential Benefits of New Technologies

II. Background: Copyright Law circa 1990

III. Cycles of Innovation and Resistance

  • DAT Recorders / AHRA
  • Encryption circumvention / DMCA §1201
  • Music Lockers / MP3.com litigation
  • Webcasting / DPRA-DMCA §114; CARP ruling
  • Centralized File Sharing / Napster-Scour litigation
  • P2P / P2P litigation; limited authorized services
  • CD Burning / CD copy protection

IV. Defects of the Resultant System

V. Where Do We Go from Here?

  • Private Property
  • Regulated Industry
  • An Alternative Compensation System
technologies
Technologies
  • Downloading: Transmission over the Internet of a digital copy of a recorded musical performance, followed by storage of that file on the recipient’s computer, enabling the music to be replayed repeatedly on demand
  • Interactive Streaming: At the request of the recipient, transmission over the Internet of a digital copy of a recorded musical performance, which is then “played” but not stored
  • Noninteractive Streaming: Same process not at the request of the recipient
distribution of the srlp of a typical cd
Distribution of the SRLP of a Typical CD

Music Publisher: 4%

Recording Artist: 12%

Retailer: 38%

RC Profit: 1%

Manufacturer: 8%

Marketing: 8%

Distributor: 8%

Overhead: 14%

A&R: 5%

functions of record companies
Functions of Record Companies
  • A&R (Artists and Repertoire)
  • Production
  • Promotion
  • Distribution
  • Risk Spreading

Rapidly dropping studio costs

Less dependence on (expensive) radio promotion

Inexpensive distribution through the Internet

Fewer “losers”; less need for insurance

internet distribution

Results: increased revenues for writers and artists, decreased prices for consumers, or both

Internet Distribution

Music Publisher: 4%

Recording Artist: 12%

Retailer: 38%

RC Profit: 1%

Manufacturer: 8%

Marketing: 8%

Distributor: 8%

Overhead: 14%

A&R: 5%

internet distribution of unsecured digital files
Benefits

(1) Cost Savings

(2) Eliminate Overproduction and underproduction

(3) Convenience & precision

(4) Increase number & variety of musicians

(5) Semiotic Democracy

Dangers:

(1) Threaten Revenues of Creators

--fairness

--incentives

(2) Threaten Moral Rights

(3) Threaten Audience Interests in stable culture

Internet Distribution of Unsecured Digital Files
copyright law circa 1990
Objects of Protection

Musical compositions

Sound recordings

Motion pictures

Rights

Reproduction

Derivative works

Distribution

Public Performance

Copyright Law circa 1990

Exceptions and Limitations

  • First-sale doctrine
  • Compulsory licenses

jukeboxes; PBS license;

cable and satellite

retransmissions; “covers”

  • Fair Use
slide9

Figure 2.1: Legal Rights in the Music Industry

Composer

Assignment of musical-works copyright

Publisher

Reproduction

license

Sheet Music

Printer

Performance

license

Harry Fox Agency

Import

license

BMI;

ASCAP;

SESAC

Record

Importer

Synchronization

license

Recording

Artist

Mechanical

license

Blanket licenses

Movie

Studio

Assignment

of sound-recording

copyright

Radio

or TV

Station

Restaurant

Record

Company

payola

slide10

Movies

Director

Composer

Actors

“Location”

owners

Screenwriters

Record

Company

releases

Novelist

Master use license

“Work for Hire” agreements

Music

Publisher

Derivative-work license

Synchronization and

performance licenses

Producer

Distribution agreement

Studio

derivative-work

licenses

Rentals plus

performance licenses

Advertiser

Theatres

mechanical license

Merchandise

manufacturer

Compulsory license

HBO, Airlines

Sales

Record

company

TV Networks

Cable

company

Video Stores

slide11

Figure 2.5: Compensation System for Network Broadcasts of Films

Studio

Advertisers

licenses

advertising fees

license fees

TV Networks

free programming

(with embedded ads)

