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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.
...the retail price of a CD jumps from $18.99 to $1899.
Those who can, do. Those who can't, write technology blogs.
Didn't my.mp3.com get in trouble even though they owned one CD of all the albums they were electronically distributing? And the judge still declared that illegal...
Essentially they operate as a co-operative. On the surface, it is the same as paying a membership fee - but on paper it is a different story (i.e. Snapster would be just like Napster on the surface, but largely different on paper).
Here's a snip from their about page:
..mork
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"
Right. But the people they distributed to were not shareholders of the company. That's the point here.
It's a funny idea, but ultimately it's a silly one. It's the surest cause for the legislators to take away fair use, or change it so it's not so fair.
Constitutional rights may be respected, repealed, or modified; but they must never be ignored.
There is no such thing as fair use. Just ask the RIAA.
;)
You got that right, they definitely put the "F-U" in Fair Use!
Join the TWIT army now!
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.
This idea is very flawed. A much better idea would be a netflix type CD rental, except they keep the CD in escrow for you and you own it rather than rent it. CDs could be bought or sold on the open 'virtual' market. You only get remote access to it. If you want physical access you pay for shipping. That remote access can be in a number of fomats from ISO,WAV,MP3 etc.
Once you have owned the CD for a day, sell it to someone else and erase your fair use copy. Next time you want to listen to it buy it again and sell it again.
Just like Cringely send some of those IPO shares to http://www.pcast.com.
Brad.
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.
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!
I can see it now, Snapster starts up, buys a few CDs, and all of a sudden every new CD that is bought comes with a draconian Microsoft-style license which explictly states that you may not play the CD on more than one audio system at a time, without the express written consent of the RIAA, which comes only comes with an unrealistic royalty fee. If you don't like it, you can return the CD to the record store. Or, not.
Unfortunately, it's going to be a long struggle before the Record Industry is forced to submit to the fact that recorded music is becoming an economic public good -- because of pratically infinite distribution (at the cost of bandwidth and storage), the good has become non-rivalrous. This does not mean music will disappear, but it does mean that it will not be profitable for a music company to distribute CDs.
Once the RIAA is forced to accept that, and takes the huge accompanying profit cut, their real business will be the promotion and distribution of the music itself -- it will lower its overhead by allowing P2P-style downloads (let the consumers give up their bandwidth), and will profit by sponsoring artists tours.
The downside is that record stores will, for the most part, go out of business. Were that there was another way to save our slave-wage friends who are knowledgable, but in every war, there are casualties.
But sorry, Cringely -- Snapster won't work for long. The fight for free music will be much longer than we hope.
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.
It probably (almost certainly, but IANAL) wouldn't work.
Remember, the corporation and its shareholders are legally separate entities. Thus the shareholders don't own the music (or any rights to it, more properly); they own a company which owns the rights to the music. And since it's doubtful that the RIAA grants a right to rent the music (first sale would not cover renting), the corporation doesn't have the ability to give its shareholders its rights.
In theory, you could do something within the confines of first-sale; it could be implemented as follows:
However, there are kinks in that plan; first, it's doubtful that files made by fair-use rights could be incorporated into this (fair-use as it's been understood by the courts only extends to personal copying; as soon as it's transferred, any legitimacy conferred by fair-use is lost). However, files downloaded without taking advantage of fair-use (iTMS for instance) would not have this issue. Then there's the final requirement; in order to qualify for a first-sale defense, the file would have to be deleted from the server after being transferred. This is somewhat difficult to accomplish, even if you could DRM stuff. However, perhaps copying the file which you obtained through this system to another location would be fair-use (and the system might even employ a hash database to prevent further transfers).
Back to the topic. Even if the corporation could rent/sell it to its shareholders, some portion of the actual value of the data would likely be counted as a dividend, or at least income, for the shareholder, who may end up paying taxes on it.
The doctrine of fair use was originally adopted by judges ruling in early copyright cases. Ultimately, Congress incorporated the doctrine into the Copyright Act of 1976, where fair use is now codified at Section 107 of Title 17 of the U.S. Code. In creating section 107, Congress listed four factors to be considered in determining whether a use is fair or not:
(1) the purpose and character of the use, including whether the use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or value of the copyrighted work.
