Cultural Flatrate

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= a flat rate levied on internet use, voluntarily or by the state, that would directly fund creators of the type of material that is shared through P2P Filesharing.

Also called "Blanket License'


Source

From a very extensive report by Volker Grassmuck, at http://www.ip-watch.org/weblog/2009/05/11/the-world-is-going-flat-rate/


Original (German) "EML study" is here at http://www.gruene-bundestag.de/cms/medien/dokbin/278/278059.kurzgutachten_zur_kulturflatrate.pdf


Description

Felix Stalder:

"The most important proposal for a comprehensive new model is the "culture flat rate". The basic idea is to impose a general levy on broadband Internet connections (similar to those that already exist on blank CDs, printers and copying machines) and then distribute the money to artists/rights holders whose works are being shared online. In exchange, a new global license would legalize non-commercial sharing over (p2p) networks. This model has gained some traction politically, through the support of the Greens at the European level as well at the national levels in Germany, Austria and elsewhere. Within the music industry the culture flat rate finds some support, since most people understand that it making enemies out of your customers by suing them for tens of thousands is bad business. Digital rights activists promote the culture flat rate, not the least because they see it as way to end the war on copying, which they fear will destroy the very foundation of freedom on the Internet.

Even though the discussion about the culture flat rate is now more ten years old, there is still very significant disagreement, among those who support the basic idea, over the major elements of the scheme. Which works should be covered by the new global license (music only, or film and other digital content)? Who should collect the money (existing collecting societies or a newly created entity)? How should the money be distributed (according to the popularity of downloads, or some other measurement, and if so, what)? Finally, who should the money be distributed to (the right holders or the artists)?

While the supporters of a culture flat rate are divided across many lines, there is also substantial resistance to the approach per se. Besides the Green Party, no other major party supports the proposal, while most players in the music industry see it as a terminal threat to their core business model. Many digital rights activists are also sceptical: either they do not trust the collecting societies, or they fear that the flat rate would effectively re-affirm the division between producers and consumers and thus fail to reduce many of the costs of the strong copyright regime that fall disproportionately on small, independent cultural producers.

Personally, I'm also highly sceptical of this proposal (in most of its forms), mainly because it addresses first and foremost the problem of the music industry – alleged loss of revenue through file sharing, in itself a highly dubious claim – yet does little to address the costs imposed by copyright systems on cultural producers." (http://www.eurozine.com/articles/2011-07-01-stalder-en.html)


Characteristics

"Prof. Dr. Alexander Roßnagel, scientific director of the Institute of European Media Law (EML) and vice-president of Kassel University, then introduced the minimum requirements for a culture flat-rate:

1.) a legal licence permitting private individuals to exchange copyright works for non-commercial purposes.

2.) a levy, possibly collected by the ISPs, flat, possibly differentiated by access speed; and

3.) a collective management, i.e. a mechanism for collecting the money and distributing it fairly. As the expertise of Roßnagel’s team has shown, it requires legal changes but these are feasible within the framework of existing German and European law. Furthermore, the study concludes: “The legal introduction of the culture flat-rate … is nothing less than the logical consequence of the technical revolution introduced by the internet.” (p. 63) (http://www.ip-watch.org/weblog/2009/05/11/the-world-is-going-flat-rate/)


Discussion

"Grietje Staffelt, Green MP and media-political speaker of the federal parliamentary faction of Bündnis90/Die Grünen, said the main advantages of a culture flat-rate in her view are that it would decriminalise P2P users, remunerate creatives and relieve the judicial system and the ISPs from mass-scale prosecution. It would do so, she continues, in a way that ensures the basic rights enshrined in German constitutional doctrine of a citizen’s right to informational self-determination and of the privacy of telecommunications." (http://www.ip-watch.org/weblog/2009/05/11/the-world-is-going-flat-rate/)


Overview of the Two Options: Europe vs. the U.S.

