Information Coops: Collective Funding of Information Goods from Software to Medicines

JANUARY 11, 2017

This is an excerpt from my upcoming book on the information age and the importance of an open future for the digital economy. I’m publishing it as part of an upcoming event with Ed Mayo and colleagues about a national strategy for coops in the UK.

Information Coops are bottom-up version of state-coordinated funding model. In an information coop individuals voluntarily pool resources to fund information goods such as music, medicines or software and then share access or revenues (access in the case of consumer coops and revenues in the case of producer coops). They are an exciting option because they offer the potential for bottom-up, ad-hoc action without the need to change policy at the national level.

At its heart, funding information goods is all about cooperation. Making a new movie or researching a new drug costs a certain amount of money. If a sufficient number of the beneficiaries could club together they could pay for the movie or the drug and then share it amongst themselves – or share it openly with everyone. Of course, coming together to cooperate in this way is not easy. This is especially true for information goods like movies or software where the beneficiaries are distributed widely in space and time. For example, the audience for a movie may be all over the globe; and some people will watch the movie today and some in twenty years time.

To resolve these kind of coordination problems we have created political institutions such as the state. And, so far [in this book] it is the state that has been our focus as the institution to use in making innovative new ways to fund information goods to replace intellectual property monopolies.

However, the state is not the only option. People band together to cooperate on all kinds of things: from neighbours having a bake-off to a sports club raising money for a playing field. More formally, consumer and worker cooperatives have a long history as well as legal recognition. And recently we have seen the rise of mass, online “crowdfunding” for everything from art projects to startups – with many of the funded projects focused on information goods such as software, online games and digital hardware designs like the pebble watch.

The Information Coop(erative) can take inspiration from elements of each of these. An Information Coop would pool resources to create or purchase a specific piece of type of information. For example, you could have an Information Coop to fund research on a particular drug or disease; or to design and develop a new software application; or to purchase rights to music or movies for its members.

In addition, I suggest the Info Coop would include the following features, inspired by the standard coop principles):

  • Member owners: Information Coops would be resourced from their members. The only additional permissible capital would be low-interest third-party loans. External investment for equity would not be permitted. Thus, the members would be “owners” of the coop.
  • Open membership: anyone could join the cooperative (subject to the membership fee).
  • Free and equal for members to coop resources: all members would receive free and open access on the same terms to the information assets owned or created by the coop. Members would receive no other economic return from their membership. The assets would also be asset locked. On dissolution or change of control, information assets help by the coop must be made open.
  • Open to everyone (eventually): the information assets controlled by the coop must be made open eventually. In some cases this may happen upon acquisition of the assets (the information is acquired so as to be made open) in other cases with a delay. This delay should normally be shorter (usually much shorter) than the time to the expiry of the underlying monopoly rights (so if the coop acquires a piece of music whose copyright expires in 30 years it should make the music open (much) sooner than in 30 years)
  • Democratic governance: the Coop would maintain something close to one member, one vote though unlike traditional coops it would not be strict in this requirement for member democracy.

In summary, Info Coops provide a structured way for people to club together to fund or purchase information goods which are then freely shared amongst the members – and eventually everyone.

Producer Coops

As described Info Coops are more like consumer coops: information is purchased by the Coop and then used by its members. However, producer coops are also possible. In a producer coop, information like software or music is produced by the coop members. It is then sold outside of the Coop and the revenues are distributed amongst the members. In a producer coop stricter rules would be required about the “eventual openness” of the assets and/or about the basis on which “consumers” may join the coop or access the coop’s resources (otherwise we are just back in a monopoly rights model but without equity investors).

Example: a music cooperative. (Spot-op)

Example: a data cooperative. (Dat-op)

Challenges for Information Coops

As a method for creating open information Information Coops have certain challenges:

  • Coops can go “bad”. They can end up being an exclusive club for their members, with all the benefits flowing to members or management at the expense of outsiders. Classic examples are some scholarly publishers which transformed into very profitable businesses and ended up exploiting their constituency as well as early data cooperatives such as OCLC (library data) or Gracenote (music metadata).
  • Coops can be inefficient and slow. Coops have democractic ownership and control – for example, every member may have one vote and votes are often independent of economic interest. This helps prevent the coop “going bad” but it often comes at the cost of efficient, agile decision-making. Decisions may require long processes and raising funds may be difficult (for example, selling equity may be impossible).

