This time from Paste Magazine (HT: Peter Schwartz via Wired Blog Magazine), and motivated by the Radiohead Experiment, and with an interesting twist:

Subscribers who choose to pay more than the normal $19.95 asking price will have their names printed in an upcoming issue of the magazine, but the entire year-long subscription can in fact be had for $1, as I just confirmed.

Both Paste and Radiohead appear to be making these moves to broaden their consumer base (and as Geoff has pointed out, getting access to valuable customer data), strategies that are at least related to strategies commonly observed from multi-product firms, rather than some more permanent attempts to incorporate voluntary pricing into the business model we’ve seen (e.g., restaurants).  Aaron Schiff has some nice posts up looking at some voluntary pricing download data from a website called Jamendo which makes the data publicly available (the minimum donation is apparently $5). Schiff reports that the average donation is a (surprisingly high in my book and much higher than the reported estimates of Radiohead’s donations) $14.55 and the data are available on his site.

Dan Solove over at Concurring Opinions reports on an insidious practice that unfortunately has become increasingly common: domain name hijacking.

Here’s how it works. The original owner of a popular website fails to renew its domain name prior to the expiration of the owner’s entitlement. An opportunistic “hijacker” then purchases the name and offers to sell it back to the original owner for a tidy sum. The original owner is then left with an unhappy choice: pay the hijacker off, or set up shop under a new domain name with the loss of traffic that such a switch inevitably entails.

The latest victim of such a hijacking scheme is Crescat Sententia, a popular blog that used to be located at http://www.crescatsententia.org/ but now has been forced to move to http://www.crescatsententia.net/.

Dan suggests that domain name hijacking of this sort may well be characterized as copyright infringement. But because the case for copyright protection isn’t clear cut, he wonders if there are other legal protections too.

Here’s my suggestion for another theory of liability: intentional interference with prospective economic advantage. The elements of that tort–(1) an economic relationship between the plaintiff and some third person containing the probability of future economic benefit to the plaintiff; (2) knowledge by the defendant of the existence of the relationship, (3) intentional acts on the part of the defendant designed to disrupt the relationship, (4) actual disruption of the relationship; and (5) damages to the plaintiff proximately caused by the acts of the defendant–all seem to be present here. The original website has an economic relationship with its existing readers or patrons; the hijacker knows about this relationship; the hijacker intentionally acts to disrupt the relationship by acquiring the domain name; the loss of the domain name actually disrupts the relationship by shutting down the old site without indicating where a new site, if any, is located; and the original owner is thereby damaged.

As matter of policy and economics, there isn’t any positive social value associated with domain name hijacking. Indeed, once transaction and switching costs are considered, the conduct actually entails social losses. One would therefore hope (or perhaps a la Posner even dare to predict) that the common law would forbid and deter such conduct. Applying the tort of intentional interference with prospective economic advantage would do just that. And so even if the copyright case against domain name hijacking isn’t airtight, the common law should come to the rescue.

Hijackers beware!

The WSJ Law Blog reports (via this AP Report) that the French law allowing regulators to force Apple to make its iPod compatible with rival offerings went into effect Thursday. “Me too” regulatory movements are already underway in Britain, Norway, Sweden, Poland and Denmark. This, as Microsoft plans to introduce “Zune,” its entry into the media player market. First, it was Apple’s shiny packaging and exploitation of consumer irrationality that explained Apple’s success in the media player market. Now, the French law adopts a different theory: it’s iTunes.

It goes something like this: Apple is a dominant firm and is exercising market power by excluding would be rivals from using its software (iTunes) to increase its market dominance. Throw in a couple of buzzwords like “network effects,” “first-mover advantage,” “path dependence,” and “lock-in,” and we’ve got ourselves a 21st century style antitrust case. By the way, I don’t mean to suggest that these economic phenomena are not “real.” I just mean that we should not let theory get in the way of facts here. And the fact is that the iPod has generated huge benefits for consumers and there is no threat of competitive harm in sight.

But since we’re here, lets talk about the theory of competitive harm here. Professor Bainbridge, for instance, is skeptical that Zune will prove to be an “iPod Killer” because Apple is reaping the competitive benefits of “path dependence” in the presence of network effects that have created substantial barriers to entry:

Apple has managed to create a proprietary system in which music downloaded from iTunes can be played only on iPods (hence, France’s recent attempt to legislate opening the iPod format). If you’ve been an iTunes user for some years, as I have, you’ve got a huge investment in downloaded music. The costs of buying all that music over again so as to use it on a Microsoft Zune strike me as prohibitive . . ..

Toss in herd behavior, whether you call it a fad or brand cachet, and Apple looks to have pretty serious lock-in effect. It’s hard to think of any other Microsoft competitor that had such a built-in protection against competition. Netscape didn’t. WordPerfect didn’t. In both cases, there were few barriers to switching. Perhaps Sony’s Playstation is the only comparable example, and in that case while the xBox has dented Playstation, it surely hasn’t been a Playstation “killer.” So it’s very hard for me to believe Zune will prove an iPod killer.

