HLB_Fall_2004_1059

HLS professors propose solutions to music industry crisis

Its revenues devastated by illegal music downloading and copying, the music industry is struggling with a full-blown crisis. On that, a trio of colleagues at HLS’s Berkman Center for Internet & Society agree.

But what to do? That’s where the three HLS professors–William “Terry” Fisher III ’82, Charles Nesson ’63 and Jonathan Zittrain ’95–part ways. And, as they debate and challenge proposed solutions, the increasingly beleaguered entertainment industry is watching them closely.

“People are desperate for answers and thinking on this,” says Zittrain. Adds Fisher, “Almost all of the players in the recorded music industry sense their business is coming apart at the seams. The film industry–a much larger industry–wants to avoid the same fate.” Consumers, artists and technology manufacturers also have much to lose. “There are a lot of people with something at stake in figuring out a solution,” Fisher says.

For that reason, the proposals emerging from the Berkman Center are attracting enormous interest. A conference in September sponsored by the center drew representatives from Microsoft and Intel, among others. In November, Nesson and Fisher met in Los Angeles with executives from a number of movie studios as well as the head of the Recording Industry Association of America. In April, Nesson hosted a conference at HLS, which included a select group of scholars, artists, engineers, lawyers and businesspeople. And the proposals in Fisher’s forthcoming book, “Promises to Keep: Technology, Law, and the Future of Entertainment,” which is excerpted on his Web site and slated for publication in August, have already received significant notice in The Wall Street Journal, The New York Times, Los Angeles Times and The Economist, as well as various online journals.

“It’s gotten a lot more attention than anything [else] I’ve written,” he says.

Professor William Fisher III

Credit: Joshua Paul Professor William Fisher III ’82 writes about solutions to the music downloading crisis in his forthcoming book, “Promises to Keep: Technology, Law, and the Future of Entertainment.”

So what exactly are their suggestions for solving the piracy problem? Fisher offers a radical plan that would replace the copyright system with a government-administered compensation plan, funded by a tax on hardware and other systems used to play digital music. Downloading and copying would be legal, but artists and producers would still make money. Nesson’s model, which he calls “Speed Bumps,” tries to improve the legal commercial market by making downloading cheap and attractive while diminishing the quality of illegal downloading. Zittrain isn’t proposing a solution of his own but has worked with the other two to hone their proposals.

“At the core,” Zittrain says, “Terry’s and Charlie’s ideas meet–both anticipate a situation where people are paying money on a bulk subscription model.” While Fisher’s model embeds these fees within Internet service provider subscriptions, blank CD sales and other existing digital expenses, Nesson’s would push people into a fee-based system like iTunes by making it more difficult to use peer-to-peer networks. “For straight music consumption, they’re really arriving at the same thing,” Zittrain says, “though Fisher’s plan anticipates that consumers can create their own new works using others’ old ones.” For his part, Zittrain isn’t convinced the status quo is untenable. For one thing, he says, the liability of ISPs for facilitating peer-to-peer transfers is “surprisingly unclear,” despite broad statutory immunities, and has yet to be battled out in the courts–something the recording lobby is likely to start pushing soon.

All three agree on this, though: The entertainment industry’s favored approach, called “Total Control,” should be avoided. At its extremes, Total Control wants to build encryption into hardware that would refuse to run unrecognized or illegal programs. (Indeed, the entertainment industry has even considered such extreme measures as creating viruses that would erase the hard drive of any computer that attempted illegal downloading.)

Not only is there serious skepticism about whether it’s technologically possible to prevent piracy, but the approach raises concerns about destroying the openness and flexibility of the Internet. Yet Nesson predicts that Microsoft, for one, will make a huge push for it; moreover, he believes Total Control has a greater likelihood of success than Fisher’s tax scheme. In the gap between those two extremes stands Speed Bumps.

