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Intellectual property, automated contracts, and the free flow of information

by Michael Nielsen on February 13, 2008

How should society reward people who write books, paint pictures, make music, write programs, or who are otherwise creative? We have an established intellectual property tradition ensuring such people’s efforts are rewarded. That tradition is now breaking down, as the internet enables creative content to be duplicated and redistributed to anyone at near zero cost. As a result, there’s a lot of ferment in people’s thinking about intellectual property, resulting in rapid technological and commercial changes that will determine both the future incentives for people to create, and the extent to which we’ll take full advantage of digital technology.

This essay on intellectual property has been influenced by many people, especially Lawrence Lessig’s excellent books The Future of Ideas and Free Culture, the Creative Commons organization, and Cory Doctorow’s writing. I believe there’s also some new ideas here, especially my explanation of how automated contracts may help lead to a world which balances the goal of providing people with incentives to create, and the goal of fully developing new digital technologies.

The conventional narrative

There’s a conventional narrative about intellectual property and the internet that exerts a magnetic pull on discussion about these issues. I’m going to set this narrative out explicitly here, in part so we can set it aside, and head off in an apparently quite different direction, before circling around to address these issues.

What the conventional narrative says is that there’s a war going on between the pirates and the content creators, or, more precisely, the content distributors, who, at present, typically represent the (commercial) content creators. (The content creators and content distributors often work together, at least at present, and so I’ll use the catch-all term content producers for both groups.) Because the internet enables information to be copied at near-zero cost, the pirates are putting everything online willy-nilly, available to be freely downloaded by anyone. The content producers are fighting a rearguard action, lobbying for strengthened copyright laws, imposing digital rights management technologies designed to make it difficult to manipulate digital media, and aggressively pursuing people they suspect of violating their copyrights.

Along with this conventional narrative is a conventional set of arguments associated with each band of participants. I won’t go into the details of these arguments, except to note that on both sides it seems to me the arguments stem mostly from self-interest. This is transparently so in the case of content producers such as the RIAA and MPAA. It also seems to me that much of the rhetoric from those who download “free” music and video is ultimately rooted in self-interest. For the most part, we’re going to ignore these arguments, and focus
instead on the question of what’s best for society as a whole, a question whose answer must accommodate both the needs of the content creators, and also the full development of digital technology.

The creative commons

Rather than pick the conventional narrative and its protagonists’ arguments apart, let’s broaden our field of vision. In particular, let’s look at an important concept dubbed the creative commons by Lawrence Lessig. The creative commons is the set of creative ideas that are available for all of humanity to reuse. Examples of items in the creative commons are things like scientific formulae, open-source software (sometimes with some restrictions), out-of-copyright books and music, myths, and many other cultural traditions. Collectively, these items form a creative commons of ideas that can be drawn on and used to create new things.

What is the impact of the creative commons? On the scientific side, results in the creative commons have laid the foundation for much of the modern economy. An example is Maxwell’s equations, which govern electrical and magnetic phenomena, and which are at the heart of all uses of electricity. Another example is the invention of the periodic table, which is at the foundation of all applications of chemistry. Imagine how much benefit would have been lost to the world if the use of Maxwell’s equations or the periodic table had needed to be licensed under an intellectual property scheme! Fortunately, basic science has a tradition that results are put in the public domain where anyone can use them. Legally, it’s not possible to patent or copyright a mathematical theorem, or a formula in physics or chemistry. This tradition of putting things in the public domain has been eroded in recent years, as Universities in many countries are urged to be more corporate in their approach, but by and large the outcomes of pure research may be freely reused and built upon by others.

In the software world, the creative commons is also flourishing, in large part because of the free and open source software movement pioneered by Richard Stallman, and now being carried forward by projects such as GNU, Linux, Apache, Firefox, MySQL, and thousands of smaller projects. The impact of this software is enormous. Huge companies such as Google, Yahoo, eBay and Amazon run large parts of their operation using open source software such as Linux, Apache, MySQL, Perl, Python and PHP, the famous LAMP stack. The LAMP stack of software is ubiquitous in web startups; the combination of free open source software and cheap commodity hardware means that anyone with some programming talent, a few weeks or months to spare, and a few thousand dollars can launch a web startup. The result is an extraordinary explosion of innovation, built off this open source software.

