Gaming compulsories

The business of music is making hits, which generate exponential returns on investment. The business of gaming a compulsory licensing scheme requires rigging one vote at a time, which generates linear returns. Because hit making is a better business than vote rigging, a compulsory licensing scheme is more likely to be oriented towards music than corruption.

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This is a proof that gaming of compulsory licensing schemes is a non-fatal problem as long
as output dollars to rights holders are no greater than input dollars from
fees or taxes.

Allow that there are open auctions for those votes available to purchase.
Then the output value of a vote minus the input cost of a vote will tend
towards zero and profits will rise linearly but slowly as a multiple of
that ever smaller amount.

But popularity follows a power law curve, while the upfront costs of
attaining it are only linear, so profits from popularity would grow
exponentially rather than linearly.

In other words, it is more profitable to pursue extreme popularity than to
buy votes. It is not an accident that the CD industry lives on hits, and
it is not likely that a music industry funded by compulsories would change
from a revenue model primarily based on hits to a revenue model primarily
based on vote buying.

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Attacks on the monitoring side of a compulsory licensing scheme will always be a worse business model than simply producing hit records. The music business exists as it is for a reason.

Comments

Neil Netanel responded, in a post to the Pho list:

But, and here I will borrow from the Cyberprof discussion, the gaming
problem is not limited to the music industry. What if a political
activist group, let's say the NRA, decides to game the system as a
means to raise money. It produces 200 low-quality, cheap pro-gun
"songs" and asks its tens of thousands of members to download and play
each as a "donation" to the cause. If these are real songs, I say --
great. Let's have more expressive diversity. But what if each "song"
file is really just a hastily created, low level employee humming I
like guns into a tape recorder -- that even NRA folks wouldn't really
listen to. Would it be worth it for the NRA to do that? Or would it
make more sense for it to invest in catch songs that might galvanize
supporters?

The NRA would make more money by generating popular songs.

Its members who offer to help by downloading the songs would be foregoing the chance to sell their votes elsewhere at full price, and full price would approach the exact value that the NRA would stand to gain, so the game would earn no more than if the NRA solicited their contributions as cash.

The NRA would only make a profit by generating songs whose popularity goes beyond direct supporters, which means that the integrity of the compulsory system would not have been compromised.

Related reading

My thinking here was inspired by Andrew Clausen's paper How much does it cost to buy a good Google PageRank?. Clausen's proofs are with regard to directed graphs of the kind that PageRank measures, which a monitoring scheme for compulsories wouldn't likely be. However his
insight that the PageRank algorithm pegs outputs (pagerank scores) to real input dollars (the cost of a domain name) is very relevant. (I didn't understand the proofs in this paper, by the way.)

Netanel pointed to Peter Eckersley's proposal on how to protect against ballot stuffing, Virtual Markets for Virtual Goods.

Chris Grigg points out that Aaron Swartz' Fixing Compulsory Licensing is a method for implementing a vote mechanism. He's right. Aaron says: when you pay the tax you get a vote. That's the same as here. Where this is different is in this bit from Aaron's essay: There is a chance that everyone will give all their money to themselves, but this can be prevented by only paying out to accounts that meet some higher threshold of cash. The mechanism I propose here shortcircuits that kind of vote rigging by allowing users to sell their votes. If they can sell their votes, giving them away -- even to themselves -- means losing money.