CalShares Investigating Voluntary Collective Licensing for Music File-Sharing at UC Berkeley Matt Earp and Andrew McDiarmid May 15, 2008 Advised by Pamela Samuleson

Earp / McDiarmid - May 08 Image (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 –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 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 solutions Earp / 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 privacy Earp / 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