“It’s actually going to be interesting if the Total Control model looms in a realistic way in the future,” Nesson says. “Then I think we may see a lot of movement on the side of those who, at the moment, turn up their noses at Speed Bumps. Suddenly, reforms of the existing system won’t seem as bad, I think.”

Taxes for Artists and Producers

Fisher’s tax scheme, he acknowledges, is the most radical of the proposals. For that reason, it has gotten the most attention–and may also be the hardest to sell.

Under his plan, it would no longer be illegal to copy digital entertainment without permission. The owner or owners of a copyrighted work–including artists and producers–could choose to register the work with the U.S. Copyright Office, which would provide a unique file name. That file name would be used to track how often the work was downloaded or copied, and the owners would be compensated from a fund administered by the Copyright Office. Funding would come from a tax on ISPs or devices used to gain access to digital entertainment. This system makes room for artists to “rip” and mix from existing works to create new songs, films or other works; both the owner of the original work and the creator of the new one would be compensated on a percentage basis.

Other than lawyers, Fisher notes, “pretty much everyone would benefit.” Consumers could download freely and legally with access to a much greater choice of entertainment. Artists and producers would get paid. ISPs and other intermediaries such as electronic manufacturers would not be obliged to police consumer use, something they are strongly resisting. Even recording companies would benefit, at least in the short run, although their long-range fortunes are more difficult to forecast, Fisher says.

Perhaps as important, the ability to create new art through ripping and sharing existing works would be preserved. “The opportunity for consumers to take materials and rewrite and redistribute them would be much enhanced,” Fisher says. “This is one of the most rapidly developing innovative uses of the new technology. Instead of accepting film and music, you can edit and modify it.” The academic term for this “creative explosion,” as he puts it, is “semiotic democracy.”

Jonathan Zittrain

Jonathan Zittrain

In that regard, Zittrain shares Fisher’s enthusiasm. “I think an understated benefit to Terry’s proposal is the idea that consumers have the capacity to produce new works based on old works, without displacing the old works,” says Zittrain. “The mixing and production tools on the average PC from Best Buy exceed the most sophisticated recording equipment of the late ’70s. It would be a shame if the law could not evolve to account for the vast new opportunities of content production offered by having these tools in consumers’ hands. Terry’s model allows for it because it suggests formulas by which people can say how much of their work is theirs versus how much they drew from existing works. It is quickly looking forward to a time when consumers can be producers, can be paid and can share. That’s at least a first cut at having the law respect and even provide an economic engine for creation of new works in digital media without economically cannibalizing old ones.”

However, within the entertainment industry, at least, Fisher’s plan is a tough sell. “It seems pretty far out to [the entertainment industry],” says Nesson. “Instead of making money selling things, they’ll be recipients of money from a government agency.” That’s something that also gives Nesson pause. “I’m not disposed to it because, at the biggest level, the end result of the Internet revolution is we wind up with a mega-government agency that’s in control of entertainment. That seems to me a net loss,” he says.

“I can’t see how anyone could give assurances that such a government agency would not discriminate,” he adds. For example, “I can’t see an agency paying out money to porn.” And, he says, “If there is some other major competitor for funds–like a war or plague–and a big pot of money is sitting there to be paid for entertainment, I don’t see what would keep the government hands-off.”

“That’s a legitimate worry,” concedes Fisher. “You’re placing a fair amount of discretionary power in a government agency.” However, the agency would not choose which artists are paid, he insists, because compensation would be based simply on numbers–which works are downloaded the most often. “The principle of consumer sovereignty would remain,” he says. However, he adds, “The total amount of money distributed through the system would be subject to some degree of government discretion. That’s an invitation for lobbying,” he acknowledges.

There is also the potential for manipulating the compensation system through what Fisher calls “ballot stuffing.” The owner of a work could artificially inflate his numbers by setting his computer to download his own songs every 15 seconds, for instance. Then there is the problem of cross-subsidies, in which a tax on all ISPs or hardware means consumers who do very little music downloading are subsidizing the heaviest consumers. “These are not fatal flaws,” Fisher is quick to note, “but imperfections in the system. In my book, I discuss ways in which each of these hazards could be mitigated. But in the end, my proposed system is not perfect. None [of the proposals] is.”

