From Computer Tyme Support Wiki

Contents 1 Solution to the problem of copyright piracy and protecting civil liberties 1.1 The solution - Make Piracy your Friend 1.2 Copyright ID Tags 1.2.1 Piracy becomes free distribution and advertising 1.3 Will it Work? 1.3.1 Apple, Google, Amazon, Netflix, and Broadcast Television are doing it 1.3.2 Will people pay if they don't have to? 1.4 My Personal Experience 1.4.1 It's OK if most people don't pay 1.4.2 Most profit from lowest price 1.5 Think Different worked for Apple 1.6 The solutions have to be simple 1.7 How does piracy Distribution compare to existing technologies? 1.8 The Back End Infrastructure 1.9 Piracy is good for society 1.10 Economics of the Piracy Distribution 1.11 The RIAA and MPA have been unreasonable 1.12 It's a new world 1.13 Links to other sites with solutions

Solution to the problem of copyright piracy and protecting civil liberties

The United States Congress in order to address the concerns of copyright holders like the RIAA and the MPA have made several attempts to pass laws to protect intellectual property. Many of these ideas have led to terrible laws and proposals the totally break the Internet. There are numerous web sites that explain why people oppose these law. This page isn't focused as much on why what SOPA and PIPA is wrong, but rather to offer a solution to what is the right thing to do. To offer a new paradigm.

BTW - Copyright by Marc Perkel - public domain. Use this as you wish! Spread it around. Please link to this web page.

The solution - Make Piracy your Friend

Here's an idea for a solution to the piracy problem that is a win/win solution. This eliminates the need for SOPA. It is an outside the box solution so think deeply. The idea is:

Don't try to stop piracy. Make piracy your friend!

What we now call piracy - people copying movies and songs over the internet - can be look at as a free advertising and distribution system. Allow files to be uploaded - downloaded - copied - and distributed. The more the better.

As it turns out the very thing that the RIAA and MPA are fighting is the best way to make money in the Internet era. What they call piracy is really free distribution and free advertizing and if you add an easy one click way to pay for any piece of copyrighted material then all you have to do is sit back and let the money roll in. The idea is to turn a problem into a solution; to make a disadvantage an advantage.

Copyright ID Tags

All files will carry ID tags and public keys etc that identify the copyright owner, rights information, how and where to buy the product, web site of copyright holder and/or artist.

Media players will recognize these ID tags and be able to allow user to immediately purchase anything with a single click that is tied in through Paypal or Google wallet or iTunes and apps store or any number of micro payment system.

Those who provide music players would have an incentive in getting a small piece of the transaction giving them an incentive to install that capability.

Piracy becomes free distribution and advertising

The idea is that this is a new paradigm. Piracy becomes free distribution and advertizing. Kids download - they like it - they pass it on - they blog about it - and because it is both cheap and easy - they buy it. At least enough of them buy it that the RIAA makes a bigger profit than they are now.

The model assumes that higher volume at lower costs is more profitable. 1 movie at $10 is the same as 10 movies at $1. The RIAA and MPA also eliminate their advertizing and distribution costs. No CDs on plastic being shipped. All money is pure profit.

The paradigm shift is - yes - there will be piracy. There will be a LOT of people who don't pay. There will be more who don't pay than those who do pay. but that's OK because the real test is if the amount of profit in the new system is greater than that of the current system. I say it will be. And I have evidence to support that.

Even those who don't pay benefit the copyright holders. They download it and play it for free. They like it and pass it on to 10 friends and 2 friends pay. Thus the one who didn't pay resulted in 2 sales. The person who didn't pay likes the music and uploads it to a popular blog and thousands download it resulting in hundreds of sales and even greater distribution.

In this model all the copyright holders need to do is put it out there and spend the money that is automatically deposited in their bank account by the system.

Will it Work?

