Mutualized Funding Schemes

How to fund creation in an era of digital copyability?

Description

From http://www.laquadrature.net/fr/society-wide-schemes-funding-creative-activities-and-their-reward:

"Mutualised funding schemes have one common point: they set in parallel a flat-rate fee and use rights for individuals. In other terms, a legal license is given to individuals for certain acts, the fee contributing to the overall ecosystem of creation [5]. In the present legal terms, it may be necessary to consider the fee as ensuring that authors do not face an unjustified prejudice and that the normal exploitation of the work [6] is not compromised. In political philosophy terms, one will see the fees as a contribution to a common interest that includes those of authors and artists, in accordance with article 27 of the Universal Declaration of Human Rights.

In contrast, in B2B (business to business) licensing to ISPs, the publishing groups would provide the Internet service providers with a license in exchange for the payment of a per subscriber fee. In the worse versions of this model, it would just exempt ISPs from the obligation (which the majors lobby in parallel to establish) to monitor usage of their subscribers or impose/advice them to use filtering software. In other terms, users could still be prosecuted, but the liability of ISPs could no longer be invoked. In less extreme models, users would be authorised to download works included in the licensor's catalog. Instead of setting a general positive right for users, there would be a case by case transfer of rights for the ISPs to let users access licensors' catalogs. Large publishing groups would retain control on the offer and hold a strong contractual power on ISPs. Experience shows that in such a situation one can at best hope to get an oligopoly and most likely a segmented market between subscriptions giving access to various catalogs. In such a situation, authors and consumers would be "the turkeys of the stuffing" as we say in France despite our ignorance of Thanksgiving. The scarcity of the offer of the majors and the concentration of promotion on a few titles would reign.

There is no reason to exclude such a model from the options submitted to a public debate. But for the quality of this debate, it is necessary to differentiate it clearly from mutualised funding (or global licensing, if one prefers) models. These models are characterised by the creation of a positive right for users to freely exchange without profit the digital representations of works that have been published." (http://www.laquadrature.net/fr/society-wide-schemes-funding-creative-activities-and-their-reward)

Characteristics

From http://www.laquadrature.net/fr/society-wide-schemes-funding-creative-activities-and-their-reward :

"The fundamental parameters of a mutualised funding scheme:

Putting in place a new type of mutualised funding scheme associated with the free non-market exchange of digital works can not be an object of improvisation. It calls for an in-depth debate between stakeholders, experts and the public. Many options exist for the type of mechanism and its parameters. Some authors have proposed mechanisms such as competitive intermediaries where each individual would assign the amount of a fee to an intermediary that would then redistribute it. Intermediaries would compete on their posted policies. Such approaches can be very interesting for managing orphan priorities in medical R&D or as a complementary mechanism in the cultural or media domains. But when the matter is to accompany such an important transition than the creation of a free non-market creative works exchange sphere, a general redistribution mechanism based on usage of works is preferable. Such a mechanism is based on the individual preferences of each individual for individual works, leaving with the public the fundamental choices. But it provides a global framework and authorises a global governance debate. Our analysis thus situates itself in the frame of such a scheme. In introduction to future debates, it proposes a few thoughts on its fundamental parameters.

Works included in the scheme

A first choice regards which works will be included in the scheme (that is works that will benefit from the redistribution of the collected fee and whose non-market exchange will be officially freed). A possibility is to include every work that has been the object of a dissemination to the public (under a free license or under proprietary reservations, free of charge or paying). At the other extreme one can imagine that every creator or copyright holder would be free to include or not a work in the mechanism. This last choice would severely limit the interest of the scheme that lies in its simplicity and legal certainty for users.

Some limits frame the choice:

• The scheme must not harm the freedom of authors to decide when they make a work public for the first time: its application can be automatic when a work has been public, but never before! It can be interesting to consider that giving access to the members of an information community (accessible through a subscription, with a protected access) does not make a work public in the sense of including it in the scheme. This approach will permit the separated development of commercial models for information communities that evaluate works before publishing them (or not). The delineation of this situation requires some specific work.

• If one lets authors or copyright holders free to insert or not works in the scheme, it must be obvious that a refusal implies renunciation to the benefit of the redistribution of funds. Conversely, disseminating a work under a free (for non-commercial use) license opens by nature a right to the redistribution.

• Finally, a mutualised funding scheme is meaningful only if ones goes back to the normal enforcement of copyright/author rights: a posteriori judicial decision on possible infringements. No a priori technical obligation (DRM, filtering) can be imposed in the full information infrastructure in order to accommodate the models of those who refuse the benefit of the mutualised funding scheme.

