First question here, have been lurking for a long time, I really enjoy reading your interpretations of the various situations. I was wondering what you believe would be the most realistic implications of a world where anything that can be made digital (music, movies, documents, images, videos, etc.) was automatically released to the public via the internet and was completely free (free as in speech and free as in beer)? Essentially, no concept of intellectual property.
I understand the question to be asking about the current economy, only without intellectual property, not some future post-scarcity economy. A post-scarcity economy would be different. Post-scarcity implies a lack of copyright, but a lack of copyright does not imply post-scarcity.
Without some kind of change in funding models, it would no longer be possible to make big budget works. For example, Star Trek (both movies and shows) would be extremely difficult to fund. It relies heavily on secondary sales (syndication and videos) for funding.
It's possible that Kickstarter, etc. would be able to compensate for this, but not definitive. Note that the most successful Kickstarter movie was funded for less than six million. Contrast that with the tens of millions needed for Serenity, which was considered a relatively modest budget for a special effects movie. The hope would be that more people would step forward if there were no traditional projects with which to compete.
Smaller works could be funded more easily. YouTube would be fine.
Television is an interesting case, because the channels would have to develop the content as well. Currently studios develop content and channels purchase it for display. Without copyright, that model doesn't work. The elimination of DVDs would drive budgets down. We'd probably see more live television like reality shows and game shows. Perhaps more concerts would be televised as well. I suspect sports would change the least. It's almost all live now.
Pay cable television would be much harder. For one thing, they could no longer buy content. For another, selling content becomes less profitable. Some people would just wait the extra day to watch copies of Game of Thrones, etc. rather than pay for access.
Music would become smaller budget as well. Note that albums serve two purposes. One, they are a marketing tool (for selling concert tickets). Two, they generate enough revenue to pay for themselves and additional marketing to promote them. Without that revenue, there'd be much less marketing. This would tend to make acts smaller and more regional. Fewer touring bands. Better bar bands (since they don't graduate to being touring bands). Some artists might never start, but it seems likely that many are motivated more by love of music than money.
Books would be extremely difficult. Few authors would be able to spend the time to write hundreds of pages of content without pay. Short stories would be more robust. Note that textbooks would also be rarer. They'd be forced to an open source model. It's possible to write popular style books in an open source model as well, but it's unclear if enough people would be interested.
In general, things that are under copyright now would get funded less. The works that remain would tend to be cheaper and more personal. Content would be created if people felt driven to create it.
Basically, we've already got a lot of that going now.
Between Youtube, Soundcloud, Blogger, Wordpress, Vimeo, etc. there is more digital culture being produced than ever before WITHOUT MONEY NEEDING TO CHANGE HANDS. Copyright law was written in an era where production of anything (and especially culture, books, music, art, etc.) required immense resources. We're far past that point.
So what happens when you take the money out of culture? Then people produce culture because they want to. We wouldn't have "The Fast and the Furious 6," but we'd still have movies and music. We're already seeing patronage resurfacing through crowdfunding platforms like Kickstarter, Indiegogo, and Patreon. Bands will still be valuable - time is unique and non-digital, after all - and they will continue to earn the majority of their revenues from appearances and merchandise, rather than the music itself. This has actually ALWAYS been the case with musicians - the record labels make the money on the music and CD's, not the bands.
Hulu "sells" TV for free (as did all TV before cable) - they make money off of your eyeballs, not your subscriptions. Soap operas are so called because they were bought and paid for by soap companies. No one purchased episodes of Days of Our Lives.
Radio is free, "digital" music.
So in short, it wouldn't look too different from today, just with fewer middlemen between artists and the public skimming money.
As pointed out by other answers, a big incentive to invent things is to make money, which would be problematic in the world that you describe.
So how do you pay those inventors?
Well one thing is that many thing that we pay today would be free, so people actually have a lot more money than today. I don't think however that people would be willing to give the same amount of money to things like kickstarter/patreon/charity/... as what they pay today.
On way to force them into giving more money would be taxes. This already exists in some countries (cf. Wikipedia), where public broadcasters rely on tax-money for their funding (as opposed to ads).