I came up with this idea back in 2002 and presented it to the Electronic Frontier Foundation (eff.org. This idea was very radical and untested at the time. However since 2002 a number of things have happened in the world where this model is already working. Several major players are already doing similar things and it works. New infrastructures are in place. This is a PDF I had made to explain my idea at the time:

http://www.perkel.com/piracy.pdf

Apple, Google, Amazon, Netflix, and Broadcast Television are doing it

We are all familiar with Apple iTunes and the 99 cent songs. Google is now selling media through its app store. Amazon is doing it. Then there are the unlimited subscription models where you pay $8/month for all you can eat such as Netflix, Pandora radio, etc. There are advertizing supported models like broadcast radio and TV. No one wants to throw me in jail for watching "Desperate Housewives" on my TV without paying.

Will people pay if they don't have to?

But - you ask - why would people pay if they don't have to?

Piracy would still be illegal. But like possession of small amounts of marijuana in California it would be at best an infraction. You don't have to pay, but you are expected to. Much like leaving a tip at a restaurant in America. You don't have to tip, but people do it anyway. AND - this is important - the media players make it both cheap and easy to pay. It's one dollar and one click. It can even be less than a dollar. When I divide how many shows I watch on Netflix in a month into $8 it come to like 25 cents a movie.

And .... this is also important - the music industry is your friend - not your enemy. The business model where the recording industry sues the customers for uploading a baby video with music to YouTube - how does that make sense. That's not marketing - that terrorism. And we all know it's not working.

Example:

Proposed law - penalty for singing a Michael Jackson and uploading it to YouTube - 5 years in prison.
Killing Michael Jackson (manslaughter) - 4 years in prison

How does this make any sense? Or penalties of $250,000 for downloading music? Make your customers hate you? Does this make sense? Not in my reality!

My Personal Experience

In the 1990s I owned a small software company. Had 3-5 employees and sold about $2 million in network control programs to companies like PG&E, Wells Fargo Bank, Chase Bank, Network Associates. I had online trial downloads and I exhibited at trade shows.

It quickly became apparent that there ware people pirating my software. I tried to fight it at first but I soon realized that 2/3 of my business was coming from piracy. People were copying my programs and passing them around and they were ending up in major companies who were sending my large orders. And in my case these were not inexpensive programs. So as weird as it seemed at the time - this was working. Piracy was my friend. Without piracy I wouldn't have been successful. Piracy worked for me!

It's OK if most people don't pay

Yes - you have to accept that a lot of people aren't going to pay. It might be that most people don't pay. So what? In my case I knew that there were probably more hot copies of my program out there and copies that were paid for. So what?

If at the time there were some perfect form of enforcement where I could collect for every copy I would have less money that with most people stealing it. I actually came out ahead. Why you ask? Because if the perfect enforcement existed then my software would not have been passed around and the big customers who bought it would never have seen it. I am money ahead because of piracy, so why would I want to stop it?

What's more important? Making more money or getting every copy paid for?

Most profit from lowest price

Of all the software I sold most of my profit came from the software I licensed at the lowest price. One of my utilities was called IniTyme, a utility that conditionally modifies Windows INI files on bootup. Retail price for one copy was $25, although $95 bought you a 25 seat license. In the 1990s I licensed IniTyme (sold by them as IniTool) for 17 cents a copy to be bundled with several of their network tools collections. This prices was less than 1/100 of the single user price. But because of the volume that single contract brought in 20x the revenue of the next closest customer and was more than 1/3 of all software income derived.

The important point here is that if the content industry created an infrastructure to collect money, even if it is a small fraction if the single user price, that the total profits derived from bulk licensing and piracy distribution would increase, not decrease total revenues.

Think Different worked for Apple

We all remember the late Steve Jobs and Apple whose motto is "Think Different". Apple did think different and created iTunes and started selling songs for a buck each. And it works! Apple has been (briefly) the county's largest corporation and it came in part by Apple recognizing the the world has changed and that it takes a different paradigm to take advantage and adopt to a changing world.

It is now time for the recording industry to get with the times and realize that we're not in the 20th century anymore and that we are living in a new world that has new opportunities for those who are able to adapt. The era of demanding that every piece of intellectual property is over and the the social aspect of the Internet as well as the bandwidth is an ideal platform for marketing songs and movies in a new way. It's not piracy, it's free advertising and distribution. Links are your friends, not your enemy. You want people to download and copy your music because it get's it out to more customers.

