PayPal and the RIAA
p2pnet.net Feature:- Steven D Levitt is one of those people who are capable of annoying large numbers of very important people. He’s a “rogue” economist who doesn’t know much about the stock market, interest rates, unemployment or taxes.
But what he does do very well is to examine social phenomena, study the data and come to a conclusion about why things are the way they are. (Reality can be dangerous).
There are some amazing insights in his book Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, and one example stands out above the rest:
The bagel guy.
It seems one of the most exciting studies into honesty was conducted completely by chance by a man named Paul Feldman.
In his job analyzing weapons expenditure for the US Navy, Feldman would bring in a basket of bagels and cream cheese for his co-workers. The bagels became popular through out the building, so to recoup some of the costs he put out a little basket and a sign with a suggested price. His collection rate was about 95%.
Then he quit his job to sell bagels by donation. Within a few years he had 140 offices with a basket of his bagels and a cash basket to collect the money. He was making more than he did as a research assistant.
Feldman kept incredibly accurate data on his bagel business and in so doing gave the world a fascinating look at “white collar” crime.
From Freakonomics
“In the real world, Feldman learned to settle for less than 95 percent. He came to consider a company ‘honest’ if its payment rate was above 90 percent. He considered a rate between 80 and 90 percent ‘annoying but tolerable.’ If a company habitually paid below 80 percent, Feldman might post a hectoring note, like this one: ‘The cost of bagels has gone up dramatically since the beginning of the year. Unfortunately, the number of bagels that disappear without being paid for has also gone up. Don’t let that continue. I don’t imagine that you would teach your children to cheat, so why do it yourselves?’
So, if we accept Socrates’ theory that people are basically honest, even without someone forcing them to be, and we look at Paul Feldman’s 87% average collection rate, what can we learn about the entertainment industry going to the wall because of file sharing?
The RIAA would be better off stopping the sue ‘em all campaign and putting a PayPal button on their website.
Let’s think about that for a minute – 87% of people will pay $1 for a bagel if you put out a jam jar with a hole cut in the lid, so why wouldn’t the same number of people pay 50c for an MP3 if you give them a PayPal link?
Let’s think about this some more. Does anyone believe PayPal, for instance, couldn’t come up with a secure payment model that could be built into p2p applications? This is a high volume model so we’ll bring PayPal’s cut down to 5c per “donation”. The code is encrypted, just like PayPal’s current link generators so it can be given to p2p developers with instructions on how to hook it into their clients’ media libraries.
So now, along with your Artist, Track, Duration-type file data you have a “Paid $X.XX” field.
But where’s the incentive to pay? We already know 87% of people will pay SOMEthing if given the opportunity to. What about the other 13%? What if they all only pay $0.01?
Simple – use the existing p2p model.
If you’ve ever visited the “Requests” forum of a private BitTorrent tracker, you’ll be used to seeing comments such as “Get a better UL ratio before requesting something dude”, or “You’ve upped fuck-all, get lost!!!11!”.
How about being pushed to the back of an eDonkey queue because someone else had more credits?
Or, have you ever looked at the painfully accurate statistics your p2p app generates for everything that can possibly be measured?
Yep. We love the statistics and hate leechers. So what happens if your donating habits are factored in next to your public share ratio? What happens if the guy with the 60mb cable connection decides he’ll give priority only to people who have a “good” donation score?
What happens if people can not only see your files, but also how much you paid for them?
Or if you want to think in REALLY radical terms, what would happen if the RIAA ran servers of their member record companies’ entire back catalogs available to anyone with an average donation of $1?
It’s called free market capitalism and p2p networks are frighteningly perfect for the job.
The entertainment companies will LOVE the idea. After all, they’re the ones telling us how important a free and honest market is to the starving artists of the world. So let’s have this capitalist’s utopia where everyone pays what they think something is worth and the best artists make the most money!
How much complicated tax legislation could be avoided if artists lived on “personal donations” and “gifts”, which are non-taxable? Even more money to the artists who are already willing to take the risk of living at the public’s whim!
And best of all, the Big Music cartel can keep its education programs in the schools, except now it’ll be teaching how important it is to be honest and to reward people for their hard work – a true public service that will affect everyone in their day to day lives.
Unfortunately, Paul “Bagel Guy” Feldman’s records show some disappointing statistics: the higher up in the corporate ladder he delivered to, the less people donated. (Perhaps being a tight-arse is a prerequisite for being a ceo?)
But that doesn’t matter because we’re not talking about executive’s honesty. We’re talking about you and I, The People. The mums, dads and children. The little guys. The ones with the power to buy a CD or use p2p software. The customers. The ones who matter.
Let’s keep thinking about this.
According to Steven Levitt, the data are there to back up the concept.
Socrates knew centuries ago that people where basically honest.
Artists reading this – tell your management you want a PayPal button on your website.
If it’s there, I’ll use it.
Alex H, Sydney, Australia – p2pnet
[Alex is an operations manager for an ATM (automatic teller machine) supplier and he specialises in infrastructure development and maintenance, and logistics. He’s also an(other) active member of the Shareaza community.]