And, as a complete restructuring of the existing system, his proposal faces the biggest hurdles. Copyright law in the United States typically changes only when all relevant parties agree, he notes. “Studios and record companies are not so sure this is good for them. And, of all the [stakeholders], they have the most political clout.” For that reason, industry reps have been far more receptive to the Speed Bumps approach.

“We know they are skeptical,” Fisher says. But “if their situation gets worse, they may have no choice.” The Berkman Center, in collaboration with others, is developing a pilot project of this model, which they hope to implement on a voluntary, subscription basis. “If we can get the demonstration project up and running, it may reduce the resistance, if we can show it actually works,” he says.

“It’s a transformation of the foundation of the record and film industries, and a change of that magnitude is very hard to engineer, so I’m not sanguine about the prospects. It will take a lot of work.”

But, Fisher adds, “I’m quite committed to the idea. I think it would improve life for lots of people.”

Speed Bumps

Professor Charles Nesson

Credit: Joshua Paul Professor Charles Nesson ’63 wants to improve the legal commercial market for downloading through his Speed Bumps model.

With Total Control at one end of the spectrum and Fisher’s model at the other, Nesson hopes to forge a reasonable middle ground. Through a carrot-and-stick approach, Speed Bumps would support a viable legal marketplace for digital entertainment while retaining the basic structure of copyright law and the open nature of the Internet.

Speed Bumps suggests making legal downloading inexpensive and high-quality while decreasing the quality of illegal downloading through technology called “spoofing” and also increasing the legal penalties for piracy. It also targets the relatively small group of people who take CDs and convert them into MP3s available for downloading for free. “The more attractive the legitimate market becomes in relation to the online black market, the healthier it will be,” Nesson says. “People will become sensitive to the fact you’re at risk if you’re putting up a whole lot to share, and that downloading isn’t always easy, and you don’t always get good material.”

And, as illegal downloading becomes more common, it will lose its attractive outlaw quality. “The idea you’re participating in a revolutionary community by freeloading will diminish,” Nesson says.

Nesson likes the fact that Speed Bumps puts pressure on the entertainment industry to reform. The recording industry, in particular, has an enormous image problem, due to the perception that it has overcharged consumers and to its response to the piracy issue, including lawsuits against consumers. It also was slow to develop creative solutions to illegal downloading. “It took them a long time to come up with iTunes,” he says. But iTunes has been a success because it’s slick, easy to use and high-quality–and “beautifully advertised,” he adds. Similarly, Speed Bumps encourages the industry to reform by charging less for its products and giving consumers more flexibility, for example, by allowing people to buy single songs instead of entire CDs.

“This is the approach the industry most naturally favors,” Nesson says.

Of Speed Bumps, Fisher says, “If successful, it would facilitate the development of an authorized online market.” But, he adds, consumers would continue to pay more for entertainment than some feel is fair. “There would be some savings but nowhere near as much as the new technologies offer,” he says. Also, computer systems would most likely include encryption systems to limit what could be downloaded or manipulated. As a result, “The flexibility and movement across systems are not possible,” Fisher adds. “So it’s better than distributing music in CDs but nowhere near as wide open as distributing it” through his plan.

Within the academic community, Speed Bumps isn’t as popular as Fisher’s model, Nesson says: “People in the academic world don’t like copyright–at least, they don’t love it. They feel it’s been extended way beyond its original concept. I feel that way too. I don’t hold myself up as any great defender of copyright.”

But both of their plans, and all of the work around digital entertainment at the Berkman Center, continue to garner international interest. “The industry is looking for concrete ideas,” says Zittrain. “Both Charlie and Terry are doing that.”