What’s Still Wrong With ISP Music Licensing? The Latest Victim is the Songwriters Association of Canada

[Here’s a blast from the past on a bad idea that just won’t die.  Digital Music News has a story today about Verizon offering to pay “the music industry” $1 a month for each Internet subscriber, an idea that was floated by Berkman Center professor, ivory tower music rethinker and Lawrence Lester Lessig buddy Terry Fisher in his book Promises to Keep.  Unfortunately, like many ideas from Big Tech funded professors who want to “fix” the music industry, it’s all hat and no cowboy primarily designed to legalize piracy without changing behavior.  A typical goal of professors who want both to be popular with students and keep sucking on the teat of government funding.  But that didn’t stop it from getting traction with even some well-meaning people.  

Originally posted nearly five years ago to the day on Sept. 27, 2010, this post critiques the then-latest version of the story promoted by the Songwriter Association of Canada.  I would not be surprised to see the idea get discussed yet again at the upcoming Rethink Music conference.  You may also want to read a 2008 article I wrote with Amy Mitchell for the American Bar Association Entertainment & Sports Lawyer called “What’s Wrong with ISP Music Licensing?”  As noted in this post, I gave a lecture about the subject at Osgoode Hall law school in Toronto which I think is still available online if you’re really, really interested!  I would note in passing that none of these ideas ever gained traction whether it was the commercial idea that Terry Fisher was selling, the stillborn Choruss, the Isle of Wight’s close encounter, or this one by the SAC.  Note that what was really underlying the ISP side of the thinking was to legalize piracy.

Why is this resurfacing now?  Perhaps Google is getting the message that processing dozens of DMCA takedown notices per minute might look to some–perhaps even some in the Congress–like a design defect and not a feature set.]

The Songwriters Association of Canada is the latest victim of the yearning to find a solution to massive online theft. Unlike some who circulate disinformation on this subject, I gladly accept the SAC’s bona fides of sincerity on this subject (and those of the SAC President, Eddie Schwartz.) Unfortunately, sincerity does not make SAC any less wrong.

Canadian songwriters are certainly free to adopt any law they like for Canadian works exploited in Canada. Unfortunately, the SAC proposal is for online uses—and takes no precautions for works by international artists who can’t vote on the Canadian law, but whose works would be subject to it nonetheless.

Where is Bernie Madoff When You Need Him?

The biggest problem with the idea is very simple. It is predicated upon each user paying a flat fee. That flat fee is divided up amongst an increasing number of works or rights holders as there are constantly new works being released every year—even if you live in a perfect Lessig world of regurgitated art, the regurgitations themselves will be new.

This means that the share of the collections will likely decline every year with each creator getting paid less and less over time. That is, unless the number of users paying the monthly fee increases at a greater rate than the number of works—forever. If this sounds like a Ponzi scheme, you are not far off.

Even if all the assumptions could be satisfied and even if creators didn’t mind trading a market solution for an ever decreasing share of a pie, it should be clear where you want to be in the calculation—you either want to be an ISP (who will whack their bit off the top) or the collecting society (which will whack its bit off after the ISP). Nobody—and I mean nobody—would want to be the creator.

It is clear that going straight to a compulsory government mandated solution without even trying to implement a SNOCAP-type solution will never solve the basic problem—no reliable information is being produced and no auditable paper trail exists. All the creators (ALL—including movies, games, etc.) would have to blindly trust the system because there is no reliable proxy that isn’t just a wild guess and is itself not auditable unlike tracking audio fingerprints.

I don’t doubt that Eddie Schwartz is a good person and wants to see creators get paid. But he must not have thought much about this since we were on a panel together in 2007 at Canadian Music Week when I raised all these same points for which he had no answer then and doesn’t now.

So while I don’t question Eddie’s motives, I do wonder if he’s really thought this thing through. I also wonder who in the world he has been talking to. Because what he’s asking for is a guarantee that all creators will end up working for The Man 2.0.

What’s Wrong the SAC Proposal

So consider these specific comments on the SAC proposal:

The Songwriters Association of Canada has its own version of the EFF proposal which is kind of a combination of voluntary and compulsory, heavy on the compulsory:

1. New Right: SAC proposes to amend the Canadian Copyright Act to create a “Right to Remuneration for Music File Sharing”.