$

product

purchases

Viewers

cost of VCRs

VCRs

Sony

holdings of sony
Holdings of Sony
  • Manufacturer of a device that can be used to violate the copyright laws is liable for contributory copyright infringement if and only if the device is not capable of significant noninfringing uses
  • Timeshifting copyrighted programs is a fair use
audio home recording act 1992
Audio Home Recording Act (1992)
  • Serial Copyright Management System
  • Tax and Royalty System
  • Safe Harbor for Noncommercial Coping
ahra 1008
AHRA 1008
  • “No action may be brought under this title alleging infringement of copyright based on the manufacture, importation, or distribution of a digital audio recording device, a digital audio recording medium, an analog recording device, or an analog recording medium, or based on the noncommercial use by a consumer of such a device or medium for making digital musical recordings or analog musical recordings.”
copyright law circa 199015
Objects of Protection

Musical compositions

Sound recordings

Motion pictures

Rights

Reproduction

Derivative works

Distribution

Public Performance

Copyright Law circa 1990

Exceptions and Limitations

  • First-sale doctrine
  • Compulsory licenses

jukeboxes; PBS license;

cable and satellite

retransmissions; “covers”

  • Fair Use
  • AHRA
encryption initiatives
DVDs: CSS

SDMI

RealMedia copy-protection switch

Ebook reader

Circumvention

DeCSS; Smartripper

Felten

Streamripper

Sklyarov

Encryption Initiatives
anti circumvention 1201
Anti-Circumvention: §1201
  • Prohibitions:
    • Circumventing access-control technology – §1201(a)
    • Manufacturing or “trafficking” in technology that circumvents access controls – §1201(a)
    • Manufacturing or “trafficking” in technology that circumvents technological protections for rights of copyright owners – §1201(b)
  • Exceptions include:
    • Reverse engineering in order to achieve interoperability §1201(f)
    • Encryption research
    • Ambiguous reference to the survival of fair use – §1201(c)
    • Biennial rulemaking establishes limits to ban on acts of circumvention – §1201(a)(1)(C)
anti circumvention 120118
Anti-Circumvention: §1201
  • Civil Remedies:
    • Injunctions
    • Impoundment and/or destruction of devices
    • Damages (treble for repeat offenders)
    • Attorneys’ fees, costs
  • Criminal penalties (for willful violations for commercial advantage or personal gain) -- §1204
    • First offense: up to $500,000 and 5 years in prison
    • Second offense: up to $1M and 10 years in prison
streambox wd wa 2000
Streambox (WD Wa 2000)
  • Streambox “VCR” mimics authentication procedure of RealMedia files and disables copy-protection switch
  • Held: violation of §§1201(a) & (b)
  • Sony doctrine not applicable
links to illegal material
Links to Illegal Material

Visitor

Site #1

advertising

2600 Magazine

advertising

Web

page

Web

page

Decryption

Program

?

