Suggest Revenue Stream System

Hello,

I am coming back and editing this post to suggest a specific revenue system. Below is my original post, which includes a more general description as well as some associated issues along with specific reasons why I think such a system would be successful.

Here is my specific proposal:

Kazaa Lite sets up a Yaga type micro-payment system. Users can go on a voluntary basis to a Kazaa Lite website and set up a debit account - say starting with $10.

Kazaa Lite then allows indepedent bands to sign up with them for free. Kazaa Lite maintains a database of artists and songs. When a song is download, the artist and title is checked against the database. If the artist is listed in the database, a link appears somewhere in Kazaa Lite screen that when clicked by the user takes them to a page where they can donate some money out of their debit account to the artist.

Kazaa Lite collects these monies and on periodic basis, say monthly, delivers them to the artists.

In my description below, I suggest two scenarios. Either the user is taken to a centralized site (as described above) or the user is linked directly to the artist page. I believe the centralized solution is better for several reasons.

1. By having Kazaa Lite collect the money to deliver, the anonymity of donator can be maintained. Part of the agreement in setting up the debit account and using the system could be that Kazaa Lite agrees to keep all donations private and anonymous. The artist will receive a lump sum monthly check. This solves the privacy issue.

2. Kazaa Lite could maintain a real-time tabulation of donations to all the artists in database. A rank, based on dollars, could be displayed on their website. This would serve as an editing function for all the bands - a way to separate the wheat from the chaff. That is, the best bands would naturally receive the most donations and appear higher in the rank. Such a chart would also inspire other bands to sign up - although I imagine many would given the service would be free for them. (Note that charging bands for this service would be a severe impediment to success.)

3. An alternative I presented was to have a link to the donation site embedded in the mp3. This would be put in the info section of the file. This link would be read by Kazaa Lite and a link displayed. However, there is a problem with this. The problem is spoofing. I could embedded a false link in an effort to direct people to a fake website to gather donations. By having Kazaa Lite maintain the database, the spoofing problem is solved.

There is a question of how Kazaa Lite would finance this operation. Clearly, there are some costs involved - implenting a micro-payment system, administering band enrollment and database, bandwidth issues of checking files against the database, accounting and cutting checks each month.

Kazaa Lite's costs associated with these services could be financed in two ways.

1. On the donation site, they could include an option that would allow the user to direct a portion of their donation to Kazaa Lite to defer operational costs. This would be at the discretion of the user. Kind of like the option of contributing a $1.00 to the Presidentail Election fund on your taxes. [Note that unilaterally collecting a portion, similar to paypal, would be a severe impediment to success and, I believe, unnecessary]

2. The second source of money to defer the costs would be the float associated with Kazaa holding the money for a specific period before distribution. This applies to user debit accounts as well as artist accounts. Specifically, Kazaa Lite would earn interest on all funds held until the end of the month or quarter before they were distributed. As the system grew, these interest payments would not be insignificant.

So, there it is. A specific proprosal based on the general description I have posted below. I would be interested in any comments, questions and critisisms - especially from any Kazaa Lite staff who happen upon this post.

Pete

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ORIGINAL POST

I have been giving some thought to the current war between RIAA et al and the file sharing community. One of my interests is complexity theory. I have attempted to come up with a revenue system that uses principles of complexity theory and complex adaptive systems (CAS) in order to provide a solution to the current situation. Rather than get into a bunch of details about CAS, I will present my idea below. If anyone is interested in the CAS side, please ask.

I am submitting a possible solution here in hopes that it will be discussed and debated. Part of my solution (consistent with CAS) is that the system must arise out the file sharing community itself after debate and agreement. I would be very interested in any and all comments, criticisms and questions.

Here it goes.

Let us start with some truths and assumptions.

1. Currently, the RIAA wants to end file sharing as we know it. That is not going to happen. I assume that file sharing will continue. RIAA may or may not come around. I have to deal with both scenarios.

2. Most of the millions of file sharers will never pay up front to download music. It just won't happen. Further, the system is such that it can quickly adapt to any changes. Therefore, I conclude that free music will continue to be available and consumed via peer-to-peer networks in the future.

The question before us is whether under those assumptions, some sort of revenue stream to primarily the arists but also possibly the labels can be created?

I believe the answer is "Yes". At the bottom I have put a list a questions to consider for discussion.

