Asymmetrical Information

"... arguments made about how 'my illegal use of intellectual property is based on cosmic principals of justice' make me cringe."

Well, yeah, me too. But! by a weird coincidence, I didn't actually MAKE that argument! What a wonder!

My argument is that what's causing you to worry isn't music but the rise of three technologies that, collectively, are radical:

Inexpensive, high-throughput networking between individually owned computers

Individually owned computers that are relatively cheap but that have as much power as a export-restrticted supercomputer would have had in 1992

The success of the Free Software Foundation, Linux, Apache, and other open-source groups at creating industrial-strength software that's available for almost zero cost to anybody who wants it

Given those three technologies, you've got a situation that's radically new -- any individual can manipulate data sets with arbitrarily high amounts of control, which means that the only way copy protection works is if you outlaw one of those three technologies. The record companies tried doing just that (for instance, the CBDTPA, if implemented, would have criminalized Linux).

Since such efforts to outlaw the future have so far failed, though, we are in a situation that, in terms of data, is equivalent to the "matter replicator" science fiction scenario I wrote about earlier. And if those efforts to outlaw Linux continue to fail, that situation will continue.

I really don't know what to say to people who think that laws will stay unchanged under such conditions. It seems to me that such an expectation flies in the face of even the most cursory examination of actual human behavior, not merely in terms of file swapping but in terms of many other "normal" behaviors.

For instance, consider the War On Some Drugs. Freakishly, I myself have been happy to obey the law against illicit consumption of marijuana and other recreational drugs -- but almost nobody else my own age that I know appears to have felt the same way, and so we have "laws" against smoking pot that apparently nobody obeys but me.

And let us not mention the embarrassment that are the laws criminalizing "sodomy" (which criminalize, ahem, many things that many people may or may not have done).

When something becomes incredibly easy to do, very difficult to detect or prevent, and is something that large numbers of normal human beings spontaneously enjoy doing, then it seems to me that you have a choice: pass a law against the behavior, knowing that that law will be at best very imperfectly enforced, or recognize that you can't use laws to make people moral if they themselves aren't moral or don't want to be moral. And it seems to me that this applies to a great many human activities that are considered immoral or at least disreputable. File swapping has simply become a recent addition to such behaviors.

Does anyone have any idea about how much the recording industry lost by taping radio or vinyl or duping tapes? I remember the record sleeves showing a cassette and crossbones warning that "home taping is killing music!"

Obviously the MP3s are higher fidelity, but the record companies surely didn't go broke back then. Nor have movie producers despite taping off cable channels and others.

When I was younger and poorer I taped things - I don't now, and taping was common was common in my college days. IMO most of the time the choice for the consumer is not copying vs. buying, but copying vs. having nothing. Either way the IP owner gets nothing, but in the second they at least get exposure that might lead to record sales.

I produce IP and thus I respect it. But I don't see this as a fundamentally new threat. And for all the talk about artists, it's the record companies who are missing the most, and they aren't sympathetic victims.

Your tipjar seems to have done all right - we aren't all free riders yet.

As a counterpoint to Robert Musil's argument, I'd point out that of the most interesting and creative music of the last 15 years or so has been based on the sampling of other music, much (but not all) of which is done illegally.

In general, I'm not sure that the Tragedy of the Commons analogy applies to intellectual property as much as it does to physical property.

First of all, the creators of intellectual property often are motivated for a variety or reasons besides the monetary incentive (fame, inherent interest in science or art, etc.). So lax enforcement of property rights might not lessen the incentive to produce as much as it does in more traditional industries.

Also, much innovation and creativity comes from the free transmission of ideas and information, and overly strict IP rights enforcement can inhibit this process.

In addition, the granting of an IP right can effectively grant a monopoly over a particular idea, technology, or creative work to the holder of that right. Monopolies face less incentive for innovation, and sometimes even have the incentive to try to quash innnovation.

So when in comes to IP rights, the Tragedy of the Commons has to be balanced off against other factors.
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Back to music: one point that didn't occur to me in my earlier post is that while MP3s probably aren't a complement to CD buying, they are a complement to other forms of music related revenue, like concerts and merchandise sales.

So while the pie of money made to be made from CD sales will be smaller, the reduction of recording, production, and distribution costs due to digital technology will mean that artists will get to keep a larger slice of that pie. Also the pie from concerts and mechandise will increase.

My guess is that the majority of artists will be better off under the new system, and the quality of music will be increase as well. But time will tell.