1. The Legal Road

"That the world will go flat has been the conviction of many cognoscenti since file-sharing saw the light. By now even government representatives like the Norwegian Minister of Education publicly state that there is no future in fighting against file-sharing and that non-commercial file-sharing should be legalised.

The EML study starts out by stating that lump-sum levies are a well-established instrument for uses that occur on a mass-scale and therefore defy individual control. But the concrete design of a culture flat-rate may vary considerably from voluntary business models to a legal obligation, covering all digitisable culture objects or only specific types of works, on a national, European or international level (p. 4).

Indeed two schools begin to emerge for the file-sharing flat-rate. One proposes an explicit exception in copyright law and a redistribution from society to creatives via collective management. The other is a voluntary market solution based on contracts among companies and between companies and consumers.

The earliest contributions to the debate came from the US, and they favoured models based on law, copyright office and collecting societies. E.g. Bennett Lincoff, former Director of Legal Affairs for New Media at ASCAP, proposed to create a new ‘online transmission right’ that would combine the existing reproduction, performance and distribution rights for online purposes and make this new right subject to a statutory license, administered by a single rights collective. It would require a system for registering and marking works and for monitoring their online transmissions. licence fees would be paid by service providers and by users of P2P file-sharing networks. (A Full, Fair And Feasible Solution To The Dilemma of Online Music Licensing [pdf], November 2002)

Neil Netanel, Professor at the University of Texas School of Law, also proposed permitting non-commercial P2P file-sharing of not only music but any kind of digitisable work in exchange for what he calls a “Noncommercial Use Levy.” It would be imposed on consumer products or services that are substantially enhanced by file-sharing, including copying devices, blank media and MP3 players but also internet access and P2P software and services. Interestingly, Netanel also suggested to include non-commercial remixing both in the legal permission and in the remuneration (Impose a Noncommercial Use Levy to Allow Free P2P File-Swapping and Remixing [pdf], November 2002)

William Fisher, Director of the Berkman Center for Internet & Society of Harvard Law School, was the first to give a book-length treatment of the issues involved and of a spectrum of alternative compensation systems to solve them (“Promises to Keep,” 2004). Fisher favoured paying the compensation through the income tax as the most fair, arguing that greater income allows one to buy more and better entertainment equipment and take greater advantage of the new distribution technologies, but saw it as politically not feasible. Fisher therefore followed Netanel’s proposal of a levy on devices, media and services, calculating a levy of USD $5.36 per month on top of ISP charges. He discussed all the elements of such an alternative compensation system, from registering works with the Copyright Office, to marking them and tracking the frequency with which they were listened to or watched, to measuring and compensating underlying works of remixes and methods for fraud prevention. His overall goal is enhancing ’semiotic democracy,’ “enabling the public at large to participate more actively in the construction of their cultural environment.” (p. 241)

Part of that system is, of course, already in place in continental Europe: a non-commercial private copying permission with a mandatory levy on devices and media. The private copying exception was invented by the German lawmaker in 1965 and turned into a highly successful export product that was quickly copied – good that legislation is considered to be in the public domain – in Continental Europe and beyond (see Bernt Hugenholtz, Lucie Guibault & Sjoerd van Geffen, The Future of Levies in a Digital Environment, IvIR, University Amsterdam, March 2003, p. 11 ff. [pdf]). It now serves as model for the culture flat-rate. The logical next step would thus be to extend that time-tested model to the internet and possibly to remixing as well.

Such a system was first established in Hungary by making the new WCT making available right subject to mandatory collective management. As mentioned before, this implementation that was later abolished was reported on by von Lewinski, and served as the legal model in the French flat-rate movement in 2005. The Alliance Public Artistes, a broad coalition of 15 organisations of musicians, photographers, designers, internet-users and consumers proposed a ‘licence globale.’ It commissioned studies on its legal, technical and economic feasibility, and gained parliamentary support from Socialists as well as Conservatives. And one night in December 2005, their amendment to the French copyright law implementing the global licence was actually passed into law. As soon as the rights industry found out, they raised hell at Midem 2006, and the decision was reversed.