The solutions have to be simple

What is necessary to make this work is keeping it simple. Media apps will help you find the tunes, download the tunes, rate the tunes, and pay for the tunes. It has to be cheap, counting on bulk to make a profit, and is has to be easy, one click and it's done. It also has to be flexible. There needs to be "pay for song" model. Maybe a penny a play model. Subscription model, bulk model, advertiser sponsored model, and other models yet to be invented.

It also need to be secure so that the identity information in the file is protected to make sure the right person gets paid. Files should contain encryption keys so s that it only works with legitimate vendors. There should be enough fields to communicate to user software if the file is public domain, creative commons licenses, for sale, by who, what are the terms, etc. These systems need to be standardized so that all players and vending systems are all playing by the same system.

There should also be alternatives to paying money such as advertising delivery. Agreeing to provide marketing data instead of payments. Credits for rating movies and songs so that if you rate a movie and give comments then you get $$$ credits towards future purchases. Especially if others "like" your comments. You get free stuff for talking about what you like/don't like.

There also has to be incentives instead of laws. Rather than mandating that media players have to allow X or prohibit X and other requirements, create incentives so those who write the player software get a piece of the transaction for playing the music and connecting to those who sell it. Make it so that market forces make people want to to the right thing instead of forcing them with prison.

How does piracy Distribution compare to existing technologies?

The best way to envision this proposal is to compare it to other things that we are familiar with. How does this compare to Napster, iTunes, Netflix, and YouTube?

Napster

We're all familiar with Napster, a free services completely dedicated to piracy. People could just download music for free that they used to pay for and Napster have no option to pay anyone anything. Napster itself had no revenue model even to fund itself.

However - one thing Napster did was wake up the world to a new distribution model. Consumers didn't want to buy music by the album on CDs at the record store. Users wanted to buy music by the song and just download it. Something Steve Jobs realized when he started Apple iTunes.

This proposal is similar to Napster in the distribution model. In face under this proposal there would be tens of thousands of Napsters, What is different is that consumers will be able to license what they download because the players make licensing easy. Those who create music players would get a piece of the action so they will want to create incentives to get users to purchase music. And the best players will offer multiple purchase options.

For example, I download a song from anywhere. At some point my player asks if I want to buy the song. I can pay $1 for it. Or - I have 100 songs not paid for and I can get them all on a bulk deal for $25. Or - I can subscribe to Netflix for $8/month and play as much as I want. Or I can subscribe to Pandora music streams. Or - I can choose to see ads, allow statistical marketing information to be collected, or answer survey questions. Or - not pay or do anything - keep it for free. But because file sharing is legal a lot of this content will be redistributed to other people, many of which will pay.

iTunes

This proposal is also like iTunes. iTunes markets musing by the song picking up on what Napster did but instead of piracy it charged for it, and it was legal. This proposal expands on iTunes in that users can download content from anywhere and pay for it through iTunes. The iTunes player would be able to license any content that it encounters and would not be limited to just Apple's collection. If someone in their garage created a new song yesterday and uploaded it yesterday you could buy that song through iTunes the next day. And the author and iTunes would both make money.

The Back End Infrastructure

One technological advancement that need to happen is an agreed upon specification for an open licensing system so that all content that is for sale can carry that information within the content so that music and video players can recognize these standard tags and sell the content. It really doesn't matter what the form is as much as having an open standard that everyone can talk to. However the richer the standard the better it will work.

Content might carry the equivalent of a UPC code - a number that identifies the item. That number goes into a lookup system that might work like DNS, which would then connect to licensing information that the player can connect to. Once downloading the information the player will know who is selling it and how to process the transaction. There may be multiple options and the user would get to choose.

Generally the player will connect to a micro payment processing engine like iTunes or Google wallet or PayPal. This engines will be able to process the transaction securely and distribute the money proportionally based on the terms of the sale. Maybe it will be customary for the music player software to get 5%, the transaction processor to get 5%, and the rest goes to the content holder or the content distributor who would then pay the content holder (author/musician etc)

The full process might look like this. A garage band named "Gilroy Geek Girls" records a song called "Fun with Garlic". After creating the music file they get online and "register" the song with some song registry service and they get a unique ID code that identifies that song. That code is embedded in the song file as well as other information that would be useful for players. This would include Title, Author, Dates, Copyright codes, etc.

