Beyond the Huffington Post Windfall: A New Way to
Finance Creative Work

By Dean Baker
February 11, 2011
http://tpmcafe.talkingpointsmemo.com/2011/02/11/beyond_the_huffington_post_windfall_a_new_way_to_f/

AOL's buyout of the Huffington Post has prompted fierce
debate among progressives. I don't have much to add to
this debate. It's great that the outstanding reporters
who are on the paid staff may reach an even larger
audience as a result of this merger. It would also be
good if some of this windfall is shared with unpaid
free lance reporters who helped to build audience.

As someone who warned of both the stock and housing
bubbles, I have to wonder if AOL will be able to profit
from this investment. After all, at the peak of the
stock bubble AOL famously persuaded Time-Warner, the
largest media companies in the world, to sell itself
for virtually nothing (i.e. AOL stock). It looks like
AOL may be repeating Time-Warner's mistake as
Facebook's success seems to be generating bubble-type
prices in anything remotely related to social
networking.

But there are more important questions at stake here,
specifically the support of creative work in the
Internet Age. The basic problem is that we no longer
have a working model for supporting creative work.

The Internet is not only destroying newspaper revenue,
it has also led to plummeting revenue from recorded
music, book publishing, and television advertising. It
is only a matter of time until the availability of free
downloads leads to sharp declines in movie revenue as
well.

While Internet advertising revenue is growing, there is
not a plausible story whereby it will replace the
revenue streams that had previously supported creative
work. Rather than haggling over a shrinking pie, it
makes sense to look for a new system of support for
work that obviously has social value.

The government already has a policy of public support
for creative work; it's called "copyrights." The
government gives monopolies to copyright holders,
allowing them to use the courts to force people who
make or use copies of their material to pay the
copyright holder.

Copyright monopolies have become increasingly difficult
to enforce in the Internet Age. To enforce their
copyrights music companies have invaded college dorms
and teenagers' bedrooms, created propaganda courses on
respecting copyrights for high schools and universities
and even impeded the spread of new technologies.
Copyright might have been a good way to support
creative work in the late Middle Ages, but it does not
work well in the Internet Age.

There are alternatives. The idea of copyright is that
the individual user pays for material when they use it.
An alternative mechanism would be to have individuals
pay for the material as it is produced.

To some extent this is what organizations like
ProPublica do with investigative journalism. This non-
profit organization pays for reporters and then makes
the work freely available to anyone who wants it. This
route takes full advantage of the Internet as a network
that can instantly and costlessly transfer material all
over the world, rather than seeing it as a technology
that must be contained.


The ProPublica model can be replicated on a mass basis
by giving every adult in the country a small refundable
tax credit - say $100--that can be used to support the
creative individual or organization of their choosing.
The work produced under this system would not enjoy
copyright protection, so that anyone would have free
access to use or distribute it.

Such a system would be able to support an enormous
amount of creative work. A $100 credit would generate
$20 billion a year, a sum considerably larger than the
total that now passes through copyright protected
material to creative workers. This would be sufficient
to support the work of more than 300,000 people being
paid $60,000 a year.

This system should not seem like a big jump from the
current system. The government currently subsidizes
contributions to tax exempt institutions through the
tax system. If a wealthy person in the 35 percent
income bracket gives $1 million to a museum, an
orchestra, or National Public Radio, the government
effectively kicks in $350,000 of this money through tax
deductions.

Instead of handing a $350,000 government subsidy to the
creative work favored by a wealthy person, this
proposal would allow everyone to spend $100 to finance
the creative work of their choosing. It could be easily
paid for by limiting the tax exemption for charitable
contributions by wealthier individuals, as President
Obama had proposed in his 2011 budget.

To make the proposal more attractive to conservatives,
it could be coupled with a cutoff of funding to
agencies like the National Endowment for the Arts, the
National Endowment for the Humanities and the
Corporation for Public Broadcasting, since these
agencies should easily be able to replace direct public
funding with the money distributed through the tax
voucher system, assuming that the public values their
work.

Whether this is the best route to finance creative work
can be argued, but it is long past time we moved past
the copyright system. Its stinking corpse is
contaminating everything it touches. There will not be
enough money to support the level of creative work that
the public expects in the absence of a better funding
mechanism. And fighting over this shrinking pool will
not solve the problem.

___________________________________________

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