Noank Media

Noank Media is a new system for distributing audio and video recordings over the Internet. When fully operational, it will provide consumers throughout the world with unlimited online access to copyrighted recordings, unencumbered by encryption, while ensuring that the creators of those recordings are fully and fairly compensated. In brief, here’s how the system will work: Copyright owners (record companies, music publishers, film studios, etc.) will authorize Noank to distribute digital copies of their works in specific countries. Noank will, in turn, enter into contracts with major suppliers of access to the Internet: ISPs; mobile phone providers; employers with local area networks; and, last but not least, universities. Those contracts will oblige Noank to provide the networks’ customers, employees, and students with unlimited access (via downloading and streaming) to recordings registered in the system, plus search functions, recommendation engines, and other services. In return, each network will pay Noank a fee on behalf of each of its customers, employees, or students. 85% of the money collected in this fashion will be distributed to copyright owners. A computer program, downloaded by each person who makes use of the system, will count the number of times that each recording distributed through the system is experienced or copied. That data (automatically aggregated, to protect users’ privacy) will be employed to determine the amount of money paid to each copyright owner. Implementation of the system is currently most advanced in China and Canada. Once it is up and running there, we plan to launch similar services in other countries. Set forth below is a more detailed description of the genesis and shape of the system. Because we are continuing to refine the model, we welcome suggestions concerning its details. The best way to reach us is via email at noank@cyber.law.harvard.edu. Background and Personnel The seed from which Noank has grown was a proposal outlined in the last ten pages of a 2004 book by William Fisher: Promises to Keep: Technology, Law, and the Future of Entertainment. Nourished by a generous grant from the MacArthur Foundation, The Berkman Center, through its Digital Media Project, explored several variations on Fisher’s proposal and then began a pilot project to test some of those ideas. Paul Hoffert, a musician and media-studies professor with deep experience in the field of Internet distribution, joined the Berkman Center team in 2005 and quickly took on many responsibilities: helping to refine the vision, overseeing the construction of a prototype, and negotiating agreements with the many organizations whose participation is essential to the success of the venture. Eric Priest, a fellow in the Berkman Center who has considerable experience in the music industry in China, took the lead in developing the Chinese version of the system, known as Fei Liu. Nick Caramello and a team of programmers at Pod then began building the software essential to the operation of the

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system. Finally, Henry Vehovec, a Canadian businessman with a strong background in digital media, took responsibility for arranging the financing of the venture. This core group – Fisher, Hoffert, Priest, Caramello, and Vehovec – have received invaluable support from a growing team of Harvard faculty, Berkman Center fellows, employees, and volunteers: John Palfrey, Jonathan Zittrain, Diane Rosenfeld, Diane Cabell, Haochen Sun, Elizabeth Stark, Catherine Zhang, Li Xu, Jackie Yang, David Kusek, and Devon Copley. The law firm of Wilmer Hale has generously provided legal assistance as the venture has taken more formal shape. How It Works The essential features of our system are as follows: • The owners of copyrights in audio and video recordings provide us digital copies of those recordings and grant us licenses to reproduce and distribute them. (The system is designed to accommodate digital recordings of all sorts – including text, photographs, games, and software – but, for the time being, we are concentrating on audio and video.) Copyright owners who have already agreed to participate in the system include film studios, music publishers, record companies, and individual artists. In addition, the custodians of several Internet archives have offered us access to their substantial holdings of public-domain recordings. Everyone is welcome; there are no restrictions on suppliers’ access to the system and no registration fee. More specifically, when contributing a recording, a copyright owner chooses one of two licenses. License #1 authorizes all participants in the Noank system to: (a) reproduce the recording; (b) prepare derivative works; (c) distribute the recording (and derivatives of it) to other participants in the system; and (d) publicly perform the recording via digital transmissions to other participants in the system. License #2 is identical except that it does not include the rights to prepare or distribute derivative works. Copyright owners who wish to preserve their “rights of integrity” (i.e., their rights to prevent their creations from being modified) pick the second license and are compensated at a slightly lower rate than those who pick the first license when the revenue pie is divided and distributed. All of these licenses are nonexclusive; copyright owners remain free to distribute their recordings through other channels. We do not deal directly with consumers. Instead, our “customers” are companies and other organizations that provide network access to large numbers of subscribers, employees, or students. We provide downloading and streaming services to their users. They pay us a per-user monthly fee. Some of the access providers are likely to pass along that cost to their users. For example, participating universities are likely to charge each of their students a modest

