Open Source Software and Open Content As Models

Open Source Software and Open Content As Models for e. Business Roger Clarke Xamax Consultancy, Canberra Visiting Professor, CSIS, University of Hong Kong http: //www. anu. edu. au/people/Roger. Clarke/. . . /EC/OMB 030925 {. html, . ppt} ECOM-ICOM Expert Address University of Hong Kong, 25 September 2003 Copyright, 2000 -2003 1

Alternative Economics of Scarcity, and of Abundance • • • The basis of value is Relative Scarcity More Supply = More Competition = Lower Prices Conventional / Rationalist / Neo-Classical Economics OR The basis of value is Critical Mass The more there are, the greater the value of each Economics of Networks, part of Information Economics Iron Ore cf. Fax Machines Vinyl carrying Analogue Music cf. Digital Music Copyright, 2000 -2003 2

Conventional, Rationalist, Neo-Classical Economics Naive Assumptions About Innovation • • • Copyright, 2000 -2003 Innovation is important to progress Investment in innovation will not occur unless investors anticipate returns on that investment Imitators contribute little Imitators are ‘free riders’ on the innovator’s creativity and investment There are few natural protections for innovators against imitators 3

Info Flows Within the Innovative Organisation Copyright, 2000 -2003 4

Info Flows Within the Innovative Sector Copyright, 2000 -2003 5

Information Economics Realistic Perception of Innovation • • Innovation is mostly cumulative, seldom ‘big bang’ Innovation is heavily dependent on contributions by users, adopters, suppliers, and competitors Imitators who ‘value-add’ contribute a great deal There are many natural protections for innovators, especially the investment and lead-time involved in: • the development of tacit knowledge • its conversion into codified knowledge • development and marketing of competitive products Copyright, 2000 -2003 6

Open Source & Content e. Business Models Agenda 1. Alternative Economics of Networks, and of Innovation 2. Open Source Software 3. Copyright 4. Open Content 5. Reciprocity in Markets 6. Alternative Business Models Copyright, 2000 -2003 7

Closed, ‘Lock in’ Software • • • Copyright, 2000 -2003 Licences are available only under highly restrictive terms The objective of the copyright owner is to maximise revenue, by imposing constraints on both competitors and customers Such software is generally very expensive 8

Open Source Software • • • Copyright, 2000 -2003 Licences are available under liberal terms The rationale is to enable cumulative fixing and enhancement, by exposing the source-code to the view of many people The ‘Free Software’ movement, since 1982 • ‘free as in speech, not free as in beer’ Unix, Apache, Linux, Open. Office, etc. The ‘Open Source Initiative’, since 1998 9

Open Source Software – Licence Terms • Ready Availability of: • • • Licence Permissions to: • • run the executable reproduce both executable and source re-distribute both executable and source adapt the source distribute adapted executables and source distribute within larger software packages Licence Constraints to: • • Copyright, 2000 -2003 a licence executable code and source-code ensure that redistribution is no less liberal prevent subversion of the objectives 10

The Bundle of Exclusive Rights that Copyright Provides Of Long Standing • reproduction • publication • adaptation • performance More Recent • • Copyright, 2000 -2003 broadcast moral rights US/WIPO/Au Post-Internet • communication to the public , dissemination by wire or wireless means, incl. • ‘push’ (electronically transmit), e. g. email, FTP put • ‘pull’ (make available online), for public access when they wish, e. g. web, FTP get 11

Copyright Infringement • • Infringement occurs when a 'substantial part' of a work is ‘appropriated’ and: • neither a legal authority nor a licence exists; or • the terms of the authority or licence are exceeded ‘Appropriated’ means (mainly): • reproduced (copied) • republished (made available to others) • adapted (into a new form) Infringements have been actionable under civil law Some actions have very recently been criminalised Copyright, 2000 -2003 12

