Thursday, February 14, 2013

Let's end the music industry's monopoly powers

Here is a problem that capitalism presents us with: if there is something that people want that requires scarce resources to produce, then we can apply the various tenants of capitalism to devise a system that efficiently produces that thing and satisfies demands. However, the creation of this system invariably leads to the establishment of various institutions and interests that depend on it, and who strive to exploit and perpetuate the system for their own gain. But if technology advances, or some other progressive change happens, that obviates the need for the system--if, for example, technology renders the product virtually costless to produce--then there arises a conflict between what is best for society (dismantling the system or replacing it with a different one) and what is best for the incumbent institutions and special interests (taking measures to perpetuate or reinforce the system).

A very concrete example of this is the impact of the internet and personal computing on the music industry. Before these technologies, the recording and distribution of music was a costly process: it required special studio equipment, playing time on limited radio bandwidths, and the pressing of vinyl records (or later, cassettes, then CDs). And so a system needed to be devised such that the costs of making and distributing music could be recouped by the producers. This was accomplished by granting the authors a monopoly on the distribution of music: with monopolistic pricing power, the authors could recoup the costs of recording, marketing, and distribution.

This system worked well initially because technological constraints happened to enable enforcement of the monopoly power of the authors: it was infeasible to copy vinyl records, and so people were forced to buy them from record stores. Later with the emergence of cassete tapes copying was easier but the quality degraded with each copy. Later still, CD's enabled perfect copying fidelity, however a person was still limited to copying the CDs that friends happened to own. Violations of the author's--or content owner's--monopoly of course occurred, but not to the extent that the recording industry could not thrive.

But this changed with the emergence of the interent, which now enabled the virtually cost-free distribution of monopoly-protected music to anyone, anywhere. There was no longer a technological constraint that kept people going to the record store as their source of music. And as internet use became adapted by more and more of society, the record industry's revenues plummeted.

What had happened, though, was that the original economic rationale for the music industry had been obviated: before the internet and affordable, high quality recording equipment/software, recording and distributing music was very costly, and required scarce resources. But post internet, anyone with an okay computer and an internet connection could produce, and distribute for free, studio-quality music. The costs had been so dramatically lowered that it no longer made sense to perpetuate the legal regime (the granting of monopoly powers) that the music industry is predicated on.

Of course, by the time this technological revolution had occurred, the special interests and institutions collectively referred to as "the music industry" had been firmly entrenched. And so rather than dropping away and being replaced with a new, more fitting system, it fought aggressively to take extreme steps to perpetuate itself. It asked for extreme powers to infiltrate and compromise computing systems to prevent the duplication of music files. It asked that extreme penalties be enforced to deter duplication and distribution of music files. It publicly campaigns that unauthorized duplication and distribution of music files is an immoral act, tantamount to stealing physical objects from a store.

These policies, arguments, and actions should be rejected because technology has advanced to a state where the system they are meant to preserve is no longer relevant. Granting monopoly powers--and, therefore, monopoly pricing power--to large companies for the production of an incredibly low-cost product is unnecessary and anticapitalistic, and stifles both the production of creative arts and their consumption. The music industry, once spawned as a means of recouping the costs of music production and distribution, now serves no societal purpose. It is a rentier, parasitic entity.

One alternative to the current system would be simply to abolish the granting of monopoly or any other exclusive powers to the authors of content. The signature benefit of such a system would be its simplicity and the fact that it would not require any invasive laws to enforce: people would be free to create and exchange bits as they saw fit. However, there would also be significant drawbacks to such a system. For one, there could arise a problem of truth-in-authorship: even if no monopoly powers were at stake, artists would not want someone else falsely claiming authorship of a piece that they created. The artist would want artistic credit and public praise for his or her works. So some legal framework may be required to give a plagierized artist legal recourse to claim ownership of the work, even if just for non-monetary reasons. Moreover, there is the issue of compensating artists for their work, under the rationale that they deserve to be materially compensated for worthy works of art, so that they may continue to contribute such a valuable thing to society. Some schemes are compatible with a free model that could result in ample revenue for an artist: for example, an artist can have a Kickstarter-like scheme where the next work of art will not be produced/distributed until enough money is raised to recoup costs and provide a living.

However, such schemes are not a realistic source of revenue for most artists, especially ones who are not already established with their own following. Such a scheme can work for Radiohead or Louis CK; but an unknown or marginally popular musician is unlikely to be able to raise any money this way. A better system is required.

One such system could be this: society decides in advance, in terms of GDP say, how much material resources it wants to divert to the musical arts. This chunk of money represents the pie from which all artists will receive a slice. The size of the slice for each artist can be determined in a number of different ways. One way could be the allocation of government grants by an esteemed panel who decides who is worthy of compensation, and how much. Another, perhaps more democratic scheme could be the printing of virtual money that all citizens can then use to "buy" works of art, with this money then being translated to a percentage of the overall arts pie. Each citizen would be granted an equal amount of virtual money at the beginning of every year. Unused virtual arts money would be voided, increasing the "purchasing power" of the rest of the virtual money actually in circulation. In this way, the selection mechanism of a free market would be replicated, though the total "revenue" for the "arts industry" would have been a fixed amount previously agreed upon my democratic fiat.

Some economic shenanigans could arise from such a system: for example, a market would naturally arise in the buying and selling of virtual arts money. However, it is difficult to see what harm there would be in this. Moreover, steps could be taken to hinder such a market, such as not enforcing contracts involving the sale of virtual arts money, and making the arts money non-transferrable by disabling this ability in its technical implementation.

What do you think?

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