The Elephant in the Long Tail — transcript

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Thanks everyone for coming to Bold.org's and BCLT's first breakfast meeting of the year. And we appreciate, ever, ever, and we appreciate seeing so many bright faces in the morning. And today we have a really interesting presenter, Chris Anderson, who is Editor-in-Chief at Wired Magazine. And he's going to talk about his theory, The Long Tail. Thank you. I'm the reason I think you were having your first breakfast meeting. I have a plane to catch, so my apologies for making it up so early.

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What I'd like to talk about, and I'll just talk for about half an hour and then we can chat, is really the new shape of culture and our economies in the next century. and we're just starting to see the glimpse of it. And it has lots of implications, economic, cultural, and legal. And I obviously will speak about the legal ones in particular. I'm not a lawyer. I'm a physicist who sort of took a left term

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and turned it into economics for most of my career and then sort of freakishly did a double backflip into Condé Nast, where I edited a magazine along with Vanity Fair and Vogue and the New Yorker and other sort of non-physics and economics things. So we have kind of interesting perspective across, you know, I span economics and culture. And so this took me to this research project, which became The Long Tail, which started as a research project, then a series of speeches, then an article in Wired in 2004,

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which is the most cited we've ever done, and then a book, which will be out, I just finished last week, which will be out in July, which I'm very excited about. So I'm going to give you a little glimpse about one aspect of it that's pertinent to you. I mean, if you'll indulge me, there'll be a little charty stuff here. So I'll try to zip through it and make it painless. This thing here is basically the shape of all markets. All markets have what they call power law shape, which is to say, I promised I wasn't going to walk too far away in here.

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So these are sales, and these are basically the different products. It could be anything. It could be jeans. It could be books. It could be CDs. It could be television shows. It could be movies. But a small number of things sell a lot, and then it rapidly falls off, and a large number of things sell a little. And this is the case across not just markets, as it happens. It's one of the factors. It's one of the weird, weird, reoccurring motifs of nature as well. Earthquakes are distributed in a parallel shape. with us. So a large number of small earthquakes and a small number of big earthquakes. Cities

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distributions, a small number of big cities, a large number of small cities. Virtually everything in human behavior and markets has this shape. And if you plot and it's basically a one over x distribution. And if you plot it as a log log, you'll get a straight line. And this is the natural shape of culture and the natural state of commerce and in many ways the natural shape of nature. Unless it isn't. And when you look at it, I've now plugged into a real data set here. This is a Hollywood box office.

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These are the top about 1,300 films, and this is the box office gross in dollars. Again, log, log. Something gruesome happens here. The line doesn't matter. It just depends on the dynamics of the industry. But the fact that it deviates from a straight line right there tells us something scary and weird is happening. Does anyone want to guess what that might be? What happened around rank 1000? People don't go to the box office? Movies. Movies don't go, exactly.

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Basically you run out of screens. There are only so many theaters in America, and they can only carry so many films, and when you run out of screens, suddenly the box office drops off radically. The carrying capacity of the American theatrical system, this is over a three year period, is about 300 films a year, about 1,000 films over three years. Just as a point of reference, there are not 300 films made each year. There's about 13,000 films made each year. So a tiny, tiny fraction of the films made

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actually get theatrical release and show up on this chart. So what's happening here isn't that they stopped making films, and isn't that the films got worse, and isn't that people didn't want to see them. What happens is that we have a bottleneck in distribution, a scarcity factor in the distribution network because it's distorting our market for films. Now, one assumes that line should go on. So one assumes there is a latent demand for these films of exactly this size. And I can take this out further. And what you're now seeing is distribution networks that don't have scarcity factors.