On the cultural and entertainment side, the creative commons has not fared so well. Over the last fifty years copyright terms in many countries have been greatly extended, and made far more restrictive. This continues as content producers lobby for ever tighter restrictions on reuse, in part as a way of defeating the pirates. People making movies and documentaries routinely spend enormous amounts of time and money tracking down the rights for every object that appears in their production. Even when a case can be made for “fair use”, a slow and expensive legal system means that most creators are not willing to risk reusing someone else’s intellectual property without their explicit permissions. The result is that it is no
longer possible to freely build upon and extend past cultural products. In the short run, this benefits content producers. Over the long run, this contraction of the creative commons hurts everyone.

The conflict between content producers and content organizers

The conventional narrative I described earlier emphasizes the battle between pirates and content producers. There is a much less visible conflict that is also going on between content producers and content organizers, companies like Google, Technorati and Apple (through iTunes) who aggregate and structure information. In fact, these two conflicts are closely related, and, as we’ll see, understanding the producer-organizer conflict sheds light on the producer-pirate conflict.

As an example of the producer-organizer conflict, consider that in 2006 a group of Belgian newspapers sued Google, ostensibly to get snippets of their news stories removed from Google News (full story). In fact, the newspapers were well aware that this could be easily achieved by putting a simple file on their webservers that would instruct Google’s web crawler to ignore their site. It’s difficult to know what the real purpose of their lawsuit was, but it seems likely that it was part of a ploy to pressure Google into paying the newspapers for permission to reuse the newspapers’ content.

This story is only one of many examples of a growing tension between content producers and content organizers. Many producers view organizers as essentially stealing their content, in some cases regarding it as not dissimilar to file-sharing services for music and video. Furthermore, the tension is tightening sharply as people develop more services for organizing information, and profits increasingly flow toward the organizers rather than the producers.

As another example, in 2007 Google had advertising revenues of approximately 16billion dollars(!), most of it from search. Yet, according to one study, approximately twenty-five percent of the number one search results on Google led to Wikipedia. Wikipedia, of course, does not directly benefit from Google’s advertising profits. I don’t know what Wikipedia thinks of this situation, but I’ll bet that at least some of Google’s top content sources are not happy that Google reaps what may seem a disproportionately large share of the advertising dollar.

What can we learn from these examples? As content moves online, additional layers of organizing services are being built on top of that fundamental content layer. Although it’s still early days, with the present architecture of the internet most of the financial benefit is flowing to the higher level services. Understandably, this is making many of the content producers unhappy. Indeed, it’s not hard to imagine that if some different design decisions had been made in the early days of the web, those decisions would quite possibly have
changed the business models used on the web, and yielded quite different financial outcomes for the different parties.

These higher level organizing services are booming. Aside from Google, other examples of new niches in the organization of content include RSS readers (Bloglines, Netvibes); social news sites (Digg, Reddit); even my own Academic Reader is an example. Of course, these services are only the tip of the iceberg. There is so much unmet need for information organization that I expect organizing services will be the single largest growth area in the world’s economy for the next decade or two. This growth will only exacerbate the tension between the content producers and the content organizers.

At the moment, in the conflict between content producers and content organizers, the organizers are wining. The content producers don’t yet have much footing to fight the content organizers. Think about what Google’s search engine does: it copies pretty much the entire web to Google’s servers, then processes that information in a sophisticated way, and then, in response to user queries, produces a list of relevant links. In short, it’s making quite sophisticated use of other people’s content in order to derive commercial benefit. But copyright law wasn’t developed with vast data mining operations in mind, and so Google is immune from prosecution under current copyright law.

I described the producer-organizer and producer-pirate conflicts as separate, but in fact there’s a continuum between pirate file-sharing services and content organizers like Google. The pirates add much less value than Google, and make more explicit use of other people’s content, but both services are still fundamentally about offering an organizing service to the consumer that sits on top of a fundamental content layer. Other services are intermediate between the two. As an example, YouTube contains many videos which remix content from dozens or hundreds of other sources. In many instances, the original sources are transformed almost beyond recognition. Here again, as with Google, value at the organizing layer does not flow to the creators of the underlying content. Instead, all the value flows towards the higher level services.