That however wouldn't necessarily suppress the existence of independent productions. For example in France a lot of movies are financed through what is called "l'avance sur recette" (sorry, I could not find a good reference in english). Basically a commission reviews the film project before-hand and tries to guess how much money it is going to make. They then give money, and if the film is actually successful enough, the commission gets its money back. [This is not exactly a loan since sometimes the money is never payed back.] You could adapt such a system by evaluating the movie depending on how much success it is going to have rather than how much money it is going to make.
Here I have been talking about cultural stuff, but I guess you could adapt this to about anything. [Note that depending on where you live, the right-wing could think that all this is a really bad idea...]
The short answer is that money drains out of the cultural sector- all television, film and music becomes free to consume and must either consequently have corporate or government sponsorship or die out.
So your visual media becomes ad supported and is filled with product placements. The same for video games.
Nobody is making a living any more as an author, a film maker, a television actor, director and so on, or anywhere in those distribution chains, so employment falls significantly and competition for work in other sectors rises. Fewer people are able to make a living from following their talents, so on the whole society is a little more miserable.
Ultimately there is a division between high-profile and low profile creators- for a few high profile creators there is plenty of sponsorship and they are able to make a living - think of your Coldplay, your J K Rowling and so on. For lesser known creators they are small fish in a huge ocean. Whether anyone is able to raise their profile to that higher level is doubtful and many brilliant people never play their songs to more than a few people, never have their books read by anyone they are not related to and so on. You can already see this happening in music and to a degree around books. If an artist doesn't have universal appeal, they cannot make a living from their work, so economics will drive creators to the middle of the road. The price of the world becoming more free is the end of professional musicians, writers, film and game makers and the loss of many unique voices.
In a post scarcity world (which is essentially what you are describing) there will still be some constraints, which will become the "new" foundations of economics and wealth.
Regardless of how much you can physically produce, there will be limits of time, bandwidth and energy. To give a simple example, a famous person today might receive millions of emails or "Friend" requests; they cannot possibly read and respond to them all (limits of time and bandwidth: in this case the processing power of their own brain). Such a person in a post scarcity environment might be considered "wealthy", and having them bestow some of their valuable time and attention on you would be like having a high paying job or a winning lottery ticket. The schlub in the corner with no Twitter followers (or the paranoid with no on line presence at all) would be "poverty stricken" in this world. How you reach that level of fame and attention is up to you, but talent and ability that you can display to others will count for a lot.
Other limits like the total available amount of energy, accessible raw materials and electronic bandwidth would also have real effects on a post scarcity environment, the unit of payment may be "time" (i.e. the famous person above might not have to wait for the Fabber to build a car, while you might have to wait in a virtual line while materials and energy is assembled to make your new washing machine. Everyone who wants one gets a washing machine without fail, the real question is "when" you can get yours).
I take your question that it will still be possible to charge for producing digital works.
If that is the case, what you are describing is more or less what we see in the free software (free as freedom) society: You can be paid for developing software, teaching, supporting, and even using the software. But you cannot be paid for licensing it.
It will give a lot of benefits: You can build on all other works and produce your own without having to consult a lawyer. This is great for works that can be improved gradually: Software, music, encyclopedias, ideas.
It will be harder for works that need a big initial investment: Writing a novel, making a movie, getting a drug approved.
Drugs are less of an issue: Today they are indirectly mostly financed by taxes in Europe (https://christianengstrom.wordpress.com/2011/03/09/an-alternative-to-pharmaceutical-patents/) and by insurance in the US. So they can be financed by using the same money directly.
Novels can to a certain extend be done as a collaborate work (think of all the quality fan fiction that already exists), but it will be harder get funding for writing a novel on your own. See Stephen King's "The Plant". The same goes for textbooks: They can be done in a collaborate way, where authors are paid to write/improve a chapter by someone who needs it (e.g. an educational institution).
The low budget news (gossip, press releases) will have no problem surviving: There will be plenty of people who will happily do that for free, and if there is a market for higher quality of this, I expect people may be willing to pay for this.