These challenges are significant, and especially so if we want coops to play a major role in making an open information economy, where all information like software and music is open and freely available to all.

Coops and Openness

First and foremost, it is not clear that Info Coops will produce more open information? After all, the logic of the information coop model is that information is only shared with members.

If membership is open to everyone this might be less of an issue. However, there is a significant risk that membership could be restricted – especially as it becomes valuable. For example, imagine a producer coop that comes up with a very popular app that is bringing in a lot of money.1 The Coop members may then be very reluctant to open up their software and lose revenues as previous paying customers become members. They may be equally reluctant to let new members into their Coop to share in their good fortune. (This is much like the way housing coops get ever more exclusive as their rents drop over time below market rents).

And for consumer coops, estricting the coops information assets to the coops members would not only be likely but probably essential. This is because if the coop shared its information “assets” openly they would be available to everyone whether they were members of the coop or not. This would mean little incentive for people to join and pay membership fees.

Thus, info coops will only be able to commit to eventual openness for their assets (and, in fact, this was reflected in the principles we set out above). Moreover, whilst consumer coops would be happy to have more (paying) members, producer coops would likely have to restrict membership, at least if they were successful, in order to prevent new memembers free-riding on previous success.

The Challenge of Scale

The second challenge is that it is hard for coops to reach adequate scale. This is a chicken and egg style problem. For example, consider the case of a music consumer coop that is trying to offer a service like Spotify but on a cooperative basis. To attract members it needs offer a good range of music. To do that it needs a lot of up-front money to license that music from creators and record labels. However, the coop model makes it hard to raise money from VCs or similar providers of capital. Thus, the main option is to sign-up a lot of members – hundreds of thousands or millions of them. But this takes us back to square one: members will be reluctant to join without a good catalog of music – and even with a good catalog you’ll need to spend a lot on marketing to recruit those members.

Non-cooperative companies solve this problem by taking up front capital and using that to subsidize one or both sides of the marketplace – guaranteeing fees to musicians and doing lots of marketing to recruit users. Cooperatives lack this up front capital, making it hard to get started.

Conclusion

Fundamentally, (Consumer) Info Coops are all about scale – the larger they are, the more people to share the fixed cost of creating or buying information – and the smaller the cost for each member. Unfortunately, scale is precisely one of the things the default coop model may struggle with. The coop model for governance, organization and ownership all struggle with scale – they are not designed for scale and agility but to protect equity and inclusivity.

This is not to say that coops cannot be a fit here – after all, one could argue the State is nothing more than one great coop. But we should not underestimate the challenges involved – and we should make sure our investment in coops does not diminish our efforts to effect wholesale political change at the national and global levels.

Postscript: a Note on Platform Coops

Almost all of the above applies to platform coops. In fact, platform coops are often just information coops in disguise (for example you could see “spot-op”, our coop for music as a platform coop but it is really just an information coop). Even where platform coops are really about platforms they share most of the same economic dynamics: a common, core asset (‘the platform’) that needs a critical mass of suppliers and users. Morever, the core platform normally usually involves some major “information” goods in the form of software, algorithms and data – even they are also “market-places”.

Thus, both the principles set out above, and the challenges, apply to platform coops. This can be useful giving the increasing discussion of platform coops in the context of increasing “uberization”.


  1. There are several examples of this situation in the cases of Kibbutzim in Israel. Kibbutzim are not only cooperative but traditionally communitarian – holding all property in common. There have been several successful high-tech Kibbutz. For example, Kibbutz Yizre’el’s back in the 1970s created the Maytronics company which designed and manufactured automated pool cleaners. Today Maytronics is a leader globally and worth more than $1bn. If Kibbutz Yizre’el were to allow anyone to join they would be flooded with members wanting a part of their windfall. As a result, membership of the Kibbutz is highly restricted. [return]