The lesson here is that the conventional framing described at the beginning of this article is only a small part of a much larger issue. The question isn’t about pirates versus content creators or content distributors. The larger question is how content can be shared in such a way as to both provide incentives to the original creators of the content, as well as to enable people to add futher value to that content, by organizing it, making it accessible, and so on? How should we, as a society, best answer this question?

It is, of course, greatly to the public benefit for the information organizers to thrive. However, for this to happen a great deal of information must be made publicly available, preferably in a machine-readable format like RSS or OAI. If the information is partially or completely locked up (think, e.g., of Facebook’s friendship graph), then that enormously limits the web of value that can be built on top of the information. Yet organizations like Facebook are understandably wary of opening that information up, fearing that it would harm their business.

The situation is complicated by the fact that the best people to organize and add value to information are often not the original creators of that information. They may lack the expertise – think of all those terrible in-house search functions that used to appear on websites. Or they may have conflicts of interest – the New York Times would have a tough time running something like Google News, since other news organizations would be reluctant to co-operate with them.

There are two nightmare outcomes that might occur as the result of current trends. The first is where content is, by default, locked up, and can only be painstakingly unlocked. This is a world where both piracy and Google are impossible. Many content producers are keen on such a world, preferring that they maintain their portion of the pie, without regard for the growth of the pie as a whole. They have lobbied hard to achieve such a world, and the past few decades have seen many notable extensions of copyright and other intellectual property law, aimed at locking content up by default.

The second nightmare outcome is where content is by default freely available for anyone to reuse in arbitrary ways. This is a world in which both piracy and Google are possible, and it will also be a disaster, as it becomes much harder for content creators to make a living, and the quality of the content being produced drops.

What we have at present is an intermediate regime, where we’re seeing a blend of these two scenarios. Outright content sharing is banned, but the present regulatory and technical framework is insufficient to close down the pirates. Content organization is still okay. What we’re seeing as a result is a migration of value up the chain from content creators like the New York Times to content organizers, like Google. This, in turn, is causing the content creators to erect fences around their data. The net result is not in anybody’s best interest.

I think we can do much better than in either of these scenarios. In particular, I think that with the right tools in place, we can ensure that content creators and content organizers are both adequately rewarded, and the public gets the full benefit of digital technology. In the remainder of this essay, I’ll describe how I think this can be achieved, and the consequences for the different groups involved – the pirates, the content creators, content distributors, and the content organizers.

The confluence of digital rights management, contracts, and digital money

How can we reach a situation in which content creators have incentives to produce content, yet information is freely available for other people to organize and add value to? I don’t have a complete answer to this question. However, I think an outline of an answer can be given, which combines legal, technical, and financial innovation, as well as the development of appropriate community norms.

Here’s what I think we’ll eventually see: automated contracts negotiated and carried out machine-to-machine, allowing people to share and reuse information. The broad overall terms that may be set in such contracts will be governed by law, and will be validated by machine; many of the terms will be set by statute. The contracts will be enforced in large part by the design of the underlying technical protocols, using ideas from cryptography and digital rights management. We will see the emergence of an information market, in which these automated contracts play a key role in mediating transactions; I think it likely that we will also see the introduction of new financial instruments to assist in the functioning of this market.

(Digital rights management tools get a bad rap from many people, largely because many of the companies now using these tools do so with asinine intent, preventing people from doing perfectly reasonable things – I was pretty annoyed the first (and only) time I bought a pdf from, and discovered that I couldn’t mark it up using my tablet PC, simply because of digital rights software. However, many of the technical ideas underlying digital rights management are quite powerful, and potentially useful in enforcing contracts, if deployed within a sensible regulatory framework, and within a set of sensible community norms.)

The move to automated contracts won’t happen in one step. What I expect is that over the coming years we’ll see this slowly happen in many tiny steps. A primitive example already in use is the automated payment option you can use at online stores like iTunes, so if a purchase is below some threshold cost, you don’t need to explicitly authorize it. Another existing example is the practice some companies have of offering a tiered way of accessing their data. For low usage, access is free through an open API, but for higher usage, one has to pay.

I’ve only described the barest outlines of a system that will balance the interests of content creators and people who would reuse and add extra value to that content. Yet I see reason for optimism that we will eventually arrive at such a system. In particular, I am hopeful that such a system will emerge from the balance of interests between the content producers, the newly emerging (but already very powerful) content organizers, and independent voices speaking for the public interest, such as Lawrence Lessig, Cory Doctorow, the Creative Commons, and the Free Software Foundation.

