CalSharesInvestigating Voluntary Collective Licensing for Music File-Sharing at UC

Berkeley

Matt Earp and Andrew McDiarmidMay 15, 2008

Advised by Pamela Samuleson

Earp / McDiarmid - May 08Image (c) Modernhumorist.com

Project Overview• File-sharing continues despite efforts of industry

• Universities increasingly targeted by the RIAA– Universities don’t want to be copyright cops– Administrators feel they’re already doing all they can

• Proposals exist for systems that monetize file-sharing, and could be a potential solution

• We propose a test implementation of the proposals at Berkeley, but:– Would such a system be attractive to students?– Is it technically achievable?– Is it in Berkeley’s best interest?– How might the industry respond?

Earp / McDiarmid - May 08

The Recording Industry

Losing the War on File-Sharing

• Revenue down 29% since 1999.– Physical sales (CDs, vinyl, 8-track) down 49%

• Napster and Grokster lawsuits have not deterred creation of new networks

• EFF: 60 million American file-sharers• Legal action against 30,000 individuals

• 2007 NPD Group survey found 57% of U.S. Internet users’ music is unpaid for

Earp / McDiarmid - May 08

From Control to Compensation

• Recording industry takes its exclusive rights seriously– Strong desire to maintain control over content

– Understandable reluctance to broad licensing

• Proposals advocate relaxing control for a system of compensation

• The proposals we examine share features:– License music – Monthly fee– Track usage – Distribute royalties Earp / McDiarmid - May 08

From Control to Compensation

• Questions– Licensing and payment: compulsory or voluntary?

– Accounting: Census or sampling?• Voluntary licensing has worked before

– ASCAP, BMI, SESAC and radio licensing

– Similar collectives could facilitate market for licensed file-sharing

Earp / McDiarmid - May 08

Our Research:A Mixed Methods Approach

• Broad literature review of industry tactics and licensing proposals

• Survey of Berkeley undergraduates• Interviews

– with campus administrators– music informatics firms– professionals with experience in digital music licensing

Earp / McDiarmid - May 08

Results

Earp / McDiarmid - May 08

Students and File-Sharing

• 75% have used a peer-to-peer network to download music, 39% actively file-share

• 79% aware of RIAA lawsuits against individuals, 69% aware of Berkeley’s “Be Smart” campaign

• 70% – awareness has no effect on behavior• 65% would opt to pay; 60% said $10-$20 per semester or more was a fair price

• 80% use DC++ or other Direct Connect clients (30% exclusively use this protocol)– DC++ means intranet file-sharing– perceived as safer from copyright enforcement Earp / McDiarmid - May 08

“Get Me Out Of the Middle!”

• One Berkeley administrator: “It’s like a nuclear war.”

• Even as universities comply with RIAA requests, they are subject to increasing pressure

• 2007-2008 at Berkeley: 28 demands to preserve evidence, 64 pre-litigation letters, 7 subpoenas

• Handled by an office of two that also processes 795 DMCA takedown notices, manages electronic evidence, and develops and enforces security and privacy policies

• Interested in exploring better solutionsEarp / McDiarmid - May 08

Accounting Options

• Audible Magic– Has a database of 6 million digital fingerprints

– Makes the CopySense network appliance– Currently sold as filtration device, but could easily be switched to simply log transfers

• Big Champagne– Digital music market research– Compiles sales and sharing data and produces Billboard-style reports

Earp / McDiarmid - May 08

System Overview

• Enter “covenants not to sue” with labels

• Collect $20 per semester from students living in residence halls

• Contract with Audible Magic and Big Champagne to develop accounting– Census-style accounting is impractical– Install ten CopySense appliances to sample Internet and intranet traffic

– Supplement with statistical models from Big Champagne, as well as their reports

• Maintain student privacyEarp / McDiarmid - May 08

Industry Reluctance• Wedded to the physical model

– Perception of lost control difficult to overcome

– Napster 1.0 ran headlong into this resistance

• Current arrangements are complex– Big Content is using outdated licensing rules and royalty rates for digital models

– Unwilling to call it licensing—Rhapsody is a “wholesale distributor”

• This is would mean admitting they lost Earp / McDiarmid - May 08

Next Steps

• Present reports to Berkeley constituents

• Forming a committee to investigate– Flesh out details with Audible Magic and Big Champagne

– Develop strategy for approaching labels

• Encouraging news: Jim Griffin hired by Warner to investigate licensing options– Interested in making deals with universities

• Berkeley should volunteer!Earp / McDiarmid - May 08