Shareware

We noted above that one of the functions provided by a publisher is an administrative one to recover payments. The Internet and its precursors have seen the creation of a new kind of licensing system known as "shareware" to address this function. The essence of shareware is that the author of software permits its distribution to as broad as possible an audience with a request that those who use the software pay a shareware licence fee. In many cases, this is nothing short of pure, unadulterated trust in human nature.

As the system cuts out the middleman, distribution costs are non existent (being borne by the end user) so returns are almost pure profit. Consequently the producer of the software may only need to sell 10 percent of what they would have had to otherwise in order to break even. There are a number of instances of shareware companies which have shared the same measure of success as jealously proprietary ventures [63]. There is even a professional association for the makers of shareware.

A variant of shareware, known as "Crippleware" exists in which some of the features of the software are reduced, or only permitted to be used for a short period of time. In order to acquire the full version, the consumer must pay an upgrade fee. The shareware experience indicates that it is possible to return a profit even in the absence of enforcement mechanisms. Another effect of shareware is to broaden the scope of choice available to the consumer, which may ultimately lead to a reduction in the overall end cost to the consumer of acquiring software.

In some instances, the concept has been taken one step further through the use of "Adware", in which advertisements are embedded into the software which is freely distributed and a fee is paid to acquire a copy of the software which has those advertisements removed. In this instance, it is not the consumer of the software who ends up paying the producer of the software - rather a third party (i.e. the advertiser) will pay a price to the author of the software based on the number of "impressions" returned to the advertiser as a result of the use of the software.

While this may appear to be all upside for everyone involved, its practical effect is to aggregate all purchasers into a single purchaser (the advertiser) who may be able to discipline prices in a manner different to the action of a number of independent users.

Globalization and a Service Based Economy

One of the catchcries of the globalised world economy is that advanced economies are those which have moved away from the provision of products and place an increasing emphasis on the provision of services. Services are seen as the cornerstone of the next evolution of the economy. In the emerging business model, businesses incur start-up and investment costs which are sunk and later recovered through the sale of services or improved products over time. The more businesses [64] come to see software development costs as sunk costs the less reliant developers of works will be on the protection afforded by copyright. Licence fees may become a competitive disadvantage.

Companies such as Red Hat [65] have used this model with some success. Anyone ever involved in licensing of software (other than shrink wrap) will know that licence fees are structured more for tax reasons (or are simply plucked out of the air) than by reference to development costs plus a margin (as the "incentive to produce" theory of copyright would lead one to believe). They will also know that the costs of ongoing maintenance are often a substantial part of the payments required to be made.

In the current market place, a failure to innovate is equivalent to rendering oneself uncompetitive. For example, in some variants of the freeware model, after there is an installed base of users, the author of the software may charge for service in the form of updates and new releases. If the innovation is simply part of the minimum to play required by the market, legislatures may consider it appropriate to reduce or discontinue incentives to innovate or to encourage them through means other than monopoly rights [66].

Legislatures may also pay attention to the chilling effect that such monopoly rights may have on independent or collaborative innovation. Whether monopoly rights are appropriate spurs to innovation is also taken as an article of faith [67].

Content - Queen or Handmaiden?

"What would the Internet be without 'content?' It would be a valueless collection of silent machines with gray screens. It would be the electronic equivalent of a marine desert - lovely elements, nice colors, no life. It would be nothing." [68]

So remarked Edgar Bronfman (then President and Chief Executive Officer, Joseph E. Seagram & Sons, Inc., the owners of Universal) to the Real Conference in San Jose, in May of 2000. These comments are a good example of the self affirming attitude of the content industry to the Internet. Similar sentiments fuelled the "information superhighway" exuberance throughout the nineties, and, during that time, appear to have completely entranced investors and legislators the world over.

Throughout the late ‘90s, vast amounts of money were spent on business models seeking to deliver "content" over the Internet. The orgy of financing which continued during that period culminated in the tech wreck of early 2000 - shortly before Mr. Bronfman's comments. Throughout that period no one was (nor is now) under any misunderstanding that end users were not prepared to pay for content. It is almost that simple.

Rather, individuals are more interested in using communications media for being active interactors rather than passive consumers. This argument is put at length by Odlyzko in his paper "Content is Not King" [69]. However, its basic truth should be obvious. If exiled to a desert island who in their right mind would prefer to have unlimited cable TV or radio in preference to being able to talk to their friends and family? [70]

If interconnection is the main use of communications media, then legislation, such as copyright, which imposes transactions costs on interconnection, by requiring administrative procedures to be put in place to monitor, identify and/or stop traffic in copyright material, is effectively a protectionist subsidy to the content industry by all users of the communications infrastructure (through increased usage charges). In Australia, the High Court has effectively required as much in the Telstra v APRA case [71]. It remains to be seen how far legislatures resolve for continuing their protection of the content industry will extend.

Increased Accountability

To date, the beauty of the copyright monopoly (at least from the point of view of the monopoly holders), is that it has no real basis justifying its existence. Rather, the proponents of copyright make deft use, as the circumstances require, of a variety of different justifications, from innovation, to giving just rewards to the author, to promoting culture (among others). As a result of this nebulosity copyright has effectively been detached from means of evaluating and testing its usefulness with the consequence that it is difficult, if not impossible to verify the effectiveness of copyright and similar monopolies in providing the benefits they claim to provide.

Further, should it be possible to contradict one of the bases of copyright, copyright proponents are able to adopt an alternative justification, given that simultaneously contradicting all justifications will be a herculean task. That said, there has been a growing demand within the community for accountability from legislative monopolies generally, with some monopolies, particularly in relation to utilities, being revoked.

Effectively, to date, copyright proponents have said to legislatures something along the lines of, "protecting us as an industry is good for society as a whole, but we can't give you any evidence which supports us on this and, in fact, there's actually no way to even measure the benefit that such protection brings to society, so you're just going to have to trust us." Of course, this is a similar argument made by all industry sectors seeking protectionist regimes.

What is different about the copyright monopoly is that, while legislatures have been aggressively slashing protection for other industry sectors, they have (surprisingly) been cheerfully increasing it for this sector. This is true even given the historically pityful track record of industry predicted apocalypses throughout the entirety of its history - the Stationers Company continued strongly after the repeal of the Licensing Acts in the late 1690s, it continued to grow despite the absolute censorship monopoly being converted to a time limited monopoly in the 18th century, the English book trade survived rampant borrowing of American industry in the 19th century, the book publishing industry continued to prosper with the advent of the photocopier, and the music industry has not died a terrible wasting death in the face of home tape recording - nor in the 10 years of the Internet nor the more recent years of the Napster experience (being the equivalent of the Internet on steroids).

Indeed the 1980s was not only the heyday of software piracy but also the era that catapulted Microsoft from non-entity to the point of supremacy it has reached today - in some cases in the complete absence of copyright protection [72]. While legislatures currently appear to be completely captured by this industry sector, it is reasonable to expect the copyright monopoly will come under increased public scrutiny including that protections for this industry be removed in the same manner as they have been removed from other industries and to require these monopolies to be justified on fixed, objective, criteria rather than on the slippery and nebulous grounds which currently underlie it.