In my optimism, I am distinctly at odds with Lawrence Lessig’s more pessimistic analysis. Lessig sees the content producers as having so much power that they’ll inevitably enforce massive copyright restrictions on virtually all forms of content. This will result in the creative commons stagnating, which will greatly diminish our collective creativity. I don’t see it this way. In the short run, I think Lessig is right: the content producers will have some victories over the pirates, mostly phyrric victories whose main effect will be to stifle innovation. But I think that powerful content organizers such as Google and voices such as the Creative Commons will counteract this short-term effect, and over the long run it’s reasonably likely we’ll see a sensible and sane copyright system emerge out of the resulting balance of interests.


What will happen to the pirates in a world of automatically negotiated contracts? They won’t be shut down completely — it’s too easy to put content online, so I expect they’ll remain a part of the ecosystem. However, a combination of three factors convince me that the importance of the pirates is going to greatly diminish in the near future.

First, there are always going to be better and better ways of organizing information; Google, eBay, Wikipedia, Amazon and the rest are just the beginning – tools like these are going to get far better, and many entirely new classes of tools will be developed. Second, organizing information well is hard. Google works far better than earlier search engines because the founders of Google had some very clever ideas about how to do it better; developing such ideas requires both brains and lots of hard work. Third, the fact that organizing information well is hard means that the best services will have a substantial lead over their nearest competitor (consider Google versus Yahoo); they’ll have an effective monopoly over a scarce resource. No matter what your goal (finding music, finding learning materials, whatever), people are going to be willing to pay to use the service that does the best job at making information more useful.

An example of this is the music recommendation engine, which does a great job of understanding its users’ musical tastes, and recommending music based on those tastes. People are willing to pay to use (indirectly, through advertising, or through their subscription service) in preference to other services, because it does a better job recommending music to them.

So what I expect to see is an arms race of people creating better and better services to organize information. People will tend to use those services in preference to the pirates, precisely because organization is valuable to them; witness the success of, which as of January 2008 had more than 15 million active users. Furthermore, the creators of those services will have to work hard, and most will hope to be paid for their labours; they thus have a vested interest in being legitimate. If the appropriate legal and technical framework of automated contracts is in place, the result will be that everyone gets well rewarded for their role – the content creators get paid, the content organizers get paid, and the public gets great content in an organized way.

As an aside, the cumulative nature of open source software means that there will be a gradual drive toward free services. We’re already seeing this today: a service which people are willing to pay for today often quickly becomes something that can be easily duplicated for free by building on open source software. This will produce a continual drive for people to innovate, in order to stay profitable. While this is good, it is possible that in some markets it may lead to an unfortunate situation where the capabilities of the systems effectively saturate, and pirates will be able to duplicate the features of for-profit systems. We’re a long way from this situation at present.

I said above that the content creators will get well rewarded for their labours in this world of automatically negotiated contracts. What about the content distributors? My opinion is that with their old business model, the current content distributors are toast. They either need to change their business model, or they will be replaced entirely by content organizers who actually add value to the content.

To pick an example, in the music industry the main advantage the big recording companies had fifteen years ago was their stable of artists and their distribution power. The latter advantage has evaporated with the advent of the internet. Meanwhile, my analysis above suggests that the main advantage the winners of the future will have is technical superiority in organizing and adding value to information, in large part driven by data they get from their users and other sources. At the moment, the RIAA and the recording companies are doing very little to build technical expertise, and they are more interested in suing their users than getting data from them.

The big remaining advantage the recording companies have is their existing stable of artists. Unfortunately, these people are increasingly likely to leave the major recording companies, as they can offer less and less to them. One possible option which one or more of the recording companies could take is to reinvent themselves as a kind of union or guild for the artists, essentially an organization for negotiating en masse with the content organizers.

The big winners in all of this will be the people and companies who are organizing and adding value to information. Humanity is well on its way to putting its collective wisdom online; now is the time to start organizing and connecting it in meaningful ways.


If you enjoyed this post, you might also enjoy my posts Open Source Google and The tension between information creators and information organizers. The latter post overlaps somewhat in content with the current post, but it has a different perspective.

