Data co-ops: a new model of data ownership
For years, musicians have complained that they can’t make a living on the royalties from music streaming sites like Spotify. The way those royalties are distributed has been a point of contention for many artists, including Taylor Swift who pulled her catalog from Spotify in the 2010s to protest its low royalties. Today, an artist gets paid between $0.003 - $0.005 per stream.
Spotify’s business relies on music from millions of artists around the world, but it is neither governed nor controlled by those artists. Its governance, as a public company, looks far different from that of a local co-op or credit union.
But such cooperative business models might represent the future of the streaming industry. New streaming entrants like Resonate are formed as data cooperatives (co-ops), where profits are more fairly distributed and control is more evenly shared.
Rapid technological advancements and the rise of a data-driven economy have led to the creation of data co-ops, which provide individuals with new opportunities to own and control their personal data.
In this week’s newsletter we draw from a report published in January, How Can Data Cooperatives Help Build a Fair Data Economy?, by Project Liberty Institute and Decentralization Research Center.
Drawing on interviews with 16 key experts in data cooperatives, digital rights, data governance, and the digital economy, the report summarizes the current state of data co-ops and sets the agenda to examine the potential for cooperatives to help transform today’s digital economy.
// What is a data co-op?
One in eight people globally is a member of a co-op. That’s 12% of humanity. In total, three million co-ops employ nearly 10% of the global adult workforce, or 280 million people.
Co-ops have been around for hundreds of years. They originated in the 18th century. Today, major companies like REI, Land O’Lakes, Best Western, and even the AP (Associated Press) are all co-ops.
The International Cooperative Alliance defines a cooperative as “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.”
Building upon this definition, Project Liberty Institute defines a data cooperative as “a form of cooperative organization based on the ownership and governance of data.”
Here is how it works:
- Members of a cooperative consent to have a third party (the co-op) hold copies of their data.
- The third-party entity is cooperatively governed by its members who participate in decision-making and oversight.
- This entity can safeguard its members’ data or represent its members in negotiations over how their data is used and sold.
It’s a simple concept, but the implications are enormous—particularly when considering how data is owned and governed on the internet today.
Vast amounts of data are owned and controlled by a few large tech companies that practice “extractive, feudalistic business models.” The billions of users on platforms like Facebook or TikTok don’t own or control the content they produce, and the data generated from their online activity is often harnessed by profit-seeking, attention-grabbing algorithms to drive engagement. The result? An internet defined by poor data privacy, monopolistic business practices, and hyper-centralized control.
A data co-op upends this and returns control to users to manage their data: Members of a data co-op actively participate in democratic governance, voting on how their data is used, managed, and monetized.
Data co-ops differ from data trusts (a more top-down structure where trustees make decisions on behalf of people who contribute their data) and data commons (a structure where data is pooled and shared as a common resource but often lacking individual rights).
“Data co-ops give individuals a financial stake, distributing economic returns directly to members,” the report noted. “Unlike data trusts and data commons, which focus on protection or collective access, co-ops uniquely prioritize member ownership, autonomy, and shared prosperity.”
However, the best model for ensuring that people have voice, choice, and stake in their digital lives may lie at the crossroads of these models. Looking at these hybrid models is precisely what PLI and DRC will explore in the second phase of their collaboration.
// Examples of data co-ops
Mei Lin Fung, the Co-Founder of People-Centered Internet, believes that “Data co-ops are an idea whose time has come. Because we’re so aware now of the consequences of irresponsible data use.”
Here are five examples of data co-ops.
- MiData is a health data cooperative that empowers individuals to securely store, manage, and control access to their personal health data.
- Swash is a browser extension and digital wallet that allows its users to get paid for browsing the internet. Considered the largest data union in the world, it allows people to exercise their data rights and make money from the value of their data.
- The Driver’s Seat Cooperative was a worker-owned ride-hailing platform aimed at distributed data governance and improved working conditions for gig-economy workers. However, the co-op model ended up not being financially sustainable, and it now exists as part of a research initiative at Princeton University.
- Salus.coop is a co-op from the Catalonia region of Spain that pools members’ health data.
Sylvie Delacroix, the Inaugural Jeff Price Chair in Digital Law and Director of the Centre for Data Futures, believes that these early experiments in data co-ops will inform future models that could become more scalable.
“I think that in the future, we’re going to see a lot more experimentation with different models of data ownership and governance,” she said. “Data cooperatives are going to be one of the most promising models. But I think that we’re also going to see a lot of hybrid models, like data trusts and data commons. The key is going to be to find models that are both fair and sustainable.”
// Addressing the core challenges of data co-ops
The report highlighted insights from its 16 interviews on core challenges that data co-ops must address to be successful.
Together, these core challenges form an agenda for future research on designing and managing effective data co-ops. Here are four (but the report outlined several more):
- Bridge the gap between theory and practice. The abundance of academic literature and conceptual frameworks surrounding data co-ops stands in stark contrast to the scarcity of successful operational models. A more pragmatic approach is needed that prioritizes building functional data cooperatives that deliver tangible benefits.
- Interrogate the actual value of data. Many experts interviewed for the report challenged the idea that data holds intrinsic value. Its value is context-specific and depends on how it's used. Finding these use cases is crucial for data co-ops to become financially sustainable.
- Focus on aligning incentives. To ensure the success of data cooperatives, it's essential to align incentives for both data contributors and data buyers. Beyond financial rewards, co-ops can offer members access to valuable insights derived from aggregated data, thereby enhancing their decision-making capabilities. Additionally, by pooling data, members can gain collective bargaining power, enabling more favorable negotiations with companies or institutions seeking to utilize their information. This collaborative approach not only fosters stronger community ties but also promotes the sharing of high-quality data, which in turn increases the cooperative's overall value and revenue potential.
- Establish better legal and regulatory frameworks. The lack of clear legal definitions and supportive policies creates challenges when setting up data co-ops. Better legal and regulatory frameworks at the local level will reduce the friction standing in the way of more experiments.
// The next step
On April 1st at the Decentralized Tech Summit at Georgetown University, Project Liberty Institute and Decentralization Research Center will convene a larger group of practitioners, technologists, and policymakers from across the cooperative, decentralized governance, and fair data realms to examine how cooperative business models might advance the goal of giving people a greater voice, choice, and stake in the digital economy. The result will be a roadmap for anyone looking to explore models of decentralized data agency.
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