Dr. Startup, or: How I Learned to Stop Complaining and Love the Micropayment

Did the internet and technology level the playing field for small-time artists, illustrators, musicians, and filmmakers? On the one hand, it is easier than ever before to become a web celebrity and for the creator of creative content to monetize that content. This is due in large part to the democratization of the internet and the ease of use of content-creating tools: smartphones, cameras, software. On the other hand, while consumers have demonstrated that they WILL pay for creative content, they have become less willing to pay nearly as much as they used to. Artists know too well the power of the micropayment. 

On March 4, 2015, Hofstra University School of Law (Hempstead, NY) inaugurated its new Center for Intellectual Property. The guest speaker, Professor Robert P. Merges of UC Berkeley School of Law and author of Justifying Intellectual Property, discussed the economic changes brought about by the rise of the internet in a lecture titled "Creative Professionals and Online Content: An Uneasy Truce." He defined IP as "property rights over intangible assets." However, the focus was "soft" intellectual property rights, mainly copyright and some trademark. The wheelhouse of aspiring performing and fine artists.

Prof. Merges expertly laid out how the '90s brought about a hope of disintermediation (better known as "cutting out the middleman"), so that artists could directly sell to the consumer. The 2000s brought about Napster and a Wild West consumer expectation of free intellectual property. However, consumers expressed a willingness to pay for IP if a platform allowed for easy access to fairly priced IP. Thus the rise of iTunes and Netflix. He opined that we are now in a state of re-intermediation, as consumers have come to rely on established platforms to enable more of an indirect connection between content creator and consumer through a trusted third party. But here's the thing that has been sticking in my mind: haven't we, the 21st century consumer, become so focused on a "sharing" and "crowdsourced" culture as to devalue intellectual property to a point of virtual worthlessness?

We used to pay $80 for a videotape and $30 for a DVD. $14 for a cassette tape and $30 for software on a floppy disk. $50 for a console game. Now we scoff at a $5 phone app. We pay $1.29 a song, or maybe nothing if we're cool with ad-supported streaming services. The payout to musicians on Spotify has been virtually non-existent despite fairer proposals, and YouTube has been leveraging its tremendous power to enforce copyright protection to demand exclusive relationships with up-and-coming artists. 

In its recent proposal for changes to the music royalties structures, the U.S. Copyright Office stated:

"There is a widespread perception that our licensing system is broken. Songwriters and recording artists are concerned that they cannot make a living under the existing structure, which raises serious and systemic concerns for the future. Music publishers and performance rights organizations are frustrated that so much of their licensing activity is subject to government control, so they are constrained in the marketplace. Record labels and digital services complain that the licensing process is burdensome and inefficient, making it difficult to innovate."

Another question that must be asked is: are we too far gone? Are royalties, more often than not, almost irrelevant? 

Smart businesspeople know something about creative content creators: a large number will continue to create, whether or not they make money doing so. Sure, those who don't make much money or any money at all will not create content as often as those who make a good living at it, but content is so readily available that it has become an entry-point for savvy creatives: the intellectual property acts as the loss leader for the whole personal brand of the content creator. Thus, record labels, book publishers, film studios, and photography distributors will likely demand "360 deals" that give them the ability to monetize the content creator's entire brand (and scope of content creation). The hit song, the frequently shared photo, the book club novel, or the Sundance darling will become besides the point! Instead, the moneymaking will be all about the backstory, the merchandise, the live appearances and speaking engagements.

Related: Why Do Entertainment Stars Like Katy Perry and Taylor Swift Go After Small Businesses for IP Infringement?

During his lecture, Prof. Merges argued pretty persuasively that little payments--micropayments--add up. He discussed the ability of illustrators to accumulate a reasonable amount of wealth by creating and selling virtual "stickers" for messaging at $1 a package. When you have a half billion dollar virtual stickers industry, there is tremendous opportunity to make a living on a platform like Line because the turnaround time for producing a sticker is short. The same can be said of filmmakers who make Vines or Instagram clips that turn them into web celebrities, or short videos that go viral. But is this what artists dreamed they would be doing when they dreamed of "cutting out the middle man," and that dream morphed into "curated content?" Drawing 50 stickers for a penny per sticker? Earning 12 cents for 300 plays of a song that took 6 months to write? If we are to strive for art that requires turnaround time, the content creators can't expect to be emotionally satisfied with a micropayment system, even if some can be somewhat financially satisfied. For them, a patronage system--also reliant on the "trusted" third party platforms of Kickstarter, IndieGogo, and RocketHub--fills the satisfaction void, if not the pocket book. 

Related: How to Start Up an Independent Film Production Company (or Have Your Lawyer Do It)

A micropayment ecosystem is pretty ingenious. Our 21st century devaluation of copyright has demonstrated that the power of thousands or millions of shrugging consumers contributing pocket change can often have a greater economic impact than a few passionate patrons of the arts. A re-intermediation is a double-edged sword, because, more likely than not, the "trusted middleman" third party platform will profit more than the artists themselves. Barack Obama beat John McCain partially because of his ability to promote microgivingthrough the internet. Through phone apps such as Acorns, you can invest pocket change into curated equity portfolios. You can pay $1 for a high-res top quality unattributed photo through a multitude of stock photo sites. As much as it may feel like a betrayal of the artist, it's becoming more and more difficult to resist the temptation of the micropayment. And it's becoming more and more difficult to differentiate the artist from the entrepreneur.