Copyright Objects ‘Then’ (The Early 1990 s) • • • Tangible things (books, journal issues, photos, vinyl LPs, audio-tapes, microfilm, video-tapes, cassettes, diskettes, CD-ROMs, games-cartridges) A person bought, rented, borrowed or visited a tangible thing, or gained admission to a location where it was reproduced, performed or played The person had no need for a copyright licence Replication was expensive, required infrastructure Copies were accessible by one person at a time Copyright, 2000 -2003 13

Copyright Objects in the Digital Era – 1/2 • convenient and inexpensive Creation desktop publishing packages, PC-based graphic design tools, animation, digital music generators • Digitisation of existing materials scanners, OCR, digital cameras, digital audio-recording • near-costless Replication disk-to-disk copying, screen-grabbers, CD-burners as a consumer appliance Copyright, 2000 -2003 14

Copyright Objects in the Digital Era – 2/2 • very rapid Transmission, unmeasurably low costs modem-to-modem transmission, CD-ROMs in the mail, emailed attachments, FTP-download, web-download • inexpensive and widespread Access PCs, PDAs, mobile phones, public kiosks, web-enabled TV in the workplace, the home, public kiosks, Internet cafes • computer-based Analysis of data-matching, profiling, data-mining, pattern-recognition • convenient Manipulation of data-objects word-processors, sound and image processing tools Copyright, 2000 -2003 15

Copyright Objects Now, and in the Future • • • Copyright, 2000 -2003 Digital Content • expressed in a Single Medium e. g. page-formatted text, audio, image • expressed in Multiple Media • enhanced (hence layers of copyright) Software Digital Content and Software Combined e. g. ‘learning objects’ in the education sector 16

What’s Different about Copyright Objects Now, and in the Future • • • Digital not physical / Bits not atoms Copying is intrinsic to transmission Copying is performed by the consumer => Consumers suddenly need a copyright licence Copies for personal use are indistinguishable from copies for re-sale, and copies for adaptation Copyability and Adaptability are intrinsic => Plagiarism is a virtue, not a vice Copyright, 2000 -2003 17

Cyberculture Ethos • • • Copyright, 2000 -2003 Inter-Personal Communications Internationalism Egalitarianness Openness Participation Mutual Service Community Freedoms Gratis Services 18

Reactions by the Major Publishing Houses • • • Copyright, 2000 -2003 Technological Protections for Digital Objects Embedment in Marketspace Mechanisms of Existing, Expanded and Imagined Rights Lobbying for, and Enactment of, Laws that: • Extend copyright laws • Criminalise hitherto civil law breaches • Enlist law enforcement agency support • Transfer enforcement costs to the State 19

The Battle Lines ULTRAORTHODOX SOCIALISM ULTRAORTHODOX CAPITALISM PUBLIC DOMAIN CONTENT CLOSED CONTENT COPYRIGHT Copyright, 2000 -2003 20

But There’s a Middle Ground ULTRAORTHODOX SOCIALISM ULTRAORTHODOX CAPITALISM PUBLIC DOMAIN CONTENT OPEN CONTENT COPYLEFT Copyright, 2000 -2003 CLOSED CONTENT COPYRIGHT 21

Open Content Licensing Choices • • Copyright, 2000 -2003 Ownership • Exclusivity • Sub-Licensing Integrity Protection • Entirety • Copyright Notice Reproduction Control • Permission • Use(s) / User(s) Republishing Control • Permission • Use(s) / User(s) • Format(s)/Media • Incorporation • Tech. Protections • • Adaptation Control • Permission • Review • Distinguishability • Copyright Vesting Usage • Territory • Purposes • Person-Types • Fields of Endeavour Liability Management • Warranties • Indemnities Pricing • One-Time Fees • Repetitive Fees 22

Roger’s Public Licence for His Content • • • Copyright, 2000 -2003 © Xamax Consultancy Pty Ltd, <year> ==> To use for profit, gain approval from Xamax. May be subject to payment, plus conditions May be reproduced and distributed gratis, subject to the following conditions: • re-publish in its entirety • reference to this copyright notice • appropriate attribution • authorship not to be misrepresented • ownership not to be misrepresented 23

