1. Proposal “we replace major portions of the copyright and encryption-reinforcement models with … a governmentally administered reward system.” Chapter 6: An Alternative Compensation System, William W. Fisher III, Promises to Keep: Technology, Law, and the Future of Entertainment (Stanford University Press, forthcoming 2009) 1

2. Outline Creator registers work with the Copyright Office Registration provides unique file name to track transmissions of digital copies of the work Taxes raise money to compensate registrants for making their works available to the public Government agency estimates frequency with which song/film heard or watched by consumers. Registrant periodically paid by agency a share of the tax revenues proportional to relative popularity of work Modify copyright law to eliminate most prohibitions on unauthorized reproduction, distribution, adaptation, and performance of audio and video recordings Music and films readily available, legally, for free. 2

3. Advantages “Consumers…pay less for more entertainment.” “Artists … fairly compensated.” “The set of artists who made their creations available … --and consequently the range of entertainment products available … --would increase.” “Musicians …less dependent on record companies, …filmmakers … less dependent on studios, for the distribution of their creations.” “Both consumers and artists …enjoy greater freedom to modify and redistribute audio and video recordings.” “prices of consumer electronic equipment and broadband access would increase somewhat, demand for them would rise, thus benefiting the suppliers of those goods and services. “society at large would benefit from a sharp reduction in litigation and other transaction costs. “ 3

4. Short Term “make creators, as a group, whole” “compensate creators and their assignees for the losses they have suffered--and will likely suffer in the immediate future--as a result of being deprived of their ability to enforce their copyrights in the new technological environment.” “begin by holding more-or-less constant the aggregate amount by which creators are currently compensated-- and only to make adjustments, up or down, to their collective incomes when we have better information about the likely effects of such changes.” 4

5. Longer Term “emergent goal would be the public interest.” “determine the amount of money that, when distributed to creators, would sustain a flourishing entertainment culture…through frequent, modest adjustments of the tax rates, followed by studies of the impact of each change.” “aspiration….not …to increase the flow of money to musicians and filmmakers until it produced what economists …describe as the socially optimal output of entertainment products. … fidelity to that criterion would be prohibitively expensive and would draw an excessively large number of workers into the entertainment industry.” “select a level of aggregate reward sufficient to provide consumers a rich array of entertainment products … – “estimate the rewards, other than income attributable to the distribution of recordings, available to musicians and filmmakers--including nonmonetary benefits (the various sources of gratification available to participants in the entertainment industry) and the revenues that they could earn from live performances. – “the larger those supplementary rewards, the smaller must be the pot of money collected through taxes. – “ more important … the office’s judgments concerning the quantity and quality of the recordings currently being produced and the observed impact of its most recent adjustments on the production of new products.” 5

6. Plusses “For consumers--large cost savings, more convenient access to more diverse programming uncontaminated by advertisements, freedom from price discrimination, and greater opportunities to participate in the creative process” “For artists--a reliable source of income, greater freedom in selecting the intermediaries to distribute their work, and expanded opportunities to draw upon existing recordings when making new ones” “For the manufacturers of electronic equipment--increased demand for their products and the elimination of constraints upon the design of their devices” “For society at large--a sharp reduction in the costs associated with enforcing copyright law plus elimination of the culturally unhealthy practice of widespread lawbreaking” 6

7. Minuses “Cross-subsidies and associated distortions of consumers’ behavior” “Erosion of artists’ ability to control the public presentations of their works (unless the system contains a second track for artists hostile to the reconfiguration of their creations)” “The hazards of administrative discretion and ‘rent-seeking’” “Leakage across national boundaries” 7