In the previous article we looked at the origin of copyright. We learned three things. Firstly, that the introduction of copyright was driven by reduced costs of creating copies of creative works. Secondly, that copyright has shifted from authors to large corporations. Thirdly, that compensating the original authors is no longer really what copyright enforcement is primarily used for. In this article we look at what happens when the costs of copying are further reduced to nearly zero. What are the consequences and how should we deal with them?

Perfect instant copies

Like many eighties kids, I too had a cassette recorder. I used to record radio shows with it. These were sufficient for listening them back shortly thereafter, but did not have the same quality as the original broadcasts. In fact: they actually degraded over time.

Back then blank cassette tapes were subject to a special home-copy fee. To this day Dutch citizens still pay this fee for each blank CD or DVD they buy. This legislation has been extended to also cover hard disks and memory sticks. What is the purpose of this fee? It gives users the right to make copies for private, non-commercial, use without violating any laws. The collected fee is indirectly distributed back to the authors.

Analog copies, made using cassettes and videotapes, are quite different from digital copies, made using DVD’s and hard disks. Why? Firstly, digital copies are perfect: they do not degrade over time. Digital films, series or home recordings will look identical played back fifty years from now. Secondly, while copying onto a cassette still took effort, creating a digital copy is as simple as clicking a button. Thirdly, modern digital storage devices can be erased and rewritten many times. This further reduces the monetary costs of making and holding onto copies. Combined with today’s fast download speeds, the costs of copying a creative work like a movie, song or book, are reduced to near zero.

The implications of effortless zero-cost copying are profound. Importantly, it allows creative works to spread broadly and quickly. This aligns with at least one of the goals of its creators: reaching a large audience. However, ironically, it also conflicts with another goal of those same creators: financial compensation for exerted effort in creating the work in the first place.

Creative works as ideas

Now, before I go on, I want to avoid the trap of oversimplifying consumers and producers of creative works. Frequently the needs of a producers and consumers are presented as being opposed. I do not think this is the case. There’s a much more complicated interaction going on than a simple exchange if you consume a creative work.

If you listen to a song that resonates with you, it changes you. It inspires you to find different music of the same form, or even to make your own version or to remix it. Contrast this with buying a bottle of water or a bag of potato chips. These are things you consume to sustain you. Instead, consuming creative works changes you, and may even change the creative work itself by leading to indirect derivatives. In short: creative works are more like an idea. For these works differences in physical form (digital, analog, etc …) do not play a big role in conveying the idea itself.

Since ideas build upon one another, it is much more difficult to classify what really constitutes an original creative work. This is in fact the subject of many law suits. Listen to Taurus by Spirit and tell me if you think the intro riff of Stairway to Heaven is still original. Listen to Blurred Lines by Robin Thicke and Got To Give it Up by Marvin Gaye. There is no clear cut definition of where inspiration ends and where plagiarism starts. That’s because these examples are essentially all ideas building on one another.

Charging for copies

Back to physical copies: when copying still took effort, it made perfect sense to collect money at the point where these copies were produced. It made sense to charge more for a cassette, videotape, or even a DVD than its material value. The surplus intended for the authors of the work, and those on the intermediate ‘chain’: distributors, promoters, etc. However, when the costs of producing a copy reach nearly zero, this model becomes much harder to sustain. Indeed, the last two decades have revealed substantial cracks in this approach.

There have been numerous clashes between technologies that enable fast and easy access to content and the copyright holders of this content. The response: a mix of artificial copy-restriction mechanisms and harsh legal steps against copyright violators. Content distribution intermediaries tend to think of zero cost copying as a treat to curtail. Perversely, copy-restriction mechanisms penalize legitimate buyers of creative works. It makes them jump through hoops and imposes usage restrictions. This leaves a vacuum, inadvertently pushing consumers towards obtaining content illegally, depriving the artists of their remuneration [5].