Web

page

Web

page

Plaintiff

reimerdes sdny august 2000
Reimerdes (SDNY, August 2000)
  • Providing a link to a website that, in turn, enables visitors to download copies of encryption-breaking software = “trafficking” in violation of §1201(a)(2)
  • Claim that purpose was to create Linux DVD player not credible
  • §1201 trumps fair use
  • Reverse-engineering exemption does not justify public sharing of the information
reimerdes ca2 11 28 2001
Reimerdes (CA2, 11/28/2001)
  • Uphold issuance of the injunction
  • §1201, as applied, does not violate 1st amend:
    • Content neutral
    • Advances a “substantial governmental purpose”: assisting copyright owners in preventing access to their “property”
    • Does not burden more speech than necessary for that purpose
  • Other constitutional challenges were not properly raised at trial:
    • §1201 exceeds Congress’ power under Commerce Clause and Art. 1, Sec. 8, Clause 8
    • §1201 unconstitutionally curtails “fair uses”
felten
Felten
  • Sept. 2000: SDMI issues challenge to break watermark prototypes
  • Felten breaks codes, proposes to publish results
  • RIAA sends Felten a letter, suggesting that publication “could subject you and your research team to actions under the DMCA”
  • June 2000: Felten brings declaratory judgment action against RIAA, SDMI, and U.S. in NJDCt
  • Defendants insist they have no intention to sue
  • August 2001: Felten presents results at a conference
  • November 2001: Suit dismissed because of absence of “case or controversy”
sklyarov
Sklyarov
  • Adobe’s eBook Reader prevents copying of electronic books
  • Sklyarov developed for ElcomSoft a program that enables the copying of eBook files
  • Sklyarov (temporarily in U.S. for Def Con conference) arrested and indicted in NDCal for violating §1201(b) – and “aiding and abetting” a violation; Elcomsoft charged with conspiracy
  • Dec. 2001: Charges against Sklyarov are dropped
  • Feb. 2002: Prosecution argues DMCA applies globally
umg recordings v mp3 com
UMG Recordings v. MP3.com
  • Nonpermissive copying violates §106
  • No fair-use defense:
    • Copying was for a commercial purpose; not transformative
    • Copied material is highly creative
    • Songs copied in their entirety
    • Undermines legitimate “potential market”
  • Settlements with 4 of the plaintiffs
  • Finding of “willful infringement” of Universal
  • 5/2001: Universal buys MP3.com for $372m
examples of folk webcasters
Examples of “Folk” Webcasters
  • Makossa Jukebox (offering “100% Cameroonian ethnic music: makossa, bikutsi, manganbeu, assiko and other freestyles”)
  • Pagan Paradise Samhian (offering “a magical mix of neo-Pagan, XTC, Tull, McKennitt, Yes, Mediaeval Baebes, Genesis, Heart, Rush [and] traditional folk”)
  • Radio Free Boonie (offering a “one-hour show for the 0 to 4 crowd and their respective grownups”)
copyright law circa 199028
Objects of Protection

Musical compositions

Sound recordings

Motion pictures

Rights

Reproduction

Derivative works

Distribution

Public Performance

Copyright Law circa 1990

digital audio transmission

Exceptions and Limitations

  • First-sale doctrine
  • Compulsory licenses

jukeboxes; PBS license;

cable and satellite

retransmissions; “covers”

  • Fair Use
  • AHRA
  • DPRA Limitations (114)
types of digital audio transmissions of sound recordings
Types of Digital Audio Transmissions of Sound Recordings
  • Level 3: Copyright Owners may refuse to issue licenses – or may demand freely negotiated fees
  • Level 2: Copyright Owners must accept “compulsory licenses” set by an Arbitration Panel
  • Level 1: Exempt transmissions
carp ruling 2 20 2002
CARP Ruling, 2/20/2002
  • Suppose HipHop.com distributes ad-free popular music to (on average) 10,000 listeners, 24 hours a day
    • Aprx. 15 songs per hour
    • 360 songs per day
    • 131,400 songs per year
    • 1,314,000,000 performances per year
  • Performance fee: $919,800 per year
  • Ephemeral fee: $80,942 per year
  • Total: $1,000,742 per year
slide32

User

User

User

User

User6

User7

User8

User1

Library

Library

Library

Library

User

User

User5

User9

Napster Website

Library

Library

Directory

Index

User

User

User

User4

User3

User2

Library

Library

Library

a m records v napster inc
A&M Records v. Napster, Inc.
  • Claim: contributory copyright infringement; vicarious copyright infringement
  • Napster’s defenses:
    • DMCA §§512(a), 512(d)
    • AHRA §1008
    • Sony defense
    • Copyright misuse
a m records v napster inc34
A&M Records v. Napster, Inc.
  • 7/26/00: Judge Patel rejects all of the defenses, grants preliminary injunction against “facilitating … copying, uploading … plaintiffs’ … compositions and recordings”
  • 7/27/00: CA9 stays the injunction
  • 2/12/2001: CA9 modifies and remands
  • 3/5/2001: Patel issues modified injunction
  • 6/28/2001: New Napster software with file ID technology; old software is disabled
  • 7/2002: Napster goes offline
  • 1/2002: Patel permits discovery on copyright-misuse issue; settlement discussions intensify
  • 2/2002: Settlement fails; case resumes
  • 5/2002: Bertelsmann buys residue of Napster
slide35