I currently do not see how to fund:
- Big budget news (investigative journalism) - it seems to be more or less the same as the solo-novel. But maybe it can be done like Democracy Now.
- Live coverage (sports) - Ad-sponsoring will not work: if the others can replicate the signal, then they can also substitute the ads.
- Big budget movies - Product placement will work some of the way.
The main points are made, I second everything brython said very much. However, I wanted to point out an obvious down side, and comments aren't enough to express it.
I believe most of our currently enjoyed 'free' mediums would, if not die out, drastically drop in quality and content. Currently most of our free mediums work based off of add revenue. I provide you with something free, you tolerate listening to my adds in exchange.
However, if everyone owns all digital media then I don't need to tolerate your adds to watch my cat videos. I own, and thus can legally download and watch at any time, every episode of The Awesomes (hulu original show I just looked up to make my point) at any time. I would therefore not go to hulu and suffer through commercials to enjoy the movie. I would torrent it or, if I don't trust torrent, download it from a sight that makes me watch only one add to cover their hosting fees prior to downloading every episode.
Thus if Hulu tries to live off of a model of using commercials to make a profit they will lose all their customers. Hulu would have to change it's income model. You may say that Hulu will need less income now that they aren't paying copyrights, and your right, but they are still paying hosting fees. It is not cheap to pay for thousands of servers and gigantic bandwidth costs to stream video. Hulu could make some money by having non-invasive adds along the side of the page, those adds we all institutionally ignore, but not enough to cover the costs of streaming video to the customers. Hulu could try to ask for donations to cover their costs, but most would find it easier and faster to download the files from large file-download sites and cut hulu out as a middle man. In short, Hulu is dead, radio is dead, youtube...well it may survive since part of what youtube offers is the ability to find videos from a collection of mostly worthless videos, their service isn't as easily replaced with a simple torrent. Still, many of our favorite youtube celebrities would find they didn't get any money from youtube for their productions, and that will cause some of them to stop bothering.
Now we could still download this media from torrent or file sharing sites, so the death of Hulu and Radio wouldn't make us lose a way to consume already existing media. However, radio, TV, and Hulu are major sources of income for artists, and that wouldn't exist. The artist can not make money selling his product in any way.
In short You can not look at these 'free' models and claim that they prove that the free market works, since these very models fail in the free market you describe.
Artists would have about 3 sources of income.
1) money given straight to the artist as a thank you for their work from fans 2) advertisements which can are unintuitive enough that they don't bother fans enough to drive them to another source, think the little adds on the side of any medium. 3) Money from product placement.
1 & 2 are not trivial. Many webcomics already make enough money to work full time as cartoonists from 1 & 2...mostly. Webcomics also sell 'swag', with their logos on it. I don't know rather you would consider it in spirit of the OP question to say that only merchandise authorized by the comic could use his characters.
A webcartonists would do pretty well with this system. If he was very popular some people would likely clone his site, using cybersquatting techniques to steal views from the cartoonist, but It would likely not be that huge a lost, and perhaps cybersquatting would still be illegal in the OP's world? The cartoonist also gets a good deal of money by selling print versions of his comics which he couldn't prevent others from producing knock-offs of. Still, he would likely get more donations from fans, who have more disposable money to spend on entertainment and more encouragement to use it via donations now that they aren't paying for other media.
However the web cartoonist only needs to make enough to pay for his hosting, which is less then the add revenue he gets per view anyways, and his own hourly wage. He has some other expenses, drawing supplies, office space etc, but they are relatively minor. Much of the media we prefer has a much higher budget!
Movies and video games will suffer drastically. Product placement will help cover a decent bit of their lost income, at the expense of making them more annoying, but ultimately any product placement that was too blatant would be edited out of their movie by a fan and the less annoying edited version will start floating around the internet quickly. I imagine that crowdsourcing donations would nearly double, with the increased disposable income and a larger cultural emphasis on rewarding those who produce products you like, but frankly that's still a drop in the bucket.