I agree with much of your post, Jane, and don't wish to delve too far into semantics, but the state no more "grants" me property rights than it "grants" me the right to life. The fact that the state threatens to punish those that seek to murder me does not create my right to life. Also, intellectual property differs from other types of personal property in that the use of an idea does not prohibit others from that use, whereas if I fill your living room with my over-served friends on New Year's Eve, you must forgo the opportunity to over-serve yours in the comfort of your home, which is one reason why we offer temporary limits to the protection of intellectual property, while I am sure to be arrested for tresspassing even if I wait 20 years before using your living room to host my drunken revelers.

On the other side of all this we are seeing the resurgence of the amateur, the one who does something just for the love of doing. All science and philosophy was once done that way, like Ben Franklin.

Book publishing in the time of hand copy production by monks was extremely limited and controlled; just try to get those monks to run off a few copies of your latest potboiler. Improvements in printing and publishing technology have brought the costs of publishing and distribution essentially to zero - blogger. So, whatever happened to all those unemployed monks?

An excerpt from Article 1, Section 8: Powers of Congress. Congress has the power

"To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;"

Thus, we the people, gave our government the power to grant copyrights and patents. The founding fathers obviously thought that this was an important thing to do.

"To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries..."

Why, yes! I yield to no one in my reverence for the Founding Fathers of our Republic. In fact, I feel such a surge of reverence coming over me that I think I'll requote that, with a wee bit of emphasis added:

"To promote the Progress of Science and useful Arts, by securing ***FOR LIMITED TIMES*** to Authors and Inventors the exclusive Right to their respective Writings and Discoveries..."

That's "limited" as in "LIMITED", not "limited" as in "the Disney Corporation thinks it should be 70 years + lifespan or until the heat-death of the universe -- whichever comes last, can be purchased more easily by paying off pliant Congresscritters, and costs them less rent-seeking".

I can't speak for anyone else, let alone "file sharers in general", but in addition to the 800+ CDs I own, I have many a song I've gotten from Der Internet.

These tend to fall into four broad categories:

1) Internet-only novelty stuff, like Laziest Men on Mars tracks or the StrongBad Techno song from Homestarrunner.com

2) Try-before-you-buy stuff. Having bought many a CD of Utter Irredeemable Crap, I find it very handy to get a feel for what something sounds like before I consider buying it. This is especially importat if, like me, your tastes run to things you Just Can't Hear on the radio.

3) Things I'd never buy. This is often an amusing pop song or suchlike. I'd actually buy this if the Record Syndicates would let me just buy the right to own a copy for a dollar or two, but it simply isn't worth any more than that to me, and since even a CD-Single is in the 5-8 dollar range, they're not getting a cent of my money whether or not I download the song. Their marginal loss to mp3 piracy is thus $0.00 (but it'd be $1-2 if they had a way for me to give them that much money for a license-to-download. And I suspect their profit margin would be higher than making, packaging, distributing, and retailing CDs. Their loss, I suppose.)

4) Stuff that's out-of-print or that I refuse to support financially. Mostly the former - *can't* buy it, since they ain't making it. Download-on-demand-for-money would get the record companies a chance at my cash *and* open up their deleted back-catalogue to sales, but they're not doing that either. The only "refuse to support" case I can think of is Muslimgauze, which made some very interesting industrial/noise/dub stuff with arabic/islamic source material. The only problem was the author donated some or all of his profits to Hamas, and I'll be bloody *damned* if I'm going to give him a cent for that. Of course, he died a few years back, so now it's mostly an out-of-print issue, as much of the catalogue was one-time limited releases.

Again, this is just me. If I like the music, I actually buy it, both because I like the higher quality (I never listen to the CDs directly, but encode my own mp3s at high bitrates for use on the iPod and playing through the computer to the stereo) and supporting the artist.

(I sympathise with the proposition that artists should get a bigger chunk of the cash (ie, enough to keep them out of debt or bankruptcy, at any rate, which given the highway robbery contracts of many labels, is too likely), and certainly some seem to do better selling their music direct to fans (even with free downloads!) than by dealing with a label that has no interest in promoting them and uses the profits from their music (if any) to finance the New Thing Of The Week. But that doesn't enter much into my calculus of what to download, nearly as much as the quality of the music.)

Completely disagree. The state is only one way to enforce rights.

More importantly, the rights you do have over your property are granted by the state's ability to use force to enforce them.

No. The rights to my property are natural rights. They exist whether political boundaries, governments, kings, lawyers, and guns defend them or not. The state is only one way to enforce rights. The blurring between natural rights and legal rights is one of the ways government has gotten so big over the last 100 years.

So why, then, do we grant intellectual property rights? For the same reason we grant all other property rights -- because they confer the dignity of ownership on our citizens for the works they possess, and because they maximize social utility by helping to ensure that items are created, and put to their highest value use.