Fasttrack

User 1

User 2

User 9

Central

Server

User 3

User 8

SuperNode

SuperNode

User 7

SuperNode

User 4

User 6

User 5

Adapted from Webnoize

peer to peer copying systems
Peer-to-Peer Copying Systems
  • MPAA/RIAA suit
  • MPAA/RIAA suit (Cal)
  • Dutch court enjoins software downloads; sale to Sharman Networks (Australia); investigation by APRA
  • RIAJ & JASRAC suit; April 2002 injunction
  • RIAA suit in NY; settlement

Parent technology: Gnutella

  • Aimster/Madster
  • Kazaa/Morpheus-Music City/ Grokster/Altnet
    • 80,000,000 downloads
    • 3.6 billion downloads in January 2002
  • Audiogalaxy
    • 30,000,000 downloads
  • Japan MMO
authorized services
Authorized Services

Secure (nontransferrable) short-term digital downloads and streaming

Subscription fees, $10-$25 per month

Limits on permanent downloads and CD burning slowly lifting

  • MusicNet
    • EMI, AOL Time Warner, BMG, RealNetworks
  • Pressplay
    • Sony, EMI, Vivendi Universal (MP3.com), Yahoo
  • Listen.com
    • Subscription streaming, $10 per month
  • [Ongoing civil investigation by USDOJ]
copy protected cds
Copy-Protected CDs
  • Rapidly spreading experiment in US
    • 10,000,000 CDs produced by Midbar so far
  • Similar initiative in Japan
  • Consumer backlash
  • Philips, owner of patents on much of CD technology, protests deviations from Red Book standards
  • Likely shift toward DVD-Audio
defects of the current regime
Defects of the Current Regime
  • High transaction costs
  • Price to consumers of access to recorded music remain high
  • No “celestial jukebox”
  • Encryption and ephemeral downloads reduce flexibility, curtail “fair use” and impede semiotic democracy
  • Continued concentration of music industry reduces consumers’ choices
  • Limited effectiveness: P2P threatens artists’ revenues
slide40

"Besides, what\'s Plan B?”

-- Alan McGlade, Chief Executive of MusicNet, July 1, 2002

outline41
Outline

I. Potential Benefits of Internet Distribution

II. Background: Copyright Law circa 1990

III. Cycles of Innovation and Resistance

  • DAT Recorders / AHRA
  • Encryption circumvention / DMCA §1201
  • Music Lockers / MP3.com litigation
  • Webcasting / DPRA-DMCA §114; CARP ruling
  • Centralized File Sharing / Napster-Scour litigation
  • P2P / P2P litigation; limited authorized services
  • CD Burning / CD copy protection

IV. Defects of the Resultant System

V. Where Do We Go from Here?

  • Private Property
  • Regulated Industry
  • An Alternative Compensation System
slide42

“No black flags with skull and crossbones, no cutlasses, cannons, or daggers identify today’s pirates. You can’t see them coming; there’s no warning shot across your bow. Yet rest assured the pirates are out there because today there is plenty of gold (and platinum and diamonds) to be had. Today’s pirates operate not on the high seas but on the Internet, in illegal CD factories, distribution centers, and on the street. The pirate’s credo is still the same--why pay for it when it’s so easy to steal? The credo is as wrong as it ever was. Stealing is still illegal, unethical, and all too frequent in today’s digital age. That is why RIAA continues to fight music piracy.” Website of the Recording Industry Association of America

private property
Private Property
  • Theory:
    • Clarify and enforce the property rights of the creators of music;
    • Rely upon Coasean bargains and the emergence of private collective rights societies to overcome transaction costs (Merges)
features of private property
In Real Property

Right to exclude

Injunctive Relief

Criminal Trespass

Prohibition of burglary tools

Privilege of self-help tracks right to exclude

Copyrights

Add full public-performance right for sound recordings

Eliminate compulsory licenses

Lower “willful requirement and increase enforcement of criminal copyright infringement

