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:
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.
As reported in Friday's Wall Street Journal, the music industry has apparently given up on suing 13-year olds and dead people in its quest to stem music piracy. Instead, it plans to work with ISPs to identify and notify copyright infringers of the need to come clean:
[T]he Recording Industry Association of America said it plans to try an approach that relies on the cooperation of Internet-service providers. The trade group said it has hashed out preliminary agreements with major ISPs under which it will send an email to the provider when it finds a provider's customers making music available online for others to take.
Depending on the agreement, the ISP will either forward the note to customers, or alert customers that they appear to be uploading music illegally, and ask them to stop. If the customers continue the file-sharing, they will get one or two more emails, perhaps accompanied by slower service from the provider. Finally, the ISP may cut off their access altogether.
Cory Doctorow, among others, has sharply criticized such an ISP partnership in the past, but I see it as a big step up from the industry's current tactics, and one that could lead to other possible solutions like a music tax at the ISP level. TechDirt doesn't like this option, but it's unclear what other (good) options the industry has.
Throttling downloads at their source - i.e., the ISP that provides the bandwidth - is at least the right area in which to target the activity. Whether a tax or some other solution ends up working matters less than that the industry is now focused on the right piece of the piracy puzzle.
For those struggling musicians worried by rampant piracy and the subsequent difficulties in earning a living, Tim Blanning has news for you: it was ever thus.
Writing in The New Statesman, Blanning traces the history of the music industry, finding "Modern musicians' lot compares very well to that of their predecessors." Indeed, Blanning points out the very bane of modern musicians' existence - the ability to record (and, hence, copy and distribute) music - is also the very reason that musicians have an opportunity to generate outsized returns on their musical investments.
Until music could be recorded, the only revenue available to the musician was from performances of that music. "Not even as great a virtuoso as Paganini or Liszt had a back catalogue."
The result? Today, good-but-not great bands like Coldplay can make tens of millions while the great composer Richard Wagner died a comparative pauper. With all the flaws of the modern system from pirates and ensuing economic uncertainties, we should be cheering the modern system and its digitization of musical content, even when some profit is lost to piracy.
For composers...copyright protection is very much a creation of modern times. Until deep into the 19th century, piracy of the most flagrant kind was the norm....In the course of the 19th century, ever-growing markets, bigger spaces for music and better communications allowed many more performers to make much more money....
...[Even so] for every Bono and his countless millions, there is a host of modestly paid session players, 90 per cent of whom earn less than [$22,500] a year....It will come as no consolation to them to know, if they do not know it already, that it was ever so.
Ever since musicians emerged from the servile but cosy world of aristocratic patronage into the harsh daylight of the public sphere, the musical profession has been a pyramid with a broad base and a sharp top. The new opportunities brought by every major technological shift have also left many casualties among musicians unable or unwilling to adapt.
There are no easy answers for the music industry, but in its quest to capture all possible digital revenue, let's not forget that digitization has introduced dramatically more available revenue than ever before. A little "leakage" hurts, but not nearly as much as it would to go back in time and earn one's keep by performance alone.
Warner Music Group has a proposition for U.S. universities, according to Techdirt: buy a blanket license to music downloads through file-sharing services, or be sued.
Techdirt thinks that this is a bad idea, and I disagree.
Techdirt's criticisms are clear:
It's basically a music tax--allowing the record industry to be lazy. Someone else gets to go out and collect all this money, and hand it over to the industry to distribute (or, actually, not distribute). It effectively sets the business model of the recording industry in stone, and harms better, more innovative business models by inserting the recording industry (and not the musicians) into a role where they don't belong.
But the benefits to such a blanket tax are also clear, as I wrote back in 2003. Consumers want a convenient way to pay for content. A tax levied by the ISP is a highly efficient way to ensure that the music industry gets paid, and that consumers don't get slowed down in their enjoyment of music.
Techdirt has some valid points, but it fails to identify the "better, more innovative business models" that would take the music industry forward, either in this article or in the others to which it refers.
Personally, I pay for my music, movies, and other media. But not everyone does, perhaps because they don't want to use iTunes or a similar service, for whatever reason. A minimal tax added to students' university fees would easily cover this, with little cost to these consumers and great benefit.
No, not every student would end up using the service, but that's the nature of a tax: sometimes you pay for others' benefits, not yours. In fact, that's usually the way it works.
It's ironic how different Europe can be from the United States. While the U.S. continues its mindless rampage against the future of digital distribution with DRM, RIAA, MPAA, and other acronyms designed to stuff the 21st century back into the 20th century's ideas of how to package and sell property, Europe is actually investing in that future. To be exact, it's putting $22 million toward peer-to-peer technology, in a BitTorrent-minded project called P2P-Next.
Surely European broadcasters are against the move, right? After all, research suggests that 50 percent of those using BitTorrent are doing so to steal TV shows. As one TorrentFreak blogger noted, however, European broadcasters believe this situation presents an opportunity rather than a threat:
One of the biggest names taking part is the BBC, who will use the new BitTorrent client to stream TV programs. Other partners in the P2P-Next project are the European Broadcasting Union, Lancaster University, Markenfilm, Pioneer Digital Design Centre Limited and VTT Technical Research Centre of Finland. The main goal is to develop an open source, BitTorrent-compatible client that supports live streaming.
... Read more
Are peer-to-peer music thieves the music industry's best customers? In an ironic twist to the music industry's woes, a new study suggests that P2P downloaders may buy more music than their straight-laced, non-P2P brethren. The results are non-conclusive one way or the other, but the researchers conclude:
However, our analysis of the Canadian P2P file-sharing subpopulation suggests that there is a strong positive relationship between P2P file-sharing and CD purchasing. That is, among Canadians actually engaged in it, P2P file-sharing increases CD purchasing. ... Read more
As it turns out, not as much as Radiohead's evil record label used to. As The Register reports on the Open Season podcast, not only have Radiohead fans been misrepresenting how much they've been paying for the free In Rainbows, but even if we take their word for it, it's still not as much as Radiohead would make had the band stayed with EMI.
People told the survey that they paid 8 pounds ($16), but the numbers don't support this. People actually paid closer to 2.50 ($5). Radiohead normally make about 3 ($6) (after royalties and such) with their record label. As such, Radiohead is actually making less giving the songs away than they did with the greedy capitalist record label, EMI.
So, was Radiohead foolish to experiment with free distribution? Or is it the sort of model that only millionaire artists can afford to indulge? (And is there an open-source analog here?)
I'm not sure, but I really did pay $20 for my copy of In Rainbows, and it is well worth it.
Oh, and by the way, Capgemini did a report which found that iTunes and the unbundling of singles represents a far greater threat to the record labels in terms of revenues lost than peer-to-peer file sharing:
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