Roger’s Public Licence for His Content • • Copyright, 2000 -2003 Ownership X Exclusivity X Sub-Licensing Integrity Protection √ Entirety √ Copyright Notice Reproduction Control √ Permission √ Not-For-Profit Only Republishing Control √ Permission √ Not-For-Profit Only √ Any Format/Media √ Incorporation — Tech. Protections • • Adaptation Control X Permission — Review — Distinguishability — Copyright Vesting Usage √ Any Territory, Purposes, Person-Types, Fields of Endeavour Liability Management X Warranties X Indemnities Pricing X One-Time Fee X Repetitive Fees 24

Tools for Open Content • • • Copyright, 2000 -2003 Ted Nelson’’s Xanadu ‘Transclusion’ (1965) • quote w/- copying, & with µpayments Ted Nelson’s ‘Transcopyright’ (1997) • have a statutory right to re-publish by pointing, and pay (cents) for it Open Content • Project Gutenberg – promo. net/pg/ • Open References - dmoz. org, wikipedia. org • opencontent. org, creativecommons. org • Public Licences 25

More Tools for Open Content Peer-to-Peer (P 2 P) e-Sharing / e-Trading • MP 3 • • Napster • Gnutella, Ka. Za. A, et al. • • Copyright, 2000 -2003 CD-quality digital sound in files sized 1 MB/minute a central catalogue of a distributed database, to facilitate sharing of MP 3 files a distributed catalogue of a distributed database, to facilitate sharing of (MP 3? ) files 26

Categories of Value Exchange Provision Without Compensation donation 'gift economy' Copyright, 2000 -2003 Direct, Immediate, Reciprocity sale (G/S v. cash) barter (G/S v G/S) 'horse-trading' 27

Categories of Value Exchange Provision Without Compensation donation 'gift economy' Copyright, 2000 -2003 Indirect or Deferred Reciprocity 'barn-raising' 'cooking pot' 'honey -pot' shareware open source software open content Direct, Immediate, Reciprocity sale (G/S v. cash) barter (G/S v G/S) 'horse-trading' 28

Categories of Value Exchange Provision Without Compensation donation 'gift economy' Copyright, 2000 -2003 Indirect or Deferred Reciprocity 'barn-raising' 'cooking pot' 'honey -pot' shareware open source software open content loans subscription advertising sponsorship Direct, Immediate, Reciprocity sale (G/S v. cash) barter (G/S v G/S) 'horse-trading' 29

Internet-Era Business Models The Concept Who Pays? For What? To Whom? And Why? Copyright, 2000 -2003 30

Alternative University Business Models WHO PAYS? For What? To Whom? And Why? • • Copyright, 2000 -2003 institutional sponsors / the State pays candidates / 'user-pays' education-related sponsors: • the university’s sponsor /benefactors pay • the candidate’s sponsor / employer pays • the course’s sponsor / employers and/or advertisers and/or IT providers pay complementary activities 31

Alternative E-Publishing Business Models WHO PAYS? For What? To Whom? And Why? • • Copyright, 2000 -2003 revenue from the Copyright Owner: • fee for publication ('vanity press') • fee for storage or access revenue from the Content-Accessor / 'user-pays': • fee for document-access ('pay-per-view') • subscription fee for access for a period of time • shareware revenue from a Third Party: • advertisers • sponsors revenue from a Complementary Activity 32

Internet-Era Business Models Lessons from Open Source and Content WHO PAYS? For What? To Whom? And Why? • Customers, for the Good/Service Distribution • Providers • Third Parties • Customers, for Complementary Goods/Services Consultancy, Training, Installation, Customisation, Integration, Audit Copyright, 2000 -2003 33

