Apple vs. Amazon
The big 4 music companies (Sony/BMG, Universal, Warners and EMI) are trying to muscle Steve Jobs. They are pretty ham-handed about it and only the fact that the Bush Administration sent all but a couple of their anti-trust lawyers home about 7 years ago, keeps them from cutting off I Tunes completely from their content. Their vehicle of choice for this Apple intimidation campaign is Jeff Bezos and Amazon. Apple has been very rigorous at keeping the price per download at 99 cents, but the The Big 4 want to be able to charge whatever they like per tune. Since there are really only two pay per tune services with scale (Apple and Amazon) this is tantamount to price fixing. Since Jobs has told them to pound sand, their new strategy is to get behind a huge Super Bowl promotion of Amazon’s service. As you can see from the chart above, the fact that digital downloads are growing, does not compensate for the total meltdown of traditional CD sales.
Ultimately the industry is going to have to come up with new models. My favorite is a content license fee charged to all broadband subscribers at the ISP level. If it could be made to work worldwide, it could easily generate $2 billion per month for legitimate copyright holders while taking some of the piracy worries in Asia and South America off the table. In the meantime, all the people downloading their tunes on Amazon’s service will probably put them on an I Pod. Since Apple has a better margin selling I Pods then selling tunes, that will suit Steve just fine.
The content license fee, or music tax as it’s being called, is interesting in that it guarantees the music industry revenue, regardless of whether internet users are downloading any music. A flawed plan, to say the least.
Jamie- You could price it so cheap–$2 per month, that it wouldn’t really matter.
So I would have to pay every month for music I’m not downloading? I’d be very upset. $2 a month is a very reasonable price for those who want to download music all the time, but it’s highway robbery for those of us who don’t.
Every restaurant or retail store you visit is paying a fee to play music, whether you listen to it or not. It’s in your bill. You just don’t know it.
Why is it that I’ve been thinking along these lines for about 15 years? It’s not like the model doesn’t already exist…it’s called BMI, or ASCAP. They’ve been collecting royalties on broadcast airplay and any playing of music in restaurants, clubs, airports, airplanes, etc. for decades. What’s the diff? There isn’t any. Why has it taken so long for these dunderheads to get “there” when they’re already “there”?
You should have seen the look on music execs faces when my pal Lowell Levinger and I came up with this business proposal called “Dream Sequences” in 1985. The concept was to sell computer music sequences of arrangements of popular tunes of the day that could be played back via “sequencers” and synthesizers. It was like a totally manipulable “Music Minus One.” Of course, one feature was that one could print out the musical score…causing total melt-down in music publishers’ offices. They had no idea that music notation could be turned into a new form of music publishing until we walked in. We totally freaked them out…and of course, we got nowhere trying to raise the dough to do this.
It’s called, “the Genie is already out of the bottle” , folks. Deal with it. You are not stuffing the Genie back in. Get used to it. Figure out how to work with that Genie; he’s not going away…
What do you thing folks thought of Gutenberg? Holy shit! Movable type? The sky is falling!!! Scribes out of business. Soup lines in the monasteries.
I just started reading your blog thanks to boingboing.net, but flawed arguments like the above make me reconsider future visits already.
Or maybe I don’t have a sense of humour.
In the restaurant, I’m paying to subsidize the ambiance. If I don’t like the ambiance, I can go somewhere else. I can do my shopping or eating at home or online or whatever.
If you start forcing my ISP to pay a tax to the recording industry, then I’m going to pay to subsidize antiquated and obsolete business models, and I really have no other choice. I’m not giving up my broadband, so I’m stuck paying a fee for something that I didn’t ask for. I can’t decide to get my broadband from somewhere else, because all the ISPs will be charging the fee.
People WILL pay for music if you package it attractively. Give them something they want at a reasonable price. Look at bands like Radiohead and Nine Inch Nails, experimenting with offering downloads and alternatives to the old models. There are plenty of ideas out there that don’t involve forcing a tax on people.
The “monthly tax levied per Customer at the ISP level” sounds nice on the surface, but I think it gets murky and difficult quickly. What’s an ISP? Is free municipal WiFi an ISP? What about the local coffee shop w/ their open access point? What about corporate-owned pipes– the DS3 to the Internet feeding a 10,000 employee enterprise, for example?
What’s a Customer? Are the people in the coffee shop Customers? How about the free municipal WiFi users? Should someone be keeping a count and ponying-up the $2.00 / month / user in those situations? What do we do about that 10,000 employee enterprise– tack $20K / month onto their port-charge?