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June 21st, 2005 at 3:58 pm
Very interesting proposal.
Experience shows that the payment rate also depends very critically on how much of a barrier you put in the way of payment. Even a very small speed bump like taking a few extra minutes or a little bit of extra thought can cut the payment rate in half when it’s voluntary. But adopting a working commercial model like Paypal is probably the best place to start.
But what about the music subscription services as a model? Yes, their catalog is limited at the moment, but suppose it was much more complete? If you could pay $20/month to hear whatever music you want, and at the end of the month you could see a quick checklist of your personal favorites with an option to buy permanent copies at $0.50 per track (without DRM of course), wouldn’t that be attractive? I’d go for that. The limited catalog and the annoying DRM is all that makes this unworkable at the moment.
June 21st, 2005 at 4:03 pm
great idea alex !!!
June 21st, 2005 at 4:38 pm
You should do some analysis of what happens on Soulseek. For a long time they’ve had a mechanism built in where if you donate to support the soulseek servers, you jump to the head of the queue.
I think the simplest answer in all this is the one suggested by myself and subsequently suggested with much more publicity by some else (Canadian?). viz, Adopt the AllofMp3 model, pack it with every audio track ever recorded and then sell the tracks at the equivalent of 10c each for 192K VBR. In other words, get rid of the bits that annoy about iTMS et al (DRM, limited catalogue, low quality) and then see what price the market will bear and how much price elasticity there is. Somewhere between $1 per track and 1c per track there’s a price that maximises profit. But you can be damn sure it’s not at the limits of that range and not for the current offering.
June 22nd, 2005 at 12:51 am
I’ve read the book (I’m the overrated literature review guy on amazon), and if I remember correctly, it says that small offices pay more than the big anonymous office. The internet is one giant, anonymous office; recorded stats may increase the donation rate, but you have to remember that people are the only flack they get is “online flack” instead of being called out as a cheapskate by their peers. There are plenty of alternatives if there’s too much of a “omg. get your ratio fixed” attitude. [Though I use ratio sites, I think they are uppity 'tards breaking the spirit of p2p. Just my opinion.] Why be pushed back the queue when public trackers are free? I’ll take my illicit activities elsewhere.
People are honest, sure, but people don’t add things up properly either. Another problem you see in economics is scale. Will people really pay 50c per song? With charity at least, and this p2p model is kind of like charity in the sense of voluntary donations, I’ve read that things just don’t scale up. There’s a $25 account for saving the rainforest, whether it’s going to an effort to save 10 Acres or 1000 acres. There’s a $5 for frogs, whether the tadpole density is 5/square meter or 1000/square meter. I highly doubt those who download 40 gigs ~5000 songs would pay $2500 for them, even spread out over time. I don’t think these stats are unreal either. Admittedly Oink is a music enthusiast’s site, but who do you think will use these official RIAA donation based p2p programs? I’m pulling stats off of them right now, and the top 250th person downloaded 183.14 GB in data in 35 weeks. Scaling problems.
I think donating to artists is the best thing to do, and indie artists are already into this type of thing. If people really were honest they would donate regardless of the incentives. They would get their songs off an unofficial p2p source and pay the RIAA back. Maybe the RIAA should just clean themselves up and set up a paypal pot on their homepage and make some statement based on morals. However, there are plenty of other things to consider too, like the ever present Slashdot favorite, the stealing vs. copying debate. There’s a difference between well-off office types buying bagels and people downloading intagible bits and bytes protected by property rights. And the image of the RIAA as evil corporate bastards doesn’t help the concept of corporate charity. Honestly, I think the cost and legal effort of creating a new model is greater than the revenues they’ll receive. And am I the only cheapskate who thinks a 10% cut for Paypal is a lot? Hopefully, if there is a donation model, I really hope that Google can step in and maybe round it down to 0% or 5%.
June 22nd, 2005 at 12:53 am
Two things:
First, the bagel guy didn’t already piss off most of his customers.
Second, when you steal a bagel, you actually do something. You have to physically take it. Someone might see you. You feel yourself taking it. With a song, you click a button and you’re done. No risk of someone else seeing you, no actual removal of bagels.
June 22nd, 2005 at 5:55 am
In the United States the RIAA is considered by many as the worst example of capitalism. The strong approach of strong arming people is akin to U.S. Senator Joseph McCarthy’s attack in the 1950’s on the movie industry, the movie writers and many movie stars. McCarthy attacked these people purely because they thought differently. It was the darkest days in the United States history. America is known as the “Land of the Free” and democratic, this is false. Not to mention the “U.S. Patriot ACT.” But, on the point of the bagel idea — as human beings, we have shared everything throughout time with each other. We have shared music throughout time as well. To all of a sudden attack and persecute your potential customers is ludricous. Another example of a dying dinosaur and it’s last slash and burn campaign. Personally, I hope the RIAA goes down in flames. They lie and they make contracts with “artists” and make all the money they can possibly make, and more. The record companies make all the money and the artists, very little. The argument the RIAA made early on was that the “Artist’s” were getting the shaft each time a song was downloaded illegally, that was a blatant LIE. The continuing year after year sales figures for worldwide music sales shows that that assertion was completely false. Stop giving the petty RIAA a place to further their ripoff techniques. I do not negotiate with terriorist and thugs, the RIAA. The RIAA are like the mafiosa of the recording companies. There are laws in the United States against “Organized Crime” called racketeering. The RIAA is a racket just like any organized crime group. And the RIAA should be treated with the same laws.