CBDTPA

Curtail DMCA and add Ploof-style liability

Features of Private Property
sssca cbdtpa
SSSCA; CBDTPA
  • Security Systems Standards and Certification Act; ConsumerBroadband and Digital Television Promotion Act
  • Would make it “unlawful to manufacture, import, offer to the public, provide or otherwise traffic in any interactive digital device that does not include and utilize certified security technologies that adhere to the security system standards”
  • Private sector has 12 months to agree on a standard
  • If fail, standard selected by National Institute of Standards and Technology
sssca cbdtpa46
SSSCA; CBDTPA
  • “The term ‘interactive digital device’ means any machine, device, product, software, or technology, whether or not included with or as part of some other machine, device, product, software, or technology, that is designed, marketed or used for the primary purpose of, and that is capable of, storing, retrieving, processing, performing, transmitting, receiving, or copying information in digital form.”
  • Would apply to PCs, hard drives, CD-Rom drives, TVs, set-top boxes, CD players, MP3 players, video game consoles, other digital appliances
benefits
Benefits:
  • Media companies, confident in their ability to make money in the new environment, would accelerate Internet distribution
    • Associated socioeconomic advantages and cost savings
  • Emergence of refined and flexible private licensing societies (cf. ASCAP) would overcome transaction-cost barriers to licensing (Merges)
  • The price system would provide creators precise signals concerning the tastes of consumers (Goldstein)
  • Enable musicians to break free of record companies
disadvantages
Disadvantages
  • Critical and transformative uses of recordings would be curtailed, threatening semiotic democracy
  • Erosion of “end-to-end” principle
  • Facilitate price discrimination – on balance, pernicious in this context
effects of increased price discrimination
Benefits

Increased profits stimulate inventive activity

Reduced deadweight losses

Egalitarianism (progressive redistribution of wealth; broader access to creative works)

Reduction of costs associated with cruder 2nd-degree PD

Harms

Increased “granularity” of social life

Invasions of privacy

Threats to transformative uses

Radically increased profits cause increased rent-seeking within music and film industries

Effects of Increased Price Discrimination
threats to end to end
Threats to “End-to-end”
  • Proprietary control over the pipes
    • E.g., AT&T’s exercise of control over its cable modem system
  • Standardization and “dumbing down” of the computers located on the ends
  • Results:
    • Greater proprietary control over digital content
    • Curtailment of both competition and innovation
outline51
Outline

I. Potential Benefits of Internet Distribution

II. Background: Copyright in Music circa 1990

III. Cycles of Innovation and Resistance

  • DAT Recorders / AHRA
  • Encryption circumvention / DMCA §1201
  • Music Lockers / MP3.com litigation
  • Webcasting / DPRA-DMCA §114; CARP ruling
  • Centralized File Sharing / Napster-Scour litigation
  • P2P / P2P litigation; limited authorized services
  • CD Burning / CD copy protection

IV. Defects of the Resultant System

V. Where Do We Go from Here?

  • Private Property
  • Regulated Industry
  • An Alternative Compensation System
regulated industry
Regulated Industry
  • Theory: Increased governmental involvement necessary to:
    • Respond to oligopolistic structure of the industry
    • Calibrate more finely the balance between incentives and public access
    • Equalize bargaining power between artists and record companies

Reject the “propertization”

of copyright; Reinstate

the utilitarian balance

Theory of

compulsory

terms

regulated industry53
Regulated Industry
  • Preserve and extend prohibitions on file-sharing and encryption circumvention
    • Enforcement at ISP level
    • NET prosecutions of operators of SuperNodes
  • Compulsory Royalty Systems for all forms of Internet distribution of recorded music

(extend current §114(f)(2)(B) and AHRA)

  • Mandatory (inalienable) distribution of revenues between performers and producers

(extend current §114(g); cf. EC Directive)

compulsory royalties
Compulsory Royalties

Copyright Office at two-year intervals establish:

  • Types of Internet distribution of recorded music
    • Nonsubscription noninteractive webcasting
    • Subscription noninteractive webcasting
    • Interactive webcasting
    • Ephemeral downloads
    • Permanent downloads
  • Terms and conditions for each
  • Royalty rates for each
    • For owners of copyrights in musical works
    • For owners of copyrights in sound recordings

boundaries

will shift as

consumption

technologies

change

Replace

ASCAP,

BMI,

SESAC

likely results
Likely Results
  • Benefits:
    • Internet distribution of recorded music grows rapidly
    • Reverse vertical integration of the music industry
    • Diversity of services available to consumers increases
    • Net revenues of record industry stable
    • Composers and performers get larger shares of revenues
  • Drawbacks:
    • Transaction costs remain high
    • Copy-protections limit semiotic democracy
    • Surveillance and invasions of privacy
outline56
Outline

I. Potential Benefits of Internet Distribution

II. Background: Copyright Law circa 1990

III. Cycles of Innovation and Resistance

  • DAT Recorders / AHRA
  • Encryption circumvention / DMCA §1201
  • Music Lockers / MP3.com litigation
  • Webcasting / DPRA-DMCA §114; CARP ruling
  • Centralized File Sharing / Napster-Scour litigation
  • P2P / P2P litigation; limited authorized services
  • CD Burning / CD copy protection

IV. Defects of the Resultant System

V. Where Do We Go from Here?

  • Private Property
  • Regulated Industry
  • An Alternative Compensation System
intellectual products are public goods
Intellectual Products are “Public Goods”
  • Can be used and enjoyed by an infinite number of persons without being “used up” (nonrivalrous)
  • It is difficult to prevent people from gaining access to the good (nonexcludable)

Creates a danger that an inefficiently low number of such goods will be produced

possible responses to public goods problem
Possible Responses to Public-Goods Problem
  • Government provides the good
    • e.g., lighthouses; armed forces
  • Government subsidizes production of the activity
    • e.g., basic scientific research; NEA
  • Government issues prizes
    • cf. reward system for atomic-energy inventions
  • Government confers monopoly power on producers
    • e.g., 19th c. toll roads; intellectual-property rights
  • Government assists private parties in increasing “excludability”
    • Trade-secret law; anti-circumvention laws
registration
Registration
  • Copyright owners register recordings with Copyright Office
    • Only unencrypted recordings may be registered
  • Unique ID numbers inserted into file name of publicly available recordings
    • E.g., #4m8sp60wxi#
  • Application designates:
    • any other registered digital recordings incorporated into the work
    • duration of the incorporated work
    • In the case of audio recordings, the owner of the copyright in the composition
  • Small registration fee to make the system self-financing
  • Opposition Procedure
taxation
Taxation

Possible principles:

  • Provide creators the full social surplus of their efforts
  • Fairness
  • Make creators, as a group, whole
  • Preserve a flourishing entertainment culture
slide62

Figure 6.1: Revenues Streams Threatened by

Free Internet Distribution

Composer

Assignment of musical-works copyright

Publisher

Reproduction

license

Sheet Music

Printer

Performance

license

Harry Fox Agency

Import

license

BMI;

ASCAP;

SESAC

Record

Importer

Synchronization

license

Recording

Artist

Mechanical

license

Blanket licenses

Movie

Studio

Assignment

of sound-recording

copyright

Radio

or TV

Station

Restaurant

Webcaster

Performance

license

Sound

Exchange

Record

Company

payola

slide63

Movies

Director

Composer

Actors

“Location”

owners

Screenwriters

Record

Company

releases

Novelist

Master use license

“Work for Hire” agreements

Music

Publisher

Derivative-work license

Synchronization and

performance licenses

Producer

Distribution agreement

Studio

derivative-work

licenses

Rentals plus

performance licenses

Advertiser

Theatres

mechanical license

Merchandise

manufacturer

Compulsory license

HBO, PPV, Airlines

Sales

Record

company

TV Networks

Cable

company

Video Stores

taxation64
Taxation

Baseline year: 2000

Estimated revenues needed (year 1):