First of all, nothing in the SAC proposal limits this “right” to Canadian works. It seems pretty obvious that if Canadians want to do something with Canadian works in Canada, then more power to them. However, since this new “right” is by definition an Internet based distribution model, it does not appear that SAC intends to have the “right” apply to Canadians only.

And even if they did, how would anyone be able to distinguish one from the other?Second, there already is a “right to remuneration”, it’s called a price. The problem isn’t that there isn’t a right, and the problem isn’t that no one knows what to pay, the problem is that millions of people ignore the rights because they don’t want to pay—just like they will keep on doing until someone tells them otherwise.

Third, why would it just be limited to music? Why not every work that is stolen? Would SAC like to explain to ACTRA why it is that their actors rights aren’t as important as songwriters? Or explain to John Degen why his rights are not? Or James Cameron or Ivan Reitman? Shall I go on?

2. The Fallacy of Composition: The SAC proposal defines “file sharing” as “the sharing of a copy of a copyrighted musical work without motive of financial gain”. Set aside the fact that “sharing” is more accurately described as “bartering” (usually a taxable event a la swap meets), the “financial gain” is occurring at the company level, not necessarily the user level. Meaning that IsoHunt, Megaupload, Rapidshare sell advertising that is not directly connected to the massive download of unlicensed content. The SAC proposal apparently would give IsoHunt, Megavideo or The Pirate Bay at the company level the same defenses that SAC attributes to their users.

That is, SAC infers from the fact that every part of a whole has a given property that the whole also has that property. This is called the fallacy of composition.Aside from the fact that the proposition is itself fallacious it’s also just a little hard to understand. How in the world would anyone know what the “motive” of millions of people is? I’d say that their motive is not to pay for their music, movies, games or anything else they can get their paws on.

I have to confess I do love this line (reminiscent of Lessig’s “hybrid economy”): “[Because of the motivation of file “sharers”] this new right is distinct from rights licensed by legal music sites like iTunes and PureTracks….The new right would cover the sharing of music, between two or more parties, using any technology.”Nice try. The use is entirely commercial at the company level, and in my view it’s also commercial barter at the user level.

3. Voluntary Payment: SAC wants to have someone—presumably the ISP—allow its users to opt out of the remuneration payment if the user says they won’t file “share”. But if the user is “caught” file sharing they’ll pay a predetermined fine if they are caught. So—who’s going to do the catching, who’s going to issue the contract, and who’s going to enforce it? The ISP? Really? Think again.I like this part, especially: “Payment of this fee would remove the stigma of illegality from file sharing. In addition, it would represent excellent value to the consumer, since this fee would grant access to the majority of the world’s repertoire of music.” And so how is it that the authors of the world’s repertoire of music got to be part of this negotiation? Answer? They didn’t.

SAC’s response: “Creators or other persons entitled by this system to claim a portion of the licensing fees but who nevertheless do not wish to be compensated under such a system could similarly opt out. Acceptance of license fees would amount to a waiver of the right to sue for the unauthorized transmission by Canadian users.”

So if you don’t take the money for the deal that you never agreed to…you can still sue?

According to SAC: “This scheme would present a major financial improvement for the music industry. Since the license fee would be paid by most internet and wireless accounts, the amount of income generated annually could adequately compensate the industry for years of declining sales and lost revenues, and would dramatically enhance current legal digital music income. Sales of physical product would continue to earn substantial amounts, albeit gradually decreasing. Masters would continue to be licensed to movies and television. Radio would continue to sell advertising and pay royalties on music.”

There is absolutely no evidence that “most accounts” would pay anything voluntarily.

4. Global Solution: “We believe strongly that by giving Canadian music Creators a solid business model for the 21st century, this endeavor would initiate a golden era for music in Canada. Ultimately, we see this model being adopted internationally, and we are working with Creators groups around the world to effect a global system of remuneration for the sharing of music files.”That’s great—for Canadians who get to vote on the proposal. When SAC is able to block access to the works of those who do not want to participate, that would truly be the dawn of a “golden era”, albeit not for the reasons given. I wonder what “creator groups” SAC is talking about—presumably Creative Commons Corporation.

“Though fears have been expressed that this new system would “cannibalize” existing businesses like iTunes there is no proof of that. In fact there are studies that have found the opposite to be true.” The study that SAC cites in support of this absurd position actually was the British Music Rights survey that used a sample of 14-24 year olds and their preparedness to pay for music. Nothing to do with this scenario.