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If you're distributing films on the Internet, obviously you have an unlimited number of screens, as it were. And this line will continue, all the way, this line here will continue right along the red line, and you'll see that this latent demand becomes realized demand, and that is the long tail. In a sense, here's another way of doing it, our parallel just got savagely whacked off because we ran out of screens. Now I'm going to go to a music, an industry that doesn't have scarcity effects. This is online music. Exact same thing,

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this happens to be Rhapsody, but it could then, it could be iTunes or anything else. same kind of power loss shape, a small number of titles sell a lot, it goes on but what happens is it doesn't get whacked off, you get 100,000 to 400,000 tracks 400,000 to 800,000 tracks, it just keeps going right here at the very end of my data set you basically have the 800,000 song still sells about once a month in other words, there's demand for

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absolutely everything, there's a lot of demand but there are a lot of them and a little bit of demand times a lot of things equals a significant market. So another way of looking at it is just like this. I basically look at the music industry. There is, Walmart is America's largest CD retailer. Walmart's carrying capacity is about 4,500 CDs. By contrast, the online music sites are now carrying about 2 million tracks. So basically Walmart gets the topic and it cuts off its supply

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It runs out of shelf space right there. But online, the demand keeps going. And we now find that in a year between March 2004 and March 2005, the fraction of music sales of stuff that is not available in Walmart went from 23% of the business to 28% of the business. And it looks like it's probably going to be about half the business over time. So in other words, by simply taking the scarcity, the bottlenecks, out of the distribution, we discovered that there's a market about as big as the market we already knew out there that is now tappable.

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That's the long tail, and that's the new market we're talking about. That's probably the big picture. Let's talk about what's in the tail. So things that sell not very well, in middling sales or even small sales, tend to come in two categories. They tend to be things that are niche products. They don't have large demand. And they tend to be things that are older products. So today's hit will be tomorrow's niche, and today's niche will be tomorrow's super niche.

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And they're all mixed together. It's very hard to tell them apart. Some of them are of a sort of niche appeal, and some of them are old. And what you need to do is you need to sort of separate the two axes and look at it this way. So basically there's the genre dimension, which just sort of says the product, how broad or narrow is its appeal, and then it's a time dimension. and new products have a decay function over time and niche products start somewhere down here in the tail

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and then also decay over time. So if you want to think of it this way, there's a, you can call that the fourth dimension, there's kind of a topology and that some combination of the breadth of its appeal and its age determines where it is on this topology of sales over time. Now, why am I going into time? Time is archives. Half of the long tail is niche stuff that wasn't going to get distribution.

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Half of the long tail is older stuff that isn't getting distribution. The vast majority of television right now is not available. Television has the largest ratio of produced content to available content. As you know, the stuff gets put out there, it's broadcast for a brief moment. If you weren't recording it, if it doesn't come out on DVD, if it isn't syndicated, which refers to almost everything, it's just gone. There's no way to see it. Why can't you see it? Well, let's talk a little bit about those constraints. These are for traditional media. Think of the DVD. These are the costs of selling that DVD through Walmart.

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There's the rights, the manufacturing distribution, retail overheads of Walmart, returns, most things don't sell, they get returned, leakage, which is another word of the same, shoplifting, and the unsold inventory, which just sits there on the shelf. on online markets all but one of those go away in digital files you have no manufacturing cost, distribution is negligible retail overhead is negligible, etc. you just have the one thing the one barrier that is retained from physical markets to digital markets

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so rights are as I call the elephant in the room or the long tail the one barrier that stops us from sort of taking that latent demand and turning it into real demand is right. And it's a complete parable. Now, this is a world that you guys know better than I do. But, you know, when I talk to people, especially in the music industry, in Hollywood, in television, everyone says, our archives have value.

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We understand the distribution methods are much more efficient. We have no good way to clear the rights. Each one is cleared individually with a multitude of rights holders. And it's not just the cost of attaining those rights, it's the complexity. The letters, etc. I'll give you a few examples. But in the course of doing a Creative Commons CD a while ago, we talked to artists and we asked them to release a track to us for remixing under a Creative Commons license.