Those are 2 distinct reasons, the first using a deontological framework, and the second using a ulititarian framework. And these two justifications for property rights give rise to very different approaches to intellectual property rights.

With regard to the first justification, the key question is - can someone own an idea?

Ideas have been around since the beginning of civilization. Farming was a brand new idea at one time. So was bronze. So was the wheelbarrow. So was the bicycle. So was the umbrella. None of these ideas were given property rights to their inventors. Giving property rights to inventors is a relatively new idea.

With regard to the second idea, the answer to whether intellectual property rights maximize social utility is not as clear-cut as you make it seem. The FDA awards property rights to people who come up with an idea even if another person comes up with the same idea a little bit later. It's the case of what is seen vs. what is not seen.

Regarding MP3's and the music industry. The impact on bands will be minimal in that most bands make their money via touring. In that regard a band does not care how it becomes famous so long as it becomes famous. For example, the band Offspring thought about releasing an album early for digital download after one of their songs ("Pretty fly [for a white guy]") was leaked to Napster. The album later went on to sell over 10 million copies and the song that was leaked was the top downloaded song of 1999.

Link

The problem is that the recording industry was asleep at the wheel and ignored this problem, then when it responded proceeded to cut the head off of the problem thinking it could kill. Unfortunately the problem was more like the hydra that Hurcules had to fight, and several smaller file sharing concerns have popped up.

Also, the recording industry has not been paying attention to what consumers want. How many times have you bought a CD after hearing a song on the radio (for free) only to find you only like a few of the songs? The technology to create "pick your songs CDs" has been around a long time. The recording industry blew its chance to get in on this innovation. Now, they are trying to play catch up and are competing against file swapping sites.

So while you might have principle and some theory on your side I think the idea of file swapping is here to stay. Trying to track down small time users will be hard to do and costly (without intrusive software). And the response of making it harder to rip songs of CDs is, IMO, the wrong tack in that it prevents even legal owners of a CD from doing with the item as they please (imagine notices on books saying you can't cut them up or some such).

This article argues the file swapping increases sales, and it is the CD-writable drives and broad-band technologies that have the biggest negative impacts. (Warning: I have not seen the analysis so take it with a grain of salt.)

I know for myself I have downloaded illegal copies of a book looked it over, then bought the hard copy if I liked what I saw (if I didn't like what I saw I deleted the download to free up space).

Whatever you do, don't read Courtney Love's articles on this. She hates the recording industry and considers them the actual pirates.

I find this post a little bit confusing. You seem to be using 'CDs' as shorthand for 'purchased digital music' and MP3s as shorthand for 'illicitly copied digital music'.
The record industry has been selling uncompressed digital audio files for nearly 20 years now, in the form of CDs.
Were they to sell files of equivalent quality online (uncompressed or losslessly compressed files) for what they sell them to the retailers offline for, they would do very well. They could sell lower-quality verstions for less. Instead of this, their paranoia about copying leads them to sell only lower-quality, locked up and cumbersome versions online, at prices about equivalent to what you pay for a CD at retail.

People will pay a premium for quality and convenience. Bottled water is the example given so often it is becoming a cliche. Maybe taking a taxicab instead of hitch-hiking is a closer analogy. Or cable TV versus over the air broadcasting.

A technology will not come along that will prevent copying - if it can be herad it can be copied.

There is a new business model that will solve these issues. Here's a summary:

mediAgora defines rules for a market in digital media so Creators get credited and paid for their work, and Customers choose to pay a fair price.

Why is this needed? Because the media marketplace is riven by conflict between companies that profit from scarcity of physical goods and access, and those who assume that because works are easy to copy they need not be paid for. In either case, the creators lose out.

mediAgora explicitly supports and encourages derivative works, as a work sold through it can be incorporated in other works under the same terms - if you use my music as a background to your video, your customers should pay me the price I set for that music, as well as paying you your price for the video. This avoids the endless rights haggling that hinders so many productions.

mediAgora rewards you when you promote a work in a way that leads to a sale. Share new music or movies with your friends, and when they buy their copies, you get a cut. Creators don't see their royalties disappear in unaudited promotion fees - payment is strictly by results.

We all create - free speech and a free market can get us paid.

One more personal viewpoint, if I may... Jane et al are 100% correct when they say that filesharing w/o permission is always wrong. I also firmly believe that there is very little (if any) actual net loss to the record companies from current filesharing.

I would gladly pay some sort of subscription fee for a "try at home before buying" service, and/or a reasonable per-song fee for legally downloading music. Since neither option is available, I do occasionally download MP3's, and my CD-buying budget is the same as it was 5 years ago.