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  1. Anders permalink

    Hi Michael,

    Short answer to a long post:

    1) Content-organization is a value-add operation independent from what is being organized. There is no natural reason that content organizers should share the value they create with anyone.

    2) DRM by any other name is still Digital Restrictions Management.


  2. Anders permalink

    And DRM will always be ‘asinine’ to the people who are restricted. The rights holders to your amazon pdf will of course tell you

    ‘Why do you have to mark up the pdf. Why can’t you just read it. Why do you want special treatment.’

    And even more seriously DRM is by design anti-innovation. By restricting use to only a few tabulated permissions. Innovation – use in new and useful ways – cannot be conducted in a DRM world.

    DRM will always cut off ‘the long tail’.

  3. Michael Nielsen permalink

    Hi Anders,

    Thanks for your comments. I partially agree, and partially disagree. You write:

    “1) Content-organization is a value-add operation independent from what is being organized. There is no natural reason that content organizers should share the value they create with anyone.”

    The first part of your statement is false. Would Google be worth as much if the web consisted of just 1000 pages? Would Amazon be worth as much if they had a catalogue of just 10 books? (Of course, Amazon does share value.) Etc.

    The second part I agree with, insofar as I don’t think there is a natural way of doing anything here. Rather, it’s up to our society to decide how that value ought to be shared.

    You write:

    “And DRM will always be ‘asinine’ to the people who are restricted. The rights holders to your amazon pdf will of course tell you

    ‘Why do you have to mark up the pdf. Why can’t you just read it. Why do you want special treatment.’”

    I quite agree with you (indeed, I say in the post) that many current implementations are asinine and anti-innovation. That doesn’t mean that the underlying technologies can’t be used to support innovation, in an unobstructive way.

    You have not addressed my point that unrestricted and uncompensated content reuse will result in value migrating more or less wholesale to content organizers (rather than producers), which is not in anyone’s long-term interests.

  4. Anders permalink

    Hi Michael,

    I think that content-organization is independent in the sense that organization of information is always value add. And it does not need to interact (beyond reading or copying) with what is being organized, nor to interact with the producers of the content. Since content organization can be done without the help and interaction of the producers there is no reason to share the value of the organization-work.

    I think that DRM can never be used to support innovation, in an unobstructive way.

    DRM is a tabulation of restrictions and permissions. Innovation happens in ways not foreseen in that tabulation. Therefore DRM will always prevent innovation.

    It is difficult to speak about value migrating. I think it is probable that per-copy pricing of digital content is wrong and harmful. Since such pricing is not related to underlying marginal cost.

    So I think some key points in continued production of content is.

    1) Cost of production must be brought down. There is no reason that current levels of cost should be viewed as sustainable when technology changes.

    2) Digital replication is not the only content-related activity to charge for.

    3) People are willing to pay even if they don’t have to.

    4) The initial replication is still valuable. Think work for hire.


  5. Michael Nielsen permalink

    Hi Anders,

    Thanks for your thoughtful comments. Mostly we’re in agreement. I certainly agree with your points 1)-4), although I have my doubts about 3) when the novelty wears off.

    I also think our disagreement over DRM is mostly terminological, not fundamental. I certainly agree with you that most current implementations are idiotic.

    I do think your statements about DRM are too sweeping. You say “DRM will always prevent innovation”. Do you think that was true of copyright (which has much in common with DRM), especially in its original, 14-year form? I think a modest copyright regime (not the current one) probably enhances innovation.

  6. Michael Nielsen permalink

    Following up, I think our more substative disagreement is over this claim: “Since content organization can be done without the help and interaction of the producers there is no reason to share the value of the organization-work.”

    If value migrates entirely from content producers (e.g., the New York Times) to content organizers (e.g., Google), as seems to be happening now, we may lose organizations like the Times. Now, you can, of course, argue that for this specific example their content is not good enough to be worth preserving, if you like. That’s fine. But I don’t think it’s a good idea if it happens 100%. I think there needs to be a balance between content producers and content organizers, if the former are to survive, and for there to be any high-quality content to organize. For this to happen, the law, technology, and cultural norms all ought to reflect that balance.

  7. Hi Michael,

    Thank you for your thoughtful blog-post :o). I really like it even if I am not convinced about all points.