To be fair, the good Professor does not suggest anywhere in his post that Apple’s bundling is an antitrust problem (just that Zune will not “kill” the iPod). I certainly don’t know whether Zune will be uproot Apple’s iPod success. Maybe they will offer a unique service with new features, maybe they will pay consumers to replicate their iTunes libraries, maybe they will fall flat on their face. Maybe Apple’s new attempts to increase distribution by integrating iPod functionality in automobiles will attract new consumers and keep current iPod users. I don’t pretend to have the answer. The answer is best left to the marketplace. My point is simply to illustrate the underlying economic concepts underlying the call for mandatory unbundling. Enough of that. Some thoughts on bundling, the French law, the underlying anticompetitive theory, and comparisons to Microsoft below the fold.
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After scoffing for months at the suggestion that satellite radio firms Sirius and XM should merge, Sirius CEO Mel Karmazin admitted this week that it’s something he’d like to see happen but expressed doubts about the antitrust authorities permitting the deal to go through. See stories here and here.

Karmazin is right that the proposed Sirius/XM merger presents some antitrust issues. But he may be wrong in thinking that the issues are insurmountable.

Take the issue of product market definition. Karmazin appears ready to concede that the relevant product market is satellite radio and that Sirius and XM are duopolists who by merging would become a monopoly. But why concede that? Satellite radio competes with regular radio for listeners. And many cars are now equipped with television and dvd players, which passengers (though not drivers) can watch. iPods can be hooked up to car speakers. And it is only a matter of time before Internet content (including audio streaming) will be widely available via portable wireless devices that are usable in cars. Satellite is just one medium among many through which it is possible to transmit content. And the market for audio content is quite thick, with Sirius and XM holding only a small combined share.

Even assuming that the agencies will define the product market narrowly to include only satellite does not end the inquiry. Neither XM nor Sirius nor a combined Sirius/XM can stop anyone else from supplying content via the satellite medium. There isn’t a discernible barrier to entry here. So if Sirius/XM raises prices unduly, one would have reason to expect entry into the satellite medium by other firms.

Another point to emphasize is the efficiencies associated with the merger, which would create an entirely new product for which there is clearly some demand. There are doubtless many Sirius subscribers who would like to hear some XM content and vice versa. Now the only way to do that is to buy two sets of hardware and subscribe to both. For these consumers at least, things would be better if they could buy all the content they want from a single provider. And in this sense at least, the merger would be unambiguously pro-consumer.

One final point: even short of a merger, it may still be possible for the two firms to facilitate “one stop shopping” for content by means of cross-licensing agreements permitting each firm to sell the other firm’s content to its own subscribers. But if this is permitted, then wouldn’t it be pointless to block a full blown merger?

Here at Truth on the Market, we’ve already broken a cardinal rule (at least a cardinal rule among transactional attorneys)—we’ve commenced a relationship (this blog) prior to finalizing the governing document. In fact, we haven’t even talked about a governing document, although I’ve given it some thought. One of the reasons for this is that as Geoff and I recruited folks to join the blog, it didn’t seem like the right time to hit them with a contract loaded with clauses like reciprocal indemnification, binding arbitration, consent to jurisdiction, perpetual royalty-free license, etc.

An initial question, of course, is whether a group blog even needs a governing document. We’re not talking about a business deal here. It’s just some law profs spouting off on various topics. Papering the relationship may be contrary to the spirit of the blogosphere (similar to putting “TM� on a blog tagline).

There are, however, a number of issues that I think should be addressed in a written contract. The biggest in my mind is copyright. Absent agreement, as a general matter each author holds the copyright to his posts. This means if we had a falling out with an author here, that author could force us to pull all his posts from the blog. This obviously would be detrimental to the blog and the remaining bloggers. Because no one knows at the front end who if anyone will be leaving the blog on bad terms, it’s generally in everyone’s best interest to address the issue now. My suggestion is that we grant each other a perpetual, royalty-free license to use one another’s posts on this or any successor blog.

Another big issue is domain name ownership. We’ve had some early success in getting other blogs to link to us. As you know, these links are important in terms of search rankings, google rating, etc. Because all the links are specific to the domain name, the domain name becomes a very important asset for the blog. Again, I think some sort of perpetual, royalty-free license is in order for the domain name.

In the next week or two, I’m planning to put together a term sheet for a group blog agreement that addresses the above and other issues. Before I launch into that, however, I want to gauge the reaction, particularly of my co-bloggers, of formalizing the relationship. I know from experience that in some situations papering a relationship is not well received, even though it may be wise from a legal perspective. In particular I’m reminded of the time I lined up a handyman to do about $500 worth of work on my house. I presented him with a “House Repair Agreement� I had drafted. Instead of signing it, he decided to take a pass on the work. So did the second guy. For the third guy, I went with a handshake.

UPDATE: Larry Ribstein, the guru of unincorporated entities (among other things), raises the issue of whether a group blog is a partnership (see here). If it is, as he points out, the copyright ownership issue is different. For reasons I’ve blogged about before (see my comments to this post), it is probably best for a group blog to avoid partnership treatment.  And due to cost and other considerations, I don’t think it makes sense to go with a corp. or LLC. Hence, my thought on handling the issue is to include an “anti-partnership” provision in the agreement, i.e., “while we are an association of more than two people, we are not carrying on a business for profit.” Any revenue we may get from selling ads will be used to cover the costs of/invest in the blog. I realize that a court could still nevertheless find we are a partnership, so the agreement would also include provisions that apply in the event a court ignores our express intent and finds we are a partnership. Thoughts on this approach Larry?

DISCLAIMER: NEITHER THE ABOVE NOR BELOW IS MEANT AS LEGAL ADVICE!