Joseph Gratz Law Student, University of Minnesota (moderator)
Chris Amenita Senior Vice President, ASCAP Enterprises Group
William Terry Fisher Professor of Law, Harvard Law School
Robert Kasunic Principal Legal Advisor, US Copyright Office
Jessica Litman Professor of Law, Wayne State University
Neil Netanel Professor of Law, UCLA and University of Texas
Sandy Pearlman Vice President, Media Development, Multicast Technologies

What is life like under your proposals for an Alternative Compensation System?

William Fisher
Everyone would be better off, except for lawyers.  The benefit of derivative works.  Enhance democracy for creative works.  Although seemingly more compulsory, would allow smaller artists to reach larger artists.

Demerits: complications in estimating consumption.  Cross-subsidies and related distortions (payers to not align with benefactors). Risk associated with the governments inclusions.  Ensuring respect . Leakage International.  Feasibility.

Neil
Both proposals are based on the reality that peer to peer is here to stay.  Designed to find a way for artists to be paid.  But i limit to non-commercial sharing and derivative works.  Mashups and remixes are a dynamic and wonderful thing.  As long as they are non-commercial.

Jessica
Proposals and modifications.  I also agree p2p is good and should be encouraged.  It is less expensive (huh) and distribution of revenues presently is poor.  We can fix copyright purgatory.  Terry's is an opt-in proposal.  Neil is compulsory.  Mine is opt-out.  Creators should have the right to not include their works in the system by be able to choose to add works to a larger, blanket license.  Paying directly to creators, subject to any other agreements.  There are many agreements we cannot find, and we should assume these p2p licenses are subject to traditional contractual terms.  Creators are easy to find.  Avoids entrenching the present intermediaries.

Is there a market failure
Rod
While thoughtful and important, the present system is not a market failure.  In light of present market activities, are we seeing a plethora of activity in the licensing market.  In short, there is no failure.  We cannot be certain these new proposals truly carry advantages that outweigh the disadvantages.  In theory, artists would get paid better.  Fair distribution is a serious question.

Chris
It snice to have a rational discussion about trying to fix issues with the music business.  Good intentions, but misguided.  The reality, the present system just needs some more time.  Am I, ASCAP, and unnecessary intermediary, even though we have collected and distributed royalties for years.  We try to balance the benefits to the user community and that of the music community.  We feel the compulsory scenario greatly benefits the user community, without benefitting the music community.  Many of our members embrace p2p.  I have not been able to negotiate a license with anyone from P2P.  I don't get return phone calls.  When we are ignored for trying to begin a discussion, I question their intentions.

Sandy
Impose a small sales tax (1%) on a subset of all devices sold, services offered - that tax applied  applied to 105 of the total volume = $1 billion for every one percent of tax.  Total royalties in EU and US, was ~ $3 billion.  These royalty payouts have been a diminishing payout.  We have to deal with the reality that has been dealt to us..  If we tried to tax WWinformation networks, they would fight it out.  But the consumer is less vulnerable and the ultimate benefactor of the new universe of music available through technology.  The levy on blank recordable media in Canada is raising ~35-37 million.  Extrapolating to the US, about a billion would be collected within the reasonable market sector we would consider taxable.

What compensation level should be be shooting for?  Fairness?

Terry
The goal it put creators in position they were in 2000.  $2.3 billion per year, for both the music and film industry... which translates to $5 per month, per broadband access.  Would the amount of money in this system ultimately equal to the present system?  No.  Cause the costs are lower.

Example: a nationally created archive of Brazilian music.  A partly public, partly private solution.  This is also be considered by Germany and others.

Chris
These ACS overlook the biggest players in the market and the total value of revenue they derive from the works of authors and copyright holders.  Instead, the full burden shifts to the consumer.  This does not, ultimately, seem fair.

Sandy
The longer we delay applying any solution, the more creators lose.  The tax levy, expands as the degree of connectivity and number of devices expands.  We have to monetize all of these systems.  And all of these system will co-exists with the market we see today.

Neil
I disagree with the idea that P2P is a market failure or not a wonderful thing.  But many more people are excited about music and accessing the creations of many more people.  If we can build a system under which more people get paid, its a good thing.  In terms of the amount, of the compulsory terms of the license... given the present terms, it is impossible to obtain volunteer licenses that matches the breadth of user interest.  Just cause the government establishes a license does not mean it sets the rate or collects the dollars.  Only in the failure of an agreement in the market, would the government set a rate.  Thus ASCAP et al, would sit at the table.

