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Cringely Proposes a Music Sharing Alternative
WEFUNK writes "The I, Cringely 'Pulpit' column at PBS presents an interesting idea for a new business model to take on the RIAA. He suggests that a publicly traded company could legally and profitably buy a single copy of each record which could then be freely copied and listened to by its shareholders under fair use. His 'Snapster' (Son of Napster) proposal is essentially a digital music co-op that would let shareholders/consumers bring copyrighted material into a quasi-public domain. While fair use and the public domain continue to be lost in our courts and congresses, maybe the capital markets will offer an alternative." While a neat idea, it's doubtful that it'll ever be implemented. Still, it's a good read.
I think most dl'ers are just going to continue stealing it.
They already have a public corporation that allows many users to share ownership of a copyrighted work. It's called a "library".
"Freedom means freedom for everybody" -- Dick Cheney
Yes, but remember that Windows server licenses are owned by a corperation, and you can only use it on one computer.
You know those little "by opening this CD you have agreed to.." things? Think a slight modification, here..
Wouldn't be that hard.
"The most looniest, zaniest, spontaneous, sporadic Impulsive thinker, compulsive drinker, addict"
This can only work assuming:
1. Most people who share music are willing to pay for music.
2. Most people who share music are ethical, and won't give the music to non-shareholders.
I think both assumptions are questionable. (Note: if you share music, I'm not saying you are a freeloader and immoral. But is everyone like you?)
Toronto-area transit rider? Rate your ride.
The ignorance of both business and law displayed in his article is nothing short of breathtaking.
First, he handwaves about going public at $20/share. Maybe in 1999, pal, but not now. You can't just decide to do it, there are significant capitalization requirements, to say nothing of the money the bankers will want for doing the work for you.
But the real guffaw-worthiness of this article is the tremendous misunderstanding of fair use he displays. Number one, it's quite questionable what corporations' fair use rights are - but it's clear that they are less than an individual. Remember mp3.com? They bought 300,000 CDs and made one digital copy of each. That's perfectly legal, under fair use, for you and me. But when a corporation does it for profit (and by definition everything a corporation does is for profit), it's copyright infringement. MP3.com got pwn3ed by the major record labels for this.
Second, and perhaps more importantly, the traditional test of fair use is, "would it replace a sale?" This clearly would. It's legal for you to make a copy of a CD so you can listen to one and home and one at work, since you won't be listening to both simultaneously. If they wanted to build this system so that only one shareholder could listen to a given piece at one time, they MIGHT be able to squeak through. But try this, and they Major Labels will just laugh all the way to the bank.
While on the surface it seems amusing enough there's some things I don't totally get, maybe someone else can explain where I'm wrong...
First off, owning company stock is not necesarially the same thing as wanting to own the company's product. I might want to own the product but not take on any of the risk of owningthe stock. Likewise, there are plenty of companies I'd own the stock for only for the point of making money, not because I want to personally want to use their products (stock in a pharmecutical company comes to mind)
related to this is the idea that there will be tons of people who want to own tons of stock for the point of being rich, namely the insiders or the investment bankers that want to make money off the IPO. Typically a large amount of shares of any company is held by institutions, not individuals. This idea sounds like he wants stock to be held by all the customers which totally goes against the way investments are usually held. I don't think the institutions would like this idea one bit.
Then, what happens to people who own shares of the stock via a mutual fund? People who own the stock that don't even know about the service? Or people who want to download the music but don't have any means of getting shares of stock because they can't open a brokerage for whatever reason (bad credit)?
Lastly, what happens at the shareholder meeting?
Maybe I just don't get this idea, but to sum up, the product / service a company provides is (and should be) totally separate from its stock.
Napster had 60 million users with a membership price of free (many of which were no doubt duplicates) therefore a service with a membership price of $20 should have an equal number of users? What part of "supply and demand" did you miss, Robert?
"Freedom means freedom for everybody" -- Dick Cheney
Is there any reason why we can't go out and buy a Sony share or a Warner share???
They own the rights to begin with!
----
Go canucks, habs, and sens!
