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October 27, 2010

For all my Copyright doomsaying, I have neglected to really flesh out a viable way forward. This is not because I don’t have thoughts of what might work, but because the economic structure of creative work is a genuinely difficult problem in the digital age. I don’t mean to sound trite but, as I have pointed out before, the average variable cost of distributing digital content–which is any content because all content can be boiled down into information represented by 1s and 0s–is $0. Though labor and other technical aspects of content production might normally be considered the variable costs, once the product is created it costs nothing more to create and distribute additional copies. Therefore, the only actual costs of creating and distributing digital content are the “fixed” costs that go into the production of the product.

One can easily think about user-controlled, digital reproduction and transmission of content in the way one thinks of the effects of Digital Video Recorders (DVR) and collections of TV seasons on DVD; portability and freedom of consumption will allow the quality and variability of the product to rise. As the ever-astute Julian Sanchez points out:

It’s much easier to tell a dense, multilayered story with many characters that unfolds over the course of a full season when you know viewers aren’t at any risk of missing an episode and getting lost, and in particular when they can go back and refresh their memories rather than having to keep the whole story cached in memory in the week between episodes.

On the movie side, though, I don’t think it’s that movies as such are in decline as elite entertainment, but that technology has effectively forced new highbrow movies to compete with the cinema’s ample back catalog. Twenty years ago, if you wanted to have a “home entertainment center” that could serve as a decent substitute for the theatrical experience, you pretty much had to be willing to drop ten grand and devote a room of your house to it. Now a 50″ high-definition TV can be had for a few hundred dollars, and will fit against the wall of an apartment living room.

Or, for a single example of why the competition for your eyeballs (and therefore the competition for quality of the end-product) is going to be more intense as portability and freedom of consumption increase:

For the cost of a $10 monthly Netflix subscription, you’ve got an ample and growing library of both classic and recent movies available on demand.

And as a few microeconomists have pointed out, TV is replacing cinema as an elite form of entertainment for just that reason. Cinema is good when you need a huge screen (and is therefore an excellent venue for comic-book inspired action and fantasy movies), whereas “television, especially the pay and cable channels, is increasingly becoming a venue for character-driven adult programs, such as The Wire, Mad Men, and Boardwalk Empire.” Longer stories allow more complexity and development. Portability and freedom to access back-episodes is necessary for an audience to access that length and complexity.

So, it’s pretty easy to tell that lower price and easier access isn’t actually bad for the quality of content. Even Shakespeare sold penny seats, after all. The question is how to structure remuneration. My first thought would be to establish some new-era patronage system, which seems the most efficient way to cover otherwise “fixed” costs. There are already platforms for fund-raising like Kickstarter that accomplish such a structure pretty easily, and in those cases the artists/creators are directly receiving the funding themselves, instead of it being trickled through the byzantine financing and ownership empires that occupy Hollywood and the old-style media landscape.

Even if we were to assume that patronage is not a feasible system of fund-raising for daring and inexplicable creative projects, crowdsourcing can solve the pricing problem, if not the initial financing. Since the costs of distribution are next to zero after the product is created, an artist can simply recoup their investments slowly and over a long period of time, through even minimal contributions, since all the costs of production are already sunk. In that sense, the most workable solution might be a sort of a “compulsory license,” which seems the most politically viable way forward for artists and audiences alike. I’m thinking of a compulsory license in the same way that radio stations have to pay a minimal and statutorily determined rate for the consumption of any song or other copyrighted work. If users just had to pay a penny (or maybe even a fraction of a penny, depending) per work, the power of aggregation would produce a pretty stable and reasonable return for most creative works, and the portability and freedom of digital consumption would allow works of art to compete on in the arena of quality, rather than the distribution arena that is controlled by the studios and old-style industrialized media.

The reason I believe some compulsory licensing scheme could provide a potential answer lies in one of the most famous distinctions that every law student learns about in the first year of law school: the difference between a liability regime and a property regime. Essentially, a liability regime is where you can do what you want and pay for the permission to do so before or after the fact (think of paying a toll at a tollbooth), while a property regime lets the right-holder determine exactly how the property is used and they are backed up by the power of the state (think of a sheriff kicking you out of someone else’s land if they don’t want you there). If we just set out a simple and clear liability regime (i.e., the compulsory/mechanical license), we can have a situation that avoids the problems of rent-seeking studios, outrageous penalties, and censorship. I’d certainly be willing to pay more than a penny for that kind of seat.


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