If the technological advances Jane mentions come to fruition before the record companies come to their senses, the industry will probably collapse in the way she predicts. But it will be the record companies who have snatched defeat from the jaws of victory!

Would you be defending this practice if it involved something you didn't want, like, say, research articles on athropodic skin diseases? C'mon, there's no one here but us chickens. Be honest.
I think I would me more likely to defend copying without compensation for research articles than for entertainment. It may be more boring, but promoting science and technology does more good in the long run.

Fortunately, even if unstoppable file-sharing kills off big-budget entertainment, it comes too late to kill the filming and release of Lord of the Rings.

There's a very big elephant in the room, and that's the record companys' inability to adapt to a digital environment. I think that the record companies have been screwing the artists for a long time. They're afraid that a download-fee-based system would demonstrate how much money comes in for this or that artist, and then the fun begins. I think even Jane will admit that there have and continue to be "issues" with the way music companies decide when a group or solist has paid back all expenses and are entitled to unemcombered royalties. Talk among yourselves, I gotta go.

The labels certainly have a bad reputation - see this report from the California Senate:

When confronted by the accusations from auditors that all royalty statements under reported royalties due to the artists, representatives from all five major record conglomerates denied any wrongdoing. I was reminded of the tobacco executives standing in front of Congress and swearing that they did not believe tobacco was harmful to ones health.

No matter whom, you believe there is clearly dysfunction in the relationship between artist and record company.

Kids aren't buying as much music? You keep saying that but it doesn't make any sense to me. Kids I know have way more buying power than I ever did as a kid. Certainly more than their parents have. And they buy a lot more music than I did at that age.

The reason try before you buy is necessary is because the industry had created a monopolistic cartel that limits our access to hearing more than a few overhyped tracks. The limited distribution channels that keep getting mentioned are limited because the cartel has expended much power to keep them limited. Argue about it all you want, but monopolies always end up dried up and dead eventually anyway.

I remember seeing "pick your song" cd machines in the music stores. I never used one because of the dreadfully limited selection of songs, maybe that's why they disappeared.

Steve,

Courtney Love is certainly entitled to her own opinion, and it may indeed be hopelessly biased.

But are you suggesting that her opinions on the matter have no weight at all, and should be discarded a priori, rather than evaluated on a case-by-case basis?

That doesn't sound quite right...

Hmm... Jane, I think you're being a bit alarmist, and underappreciating both human ingenuity and (ironically) cost-benefit tradeoffs. And the MP3 "sharers" are just as prone to tragedy of the commons as everyone else.

At the moment, the record companies put out music on easy-to-copy CDs, even though they know that (a) those CDs will get copied nearly as soon as they are released, and (b) there are better, more secure methods of distributing music. Why do they do this? Because enough people buy the CDs to make the whole operation worthwhile, even if sales are reduced by MP3 "sharing" that goes on (not to mention other bootlegging). Moreover, any attempts to "secure" CDs are liable to cause problems for people, cause discs to be returned, and in the end end up costing more than the (still comparatively small) problem such measures are designed to fix.

But this is only true as long as there is a viable market for CDs, and the problem of bootlegging remains small. If your theory pans out, and more and more people start "sharing" music off fewer and fewer paid-for CDs, the economics change. Past some break-even point, it's actually not worth it for music companies to even put out CDs -- but that doesn't mean they simply roll over and die. In fact, that just makes their next move easier: by reducing the opportunity cost of losing CD sales to a manageable amount, the widespread "sharing" will give rise to wholly new, more restrictive ways of releasing and distributing music, which today are kept out by CDs.

I don't know what those formats will be -- but we can make some guesses about the restrictions. For individual downloads, a unique ID code could be "watermarked" into each file -- if the file gets loose, the original downloader is held liable, perhaps criminally so. Or some kind of dual-key encryption could be used on the data, with only specially licensed hardware makers able to decode it. In all likelihood, your choice of playback device would be much more limited -- no more copying a song from its storage medium to your MP3 player, for instance. You may not even be able to borrow a friend's album anymore; at least not without a "quick, painless, and totally private" phone call to the record company. All of this is, of course, theoretically defeatable -- but not trivially, and the idea is to make copying difficult enough that only the hard core types even bother trying, and the rest of us with lives and jobs just hand over our cash for the music. Sorry everyone, but put away your banners -- The Revolution is not coming.

So far, technological progress in content distribution has been mostly driven by the consumers, the producers usually acquiescing, if sometimes reluctantly, because they ultimately benefit from greater demand and greater profits. If and when this is no longer the case, you can rest assured that they will not sit idly by and watch. So far, they've tried the easiest tactics -- legal restrictions, backwards-compatible copy protection -- because there's still a market they don't want to alienate. If that disappears, they'll play the meanest hardball this side of prison rugby.