As part of the registration the band would also indicate how they want to license their song. They could - for example - just sell it direct of $1 each. If someone bought it then the music player would get 5 cents, Google Wallet would get 5 cents, and they would get 90 cents if a single purchase where someone downloaded it from anywhere and decided to buy it.

The band might also allow other options. They might also choose to be part of the iTunes collection. They would see a check box and terms of agreement and if iTunes sold it then they might take 40 cents and the band would get 50 cents. But they would also get better distribution and sell a lot more copies.

Another option is that they could check a box to allow Netflix to carry it in their collection. Netflix would have a pot of money, say $4 of their $8 monthly fee goes into the pot. ($4 x number of subscribers). This pot would be distributed monthly proportioned to content holders based on the popularity of the song. If no one chooses "Fun with Garlic" then the band gets nothing. But if millions listen to it then they get a good monthly check.

The big record labels can get in on it too. They can form their own collections and bulk sell their products. They can contract with popular bands, do marketing, and create custom licensing agreement.

The system can also be used for unusual licenses. Suppose Toyota wanted to use a song in a national TV spot. Maybe they would pay $20,000 to license a song for X TV spots. They could just license it through the system and the content holder would just get money showing up in their account.

These examples are an overview of how the system would work. In practice it would probably be far richer allowing forms of licensing that no one has yet contemplated. The point here is a system like this would work and that in reality it will evolve into something even better.

Piracy is good for society

The thing about intellectual property is that it costs nothing to reproduce. if someone who has no money listens to a pirated song it doesn't cost the copyright holder anything. But suppose a company is selling online courses teaching them subjects like math, science, accounting, or any number of skills, and poor people start learning for free? Then they can go out and get jobs, earn a living, pay taxes, reduce unemployment, pay down the national debt, get off drugs, and become a productive member of society. Maybe once they get a job they can start paying for intellectual property?

So if we let the poor listen to music without paying for it - what harm does that do? Of if a homeless person gets to watch Avatar without paying for it - who cares? it's really no skin off the motion picture industry's butt if people who never pay anyhow get to watch a movie for free. The recording industry will pay less in taxes because they don't have to feed these criminals in jail.

Think about it. An 8 year old sings "Happy Birthday" - a copyrighted song - and goes to prison for 5 years - till they are 13? And that makes sense? Maybe we should tax the IP community if they want this kind of enforcement to pay for the law enforcement costs and prison costs to punish all these people who are singing illegally?

Economics of the Piracy Distribution

So you might be asking yourself, "How the hell does someone make money giving away stuff for free?" The answer to that is understanding the non-linear economics of the Internet. Plenty of companies make money giving away stuff for free. Google, Yahoo, Facebook, Microsoft are all examples of companies making money from free services.

We are all familiar with what I will call a linear economic system. I make a gizmo for $5 and I sell it for $10 and make $5 each.

Profit = (Sale Price - My Cost) * Units sold

This is the model that would apply if music we sold on records in record stores. But that's not what is happening today. Music is now downloaded and the record store model is all but dead. Now we have a new paradigm, the Internet. On the Internet distribution and manufacturing cost is $0. The music industry can put a song in the hands of customer with no cost at all. They don't even need to promote it, it promotes itself. All they have to do is stop fighting it and start collecting the money.

With piracy illegal and criminal sanctions of up to 5 years in prison for illegally singing a copyrighted song lets assume that the recording industry stops piracy completely. People go to iTunes and buy 10 songs for $1 and someone makes $10. None of these people share it with their friends because they don't want to go to jail.

But let's change paradigms here and change to a model where file sharing is both legal and encouraged. We'll start with the 10 people who initially want the song. They download it without paying first and they really like the song. Some of them email copies to their friends and they start uploading it to web sites, blogs, etc. The song makes it into the file sharing networks and it's popularity score goes way up. The song is everywhere and people are talking about it and passing it around. Now 10,000 people have it.

Out of those 10000 people who have it let's say as few as 1 in 100 decide to register it with the "buy it now" button on their media player. That $100 in sales by giving it away for free compared to $10 charging for it. The profit is 10x greater.

