Brad Templeton Home
Microrefunds for a Creative Economy
(This essay, from 2002, needs some updating but the core values are correct.)
To solve the question of how to build a "creative economy" where creators of "content"/IP/art/call-it-what-you-will can be rewarded by those who appreciate it, there have been many ideas, but no clear success as yet. Systems like Napster, where nobody was paying, may help publicise music but don't directly put bread on the artist's table.
I have written a summary of all the different responses to the copyright crisis from all corners which may help you frame this issue.
For a long time, many have hoped for a "micropayment" infrastructure, that would allow people to use digital money to make easy, small payments, down to the fraction of a cent. Today's digital money is largely the credit card, and it's not efficient on transactions much below $10.
The hope of micropayments is that we could surf the web and other online media and hand over tiny amounts for everything we read. A penny to click here, a dime to click there. The cost would be minor, and the producers of content would be rewarded, and have a way to bill for it without a lot of overhead.
Computers, of course, can count fractions of a cent easily, though it turns out to be harder to make this work than it seems. The really tough part of micropayments is the human cost of billing. People resist having a meter running, and they resist making a financial decision. Even, in many cases, over something tiny. So while it may cost the computers little for you to bill me a dime, it costs me "thought-time" to decide if I want to click on something that costs me a dime.
Surprisingly, this "thought cost" can exist even among the wealthy. I bet with most of you the cost range of a paperback book is quite low compared to the time you will invest and the enjoyment you'll get out of it if it's good. Yet I bet that despite this you have sometimes muttered, "that's a lot for a paperback book."
Micropayment is a fancy word for what some people have called the "buy," button. You select a song or a book, you click "buy" and you've got it and the provider gets their small sum of money. It's often predicted that a good micropayment system, along with direct connection to artists and authors to avoid paying middlemen, would result in very cheap music and books. After all, today the artist only makes perhaps a dime from a song on an album, and novelists tend to make about 50 cents off a paperback sale.
One possible option is subscription services. I liked this one so much I tried to build an online fiction library using it in 1992. I offered readers all the science fiction they could read, from top authors, for $5/month. I went around preaching "Instead of 'information wants to be free,' how about 'information wants to be $5?'"
It always got a laugh, but the grain of truth was that when people pay a flat fee for unlimited access, the start thinking of the resource they are accessing as free. More to the point, in the subscription model, those within the system can use, copy and share with others in the system with all the benefits of the free information world. Except of course when it comes to leaving the system.
Subscription systems will come, though they have some obstacles. For one, it really works best if there are a very few subscription pools to choose from, but that's counter to the fact that most things work best when there are lots of competitors. In other words there are natural monopolies here and those won't always be for the good. Secondly, while it works for books, movies and music where the norm is that all products cost the same -- a good movie makes more money by selling more tickets, not charging more per ticket -- it fails in other areas like software.
Changing the default
My proposal to merge the "everything is free" model that Napster temporarily promoted with a system that rewards creators, but doesn't need a flat-fee subscription and thus can be used universally.
Shareware (effectively an optional "Pay" button) makes getting something free the default, while paying for it requires special action. I suggest reversing things, so that paying for something is the default, and not paying requires special action. As long as payments are small and predictable, or clear and manageable, they could just be made automatically as media are downloaded or played.
However, those who don't want to pay, for any reason, could select within 60 days to get a refund -- a microrefund back to their account. They might be poor. They might find the price too high. They might not like the product. They might have found out something later that suggested the creator was trying some trick, or overcharging. It doesn't matter a lot, as long as most people just take the default action and don't feel too bothered by it. And that's the way it is with default actions -- most people take them.
One could imagine putting a "don't pay" button on applications to replace the "pay" button of micropayments. However, my real goal with these repudiable micropayments is to not have any button at all to think about.
A more workable approach might be to present the user with no questions at all, but the simple ability to review all charges at a later time, such as once at the end of the month. A person reviewing their charges could negate any charge they didn't like, getting a microrefund. By doing this in "batch" mode, the "thought cost" becomes much more tolerable. In addition, the system could be devised so that only the most unusual (higher than normal) charges are at the top of the list for review, so that users don't have to review or think about minor charges at all.
Another way to think about this would be to imagine that all content under such a system comes with an implicit "money back guarantee" so you no longer have to worry about what you purchase.
Many people might end up buying their content and simply getting a notice at the end of the month saying, "You paid $85 for content this month. You may now review and cancel any inappropriate charges." Most people would, if the bill was in the normal range, let it pass without review. If it got out of hand, they might go and get some microrefunds or look for unusually high charges.
A payment system could even still pay the artists when the user clicks the "don't pay" button by taking a percentage out of the pool of default payments that are made. That way, as long as don't-pay clicks stay within a certain norm, each artist is still compensated for every single use.
