February 14, 2012

Following Silicon Valley's unexpected victory over the Hollywood team, one of the latter's official trainers complained the game was rigged (*).

There are several ways to read Cary H. Sherman's lament. As the pot calling the kettle black, it is highly amusing. As a genuine document, it records history in the making. As a desperate call for reason to prevail, it challenges us to look beyond the pageantry into the nature of the Information Age.

I hasten to say that I agree with the CEO of the Recording Industry Association of America that "the problem of [...] piracy is real and damaging". I similarly condemn "hyperbolic mistruths" and "self-serving political declarations". Were these opinions to receive their full extent! Were all attempts to invoque Freedom of Speech be as firmly scrutinized! Were corporate pirates punished in proportion when they plunder individual data!

Cary H. Sherman is right again when he "raised questions about how the democratic process functions in the digital age". Where some see "the power of the digital commons", he uncovers the lobbying power of Wikipedia and Google. Absolutely.

When he decries "demagogery" however, what does he call the "lobbying by big players like the Motion Picture Association of America", RIAA's sister, to quote Jenna Wortham and Amy Chozick (**)? When he invokes "reason", does he recall how the RIAA itself got a college student fined $675,000 "for downloading and sharing 30 songs" (1)? When he promotes employment in America, is he calling our attention to the attempts by the same RIAA to shut down any start-up which threatens his interests, however legitimate its business model?

Who shows "patent hypocrisy" should accuse no one. But as entertaining as his lack of self-knowledge can be, let us look for more lasting lessons.

This is a remarkable moment. We all understood that the Information Age is upending the business model of many industries, most prominently of information providers. We now discover the same is true for lobbyists, the power behind our Western pronaocracies.

A traditional lobbyist buys the votes of elected representatives by, directly or indirectly, stuffing their campaign coffers. Money they use in turn to buy the votes of their electors by saturating them with relentless advertising. The new style lobbyist is far more efficient. He contributes no money. Replacing costly carrots with inexpensive sticks, he uses his own web site to turn future electors against representatives reluctant to fulfill his wishes.

""Old media" draws a line between "news" and "editorial"", but "Wikipedia and Google don't recognize [this] ethical boundary". Cary H. Sherman may be a hypocrite, his lawyer's mind is quite sharp. The crux of the matter lies indeed in the difference between old and new media.

Not of course as Cary H. Sherman presents it. Old media needs no editorials to let its voice be heard, it is enough to select the stories as it sees fit. And remember how Murdoch's minions used to blackmail the members of the British Parliament until their methods got exposed.

No, the real difference lies in new media's business model. Advertisers pay on clicks, distribution costs are minimum and users pay nothing, either apparently, hoodwinked as they are into contributing their personal data in lieu of money, or truly, when the service is fully paid by the advertisers, like Google's original search, or is not for profit, like Wikipedia. Thus new media gains freedom over their clients and power over their readers.

Extreme case, when the sacraments are withheld from the people, secular rulers lose all legitimacy. Wikipedia's blackout reinvents the interdict, the weapon wielded by the Church over princes proven impenitent (2).

The game was not rigged. Both teams read from the same manual. But when the manual was updated, only Silicon Valley adapted. Now "the challenge is for the two sides to find common ground on how to combat the piracy problem". Pronaocracy is to democracy what lawsuits negotiated by the lawyers for the defendent and the plaintiff are to justice. The people is no longer the font, but the front of authority.

Ultimately the point remains how to manage information monopolies, including the conflict between distribution and creation. Society has long sanctioned monopolies to its benefits but has never granted them without prudent limits. The RIAA has simply had the misfortune to demand richer terms at the very moment technology made them meaningless. Copyrights should no longer be based on industrial reproduction but on service.

Five years ago, I suggested to cap copyrights on income rather than in duration. I also warned feuding monopolists against ignoring consumers at their peril. I was only pragmatic. "Fred Wilson, a prominent New York venture capitalist" seconds me by example. "Time Warner was not showing [a] game because of a contract dispute. [...] Within minutes he was streaming the game illegally". Who will dare call it a foul?

Instead of hanging Fred Wilson as a pirate, he should be consulted on his expertise, the evaluation of new business models. For, pronoacracy or not, the jury is still out on what will replace the one to which Cary H. Sherman is hanging on for dear life. Let me offer some remarks.

It is unhelpful to mix unauthorized copying with counterfeiting. Faking ownership is not the same as faking the goods. The latter falls under new business models I have already described. The former puts the lights on star creation and management.

Since recording costs relatively little and digital reproduction almost nothing, it follows that content providers spend most of their money on marketing their goods. How foolish! If the locks on your place are no good, should you advertise to the world you own Mona Lisa? Should you buy Mona Lisa in the first place? Perhaps not but, you will say, how will masterpieces be created in the future if stealing is the norm?

What comes first, the art or the artist? Is it reasonable to try to sell the artist instead of the art when she is not a star and once her star status has been recognized insist on selling the art instead of the artist? Shouldn't one avoid confusing an expense for an investment, the art behind any sound business? Today investing in an artist ahead of the public is only an investment when in a service business, not a record manufacturing industry.

Unless Cary H. Sherman changes his tune, soon the sole sound of music over the hills of Hollywood will be a dirge for a passing age.

Philippe Coueignoux

• (*) ... What Wikipedia Won't Tell You, by Cary H. Sherman (New York Times) - Feb 8, 2012
• (**) . The Piracy Problem: How Broad, by Jenna Wortham and Amy Chozick (New York Times) - Feb 9, 2012
• (1) see Sony BMG v. Tenenbaum in the wikipedia
• (2) see the interdict in the wikipedia