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

February 11, 2011

Dean Baker
TPMCafé, February 11, 2011

See article on original website

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 were shared with unpaid freelance 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, one of 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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