A lot of people have been talking about how MP3s compliment CDs, rather than completely substitute for them.

This is clearly a short term technological issue. In a couple of years the Transfer rate will be able to give entire CDs for download at the same rate as a MP3 today. Then there will be complete substitution.

At this point the only thing keeping the movie studios alive will be a policy of not releasing any recordings until the last drop has been squeezed out of the cinema market. Copying a movie by taking a video camera into the theatre is not good enough as anyone who has seen a pirate VCD can attest.

Even then, a few different videocameras, with their output combined using error detection software, could make an acceptable product.

Then we will get a lot more product placement I'll bet.

Congress has the power to grant copyright to "promote the progress of science and the useful arts" not give authors absolute control of their work. Copyright was intended to ultimately increase the public domain, not enrich the heirs of authors.

IP and physical property are not the same. As someone else mentioned, if you come over and use my house, you'll get in my way. If I write a book and you make an illegal copy of a friend's copy, I still have the original. My ability to make money off the book may be reduced (or not, can't know for sure), but the IP is not affected. And while the government is probably the most effective defender of both types of rights, I can easily determine who is illegaly using my house and do something about it myself. If I publish a book or distribute a song, it would be incredibly difficult for me to do anything about illegal copying.

In my opinion, the current copyright law is unconstitutional, and I feel no obligation to respect any IP that is older than about thirty years (14 + 14). I know that the government and the courts have disagreed with me and I still feel compelled to consider the possibility of jail time or fines before actually violating older copyright, but those practical considerations are the only thing that would stop me from copying an old work.

New works, are of course a different story. The behavior of the RIAA and MPAA do put them in the position of essentially attacking me. Not that they're just trying to control the music they distribute, they're trying to get laws passed that could affect my ability to legally listen to music I bought. They could also, ultimately, affect my ability to distribute and copy my own video (kid videos) and pictures. I don't appreciate this.

Bolie IV

But what about people who use your house when you're not there? Is that okay, as long as they don't break anything? What if you have a piece of property you're not using and someone else comes along and pitches a tent there -- is that okay?

You wouldn't really want to live with any precedents you set for different treatment of non-rival goods. You'd soon find that a lot of the things you think of as "yours" are considered by others to be non-rival.

C'mon, Jane. If someone is using a piece of your real property, it automatically forces you to adjust your use of that property, if only because one must communicate with the co-user. The same doesn't apply to intellectual property. I happen to agree with you that stealing intellectual property is unethical, if ever more difficult to prevent, but to pretend that there are not real differences between intellectual property and other types of property doesn't strengthen your case.

Not necessarily. What if it's an investment property and you aren't using it for anything while you wait for development, or appreciation? Would that be okay?

Before you answer be aware that a lot of landlords had property seized from them in many countries on just such grounds.

That happens in this country too, where cities will seize property that has been condemmned. In some cases this is even socially beneficial. But whenever it's done, it's justified on the grounds of overall social welfare, not on the grounds that property is a non-rival good, which it clearly isn't.

If someone breaks into your house, that clearly takes away from your ability to use the house at that moment, whether or not you are there. The key point is that if you were there in the house, it would. By contrast, someone else listening to an illegally shared mp3 doesn't ever interfere with my ability to listen my legally purchased CD with the same song.

Besides, there are other reasons besides non-rivalness(if that's a word!) to treat IP different from other property (see my earlier post).

Again, once the property is seized, you are precluded from changing your mind about it's use, if only it means you are forced to communicate with the seizer. My listening to a music file has exactly zero impact on another's current or future plans to listen to that piece of music. There is a reason why intellectual property is given only temporary status in the Constitution; it is expressly recognized that such property is different in kind from other types. Again, I am largely sympathetic to your position regarding the ethics of appropriating the creativity of others without their permission, but I think it must be recognized that intellectual property has differences from other types.

Jane, I've read your blog with admiration for quite a while. This is the first time I think you're way off base, both economically and politically.

You may have noticed that in the American system, intellectual property is based on economic utility, not moral rights. And the economic utility is to the society as a whole, not to the producer - and particularly not to the distributors - of the IP.

It's certainly the case that technology's advance has destroyed entire modes of IP creation and distribution before. See any good newsreels lately? How about stereographs? Care to place a bet on the relatively value of the sheet music market now, and before radio and the phonograph?

