On Intellectual Property Part 2: How Can It Be Fixed?

In the decade before the American Civil War, the South worked furiously to strengthen the position of slavery in the law. They forced several compromises that required a new slave state be added to the country with every new free state. They passed, and several times strengthened, the Fugitive Slave Act, that made it illegal for anyone to assist slaves in escaping. They considered slaves to be ‘their property,’ and they inserted this into the law of the land. They clung to this, even though mechanization and other advances were making their labor-intensive style of agricultural uneconomical anyways. Their position was plainly wrong, and slavery was abolished after our civil war.

In the last decade, the music and similar industries have worked furiously to strengthen the position of intellectual property in the law. They have forced many changes to the copyright law (especially the Copyright Acts of 1976, and 1998) to prevent anyone from stealing ‘their property’. While the Music Industry isn’t treating the music artists and consumers, quite nearly as badly as slaves, bold action is needed to restore justice in the land.

In my previous post in this series, I documented that both creators and consumers raise fair and good points, so that a reasonable compromise between the 2 groups is needed. I also documented that pirates and intermediaries (recording labels, RIAA, etc.) are both part of the problem. The problem of piracy is obvious: it keeps creators from being able to make a living by creating. I then documented 4 equally-bad problems caused by the intermediaries:

Given these many problems, it is no surprise to me that record labels’ sales are down. Even if there were zero piracy, their sales should be down given of all these problems. When auto makers want to increase their sales revenue, they wow and woo the consumers with pricing-incentives, more stylish, more powerful, more reliable, more fuel efficient vehicles, and sometimes even go so far as to pay consumers just to test drive the cars. They continuously improve. The music industry does not do this. Instead, it clings to unreasonably high prices.  I see the Federal government has since sued, alleging price fixing.   Moreover, the industry does not improve the product, and sues consumers who attempt to download songs, (even though research shows that downloaders purchase more music than non-downloaders). The music labels invite piracy by taking such a backwards and arrogant position.

In my previous post, I showed that the music labels are the root cause of all the problems for themselves and consumers, including piracy, and, as such, should not be allowed a role in any solution to these problems. They are like the aggressive and ill-tempered dinosaur that resfuses to die gracefully – witness the Sony Rootkit.  

nd the lawsuits against pirates . Notice  the ridiculous damage awards, and that many of the accused are likely innocent.   The industry even accused a Hewlett Packard printer of illegally downloading songs . The meteor of electronic formats and distribution has struck their industry. Rather than evolve into a smarter, better business model, they bully anyone who opposes them with lawsuits and gnashing of their dinosaur teeth. Like the slave-owners before the civil war, the music industry clings to an outdated and outclassed business model. In my opinion, they should be allowed to be abolished by the merciless market they find themselves in.

So let’s have the reforms:

  1. The copyright law should be restored to a balance. Fair use should be defined reasonably and clearly. Piracy should not be allowed, but beyond that, there should be no restriction on what customers can do with the music they purchase or how they do it. (properly done this would take care of piracy, DRM, the copyright law etc.)

  2. There is already a strong and growing internet-based market of independent artists. The government should explicitly allow this to out-compete the big record labels by shielding it from their litigation, and by setting up a market for insurance that new artists could buy into to pool risk of making a low-selling CD amongst themselves.

  3. Privacy concerns could be easily addressed too. The brick-and-mortar music stores could buy any MP3, CD, etc. and burn the image to a portable external hardrive that you bring in to the store. You could pay cash, and your anonymity would be assured.

Taken together, the above three reforms would result in lower prices for consumers, and both higher sales and higher profit per unit for creators. A 6 week experiment on Real Networks’ Rhapsody site showed achieved a tripling of sales by reducing price by half. I see independent artists have gotten the cost down to as low as $5/CD on CDBaby and Tunevault offers MP3 downloads: some free; others paid.   DefectiveByDesign lists vendors without DRM.  Now all we need is a private (preferrably anonymous) way to shop online.  Done properly,  reform would also result in the death of the record labels, so that everyone else could live happily ever after.

The problem is not confined to the music industry alone. Time allowing I will explore similar problems in the movie and software industries – and propose solutions.