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And one of them was Chuck D. and Chuck D, actually one of them was the Beastie Boys who had a sample from Chuck D. So the Beastie Boys said, fine. And Chuck D said, fine, you can use our sample. And we said, okay, fine. And then Chuck D said, oh, but by the way, when I released that song, I was on a different label. So Beastie Boys, fine. Beastie Boys' lawyer is fine. Beastie Boys' label, fine. Chuck D fine. Chuck D's lawyer, fine. Chuck D's label, fine. Chuck D's old label, not fine.

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Not that they had any problem with it. They saw no upside. No reason whatsoever. Why should we give away rights? What's in it for us? It's all downside. We've possibly lost all the value of this. And no upside. We're going to get no revenues from it. And so not because they had the philosophical opposition to it, but because they had no incentive to do it, they just said no. They just said no. It's so easy for a lawyer to say no. It only takes one lawyer to say no. So that's where we found ourselves and so we couldn't run the track. It's the best track on the CD and you know we

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realized that that we could have asked Chuck D. It was just three words. He says we're going to need a change. We could have called him on the phone and said say going to need a change and recorded it and we would have gotten over this problem but because we didn't do that we ended up you know not being able to do this and that was just one track out of 16 and you know each one of them had samples, etc. It's incredibly complex. So as you know, you guys know all the details of Rice Clearance, but you have, you know, music is the gnarliest.

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You have performance, you have songwriter, you have mechanical. There's all sorts of different statutory and negotiated levels of this. There's a number of different agencies. It's, you know, then we, and then you end up with this kind of, you know, these are what really gets messy when you get things like families. And it's not just a matter of having legal permission to do it, you also need them just to do the paperwork. You need them to sign it. You need them to be willing to entertain the request and you need to find out who they are. It's just

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horrible. This is sort of grounds there. This is the worst case ever. I'm talking about television in particular. So television turns out that the video rights are not a big deal. You can get There's a kind of a well-established process. And the studios and the actors, that's a well-established process. The music in the background of television, it screws everything up. WKRP in Cincinnati is the toughest nut in all television because it was a show set in a radio station.

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And during the show, there was this music playing in the background all the time. And what's worse about it is that its appeal, if there is any, is largely nostalgic. and part of nostalgia is hearing the soundtrack from that time in the background. You can't substitute fake music, you can't substitute new music, you can't substitute different music. It has to be the music that was playing then. I've seen various estimates of what it would cost to clear the rights, if it were even possible to clear the rights for this. And it's in millions of dollars. And as a result, you can't get WKRP Cincinnati on DVD.

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And you may never be able to get WKRP Cincinnati on DVD, unless someone figures out how to clear rights cheaply and efficiently on an industrial scale. So maybe one of you will figure out how to crack this nut. Find a way to clear WKRP in Cincinnati and you have suddenly unlocked the potential of the long tail. Let me give you one other example, movies. So I told you that most of it is something like 13,000 movies shown at festivals each year, of which only 300 get theatrical distribution.

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Some of you may know this, but the way a filmmaker works is that they shoot the film they want to shoot and they pay no attention really to the rights they put the soundtrack on that they want they have whatever kind of you know whatever might be on the television in the background whatever kind of copyrighted information may be kind of incidentally in the screen they don't care, they just do what they want that's the film what they want and they show it at a festival the hope is at the festival that some distributor will will pick it up and buy it for distribution.

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Part of what a distributor does is actually get it to those theaters, and part of what a distributor does is clear the rights for them. They're allowed to show the film without the rights cleared under something called the festival exemption. So at Sundance, there's more than 3,000 films submitted, there's more than 600 shown, and there's three picked up on average each year. So almost all the rest of the films don't get picked up. So what do they do? Most of them are never seen again outside of the festival.