5. Endless Adminisration Fees: And this is my favorite part: “ISPs would receive an administrative fee for collecting and remitting license fees to the appropriate collective(s).” Ah. So the ISP will take their whack, the “collective(s)” will take their whack—I suspect that the ISPs bit is going to be similar to what the DSPs take on ringtones.

“As file sharing becomes a legal activity, ISPs would fill their servers with clean great sounding versions of all the popular socially distributed tracks keeping much of the activity within their own networks thereby drastically reducing expensive bandwidth demands. This would mean millions of dollars in savings for ISPs.”

Say what? How exactly does that work? Who would provide these “clean great sounding versions”? Who would pay for the copies and who would host them?

6. Accounting: “The collective would be responsible for tracking vast amounts of internet and mobile file sharing activity as well as distributing royalties to creators and rights holders. Tracking could be outsourced to one of the companies that currently does this work.” Exactly how does this work? Magic? Tracking mobile file sharing? What companies “currently” do this work? Whatever it is that SAC has in mind, this step is THE MOST important part of the whole process and as usual GETS THE LEAST ATTENTION.

That’s because they don’t have a solution.

What Is the Solution?

The problem of file-barter is not something for which there is a silver bullet solution and will die the death of 1000 cuts. We also have to accept the idea that there has never been a time in the creative industries that was 100% pirate free–there’s a market clearing level of piracy that we have to accept. Having said that, the answer that you can’t stop all piracy is not a reason to stop what you can.

But there are some concrete steps that can be taken to improve the likelihood of success for creators.

1. Prohibit Trading with Pirates

Companies like Google, i.e., otherwise legitimate companies especially those who trade on public stock exchanges, should not be allowed to sell advertising on pirate websites. How would you know a website is a pirate website? Easy–ask those people who you supposedly want to do business with in the entertainment industries if they’ve licensed Megavideo or LimeWire.

Companies like PayPal, Visa and Mastercard should not offer credit card merchant accounts to these people either.

These changes require law enforcement agencies to seize advertising, credit card and PayPal accounts of thieves and those who support them, as well as prosecute both pirates and employees of otherwise “legitimate” companies who give them succor.

Will that stop thieves? No, but it will make it very much harder to operate as it did in the case of allofmp3.com absent government help.

2. Permit ISPs to Kick Pirates Off Their Network

Offer ISPs a safe harbor to never let these people on in the first place or to terminate them once they are discovered. I got your safe harbor right here.

3. Endorse Graduated Response

Although I don’t endorse disconnection as a punishment for individual users, I do think that a graduated response program should be available as well as a HADOPI style regime to bring the government’s resources to bear on bad actors.

I would prefer to see network operators charge users who upload the full unsubsidized rate for bandwidth usage, and heavy downloaders get substantially degraded service. (But see 2–the real solution is to avoid letting the pirates on the network at all.)

If these three tools were available, we could begin to build the rules in the market place for the digital society that would permit ideas like SAC’s to flourish.

4. Best Practices

ISPs and other legitimate companies should work with the government and stakeholders to determine a set of voluntary best practices for network management and the development of services and business models along with the network infrastructure to support them.

I gave a talk at Osgoode Hall in Toronto last year that covered much of this ground and offered a few other solutions. I’ve tried to keep this list of potential solutions shorter after having had another year to think about it and another year of experience in the space. I don’t necessarily reject anything I said last year, but I’m more convinced than ever that (a) the criminal enforcement arm of the government is necessary to go after the commercial operators (so I agree with John Morton’s approach at ICE), and (b) ISP cooperation is essential.

I do think that at long last there is the political will in the US to accomplish these four things in no small part due to the efforts of AFTRA, the AFM and the AFL-CIO, Vice President Biden, Senators Leahy and Hatch, Congressmen Conyers and Berman, and IPEC Victoria Espinel.