Really, people, step back and look at what we're talking about here. Who cares if it is technically legal? Clearly it is a loophole if it is legal, and that hole will quickly be closed by lawmakers.
The other point is, why would you want to do this? Does no one here understand the basic concepts of economics? If people don't pay for music, there won't be any music -- or, at least, there will be very little. It costs money to produce. The artists need to eat. Sure the RIAA is evil, but two wrongs don't make a right. How could anyone seriously consider a plan like this without realizing that it is wrong?
Why do you people believe that you are entitled to free (or absurdly cheap) music? If you're unhappy with the RIAA, don't buy their music, but don't steal it either. You have no right to use something that someone else spent time and money to produce if you are not willing to use it under their terms.
Cringely has always struck me as a moron.
A simple perusal of copyright laws would show anyone with half a brain that what he proposes is illegal.
Fair use allows for the end user to make a copy for PERSONAL use. Not corporate use, not public use, not any other use. Personal, baby.
Survey says....
BZZZT!
Whatever. Considering the average mp3 @ 192kbps
is 4MB x 100,000 mp3's = approximately 390GB served to a large user base. For $100,000.
This guy may have ran his idea by some lawyers, but he didn't ask anyone here...
However, there is still a distinction between the assets of the corporation and the assets of the shareholders. The assets of the corporation do not become the assets of the shareholders until the corporation liquidates, and then the shareholders are last in line (as various governments, followed by those who are owed money by the corporation have first crack at the assets). Even then, each shareholder would get it on a pro-rata basis. If the corporation bought 50,000 CDs and had 5,000 shares outstanding, you would ultimately be able to get 10 CDs for each share (assuming no one was ahead of the shareholders in this example) you held, and you would be the only shareholder to get each particular CD.
Yeah, I'm sure it would work great. There does seem to be this little "leap" there in the middle... let's see:
1) Buy 100,000 CDs
2) Suddenly every shareholder somehow now has a right to have a copy of that CD which they will make full use of (way beyond fair use)
3) Profit!
Wow, I'm impressed. Cringley has uncovered the long-sought step 2.
Really, I think he may run into a little trouble with the idea that a shareholder suddenly has rights to everything the corp has a single copy of. Heck, that wouldn't even fly if the corp held the original copyright. If it did, I'd be set! Buy a share of Microsoft, get a free copy of any MS software I want. Buy a share of SCO, I can run all the unix-like software in the world I want. Heck, I don't need Cringley, I'll just buy a share of each of the 6 or so music companies, and then I'm cool getting whatever I want from Kazaa.
But who knows, maybe in some strange way, he's right. Just in case, I present the open-source version of his plan:
I form a corporation for $100 dollars or so. I issue 10 billion non-public shares. I make each of you an officer in the corp, and issue you a share. You take a CD that you have a copy of, and transfer ownership of it to the corp. This is a distributed corporation, so you will be storing said CD in your home. You then rip the CD in MP3, OGG, etc.. and store on your harddrive. You then join the private corp p2p net. BTW, in order to actually sign up for the corporation and receive your share, you join the p2p network. To indicate that you wish to transfer ownership of your CD, you rip it and make the files available on the p2p network.
I think I'll call it Kazaa.
This may make RIAA extinct, but there's no revenue stream for musicians, and it's worse than Napster/KaZaA as presumably all the titles will be perfectly ripped and organised, thus providing even less incentive for people to go out and buy.
Coupled with the dismissive "Oh, it only takes $500 per hour to do a recording", and with profits being skimmed to support the pyramid scheme, Cringely sounds like one of these guys who think the cost of the average recording looks like this:
1. CD and box, 10 cents
2. ???
$19.90. Profit!!!
2. Not relevant, you're already out of business from 1.
3. "Would it replace a sale" is a shorthand way of saying, "would you normally need to buy it to do what you're doing?" The relevant law is 17 U.S.C. 107, "Limitations on exclusive rights: Fair use":
I'd say his idea is a slam dunk not-fair-use under section four, as (he freely admits) it would "destroy the potential market for...the copyrighted work." Not fair use, not legal, not a good business idea.