    I think that some people will be willing to pay even if they don’t have to. Even when the novelty wears off. True fans. Some producers of content will have true fans, some won’t.

    I think there are two fundamental differences between copyright and digital restrictions (if the restrictions work).

    1) DRM is “hard”, copyright is “soft”. One can experiment and innovate with copyrighted works and share the product in violation of copyright.
    And it is relatively safe to do if the sharing is with friends and family. With digital restrictions experimentation and innovation is prevented.

    2) There is a balance of effort in copyright. The rights holder must judge if an intervention to enforce copyright is worth the effort. There is no such balance with DRM.

    I think that modest copyright priviledges (eg. reproduction monopoly) probably enhance innovation. But I am not sure it is worth the cost.

    Furthermore, I think there are two practical reasons that dreams of “[DRM] used to support innovation, in an unobstructive way” are unrealistic.

    3) Any set of privileges especially if given to compaies will be abused. The DMCA is a current example.

    4) With the current level of protection and priviledge afforded to rights-holders it will be difficult to scale back.

    With these two items, maybe I’m just being pessimistic.

    To me, arguably, The New York Times is a content organizer. They organize the work of individual journalist in a particular way. Which I currently find superior to e.g. Google News. I may not in the future.

    I think that the idea that value will migrate from producers to organizers is a bit off. Content organizers will increasingly add value for people seeking information, because there will be much content to organize. And it will only be accessible (and discovered) if organized. But not only Google organizes. Social networks organize. For free.

    At the same time, but related only in the way that people have a limited amount to spend, and may reprioritize, content producers will find it difficult to find models of revenue generation that are not of the unsustainable “per view/reproduction” type.

    And people will find it difficult to decide how to effectively and fairly support producers they like.


  8. Hi Anders,

    That Kevin Kelly piece you link is terrific. If I had to read just ten blogs, I think he’d be on the list.

    Regarding DRM: As I said, I think our disagreement is mostly terminological. I agree with everything you wrote about DRM if you replace the phrase “DRM” by “current implementations of DRM” in your comments.

    The way I understand the term DRM is to refer both to a product (e.g., as used by Sony, Apple, Amazon, etc), and a set of underlying technologies. I believe you’re using the term in the former sense, while in my post and comments I’m using the term in the latter sense.

    I completely agree with you that most (nearly all) current DRM products stifle innovation, and hurt everyone, including the companies who peddle it.

    However, used more sensibly, DRM technology could be used to build products that promote the kind of balance of interests that (early) copyright law promoted. Sadly, only a few companies seem likely to take this attitude of enlightened self-interest. Unless this changes, I think the best we can hope for is legal restrictions on DRM, balancing the rights of consumers, companies, and the need for innovation.

    Re: The New York Times. A large fraction of the value produced by the Times is in the reporting, i.e., content production. The fact that some fraction (a relatively small fraction) of their fixed costs are in organization doesn’t affect my argument at all.

    I agree with you that “people will find it difficult to decide how to effectively and fairly support producers they like.” This is what worries me.

  9. Hi Michael,

    Back from vacation now.

    What I am trying to say is DRM is a bad idea _exactly_because_ it is a technology. It is a machine protocol. It regulates machines. Copyright regulates humans. That is the difference. No amount of hypothetical future better implementation will change that.

    Also, in my opinion, DRM cannot be used sensibly. Not only will the machine-ness and limited tabulation of permissions always hinder innovation. The prerequisites for DRM to work are horrendous. Machines and software that implement DRM cannot be studied/tinkered. Machines and software that implement DRM cannot be changed by users. DRM is fundamentally incompatible with freedom and userdriven innovation. Not only in the use of content itself but also in the use of the machines and software related to using the content.
    The costs of DRM are breathtaking. The benefits: preserving a business models out of touch with the physical reality of neglible cost of digital copies.

    Maybe I am splitting hairs. But to me, NYT is an organizer. _Journalists_ produce the reporting. Journalist that could work elsewhere. Journalists that could write the same content on their blog. If the NYT building was dismantled and the executives disappered the journalist could still write.

    “I agree with you that “people will find it difficult to decide how to effectively and fairly support producers they like.” This is what worries me.”

    It worries me too. But I feel that per-use pricing of digital content is wrong. It violates the fundamentals of price-marginal cost relation. And the artificial scarcity it requires is anti-social.