Internet-Era Business Models Lessons from Open Source and Content Who Pays? FOR WHAT? To Whom? And Why? • • • Goods & Services Value-Added Goods & Services Complementary Goods & Services Infrastructure After-Sales Service Copyright, 2000 -2003 • • • Data Information Expertise / Knowledge An Idea in Good Standing Timeliness Quality 34

Internet-Era Business Models Lessons from Open Source and Content Who Pays? For What? TO WHOM? And Why? Direct Copyright, 2000 -2003 Intermediated • Retailer • Franchisee • Value-Adder • Bundler • Transaction Aggregator 35

Internet-Era Business Models Lessons from Open Source and Content Who Pays? For What? To Whom? AND WHY? • • • Copyright, 2000 -2003 Resource Control Switching Costs (capture, lock-in) Perceived Value Cost Advantage Quality Advantage 36

A ‘Business Models on the Web’ Taxonomy • Rappa (digitalenterprise. org/models. html) Brokerage • Manufacturer (Direct) Marketplace Exchange, Buy/Sell Fulfilment, Demand Collection, Auction Broker, Transaction Broker, Distributor, Search Agent, • Virtual Marketplace • Advertising Portal, Classifieds, User Registration, Query-based Paid Placement, Contextual Advertising, Content-Targeted Advertising, Intromercials, Ultramercials • Infomediary • Merchant Virtual, Catalogue, Click&Mortar, Bit Vendor Copyright, 2000 -2003 Affiliate Banner Exchange, Pay-per-click, Revenue Sharing Community Open Source, Public Broadcasting, Knowledge Networks • Subscription Content Services, Person-to-Person Networking Services, Trusst Services, Internet Services Providers Advertising Networks, Audience Measurement Services, Incentive Marketing, Metamediary • Purchase, Lease, Licence, Brand Integrated Content • Utility Metered Usage, Metered Subscriptions 37

Conclusion • • • Copyright, 2000 -2003 As we search for e. Business models we must not be constrained by conventions that were the basis of old and big business Open source and open content are not naive, 'gift economies' They are harbingers of a new wave of business activity that transcends naive economic rationalistism 38

Open Source Software and Open Content As Models for e. Business Roger Clarke Xamax Consultancy, Canberra Visiting Professor, CSIS, University of Hong Kong http: //www. anu. edu. au/people/Roger. Clarke/. . . /EC/OMB 030925 {. html, . ppt} ECOM-ICOM Expert Address University of Hong Kong, 25 September 2003 Copyright, 2000 -2003 39

Copyright, 2000 -2003 40

References – Copyright http: //www. anu. edu. au/people/Roger. Clarke/. . . Clarke R. & Dempsey G. (1999) 'Electronic Trading in Copyright Objects and Its Implications for Universities', at. . . /EC/ETCU. html Clarke R. & Nees S. (1999) 'Technological Protections for Digital Copyright Objects', at. . . /II/TPDCO. html Clarke R. , Higgs P. L. & Dempsey G. (2000) 'Key Design Issues in Marketspaces for Intellectual Property Rights', at. . . /EC/Bled 2 K. html Clarke R. (2000) ‘File-Discovery and File-Sharing Technologies (aka Peer-to -Peer or P 2 P): MP 3, Napster and Friends’, at. . . /EC/FDST. html Clarke R. (2002) ‘e. Business and Copyright’ Power. Point slide-set for European Patents Office, June 2002, at http: //www. xamax. com. au/EC/EPO/e. Copyright. ppt Copyright, 2000 -2003 41

References – Open Source and Content http: //www. anu. edu. au/people/Roger. Clarke/. . . Clarke R. (2003) ‘Copyright: The Spectrum of Content Licensing’, July 2003, at. . . /EC/CCLic. html Clarke R. (2003) ‘Open Source Licensing’, September 2003, at. . . /EC/OSLic. html Clarke R. (2003) ‘Open Source and Open Content Offer Insights for e-Business’, Expert Address to the ECOMICOM Programme of the University of Hong Kong, 25 September 2003, at. . . /EC/OBM 030925. html Copyright, 2000 -2003 42