But - the content industry argues, "These people are thieves! If everyone paid as they all should, we would have $10,000! Are we to give away 99% of our profit?" That is in fact the argument they are currently making. "They're stealing $9990 worth of merchandise!"

That is however a flawed argument because in an environment that oppresses file sharing they wouldn't never reach the other 9900 people in the first place. Those people either would not know about the song or they wouldn't be sufficiently motivated to buy it. There wouldn't be networks of friends or the buzz on the blogs about it. Piracy is free advertizing, and it's free distribution. It's an advantage, not a disadvantage.

The correct way of looking at this is that in the current paradigm the content industry makes $10 and in the new paradigm they make $100. They would make more money by encouraging file sharing that prohibiting it.

These numbers were just pulled out of thin air but the principles are accurate. Would only 1 in 100 pay for it? Probably would be a lot higher. If one in 10 paid for it then the profit would be $1000 instead of $100. Would 10,000 people get it? Napster and file sharing networks see to suggest that would be the case. I challenge anyone to show the math indicating that they wouldn't make more money from piracy than they do now.

The RIAA and MPA have been unreasonable

The insistence that every piece of intellectual property be paid for every time is ridiculous. I remember when people were paying radio stations to play their music (payola) as a way of getting people to hear their songs and want to go to the record store and buy them. They actually paid for the opportunity to give away their music for free. Now with the Internet and downloading it makes free distribution even easier. And they don't have to go to the record store all they would have to do is click a mouse.

The world has changed in the last 50 years. We used to have radios and records, then 8 track tapes, then cassettes, then came the CDs. Now we have the Internet which is the greatest advance in human evolution since language. The potential to make money is greater now that it ever has been but you can't do it if you're stuck in the past.

With the new technology the IP holders could have decided to take advantage of the new technology to make more money and reduce their costs, but instead they used the new technology to try to enforce punitive laws. Instead of promoting new technologies and ways of using innovation to take advantage of opportunities they have spent billions to influence Congress to implement draconian laws to punish customers. If your customers hate you - is that a good marketing plan? I don't think so!

The RIAA and MPA need to step up and adapt to a new world and a new reality. What they need to do is look at what is working already and go with what works. The suggestions here are not untested theories. It works for Apple, Google, Amazon, Netflix, Pandora, and many other companies. It could work even better if the RIAA and MPA would just wake up and embrace it rather than fighting it. What they want doesn't even work, so to call them greedy bastards would be generous. It's time to embrace what does work and make it work better. Law makers should just tell them to modernize and go away. We aren't going to break the Internet to make sure children can't sing "Happy Birthday" without facing prison time.

The best way to express the current state of the content industry is what you can read in this Article abut Steve Jobs music vision. In it includes this paragraph:

Jobs could be ruthless when he talked to the labels. Kevin Gage, then Warner's technology vice president, remembers one key meeting at Apple's Cupertino, California headquarters where he and Vidich tried to persuade Jobs that digital rights management – virtual "locks" to prevent songs from being shared – was necessary to get other labels on board. He was three slides into a PowerPoint presentation when Jobs, rocking in his chair, exploded into a tirade about how the music business just didn't get it. "He said, 'You've got your head stuck up your ass' to me a number of times," Gage recalls. "There's that side of Steve – but in a smooth kind of way. He never reacted to Roger (Ames, then Warner's CEO) the same way he reacted to Paul and myself, put it that way. When Roger came into the room, you saw Steve at his brightest and sharpest."

It's a new world

Humanity is evolving fast and the Internet changes everything. The content industry has to adapt to new realities that require a change in the paradigm they operate in.

When you have a system that isn't working it's time to rethink everything and come up with a completely new paradigm. One thing that everyone agrees on is that what we have not doesn't work. Everyone is unhappy.

The new paradigm suggested here is now proven to work. Netflix, Apple iTunes, Google, Amazon, Pandora, all working. Making money - happy customers. If you changed the distribution to include piracy - it would even work better.

Links to other sites with solutions

• Obama whitehouse doesn't like SOPA/PIPA because it breaks the Internet.
• The Electronic Frontier Foundation promotes Voluntary Collective Licensing.
• Computer book publisher Tim O'Rilly offers his ideas on SOPA and PIPA.
• The 1709 blog has this article.