Alternative Compensation Systems for Digital Media

The dispute over digital media (particularly music, but increasingly also other forms of creative content, such as movies and books) on the Internet tends to get bogged down in polarized arguments over how copyright law should work.  A natural but unfortunate tendency to take for granted the primary features of the existing legal system has caused policymakers to pay too little attention to alternatives to the traditional United States or dominant European copyright schemes.  The present crisis in digital media, increasingly a global phenomenon, calls for the consideration and rigorous analysis of alternatives to those schemes.

Recently, activists and scholars have begun to consider various state-run compensation systems as ways both of realizing the extraordinary economic and cultural opportunities created by new Internet-based technologies for distributing and storing digital media and of ensuring that the creators of that media are fairly compensated.  These proposals suppose that the copyright system currently used in the United States, Europe, and many other countries, to stimulate and reward the development of digital content would be replaced by a system in which the creators and producers of such content were compensated by governments in proportion to the frequency with which their products were consumed.  The revenue necessary to fund such a system would be raised through taxes on consumer electronic devices and internet access.

Somewhat more specifically, these proposals contemplate that the creator of a sound recording or movie would register it with the U.S. Copyright Office or its counterpart in another country and would receive, in return, a unique file name, which would be used to track internet transmissions of the work.  The government would tax devices and services used to gain access to digital entertainment.  The primary target of such a tax would be ISP access.  Secondary targets would include CD burners, blank CDs, MP3 players, and the like.  Using techniques pioneered by American and European performing-rights organizations, a government agency would estimate the frequency with which each song or film was enjoyed by consumers.  Revenue collected from the tax would then be distributed by the government agency to creators in proportion to the rates with which their recordings were being heard or watched.  Once this alternative mechanism for compensating creators was in place, the old one would be dismantled. In other words, copyright law would be reformed to eliminate the current prohibitions on the reproduction, distribution, public performance, adaptation, and encryption circumvention of published music recordings.

A voluntary alternative compensation system might serve as the interim step between the current copyright schemes and a full-blown, state-run alternative compensation system.  This idea, termed an “Entertainment Co-operative,” would offer creators, producers, and consumers of digital content a means of pursuing this mode of distribution and compensation prior to formal enactment of such a system.  Such a voluntary system, especially if developed on a global scale, might serve as either an end-point in itself or as a step toward a mandatory model.

One of the most important aspects of either the state-run or the voluntary model is that it must exist within a global environment, in which the Internet connects people around the world almost instantaneously.  Among the issues currently being examined by the scholars and activists developing these proposals is how to curb “free riding” by nonparticipants, how to prevent unscrupulous creators or intermediaries from artificially enhancing their shares of the tax revenues by “gaming” the system, and how to ensure that the information necessary to run such systems is not employed in ways that invade consumers’ privacy.  These problems are soluable, but will require careful attention to the details of institutional design.

For more information, see this C|Net op-ed for a short-form description of one proposed alternative compensation system, set forth by Professor William Fisher of Harvard Law School.  A more complete description, including an analysis of merits and demerits of such a system, from a forthcoming book by Prof. Fisher, may be found here.   Several other leading thinkers and activists – notably Peter Eckersley, Jamie Love, Kevin Marks, and Neil Netanel among others – have developed models intended to serve a similar end, each of which differs somewhat from Prof. Fisher’s model.  The Berkman Center for Internet & Society at Harvard Law School is exploring these models through its Digital Media in Cyberspace project, which is supported by the John D. and Catherine T. MacArthur Foundation, the Open Society Institute’s Information Program, and Gartner|G2.  

The Berkman Center welcomes the collaboration of those interested in exploring the development of an alternative compensation system as one possible solution to the digital media crisis.  The Berkman Center is hosting a meeting on December 5, 2003, (here in html), in Cambridge, Massachusetts, USA, to develop further the existing alternative compensation systems models.  Contact: John Palfrey: jpalfrey at

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