The Cultural Markets Of The Future
Nobody Asked For A Refrigerator Fee
A hundred years ago, one of the largest employers in the Stockholm, Sweden, was a company named Stockholm Ice. Their business was as straightforward as it was necessary: help keep perishable food edible for longer by distributing cold in a portable format.
They would cut up large blocks of ice from the frozen lakes in the winter, store them on sawdust in huge barns, cut the blocks into smaller chunks and sell it in the streets. People would buy the ice and keep it with food in special cupboards, so the food would be in cold storage.
(This is why some senior citizens still refer to refrigerators as “ice boxes“.)
When households in Stockholm were electrified during the first half of the last century, these distributors of cold were made obsolete. After all, what they distributed was the ability to keep food cold, and suddenly everybody could do that themselves.
This was a fairly rapid process in the cities. With the availability of the refrigerator from circa 1920, most households had their own refrigerator by the end of the 1930s. One of the city’s largest employers — distributors of cold — had been made totally obsolete by technical development.
There were many personal tragedies in this era as the icemen lost their bread-winning capacity and needed to retrain to get new jobs in a completely new field. The iceman profession had often been tough to begin with, and seeing your industry disintegrate in real-time didn’t make it any easier.
But here are a few things that did not happen as the ice distribution industry became obsolete:
No refrigerator owner was sued for making their own cold and ignoring the existing corporate cold distribution chains.
No laws were proposed that would make electricity companies liable in court if the electricity they provided was used in a way that destroyed icemen’s jobs.
Nobody demanded a monthly refrigerator fee from refrigerator owners that would go to the Icemen’s Union.
No lavishly expensive expert panels were held in total consensus about how necessary icemen were for the entire economy.
Rather, the distribution monopoly became obsolete, was ignored, and the economy as a whole benefited by the resulting decentralization.
We’re now seeing a repeat of this scenario, but where the distribution industry — the copyright industry — has the audacity to stand up and demand special laws and say that the economy will collapse without their unnecessary services. But we learn from history, every time, that it is good when an industry becomes obsolete. That means we have learned something important — to do things in a more efficient way. New skills and trades always appear in its wake.
The copyright industry tells us, again and again and again, that if they can’t have their obsolete distribution monopoly enshrined into law with ever-increasing penalties for ignoring it, that no culture will be produced at all. As we have seen, equally time and again, this is hogwash.
What might be true is that the copyright industry can’t produce music to the tune of one million US dollars per track. But you can’t motivate monopoly legislation based on your costs, when others are doing the same thing for much less — practically zero. There has never been as much music available as now, just because all of us love to create. It’s not something we do because of money, it’s because of who we are. We have always created.
What about movies, then? Hundred-million productions? There are examples of garage-produced movies (and one even has beat Casablanca to become the most-seen movie of all time in its native country: the film Star Wreck in Finland). But it may be true that the argument is somewhat stronger with the blockbuster-type cinema productions.
So far, the film industry has been setting new box office records every year for the last decade. For all their doomsday scenarios, they have never done better financially than right now. But, fair enough, perhaps there will come a time when people will become less interested in paying for hundred-million dollar films.
But even if it would be true that movies can’t be made the same way with the Internet and our civil liberties both in existence, then maybe it’s just the natural progression of culture.
After all, we have previously had operettas, ballets, and classical concerts as the high points of culture in the past. They all still exist, but they are not at the center of mainstream public attention in the way they once were. Nobody is particularly concerned that those expressions have had their peak and that society has moved on to new expressions of culture. There is no inherent value in writing today’s forms of culture into law and preventing the changes we’ve always had.
Everywhere we look, we see that the copyright monopolies need to be cut down to allow society to move on from today’s stranglehold on culture and knowledge. Teenagers today typically don’t even see the problem — they take sharing in the connected world so totally for granted, that they discard any signals to the contrary as “old-world nonsense”.
And they certainly don’t want to pay a refrigerator fee.
Cultural Flat-Rate: A Non-Solution To A Non-Problem
Cultural flat-rate, or global license, or a broadband tax to give money to copyright holders, is an idea that has been around for at least a decade, but has never become reality. There is a reason for this. The idea sounds deceptively simple and possibly attractive when you first hear it, but when you start looking at the details to formulate a concrete proposal, you become aware of the problems.
