Tuesday, December 25, 2007

Economics in a DRM-Free World

After my previous post, Doug Johnson asked me to explain the economic model of a DRM-free world. This has been done by others on numerous occasions, so what follows should only be thought of as a summary.

Today, the demand that someone (not necessarily the artist) be compensated for the creative act is driving the demand for digital rights management. Because it is today so easy to make copies of content, the idea is that any access to content must be compensated. Otherwise, we are told, the creator (or, more accurately, the rights holder) will not be rewarded.

But we have had free content since time immemorial. Not always in the form of television, obviously, but from the days the first stories were told around the campfire and the days the first paintings were drawn on the walls of caves, listeners and viewers could access that content for free.

It is important to recognize this. It is important to see that free access to content has, though history, been the rule, not the exception. That the commodification of content, that the charging of access fees, subscriptions, or some other form of tariff, is a recent invention for almost all forms of content.

Yet, somehow, through history, artists and authors and musicians managed to ply their trade. How was this possible? It was rarely through sale of recordings or reproductions. Here are some ways authors, artists and musicians can support bthemselves in a post-DRM world.

1. Sale of Original Works

The best examples of this practice are found in the visual arts - paining and sculpture, especially. Even though it is possible to create copies, the original cannot be recreated. This makes it rare, and hence, valuable. The same approach may be used in writing; witness J.K. Rowling's The Tales of Beedle the Bard, handwritten and bound, which sold for £1.95 million at a Sotheby’s auction.

Indeed, it is by selling original works that most craftsmen and artisans make their livings. We see at the Craft Fair at the local park very year everything from photographs to candle holders to wood shelves to maple syrup being sold by local merchants. And people who lay bricks, build houses, make hamburgers, and grow wheat also profit by the sale of original products. This, indeed, is the dominant form of commerce in society, one that artists would do well to consider.

2. The Sale of Services

While the musician does not frequently sell an original work, the musician is almost unique among the artists in his or her ability to offer a performance (though you can also watch painters performing). As we are frequently told, musicians typically make more money performing than through CD sales. That is why Canadian musicians have split from the recording industry.

Most people in the world make their livings from performing services. Photographs take photos by request, artists paint portraits, authors write news articles and obituaries and greeting card poems. Waiters bring us our food, receptionists greet people and ask them to sit in the waiting room, call centre staff answer questions and provide advice. The people who perform services rarely, if ever, retain rights to the work they have performed. Artists and other creative talents should consider that this might be good enough for them as well.

3. Selling Sponsorships

This is the reason we have free access to content on television and radio. Today we know this under the more generic name of 'advertising', but the sale of sponsorhips has a wide variety of models, everything from the restrained sponsorship messages on public broadcasting to the blazoning of company logos on sports jerseys and racing cars.

Advertising has always been (and remains) the major source of revenue for newspapers - so much so that even the venerable New York Times has abandoned its paid content model in order to lure more readers to view its advertisements.

Advertisers seek implied credibility by association with quality or entertaining content. So advertising is not suitable for all types of content, of course (though you would never know by the way it is relentlessly pursued). Advertising is probably inappropriate for educational content. But for many artists - especially those in video and entertainment - advertising can help pay the bills.

4. Obtaining Patronage

Mozart was employed as a court musician by the ruler of Salzburg Prince-Archbishop Hieronymus Colloredo. Michelangelo worked under the patronage of Pope Julius II. Even Ranier Maria Rilke was supported for a time by the patronage of Ludwig Wittgenstein. The glory days of patronage may have passed us by, but it remains the primary means of income for many creative workers.

My own work, for example, is funded by the Government of Canada, as I am employed by the National Research Council, an appointment that may be seen as a sort of patronage. Foundations routinely support authors and artists and others. IBM has its fellows program. Japan has its living treasures program.

5. Work for Hire

If it's good enough for tens of thousands of university professors, it should be good enough for artists as well. Professors are not compensated for the articles they write, nor do they receive income for reviewing publications. Even if they write textbooks, their earnings are minor compared to the salaries they receive for teaching and research.

The vast majority of crative workers - authors, artists, even musicians - receive no royalties or other income from their creative works. These rights are retained by their employers - newspapers, magazines, advertising agencies, and myriad other businesses and agencies. This content is, in turn, used to make money by any of the other means described in this article.

6. Bundling

Vendors compensate artists for creating or contributing content to be distributed with their products.

Prince recently created a sensation when he released his latest album for free as an insert inside the Daily Mail. This is a distribution method writers of open source software will recognize instantly, as almost everything written under the GPL eventually winds up on a magazine CD as a giveaway. Starbucks, meanwhile, has been giving away free music to coffee patrons. Even McDonald's is giving songs away with meals.

It's a bit harder to give away writing and art - there's less demand - but nonetheless very practical and useful add-ons can be given away with food, hardware, indeed, any sort of product. This will be a significant source of income for learning materials, as vendors seek to stimulate a demand for their product by teaching people about it (the book on types of coffee the vendor in McEwan Hall once loaned me made me an affectionado for life).

7. Loss Leaders and Marketing

When Ben Goodger was hired by Google, his previous position had been unpaid: he was one of the lead developers for Firefox. Like many programmers, he made his name writing open source software. The work he did became a a calling card or an advertisement for his work.

If we look around the education boogosphere we see numerous examples of the same phenomenon. Jay Cross, Harold Jarche and Nancy White all offer consulting services - and they also make their views known for free on their weblogs. Their free public writings are the best publicity they could hope for as they can clearly demonstrate their talents to others.

8. Helping People Being Creative

I call it the 'butterfly thesis'. It goes like this: people everywhere in the world decorate their homes with wooden butterflies. They are not paid for this act of creativity; quite the contrary, they actually pay for the privilege. But they want btheir houses to look nice.

In a similar manner, the vast bulk of the content on Flickr was produced not by people who wanted to make money from their art but by people who were creative and simply wanted to share.

This becomes a business model when people realize that our desire to share is itself a powerful force in society. From the scrapbooking store down the road to the photography shop to Google Video and YouTube, people have been making a living helping other people be creative.


The idea that you have to restrict access to make money is a fallacy. None of these techniques require payments or subscriptions or other fees, nor do they require digital rights management or any sort of access control at all. Indeed, many of them depend on free and open access.