March 13, 2008 The Blanket License Debate
Ahead of the actual discussion led by Jim Griffin at SXSW Friday, Wired has posted and overview of a notion that has been whispered about in the hallowed halls of the major labels for years…a fee imposed on ISPs that provided end users with an “all you can eat” music service. Read Music Industry Proposes a Piracy Surcharge on ISPs for additional details, but the idea is pretty basic. All ISPs would put a fixed amount (for example, $5 per month per subscriber) into a pool, and that pool is then divided up between the various rights-holders (performers, songwriters, labels and publishers). An independent third party would be responsible for dividing the pie according “popularity”.
I’ve been a proponent of figuring out the details on such a model since the early days of Napster, but such a notion was blasphemous back then and is only starting to gain some interest now that its clear the toothpaste can’t easily be put back into the tube.
There are unquestionably a multitude of issues that would need to be worked out…would this require Federal regulation of ISPs in the U.S.? What is are the global impacts and requirements? What technology would be agreed upon to determine the exact content of the traded bits & bytes? What privacy issues would arise from the implementation of such technology? What about the technology itself? What are the development and deployment costs? What about advertising and marketing plans/committments in a world where “street date” ends up being whichever day the music leaks? And what about the enormous hurdle of getting all of those stake-holders to agree on the raw dollars, the allocations, the methodologies and a manageable audit pathway?
These questions are just a handful that represent the tip of the iceberg. And while plenty of folks at the labels that I’ve discussed this with have balked, myself and plenty of others believe that resources put into figuring this out will prove to be well allocated, and with the right solution will more than outweigh the current resources being put into anti-piracy (both technology due diligence and legal fees). In fact, should this become a reality it only makes it easier for many new music business models to gain traction. But make no mistake about it…the notion sounds interesting but the necessary legwork and underlying platform are enormous tasks to undertake, and likely years before they could be reasonably implemented.
Feasible? Folly? What do YOU think?
Bruce Warila
Syd,
This is an interesting debate. It reminds of talking to my mechanic about fixing the transmission in my car, when I know the problem is with my engine. If the last digital product the music industry ever builds is the MP3, then maybe we should be discussing an ISP tax.
I believe we should focus on the engine first - to see if we can get the car to run properly. The engine problem the digital music (MP3) industry has is inadequate gross margin. There is not enough profit in selling digital music (as MP3s) to adequately compensate everyone in the value chain.
I absolutely believe that innovation can solve this problem. The sharing of music can still occur, margins can be restored, consumers can receive more value, exciting new digital products can energize the marketplace, and best of all - governments will not have to be involved.
If innovation is not the solution, then the vertical integration that’s happing in the marketplace will be. Chopping out redundant links and squashing various segments of the industry into efficient businesses is another way to fix the engine…
An ISP tax is seductive to those that are focused on fixing the transmission. If you move the debate over to the engine compartment, the problem with the transmission will go away.
This is a great post and it’s a great time to be discussing this. Thanks!
Andrew Dubber
I can see how the apparent simplicity of a blanket licence across ISPs might be an appealing solution to the record industry - and I can see how that simplicity falls apart when it comes to implementation. I think Bruce is right when he says we're focusing on a symptom rather than the problem, but I think there are two fundamental conceptual problems when it comes to the blanket licence debate.
It does address some real issues, and this has been best expressed (at least to me) by Cory Doctorow, who is really pretty convincing on this stuff. But it overlooks the ways in which music consumption works, and it takes the position that when you fix the problems of the record industry, you solve the issues of the music industry - and I don't believe that to be the case.
People don't just buy music (or download it free) and listen to it. They do a whole range of things that can be broadly categorised as consumption. In other words - it's complicated, and the ways in which music creates value extend far beyond 'format' and an exchange of cash for an artefact - whether physical or digital.
In other words, I don't believe for a second that a blanket licence will solve anything more than a cashflow issue for major record labels - and it will certainly reveal more complex problems elsewhere.
And I'm not convinced it's the responsibility of the Internet industry to be the police force and revenue collection agency of the Record industry. In fact, I find it slightly alarming that one industry can make those demands of another industry - and it strikes nobody as untoward or unusual.