In my previous post in this series, I documented that both creators and consumers raise fair and good points, so that a reasonable compromise between the 2 groups is needed. I also documented that pirates and intermediaries (recording labels, RIAA, etc.) are both part of the problem. The problem of piracy is obvious: it keeps creators from being able to make a living by creating. I then documented 4 equally-bad problems caused by the intermediaries:

  • DRM, and other restrictive technologies reduce the value of the content to the consumer

  • Present retail technologies do not permit anonymity in purchasing music online (but illegal downloads do)

  • The intermediaries have so entrenched their special-interest needs into the copyright law that it is egregiously out-of-balance and must be reformed

  • The cost of music is unnecessarily high, at the same time as the new music released has become extremely poor. (I believe I could run a very profitable record label charging $13.30/CD and $.38/MP3. https://independentblogger.wordpress.com/2010/01/21/on-intellectual-property-part-1-what-needs-to-be-fixed/

Given these many problems, it is no surprise to me that record labels’ sales are down. Even if there were zero piracy, their sales should be down given of all these problems. When auto makers want to increase their sales revenue, they wow and woo the consumers with pricing-incentives, more stylish, more powerful, more reliable, more fuel efficient vehicles, and sometimes even go so far as to pay consumers just to test drive the cars. They continuously improve. The music industry does not do this. Instead, it clings to unreasonably high prices (I see the Federal government has sued over price fixing http://arstechnica.com/tech-policy/news/2010/01/digital-music-prices-are-they-illegally-fixed.ars )

, does not improve the product, and sues consumers who attempt to download songs, (even though research shows that downloaders purchase more music than non-downloaders). The music labels invite piracy by taking such a backwards and arrogant position. (http://news.bbc.co.uk/2/hi/entertainment/3052145.stm )

In my previous post, I showed that the music labels are the root cause of all the problems for themselves and consumers, including piracy, and, as such, should not be allowed a role in any solution to these problems. They are like the aggressive and ill-tempered dinosaur that resfuses to die gracefully – witness the Sony Rootkit http://news.bbc.co.uk/2/hi/technology/4577536.stm and the lawsuits against pirates . Notice 1 the ridiculous damage awards http://news.cnet.com/8300-1023_3-93.xml and 2 that so many of the accused are likely innocent http://news.bbc.co.uk/2/hi/technology/8129261.stm and http://www.washingtonpost.com/wp-dyn/content/article/2008/12/19/AR2008121902930.html . The industry even accused a Hewlett Packard printer of illegally downloading songs . The meteor of electronic formats and distribution has struck their industry. Rather than evolve into a smarter, better business model, they bully anyone who opposes them with lawsuits and gnashing of their dinosaur teeth. Like the slave-owners before the civil war, the music industry clings to an outdated and outclassed business model. http://arstechnica.com/tech-policy/news/2009/06/british-music-boss-we-should-have-embraced-napster.ars They should be allowed to be abolished by the merciless market they find themselves in.

So let’s have the reforms:

  1. The copyright law should be restored to a balance. Fair use should be defined reasonably and clearly. Piracy should not be allowed, but beyond that, there should be no restriction on what customers can do with the music they purchase or how they do it. (properly done this would take care of piracy, DRM, the copyright law etc.)

  2. There is already a strong and growing internet-based market of independent artists. The government should explicitly allow this to out-compete the big record labels by shielding it from their litigation, and by setting up a market for insurance that new artists could buy into to pool risk of making a low-selling CD amongst themselves.

  3. Privacy concerns could be easily addressed too. The brick-and-mortar music stores could buy any MP3, CD, etc. and burn the image to a portable external hardrive that you bring in to the store. You could pay cash, and your anonymity would be assured.

Taken together, the above three reforms would result in lower prices for consumers, and both higher sales and higher profit per unit for creators. The New York Times reports that a 6 week experiment on Real Networks’ Rhapsody site showed achieved a tripling of sales by reducing price by half. http://www.nytimes.com/2003/10/12/arts/music-what-price-music.html. I see independent artists have gotten the cost down to as low as $5/CD on CDBaby http://www.cdbaby.com/ and Tunevault offers MP3 downloads: some free; others paid http://www.tunevault.com/mp3/. DefectiveByDesign lists vendors without DRM: http://www.defectivebydesign.org/guide Done properly, it would also result in the death of the record labels, so that everyone else could live happily ever after.

The problem is not confined to the music industry alone. Time allowing I will explore similar problems in the movie and software industries – and propose solutions.

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