The adoption-based music economy

Digitization has a disruptive effect on a wide range of industries, from music to software to publishing to...you name it. If it can be digitized, it can be disrupted.

It's therefore encouraging to see the music seemingly converging on a cool new-old model: an ASCAP (American Society of Composers, Authors, & Publishers)-like tax from one's Internet service provider that allows unlimited downloading of music.

Gerd Leonhard's recent presentation on the subject is the best I've seen yet, one that I'd recommend you review, even if you never stray from the software world to think about music:

Compensation Not Control Music 2.0 Gerd Leonhard Midem Net 2009.Key

View more presentations or upload your own. (tags: isps leonhard)

Leonhard argues that digitization has made a control-based music economy impossible, forcing the industry to seek other ways to monetize music--ways that conform to digitization's abundance, rather than to the old idea of scarcity.

In a sign of things to come, the Isle of Man just approved "a single blanket fee (that) will cover unlimited download activity for all 80,000 or so...residents," as Ars Technica reports.

This follows a new trend toward "free" services, in which the music industry hides the cost of the music in the price of a separate service or device. It's oddly similar to trends I'm seeing in software.

This isn't the only model. As the Future of Music blog points out, some musicians, like Corey Smith, are finding that giving away music to drive more concert ticket sales can be a winning recipe. But while $4.2 million last year for Smith is a great return for an individual artist or band, it's not a great way to build an industry. I'd liken it to "lifestyle" software businesses that generate great revenue for their founders but provide little in the way of equity for other participants in the company's success.

So I think the "adoption tax" model is promising. The future is flat-rate: you subscribe, you forget about paying for individual transactions, you enjoy more music than you ever have before.

"Digitization has a disruptive effect on a wide range of industries, from music to software to publishing to...you name it."

At which point was software not digital?

[Matt Asay]

Guess I'm referring to the media in which it's delivered, but good point.

[umbrae]

Why do you link to articles that are not open to the public? I hate following a link in a fluff article to a closed source article. Either report what is there or link to information that has the same usage requirements of your own. I do not have to login to Cnet to view your article, so why should you link to information I cannot view the same way.

Thanks for thinking about the user... NOT!

[Matt Asay]

Every link in the post is open to the public...for free. What are you referring to?

[dannyo152]

As to the proposals for compulsory licensing I've seen to date, I don't think they will lead to long-term health for the music industry. If the past is any guide the mechanism and formulas for collection and compensation will be grooved to the advantage of the majors. Next, the majors gets revenue even if the broadband subscriber spends their entertainment dollars on other media.

Finally, will compulsory license revenues replace declining sales revenue? That is the crux of the dilemma as I see it. If licensing fees, with a practical upper limit, do not replace sales revenues, the majors will fight this and they have the political muscle to kill any schemes. Status quo. If it does replace or exceed, then they don't really need to be in the music business beyond living off their library. Status quo.

What do we, as a society, culture and music lovers, want? Majors to be guaranteed a profit in perpetuity for the library they built between 1940-2000 or an industry that is a somewhat hungry and where the hustlers with ears are rewarded for taking a risk on the new? No compulsory licensing. Reduce the copyright length for recordings. Too much old growth in a forest is unhealthy.

[dannyo152]

Apologies and please read the last sentence in the first paragraph as:

Next, the majors get revenue even...

[I. M Amazed]

To force me to pay for something I don't want or use is not acceptable. I have a bad taste in my month from the Cable TV industry who forces me to pay for dozens of channels I don't want or watch, just to view a few that are of interest. I'll pay for something that I want and use but am very disturbed about having to pay for something that I don't want and that doesn't provide me with any value.

[gleonhard]

Matt, thanks for posting this and quoting me. This is a great summary of this debate. One important point: it is not the USERS who should be asked to pay extra for this deal; and it's not a tax (unless that is desired by the government, in some [few] countries).

It's the Ecosystem that can generate 1 Euro or similar per week, once it's actually set-up: handset makers, social networks, advertisers (2.0!!), brands, subsidies, search, sms, affiliate revenues etc. This is crucial: feels like free for the users, little extra costs for the ISPs (and access to a whole new ecosystem!), guaranteed payments for the creators (and lots of new stream above and beyond). Check out http://www.gerdtube.net (Blip.tv) for my videos on this, and www.gerdtube.com for my Youtube stuff. Cheers!!

[Matt Asay]

Great clarification, Gerd. I agree that it shouldn't pushed as a tax, but perhaps simply an elective service with one's ISP. I'd sign up for it in a heartbeat.

[Tonsotunez]

For so many reasons ... all of them chewed up and spit out over and over and over again across the Net, this regurgitation of an ancient idea (in net years) can't work and is a waist of everybody's time. I don't understand why Gerd, who sells himself as a futurist, is dredging up this out of gas old idea one more time. Perhaps if he were a realist he would take a little time to try to understand all of the components that have to work together to create a resolution to the digital distribution issue that would satisfy both consumers and creators. There is no way that taxing everybody to provide a commodity of interest to a few is going to work.

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