Collecting the money is one thing. You can discuss if it is fair to force people who do not actually download anything to pay anyway, or why businesses should be compensated for technological progress, or details like how to handle the multiple (mobile) Internet connections that a family normally has. But we leave that aside.
It is when you come to how the money should be distributed that the real fun begins.
• TV and radio play: Giving to the rich
If you base the payouts to artists on what is being played on TV and radio, most of the money will go to the established artists that are already doing very well. This is how the current system with levies on blank discs and various electronic devices works.
One of the most attractive features of the Internet is that smaller and not yet established acts can reach an audience, even if they are not played on TV and radio. This is the ”long tail” effect, and all the small acts together constitute a fair amount of what is being downloaded from the net.
This is the group of artists that most people would want to support, both for the cultural diversity they provide, and simply because they very often need the money. With a cultural flat-rate based on TV and radio play, they will get very little of the money collected. At the same time, their fans will have less disposable income to spend on these artists, since the fans have had to pay the flat-rate out of their household culture and entertainment budget.
The net effect could very well be a system that reduces income for poor artists, and gives the money to the already rich.
The alternative that most flat-rate proponents favor is to instead measure what is actually shared on the net, and base payouts on those numbers. But that leads to other problems.
• Billions to porn
35% of the material downloaded from the net is porn. Pornography has exactly the same copyright protection as other audiovisual works. If the payments from a cultural flat-rate system are to be seen as ”compensation” for the downloading of copyrighted works, then 35% of the money should rightly go to the porn industry. Do you think that the politicians should create a system?
The point here is not to criticize porn as such. It is a popular form of entertainment, and there is nothing inherently wrong with it. But this does not mean that it requires billions in government mandated subsidies. Throughout history, this is an industry that has amply demonstrated its ability to stand on its own, if that is an appropriate expression in this context.
But if you want to exclude porn from a cultural flat-rate system, you will not only have to create a ”European Board of Morality and Good Taste”, or some similar mechanism to draw the line between pornography and art. More importantly, you can no longer use the argument that the cultural flat-rate is a ”compensation”, or has any connection to copyright.
Instead, it becomes random cultural subsidies at best, or an undisciplined money-grab at worst.
• Filling up the networks
It is technically possible to measure what is being shared on the net with a reasonably high precision. Some people have voiced privacy concerns, but in this particular case, that would not be a problem. The measuring only has to be ”good enough”, so it is not necessary to track every individual download that everybody does. You can fairly easily design a system to collect good enough statistics without invading anybody’s privacy.
But the minute you start paying out money based on the download statistics, people will change their behavior. Today, if you like an artist who has released a new album, you will download that album once so that you can listen to it. But if you know that your favorite artist will get money in proportion to how many times the album is downloaded, you realize that you can help that artist by downloading the same album over and over again.
Since it doesn’t cost you any of your own money even if you download the album a thousand times, or a million times, we can expect fans to do exactly that. We know that fans really love their idols, and want them to prosper economically. If all you have to do to make that happen is to start a three-line script on you computer when you are not using it for anything else, a lot of fans will.
The only real limit on the total number of ”I-want-to-help-my-favourite-artist downloads” will be the capacity of the Internet infrastructure. In other words: With a cultural flat-rate, the net will turn into a permanent gridlock of completely unnecessary traffic, and no matter how much money backbone providers spend on increasing the capacity, it will fill up immediately.
• A revenue stream for virus writers
Computer viruses are a major problem today, despite the fact that it is actually quite hard for virus writers to make any money from their criminal activities. The purpose of a computer virus is usually to install a back door in your computer, to make it part of a so called ”botnet” of thousands of computers that the virus writer can take control of at will.
A botnet owner can sell his services to criminals who want to send spam or commit various forms of advanced fraud, but unless the virus writer has connections to organized crime, it is not trivial for him to convert his virus writing skills into hard cash. With a cultural flat-rate system, that changes.
In principle, all the owner of an illegal botnet needs is a friend who has recorded a song that is covered by copyright. He can then order the thousands of computers in the botnet to download the song again and again. Thanks to the flat-rate system, these downloads will automatically result in real money being paid out to the friend who has the copyright on the song.
