Digital marketplace summary

At the moment, anyone in the world with a fast internet connection has access to all the music they want, using a highly efficient digital distribution system that avoids the environmental impact of manufacturing and distributing CDs. Trouble is, the creators aren't getting paid.

Possible answers:

• New business models (releasing copyright)
  • In which the recorded music files are left freely available as they are now, while money is made from touring, merchandise, artwork, etc. For text, money can be made from buying the physical product, while images can be used to promote a subscription product.
    • Criticisms
      • Some people should be able to make money from selling recorded music, a valuable creation.
      • No-one knows if it will work. For text, although sales of physical copies may rise due to publicity as the computer is not the ideal reading medium for most people, too much money may be lost giving away digital copies.
    • Payment by donation may replace some of these criticisms. Download and use for free, then pay for usage after the event, when feel the price has already been justified. Again, it's unknown if enough people will be willing to pay.
• Compulsory licensing (altering copyright)
  • Collecting a tax on broadband internet usage and distributing the money between artists in a ratio calculated from random sampling of the P2P network, made using licensed P2P software that reports transfers following a voluntary opt-in.
  • Criticisms
    • Gaming the system
      • Incentive to artificially inflate transfers of particular files in order to gain an increased portion of the compensation. Privacy protection would require anonymous sampling, which would not allow identification of abusers.
    • Not all-inclusive
      • Only those in participating countries, principally the US, will be paying the tax, and only artists in participating countries will be paid their dues.
    • Other digital media
      • Licensing scheme covers music only. No compensation for other artists (images, video). (Software unnecessary as already includes DRM in the form of serial numbers - allowable here as not needed to convert to other formats and play on other devices, also means files are redownloadable if lost).
• Traditional sales (retaining copyright)
  • For each file downloaded from a central server, a charge is made to the downloader and paid to the creator. Distribution can be routed through the P2P network.
    • Criticisms
      • No benefit for being part of the network (other than legal status).
      • No availability of rare files.
      • Distributor has a monopoly, so can charge high prices.
      • People can still give those files away for free, at no cost to themselves.
• Proposed solution
  • Distributed sales network (retaining copyright)
    • P2P as it is now, but with the possibility to authorise any transfer through a central server. As a result of the authorised transfer, the recipient is charged a fee - the majority of this payment goes to the creator, while a percentage goes to the distributor. The base price for the file and the percentage commission are fixed by the creator and the distributor respectively.
    • Benefits
      • Each transfer has a cost to both the distributor (who must pay the creator) and the recipient (who must pay the distributor). This disrupts the ability to manipulate the system by transferring the same file many times, or by falsifying the identity of the transferred file.
      • The ability for a distributor to receive commission from each transferred file will be an incentive not to give files away for free. The money they receive can even be invested in hardware and stock, to improve the network.
      • Can cover music, images, video and text, as long the creator has registered that file with the central server. If the file is unidentifiable, no payment will be made and the distributor will not be able to receive any commission for transferring it - this provides incentive for all files to be marked up by the provider with the appropriate metadata.
    • Solved problems
      • Rip-offs
        • When buying from a stranger, you have to trust that the file will be of the promised quality and that the download will be completed. An EBay-style reputation system would allow users of the marketplace to rate each other's reliability and performance. Also a preview can allow the recipient to download the first 25% of any file free of charge, to provide a measure of the quality of each file.
      • Original supply
        • Those with access to the source material will have an immediate advantage over those who do not. This could unfairly benefit those who have previously obtained files outside the existing copyright laws. However, this imbalance shouldn't last for too long. Scarcity should disappear, as the rarest files will command the highest prices and will be most worthwhile making available.
      • Unequal competition
        • Big companies with low prices will command all the distribution and commission. However, this will correct itself, as if the commission gets too low, everyone will just go back to giving the files away for free again until the marketplace becomes worthwhile again.
    • Unsolved problem
      • Privacy
        • As with credit/debit cards currently, there is the potential for the central server to record all the transactions that take place, and between whom. This may be a necessary compromise, or there may be a need for audited anonymisation and destruction of records, or a technical solution may be found.