Abstractions that worked in the physical world do not easily map onto the new digital reality. For example: I once encountered an on-line library that had only five digital copies of a specific book available. Since they were all ‘lend out’, I could no longer ‘lend’ this book. This bizarre example underscores the odd dichotomy. On the one hand, authors want their books to be read and spread as much as possible, making a case for unrestricted copying. On the other hand  authors want payment for each copy, making a case for restricting copying. This raises the question: is the point at which a creative work is copied, still the right point to charge for it?

Easy access

There are platforms that still charge for each copy, like Apple’s iTunes. iTunes is interesting because it broke with the traditional method of selling music. Instead of having to buy an entire album, consumers could conveniently choose to buy individual songs. This again emphasizes that the rise of piracy may have less to do with consumers being unwilling to pay authors for their works, and more to do with those works being hard hard to access legally. Indeed, piracy seems to be a service problem, not a pricing problem [3].

There are also alternatives that have moved away from charging for each copy, instead charging a subscription fee. This fee is distributed to the copyright holders of the original work. Sidestepping the issue of charging per copy, instead providing on-demand access to content for an ‘all you can eat’ fee. Examples of this are Netflix and Spotify. The downside of the subscription model and platforms, is that users tend to flock to popular ones. These popular platforms grow in terms of user base and power. When they become too dominant, they have an incentive to take a increasingly larger cut of the proceeds. This siphons away compensation from the author to the distributor. Hence, digital distribution platforms risk becoming the new middle-men. Meet the new boss, same as the old boss.

The upside is that there is a willingness to pay for easy legal access to content, regardless of whether this is based on copies, or subscriptions. This is hopeful for both producers and consumers, more niche creative works will get a chance, which leads to more choice as well, and more quality by sheer volume of creative works being produced.  The recent rise of high quality television series is testament to this.

Alternatives

Is there an alternative model of compensation we could think of? Going back to the idea behind copies: the first copy of a book or movie is very expensive to make, but all subsequent copies cost almost nothing to produce. Finding a buyer for that first copy that distributes the subsequent copies for free is economically optimal and efficient. However, this still assumes that copies are the right way to think of creative works, is this still really the case?

Another way to think of a creative work is simply that creating the work itself boils down to putting in time and effort. Instead of paying for the copy, we can reward authors for their investment of time. This circles back to the original intention of copyright: to recoup your costs. Indeed there are alternative models that follow this model more directly: Kickstarter projects get funding in advance for producing a creative work based on an estimation (though some still rely on copy protection afterwards); pay what you want models ask you for a fee of your own choosing after the creative work is already produced, with usually no restrictions on copying; The gig model is based on spreading a creative work for free and then shifting to experiential modes of reproduction that can not be copied: giving concerts, provide public readings, etc.

These alternative ways of charging for creative works is interesting for producers and consumers as well, particularly because it allows cutting out the middle-man: studios, distributors, etc … this enables a much more personal and more direct connection between authors and their fans, and more efficient economics at the same time.

Conclusion

The ability to make perfect instant copies at negligible cost has changed the world profoundly. It has also, for better or for worse, has led to a much broader spread of creative works, some of which is legal, some of which is not. One point of view: sharing copies freely acts as a disincentive for authors to keep up their creative endeavors: the original problem that copyright intended to address. However, the low cost of spreading (and even producing) creative works seems to have led instead to a proliferation of such works, available under many different compensation schemes. Making it easier to both produce and consume such works.

Instead of the dire predictions, mostly by large corporate copyright holders, of a world deprived of creative works, we now live in one that has undergone a Cambrian explosion of such works. It seems that the original copyright model has outlived its usefulness. A more liberal approach that allows copying of creative works by consumers in combination with novel compensation schemes for producers, seems prudent for sustaining the ongoing dialogue of ideas these works represent.

References

1. Stallman, R. (1997). The Right to Read
2. Economist (2004). Killing Creativity
3. Newell, G. (2011). Gabe says Piracy isn’t about Price
4. Rosen, B. E (2010). Walking on Eggshells
5. Kinsella, S. (2010). Kroes wants copyright as a building block
6. Kelly, S. & Robinson, R. The Fast and Furious Rise of the Subscription Economy