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Most of them never get out there. Others, they'll replace the music with the music that they do have the rights to. And so this is why you hear sometimes cheesy soundtracks that they produce themselves or music that isn't exactly what they wanted but they could get the rights to. And then they'll try to get it out there on DVD, but it's tricky. And I want to give you one example. So Tarnation was a famous movie made, a documentary about his crazy mother. And when this got out there, this is one of these kind of underground,

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grassroots success stories you hear so much about. Everyone said it cost $218. He made it on his Mac, home video camera, it's fantastic. Well, it may have cost $218 to make, but you couldn't release it for $218. It cost $250,000 to clear the rights, but no one ever tells you this. so that's so these great inspirational success stories about how you too can make a movie have this elephant just lurking right around the corner that says actually you can make a movie but you can't show it and if you want to show it

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you need to be playing in that kind of and the $250,000 by the way is cheap it could have easily been $4 million depending on the music $4 million is a more typical rights clearance number it's got to get easier so right now in the music industry you're seeing the rise of companies that are called rights aggregators. And what they do is, Odia is one of the online digital music... Iota. Iota, yeah, exactly. I think they're local, even.

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And these are companies that are trying to take niche music, music from amateurs, and sort of clear the rights, or at least certify that the rights are cleared, so that when you approach an Apple, you're not saying, here's onesies and twosies, they probably won't sell much, but you've got to sign the paperwork. What they sell is, here's 400,000 tracks, one form, rights cleared, will help you. So that's fine for new music.

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But for older music, we have no method. We don't really have a kind of an industrial scale, batch process, one signature deals with an entire archive kind of rights clearance. As I say, there's three ways to achieve this. The way that's probably least likely is that Congress fixes this problem. I think we can just... not in our lifetime. The second way is that 12 people, the heads of ASCAP and BMI

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and maybe some of the big labels, can get in a room and just agree in principle to set up a structure that makes things easier. That could happen. That could happen. It probably should happen. We've sort of seen a little of this with what Steve Jobs did with iTunes. Steve Jobs has this catalytic figure who can actually pull the right people in the room and say, look, I know you have your differences. I know we're a little bit off, but I want to do this. He has the clout and the authority and the connections to be able to bring people in the room and say, let's be real.

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and let's just do it. It's not perfect, but it's a good way to start. The third way to do it is that some innovative company or lawyer or law student is going to figure out a smart way to do this, a smart way to scale these up, and that's a fantastic entrepreneurial opportunity. If anybody can do this, that's a company I would invest in. So let me just finish by just making, showing you just how

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big an issue this is, our entire rights structure has been oriented around the interests of Madonna, basically. The entire interest of the music industry are really, which is really the interest of the top sellers in the music industry, are what drives legislation. Bands that you hear around here don't have lobbyists in Washington. The big labels in Hollywood has lobbyists in Washington. So it's the interests of the very top of the curve that have basically determined the legal structure that applies to the whole code.

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Some of that stuff is like, as I mentioned, the sort of existing and semi-commercial goods that weren't reaching their full potential. Some of it is this pure production stuff that's just starting to emerge. I mean, you see this incredible phenomenon of online video with YouTube and Google Video, etc. You know, virtually all that stuff has got copyright violations. It all has music that they wanted. It has, you know, all sorts of soundtracks. They rip, mix, they burn, they mash up, they sample. it's all illegal technically and it's illegal because it happens because A. most people don't care

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and B. there's no way to scale the laws down so it can be legal we just haven't scaled the laws the procedures down so it applies to the bottom of the tail you know the structure is set up for the professionals but increasingly the contents is being made by the amateurs and people who are just working some in their spare time it's set up to orient it around money-making enterprises, but increasingly content is being made for reasons other than money-making. It's being made for reputational purposes. Wikipedia is an encyclopedia

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built not for money, but for reputation and expression, because it can be done. And most music, as you know, is made because it's fun to make music, not because someone expects to get rich. Again, we assume that copyright applies to the music industry. Well, copyright is of interest at the top of the music industry, In the middle of the music industry, the MySpace sort of era, copyright is of course granted by default, but people ignore it. Artists put the music up for free and they say, we may have copyright, but we allow you to download for free,

