Feasibility and Barriers to Their Adoption

Information wants to be free, but people want to be paid for the knowledge they possess and products that they create. As we have seen, the old copyright models favoured the middlemen. Over the years alternative models of compensation such as levies and value-added charges have emerged as ways to compensate those wishing to be paid. Are these schemes feasible? What are the barriers to their adoption? 

Alternative Compensation Models: Feasibility and Barriers to Their Adoption

Alternative compensation models have been proposed to allow the extensive reproduction of copyrighted works while still paying the copyright owners and authors for their works. The use of peer-to-peer file sharing (P2P file sharing) has given the alternative compensation model popularity and consideration. Gervais (2004) argued that alternative compensation models are the only practical solution to the problem. However, others have suggested that P2P sharing in actually beneficial, and levies and taxes are more pleasing tools to pay artists, rather than digital retail management technologies to prevent copy. 

The proposal of alternative compensation methods for recording artists in the music industry has gained popularity since the time internet copying has threatened record sales. Different organizations like Electronic Frontier Foundation now support the use of alternatives such as levies and collective licenses for recording devices and internet connections (Oksanen & Välimäki 2005). 

They are a number of ways to receive the returns from your copyrighted works. The most obvious is to collect fees or royalties for all restricted acts such as distribution and copying, as specified in the copyright laws (Landes & Posner 1989). 

Fees or royalties in the music industry are mainly collected from record sales, i.e. rights to copy and distribution; and airplay, i.e. right to public performance.
It would seem that these alternative compensation systems provide a good solution to the failures of the content market today, with regard to producers and consumers both. 
Firstly, the alternative models of compensation create a media market with hardly any barrier for entry. Any producer can easily upload his/her work to the internet. It could be then accessed and used by a large number of people and the artist would receive direct compensation for the use of the content. In such a situation the producers would not have to rely on the intermediaries for compensation. They would collect that from the administrative agency directly. 
These models will benefit the consumers also as they will not be limited to only content chosen by intermediaries to promote and distribute. They can access a wide range of content directly from the internet while interacting directly with the artists (Zarsky 2006).

However, Zarsky also goes on to say that these may only be rosy predictions of the content market with alternative compensation models. The change to this type of compensation models will lead to lower barriers of entry to the content market. People will be able to easily upload all their content and distribute them directly to the consumers. This will weaken the role of the intermediaries.
Alternative compensation systems like levies and value-added charges have two important advantages. They do not force artificial scarcity on copyrighted works. Anyone can download as many films and songs as they like. Therefore it eliminates the excessive burden of copyright monopolies. With alternate compensations, social and technological costs of digital copyright enforcement can be avoided. 

One of the major barriers to adopting these models is the “deadweight loss” of taxation that will be collected. Deadweight loss or excess burden is an economic loss that society experiences as a result of tax. Another barrier is the need to decide what levy and tax rates should be used for the system. There has been some academic critique against the proposal of alternative compensation models by Liebowitz (2004). He argues about the various difficulties in measuring the correct rate of taxes and levies to be used. 

There are several people who believe that this shift to alternative compensation models is not feasible. They believe that its implementation is technologically, politically, and economically not feasible. 


  • Gervais, D. (2004). The Price of Social Norms: Towards a Liability Regime for File Sharing. Journal of Intellectual Property Law.
  • Landes, W.M. and Posner, R. A. (1989). An Economic Analysis of Copyright Law. Journal of Legal Studies, 18 (2), p.325-363.
  • Liebowitz, S. (2004). Alternative Copyright Systems: The Problems with a Compulsory License. IPCentral Review, 1 (2).
  • Zarsky, T.Z. Assessing Alternative Compensation Models for Online Content Consumption. Denver University Law Review, 84 (2), p.646-676.

Elad Shalom,
CTO at ITweetLive.com


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