There's nothing that enshrines the distribution modality, or the incumbent distributors, in any type of IP. Society can benefit as a whole, both economically and culturally, by cutting the fixed costs of entry and distribution that are inherent in physical media like CDs. [Though these are also dropping fast: the first CD-ROM premaster system I bought cost $250,000 in 1986. Now I do it on my desktop.]

Now while I don't condone theft, the Napster/Kazaa users and the rest of the rippers know something in their bones that the big media distributors don't want to acknowledge: the economic utility of their role is ending. The whole system of hype, promotion, payola and channel control that worked in a physically contrained distribution system, and that restrains cultural diversity, is ready to crash.

Unfortunately, the incumbents don't see it that way, or are determined to go down fighting rather than find a new value proposition. What they're willing to do is what makes them more than an media economics case study:

They are willing to damage entire industries to preserve their own business, regardless of the overall economic consequence. They are willing to act to abridge my free speech rights, in code and other modes. They are willing to spend up to the present value of their franchise in the form of ill-disguised bribery to artificially perpetuate their role. For this I name them enemy.

And so back to your original issue regarding amortization of fixed costs across a shrinking unit volume. And to the one word that the RIAA dares not speak: boycott.

I'm (safely) part of that over-40 audience. I've never downloaded and kept an MP3 where I didn't own the CD. Never will. But I've quit buying CDs through the standard channels. I buy from artists, through indie distributors, and I go to more concerts. I'm putting the same amount of money into the medium, but I'm making sure very little of it is getting to the labels.

If these jackasses want to try and trash my industry, abridge my rights, and corrupt my government rather than figure out how to add value, then screw 'em. They can go to hell without my assistance. And I encourage everyone else in my demographic to boycott as well. Let's both the kids and us old farts take our money and leave.

"File sharing essentially destroys the property right. Just as your land title is meaningless if the state simultaneously grants everyone in the country the right to use your land, file sharing makes property rights meaningless, because it destroys the ability of the putative owner to control the property's use."

But it really doesn't destroy the property right, because the copyright that's being infringed in the case of file sharing is the copyright in the recording, not the copyright in the song. The songs don't belong to the record label (it would be a stupid, stupid songwriter these days who allowed the label to handle their publishing), they belong to the publisher. Even if a million people illegally download mp3s of, say, the latest Britney Spears claptrap, that doesn't endanger the rights of the person who wrote the song to have it recorded by another artist.

The labels seem to be under the impression that they are entitled to the music provided to them by writers and artists as much as the file sharers do. If artists stopped seeking out the attention of the labels, the labels would find themselves with a lot of blank media on their hands. I can see why they do -- economies of scale, the economic power the labels have in terms of distribution and promotion, etc. -- but there's nothing that enshrines that relationship beyond any point of modification.

Right now the relationship is so preposterously lopsided towards the labels that the great majority of bands who receive a record contract never end up releasing an album; and of those that do, the vast majority of those never end up releasing a second album, and end up owing the record company money because all money fronted to the band for equipment, recording and "artist development" is 100% recoupable by the label. It used to be that a label would stick with an artist through an initial soft-selling album or two, to try and nurture them along. Now, if they aren't in the Top 40 out of the gate, they're dropped, and the label sends them a bill for the recoupables.

The labels don't care about the artists, really, except to the extent that they can manipulate them and use them as revenue streams. So Christina's new album is getting panned? Oh well, time to find a new Christina. All their posturing about file sharing simply is their effort to protect a dying, outdated distribution model.

Nero, I think you are mistaken in the economic utility of the record companies. If their job were simply the pressing and packaging of CDs, they would have been driven out of business by offshore CD factories a long time ago.

As Jane says in another post, the record companies' primary role is as gatekeeper/selector, and promoter. They can probably be replaced in that role by someone else (newspapers, DJs, even bloggers), but they aren't going to give it up so easily. And really, download patterns on Napster and its successors demonstrate that the public does utilize the record companies' gatekeeper/promoter function -- which is why the most popular downloads are Top 40 songs, not indie bands that probably don't have record deals anyway.

The record companies aren't going to simply surrender to copying and go out of business -- they have shareholders to answer to. So if they ever get to the point where selling unsecured CDs results in losses (because of rampant copying and "sharing"), they will stop making CDs and start using more copy-resistant methods. And the losers will be not the record companies, but those who legitimately benefit from the easy copying of formats now -- e.g. those who copy their CDs to personal MP3 collections for easier retrieval.

I'm not trying to lecture or moralize here; just saying that if "sharing" becomes successful enough, those will be the consequences. Nor rewards, not punishments -- just consequences.