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“entertainment fee,” analogous to an athletics fee. Others may absorb the cost. Still others may charge their users more than they pay us. It’s up to them. • We provide each user of a participating access provider a piece of software, which presents to him or her: o a catalog (constantly updated) of all of the recordings legally available through our system within the country in which he or she is located; o several search functions and recommendation engines; and o tools for sharing playlists and opinions with groups of other Noank participants. Users can download unlimited numbers of these recordings in a variety of formats (none of which is subject to technological protection measures), which they can then play using any of a variety of players, either through their computers or through associated portable devices. Our software counts the number of times that each recording registered within the system is used and periodically relays that information to Noank, enabling us to make precise estimates of the relative popularity of those recordings. The software code will be open, so anyone can verify that we are keeping our promises and not collecting any other information illicitly. We do not aspire to provide members a comprehensive set of media-related services. On the contrary, we encourage others to supply Noank users compatible ancillary services, such as high-speed streaming, special recommendation engines, and customized user interfaces. Some of these services may be provided by our network customers; others will be provided by third parties. Noank will make available to advertisers and others aggregated (not individualized) data concerning participants’ listening and viewing habits. Noank will accept advertising on its service screens. All of the fees collected from customers, advertisers, and others will be distributed as follows: 85% will be paid to the copyright owners. (This is a higher percentage than that distributed to copyright owners by any comparable organization in the world.) A small portion of the remaining 15% will be paid to an online arbitration service that will provide fast, fair resolution of disputes concerning ownership of the copyrights in registered recordings. Most of the balance will be devoted to the cost of developing and running the service. The remainder will be paid to investors.

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A chart summarizing the relationships among the various components of this system is set forth below. Black arrows designate copyright licenses. Red arrows show how the recordings and ancillary services are delivered. Green arrows show where the money comes from and where it ends up.

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The one word that best characterizes the system is “open.” It’s open to artists, any of whom can participate. The recordings we make available are “open” in the sense that they are not subject to any technological protection measures and thus can be played with any devices. It’s open in the sense that we welcome partners who will add to the value and convenience of the service. And the source code for our software will be visible. Advantages This system offers substantial benefits to every constituency with an interest in the production and distribution of audio and video recordings.  The owners of the copyrights in those recordings get paid – and, indeed, get a larger share of the revenue generated by the system than they can obtain anywhere else. Many of the groups of consumers that we reach – above all, university students – represent largely untapped sources of revenue.  Independent artists get a simple, free way of delivering their creations directly to the consumers, while getting paid, and can decide for themselves whether to retain or relinquish their rights to control modifications of their creations.  Consumers pay less than they are currently paying for a much larger and more diverse menu of recordings. The copies they obtain are permanent and are compatible with a wide array of players. -4-

 Access providers who sign up with the system get: protection from legal liability; reduction of the loads that traffic in recordings imposes on their systems (because popular recordings can now be cached); and a way of increasing their attractiveness to potential customers. Universities in particular get relief from pressure by the recording and film industries to crack down on illegal conduct by their students. In addition, widespread deployment of this system would benefit society at large in two ways. First, it would largely eliminate the massive and wasteful expenditures of time and money that we have spend in recent years on efforts to curb the illegal sharing of audio and video recordings over the Internet. Second, by making widely available a large stock of recordings that may be easily and legally modified and combined with other materials, and by providing a convenient channel for the distribution of those modifications, the system will help sustain the rapidly emerging culture of creativity and amateurism on the Internet. In short, for may reasons, we believe deeply in this approach. We welcome your suggestions and hope for your support.

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