Briefly, the system I propose would be a voluntary "donation" system. It would work something like this (this is just one possible variation).

When a user downloaded a song, say, in Kazaa Lite, a link appears that when clicked takes the user to a "donation site". This may be a centralized location or could simply be a paypal link on the artist site. Users who really like the artist would then be able to contribute money to that artist.

That is a basic description. Some things to consider:

Link dynamics: There are (at least) two possible ways to generate the link. The link could be imbedded in the mp3 or the software provider (e.g. Kazaa Lite) could program in the capability to read the artist and title and provide a link from a maintained database. This database could be built through voluntary artist registration. There are some pluses and minuses to each of these but since this is a summary, I will defer discussing those until some other time.

Revenue Distribution: One possibility would be for the "donation" site to display how any donated money would be distributed. For example, 50% to label, 50% to artist. That way, if a user did not like the distrubution, they could withhold their funds. Alternatively, a donation site could allow the user to determine the distribution.

Donation Mechanics: This issue is too involved to discuss all the issues here. However, it pertains to whether a cental site (e.g. Kazaa Lite or some new third party entity) handles the donations or whether the link is directly to the artist site. A centralized site would might be easier to maintain while links to artist pages would be decentalized and, therefore, less vulnerable to 'opposition'.

Another issue of 'Donation Mechanics is payment method. With links to artist sites, the artist would pretty much determine the method (e.g. paypal). With a centralized site a streamlined, efficient payment methodology could be implemented. One important thing to consider is the issue of online accounts. For this system to work, users need an account to tap. While paypal is fairly easy to set up, there may be some 'inertia' issues.

Privacy: One big issue that needs to be dealt with is privacy. If I am going to paypal an artist or label a donation because I really like a song, I may want to remain anonymous or at least have a guarantee of privacy (I don't want my name to end up on some 'file sharing list').

There are probably some other issues as well. Please feel free to raise and discuss them.

What does this system get us. Well, it provides what has been missing from the peer-to-peer community and that is a way to reimburse artists (and possibly labels) for their work. My gut tells me that there are many here who would be not only willing but eager to contribute some amount money to their favorite artists under certain circumstances and conditions. I know I would.

Why I think this would work:

1. I believe that users are interested in supporting their favorite artists. In the current file sharing environment, there is no way to do that. If an efficient way was created, I believe it would be used.

2. This system recognizes the realities of the system dynamics. In particular, that users are unlikely to pay for access. This is a weakness in the current pay per play solutions appearing on the Net.

3. This system distributes power to the end user in several ways. First, the decision to pay or not is transfered to the end user. Second, the distribution of any donation could be delegated to the end user. Third, the privacy and anonymity of the end user is maintained. All of these things strengthen the 'distributed agents' (in CAS language) of the system. This makes the system more robust (think 'powerful' and 'explosive'). In other words, the system is set up to faciliate rather than limit agent action.

4. It is possible that this system could first be implemented for independent bands. I think it would be successful. Once the labels saw the revenue streams, they may be more willing to modify their position and embrace the working system.

5. Such a system provides the "editing" function that the Labels are so quick to take credit for. That is, they say that they wade through all the crap and present only what is good. In a donation system, the best bands will reap the most donations. Bands that suck will get fewer donations and die on the vine. The connection between quality and reward is actually much more direct and, I think, will be much more efficient.

So, there it is. In order to facilitate discussion, I ask the following questions.

1. Assuming adequate privacy and security, does this sound like something you would use? That is, under the appropriate conditions, would you contribute?

2. What would be required of this system for you to participate? For example, privacy, security, online account creation, etc.

3. Which methods, (i.e. centralized versus artist site, embedded links versus centralized) do you favor?

4. Do you have any modifications to this system that you think may improve it or fix potential problems?

Again, I am submitting this proposal to the file sharing community for discussion. I believe that any such system can only come from that community. In other words, it must be grown from within and not imposed from without. Trying to impose such a system on us would never work.

Please feel free to make a comments, suggestions or criticisms you can think of.

Incidently, I think such a system will likley emerge eventually. This would be a model where an artist releases their music into the peer-to-peer network for free. For revenue, the artist would rely on donations in a system similar to what I have described as well as in selling the service of burning the CD and providing art and text content (i.e. in-store shrink wrap). This latter concept is similar to Kevin Kelly giving his books away for free on the net but providing a "binding service" by also selling them in the stores.

Thanks for your time.

Pete