This is the extended version of my talk notes for the Alternative Compensation Systems panel at Rethink Music on 27 April 2011 in Boston, MA. For some impressions from the conference in general see here. The video recording of our panel — Terry Fisher as moderator, Larry Lessig, Jim Griffin, Ronaldo Lemos et moi — is embedded at the end of the text.

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It’s a great honour to be on a panel with the founding fathers of the idea of legalizing and remunerating file-sharing. With Terry Fisher who set the first book-size monument with his “Promises to Keep,” with Larry Lessig who coined the motto “Compensation without Control,” with Jim Griffin who called for “Monetizing the Anarchy” and with Ronaldo Lemos whom I’ve met for the first time at a Berkman Center meeting on Alternative Compensation Systems in December 2003, and with whom in fall 2010 I’ve been working to promote the Sharing Licence in Brazil.

Is file-sharing a problem that needs solving?

One of the most amazing things we have seen come out of the digital revolution so far are peer-to-peer structures: P2P production as in free software and Wikipedia and P2P distribution as in BitTorrent and Rapidshare. Scientists use it, so do free software projects, filmmakers (Vodo, Onlinefilm), games companies and many others (LegalTorrents.org). Most important, individuals, a significant part of the Internet population, are using it to collectively build a global multi-media online library. File-sharing is not a problem, it’s a solution. This is my first thesis.

Two problems arise from it: When works are shared without permission, no money goes to artists.

Paying Artists

That authors are not getting paid decently is a chronic problem. Recently, historian of economics Eckhard Höffner published a study that made waves in Germany. He showed that book publishing thrived in German lands while there was not yet a copyright law. When it was introduced, the number of releases, the size of print runs and the honorariums of authors all dropped dramatically. At the other end of history, Kretschmer and Hardwick in their 2007 first large-scale study on authors’ earnings in the UK and Germany showed that the situation hasn’t improve but is continuously getting worse.

A collectively managed levy for legalized file-sharing cannot be the entire answer, but it will go a long way to improve authors’ and performers’ income.

Also here, a P2P solution is starting to emerge: P2P funding. One of the nearly forgotten origins was the Street Performer Protocol that Bruce Schneier and John Kelsey had proposed in 1998. In the early 2000s a first wave of funding platforms built on this idea. Today, second generation systems are emerging. We heard about Kickstarter yesterday. It distributed 200 million US$ in its first 18 months. Flattr, the new project of Peter Sunde, one of the founders of The Pirate Bay, is now distributing 100,000 Euros a month or 1.2 million Euros per year – not bad for one year word-of-mouth project. SellaBand, IOU Music and SellYourRights are variations of voluntary payment platforms. Yochai Benkler has a great article in the Briefing Book which points to their research paper on Magnatune and two other music sites, all three based on CC licences and pay-what-you-like. They empirically show that musicians receive quite a bit more through voluntary payment than through forced payment like on iTunes. This is only starting, but my second thesis is that this direct exchange between artists and audiences that Metric highlighted yesterday is the future.

As promising as these voluntary approaches are, they will not legalize file-sharing.

Putting an end to war on sharing

The second problem that needs solving is that the measures for suppressing file-sharing are getting ever crazier. They take the form of technology: DRM is pretty much gone, at least in music, but the current wave is Internet filtering by means of Deep Packet Inspection (DPI). A whole enforcement industry with technical service providers monitoring the networks and specialized law firms has emerged. Repression also takes the form of new laws like 3-Strikes and COICA. Industry has started already to lobby for exporting domain seizures to Europe. And it takes the form of administrative multilateral agreements like ACTA and currently the Trans-Pacific Partnership (TPP) that shift the division of power away from the elected legislative to the executive branch. These cause great harm not only to those directly effected, criminalizing the generation of our children, but to the Internet, to the democratic system, to society as a whole.

The solution is clearly to legalize file-sharing in exchange for a collectively managed levy: an ACS (Fisher), the Licence Globale in France in 2005, the Kultur-Flatrate in Germany and what we have termed the Licença de Compartilhamento (Sharing Licence) in Brazil. Just as the private copying exception prevented a war on copying, the Sharing Licence will put an end to the war on sharing.

While the basic model is to distribute the collective levy pool based on the empirically established popularity of works in file-sharing networks, variations have been suggested that combine a statutory model and mandatory payment with a Street Performer-style voluntaristic distribution by Internet users. The first was in 2002 Artists Want to Be Paid: The Blur/Banff Proposal by James Love. In it, the participants of the two meetings suggest that “listeners would have to pay, but could choose who they paid,” either directly or through competing intermediaries with various policies for allocating the remuneration.

Philippe Aigrain goes further in taking non-market sharing of digital works between individuals out of copyright law altogether, proposing a new social right granted to living artists and contributors. The creative contribution is thus not intended as “compensation” for an alleged “harm” by “infringers” but as collective funding of creativity in a wider sense: rewards for published works shared on the Internet, funding for the production of new works as well as for the environment of creation. Allocation would be based both on actual use data voluntarily provided by users and on user preferences.

Yet another proposal is the Kulturwertmark published yesterday by the Chaos Computer Club. It would also require Internet users to pay a fixed monthly amount and would give all of it back to them to pay for or donate to any work of their choosing.

Much is in flux in the digital revolution an in the thinking about collective re-distribution systems for funding creativity.

Thus my final thesis: The Sharing Licence is not the solution for all time to come, but a „bridge technology” for transitioning out of the war on sharing and possibly out of copyright. („Bridge technology” is a popular phrase today in the German debate on the society-wide consensus to exit from nuclear energy that has been re-confirmed after Fukushima. Both the Greens and the right-wing party CSU argue that gas is the least harmful bridge technology that will allow us to phase out nuclear and move to regenerative energy until 2020.) The Sharing Licence builds on the current copyright regime and on the legacy of the culture industries of the 20th century, which includes the collecting societies, but needs to take a big step into the digital age.

As for allocating the collective pool, I think that one part should be distributed in proportion to measured popularity of works. A second part is allocated by a curatorium, just like the 10-20% that collecting societies today are required to set aside for cultural and social purposes. As Philippe suggests, this is used to fund the creation of new works, to improve the overall infrastructure and address issues of special interest to the creative community as a whole, e.g. incentivizing creative co-working spaces, collecting reference and best-practice examples and participating in standardization efforts. Finally, building on the Street Performer idea, a third part would be given back to Internet users in form of tokens that can be given to any creative expression encountered on the Internet. Operating these three modes of allocation in parallel will give us empirical information about the advantages and disadvantages of each and allow us to make informed decisions about the culture and its funding that we as a society desire. The Sharing Licence thus becomes a testbed bridging the way to a P2P state of things, with P2P production, P2P distribution and P2P funding.

Many proposals I have heard at this conference try to solve the challenge of music by making somebody else pay: advertisers, ISPs, hardware makers, Google. Even though this may feel free to users, all of us are paying in the end. More important than hiding the cost we are paying, it means that both artists and audiences are out of the loop in negotiating this new social contract. It becomes a business-to-business transaction in which those who appreciated the music and those who make it are objects rather than subjects. The advantage of a statutory sharing licence is that it rests on a society-wide negotiation of a new social contract between artists and audiences. The debate on what kind of culture we want to have is already of great value in itself.

A remark by Francis Gurry, the new Director General of a new WIPO, at a recent conference in Australia is very much to the point: “People do not respond to being called pirates. … They would respond, I believe, to a challenge to sharing responsibility for cultural policy.” But maybe we first need a core-melt-down of copyright for this to happen.

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Video recording of our panel on Alternative Compensation Systems:

at LiveStream.