As a counterpoint to Robert Musil's argument, I'd point out that of the most interesting and creative music of the last 15 years or so has been based on the sampling of other music, much (but not all) of which is done illegally. In general, I'm not sure that the Tragedy of the Commons analogy applies to intellectual property as much as it does to physical property.

With all respect, I don't think this point meets the argument. If the ordinary real property rights in one's home were abolished, the fact that some of the people who moved into what used to be one's living room made "interesting and creative" use of it would not carry much weight in the economic argument pro-or-con private real property rights as a wealth maximizing system. For one thing, if the "interesting and creative" use the residents put one's living room were really the maximally profitable use of that room, why couldn't they have knocked on one's door and proposed renting the room to perform the use?

The considerations really are largely similar in the real and intellectual property cases. For one thing, the "interesting and creative" use of an item of property is not necessarily the most productive use of it. Making paper airplanes out of, say, a whole basket of $100 Bills and flying them off the Statue of Liberty into the water of New York Harbor might be "interesting and creative” from a performance art perspective, but most people would not take that as the best use of the money.

Further, what is "interesting and creative" can still damage the residual value of the underlying intellectual property. But in the absence of property rights the users has slim reason to care. Using "I've Got You Under My Skin" in a toilet bowl ad would, I'm sure, be considered "interesting and creative" by many people.

Most importantly, if a particular use of intellectual property that is “interesting and creative” is also optimally profitable, then there are normally ways of reaching the owner of the property to propose the use consensually. If the owner doesn't want to consent once contacted, that is strong evidence that the proposed use is not in fact optimal. A lot of energy is being spent these days in the area of copyright theory to overcome this basic argument, but those energetic efforts need a lot more fuel to make them go than just pointing that some use or other would be "interesting and creative."

"Making paper airplanes out of, say, a whole basket of $100 Bills and flying them off the Statue of Liberty into the water of New York Harbor might be "interesting and creative” from a performance art perspective, but most people would not take that as the best use of the money."

Actually, if you can scrawl anti-American or anti-religious graffiti on the bills first, I bet there's an NEA endowment waiting for you.

Robert Musil, you correctly point out that what is ‘creative and interesting’ subjective and hard to quantify. That doesn’t mean that questions of pure artistic merit are not important, though.

In any case, if you substituted ‘profitable’ for ‘creative and interesting’ in my original argument, I think the argument would still hold.

As to other points of your argument, if we were living the economic theorist's wonderland of competitive markets and no transaction costs or externalities, and where all the important factors were monetary or easily monetizeable, then I'd be more inclined to agree with you. However, I think those things tend not to be true in the world of intellectual property. The reasons for this were discussed in the earlier post: IP rights create monopolies and incentives for rent seeking, large positive externalities are associated with the free flow of information, and many of the incentives involved in IP creation are non-monetary.

There are no clear cut answers on this question. You have to try to balance out the positive and negative effects that come from the granting and enforcement of intellectual property rights. These things are already recognized to some extent in the law, that’s why we have limited terms on patents, fair use doctrine, etc.

My point was that if you just talk about the Tragedy of the Commons and analyze it from that point of view, you’re only presenting half the story.

Jane,

I think we're all missing the main point here. I realize as post #30 here, there's not a lot of chance of this being read, but I hope some will see it and reconsider.

First, there is nothing illegal about "file sharing" per se. Let's say I type up a document, or record an MP3 file of my band, and want to use popular software to share it. What copyright am I violating? None! So, in the abstract, "file sharing", per se, is no more "copyright violation" than "driving" is neccessarily "speeding" nor "DUI".

Next, there's the question of practice: We'll all admit, in practice, that most file sharing technologies are used to violate copyright laws. True! but, legally, that is not a reason to prevent file sharing. (As I believe was confirmed in the Xerox decision, where it was found that mere possibility of illegal use was not enough to ban technologies which could circumvent copyright -- I'd also believe most machines which pass through photocopiers at libraries are probably copyrighted...) So in practice, it seems to me our policies are also in error. The answer is to prosecute actual copyright violators -- NOT create a universe which is so closed that no one could ever violate a copyright -- something the RIAA dreams of, and which we are currently on the road to doing, with the support of many of you.

Next, there's the Gnapster decision, which sets a troubling precedent. What the Gnapster software did was simply advertise user-published lists of files found on computers. The Gnapster servers never copied a single illegal file -- this was initiated by users, using software on their own computers. The situation was equivalent to each person publishing a list of links on their local "web servers" to a common internet site...

What we did in this case, was to ban the publishing of the list of links -- even though that information in no way violated a copyright. If we really think this is a wise precent, then we have to start holding other information publishers responsible for the how people use links they publish, and further, to stop people from publishing future links because some people used past links for wrong purposes.