This system could be based on Digital Rights Management locks (DRM), but it could also be based on open systems with a reasonably honest populace. And surprisingly, if the cost is not too high and the inconvenience low, we have an honest populace. Since DRM makes media more inconvenient to use, users will flock to a DRM free system if they can.
If the readers and players that charge the default fees are high quality (and they can be, since they can be supported by a portion of the fees) people will feel happy to use them over viewers and players that don't. And copyright law can still be used against any organized piracy, such as major download sites offering copies of works without the default payment system in place.
In fact, institutional consumers of content -- radio stations, concert halls, corporations and so on could be required by ordinary copyright law to participate in this system. It's worth enforcing complaince with such large parties, even if participation is not enforced with ordinary consumers.
This system needs much to make it happen, of course, but it has potential as a solution to the copyright crisis.
This is just a draft proposal. I'm seeking many different possible solutions to the intellectual property crisis. Ways to reward creators and protect their rights without saddling the world with DRM, the DMCA and technological control.
Finding such answers is one of the major issues of our day.
Even the above system had issues. It should be designed to protect privacy (with anonymous payments) but this might make it too tempting for some to cheat. It needs to work in open source software, but this leaves open the question of how many people will run patched versions that never pay for anything. And there are questions of how to design such a system when some people are running it and some are not.
Such as scheme might borrow from a new project called the Creative Commons, a project to provide legal language and rights specifications for works that are made available for some forms of free use. This is a good project, but addresses only material that will be free. The commercial segment of the information world is much larger.
However, the idea of developing a set of tags which define some prepared licence rights could work here. This could be combined with tags describing price rules for those various rights, including costs for download, per-use costs, per-use cost caps (ie. 4 cents per play, but no charge after 20 cents is paid) and broad descriptions of the classes of works. One could even charge for a "lifetime relationship" or an annual fee -- You pay the artist $3/year and get everything she produces each year that you stay a fan.
Players and downloaders could look for these tags, and arrange payments when content is copied or played. They could look for patterns, and only ask the user's opinion when some item has an unusually high charge for its sort of media. These algorithms need not act at all during ordinary use, however. It is fine to call them into play when reviewing past charges, for example.
This ability to revoke payment with a microrefund inhibits "gaming" of the system by people who try to extract money unfairly. All it takes is one watchdog to detect this behaviour within a month or two, and all users who care can get their microrefund. (After some period of time, the payments would become final and not subject to refund, but it could easily be a long period like 60 days.)
No DRM is required, but it does depend on people being willing to have a content bill, and on the market keeping the prices of content fair and in line with consumer expectation. If the content bill gets very high, users will be tempted to use players that don't pay the creators. If too many people try to sneak in bogus charges, users will also be tempted to leave if their annoyance level increases. The market can solve this by putting in reputation systems or other means to warn about content that is overcharged and not worth the hassle.
It's also possible that rights for paid re-use could be defined in this language, allowing people to create certain types of derivative works or compilation works, with payment, but without need to get special permission, if the creator so desires.
How it could begin
A system like this could begin on an entirely voluntary basis. That is to say, users/consumers of content could simply agree to sign up, agree to do payment by default for works they use at some level which are also in the system. It is a low risk decision, as they can get their money back at any time, or even leave the system after paying nothing.
We would not need to force the users to pay, since after all, only their good will or laziness makes them not grab refunds on everything. The central question is whether they would do it.
Certainly it's an easier thing to do than to make voluntary shareware style contributions on an ongoing basis. The whole point is that there is only one core decision to make -- whether to get in or not -- and then a monthly decision over whether the cost people charge for their works is too high.
Many people, given the chance, want to be honest, and pay what they think is a fair price to the creators of what they appreciate. They would welcome the chance to do so, if the price doesn't fall outside their range, and the system is easy to use. Many people, however, would not, or have a very limited price range they would accept.
In addition, some creators would attempt to exploit the system, so defences against this would need to be in from the start. However, if many subscribe to services which broadcast lists of over-exploiters and any exploter gets a rash of refunds, it becomes non-productive to do this.
The system can, of course, be enforced with copyright law. Creators can already declare that their copyrighted material is available legally only to those who are in the system, or who purchase it some other way. That's actually the default today. This would not stop people who wish to ignore that aspect of the law, and might even turn off some, but it might make more people feel a duty to join the system, and would probably be highly effective when it comes to business users and corporations. If the only "losses" are the consumers who aren't willing to make the leap and declare they wish to contribute, the amount of lost revenue might be quite small, and in fact, far less than the newly gained revenue that would come from such an easy to use, DRM free payment system.