6 thoughts on “What’s Still Wrong With ISP Music Licensing? The Latest Victim is the Songwriters Association of Canada

  1. Many thanks for your commentary Chris. I am happy to address every point you raise and welcome the discussion. The first place to start is to refer you to an already existing business model whose revenues are up 40% at the same time record labels are down 50% or more, and that is performing royalties. Our model is based to a large extent on the way performing royalties have been collected and distributed in Canada and around the world for many decades. SOCAN now distributes something in the order of $250 million dollars a year to music creators and publishers. Much of the methodology that has been applied to broadcast royalties could be applied to music file-sharing revenues. Administration costs are in the order of 15%. Also, half the board of directors of SOCAN are composers and songwriters who are very involved in making sure the system is well run and fair to creators and right holders.Allow me to point out that the PRO model I outline above has never been applied to movies or other media who, thanks to netflix, the ipad, the Kindle, etc etc, are developing their own different responses to the challenges of the digital age.Finally there is evidence that the vast majority of file-sharers would pay a reasonable monthly fee. The University of Hertfordshire study in 2009 of file-sharers concluded that 80% of those who file-share would welcome an authorized paid way of doing so. We estimate that our model would generate $350 million in Canada alone.Thanks againEddie Schwartz


  2. Eddie, I'm very flattered that you read the piece and also took the time to reply which I greatly appreciate. I want to emphasize again that I believe you are truly trying to find a solution.I accept that the model is inspired by the PROs. I also accept and even share your aspiration that a PRO-type model could be replicated online.What I know from experience, however, makes me very critical of these kinds of ideas.First and foremost, I think that simple fairness (if not international law) would compel you to offer non-Canadians the ability to opt-in, not opt-out. Meaning that works by authors not subject to Canadian national treatment should not be used until the owner tracks down the use and makes it unauthorized.An opt-out solution is almost exactly what Google sought to accomplish in the Google Books settlement that attracted the ire of several COUNTRIES, much less tens of thousands of authors.But talking about opting in or out of a registry is a walk in the park compared to opting in or out of a file barter situation or cyberlocker/pirate advertising supported situation.Until there is a significant change in the way that governments permit these illegal operations to function online (which could begin to be accomplished through international agreements such as ACTA), it is effectively impossible, and therefore I would say that it is impossible, to offer non-Canadians the ability to block their works.Therefore it is essentially impossible for the SAC proposal to offer songwriters the ability to be excluded from anything except the payment of money. And that's like saying we won't protect you and you can volunteer not to be paid if we ever get any money.Leaving aside the essential unfairness of it all, comparing the barter community to the network of licenses that underpin PROs is particularly inapt. For reference–look at what it took to get HADOPI passed in France and the Digital Economy Act passed in the UK. These laws provide the essential boundaries in which a market solution can exist.Unfortunately, I think that the SAC proposal, however sincere, would require the same kind of network of licenses that the PROs have developed, as well as the payment obligations, legal requirements and respect for the law and human rights that allow these systems to operate.Instead, you have IsoHunt. You have the Pirate Bay–mocking creators who seek to enforce their rights.You have Google selling advertising on pirate websites, splitting the revenue with theives, and driving traffic to illegal destinations. And that's a public company.I'm encouraged by the willingness of some ISPs (including Quebecor) to have a meaningful discussion about what we must do to reach a conclusion that brings justice to the digital society. There's still a long way to go, however, and I always get the feeling that proposal's like SAC's are a voice from a future that has not even begun to materialize.I'm happy to help you try to get where you want to go, but I'm unfortunately going to be demanding the correct roadmap.


  3. Thanks Chris. We are completely open to other practical ideas that will remunerate creators and right holders for their work. Infringement has often preceded a licensing regime, and in fact has led vibrant and profitable industries such the modern broadcast industry. As creators we no longer have the option of standing on the sidelines hoping someone else figures this out and will continue to put forward ideas we believe have merit.BestEddie


  4. My "biggest beef" is with those who deny creators the right to say "no". This actually has little or nothing to do with European-style moral rights, and everything to do with international-style human rights.


  5. Eddie, I have read Lessig's books, too, but am not persuaded by his analogies. I think the SAC plan as articulated has vast unworkable assumptions at several key points–the same points as in the Lessig, Fisher, and EFF plans, frankly–and while I like to think I understand your frustration, that doesn't mean it will produce a fair distribution of monies. Like I said, if you want to do it for Canadian works in Canada, and anyone else who wants to opt in, more power to you.


  6. Chris, so there is no confusion, we at the Songwriters Association are not copy-leftists. Quite the contrary, we are professional songwriters and performers who believe deeply in, and have benefited from copyright. Our international performing rights system is by no means perfect, but in reality both creators and right holders are happy to accept the money from around the world, and since the US has historically been a net exporter of culture, the largest beneficiary has been the United States and it's creators. ThanksEddie


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