Lastly, this whole situation could be balanced a bit, in my opinion, by looking to the original purpose of copyright. The framers considered copyright, as an *abrigement* of a right [ours], but a worthwhile tradeoff to encourage the creation of *public* property -- not perpetual private property. And the notion of "fair use" needs to be restored.

My recommendations:

(1) Prosecute actual offenders, not publishers of potentially-legitimate information.
(2) In light of the speed of information creation, and past abuses by the music industry, decrease the lifespan on copyrights -- say, 7-20 years.
(3) View mp3s which are of insufficient audio quality (easily 112kbps for music, and song fragments) as "fair use" to ensure public debate and quoting are still allowed. Ensure that "fair use" is not abrogated henceforth.
(4) Look into some of the practices of the music industry, and prosecute bad behavior where found.

All of this is *very important* for allowing our freedom of speech to continue. If we ban all file-sharing services, we are tricked into banning behavior which is the essence of the internet itself, and ignoring legal precedent. I feel those of you aruging this position are dangerously wrong both from a legal/historical point of view, and philosophically as well.

Please note, I agree with all of your points about illegally copying files -- of course you're violating a copyright from a legimate holder -- the record companies worked hard (not $17.95 hard, but somewhat hard) to produce that data. But the very fact that you use the words "piracy" and "file sharing" interchangibly shows how far the RIAA has influenced public debate. (The whole web is file sharing, sister. :-)

Respectfully,
Tim W.

But are you suggesting that her opinions on the matter have no weight at all, and should be discarded a priori, rather than evaluated on a case-by-case basis?

I was being a bit facetious there. Courtney Love is the most vocal/famous critic of the record labels I know of. She calls the pirates and mobsters. She argues they are making lots of money off album sales and the artists see virtually nothing of it (in some cases artists have to declare bankruptcy to get out of the record deals they stink so bad).

But it really doesn't destroy the property right, because the copyright that's being infringed in the case of file sharing is the copyright in the recording, not the copyright in the song. The songs don't belong to the record label (it would be a stupid, stupid songwriter these days who allowed the label to handle their publishing), they belong to the publisher.

Actually I think the songs often do belong to the label and not the artist. This is not the case with books, but music/songs are different apparently. Now some of the big bands may not have this problem, but I think that is the exception vs. the rule.

As Jane says in another post, the record companies' primary role is as gatekeeper/selector, and promoter. They can probably be replaced in that role by someone else (newspapers, DJs, even bloggers), but they aren't going to give it up so easily.

How about file swapping programs? The record companies are essential engaged right now in rent seeking. Rent seeking is where you allocate resources to gaining more/holding resources. It is inefficient and unproductive (i.e. produces nothing--an analogy is that it simply recuts the economic pie doesn't add to it).

Re E. Nough's comment: I don't suggest that the labels add no value in selectivity, but rather that they are spending their time trying to control distribution rather than applying themselves on creating real value through market information and bundling:

In every medium that we can manage to track, the distribution of customer/user/reader attention follows a power law. See http://www.hpl.hp.com/shl/papers/webmarkets/ for a nifty Xerox PARC study demonstrating it on the Web.

The potential for a very 'long tailed' distribution of readers over offerings doesn't mean that the lesser regarded offerings are commercial viable. Every medium has a characteristic 'cut off' point, which can vary with time. For instance, when television was defined by local RF distribution of microwave carried content, the cut off point was 3 - ABC, NBC, CBS. Now with direct and indirect satellite distribution, there (domestic) cut off point somewhere over 100 offerings.

Two elements of determining the commercially viable 'cut off' point are the fixed costs of creating an offering, and the variable costs of distributing it. With respect to music, both of these elements are radically affected by the 'net, potentially increasing the number (and percentage) of commercially viable offerings.

There is a potential business model consequence to this. When limited to physical distribution, the music business seems to be inherently hit driven. In that case, you need a party with risk capital to fund offerings and spread the risk across enough of them to have good odds of picking one winning pony, and then exploiting promotional power to recoup the losses. With more of the offerings potentially viable, albeit at a lower return, there's a chance of artists and production partners making a successful business on a 'cash flow' basis with a lot less money at risk.

In that environment, a flow of meta-information such as reviews and genre maps is more valuable, not less. Would that the labels were reorganizing to provide it! Instead I can find more useful information on fan sites and Amazon comments that from the 'profesionals' that are too busy trying to keep their old distribution model in place by coercion to figure out some real value add! Don't get in my face; instead give me something worth paying for.

Perhaps with 2 bloggers present, even post #32 will get read! :)

Can you cite specific sources claiming that VCD format is the easiest to pirate?

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