  • Music Industry
    • Injury to record companies from diminished sales: $1.05 billion
    • Injuries to music publishers from diminished record sales: $132 million
    • Injuries to music publishers from reduced radio public-performance fees: $58 million
    • No compensation for diminished webcasting license fees
    • Music Industry total: $1.24 billion
taxation65
Taxation
  • Film Industry:
    • Impairment of studios’ income from domestic home-video sales and rentals: $435 million
    • Impairment of cable and satellite licensing revenues: $60 million
    • Impairment of pay-per-view revenues: $37 million
    • Film industry total: $532 million
  • Total: $1.774 billion
taxation66
Taxation
  • Assuming that the agency devotes 20% of its revenues to administrative costs, it would need to collect in taxes during the first year: $2.217 billion
  • Adjusted (using Consumer Price Index plus projected inflation rate to 2004): $2.418 billion
count consumption
Count consumption
  • Webcasters report playlists and number of listeners
  • Websites count number of downloads
  • P2P systems report frequency of sharing registration numbers
  • Surveys estimate frequency of replaying stored recordings
  • Sales of prerecorded, non-copyprotected CDs
  • Sampling and penalties to deter “ballot stuffing”
payment
Payment
  • Monies allocated among categories of copyright owners, initially, in accordance with magnitude of estimated injuries
    • Sound recordings: $1.05 billion
    • Musical compositions: $190 million
    • Motion pictures: $418 million
  • Within each category, money distributed in accordance with frequency of consumption
  • Over time, the shares allocated to each genre would shift in response to changing injuries and costs
lift copyright system and dmca
Lift Copyright System and DMCA
  • No liability for reproduction, distribution, modification, adaptation, or performance of audio or video recordings over the Internet
  • No liability for circumventing encryption protections
merits
Merits

For consumers:

  • Large cost savings
  • Elimination of deadweight loss (music priced at marginal cost of replication); increased consumer surplus
  • Convenience
  • No price discrimination
  • Cultural diversity and semiotic democracy
cheaper entertainment
Cheaper Entertainment

Average American household currently spends $100 on CDs and $350 on video recordings. Total: $450

Broadband subscribers: for $42 per year in taxes, get unlimited “free” music and movies

Dial-up modem users: for $180 in increased subscription fees plus taxes, get unlimited “free” music and movies

Households without Internet Access: no material change in position

merits72
Merits

For artists:

  • Incomes protected from corrosion
  • Opportunity to offer products directly to consumers
    • economic and cultural gains
merits73
Merits

For manufacturers of electronic equipment and suppliers of electronic services:

  • Increased taxes offset by increased value of the products and services
merits74
Merits

For society at large:

  • Decreased litigation
  • Decreased costs of law enforcement
  • Decreased encryption costs
demerits
Demerits

Who gets hurt?:

  • Manufacturers
  • Distributors
  • Retailers
  • Record Companies and Studios??
demerits76
Demerits
  • Distortions and Cross-subsidies
    • E.g., data CD sales
    • Underconsumption of ISP access
  • Giving a government agency considerable discretionary power
    • Risks of rent-seeking
life cycle of the system
Life Cycle of the System
  • Launch:
    • Reform Berne Convention, Articles 9, 11, 12
    • No 5th amendment problem
  • Growth
    • Increased usage results in increased taxes
    • Offset by:
      • Growing tax base
      • Increasing savings
  • Expansion and technological change may eventually lead to replacement with federal income tax
variations on the theme
Variations on the Theme
  • Global version
  • Comprehensive Domestic Version
  • NUL Domestic Version
  • Voluntary Version – entertainment co-op
scale

everything

Scale

global

Varieties of Materials

music & film

geographic

multilateral treaty

national

music

P2P

all forms of Internet distribution

Varieties of Uses

All uses

entertainment co op
Entertainment Co-op
  • Artists register with private co-op
    • Grant transferable non-exclusive license to download or stream material
  • Co-op licenses webcasters and download sites
    • Each accessible with a single subscription fee and associated password
    • Licensees provides data concerning usage
  • Revenues from subscription fees distributed in accordance with revenue-sharing plan
  • Consumer willingness to subscribe reinforced by tightened penalties on P2P systems
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