None of this, of course, is trying to make any argument about what the law should be. But these questions aren't hard under the law now, and they're very obviously not legal under the law now. Anyone who tries this is going to get eaten for breakfast by the major labels (and the minor ones, too - they sued mp3.com pretty hard as well).
Uhhh, no? Otherwise why wouldn't you just buy 1 share of Sony and AOL-Time-Warner, etc.? If that argument held any water at all you'd be legally able to download any song you wanted by a company you had a share in.
If I own part of a corporation, and that corporation owns a recording, do I not have rights to that recording?
The best way to look at it is that music is similar to software. If you own a copy, you have a right to make a backup. I own a CD, I can back it up to my computer or mp3 player.
Fair use dictates that the copy is for personal use only. I can listen to my stereo, my computer, or my mp3 player, but I only listen to them one at a time. If I copy it to someone else's device so they can listen simultaneously, it goes beyond "fair use."
If I have a copy of Photoshop, I can only use it on one computer at a time. Same for a corporation. Even if all your emplyees were shareholders, you couldn't buy just one copy of Photoshop and copy it to ALL their computers -- even if they all technically "own" it. It's simply NOT legal.
Cringely's scheme is quite lamebrained...
MP3.com owned 300,000 CDs, but the usership of MP3.com was not limited to MP3.com. I'm not saying that Cringely's idea would work, only that the MP3.com involves different legal issues.
The naysayers to this idea forget that the _critical_ component of this plan is that it must IMMEDIATELY go public. It also must limit downloads to owners (shareholders) ONLY. While the cost of going public may be significant, there is not necessarily a need to bring in investment bankers and join the NASDAQ or NYSE... The press would likely provide the marketing for free on the nightly news (due to the sheer audacity of the idea), and the employees of the business could probably sell the shares via telephone. "limit one share per customer"! (or something).
The real problem here is that by sharing the backup or shifted assets of the company among the owners in this way, IF a court later decides the idea is illegal, they (the RIAA) might then seek to recover directly from the owners... Usually by being a corporate entity, this kind of thing is avoided, but since the corporation is distributing it's assets directly to the owners, who can say.
Concerns that users may share their downloads with their non-owner friends are baseless. TODAY, even without this company, people MAY record things from TV and share it with their friends... and TV and radio are legal last I checked.
One final note. In the end, the legality of this plan would not matter. Unless stopped quickly by injunction, Current RIAA distribution methods would become obsolete technically (ok, ok, they are already technically obsolete), and practically. If this became widespread, digital distribution would be the only comercially viable alternative. The distributors would have to change or declare bankruptcy in short order. This company would need to be able to drag out any court proceedings... basically, they'd need to take a page out of Micro$oft'$ playbook. A delay of two to three years is all that is needed...
There will always be a small market for physical distribution, but the days of monopoly-via-artificial-scarsity-of-media would end. And wouldn't that be nice?
Strictly speaking, this is only if the corporation is that modern beast of commerce, the Limited Liability Corporation. You can certainly have -- and indeed, prior to the railroads, often did have -- wholly owned companies which were not LLCs. Of course, no sane investor would ever buy into Snapster if it weren't an LLC, since then the RIAA would be able to sue for that investor's personal wealth as well as that of the company.
Hmmm. I wonder if that could be a way around the ridiculous lawsuits? Incorporate yourself, then file-share as the corporation. Then.... profit!
The Mongrel Dogs Who Teach
Property rights, communal rights, performance rights, and copyright do not map one to one. A corporation cannot buy one copy of a book and then send a photo-copy to all its stockholders. A corporation can't take a hit song, buy the CD, make it the corporate anthem, and play it at company events without charge.
At best, it can behave like a library: offer the book up, and let one stockholder at a time read it. If the one-at-time method is implemented via electronic downloading of the data, the copyright holder probably has a good claim that the whole system is designed to facilitate infringment.
The reason everybody is so riled up about this is that it flips the burden of proof onto the accused. The RIAA can subpeona anyone they want, then file a lawsuit against that person. That person will probably be contacted by the RIAA prior to going to court and offered the following choice: settle for less than a lawyer would cost, or go to court and run the risk of having to pay enormous damages, plus a guaranteed huge lawyer bill. Whether this person has done anything wrong is irrelevant. The RIAA has become an Enforcement Agency.