For some media, putting in place a mutualised funding scheme redistributed on the basis of the usage of works is not sufficient to ensure the existence of some functions necessary to creation. This can be the case for instance for media where producing a work is costly and requires a complex organisation: film, audiovisual production, and for other reasons, video games. The Attali committee (put in place in France by the Presidency and asked to make proposals for "unleashing growth") has wisely suggested to complement the mutualised funding scheme it recommends with specific renewed support schemes for the production of works in these media.

The amount of the fee

In the French 2005 global licensing version, paying the fee and getting the associated rights was optional. This weakened the proposal for two reasons: the collected sums were not predictible with certainty and the existence of internet users choosing not to enter in the scheme could be used as a pretext to argue a continued need for DRMs. The first point led at the time to all kinds of fanciful statements on the insufficience of the collected sums. A compulsory (for all broadband Internet subscribers) fee seems thus to be the only credible choice. In practice, if the freedom of non-market exchange of digital works is confirmed, it will establish itself as a distribution mechanism that is so much superior to others there will hardly be many Internet users abstaining from using it. A social adjustment of the fee according to household income (in order to avoid creating a further digital divide) must of course be considered. Those who argue an increased risk of igital divide should nonetheless have been moved to speak earlier, for instance when the European Commission refuse to include broadband Internet in the definition of universal service.

One of the parameters that needs to be discussed is the initial amount of the fee. Some reference points can be given for a future debate that must also take in account distribution of the collected sums by media. The distribution of the private copying levies and more generally the governance of collective management have given rise to much criticism. Squaring the Net will soon publish an article dedicated to the needed reforms in this matter. However, the private copying levies redistribution also provides some interesting inspiration, in particular the principle of distribution in 4 fourths (authors, perfomers, producers et added-value intermediaries, support to creation and dissemination).

An estimate of the initial value of the fee (as a starting point for a future negotiation) could be based on aiming at a global collected fee (adding the private copying levies if they are maintained) representing twice the amount of rights paid to authors and performers for direct sales or licenses to individual end-users (sound and video recordings, paid-for downloads, multimedia publishing, books) that risk to be negatively affected by the development of free non-market exchanges. In other terms, one would guarantee authors that despite the possible substitution of non-market exchanges to sales and licenses of digital works to end users, the total amount of funding that is redistributed to them would at least not decrease. The multiplication by 2 is for the two other fourths distributed to producers, publishers and added-value intermediaries.

Some will argue that only part of the income from rights that has served as a basis for our reasoning risk being negatively impacted by free non-market exchanges. They will stress the positive synergy between non-commercial exchanges and otehr activities that are source of income from author rights / copyright (some sales of carriers, performing arts, etc.). They will note that the book sector is - for the time-being not the first concerned by possible losses of income when it represents more than half of today's rights income distributed to authors for sales and licenses to individual end-users. On the contrary, others will estimate that it is the full amount of individual end-user sales and licenses rights income that must be taken in account, if only to allow for a growth of the funding of and reward to creation. In this last case, it would be necessary to collect 1240 millions euros per year (700 millions euros multiplied by 2, less 160 millions d'euros of present private copying levies). If one esteems that only half of the present rights risk being affected, only 540 millions euros would have to be collected. The amount of the fee would thus be set to a figure ranging from 3 to 7 € per month for each household presently having broadband Internet access. Whatever is the outcome of the debate on setting the amount of the fee and its possible social adjustment based on income, the feasibility and economical acceptability of the scheme is not at doubt.

Distribution per media and evolution of the fee

If the private copying levies can provide us with some inspiration on the redistribution among types of actors, it is hardly a good example regarding their distribution by media and even more its evolution in time. These levies have strongly increased, without any indication the the activities that justify them (private copying) have grown in the same proportion. The distribution by media of the collected sums also seem to results form compromises disconnected from the real usage.

A distribution by sectors and evolution of a fee associated with the freedom for non-market exchange between individuals of digital works should be based on a more serious and verifiable mechanism. Which basis is to be used? The volume of exchanged data is not representative since it favours the media that are bandwidth consuming in comparison to more "concentrated" media. The true measure lies in the real usage of individuals, in particular the time budgets devoted to produce and access various forms of contents. For the detailed distribution of collected sums to beneficiaries, it is neither needed nor necessary to survey in detail individual usage (see coming article justifying the absence of need for such an observation for a just distribution, notably for small beneficiaries). In contrast, detailed usage surveys based on samples, in order to better know the time devoted to various contents and activities would much enrich the knowledge of cultural activities. These surveys would provide an objective basis for decisions regarding the evolution of the amount of the fee and its distribution by media/sectors, taking in account the specificities mentioned above. This basis would form the starting point for a negotiation (submitted to a public debate)." (http://www.laquadrature.net/fr/society-wide-schemes-funding-creative-activities-and-their-reward)