June 22nd, 2005 at 10:02 am
Just pay the artist with whatever method you find, paypal link, check, credit card etc. Just avoid the middle man! I do not agree to have a charity like payment, where we pay the RIAA!
June 22nd, 2005 at 12:43 pm
87% is pie in the sky dreaming. I did blueprints of buildings and got ripped off over a 25 year period by 50% of the construction companies. Simply because it was the honor system. Most wouldn’t rip me off for the full amount. It’s no accident that the police,teachers and doctors are in unions. They wouldn’t paid if they weren’t. Stephen King believed his loyal readers loved him. He is awfully popular. So he didn’t like his publisher and bookstores getting 50% of the cut so he sold a book 1 chapter at a time for $1 each on the honor system. He claims he collected 25%. Makes me think my drawings that ran hundreds or thousands must have been awfully good. Turns out Kings publisher and bookstores were much more important in collecting his wages than his work itself. I think that applies to most wages.
A good band could now sell their music directly on the internet for little cost. Concert tickets go for huge amounts of money by scalpers buying them and selling them for 10 or 20 times the cost. The bands could give credits or rankings to their fans that buy music from their website to be applied to special consideration for concert tickets or online chats and such. Bands will need to tour more and accept losses using the honor system by cutting the overhead. Steven King did well at 25%. The number would have increased over time.
June 22nd, 2005 at 6:08 pm
Musician Brad Sucks (www.bradsucks.net) does this (sort of). You can download his MP3s for free, pay $5 for a CDR of his album, or now pay $10 for a profressional press of his CD.
It seems to be workign well for him (although I can’t speak for him, just being a fan)
June 23rd, 2005 at 11:42 am
If only the RIAA hadn’t already destroyed all goodwill with anyone who might be willing to donate. Without goodwill, this can’t work, especially with companies that keep turning out trash instead of nice tasty bagels.
June 28th, 2005 at 1:29 am
With RIAA artists do get ripped off (see Courtney Love’s speech in Salon). $1 per song is ridiculous. Even selling traffic (as allofmp3.com does) is not that good an option. What we need is some sort of a holding organization (not RIAA, of course) that would collect some sort of traffic tax and disperse it among the real copyright holders (e.g. artists, musicians etc). Something like Central Intelligence Corporation in Neal Stephenson’s “Breakdown” – everybody deposits information, those who use it, pay.
July 6th, 2005 at 9:14 am
Alex,
Merck Records did this awhile back. the story even made headlines in Japan.
http://www.m3rck.net
paypal button towards the bottom.
no idea how much Gabe gets from it (if anything).
peace,
a
July 6th, 2005 at 9:45 pm
This is different then the bagel scenario.
For the bagel, I would feel that I own $1 for a bagel. For music, I think $0.50 is too much to pay per song. Part of the problem of this is having a broker (the RIAA) between the artist and the customer.
So I would not be inclined to pay an exorbitant amount. It would be like asking me to buy a bagel for $20.00
I would be inclined to pay something on the order of a dollar a day or something. I don’t want to ‘own’ the music, I just need access to it, all of it.
July 28th, 2005 at 4:09 pm
You must take in account that all of this is builded over TRUST.
TRUST, by its nature, it is not really builded fast and in a few iterations – exchange.
More trust is builded up in multiple iterations of exchanges.
The size of the exchnage don’t matter.
What matter is how many times it happened and waht is the incentive to be honest.
In the bagels story, the incentive to be honest is in the repetetiveness of the exchange (all days, any day) and in the fact that cheating will dry up the bagels flow.
The notices placed when the bagel are not paied enought are a simple warning that the flow is at risk to be ended.
When people start/learn to pay the bagels honestly, they MUST decide to cheat, and this bring a cost (thinking about it, remorse, risk no more bagels, etc.).
This can be explained with a “prisonier dilemma” simulation, where the incentive to cheat idecrease as the number of times the game is repeated grow.
July 30th, 2005 at 10:19 pm
The cost of the music could be commensurate with the quality of the recording. For instance, I might pay $0.99 for a 24-bit/96kHz recording of one of my favorite tracks. I would even want to collect such high-quality recordings.
But I would not pay such a price for 16-bit mp3s. That is a sample to listen to, a freebie to check it out.
And yes, I you can hear the difference. When a song gets loud and suddenly the recording attenuates the amplitude to squeeze it into 16-bit, the experience is that of an aural cringe. Like ducking when a jet flys over, or what you hear when an ambulance turns to face you. It’s an unpleasant effect that is similar to driving speakers without a strong enough amp. Like the distance to the music is changing.
So yes, I would definitely like to see quality for sale.