5:16 PM

Compulsory licensing has been a hot topic lately. On Monday, The Daily Princetonian ran a piece by Fred von Lohmann, a lawyer with the EFF, in which he advocated compulsory licensing as a solution to file sharing. In response, Alexander Payne wrote, "Compulsory licensing makes me cringe." Derek Slater responded with his "facts and myths of compulsory licensing." Payne responded to the comments he's received, while Ren Bucholz jumped in support of Derek. Today, Slashdot even has an interview with Edward Felten in which he mentions compulsory licensing in passing. (Thanks to Derek for many of these links.)

I mentioned compulsory licensing last week, in a slightly different context. I've been intending to make a more in depth post about the subject, but I've been putting it off, for one simple reason: compulsory licensing is complicated. I didn't want to say anything about it until I studied it and understood its history and its current functioning. Given that the subject has taken off without me, I'm going to go ahead and express my current thoughts anyway.

The music industry has a problem. The industry depends on sales of CDs to make money, but CD sales are falling. At the same time, file sharing, in which one computer user makes computer files, often music files, available to any other computer users to copy, is rising. Music publishers fear that consumers are downloading songs they like rather than purchasing them, and they are fighting file sharing with information campaigns, legislation, lawsuits, and technical measures. In his article, Fred von Lohmann observes the harm this fight is doing to the music industry, the computer industry, and education. He proposes that a solution is compulsory licensing. Under his proposal, ISPs, including universities, would pay a fixed fee per user to a fund that would be distributed to publishers and artists. He notes that compulsory licensing is already used in the music industry and argues that universities could be a testing ground for various compulsory licensing approaches.

Everyone else has started discussing the merits of that approach. My response is to urge everyone to move slowly and cautiously and not be too quick to judge the merits of compulsory licensing. My response is to be skeptical of compulsory licensing. I am doubtful that a solution that satisfies the music industry while not harming the Internet can be found.

I'm going to start by looking at the music industry in an ideal world. First, consider music distribution when distribution can only occur in a physical medium. A musician records a song. If the musician wants to distribute the song, many copies must be produced and then shipped to customers who are interested in the musician's music. Intermediaries arise naturally. The most important of these is the record label, which takes responsibility for manufacturing and distributing the recordings of many artists. The record label sells the recordings and distributes some of its revenues back to the artists.

On the other extreme, consider music distribution when distribution is automatic and there is essentially no distribution medium. A musician records a song. If a customer wants a song, they get the song automatically. The functions of manufacturing and distributing are unnecessary. The musician can sell the recordings and receive the revenues directly.

In the real world, we're somewhere in between. CDs are the dominant physical medium. Prior to the development of computers, radio and cassette tape were the mechanism of automatic distribution. Computer technology has greatly simplified automatic distribution. Effectively, we've shifted from resembling the first ideal to resembling the second. This threatens to make the primary function of record labels obsolete.

Reflexively, my idealistic response is to say, "too bad for the record companies." As a practical matter, that won't work. The record companies will fight to ensure their survival and their existing business practices. Beyond that, I like CDs. If the Internet became the only medium of music distribution, many customers would feel a loss.

So here's the problem. The music industry has developed a business model that's in danger of being made obsolete. Compulsory licensing does not change that. The most it does is say, "In exchange for destroying your business, here's some cash."

The music industry is doing great harm by fighting technology. Obviously, a solution that benefits both the music industry and the computer industry while preserving customers' rights would be a great thing. I'm doubtful that compulsory licensing actually solves the right problem, but I'm curious about what problems led to compulsory licensing in the past. I think the thing to do now is to read up on the origins of compulsory licensing.

0 comments

1:38 PM

The current round of questions about the fate of ReplayTV has finally been resolved. Reuters is reporting that D&M Holdings won the bankruptcy court auction for ReplayTV and Rio.

SonicBlue, the current owner of ReplayTV and Rio, declared bankruptcy on March 21st. At the time, SonicBlue announced its intention to sell ReplayTV and Rio to D&M Holdings, the parent company of stereo equipment companies Denon and Marantz. SonicBlue and D&M Holdings failed to complete the sale, so a bankruptcy court auction was announced. Now D&M Holdings has won the auction, so ReplayTV and Rio have ended up where they were going anyway.

The question now is what D&M Holdings intends to do with ReplayTV and Rio. Rio has been one of the leading MP3 player manufacturers, but its focus has been on portable products. Neither Marantz nor Denon have existing portable products of any kind. Rio may continue to develop its product line independent of the other companies, but the purchase raises the intriguing possibility of developing a MP3 player as a home stereo component. Rio has been moving in that direction already, but the support of established home stereo companies could accelerate that and add more legitimacy to MP3s as a sound format.

ReplayTV is more complicated. While I'm sure that D&M is interested in digital video recorder technology, it may not want to fight the existing lawsuit. If it settles and removes features from ReplayTV, that will be an unfortunate restriction on the development of technology by the television and movie industry. Alternatively, Denon and Marantz may be powerful enough to fight through the lawsuit, with the result that ReplayTV could move from its current weak position into a much stronger and larger company, becoming more effective in promoting digital video recorders to consumers in general.

Both MP3 players and digital video recorders are upstart technologies that have had to fight for legitimacy in the face of movie, television, and music industry resistance. MP3 players have been established as portable devices, but haven't yet become integrated in home stereos. Digital video recorders are still struggling. The major players have been small companies with uncertain futures. This purchase may give both technologies the support they need to become mainstream.

0 comments