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because we see the marketing potential, getting my music out there, as much more valuable than, and getting people to my shows, and getting a buzz around my band, than any kind of tiny amount of sales I might have gotten in CD, or download sales. So there's kind of the emerging market of sort of renouncing the rights they have. And then there's the kind of even more explicit market, people who sort of explicitly say, I declined my rights with Creative Commons. And I do that on my blog, most blogs, or many blogs, explicitly publish on a Creative Commons license.

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Flickr photos are, I think, by default given a Creative Commons license. And you guys know as much about this more than I do. and finally the recognition that the markets which has traditionally been all about economics are now sort of a mixture of economics and sociology or psychology but the laws are all about economics and so we just need to morph these so if we get it right we'll someday have this and if we get it wrong we won't so with that I think I've got about 15 minutes to chat about whatever you want to chat about

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other examples I'd love to have your ideas on this because I've got to say, this is the one nut I haven't learned how to crack. It's just a really, really serious problem, and as both a consumer and a kind of observer of this, I find that the rights issues are the ones that are really frustrating and, let's say, senseless constraint, as bad as limited shelf space and screens. So with that, let's talk.

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So do you think that creative commons is helping the problem at all? Well, let me start with a second. Do I think it's helping? It's not hurting. I think it's got no practical effect, but I think it has a psychological effect. I think it's sort of making people recognize that there is virtue in giving yourself out for free. I mean, again, we've grown, it's been 100 years sort of seeing the world through a hit-driven lens. And we think that hits are sort of the natural sort of cultural, you know,

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we think that hits are what the culture wants. In fact, hits are what the distribution networks want. The hits are sort of lowest common denominator fare that can cut across many, many interests on some generally superficial level. That's because distribution networks require highly efficient products that make the most use of their space. Hits also have their legal implications. Now that we're shifting away from a hit-driven mentality to a niche-driven mentality, we're recognizing that a lot of the assumptions we made about markets are wrong.

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One of the assumptions is that economics drive the markets. One of the assumptions is that everyone makes content to get rich. And one of the assumptions is that everybody wants copyright protection. So I think the fact that you see a large number of people sort of voluntarily adopting Creative Commons is kind of a vote saying, we don't want traditional copyright protection. Is it actually making things easier? No. I mean, iTunes doesn't read Creative Commons licenses. These things are supposed to be machine-readable, and none of the services are machine-reading them.

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iTunes has no capacity to sell music for $0. zero dollars. You can sell music for 99 cents and you can sell a podcast for zero dollars, but you can't sell music for zero dollars. And yet, fully half of the musicians out there would love the music to be available on iTunes for free, but there's no way to do it. So that's, you know, if they, now the reason they don't is because they can't be bothered, they just don't know how to build up that structure, they don't know how to ascertain that free music in fact should be free. And if a Creative Commons license were machine

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readable that would help. I mean it then gets into a kind of problem we've seen with open source which is how do we know that the person who put the Creative Commons license on that product had the right to do so. And you know right now you're looking at problems we have. We have incentive asymmetry which is that the upside in doing this is zero for iTunes because there's no money involved. The downside of hosting you know illegal content is potentially infinite. So creative commons is not by itself the silver bullet, I'm afraid, but it's a good start.

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And as I say, I do everything under creative commons. Do you think that the answer to getting to this goal is we actually need more lawyers? Which is what people usually say. Well, that's why I say in my article. Yeah, in my original white article, I say it's one of those few instances where we need more lawyers, not fewer. Temporarily. And then I want them all turned into something else. Yeah. So, on one of your graphs, you mark how the laws aren't easily scaled down towards the right .