These factors are essentially the same factors that had been used over the years by judges, and Congress's stated intent was to preserve the fair use doctrine as it had evolved. However, as many courts have pointed out over the years, whether something constitutes fair use is very fact-specific. It is difficult to craft a clear, bright-line rule that explains which particular uses of a work are fair use and which are infringement. In short, the exact parameters of fair use are often determined based on the facts of specific cases.
Just from a quick look Cringely's idea, while novel, seems to violate several of the 4 criteria. This would be copyright infringement for comercial gain on a massive scale. No way any judge would believe that this falls under the intent of fair use.
When you lose something irreplaceable, you don't mourn for the thing you lost, you mourn for yourself. - Harpo Marx
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...
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).
>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.
Your ignorance is equally breathtaking.
Cost to incorporate (where I live): $403.30
Cost to put your corporation on a penny stock market: Minimal (free? I'm not sure).
Amount of bookeeping required: Almost none, short of dealing with taxes. ZERO SEC requires, that's for sure.
You think such a corporation has to be Nasdaq listed or something? At best you might need to hire 1 accountant to get going. Big deal.
By the way, I'm incorporated. Want to buy shares? Well, I'm not selling right now, but the effort required by me is none. The only thing I'd have to send you is a paper saying how much stock you've bought, and get the accountant to record your purchase in the books. I never have to speak with you again, if I didn't want to. Total cost to me? About $0.10 if you include the price of the toilet paper your stock would be printed on along with the accountant's fee (assuming he enters everything in all together when closing the books at the end of the year, like with my corporation).
Here's a few examples that might be helpful to you. How many of them do you think are going to give out shareholder's packages every year? 2... maybe 3?
If you could be told what you can see or read, then it follows that you could be told what to say or think - BoC
Ownership is not transitive (at least in this sense). The assets of the corporation and the assets of the shareholders are separate (though the shares of the corporation are assets of the shareholders). Part of the definition of a corporation is that it is a separate entity from its shareholders.
"Snapster is built on the legal concept of Fair Use, which allows people who purchase records, tapes, and CDs to make copies for backup and for moving the content to other media", says Cringely.
Baloney! That is not at all what Fair Use is. I am not sure what "lawyer friends" he spoke to, but if he bothered to read any of the Fair Use links on his own page, he might have thought twice about publishing this article. Fair use is what I did in the previous paragraph, quoting Cringely for purposes of criticism. It's always about partial copying of a work, and only for very specific enumerated purposes that are listed in the US copyright law (Title 17). Please see the actual law at http://www.copyright.gov/title17/92chap1.html#107 if you don't believe me. It's quite an easy read. It discusses what is an infringement, and then lists exceptions, one of which is Fair Use (which is not the process Cringely describes).
Also, I believe media shifting is an entirely different topic. I am not sure where this exception to copyright infringement comes from (IANAL, but I don't see it in title 17. Can anybody post references to the legality of media shifting?). But the one thing I do know is that all the cases I have heard of it being legal have one thing in common: the use does not increase the number of copies being accessed simultaneously. When you make a backup of your media, you're not watching/listening to it at the same time as the original, or letting a friend do so.
1) Buy one share of any RIAA member company.
2) Taking your share certificate with you, walk into their corporate headquarters with a CD burner, and demand to be allowed to make a copy of the IP you "own".
3) Be sure to bring ear plugs, as the laughter may exceed safe decibel levels!
"Freedom means freedom for everybody" -- Dick Cheney
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?
No, your Honor. I did not pay this woman for sex. I bought a share into the corporation that she is married to.
I'm an American. I love this country and the freedoms that we used to have.
I think mp3.com's idea was a good one. I was head of technology for EMusic, and I had the exact same idea before they announced theirs. Thankfully, our legal counsel was better than theirs (or more listened to by us) and he said, "What, are you insanse? As soon as you make the copies, you've broken the law!" It makes sense to the tech mind from an outcome perspective. Ironically the service itself seems to meet the fair use tests I describe above - it doesn't replace a sale, since we know you have it. Unfortunately, it's very clearly against the law. As soon as mp3.com announced their service I knew it was the end of their company as a seperate entity.
