Friday, March 14, 2014

Incubating Indies: New Distributed Models to Support Diverse Culture

Guest Blogger

Sean A. Pager

For the conference on Innovation Law Beyond IP at Yale Law School

It’s date night, and there’s nothing to watch at the local Cineplex.  Sadly, this has become a common complaint.  My wife and I live in a medium-sized, Midwestern college town.  There are at least five different movie theaters within a 15 minute driving radius, all of which have multiple screens.  Yet, they all feature the same five movies, screened in multiple versions: 2-D, 3-D, IMAX, etc.  Moreover, those five movies often seem an indistinguishable variation on last month’s offerings: a mix of Superhero action films, zombie/vampire fantasies, and gross-out humor comedies, whose formulaic plots hew to narrowly defined genres that emphasize spectacle over subtlety.

Perhaps my wife and I don’t fall within Hollywood’s target demographics.  But we’re not the only ones complaining.  Acclaimed filmmaker Steven Soderbergh issued a passionate cri de coeur over the “state of the cinema” in a speech at last year’s San Francisco International Film Festival.  Even Steven Spielberg and George Lucas have criticized the blockbuster-heavy film culture they helped to spawn.  Spielberg says he struggled to get his Oscar-winning film, Lincoln, distributed because it fell outside the mold.  If Steven Spielberg is struggling, imagine how bad things have gotten for lesser-known indie filmmakers.

Lack of diversity in film and other popular media impairs consumer choice and impoverishes democratic discourse, but what does diversity have to do with innovation policy?  There are many reasons why Hollywood’s focus has narrowed, but, at bottom, they all have to do with money.  And the money Hollywood makes is underwritten by hefty indirect subsidies conferred by the copyright system.  Yet, the Constitution tells us the purpose of copyright laws is to promote “Progress.”  We are therefore entitled to ask whether we are getting our money’s worth.  If copyright is not delivering the kind of cinematic “Progress” that we desire, perhaps it is time to consider investing in alternative subsidy regimes.

In fact, we as a society already subsidize the production of film and other creative media through a variety of mechanisms:  Besides copyright, subsidies flow through direct patronage regimes (e.g. NEA grants), tax policy (e.g. deductions for charitable donations), higher education (e.g. film schools), public arts infrastructure (e.g. performing arts centers), and communications regulatory policy (e.g. public access television).  We should look at this entire mix of direct and indirect public subsidies and consider ways to refocus incentives toward achieving more diverse, innovative outcomes. 

Some may question whether subsidies are called for at all.  Many copyright commentators are enamored by DIY content created by amateurs.  Others place their faith in alternative business models that could fund diverse, long-tail content through purely market mechanisms.  I am less sanguine that such solutions will suffice to fill the gap.  The gulf between amateur content and mainstream commercial productions is vast, and Big Content’s distribution clout is unrelenting. 

My own approach is therefore more incremental and evolutionary.  In my draft paper, Incubating Indies: Distributed Subsidies for Diverse Culture, I explore ways to adapt and supplement
existing models to support indie films and other forms of diverse culture.  I focus primarily on approaches that combine (a) distributed allocation mechanisms with (b) ex ante funding.

By distributed allocation mechanisms, I mean avoiding the need for centralized decisions as to who gets the benefits.  Distributed models are generally more efficient and democratic than top-down patronage regimes.  Copyright offers a good example of a distributed mechanism:  The copyright system has low threshold entry requirements and broad, content-neutral criteria as to subject-matter eligibility.  But copyrights need to be monetized to have value.  Therefore, in practice, the copyright decisions leaves the allocation of benefits to be dictated by the market;  works that sell well enjoy disproportionate benefits.

The problem with copyright is that the rewards, if any, only arrive ex post, after the initial production expenses have been incurred.  As Lisa Larrimore Ouellette observes in her blog post for this conference, and co-authored paper with Daniel Hemel, delayed and speculative rewards under an ex post incentive regime can deter creative investment.  I argue that such deterrent effects are particularly injurious when it comes to resource-intensive works produced by independent artists, many of whom are unable to bear the up front costs alone.  Yet, as commercial studios narrow their focus to big-budget “tent-pole” movies, external backing for indie films has become increasingly unavailing.

For an alternative regime that operates in a both distributed and potentially ex ante fashion, we could look to tax policy.  Tax deductions for charitable donations allow individual taxpayers to indirectly allocate tax subsidies to eligible arts non-profits.  Unfortunately, because such deductions are skewed toward the very wealthy, the results are not as diverse and democratic as they could be (opera companies benefit more than indie films), nor is such funding typically oriented ex ante.  Allowing tax deductions for donations to indie film projects on crowdfunding sites such as Kickstarter would redirect tax subsidies explicitly toward ex ante production in ways that would benefit a much more diverse body of creative works.

State governments already offer subsidies that are targeted directly at film production, but the benefits flow disproportionately to Hollywood blockbusters.  Here too, a reallocation of benefits seems warranted.  By reserving production subsidies for lower-budget local films, states could avoid subsidizing “runaway productions” that parachute in from Los Angeles and instead nurture home-grown indie film industries that would generate more lasting economic benefits. 

Nor are tax incentives the only means to provide distributed, ex ante subsidies.  Publicly funded investments in creative infrastructure that enhance productive capabilities can generate both direct and indirect benefits.  A variety of different actors can decide how best to use the shared resources, yielding sometimes unexpected payoffs.  Public access television provides an existing model of such publicly-funded infrastructure in the United States, albeit one that has long suffered from neglect.  Brazil’s Culture Points program offers a more successful example overseas.  Public-private partnerships there operate community centers for digital production where ordinary citizens can take advantage of equipment and training to “create culture.”  My papers considers ways that such a “cultural incubator” infrastructure model could be translated to the United States context.

Finally, indirect subsidies do not have to be limited to ex ante production assistance.  Improving market access for indie productions represents a further distributed support strategy.  Copyright offers a familiar example of such a market-based subsidy.  However, market access can be conferred in ways other than IP rights.  For example, movie theaters could be required or incentivized to offer a more diverse selection of movies.  In addition, developing better online recommendation tools would serve as a public resource that expands the market for long-tail content by allowing users to find diverse works that suit their idiosyncratic tastes. 

These examples hardly exhaust the range of possibilities.  However, they do illustrate the potential for innovative thinking in the realm of innovation policy.  If we want to engender more diverse forms of creativity, we should diversify our existing menu of support.

Sean A. Pager is an associate professor of law at Michigan State. He can be reached at spager at

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