Perhaps I’m being too cynical, but I can’t imagine that the people running the copyright cartels are going to be satisfied with the “pie” of a somewhat fixed size that this model generates– even if it is $2 billion. Acceptance of the “levied tax model”, assuming that it can have a fair framework of rules worked out, isn’t going to be a pill that these industries are going to swallow easily. The idea that revenue should increase in proportion to the “volume” of the distribution of content (which, up until the last few years, tracked “sales” figures rather closely) is too deeply set in the minds of many of the executives in these industries.
This idea of a “tax levied on the Internet” is, perhaps, a stopgap measure that the copyright cartels will eventually accept as their “traditional” business model dries up (and hopefully with it their litigation-based business models). In the end, I think that the idea of paying to receive copies of bits, even at the level of this “tax” is doomed. Too many bits can “leak” around whatever rules framework we establish.
To my mind, revenue-generating business models need to be built around scarcity. Why would I pay for something that’s plentiful and free? I want to pay for things that are unique and scarce (a piece of my favorite artist’s time, a physical good that I can’t manufacture myself as cheaply or as quickly, etc). Streams of bits are commodities, and won’t ever not be that way again.
First off, we have to realize that as a knowledge economy (aside from airplanes the U.S. doesn’t really have a stong export sector besides “knowledge goods”), the problem of piracy of our music, movies, video games and software programs in Asia, Latin America and Eastern Europe is a serious and growing problem. If we levied a small fee such as the ASCAP fee Rick Turner mentions on AT&T or China Netcom based on the number of subscribers they had, the piracy issue would become much less important. Today, we guess that the major CD pressing plants in China are owned by well connected Party members. The Chinese can put on phony piracy raids just before U.S. trade officials visit, but its a sham. To pay $2 or $3 a month to have access to all the world’s music or film does not seem to me to be a big imposition. Since there will soon be 500 million broadband subs moving towards 1 billion we could actually see the music and film industries as having a great future.
Jon,
The problem is we already have a world wide agreement. That is the Berne Convention. It’s something the USA signed on to, reluctantly in the late 1980′s, but doesn’t obey. Copyright is not about enriching corporations. It’s a human right for artists to be allowed to be paid for the original works the create. Forget creating new taxes, most of the major industrialized countries already have taxes to pay copyright holders (who are the artists, writers, directors and actors, not corporations) money for the work they create. Unfortunately, USA corporations don’t want to pay artists, and expect those taxes to go to them. So why should we create a new tax structure in the USA to pay corporations, rather than the real creators of intellectual property, the writers and other artists involved?
The ASCAP and BMI fees filter down pretty effectively to the individual songwriters. Of all the people I worked with in the rock and roll business in the 60′s and 70′s, the songwriters are doing fine. Its the regular musicians that have lost the royalty income stream from back catalog they used to enjoy.
To me a broadband tax is the same as an assumption of guilt — you’re saying that all users of broadband are thieves, therefore they should all pay the penalty. If I go day to day buying all my CDs from BestBuy, or my MP3s from iTunes, I’m not a part of the problem. If I’m deaf, and never listen to music, I still pay the $2/mo to support a service I never get? Your point about restaurants assumes that I can go to a restaurant w/o music, and avoid ASCAP fees. If a broadband tax was levied across all users, there would be no choice. Likely, instead, someone would create a new ISP that somehow avoided the fee — back to squeezing balloons.
I hate to say it, but I feel that the music industry is going to have to accept downsizing — remember that they weren’t as big as they are before the 60′s, when it was a much more single-driven business. Album-Oriented Rock should be seen as a fluke, instead of the new standard of reality. An ISP tax would only serve to concentrate revenues back in the hands of businessmen who have not figured out how to deal with changing times. Honestly, they don’t deserve that cash flow.
Mass market distribution completely distorted the economics of music for so long that its difficult to remember that it was never about a product, it’s about a performance. The record companies exist(ed?) to produce the physical goods that enabled more people to hear the performance, and they were generous enough to pass some of the profits along to the performers. Now, there is minimal cost to distribute, and listeners don’t want to pay for what is free. ITunes doesn’t really charge for music, they charge for convenience. The way out for musicians is to treat their downloadable music as they are now – free public concerts. NIN and Radiohead have made progress, so have a few indie artists, but nobody has fully embraced the idea that they are superstar street artists. Put out a tip jar, and rock out.
A tax to keep the aging and failing business models of content industries is a terrible idea for reasons stated by others posters here. The problem isn’t piracy, it’s that the move to online single sales and that record companies will never again have a “re-buy everything in CD format” windfall again means that there just isn’t enough money in the old model to keep the bloated infrastructure going.
