The Digital Auction

Suitable for mass sale of unique, but easily reproducible products.

In light of Napster and Gnutella demonstrating that digitally copyable artwork will soon effectively be beyond copyright jurisdiction, a new revenue model is required.

Patently, once a digitally copyable work is released, it is effectively within the public domain. Therefore, it becomes uneconomic to prosecute copyright infringement after sale. The transaction that remunerates the artist must therefore occur upon first (and probably only) sale.

Fortunately the same technology that enables free and mass copying of artwork, can also be harnessed to enable mass commissioning of artwork. Now that we are able to obtain extremely rapid purchasing decisions from a significant proportion of a product’s potential market and communicate with that market as a whole, we can facilitate a product’s purchase as a single collective transaction rather than as a series of individual transactions.

Because the market is able to act collectively and understand itself given real-time feedback of its bidding, the market will soon learn that a product cannot be bought by the few and enjoyed for nothing by those who manage to obtain a free copy after sale. If the market wants a product, that will only become available when the vendor feels they’ll receive fair compensation, then the market will have to pay for it in one lump or go without. Of course, there will be free-loaders, but they’d have been free-loaders under the traditional method. The single, collective transaction method cuts out the middle-men, and obtains what the market will bear, without the problems of the traditional method risking losses due to piracy or the product entering the public domain.

The difference is that the market has to want the product all at the same time (like, now!) as opposed to in dribs and drabs over the course of a few years. This will mean the vendor will probably need to consider when the right moment to sell arises.

Example

An up and coming musician provides a low quality preview of a new single, offering the high quality digital recording at a suggested price of $10,000. One hundred thousand punters make a bid. The artist finally accepts the high total offer of $120,000 which results in a sale price of $2 per head between 60,000 punters who had bid at least $2. $1,200 commission goes to the company.

The digital recording soon becomes freely available on the Web.

For distribution direct to their cable networks EMI had privately offered $150,000 for the single along with full rights, however, the artist was adamant that they’d sell direct to as many of their fans as possible.

Key Features

* The vendor’s product is advertised by the company on the vendor’s behalf at the vendor’s suggested per-head price (which though cannot be revised, is not committed to).

* The product cost is to be shared among the commissioning group of initial purchasers/bidders

* The sale of the product occurs (or not) at the vendor’s discretion.

* The vendor may optionally specify a total sale price at which the sale will automatically be agreed. This can be changed or withdrawn by the vendor at any time.

* Bidders may raise or lower their bids at any time until the vendor decides to accept an offer, or withdraws their product.

* The sale occurs when the vendor chooses to accept a price that can be met by a group of bidders (which is not necessarily the largest number of bidders).

* A bidder’s ability to meet their bid is guaranteed in advance (by credit card say).

* The vendor’s product is declared on trust (not requiring validation) or to be validated by the most popular agency selected by the accepted bidders, whose approval they have made a condition of their bid. As long as the product’s exclusivity is protected, the vendor may make their product accessible for review by any party at any time. However, it must always be accessible for review by all of the validating agencies whilst it is being offered for sale.

* Validating agencies may register with the company on application for a nominal fee. The company may choose to commend particular agencies. The validating agency receives no commission on sale. Instead they receive a selection fee from the company each time they are selected to validate a product for sale.

* Upon sale, the product is delivered exclusively to the group of bidders that met the per-head price when the vendor agreed the sale. After delivery has been completed, any copyright is dissolved and the product is considered within the public domain.

* The vendor may produce a freely available preview of their product as evidence of the final product without necessarily compromising the value of the final product. However, the vendor guarantees that they own copyright of the product prior to sale, and that they have not compromised the ability to exclusively deliver the product

* At any time prior to sale, the vendor may withdraw their product, e.g. to conduct a sale privately.

* The company makes no guarantees concerning quality or uniqueness about any of the products whose sale it facilitates, nor does it guarantee that vendors will deliver their products. However, it will act as escrow, conveying the sale price only to the vendor when it is satisfied that the product has been delivered (having been approved by the validating agency). The company may choose to offer a delivery service for products.

* Once the sale has occurred, the product has been delivered, and the vendor paid, the company’s involvement with the sale is terminated. Should there later be cause for complaint against the vendor, it is up to the purchasers to pursue the vendor.

Example of Real-Time Information provided to Vendor and Bidders

Current number of bidders:

* “There are currently 25,793 bidders”

Vendor’s current total sale price:

* “The vendor is currently offering an automatic sell at £300,000”

Maximum sale revenue currently available to vendor:

* “Best sale to vendor is currently $239,568 @ $48/head between 4,991 bidders”

Minimum per-head price to reach vendor’s current automatic sale price:

* “Minimum per-head price for current bidders to reach vendor’s automatic sale price of $300,000 is $12/head, and only 11,002 bidders currently meet that”.

Number of bidders to reach vendor’s automatic sale price at vendor’s suggested per head price:

* “Only 9,403 bidders currently meet the vendor’s suggested price of $10/head, leaving another 20,597 bidders to be found at that price before the automatic sale price is met”

Trends:

* “Based on past and current bid trends, estimated date at which vendor’s automatic sale price can be achieved is in 10 days time.”

* “Estimated date at which 30,000 bidders would reach the automatic sale price of $300,000 at the vendor’s suggested price of $10/head is 23 days time.”