When in January 2008, a commission instituted by French president Sarkozy and headed by Jacques Attali issued its final report [pdf] on policies to overcome restrictions to economic growth, the broad range of 316 proposals also included a levy on internet use. In the objective leading to Action 57 it is defined as a reconciliation of economic development and free legal downloading. The report argues that introducing controls of individuals’ internet use like filtering and monitoring would be a major impediment to growth and conflict with constitutional rights of privacy and individual liberties. Thus a lump-sum levy paid by ISPs to the various collecting societies would ensure a fair compensation for artists without penalising internet development.

The second book-length exposé of a legal flat-rate also comes from France. In “Internet & Création” (October 2008, pdf. Short English summary), Philippe Aigrain develops detailed proposals for each of the building blocks of such a system, including an empirically-based modelling of its impact on cultural diversity and measuring usage of works by means of a statistical panel. His core concept is that of “creative contribution,” i.e. creatives contributing their works to society and society in turn contributing remuneration back to creatives.

This proposal is receiving broad support both from the creative community and from MPs in France. Socialist MPs had tabled an amendment to this effect in the debates on the Creation and internet bill. A new coaltion “création public internet” has recently been formed by founding members La Quadrature du Net, UFC Que Choisir, ISOC, SAMPU, an association of artists from music, dance and drama, and Pour le Cinema, a group of movie directors, producers and actors set up to speak out against HADOPI.

Aigrain discusses different possible legal solutions, including a third alternative next to a copyright exception (Roßnagel) and mandatory collective management (von Lewinski / Lucas): an extended collective licence. This instrument is widely used in Nordic countries since the early 1960s for broadcasting and cable re-transmission and has recently been applied to the reproduction of works for educational purposes and the digitisation of works in libraries, museums and archives.

The Nordic model is also at the core of a Position Paper on File-Sharing and Extended Collective Licensing (March 2009) by NEXA, the Center for Internet & Society at the Politechnic of Torino. The NEXA paper points out that since extended collective licensing is not a copyright exception but a support mechanism for freely negotiated licensing agreements it does not require changing the EUCD which expressly provides for that possibility in recital 1825. It also cites the “Final Report on Digital Preservation, Orphan Works, and Out-of-Print Works” [pdf] by the EU High Level Expert Group (June 2008) which suggested extended collective licensing as a solution to the issue of unknown or non-locatable rights-holders.

Expectations are high regarding the Isle of Man, ever since government official Ron Berry announced at MIDEM 2009 that they will simply go ahead and legalise P2P file-sharing in exchange for a nominal monthly licence fee.

The Roßnagel study stands in this tradition. He is not the first legal scholar in Germany to speak out for a culture flat-rate. Thomas Hoeren, Norbert Flechsig, Artur-Axel Wandtke and Alexander Peukert have done so. In addition, representatives from the music industry (e.g. former Universal Europe CEO, now head of Motor Entertainment, Tim Renner or music advisor Gerd Leonhard) from collecting societies (Alexander Wolf, GEMA) and from activism (privatkopie.net and FairSharing) all have posited the flat-rate as the only meaningful solution (for an overview on the German and global debate s. Grassmuck, State of the Culture Flat-Rate, March 2008).

But the EML’s is the first large juridical paper in Germany, at 72 pages considered a “short study”. Only now the proposal has picked up enough momentum that the Greens are taking it up, being the first political party to commission academic expertise, as Staffelt had pointed out.


2. The contract road: U.S.

"The alternative to a legal road is based on voluntary arrangements and on choice and competition. An early proposal emerged from a group of lawyers, academics, technologists and musicians meeting at the Banff Centre for the Arts and was reported by economist and consumer rights activist James Love. The Blur/Banff Proposal [pdf, March 2003] did envisage compulsory licensing for P2P distribution. But in order to mitigate the ‘Britney effect’ of most of the money going to a handful of famous artists, it suggested that members of the audience were be required to pay, but could choose who they paid either by allocating their share directly to specific artists or by going through an intermediary of their choice.