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It seems also that the enforcement mechanisms for copyright holders aren't scaling up well, and so the record may have had a hard time. They've tried suing absolutely everybody. Yeah. So YouTube, for example, is where I see a lot of infringement, a lot of really neat sort of cultural and social sharing going on, but it's one place, it's two. So what I'm wondering is, do you see a place for more, like, take back the streets, less

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legal, regulatory, whatever, but more of a social kind of a, let's just do this and and have a YouTube kind of services like that to support not being able to get somebody a lot of attention. Yeah, well, BitTorrent or Torrent hosting sites get sued all the time as well. I'll try to answer. I may not have got your question quite right, so let me take a whack at it. As you know,

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if you attempt to enforce copyright, you actually make yourself vulnerable to suit. So it's just sort of like we don't even look. It's actually seen as kind of a get out of jail, the free card. And the way Google Video and the others work is they sort of say, look, we're not trying to certify this. If there is a copyright violation, send us an email. It's gone. No questions asked. And if you do try to certify it and fail, then you're potentially negligent and could be sued.

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You know, right now, you know, the vast majority of infringing content on YouTube is not taken off and is not, and doesn't become an issue. And when it is taken off, it's taken off again. An email goes out, a phone call goes out, it's taken down. No lawsuit and it ensues. I guess you're implying that someday somebody will sue. The NBC thing, I think, was particularly... They didn't sue. They just took it off. and is your sense that that doesn't that right now they're playing nice but they won't?

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I mean what I'm wondering is is there a there's got to be sort of something that's outside of markets outside of regulations outside of legal systems that sort of an answer that's sort of a well creative commons was meant to be that but again because because you don't know the original provenance of the content, it's not enough. It isn't a silver bullet.

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My sense is that, of course, this is the laws of physics. You're up against an infinite number of people doing this kind of stuff, and they just can't win. Interestingly, the RIAA suits, the peer-to-peer networks, since the original suits, I guess, in 2000, 2001, peer-to-peer traffic has doubled. We think of it as having been successful, because the the case has got all the attention, but it has had no significant effect. So I think they can't win over time. And this is what gives me some hope that they will come up with a solution on their side

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because it's a losing battle. The legal system is just thumb in the dike. Actually, he actually stopped the water, didn't he? It worked. Thumb in the dike's the wrong analogy. Okay. Yeah, okay. It was a New Orleans dike, though. So there's a bunch of ways. The technologist in me wants the rights to be encrypted and enclosed in the content

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and then evaluated by the services and client software to determine whether it's fair to... They're kind of a smart DRM solution. Unfortunately, we've never seen a smart DRM solution. We've only seen stupid DRM solutions. I mean, maybe one of you will develop a smart DRM solution, but so far it just seems to make things complicated and messy. So I just don't know what the answer is. The answer may be China, and I don't know if you've been following music in China,

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but music in China is a fascinating example. In China, where I lived for most of the 90s, you basically have very poor copyright protection, and that is kind of, rather than fight it, although we, you know, Business Software Alliance does try, rather than fight it internally, you sort of recognize that this is the way it is, and that you think of the music, the product itself is being marketing for the artist. And so Chinese musicians, at least the popular ones, basically assume that the content is going to be pirated and make the money off appearances, off product placement, off

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advertising, off their live shows. They use the goods as an advertisement for the non-piratable commodity, which the artists themselves. And I think that's my space. It's exactly the same thing. It's exactly the Chinese model. Give away your music and bring people to your shows and get buzz, et cetera. That may be the future of music. I mean, it's a little bit like what we were talking about in the 90s of information wants to be free. People forget the second half of that sentence. The sentence was information wants to be free

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and information wants to be really expensive. What that means is commodity information wants to be free but the non-commodity information, i.e. the live performance, wants to be really expensive. And the notion was, just like I do with my blog, people ask me all the time, why don't I put ads on my blog or charge a subscription? Because the $1.50 I would get from AdSense on my blog pales next to the money I would get if I took the money from consulting, from public appearances, from the $40,000 I would charge you for this speech,

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for the board seats, the friends and family shares, the job offers, etc. The commodity information, which is what I ran in my blog, is a marketing for the non-commodity information, which is my personal customized consulting and appearance value. So that may be the future of all this. Yeah, I think we should get in back. There seems to be a greater criminal and philosophical problem which sort of spans all economies and aspects of society in that people think that if they have a right, they could be able to monetize it. You know, there's numbers that apparently 35% of America thinks that they're going to at some point in their life be the top 1% of the income spectrum.