If we had no prisons, but instead all of our criminal punishments were monetary in nature, then there would be no difference between the RIAA and the police.
While the "stealing" of music is illegal and violates copyright laws, why is the RIAA using so much time and resources to elimate this? Is the pirating of mp3's an immediate threat to national security? I would really like to see an UNBIASED source of information regarding exacly how much revenue the artists and record labels are losing as a result of music pirating. In my opinion, this is only giving more reason for people to come up with better/faster/more secure ways around the system...
Uhhh, no? Otherwise why wouldn't you just buy 1 share of Sony and AOL-Time-Warner, etc.? If that argument held any water at all you'd be legally able to download any song you wanted by a company you had a share in.
Sorry, that doesn't work, either. It's up to the rest of the stockholders to decide whether or not you have access to the corporations assets and secrets. However, what Cringely is talking about is one where the corporation DOES grant these rights. The problem is I don't think the corporation has the power to grant these rights in the first place, so the point is moot.
We don't have a state-run media we have a media-run state.
The critical difference between CleanFilms and Cringley's stupid idea is that CleanFilms has that 1 to 1 ratio thing going.
For each movie they give to a customer/"co-owner", they've purchased one DVD from the publisher.
Cringley's plan is to somehow achieve a 1:200000 ratio. Buy one copy of each CD, and somehow let multiple shareholders play several of them at the same time.
That's just illegal. One entity (single person, or a corporation) is allowed to buy a CD and make backup copies. But if you play more than 1 of those at a time, you're breaking the law- because playing it isn't a "backup" use.
Cringley's idea is as dumb as suggesting Merril Lynch can buy one copy of Microsoft(tm) Windows XP(r) and install it on 9000 PCs, because they're all property of 1 corporation.
So tell us, how long have you been involved with Amway?
This is a pyramid scheme. The problem is, it only works as long people are buying into the bottom. While I agree that there are lots of alternative ways to sell music, this isn't one of them.
If I'm Joe Indie, why would I want to let someone else take half the profit for "distributing" my music (which amounts to keeping it on their hard drive and running Kazaa or whatever), when I could do the same thing myself and get all of the profit?
In fact, that's why Justin designed Gnutella the way he did - no company in the middle. I am of the opinion, however, that decentralized P2P will, long term, only be used for things that are illegal. It's inefficient by definition compared to a backbone network. Recent attempts to make distributed P2P be more like a backbone network come dangerously close to making the network attackable, I think. True anonymity (freenet) under the current Internet must be more expensive than traceability. As long as this is true, anonymous P2P will only be used for things where anonymity is more important than efficiency - i.e., for illegal things like piracy.
But, once you get into morality I think the tradition in US copyright is that piracy isn't immoral (whatever the RIAA would tell you aside). The Constitution's enshrinement of intellectual property was controversial at the time and is entirely pragmatic: It is "for the advancement of the useful arts and sciences," not because copyright owners have some moral right to control their works. Tonight I've merely been discussing what the law is. I've made no assertions about what it should be.
Well, you asked, and after being slashdotted you probably are getting a lot of answers, but I do see a snag or two in your plan. Bear with me... I tried to be concise, but my response ended up being almost as long as your article.
Under the current system, artists depend on a big, evil record company to not only get their albums made, but to get them marketed. Okay, most artists get screwed by this deal, but the most popular acts eventually start making money when the big, evil record company sells enough CD's.
Under your proposal, any artist, with or without a label, would sell exactly one CD to, well, the entire world, because people would be crazy to not participate in "Snapster" if it exists.
So how in the heck does any artist make direct money off an album? A small percentage of 2 Million sales is certainly a better deal than 100% of one sale.
If such a company were to exist, recorded music would be released for the sole purpose of marketing the band, who hopes to make their cash via concerts. (Unless I'm mistaken, Phish pretty much already lives this way, cranking out lots of low-selling albums to drive ticket and t-shirt sales at their shows.)
