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Recognizing the Vibrant Market for Digital Content

Progress Snapshot
Release 2.23 October 2006

by Patrick Ross *

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Editor's note: Today, October 25, 2006, the Consumer Electronics Association, Public Knowledge and the Media Access Project announced a joint project titled the Digital Freedom Campaign, a public relations initiative targeted at consumers and lawmakers designed to "to empower innovators, students, artists and consumers to create and make lawful use of new technologies free of unreasonable government restrictions and without fear of costly and abusive lawsuits." The editorial below addresses some of the Campaign’s concerns.

In an age of increasingly creative devices permitting consumers to make use of digital content in ways never before imagined, it is appropriate to debate how we can ensure that such innovative goods continue to be produced and marketed, that consumers have access to and can enjoy those devices, and that the producers of the content being used see their rights preserved. Ultimately, consumers win if they have access to a choice both of devices and content, and the best way to guarantee continued content choice is ensuring artists have the ability, in a free market, to negotiate use of their content.

This debate has been raging for several years now in various manifestations, but it has not been restricted to the market; it has been fought in the policy arena as well, and not always with the most civil language. The most recent example of this lack of civility was when a top lobbyist of The Consumer Electronics Association was quoted in the October 19 th issue Consumer Electronics Daily suggesting that the recording industry was engaging in a "campaign of terror" in its suits against alleged unauthorized P2P uploaders, and that what he described as a successful campaign by labels to encourage a device manufacturer to change its MP3 player features demonstrated that "bingo, terrorism works."

Clearly the fanciful rhetoric of one CEA lobbyist does not reflect the consumer electronics industry. But the industry the lobbyist has chosen to target is not surprising given the market. It is not unreasonable to say that if you manufacture a device that gives consumers new ways to use content, you want the price of that content to be as close to zero as possible. The lower the overall price is to consumers - defined as device plus content - the more devices you will sell. As a manufacturer there is nothing wrong with this position; it is good business. Your ideal market is one where razors are priced high and razor blades low.

Of course, if you are a creator you want to maximize the worth of the content that you have created, content that clearly has value to others. You will carefully examine the market and determine the price points available to you for various rights offerings, including selling or leasing of rights. Some you may choose to give away, either through altruism or because you see them as having little economic value. But regardless of how you choose to market your rights, in the market you wish razors to be as inexpensive as possible so consumers can buy more razor blades. It's a natural conflict.

Any barriers that exist to someone making use of another's creative work are simply the same barriers found in any other market, and as in any market they can be overcome either by reaching a mutually agreeable price or settling for a close substitute. Is the current rights market in music healthy? How many urban music hits of the last decade have involved a sampling of another's song? How many songs do we hear daily in movie soundtracks and in commercials?

We clearly have a healthy, functioning licensing market for music, from the statutory licenses that allow us to stream online Fountains of Wayne's "Leave the Biker" or hear "The Girl From Ipanema" in an elevator, to individual licenses that grant us the pleasure of hearing The Pussycat Dolls on TV performing "Don't Cha" while selling Heineken beer. Could the statutory licensing regimes be liberalized to allow more free market input? Absolutely. But those taking aim at copyright would go the other way, toward licensing regimes that devalued content in favor of those seeking to obtain rights to it.

These parties are aware of the existing market for rights, they just don't wish to participate in it; they wish to create methods to bypass it. How can such an argument be justified? A common method seems to be to attempt to identify victims of the market. Overlooking the concerns of the original creators of content, it is argued that the secondary creators – the ones down the value chain who have chosen to put themselves in the delicate position of creating works that depend on someone else’s original work – are occasionally being denied the ability to perform their work if they can't reach an agreement on their terms. We are told culture is lessened as a result.

That argument, however, doesn't often sway the artists further up the value chain, including those who may have declined the low price offering of the secondary artist. Recognizing that the chances are good that these original artists have had some contractual dispute at some point in their careers, they are told those problems were the result of copyright law.

There are a multitude of artists out there who have signed deals with corporations to promote and distribute their work. Not surprisingly, the relations between artists and these corporations have not always been harmonious; that is true in any contractual relationship where money is involved. But these problems have existed as long as there has been a market for performing artists or recorded works, and there are legitimate groups such as the Blues Foundation and the Music Makers Foundation that address these issues on behalf of artists.

Many groups claim to speak for artists. But artists, with their broad array of interests, can’t be said to be represented in policy debates by any one advocacy organization. Still, there are some of note, including the Recording Artists' Coalition and the Songwriters Guild of America (SGA), among others. One element of credibility they have is that they do not have a financial stake in seeing the market value of content approach zero.

Artists are not threatened by copyright; they are empowered by it. Artists wishing to make derivative works are not collectively prevented from doing so; a vibrant market exists to facilitate that, and there is almost always substitutable content for those rare occasions where terms can't be reached. Policymakers must recognize that regardless of the self-interest of any given party in the copyright debate, we want artists to maintain their copyrights in the digital age. If artists' rights are preserved, there will be a continuing stream of new content we can legally enjoy in new and unprecedented ways.

*Patrick Ross is a senior fellow and vice president for communications and external affairs at The Progress & Freedom Foundation. The views expressed here are his own, and are not necessarily the views of the PFF board, fellows or staff.



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