    But I think Kevin Kelly is on the right track. We need to find ways to support content producers without imposing artificial scarcity on society. And we need to see that the the spending by current information monopolists may not be sustainable in the future.

    And we need to be optimistic for the future. A society where spending is driven by true fan-ness may well have much better content than a society where content is driven by indifference to advertisement intrusion eg. soap operas or churnalism.

  10. Michael Nielsen permalink

    Hi Anders,

    I doubt we’re going to find much common ground about DRM. You are, as I said earlier, using the term DRM quite differently than me. Used in your sense, I agree with most of what you write. But I believe you’re thinking too narrowly about DRM, focusing on current instantiations, rather than thinking about the potential of the underlying technology.

    As a concrete example, do you think digital money should be banned? It relies on DRM, broadly construed.

    On the NYT – if you tease apart the production and organization functions of the NYT, as you have, then I agree with you; as an organizer (though not as a producer), the NYT is simply being outcompeted by Google. It doesn’t change my underlying point – the producers are being put in a bad situation by the present arrangement, and something will have to give.

    “I feel that per-use pricing of digital content is wrong. It violates the fundamentals of price-marginal cost relation. And the artificial scarcity it requires is anti-social.”

    I agree with much of this. However, there is a tension with the idea that people who create more popular content should be more richly rewarded. Do you have any thoughts on how to resolve this tension? Maybe true-fandom is the way to go?

  11. Michael Nielsen permalink

    By the way, Anders, thanks for your continued thoughts! And I hope you enjoyed your holiday!

    Best wishes,


  12. I think a more narrow definition of DRM is usual.

    To me DRM is someone else enforcing access control to content on my device. Digtal money does not rely on this. The interaction between digital money and my computer (netbanking) just relies on authentication.

    A practical test is: DRM doesn’t work on GPLv3-Free Software. Digital banking does. DRM takes control over my device away from me. Digital banking does not.

    On what “has to give” I hope it will be the present cost structure of media organizations.

    To me some of the most interesting stories in the NYT are the columns and the op-ed’s. These are not expensive parts of the newspaper. Do we need to pay people to express their opinions? History suggests not. Paul Krugman writes well on economics. And it is not expensive to him to know the subject matter, since he is an economist. Do we need Economics journalists?

    More expensive would be an Iraq correspondent. But is the NYT coverage really better than a good collection of iraqui blogs?

    Do we need Iraq correspondents? Do we need one at each major newspaper? The internet has changed the cost of us getting news directly from a diverse collection of Iraquis.

    As Clay Shirky says. Large parts of the internet can run on Love alone.

    I think this will also be so for news coverage.

    And I think there are models of the future out there.

    1) BoingBoing. You probably know it. They organize news in a way google doesn’t.

    2) – Easily the best newspaper in Denmark. It produces high-quality original content. And through collaborations with eg. “The Independent” in England and “Liberation” in France they get high quality foreign content. It’s a nich newspaper. And I’d say it is already close to true-fan based. I’m a fan too. I subscribe even though I almost exclusively read their blog. The blog is free for all and in some ways even better than the paper itself.

    I think that more popular content will always be more richly rewarded. Just less richly than in monopoly times. I have thought about the same. There is some fundamental satisfaction that the market rewards the good and not the bad. Fortunately the “True Fan” market will do the same.
    Tim O’reilly says it well

    “Piracy is progressive taxation”. And legal copying with the lack of legal reproduction monopoly as copyright is the same. And I am a fan of progressive taxation in general :o)

    And yes. I think it is safe to predict that more popular content will give more true fans.


  13. Michael Nielsen permalink

    DRM and digital money rely on the same underlying set of technological ideas. For example, most types of digital money don’t allow the money to be copied (for obvious reasons), and it can only be in one person’s hands at a time. If there’s a distinction between those ideas and DRM, I can’t see it.

    I agree with most of your opinions about DRM, but only narrowly construed to be as applied by a few of today’s companies. As stated in my article:

    “many of the companies now using these tools [DRM] do so with asinine intent, preventing people from doing perfectly reasonable things.”

    But, as I’ve said repeatedly, a much broader view is possible. You don’t seem to be willing to think about that broader view.

