A Quick Case for Intellectual Property Use Fee (IPUF).

S.Osokine.
osokin@osokin.com
3 Mar 2002

  1. The present situation with the rich media content (music and video) distribution on the Internet is not satisfactory for every single party involved. Artists and copyright owners are not getting paid, the technology innovators are forced into "underground development" out of constant fear of being sued, and users have to change the delivery services once every few months - as the next service is being shut down. Which does not stop several new services from appearing in its place anyway.

  2. The encryption-based DRM (Digital Rights Management) methods cannot be viewed as a solution, since those get "hacked" as soon as they are invented.

  3. The fundamentally novel character of the Internet as opposed to the physical (CD) distribution channels makes it impossible to control the distribution process in the traditional way.

  4. Faced with a fundamentally new situation, the recording and movie industries try to apply the familiar business and piracy-fighting practices without much regard to or knowledge about what is technically possible and what is not in this new environment. They clearly need help from the technological sector if they want to find the workable approach. The money spent by them on the litigation could be used much better elsewhere.

  5. The attempts to strictly control the Internet on the world- wide basis or to install the "national borders" in cyberspace are unlikely to succeed - this new media is too fluid, robust and fast-moving to make the global control successful.

  6. The broad cooperation of content owners, their representatives, the technology community and of the privacy advocates is necessary to achieve the mutually satisfactory solution, which by necessity would have to be really satisfactory for all these groups - otherwise any group's unilateral action could bring us to square one.

  7. At the same time, the current situation is far from being a uniquely novel one. Many industries (radio, TV, cable TV) have been through the similar ordeal before.

  8. It is possible to apply the existing business models from these industries to this new situation - in a similar fashion as cable TV customers ultimately pay for the shows through their subscription fees.

  9. The single biggest source of money on the Internet is the revenue coming to the Internet Service Provider companies from their subscribers. All the other revenue sources - advertisement, pay-per-view/per-hear can be viewed only as secondary (though important) ones.

  10. It is possible to use this single biggest source of the Internet revenue as a basis for the payments to the content owners through some sort of the surcharge (content tax or compulsory licensing fee), according to the overall Internet content downloading statistics.

  11. Currently there appears to be no other long-term solution for solving the content payment problems: it is technically impossible to rely solely on DRM and psychologically unfeasible to rely on pay-per-view models as the primary revenue stream.

    In principle, the copyright payments can also be included into the player/recorder device price. Even though this approach can be viewed as the source of the additional income, in my opinion, it cannot be its primary source.

    The reason for it is that this is fundamentally a one-time payment, as opposed to the constant income stream from the ISP subscribers, which is likely to be demanded (and deserved!) by the content authors.

    Furthermore, even though this model might be attractive for the emerging industry - when the new relatively expensive devices are still in the process of saturating the market, it quickly loses its appeal as the industry matures. At this point the device prices drop and the market for these devices becomes saturated - not to mention the fact that the networked character of the present content distribution situation would mean that every computer would have to be "surcharged", which seems to be difficult to achieve in practice.

  12. The proposed solution is clearly related to the existing efforts - for example, it is a lot like MOCA, but unlike MOCA, it also appears to solve the problem of the distributed networks (like Gnutella) that do not have any explicit central points and servers and are thus unlikely to benefit from the MOCA compulsory licensing provisions.

  13. This model is also attractive to the ISPs that might want to impose their own "premium" or "pay-per-view" charges on top of the basic "flat fee" charge.

  14. This business model has a very attractive "incremental income" nature - if the recording industry accepts it, all the money would be received on top of the existing CD sales, whereas otherwise the world-wide distributed networks are likely to achieve the same amount of content propagation throughout the Internet, but with no revenue whatsoever.

  15. This money distribution method is so fundamentally fair and familiar to the users (due to the cable TV widespread use) that it is likely that this solution will be accepted by the consumers.

  16. The technical difficulties related to the statistics gathering and rating calculations do not appear to be unsurmountable. Further, this rating system might have many additional uses in addition to its primary purpose.