Reader Comments (12)
I think such a model would be disastrous.
It would be very difficult to come up with a technical system that would accurately report just whose work was being downloaded. Just look at what we have right now. Radio reporting and publishing is a mess.
And with such a large pile of money, there would be heavy incentive to skew the system to a few key players. There is never an "independent" body with that much capital at play. You'll end up with a small section of the industry making all the money and icing others out.
But that's the worst part. This model will make it virtually impossible to sell music independently since that mandatory nature of the surcharge will prevent any alternative system from taking shape. We've seen a system where everything was centralized and controlled. Let's not go back there.
I can see why this model would look like a good idea, but the humanity will get in the way and corrupt it. Better to pursue a market driven approach where the negatives are turned into positives.
The Idea is interesting, but I have to say I am skeptical. I just have a hard time believing that money will be allocated fairly. Also I refuse to download music, largely because I don't get a nice CD package with it which I love to have (yes I am a little materialistic), so why should I pay an extra $5.00/month for a service that I will never use. In the same breath I will also say that if I was a consumer that would be wicked if I could legally download all the music I want for $5.00/month. However, would it balance out? Would people be downloading so much music that the $5.00 maybe won't cover it all and we're loosing even more money? How soon until we get to $10.00, $15.00 so on and so forth. I understand that the $5.00 is just a random number, I'm just saying it for the sake of argument.
The idea is interesting, but I'm not quite sold yet. At least ideas are being thrown out there and looked at.
I honestly hate this idea, not only because I'm an independent artist who would be negatively impacted by a model like this (as Mike mentioned), but also because it would mean my internet bill would go up, whether I wanted the service or not (as Paul mentioned).
And more than anything, I'm tired of the RIAA and the music industry running around trying to force everyone to play the game their way. It's the entertainment industry for god's sake! Music is important, art is important, but this is not about that, it's about money and their fear that they are missing out on some. If I ran an ISP, I'd be pissed by the very thought that this was being seriously discussed.
And the sad truth: no one's asking the artists. I bet you wouldn't find one artist beyond the edge of the Billboard charts that would believe for a second that they would ever see a cent of this fee. So yeah, something needs to happen, but this ain't it. :)
I also hate this idea. I'm an independent artist and I don't believe I would see any money this way. I don't trust the players. RIAA, BMI, ASCAP and others would be all over this, not to mention the record companies, and we all know they don't play fair. Better to use systems like Amie Street and Snocap where the independent artist has a fighting chance.
Darren Nelsen
http://curiomusic.com
I wonder how many of the independent artists who are complaining about this model on this blog actually made any money from traditional models. Can someone nominate their best year from sales?
I made next to nothing and this was the case for many of my colleagues in the industry. And no, the bands weren't unheard of, a number of them charted at indie level in decent sized markets. Most indie labels don't account properly or pay their bills. Everyone knows that.
As for download tracking, how about server logs being made available to special collection agencies? Server logs would be accurate and complete. As 95% of all artists make nothing from recordings, bring it on. What have you got to lose?
The comparison with broadcast royalties is unfair. These are calculated on limited surveys.
One thing I find missing in the criticism of one industry forcing another to implement a fee of this kind is that file sharing is in fact the major contributor to Internet data transfer. Byte for byte, websites, blogs, e-mail and whatnot weigh absolutely nothing (I've got something like 2 terabytes of annual transfer limit on my sever and I'm likely to use up less than 4GB of it - mp3 downloads included). In other words, the service ISP's tacitly offer (by providing users with way bigger transfer limits than are necessary for normal Internet use) is the ability to obtain music and film for free, in sizeable quantities.
The point is that, as far as music goes, the Internet is not quite unlike radio - blabber aside, people listen to radio primarily because it plays music. I used to tape songs off the radio and people would still be doing it if the Internet hadn't made the exercise pointless. Hell, back in the Communist days, when you couldn't get most Western records in the stores here in Poland, several DJs would play whole albums on air for fans to record. I think that every artist is likely to have a problem with broadcasters playing their music and refusing to pay for it, so why's it different with the Internet?
