Prof. Jane C. Ginsburg, Columbia University School of Law
August 24, 2015

Yesterday’s New York Times Magazine cover story featured a remarkably sanguine article about the prospects for creators and creativity in the online environment.  See “The Creative Apocalypse That Wasn’t.”  Good news in the creative arena being hard to find, the author’s perception of bright prospects for the creative trades should be heartening.  And in many respects it is: The author, Steven Johnson, emphasizes the reduced costs of creation and distribution in the music and audiovisual fields, and the increased opportunities for new creativity particularly in connection with works (videogames) and platforms (YouTube) unknown or less exploited before Napster and its aftermath.  As others have noted as well, musicians in particular may offset lost sales of recordings with more ticket sales to live performances.

But, on closer reflection, the picture may not be as rosy as Johnson suggests.  The easy reproducibility and unauthorized communication of digital works of authorship depresses the price of these works (or at least their returns to the creators) to close to zero.  For creators to earn a living, they may most often need to purvey something whose supply they can control, from live appearances to merchandising properties commemorating those events.  Of the six success stories profiled by Ryan Bradley in the article’s adjoining sidebars, only two appear to be earning a sufficient return from creations unbolstered by live appearances on the lecture or concert circuit, or other forms of personal services or hardgoods.

I am certainly not deploring direct personal contact between creators and their audiences (though where those appearances used to promote the sale of works of authorship, it seems nowadays that the freely distributed works furnish bait for ticket sales).  But there are only so many live appearances a creator can make (and finance), and every day on the road or on the stage takes away from the time to create new works.  Moreover, while some performing artists today may make money on everything from clothing lines and perfume to licensing their songs to TV shows and movies to uploading content to YouTube, the more extensive the licensing operation, the more likely it requires a distribution intermediary.  The increasingly popular “360 deal” in contemporary recording contracts, granting to the label the rights including merchandising, film, and TV or guaranteeing the label a cut of profits from those activities, significantly limits performers’ revenues on rights peripheral to the recorded performance.1

The article’s Olympian view, largely based on the “hard data” of labor statistics and census information, did not aim to address questions of copyright ownership and management, but for many creators, earning a living means successfully exploiting their copyrights.  In this column, I propose to descend a few layers of abstraction to examine some of the burgeoning business models available to authors who retain their copyrights.  Nowadays, the technology that brings works directly to users’ computers and personal portable devices no longer requires traditional publishing’s infrastructure of intermediaries.  Every computer-equipped author can make her work directly available to her audience via the Internet.  But availing oneself of the means of distribution is one thing; making a living from the works one distributes is another, particularly when the media that empower authors also empower users to acquire and disseminate works for free.

To an increasing extent, every author can employ electronic copyright management, and/or copyright management collectives to set the financial and other terms and conditions for access to and copying of her work.  Or, more rudimentarily, she can make the work available without technological restraints, and appeal to user generosity, though as Radiohead and Stephen King discovered, passing the hat may prove a precarious strategy.  Nonetheless, some variations on pass-the-hat may succeed.  For example, The Humble Bundle service [] offers bundles of digital content, primarily video games and comic books.  It makes each bundle available online for a limited amount of time.  The user selects the price she is willing to pay (there is no suggested price, but the minimum is $1) and the division of her payment among the content creators, and website-designated charities.  The pricing scheme has generated some revenue, but many users continue to pirate works.

Pay-what-you-want, moreover, may disadvantage lesser-known creators, since the desire to pay may decrease with the celebrity of the beneficiary.  As one commentator put it, pay-what-you-want can work where there is “a fair minded customer, strong relationship with customer, a product that can be sold credibly at a wide range of prices, or a product with low marginal cost.”2   Even then, generosity does not always abound, neither in the proportion of users who pay, nor in the amount expended by those who do pay.  For example, the website Tech Dirt, a blog and news source on technology news, provided a pay-what-you-want scheme in its “Insider Shop.”  Customers could choose several options ($0, $5, $10, or $20), although the $5 default payment somewhat masked the zero option.  The site optimistically advertised the experiment as a success, although 51% of downloaders paid nothing and the average price paid was $2.41.3

“Freemium,” a hybrid free-access/paid-access model, which allows access to the bottom tier of content for free, but charges per unit or by subscription for more or better content, or for content without advertising, offers another approach for authors’ self-financing on the Internet.  The model has perhaps encountered its greatest success with digital phone applications.  The content provider hopes to attract a large number of free users and convert a percentage of them to premium users.  The freemium model typically begins as a loss-leader, until enough users become premium users to turn a profit.  Its success thus depends on attracting and retaining customers and efficiently developing and marketing the premium content.

