An Alternative Compensation System is a proposal for an alternative means for ensuring the authors still receive income from the digitally produced works while the works are digitally produced on a wide scale. Numerous requests and proposals for Alternative Compensation Systems have been made worldwide to adapt to the changing information distribution environment.

A less formal proposal for Alternative Compensation Systems entails that of establishing voluntary collective types of licensing. Most of the requests for an Alternative Compensation System, however, involve governments. Peer to peer file sharing is perhaps the most important reason for such proposals as it has become so widespread that it is almost universally acceptable for the users of share systems to do so without considering it as illegal. Many of the proposals suggest taxes on the share systems which could be used for compensation to the authors.

Proposals for such a government driven Alternative Compensation System include targeted levies for digital media players, share systems, and Internet connectivity. The problem still to be addressed then is that a share system operator can avoid paying levies when agreeing not to allow peer to peer sharing. In essence there will always be some form of loophole, depriving the authors and artists of valuable compensation.

Another problem still to be addressed regarding the Alternative Compensation Systems is that of distributing the royalties. One agency will have to be in place and with the large number of works produced annually, the agency may easily become overloaded and thus pay out later than should. Yet a further concern is that of fraud and corruption which could leave such an agency useless if it is a government run agency.

A final question still to be addressed is how to determine the royalties. Until a workable solution for each of the problems mentioned, is found, the Alternative Compensation System will stay an unimplemented concept.