The Problem(s) with Voluntary Collective Licensing

Today at Law.com, Fred von Lohman (an attorney at the Electronic Frontier Foundation) posted an article entitled "Is Suing Your Customers a Good Idea?” Mr. Lohman posited that while 4,280 RIAA lawsuits have now been brought against file swappers and that today marks the one year anniversary of the recording industry’s campaign against its own customers, in reality the effort to curb the tide of file swapping has been laughably futile (Mr. Lohman's stance is conflicting considering that EFF on their "about us" page states, "Unfortunately, the recording industry has targeted the technology instead of the users who are actually violating their copyrights"). Yes, Mr. Lohman admits that the record industry has the better win-lose percentage in their lawsuits – largely because of settlements, but at the same time file swapping is still growing in America and globally “skyrocketing.”

Mr. Lohman cites some interesting (perhaps disturbing is a better word) statistics as well – 88 percent of children between the ages of 8 and 18 know that P2P music downloading is illegal, yet 56 percent continue to download anyway. While I do believe we are setting a horrible example to children that breaking the law (whether the law is right or wrong) is ok, what I found problematic with Mr. Lohman’s article is the solution he proposes to stem the tide of P2P sharing. After noting that both current methods of curbing file swapping – (1) RIAA lawsuits and (2) the “carrot” of authorized music stores, like Apple’s itunes have not worked, Mr. Lohman proposes a solution – “voluntary collective licensing.”

I do not claim to know the ins and outs of voluntary collective licensing but to me this “solution” really is just a mutated version of the doomed to fail authorized music downloading. Both he and the EFF state that this is a compromise-like solution, created to compensate artists and rights holders because the file sharing phenomena is here to stay. I don’t think they’re going out on a limb there, but does voluntary collective licensing really solve the problem?

EFF and Mr. Lohman fail to sell me on the inevitable problem with such a solution - how do you get people to pay? The EFF proposal is for $5 per month for unlimited downloading, with the proceeds to be divided between rights holders based on the popularity of their music. Perhaps I’m missing the point but isn’t this exactly what we have now with authorized music downloading websites, and why do these sites currently fail to solve any problems or generate even modest memberships – the free rider problem. In response to this issue EFF states on their website,

“So long as ‘free-riding’ can be limited to a relatively small percentage of file sharers, it should not pose a serious risk to a collective licensing system.” (emphasis added).

EFF does not elaborate on how voluntary collective licensing would minimize the number of free riders except to say that under their system more songs would be available to download than currently available at e.g. itunes and Napster 2.0 and that people would be more than willing to pay $5 to avoid a costly settlement with the RIAA. If you look at Mr. Lohman’s statistics, noting the “skyrocketing” number of downloaders and also considering the 56% of 8-18 year old kids who just don’t care about breaking the law, I think our society would just rather save the $5.

The ramifications to such a solution were it to succeed are clearly beneficial. Unlike now, artists and rights holders would get compensation, government intervention would be kept at a minimum, the cloud of litigation would be removed, and technological innovation in terms of P2P capabilities might increase. However, because for the time being the free rider problem is here to stay, this pie in the sky solution is clearly unrealistic. I'm not sure that there's a proposal out there that is clear winner but its clear that voluntary collective licensing will not work. 60 million Americans have spoken; and maybe the real problem is that 4,280 isn’t enough.

Comments

[Joe Gratz]

Actually, that's 4,280, not 400,280. This strengthens your argument that lawsuits against infringers aren't going to get us there, especially since the monthly cost of the risk of getting sued by the RIAA is about $0.54:

http://www.joegratz.net/archives/2004/06/22/the-cost-of-riaa-risk/

You can get around the free rider problem for any public good by making contribution mandatory (i.e., a tax). That solution raises its own problems, but free riding among United States citizens isn't one of them. (Free riding by downloaders in other countries is, though.)

[Tommy O'Reardon]

After I posted I realized the obvious error, 400000 would actually be quite a lot. To your next point, is there any hope you see for voluntary collective licensing? Why propose such an apparently unworkable solution? Is there any solution to the free rider problem but a tax (involuntary collective licensing), a tax that presumably would have to be imposed on sharers and non-sharers alike?

[Tommy O'Reardon]

I have corrected the numerical error in the blog to accurately relfect the number of RIAA lawsuits to date - 4,280.

[Chris Brand]

It's like an insurance premium, which is also voluntary.
Each person evaluates the cost of the premium and the risk of not taking it out and decides whether it's worth it.

Judging by Joe's post, though, it sounds like the proposed figure is a factor of 100 or so too high. $0.50/month for immunity to RIAA lawsuits for p2p filesharing ? That sounds like a reasonable deal to me, and with millions of filesharers (did I see 60 000 000 somewhere ?) a reasonable income stream for the music companies.

Oh, and the reason it's more attractive than the current offerings from online music stores is because of the selection - the online stores made a big deal over having reached 1 000 000 tracks. They're mostly constrained to music from one or two labels.