Another voluntary but tax-based system was proposed by Dean Baker, co-director of the Center for Economic and Policy Research in Washington, DC. The artistic freedom voucher [pdf, November 2003] “would allow each individual to contribute a refundable tax credit of approximately $100 to a creative worker of their choice, or to an intermediary who passes funds along to creative workers.”

The Electronic Frontier Foundation (EFF) has been most pronounced about voluntary models. In Voluntary Collective Licensing of Music File Sharing [pdf, February 2004 & April 2008] the premise before anything else is that “any solution should minimise government intervention in favour of market forces.” The EFF suggests that music industry voluntarily form a collecting society like they did when radio started. Back then three competing organisations, two non-profits (ASCAP, BMI) and one for-profit (SESAC), emerged, representing their particular portion and genres of the total music catalogue.

Membership of creatives and publishers would, in fact, only nominally be voluntary, since not joining would mean waiving the possibility of receiving their portion of the fees collected. File-sharers would not pay as voluntarily as the EFF makes it sound, either, since the alternative would be the ongoing legal threat for unauthorised sharing. As for mechanisms for paying: ” That’s where the market comes in. … There should be as many mechanisms for payment as the market will support.” Fans could pay directly to the collecting society, or ISPs, universities and P2P file-sharing software vendors could bundle the fee into subscriptions. In return for a US$5 per month fee they would get not a licence but a covenant not to sue.

Given 60 million file-sharers in the US, $5 a month would net over $3 billion – “$3 billion in annual profits to the record labels – more than they’ve ever made.” The EFF talks about remunerating music file-sharing only, because “the music industry is the only industry that appears to be unable to adjust their business models to take file sharing into account,” while the movie, software and video game industries continue to show strong growth and profitability. “Of course, if other industries want to form voluntary collecting societies and offer blanket licenses to file sharers, there is nothing to stop them from doing so. Individuals would then be free to purchase the licence if they were interested in downloading these materials from the file-sharing networks.”

The EFF’s main point: “We could get there without the need for changes to copyright law and with minimal government intervention.” And in case the music industry does not voluntarily set up the system the EFF is proposing there is a Plan B: Congress could then enact a compulsory licence and create a collecting society. “Government involvement, however, should be a last resort.”

Aside from these theoretical contributions to the debate, a number of systems have developed actual technology and negotiated contracts, among them non-profits attempting to broker between major labels and universities. Fisher kept his promise and is pursuing a voluntary free-market approach. At Harvard University he developed a software suite including a web browser with search and recommendation functions, a file-sharing servant, a media player, a counting system and social networking, such as playlists and chat. The module that counts the number of times that a file is played works with other players as well. It periodically sends that information to the service so the fees can be fairly distributed, respecting users’ privacy in the process.

Fisher then got venture capital to set up Noank Media Inc. and is focussing its activities on universities and ISPs in China and Canada. In July 2008 Noank launched a beta trial of its legal P2P service together with Hong Kong ISP Cyberport. Participating copyright owners submited works for inclusion in the system and were given the choice whether to permit or prevent remixing. Cyberport users thus had access to Noank’s blanket licensed catalogue of music and educational content. The largest part of the fees collected is to be passed on to copyright owners. Noank plans to keep 15% to pay for its administrative overhead, for dispute arbitration and for media research and support of creatives through a non-profit foundation.

Colleges and universities are a fairly manageable terrain: the institution is the ISP and controls the network, it has paying contracts with the students and can bundle the fee with the tuition or offer it as an extra. Legislative pressure to get a grip on copyright violations by the US Higher Education Opportunity Act enacted in August 2008 creates a powerful incentive for universities to find solutions.