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Yeah. If people just have this idea that, hey, I've done something here, I might be able to make money off of it at some point so people can hold on. You know, I know what you're saying, and there's a lot of validity. I mean, obviously, that's what makes America great is that everyone thinks they can be president of the United States. and opportunity is our core competence. Look at MySpace. MySpace is really a cultural phenomenon. You have something like 300,000 artists giving away their music on MySpace.

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So they're clearly not doing that. Maybe they think that someday they're going to be in the top 1%, but right now they see the value of giving away the content so as to get there. So if that's the lesson from this era, which is that at a certain point in your development, you give away your products so that possibly you can someday monetize it that seems perfectly okay to me and that is sort of the trend we're seeing right now we're not seeing young bands

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sort of adopting the proprietary psychology of the hits we're seeing them sort of growing up in a market where they realize that they operate in a sort of non-economic domain, they keep their day jobs until they get famous rather than acting like they're famous while they're not. Yeah. Assume that the copyright problems go away, that iTunes is really sufficiently available. That's the end of it, assuming. Right. In that world, do you see then a problem

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with the net neutrality issues? Do you see that for you at all? So I promised I wasn't going to get into politics, especially here. But you forced me. So I think the net neutrality thing is completely bogus. I think, by the way, I think the traditional arguments against what the telecos are trying to do are just not going to work.

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Net neutrality is not a policy that we've legislated. It's just the emergent property of the internet itself. The markets established the currently only roughly neutral internet we have today. As you know, of course, you can buy better service. You buy more bandwidth or bigger servers or better peering connection, etc. So the only sort of net neutrality we have has been broadly the market at work, which is that it's

Listen from 35:18 (MP3 audio)

a sort of transparent market in quality of service which you can buy. and I'm all for transparent markets. The legislators, and is it, who's the senator? Wyden, exactly, who I met. What they're trying to propose is regulating the internet for the first time. And having seen what regulations did to the telephone networks, this is not what we want. Well, telephone has traditionally been regulated as a common carrier, and so that's a concept that they want to preserve.

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Well, the Internet is unregulated at the moment right now. If you impose regulation, you end up with all the complexities, which is basically you have to have a PUC approving rate schedules, which is just hideous. It gets corrupt, it gets slow, it gets inflexible, it gets typically unfair. The one compromise I'd be willing to see would be pricing transparency. Well, we're not talking so much about rate schedules as non-discrimination.

Listen from 36:23 (MP3 audio)

Well, but how do you confirm non-discrimination without publishing and having approved a rate schedule? This is how it's done in the telco world. I thought it was interesting, just right after the FTC-ATCP merger, all of a sudden, equity neutrality is an issue, when the backbone is starting to concentrate. This is not a new issue. I mean, we've been talking about the internet tax for 15 years now. It never happens because the market won't allow it. I mean, this is a case where once the genie is out of the bottle, once an unregulated Internet is out there,

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it's very hard to, you know, for any, I mean, no one has monopoly power. There is no telco out there who could unilaterally make this happen, even if they wanted to. They can try, but they'll find that they'll be nibbled away by free market competition from around, you know, from all the thousands of other ISPs. So I think actually this problem just goes away on its own. Let the telcos do it. They'll fail. So you posed a very difficult problem for us. I don't know that there's going to be a solution, but let me give you three

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possible solutions. Pick any two or something. And now I'll tell you that I don't even think these would work. One thing we could do is have a copyright term that's far shorter, like 14 years or something. Yeah, but that's legislation. Sure. And that might solve something like your WKRP thing. If you just wait long enough, the problem goes away, you don't have to deal with families. And there would probably also need to be some registration required, right? So we know whether you renew this or not. Go back to the old system. Would love that. Not going to happen. Another thing we could do is say, look, you don't have a derivative works right anymore.

