Co-ops: Sharing the Spoils

For quite some time this blog has been a dumping site for thoughts about how to operate as independent software creators while being fair to the users and developers we work with. Recently those thoughts have turned to the co-operative model, including the focus on giving back to a wider community (not exactly an uncommon consideration for an industry with so much FOSS foundation) while still aiming to operate as a commercially viable entity inside the capitalist hellscape we currently operate (until the seas boil).

Even with the new funding models around donations (eg Patreon and KickStarter), there has been little movement around changing the deal for users (from offering source code & unbaked assets as standard to taking investment as ownership - creating consumer co-operatives) or developers (eg moving to a worker co-operative to democratise the office that is now funded by thousands of small individual donations rather than an investor who takes ownership of the company and chooses the boss). Meanwhile, every week there is a story about workplace conditions and we all kinda know the only reason no indie teams are getting the negative press is because stories do the numbers when tied to well known corporate brands. The EA Spouse blog post is almost 15 years old and things only change at the slowest speed those in power think they can get away with (once again, see boiling oceans); and that's mirrored in how we push ourselves into early burnout (and to keep up with a competitive marketplace filled with so many products).

The big play with a worker co-operative is that they're democratically owned. Every worker buys into the institution and so become a co-owner. Big decisions usually require consensus votes, smaller things can be majority or even left to individuals. As a large company, you still have the same management tiers but ultimately they answer to all the workers rather than shareholders or a small group of private owners. The details are somewhat fluid so maybe in one place you can increase your share through time worked (while most places do it so that after a trial period everyone buys in with an equal vote/share) but fundamentally all workers can buy in and democratically control the institution while also receiving the full returns from their combined labour.

Some places are particularly precious about one vote/share per person. I think we're all aware of how soft power works and that every person having one vote does not mean everyone has equal power. As long as you're being rewarded (eg for time dedicated to the co-op, which increases institutional cohesion) and it has a low share ceiling then I feel those rules make enough sense. I'm actually somewhat more concerned by the other running decisions and initial investment, which is great if you're building a co-op by and for devs who all have $50k cash (and a lot of time to invest that we could value at market rate $10k/month) to create a viable business but becomes less great when you look at who that excludes and how the final system works (often with the aim to move to a salary system to even out income but at the cost of decoupling project profit from remuneration).

It's not helped by software as a product. Work several years on a video game with zero revenue and then you've got a source of cash, an IP bundle that can be duplicated for basically free as buyers are found for additional copies, that may or may not pay for the next development cycle. It's all a bit luck-based because the wider games industry is a hit-driven market. If you've got personal reserves to self-fund then you're buying those lottery tickets. Tying remuneration entirely to a project rather than salary system also seems inadvisable. I have been part of that process of a decade of obscurity and I'm not convinced that the co-op model automatically does anything to ensure those who built the foundations are fairly rewarded.

Buying a company

There are many ways of organising this (or less many, depending on your local legal landscape) but in general you buy your slice of the company when you join and everyone else has to collectively buy back that slice when you leave. I imagine it would be advisable to minimise the value of the company if you're doing direct ownership, because otherwise buying a slice could become prohibitive for new hires and difficult when someone leaves, although with so much being IP rights then minimising value isn't trivial.

My preference would be to put the co-operative's ownership into a trust to be run for the benefit of all employees. That means you can have the buy in be a dollar or similar symbolic value while a contract requires trustees to operate the co-operative for all workers, under rule by the decisions of those workers, while not requiring workers have the net worth of where they work inexorably linked to their own finances. The company as a focus of value to be exploited is an unhealthy model that pushes market cap maximisation and other unsustainable growth models which the co-op model already rejects (along with the potential to raise investment in that way).

Dividing up the IP

What we've started to build up here is a company that splits revenue between paying sustainable salaries to all workers with a bonus based on project contributions. Ultimately that's based on the agreement of all the workers, as they are co-owners, but an initial split would be for everyone who contributes to a project to vote on how the bonus is split. That's how the model works: we have suggested structures for how this works and recruit based on that but also, if all workers agree a different system, then even the core bylaws change with a unanimous vote to change them. The co-op can adapt and change over time.

The system I'm currently thinking through, and the impetus for this blog post, is to tie the IP and projects to the workers rather than the co-op as a whole. Clearly the co-op needs central funding to continue to operate and pay out salaries on unfinished projects. Without that, it all falls apart. Traditionally you'd assign IP ownership to the co-op and then it, as an entity, would divide out the bonus to workers on a project; keeping the rest as core funding and slowly increasing the accumulated IP the co-op owns.

But if we go back to our basic copyright law, there is already a suggested construction for IP which is worked on by several people and is indivisible. Shared copyright ownership where all contributors own the IP but either must agree any license or must equally compensate every owner for any individual deal done (how this works by default changes depending on local legislation). There is the framework for assigning the IP created on a project to the workers of that project and licensing it to the co-op as entity for commercial exploitation and future development. This goes beyond the original model of splitting the company between all workers and also splits the IP between the workers not just as via direct ownership but also applying via indirect ownership & on a per-project basis. If we're working on this, we could also attempt to spread our values even if the workers on a project leave the co-op with their IP, something that copyleft licenses are an example of.

A viral license

So what do we need this system to do and prevent? (Consider this working on top of our previously stated general rules for creating software, so the license will already include terms that automatically transfer the IP to the public domain after a certain number of years of commercial exploitation or after a high return on investment is achieved.)

• The co-op must be given a reasonable ability to commercialise the project, which repays it for day-to-day costs, salary payments made during development, ongoing platform services, and ensures the future operation of the co-op. This may require it have the exclusive rights for some years to prevent competition from project members operating outside of the co-op. It should probably also have rights to develop new IP on top of the existing IP (sequels, use of the codebase in new projects etc).
• The individuals on a project should be fairly compensated for commercialisation of their work, around an agreed bonus split. Future work to maintain ongoing development (patches etc) may need to be accounted for in this agreement or allow renegotiation of the original split.
• To prevent IP becoming inaccessible due to disagreement between shared owners (something several commercial games currently are stuck with), the contract should err on the side of providing every individual with the ability to further commercialise the IP after any initial exclusivity, as long as the returns are split back to all individuals in a way considered fair (a new unanimous agreement) or along the lines of the bonus split (the original agreement).
• To ensure the IP does not calcify, only able to be duplicated and sold as a fixed product, a viral license should allow new IP to be constructed on top of the existing IP by those who own a share of it. The value of the viral component is to ensure that any project member who takes the shared IP with them will also be constructing new projects that value shared ownership. This will require some sort of agreed structure for how various derivatives built on top of the IP are required to return some cut of their revenue to the original bonus split or find unanimous agreement in drafting a new split and cut amount.

As you can maybe sense, this is very much still a rough outline. I'd love to find projects already working along similar lines that manage to take the idea of worker ownership and split the difference between treating that as a project and co-op office being primarily owned by all workers. Also a way of sharing IP with a framework for future exploitation by the shared owners which has been designed with the expectation that everyone working on the project would be a shared owner (the existing things I've read around this are closer to classic music contracts where various things are not considered indivisible and they are never expected to scale out to a full team working on a project all getting shared ownership).

Worker co-ops are already heavily marketed as part of a wider social movement promoting more co-operatives, which would seem to be a great match for nailing down a form of shared IP ownership that also brings with it various restrictions that mean anyone exploiting it outside of the original co-op would still be bound to the principles of democratic shared ownership between every contributor and fair remuneration.