There is the question of dividing the dough fairly, but Julian has already adressed this point. I'd personally like to add that the reason independent musicians don't get a say (or a share) is that they are a fragmented interest group. The whole point of collective administration with regards to copyright was for creators to speak with one voice and to bring their combined pressure to bear. The lesson I see in this is that it's probably best to get organised.
I don't know if any of the above makes any sense, but I feel like it should.
Great blog by the way, guys. I'm adding it to my subscriptions.
Krzystof, there are many valid uses for high bandwidth beyond illegal file sharing. Software downloads, updates, streaming media, online gaming... those are all normal internet use. You can't blame TV manufacturers for making bigger TVs because it will lead to folks inviting more friends over to watch, reducing the number of DVD sales, movie rentals, etc. We should never limit technology purposely because it might be used illegally.
And independent musicians having to band together in any one given forum to have their voices heard may be necessary, but it's kind of counter-intuitive to the essence of being independent, and it's not likely to happen on any representative scale, for better or worse.
Everything you say is of course true. Unfortunately, so's everything I say. The big question is: what's to be done about it? I agree with Julian, almost anything is bound to be an improvement on the situation today.
My gut tells me that the current meme of "free the music and sell around it" is the inevitable end, because it seems to have the highest natural velocity. I think the blanket license approach of freeing the music by charging for it indirectly is just the industry's way of (once again) not really dealing with the problem. Unfortunately, I haven't come up with the solution myself (yet), or I'd be off building a company to capitalize on it ;)
Thanks for the topic and great discussion.
Clif
I saw the panel at SxSW, and Pearlman was the only person there with a clue. Griffin suggested a workable solution at the outset, but then seemed to lack the integrity and fortitude to then stand behind it. The remainder of the panel was totally predictable.
Feasible? You have to be kidding me. The whole process will be entertaining though. I can hear Frank Zappa laughing at the notion.
Folly? Yes. Go read Prof. Ed Felten and Bruce Schneier as your penance.
Federal Regulation of ISPs? What better way to stagnate yet another industry?! I can hardly wait for the new legislation from Diane Feinstein and Orin Hatch, to come to our rescue, while simultaneously protecting our children ;)
No thank you Monty, I would like to see what's behind door number 2. I can only pray it will be a free market and not mercantilism. Fortunately, there are others posting here that are also mistrusting of any sort of marriage of our Government, with the Fat Cats.
The problem I see is that in a while there might not be any market for recorded music. A market involves buying and selling and you can't sell something people can get for free.
It's already happened here in Poland with the live performance market. Since all the big Polish stars are playing for free (mostly at community events or shopping centres), the only artists who do big shows around here are foreign stars. They come here rarely (if at all) and ticket sales aren't always spectacular (if they are, it's only because you get one concert in the whole country once every couple of years). Occasionaly a major Polish star will do a club gig (we're talking venues of a capacity between 500 and 1000) and will be happy to sell that out. As it is, the top end of the live market is dominated by a couple of artists who might not sell many records (some of them haven't released anything new in years), but are well known enough for the marketing person on the sponsor's end to say "Yes, we can pay several thousand for their appearance". Obviously, the system breeds corruption and nepotism, because the market potential of the artists involved isn't a factor - the show is free anyway and people will come reagardless of who's playing.
The bottom end of the market is in the cack meanwhile, because people aren't used to the idea of paying for concert tickets, let alone a price which will guarantee a break-even at more than minimal costs. This means that if you do as much as a hundred decent posters and pay your sound and lighting engineers, you'll be in the red.
I've said it before and I'll say it again, if musicians are going to turn into clothing companies (for instance) with a musical bonus marketing element, I quit. At this rate, that is the future of music. I will not stand for it.
No one has yet addressed the issue of privacy. There's no way to fairly allocate the fees without going over users' traffic logs with a fine-toothed comb. As a citizen who cherishes his right to privacy (read: safety), I don't see how anyone could be so willing to give that up for the sake of downloading unlimited amounts of music.