References – Copyright – 1 of 4 Barlow J. P. (1994) 'The Economy of Ideas: A Framework for patents and copyrights in the Digital Age', Wired 2. 03 (March 1994), at http: //www. wired. com/wired/archive/2. 03/economy. ideas_pr. html Barlow J. P. (2000) 'The Next Economy Of Ideas: Will copyright survive the Napster bomb? Nope, but creativity will' Wired 8. 10 (October 2000), at http: //www. wired. com/wired/archive/8. 10/download_pr. html Benner J. (2002) 'Public money, private code' Salon Jan. 4, 2002, at http: //salon. com/tech/feature/2002/01/04/university_open_source/p rint. html Copyright, 2000 -2003 43

References – Copyright – 2 of 4 Dyson E. (1995) 'Intellectual Value' Wired 3. 07 (July 1995), at http: //www. wired. com/wired/archive/3. 07/dyson_pr. html Greenleaf G. W. (1998) 'An Endnote on Regulating Cyberspace: Architecture vs Law? ' UN. S. W. L. J. 21, 2 (November 1998), at http: //www. austlii. edu. au/au/other/unswlj/thematic/1998/vol 21 no 2/ greenleaf. html Greenleaf G. W. (1999) '"IP, phone home" - ECMS, ©-tech, and protecting privacy against surveillance by digital works' Proc. 21 st Int'l Conf. Privacy and Personal Date Protection, 13 -15 September 1999, Hong Kong SAR, China. at http: //www 2. austlii. edu. au/~graham/publications/ip_privacy/ Copyright, 2000 -2003 44

References – Copyright – 3 of 4 Kelly K. (1997) 'New Rules for the New Economy' Wired 5. 09 (September 1997), at http: //www. wired. com/wired/archive/5. 09/newrules_pr. html Lessig L. (1999) 'Code and Other Laws of Cyberspace' Basic Books, 1999 Lessig L. (2001) 'The Internet Under Siege' Foreign Policy (Nov-Dec 2001), at http: //www. foreignpolicy. com/issue_novdec_2001/lessig. html Lessig L. (2001) 'The Future of Ideas: The Fate of the Commons in a Connected World' Random House, 2001 Negroponte N. (1995) 'Being Digital' Hodder & Stoughton Copyright, 2000 -2003 45

References – Copyright – 4 of 4 Samuelson P. (1996) 'The Copyright Grab' Wired 4. 01 (January 1996), at http: //www. wired. com/wired/archive/4. 01/white. paper_pr. html Samuelson P. (1999) 'Intellectual Property And The Digital Economy: Why The Anti-Circumvention Regulations Need To Be Revised' 14 Berkeley Tech. L. J. 519 (1999), at http: //www. sims. berkeley. edu/~pam/papers/Samuelson_IP_dig_ec o_htm. htm Shapiro C. & Varian H. R. (1999) 'Information Rules: A Strategic Guide to the Network Economy' Harvard Business School Press, 1999 Copyright, 2000 -2003 46

References – Open Source and Content Gabriel R. P. & Goldman R. (2002) 'Open Source: Beyond the Fairytales' August 2003, at http: //opensource. mit. edu/papers/gabrielgoldman. pdf Lerner J. & Tirole J. (2000) 'The Simple Economics of Open Source' National Bureau of Economic Research, Boston Mass. , Working Paper 7600, at http: //www. nber. org/papers/w 7600 Newmarch J. (2000) 'Open Content Licences', June 2000, at http: //jan. netcomp. monash. edu. au/opendoc/paper. html Pal N. & Madanmohan T. R. (2001) 'Competing on Open Source: Strategies and Practise' January 2002, at http: //opensource. mit. edu/papers/madanmohan. pdf Raymond E. S. (1998) 'The Cathedral and the Bazaar' First Monday 3, 3 (March 1998), at http: //www. firstmonday. org/issues/issue 3_3/raymond/ Copyright, 2000 -2003 47