As I understand the mp3.com situation - and EMusic got bought by Vivendi and our tech got merged with theirs, so I've been down there a number of times and talked to a lot of people involved, and read the court decisions, etc. - what they got in trouble for was making the initial copy needed to compress the CDs to mp3 format. That's it.
The logic of the court is, basically, whatever mp3.com is doing is by definition for profit. If you're doing something for profit, it's by definition not fair use. The point of copyright law is to ensure that, if you make money off copying a copyrighted work, the copyright owner gets paid.
So, while it would be perfectly legal for you as an individual to copy those CDs, compress them and stream them to yourself, because mp3.com did it for you for their own profit, it's clear copyright violation.
It is exactly the same way that you can photocopy a book yourself in your home and it's fair use, but if you pay Kinko's to do it for you it's a copyright violation. On the surface it seems the same and it seems fair that you be able to pay Kinko's to save you the effort and investment of a photocopier, but the whole point of copyright law is that Kinko's can't copy works without paying the copyright owner.
People can rail against this as being cretinous, but I don't see how the current idea of copyright can continue without the law being like this. If you think copyright should exist at all (leaving aside questions like the lunacy of the DMCA's anti-circumvention provisions), then I don't see how the law could be any other than this and still work.
Obviously not everyone thinks there should be copyright, at all, but that's a different issue entirely.
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.
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?
Which leaves us "renting" the CD through the mail. Ever wonder why you never see CD rental places in the US? Why there's not a "nettunz" to go with "netflix?" It's because they're illegal. According to USC Title 17, Section 109, "Limitations on exclusive rights: Effect of transfer of particular copy or phonorecord":
The edits are necessary for clarity because this section also has a lot of cumbersome language about software; go read the original if you doubt my interpretation. Why can actual libraries get away with it? Because the next sentence says, "Nothing in the preceding sentence shall apply to the rental, lease, or lending of a phonorecord for nonprofit purposes by a nonprofit library or nonprofit educational institution."
So, could you set up a nonprofit corporation to do this? I guess so, although it'd face all the normal challenges a nonprofit does in trying to find the money to build its collection. And, your strongly implied personal copy before return would itself be illegal. If it were used pretty much only for this purpose, and got big enough, I bet the RIAA would try to claim that the nonprofit should know there's monkey business going on and try to shut it down. Whether they could would be up to the courts.
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.
Not being a lawyer, I found Cringely's idea very imaginative and stimulating. Other readers have mentioned possible legal flaws, but I think the scheme has an even bigger problem: it ignores the fact that we really don't need a music downloading business. Of any kind. The recording industry might need one, but musicians don't need one and the public certainly doesn't. The idea that anybody has to make money distributing individual copies of songs is an artifact we can afford to lose.
In an editorial mentioned on Slashdot a couple days ago, Doc Searls said something about television that I think is highly relevant: that it is a mistake to think of television shows as products and viewers as customers. Searls points out that the television industry makes its money selling eyeballs to advertisers. Shows aren't the product, they are merely bait that converts ordinary people into ad absorbers who might buy products later.
Likewise, from a musician's viewpoint, recordings are a way to convert people into future concert ticket buyers. It's been pointed out abundantly on Slashdot and elsewhere that musicians make money by performing, not by CD sales. What musicians get out of distribution (of any sort) is the fame that generates better gigs. For some reason everybody seems to have a hard time letting go of the idea that somebody has to make money selling copies of songs.
Try looking at it this way. The recording industry is in the position television set manufacturers could have been in if they had thought of building tv's like pay phones, collecting the coins, dictating which shows could be broadcast and demanding most of the rights. If that were the case, television set makers would now be right in the middle of the fray over video file swapping, claiming to be losing money with every download, probably also claiming to be protecting the creative artists who produce the shows (but who get none of the coins), and perhaps suing everybody like the RIAA is doing.
Obviously all that is unnecessary and sounds ridiculous, but it might not seem so if we were used to it. After a century of constantly feeding quarters into televisions, it might well seem like something was morally wrong unless someone was getting paid whenever a show was viewed.
There is in place right now plenty of infrastructure to freely distribute the songs of anybody who wants their songs distributed. What musicians and the public get from this technology is a way to eliminate the filtering imposed by the music business, do the distribution automatically, get the exposure for free and let the public pick the winners. Replacing the recording industry with a different middleman is completely unnecessary.