  14. Hi Michael.

    I think there is a fundamental distinction. Digital money works just fine with untrusted copies (see below) as long as there are trusted copies. So trying to take a broader view seems non-sensical to me. Digital money works without DRM. And the concepts that make digital money work do not work for “digital content” want-to-be monopolies.

    The current handling of digital money is different from DRM. I would not trust a signal from your PC saying that you have $1000. And I will not accept a signal from your PC telling me that you are transferring $1000. I will accept a signal from my bank that $1000 has been transferred to my account. And my bank accepts a signal from your bank.

    And the bank does not rely on any information on your account balance that is on your PC. You can have a statement of your balance sent to your PC. And you can change or copy that as many times as you like. That copy of the information is not trusted by anyone. The balance the bank trusts is the one it has on it’s own servers.

    For your sake the bank requires an authentication of your identity to allow withdrawals from your account. And you can authenticate by using the digital certificate and password you have established with the bank. But this is not DRM, because it requires no access control to content on your PC.

    You see the distinction? Digital money works without DRM.

    Can you point to any system of digtal money which is not either essensially the above or an expensive failure?

    So why don’t “digital content” want-to-be monopolies use the same strategy as banks for digital money?

    Because, obviously, “digital content” has no value to you if it stays on some companys server. You want the content on your computer to use it. Much unlike digital money which has value exactly because the information is on the server of the bank.

    Does this make sense?

    That DRM sucks is not a failure of todays technology in my view. Someone else exercising access control on your PC will always suck. It is a failure of the underlying concept. It will never be better.


  15. Michael Nielsen permalink

    See the Wikipedia article on “Electronic money” ( for examples. The forms of digital money I’ve studied in detail (several) are, both technically and conceptually, very close to DRM. An example is the articles of Chaum, linked at the bottom of the page. Are you familiar with these systems? Would you prevent their use?

  16. Hi Michael,

    The articles of Chaum are neat. I was not familiar with them, so thanks for the pointer. I think I need more convincing to agree that what he describes is “technically and conceptually, very close to DRM”. At least I would have no hopes to sell it to a would-be content monopolist. I think I will be turned down. It does not do what they want.

    To adopt the terminology of Chaum p 201. Want-to-be content monopolists have content “x” and want functions c and c’ such that c'(c(x)) = x and they want to supply people with c(x) and some device that is capable of performing c’ but without giving the users access to x except in a set of predefined ways. And this list must not include “copy x out of the device”. Do you agree that this is what DRM is? And what it must be to be functional? And that it is not what Chaum describes?


  17. Michael Nielsen permalink

    Digital cash in general is very concerned with the problem of making digital objects that, like ordinary cash, have restricted copying possibilities. In particular, good digital cash can be transferred from person to person, but two people can’t both have a copy of the same digital cash, for reasons I trust are obvious. Conceptually, this is very similar to DRM, and the technical ideas used are also very similar.

    It’s been nearly ten years since I read the Chaum paper, so I don’t recall if his scheme has this exact property. Even if it doesn’t, many of the more recent digital cash schemes do.

  18. Hi Michael,

    I tried to define which properties any DRM scheme must have. Have I missed some property? Do you have any clarifications. If we can reach a good list of requirements for DRM to work, then further analysis may be easier.

    We have seen that digital money schemes exist which superficially seem to disallow copying and allow person to person transfer, but which actually rely on properties that will not work for a DRM scheme.

    1) Netbanking – relies on the fact that the only _trusted_ copy of an accunt balance is the one that the bank has. This does not work for DRM

    2) Untracable signed digital cash (Chaum) – relies on the fact that the bank will not count the same token twice. This does not work for DRM. And in this case two people can have a copy of the same digital cash – for reasons that are obvious. The bank doesn’t care.

    And I think we will find that ALL other digital money schemes rely on subtle assumptions that are not valid for “digital content”.

    Eg. the Octopus public transport ticket system mentioned on Wikipedia. It relies on specialized information storage and specialized readers. So far, there is some similarity to eg. BluRay discs. But it also relies on the eventual clearing by banks! And on the fact that its information does not have value if it is copied out of the storage/reader system. This is not true for “digital content”. Movies have more value to many people if they can be stored unencrypted on their harddrive/iPhone/backup-cd than if they are stuck on the BluRay disk.


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