In its most primitive form the police would perhaps be able to detect this criminal activity and put an end to it, but it is easy to imagine how more sophisticated criminals can elaborate the scheme. The cultural flat-rate system, which would pump out billions of euros per year on the basis of automatic download statistics, would become a very rewarding target for criminals. Writing harmful computer viruses would become a much more profitable activity than it is today.
• There is no problem in the first place
There are several other arguments against cultural flat-rate as well, but we’ll skip those and go directly to the final, and very positive one:
There is no problem to be solved.
The Internet is a revolutionary technology that changes many of the preconditions for the cultural industries. The task for policy makers and politicians is not to protect old business models or to invent new ones. However, policy makers do have a responsibility for making sure that we have a society where culture can flourish, and where creative people have a chance to make money from what they do.
Ten years ago, when file sharing on the Internet on a massive scale was a new phenomenon, it was perhaps reasonable to wonder if this new technology would impact the market conditions for artists and creators so that they would find it impossible to make money from culture, and worry that cultural production would drastically decrease in society.
Today, we know better. We know that more culture is being created than ever before, and the people who were predicting ”the end of music” or similar doomsday scenarios were simply wrong. There is a growing body of academic research showing that artists are making more money in the file sharing age than before it. The record companies lose, but artists gain from file sharing.
It is not easy to make a living as an artist, and it never has been, but the Internet has opened up new opportunities for creative people who want to find an audience without having to sell their soul to the big companies who used to control all the distribution channels. This is a very positive change for the artists and creators, both from a cultural and an economic perspective.
There is no need to compensate anybody for the fact that technological progress is making the world a better place.
This IS The Market, Stupid!
Working with Pirate MEP Christian Engström in the European Parliament, I often come in contact with advocates for Intellectual Property – lobbyists from the film, music and book industry. And one thing almost always strikes me...
They don’t seem to have a clue about what’s really going on.
They don’t seem to realize that we now live in an information society with hyper distribution. And if some of them might have some sort of a clue after all, it seems they think the Pirate Party or Christian himself invented the Internet, free flow of information and file sharing.
(We sometimes respond to that, saying “No, that was someone much more clever”. But they really don’t seem to catch the subtle humor, nor the message.)
What the Pirate Party does, is “just” to point out what policies are reasonable in our new society.
Billions of people are online. All of them can, at least in theory, connect with each other. And there is often a surprisingly short distance (or few links) between person B and person Q. A thought, an idea, or an application can spread over the world in just a few days. All kinds of data that are on my computer could be transferred to yours. Or to that of a bike repair man in Chile. If it is good and interesting enough.
Some entrepreneurs have got the message. They start net applications, they set up web stores (that often are more successful, the more specialized they are), they start their own media channels and they start projects where people cooperate. In most cases it can be done with very little money. And if they choose, they can address a global market.
The IP-lobbyists from the entertainment industry, on the other hand… They refuse to see or to accept the real world as it is. They are upset, because people don’t want to go downtown to a store to buy their products engraved to plastic discs anymore. They go bananas if someone shares the information he or she has bought with someone else. They curse the Internet. They want so supervise, filter and control the flow of information. They want to cut people off from the net. They have no problem making the world a worse place for everybody else – all the entrepreneurs, scientists, students, activists, artists, bloggers, and ordinary people that every day spontaneously fills the Internet with life and creativity.
The IP-lobby does not make any real effort to accept, embrace and make use of our new reality and of the information society. They could, if they wanted. And they could make a lot of money doing so. But so far, they seem unable and unwilling to think outside the box.
Sometimes it’s almost amazing. We met with a person from the book publishing sector. That person told us, with a stiff upper lip, that the amount and the multitude of information on the Internet is a problem – as no one can handle the selection process, deciding what should be published and not. So… condescending.
An online information society with a multitude of information and hyper distribution is the new market. And in many ways it is a much more free market than the old one. You should accept it – or get out of the way.
And let’s face it. Some products, business models, concepts and stuff will end up in the trash can – as they don’t fit our modern society. And they should end up in the trash – making open space for things that are new, profitable, focused on the future, viable and blooming.
No one can tell what tomorrows business concepts will look like. But you don’t need to worry. We’ll find out, eventually. The market will solve that. On its own. There will always be talented people developing new stuff for new markets. You might call it capitalism, spontaneous order, progress, the invisible hand, dynamic effects or whatever you like. But it will be there.
Trust the Force!