Like pay-what-you-want, this approach may primarily benefit creators, and especially performers, who already enjoy a substantial fan base.  But the scheme can apply more broadly, at least to recording artists.  For example, Bandcamp [], a music streaming and download website, allows artists to develop their own freemium pricing schemes.  Artists upload their music and choose whether to price it free, pay-what-you-want, or for a fixed price.  Nonetheless, currently the principal successful exploiters of “freemium” models appear to be Web services, rather than individual creators.4

Freemium models, by placing some content behind paywalls, rely to a greater or lesser extent on technological protection measures to secure the paywall.  Although DRM limitations have drawn criticism in other contexts, freemium models that restrict access to the upper tier of content, or require payment after a certain number of free views or downloads (an increasing practice in the beleaguered journalism business) seem to be gaining general public acceptance, despite their reliance on technological protection measures to separate the free and premium tiers.

Another revenue model depends on advertising.  (The growing popularity of ad-stripping software may, however, considerably reduce this source of income.)  Some major streaming services share ad revenue with creators.  For example, YouTube pays record producers and songwriters a percentage of the revenue received from advertising accompanying videos.  But YouTube’s policies in connection with its new Music Key streaming service appear to require artists and composers to sacrifice control over which platforms they post to first in exchange for receiving a share of advertising revenue through YouTube’s Content ID service.  In effect, YouTube will continue to add to its repertory not only content the creator had licensed to YouTube, but also works or performances that third parties have posted, and unless the creator agrees to the new terms instituted with the Music Key service, she will not be paid for any of the content.5

Spotify includes ad revenue in calculating the total amount of royalties it will pay out.  Blip, a free online distributer of Web series, pays content providers 50 percent of the advertising revenue they generate.  It is not clear, however, that these services in fact generate meaningful income streams for authors, or, for that matter that copyright owners, who may be receiving income from advertisements on online platforms, are in fact sharing it with authors.

By contrast, author-oriented business models for aggregating sales of content, or that undertake micro-licensing of content for incorporation in other works, are beginning to emerge.  Two examples, both from the independent music business, may point the way.  CD Baby [] is an artist-run hub for sales of CDs and downloads by independent recording artists.  The artists set the prices; CD Baby promotes and sells the recordings both direct to consumers and to online music retailers, returning most of the revenue to the artists.  CD Baby has also partnered with Rumblefish [], a micro-licensing service for recording artists.  Musicians place their music in the Rumblefish catalog and video-editors and app developers can license the recorded songs for incorporation in audiovisual works.  Rumblefish then distributes license fees to the copyright owners. YouTube and other social video sites link directly to Rumblefish so that uploaders can license their soundtracks as they upload video.  So far, the Rumblefish catalog contains more than 5 million tracks, which have been licensed for more than 65 million videos’ soundtracks, resulting, according to Rumblefish, in millions of dollars in royalties for its artists.6

Online micropayment and other systems for compensating individual authors, albeit often embryonic, hold promise.  But it remains to be seen whether these new means of remuneration will prove viable.  The New York Times Magazine article seeks to allay the fear that the digital environment makes paying for creativity an avoidable act of largesse.  It stresses the increased access to audiences that digital media affords to creators, thus expanding the numbers of people who can endeavour to be creators: “It has never been easier to start making money, for your passion to take that critical leap from pure hobby to part-time income source” (emphasis in original).  The key words here are “start” and “part-time.”  The Internet’s vast exposure and low production costs have undoubtedly opened the way to new entrants, but we also need to enable new creators’ continued endeavours.  As the article concedes, “The new environment may well select for artists who are particularly adept at inventing new career paths rather than single-mindedly focusing on their craft.”  Accolades to those artists who succeed as digital entrepreneurs; but we need an economic environment that fosters authors’ full-time professionalism as well.