The invention and rapid adoption of Napster’s technology of shared digits has brought to the forefront the issue of private property in ideas. This legal and moral issue will not go away soon.

I begin with a presupposition: A law that cannot be enforced is not a law. It’s a suggestion. Copyright law is about to become a suggestion.

The publishing industry is going to change. So is the entertainment industry.

John Perry Barlow, who used to write songs for the Grateful Dead, is correct: copyright protection was always based on control over the container, not the contents. Copyright law could be enforced because the government could prosecute publishers. The centralization of printing technology made policing cheap. The Web decentralizes. Copyright protection is about to end.

Life Before Copyright: Luther’s Model

On October 31, 1517, an obscure professor of theology named Martin Luther went to the church in Wittenberg and nailed to its door a challenge, written in Latin, to debate 95 points of theology. One would not have expected this event to launch a social, political, and theological revolution. Had it not been for the technology of the printing press, then two generations old, it couldn’t have.

Somehow, a now-forgotten printer got a copy of the document. He had it translated into German. Then he published a few copies. They sold. He published some more. They sold. Pretty soon, printers all over Germany were selling copies.

Had it not been for the printing press, we would never had heard of Luther. Luther was a radical and genius promoter who soon grasped what this new technology could do. He became the first and still the greatest master of the pamphlet. Philip Schaff, the 19th century church historian, describes what happened next.

The statistics of the book trade in the sixteenth century reveal an extraordinary increase since Luther. In the year 1513, there appeared only ninety prints in Germany; in 1514, one hundred and six; in 1515, one hundred and forty-five; in 1516, one hundred and five; in 1517, eighty-one. They are mostly little devotional tracts, flying newspapers, official notices, medical prescriptions, stories, and satirical exposures of clerical and monastic corruptions. In 1518 the number rose to one hundred and forty-six; in 1519, to two hundred and fifty-two; in 1520, to five hundred and seventy-one; in 1521, to five hundred and twenty-three; in 1522, to six hundred and seventy-seven; in 1523, to nine hundred and forty-four. Thus the total number of prints in the five years preceding the Reformation amounted only to five hundred and twenty-seven; in the six years after the Reformation, it rose to three thousand one hundred and thirteen.

These works are distributed over fifty different cities of Germany. Of all the works printed between 1518 and 1523 no less than six hundred appeared in Wittenberg; the others mostly in Nurnberg, Leipzig, Cologne, Strassburg, Hagenau, Augsburg, Basel, Halberstadt, and Magdeburg. Luther created the book-trade in Northern Germany, and made the little town of Wittenberg one of the principal book-marts. . .

Luther gave to the world the first mass market publication industry. This market is what made literacy a valuable skill for the common man.

Luther was not trying to get rich. He was trying, first, to reform the Catholic Church, and later to destroy it. He let his publishers keep the money. He settled for the Reformation.

Entertainment Tomorrow Night

The entertainment industry now faces a crisis comparable to what the Papacy faced in 1540. It cannot stop the technology of digital distribution. Napster makes no money directly for the use of its technology, which links tens of thousands of computers and their music files. “Share and share alike” is legal, according to United States law. It is hard to imagine legislation that could stop this digitized sharing process without creating a tyranny. If the Soviet Union had problems controlling the use of photocopy machines, what will any constitutional republic do about phone lines?

For an unknown performer, Napster is no big threat. If anything, it is a benefit. I contacted a songwriter-performer friend of mine, who 32 years ago made a lot of money with one big hit song he wrote. He told me that he had not given much thought to Napster, but he thought it might help his performing career. He makes most of his money playing before small audiences. Napster could make these audiences larger. (I checked his name on Napster: no listing. It’s not 1968 any more.)

The recording industry, like the book publishing industry, meets its payrolls with income derived from a few performers who happen to hit it big, usually briefly. The industry sells millions of their CD’s, takes the money, and gives these performers a small royalty. Most of the industry’s CD’s do not make much money. The strategy is to lock in one performer who, through unforeseen free market forces, subsequently makes it big. Not many ever do.

Napster and competing technologies threaten to undermine this arrangement. Digits are digits; the 100,000th copy is identical to the digital master. Most pop music has a very short half life. Napster threatens to cut deeply into the sales of these short-term monster hits. It can match supply with demand at zero monetary price.

The music industry will make a few performers famous, only to see its income streams siphoned off by the consumers’ sharing of digits. There is not much that the industry can do about this.

For successful performers, this will be a mixed bag: more concert tours and larger audiences, from which the performers receive the lion’s share of the ticket price, vs. reduced royalties due to reduced CD sales. On the whole, this will be beneficial for most of those performers who gain favor with the public. As for the unknowns, some will make big it through the Web, and others will not get noticed, since the music industry will not be able to carry as much skim milk when its cream is being skimmed off.

Books will be next. In 1998, Congress passed and Clinton signed the posthumously named Sonny Bono copyright law, which extended copyright protection for another two decades. This was initially thought to mean a fortune for trade publishers who own the copyrights of American novelists of the golden era of American novels, 1925-40. Everything published in 1923 or later that was properly renewed on schedule was legally locked in for another 20 years.

The Web will bury this law. As soon as technology delivers a lightweight, flat-panel screen with 1200 dots per inch resolution for a book-sized reader that runs on rechargeable batteries, the book publishing industry will face what the recording industry now faces: the shared digits phenomenon.

Book publishing will be governed by a new rule: “If it’s worth producing a Cliff’s Notes version of a book, it’s worth downloading the book for free” — along with an attached copy of Cliff’s Notes.

There is one book I never expect to see in a book store: Downloading for Dummies. It would be the equivalent of Abbie Hoffman’s Steal This Book.

There are today about 180 competing jurisdictions called nations. More are already in the political pipeline. All it takes is one that does not honor international copyright laws. It will become the center of the shared digits industry.

Consider a college textbook that sells for $65. Its pages — color and all — can be put into digital format, such as with the DjVu technology. Once on-line, it can be downloaded in a few minutes. With fiber optics, it will take only seconds. The cost of printing out the pages on a laser printer would be about $10 for 1,000 pages. The more widely adopted the textbook, the more likely that some student will post it on-line.

The “information should be free” ethics of the World Wide Web favors sharing. If it is not illegal in Lower Slobbovia to post a book on-line, then a student will not think twice about the economic implications of what he is doing to the publisher, for whom he has no love anyway.

Today, reproducing an image of a book on the Web is a technological hassle. In ten years or less, new technologies will make it simple. The cost of sharing digits will fall. The amount demanded will rise as the costs fall.

What will video rental stores do when DVD copies of movies can be downloaded, free of charge, in a few minutes, over fiber optic lines? What will movie theaters do when they all use only digitally distributed movies to show on-screen. The premier showing of “Titan A.E.” this summer was transmitted digitally. One easily purloined copy, and the movie is available on-line for free.

Encryption is one solution. But encryption has limits. It can be broken if enough time is focused on one code-breaking project. Meanwhile, the National Security Agency makes it illegal for American software firms to produce and sell advanced encryption technologies for data transmission. The government wants control over private data transmission. If the government eases up on these rules, privacy will make a quantum leap forward. What’s a government to do?

Conclusion

If you are an executive with a major New York publisher, start working on your resume.

If I were going to write a book on the future of the movie industry, I’d call it Saving Private Spielberg.

September 8, 2000

Gary North is the author of a ten-volume series, An Economic Commentary on the Bible. The latest volume is Sacrifice and Dominion: An Economic Commentary on Acts. The series can be downloaded free of charge at www.freebooks.com.