So long as a CD costs $15, it's folly to think that lots of good albums will continue to be released in such an environment. What will probably happen is albums by established bands, such as U2 or Jewel will suddenly cost $10,000,000 per CD (or more), and albums by bands who are not established will be worth what Snapster is willing to pay (nothing).
Stay with me now, I don't think my conclusions are over-reaching just yet...
The only way to raise the price that Snapster will pay for your albums is by "getting established." The only way most bands will be able to do that is... big shock here... sign a contract with a big, evil record label (now a "marketing service") who is entitled by the contract terms to something like 95% of the sale (not sales, sale) of each CD the band releases under the contract.
Since these big, evil companies will be hungry (something like 40% of their business model is in back-catalog sales, which Snapster will have already erased.) They can then take the following steps to restore as much of their lost profits as they can:
1. Jack up the price of the individual album, including back-catalog disks.
2. Form their own Snapster.
3. Stop selling albums. Completely. If you are not a member of the big, evil labels' version of Snapster, you can't hear the new Avril CD. Instead of being a record sales company, or a music marketing company, they will be in the business of owning content which is not for sale, but is streamed exclusively to their shareholders for a fee.
4. Wait for your Snapster company to die on the vine.
5. Jack up the shareholder download price to the point that it's just as expensive to download as it was to buy CD's.
The only way to stop this would be to claim that Evil Snapster is in violation of anti-trust law. Apart from Standard Oil and Bell, how often does a company lose one of those!? Besides, what politician is going to want to bust up a company when it's partly owned by almost every single American who listens to music?
Information wants to be anthropomorphized.
>Bottom line. Music is *for sale* and if you want
>it, you must pay for it.
No, there are many ways to get or listen to music without paying (and yes, I am talking about music that still has a copyright on them). I can for example go to a friends home and listen to his music. I can turn on the radio and listen to the music. I can record music of the radio. I can (at least in Sweden), get a copy of music from a friend (since such music is allowed according to our copyright law, at least for now) and so on.
There are many other ways as well where I don't have to pay for music I want that are all according to the law and does not infringe upon copyright. Of course, big content providers typically want you to believe otherwise and some press tend to jump onto that and write such things too, but that does not make it that way, fortunately.
Let's say you and a friend go to the store to buy CDs. Getting there both of you discover that neither one has enough money alone to buy the CD they want, so you pool your money to buy the CD.
Now who has ownership of the CD? I'd say you now have shared ownership of the property. Could both of you make a copy for backup, probably. Could both of you transfer the music to MP3, yes, however my understanding of the law would say that the mp3 copies of the song could not be used at the same time. There is the problem.
Otherwise Blockbuster could make DVD copies of all there VHS tapes and form a a mini-partership which would allow all parterns to have unfettered access to the material.
I think Cringley is onto something though, morph his idea into a music rental system, similar to Blockbuster. Form a company, buy CDs (you'll need multiple copies of popular CDs) and offer streaming access to that music though a subscription service.
However the max amount of people who can listen to the same song at the same time is limited to the number of copies of the song that have been purchased. Example you buy 10 copies of CD "X" you can now offer out 10 streams of each song on CD "X", if an 11th person wanted to listen to that song they would need to be queued.
Would probably be legaly viable now would it be practical from a business view.
I have no
Very, very good point, and something that Cringely misses in his article. On possible solution :
Cringely states : "Each share also carries the right to download backup or media-shifting copies for $0.05 per song or $0.50 per CD, that download coming from a separate company we'll call Snapster Download that is 100 percent owned by Snapster."
Why not double this to $0.10 per song, $1.00 per CD and split half with Snapster and half with the artist. Snapster would still have the revenue needed to run, and the artists would make more than they do now. Databases could be built to also make sure that song and lyric writers get a cut. Since each successful download would be logged, each artist would get what they actually earned instead of going by popularity ala ASCAP. Britney would only get what she earned while the independent band who cut a CD and got it on Snapster would actually get a check! This would keep the production of new music viable, and perhaps even more profitable for Musicians, while reducing the end price of music -- a win/win situation.
Beware of Sleestak