Some very good products will still be made, I've enjoyed some RPGMaker games better then high priced commercial products (insert rant on how much I hated FF13 here). However, large budget entertainment would die out. There would be no funding for it.
On the plus side the open source community is awesome enough that most of our every day non-entertainment software needs would be covered. A company could pay to have more specific software products built for them by promising to pay someone for making it regardless of copyright. In short our software development would not be hurt nearly as badly. Some for-profit products would die out, but the open source community would swoop in and fill the niche.
Music industry would survive to some form, by emphasizing live concerts and selling of swag, which is a large part of their profits anyways. The rock stars wouldn't be quite as rich, but honestly I'm not that upset about it.
The fremium business model for games may work...to an extent. These games sell a service in game, and can still make a profit on that in-game service as long as anyone plays their game. The biggest problem is that nothing would stop someone from starting up their own server that clones the existing game and sells the same 'services'. Phone and facebook fremium games would thus suffer significantly. When candy crush made good money someone would create a new candy crush that charged 5 cents less for a new game, and people would switch to it. Then someone would do the same for 5 cents less etc etc. The price would keep dropping. since it costs nothing to provide something in game there is nothing to stop other's undercutting the fremium provider's services. The original provider may get customers who are willing to stick with them as a way of rewarding the original producer of the product, or who stick with them because they don't know how to find the cheaper service though. Thus the original candy crush would likely charge more then the cloned version, but ultimately they couldn't charge significantly more without loosing too much of their customer base, thus their prices would have to be low. Some profit could be made, after all candy crush has a pretty small production and hosting cost so they don't need much coming in per-gamer to net a profit, but it would be much less then it is now. Still, fremium games would be the only way to make a direct profit from customers, and thus they would still be our primary type of for-profit game.
Larger fremium games like LoL would actually fair even better. That's because you need to have a certain number of people using your product before a game like LoL is worth playing. There is no point joining a server with 1/10 the customers (and thus longer waiting queues and a great skill disparity on teams) just to get a free skin. Between name recognition (or perhaps I should say server recognition), inertia of having the largest user base making you preferable, and customers intentionally using the original creator's server to reward that creator's hard work LoL would be able to keep a decent percentage of their customer base even if others started cloning their game and offering services with cheaper skins. They would still lose a decent chunk of their net income, but not enough to put them out of business. large skill online multiplayer style fremium games would be the only for-profit games produced with any real budget.
Still, any large movie or single player video game would be dead. Smaller fan made games, with perhaps a decent increased budget compared to today but still nothing spectacular, would be all you would have.
Books...technically could still be sold so long as they were never digitized according to a technical reading of the OP question. However, if books lost copyright protection they too would quickly drop in number. There would be some die hards who produce for the love of the work; I've ready some great fan fiction for instance, but not nearly as many writers would exist, and even the best would have less time to focus on writing since they would have to pay their bills in other ways as well. A 'professional' writer would be rare, and limited only to those who achieved meme status online (thinks like fifty shades of grey, though I feel dirty inside implying that book did anything right).
Let me contemplate a variation of what Isaac posted. Suppose that the amount of stuff I consume, such as music and TV entertainment, is fixed. I have a budget, a reasonable affordable amount, and I patronize someone or another as my interests go.
The free-digital concept means it is essentially free to reproduce and distribute content. The only cost is the actual production. But, it scales enormously because everyone in the world can chip in to fund it. The price of consuming it drops directly in proportion to the audience size.
People can produce and distribute more content for less expense. That makes it cheap to consume.
Good stuff also accumulates, so it can continue to earn credit years later. Past hits are an investment.
Patreon is far less of vechile for cons and scams than Kickstarter. It still happens, where someone can milk the monthly contributions and avoid finishing because that means an end to the funding. But ideally content providers are paid as they go and because we like what they are (continuously) producing.
If the consumption went through a service that automated funding payment, it would be much like attending a live event: I pay at the door plus take care of my own costs to get there, so the presentor sees income directly proportional to the number of attendants with no change in effort. A better analogy would be if the venue itemized its own fees as separate from the performer's fee on the ticket. And the venue costs were the same no matter how hot the performer.