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You put your thing out there, only thing copyright gives you is protection for that thing. People want to make derivatives, they're free to do so. You could do that. Love it. Also legislation. And my third is going to be legislative. Another thing you can do is have a very objective, fair use standard instead of the four-part balancing test that we have now because as lessing says right fair use is the right to hire a lawyer we could say look if you take less than five percent of the work you know you're home free or something you know you could set something arbitrary up like that yeah it wouldn't work very well but you could do that um now suppose you did all those things

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i'm generally not a person very sympathetic to the copyright maximalists who are really worried about protecting their rights even i think this book might not work right you might not get us what you want, and it might go too far, right? I mean, I think about the copyright owner now in this world, and they have lost maybe something valuable, you know, the chance to monetize, even if they're crazy, right, that they can never, most people will never monetize. We take this much away from them, I think we may actually hurt somebody that we care about. Well, you probably will hurt somebody.

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In the congressional debate, the little old lady who inherited the rights to is not happy birthday, something like that, is always invoked. They're not sophisticated about this. They don't know to renew the rights automatically. Their fixed income, the pension depends on the trickle of rights that comes from people singing happy birthday, whatever, and if you make this automatically expiring and raise the barrier to entry to preservation of these rights, that these smaller

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rights holders will lose. And it's true, they would. they would lose. I mean, I think you basically have to balance the kind of interests of society with the interests of the many against the interests of the few. And, you know, if I thought that Congress had the wisdom or even the ability to make smart policy on copyright, I would love to have that conversation. But, you know, all of the evidence we have over the last 10 years is things are getting worse, not better. And I think it's going to have to come

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from the industry itself. Because Congress follows the industry's lead. If the industry decides to stop lobbying for copyright extension, or to instead lobby for a more flexible copyright regime, then I presume Congress will follow that, or at least will consider it. And the question is, how do you get the people who are really in the midst of this to understand the broader, the bigger picture and the advantages of remix culture, without just being stuck in the old world of preserving every possible right they have.

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That's what I was going to say. Isn't that sort of industry changing their mind, solution, just sort of a matter of time in a way? Because both as the sort of industry sort of slowly realizes, okay, change is okay, we can do change, we can still make money. It just might have to be a little more slow. Then also as a generation of artists and consumers grows up with a MySpace model and all of a sudden maybe the music industry can't get any artists on their big label anymore because, I mean, so, I mean, maybe, you know, weight isn't the right answer, but... No, I think you're absolutely right. I think it is a matter of time. I think it's,

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I think it's not a matter of, you know, the existing executives kind of changing their mind. It's more a point of a new generation of executives, probably in new companies. I mean, I expect that the existing companies are going to, are going to go out of business or be acquired or shrink dramatically, and you're going to actually have to see new companies growing up with new models who, who understand this. It's very hard for, you know, I, I work America's biggest publisher, biggest magazine publisher, and I can tell you that we have a huge business to preserve and a tiny business to grow. And all of our jobs basically depend on preserving the old business, not only the tiny upside

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in encouraging the new business. And so it's just structural problems in the industry. It's not a matter of wisdom. They're all smart people. I mean, the problem's not that they're stupid or mendacious or evil. The problem is that they're locked into incentive structures that don't allow them to migrate to the new way. And that's why I think that I'm looking at startups, new companies, radical innovators like Steve Jobs to come in and really sort of cross that chasm. All right, Thomas, please. Great. Thank you.