Rob
If the past provides any evidence, the establishment of compulsory of large licenses will not necessarily reduce legal costs or other costs.  P2P as a good thing is certainly an opinion that depends upon the eye of the beholder.  We need to consider the opportunity for artists to choose.  We should be expecting growth in terms of the revenue not collected, not just benchmark against the past.  And we need to more seriously consider the collection and distribution of these numbers.  The technology has worked around the standards established by the AHRA regarding collections from DAT tapes.  This is a big question.

Sandy
Dat was a loser technology that never took hold.  Canadians may not be happy they have to pay more for CDr media, but on the other hand many creators are happy to be receiving some money.

Chris
We work with cable compulsory licenses.  At the first bet, this was a small market.  In 1998 we were told monies were collected by the government regarding these licenses.  We have been told we will receive these monies in 2005.  Dealing with monitoring and collecting the information necessary to make legitimate payments.  Its not cheap to roll out the technology.  It may sound simple, but it is an expensive, and time-consuming process.

Sandy
But the spyware people have shown us tracking mechanisms can be built cheaply and quickly.

How would this look on the hill?

Jessica.
Before getting to committee, Terry's ideas die.  Communities and musicians need to draw the attention of their congresspeople to these issues.  Now that college kids are getting sued, copyright law is something everybody needs to know about.  But the current statues is over 200 pages and not in accessible language.  Everybody needs to understand their position.  And the law needs to be simpler.  We cannot make P2P go away by suing people every few months.  The EFF has proposed the copyright holders acquire an anti-trust exemption, collectively license to consumers and build the solution.  We need the solution to ultimately not be drawn by those who traditionally control music consumption.  The more poeple having tihs ocnversation, the more likely we will have a more sensible law.

Questions?

What about fraud.  And the limits of statistical sampling.

Chris.
AN outside agency that selects when things are sampled, so internally we cannot stuff the box.  We own our own technology for audio fingerprints.  Can people rig the system?  Yes.  Could are large part of the money goto the usual players.  Yes.

Neil
The receiver of monies are legitimate businesses who are reliable in their likelihood to payout.  Can the system be gamed, yes.  But statistical sampling can be adjusted to account for nominal levels of gaming.

P2P United chair, asks question.
This panel is the only rational conversation on this issue that has occurred in this town.  I would like to invite people to join us in asking legislators do something radical and throw out lobbyists to have an open discussion like this.  Will you join P2P united in our call, not for a new model, but for a clear discussion.

Chris
Have you ever contacted us? No.  You have never spoken to us.  You can meet me afterwards, and we can start.

John Schuch
Where is the market price clearing mechanism?  The mechanical compulsory was 2 cents for half a century.  What is the confident that the determination of fair pricing will result.

Terry
I am not terribly confident of stakeholders finding the price sweetspot without agreeing upon conditions.  IT has been proposed the whole social value of creative works be attained by economists.  But this is politically infeasible, we don't do it in any other category.  Only fairly vague criterion, to enable the survival of a creative industry.

Neil
This is a difficult question.  I point to a ten-year look ahead for the size of the market.  It is important to emphasize, that the main point is to bring relevant parties to the table.  So the fear that an agreed solution does not result can be used to encourage the discussion - in a compulsory world the government has the threat of setting the price.

Rob
Rather than the government set the rates, it is preferred that this is reached through some private, collective conversation.  While it may set only one rate, it will affect the other rates as well.  That is a major concern.

Sandy
The notion of a sweetspot is irrelevant.  All of the current systems, or those potential, will co-exist.  We have the legacy structure of payments while we may end up with additional pools of money that may add to the value of the whole market.

Kristen with the FOM coalition
What about the authentication database that needs to be built in order to find all the people that need to be paid.  At this point , there is not formal database that includes this information.  There are PRO, Copyright office and Sound Exchange.  Where is the collective database that can handle the whole market of music and music history.

Chris
We do that on a daily basis.  In the future that orgs that represent rights owners will be able to pass information back and forth.  The notion of one huge big database should worry some people.  The idea that it is spread out, is something we are working on right now.

Doesn't the copyright office have this?

Rob
We only have the records of the people that have registered.  This in not necessarily an accurate picture of the ownership market.  Other collectives are in a better position for this database.  There are still big questions in the technology of identifying what has been used/played.

Terry
There are many difficult aspects to this.  If creators can get a bunch of money from the system, they will want to make their identities known.

Neil
States Big Champagne already accurately measures this information (incorrectly: BigChampagne measures what people have in their folders).