Just like Fisher’s Noank, Jim Griffin is catering to this market. Griffin, who ran Geffen Record’s technology department and set up his music consultancy One House, early on opted for statutory licensing because “market forces will not resolve the problem.” (At Impasse: Technology, Popular Demand and Today’s Copyright Regime, April 2001). In March 2008 Griffin was hired by Warner Music Group to develop a system for providing legal P2P to students. For this purpose he set up Choruss LLC in December 2008, a non-profit intermediary between universities and collecting societies, which has the backing of both the EFF of whose Advisory Board Griffin is a member, and of three of the major labels." (http://www.ip-watch.org/weblog/2009/05/11/the-world-is-going-flat-rate/)


A Critique

Felix Stalder:

"One of the main themes of the discussion was the culture flatrate and the collecting societies. In part because the main organizer of the forum, exgae, is in a high-stakes fight with the Spanish collecting society, sgae. In part, because the notion of a culture flatrate appears to be gaining some ground politically. I use the qualifier 'appears' on purpose, because I haven't seen it at all, but others, who are more deeply plugged into the back channels of the policy process, are saying so.

The discussion, though, was rather unproductive, confusing and exhausting, mainly because the two concepts are mutually exclusive.

Free Culture, in its most basic notion, is about the resources and rights available to every individual to make a contribution of his or her choosing to culture (a distributed system of meaning) and to communicate the activities to anybody he or she wishes to. It is a transformative view of culture were the input and output of the productive process are not categorically distinct, implying that existing cultural artifacts and processes are part of the resources available to everyone.

The culture flatrate, on the other hand, is about raising money for remunerating creators for their works that others consume. The two groups need to be kept distinct. Otherwise it would become impossible to decide who should be paying whom and the whole mechanism would morph into something like a general basic income. It's an object-centered view of culture, with a particular notion of the work, as discrete (i.e. one work ends before the next begins) and stable (i.e. the work doesn't change over time) so to establish a long-term relationship between author and work, a relationship that even outlives the author by 70 years (i.e. the full duration of copyright). Such works are then registered and their travels through society need to be tracked in a system that interprets each step in their orbital movements as an act of consumption.

A culture flatrate is not about providing resources at anyone's disposal to add to distributed systems of meaning, but about efficient means of delivery and renumeration for the consumption by the many of circumscribed works created by the few. It is, in a way, radio2.0.

Within the discussion at the Forum, there were several people who argued for the culture flatrate as a means to end the "war on copying". They were all very knowledgeable of the past and current policy initiatives and scared of the weapons of mass destruction that are amassed to wage this war. They may well be right, but from the point of Free Culture, accepting the flatrate is like killing oneself for the fear of death. No matter how weak one might see one's own position, this is always a rather poor strategy.

So, what to take from all of this? Something rather simple: Free Culture cannot be financed by a culture flat rate. In Free Culture reading and writing are overlapping activities and one cannot count copies for income." (http://remix.openflows.com/node/148)


Status

Political situation in Europe, April 2009:

"The Greens have already included the culture flat-rate in their campaign platform for the upcoming 7 June European elections [pdf, in German]: Under the heading “Remunerating artistic contributions on the internet” their first point is getting money to creatives. The second emphasis is on consumers. “We clearly reject the ongoing massive flood of lawsuits, the intrusions of the private sphere, deployment of DRM or filtering of data traffic. They are disproportionate intrusions into the rights of users.”

A triangulation of those two points automatically leads the Green Party, like many other observers today, to the levy-remunerated file-sharing permission. While in the European election platform the culture flat-rate is still a bit cautiously positioned as an option that “might be a right way forward,” the EML study is the first concrete step taken by the Greens, in fact, the first study in this field commissioned by any political party. It confirmed the legal feasibility and strengthened the politicians’ commitment. A similar passage will be included in the German election programme as well, as Oliver Passek, speaker of the federal working group media of Bündnis 90/Die Grünen, told the press conference. Meanwhile, the Social Democrats, the SPD, have followed the Greens’ lead and included the culture flat-rate as a model to be assessed in the draft for their national election platform [pdf, in German]." (http://www.ip-watch.org/weblog/2009/05/11/the-world-is-going-flat-rate/)



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