Taxes and subsidies have a horrible tendency to never die and in fact they just grow over time. Technologies change, markets evolve, established players fail. Deal with it.
This discussion is getting more and more interesting. I really appreciate the intelligence of the posts and the civil language. This can go much farther if we all want the same thing, which is for good musicians to be be able to be paid for their genius. When I hear talk that recorded music should be free and musicians can make their money off live appearances, I think: Are you saying that Aretha Franklin in her 70′s should have to go on tour in order to reap the value of the enjoyment a whole new generation is getting for work she did in the late 60′s? That seems unfair to me. She made a record called “Respect” and as long as you keep wanting to get that record for your own “collection”–Aretha Franklin should get paid something.
This conclusion comes out of watching my dear friends in The Band, get ripped apart emotionally, because Robbie Robertson wrote all the great songs and the rest of the guys played and sang his songs magnificently. But 30 years later, one member of The Band is rich, two are not as rich and two are dead. So the songwriter gets his money, even if the musician doesn’t in the post Napster world, just because his rights organization (ASCAP or BMI) organized their power years ago in the days of Tin Pan Alley.That is because the music publishing business works on a “collective license”. Many of you, reacting I feel from the Republican mind meld, want to call it a tax–but the reality is we have usage fees all over our economy and the usage fees for music in elevators, bars, retail stores, TV shows, etc all have blanket, prenegotiated license. The restaurant owner never has to negotiate the price of paying any music she wants .
All I’m saying is that system works, you don’t consider it a tax when you walk into Starbucks or The Gap and the writer gets paid.
It is obvious to me that those most vehemently opposed to the extension of the BMI and ASCAP model of payment have absolutely no experience in the music industry and are part of the “knowledge should be free” generation that is ripping apart the concept of intellectual property.
OK, so maybe it’s a good thing that cocaine, hookers, and trips to Las Vegas will no longer be a hidden expense in the antiquated “record industry”, but believe me (as a past session guitarist, pro touring guitarist, BMI song writer, record producer, recording engineer, guitar repairman to major stars, and guitar builder to same…), there has to be an income stream flowing to both songwriters and performers or the whole thing will collapse.
Many of my current clients and friends work “under the radar”. They are incredible artists like Stephen Bruton, David Lindley, Muriel Anderson, and Laurence Juber, Martin Simpson, and Janet Robin. They absolutely depend on those dozen or three dozen CDs that they sell at every gig to push touring over from a money loser to a break even or better proposition. Peer sharing downloads absolutely rip them off of their most basic means of survival.
It breaks my heart that so many of Gen Y think that file sharing is OK. It’s not. It’s dipping into some sort of Satanic belief system that it’s OK to rip off your nearest neighbor. And it’s all done on the false excuse of “sticking it to the man” or this bullshit concept that knowledge is free.
If you believe that knowledge is free, you’d better be ready for a piss-poor future…
although i fully believe that blanket licensing is one of the only roads forward for media, i have to quibble with jon’s argument that ascap/bmi/sesac “filter down pretty effectively.” actually, ascap et al are terrible at filtering down, and they get worse all the time. i should know; i’m not just an analyst — i’m also a member. just last year or so, they RAISED the minimum amount you’d have to be owed before they’d cut you a check — right at the dawn of the “long tail” age. thus, one of the consequences of their policies is to filter money from poorer artists to richer ones.
Jon,
You’re right, songwriters (except for those, mostly black, who were forced to share writing credits) have done pretty well. I guess that’s why mafia guys wanted to have song writing credits.
But what about the writers of movies? Mafia guys don’t care about that so much. Yet the Berne Convention gives film writers copyright protection as well. But the US corporations refuse to accept that. (Only in the USA are the writers of movies not allowed copyright.) Hundreds of millions of dollars are collected each year around the world in “levies” for the “writers” of movies but they are instead shifted to USA corporations that did not create these works and under international copyright law (not US law) are not allowed to collect this money.
Copyright is a human right. It is not a corporation right. Except, of course, in the United States were it was twisted by of all people Thomas Edison. He wanted to keep all the money to himself, so he got the US Congress to completely pervert the nature of copyright to make it something corporations controlled, not authors. (Google Edison and Elephant if you want to get over your child history book notion that this was a great nice guy. He was a thug.)
@Rick Turner: It doesn’t seem to be much of a stretch, to me, to read your whole comment as: “I want the old business models of the past to continue because some people made/make their living that way, and it’s not fair that technology is making that harder/impossible. ”
Boo-hoo. It’s not very moving to me that your “heart” is “broken”. Where is your sympathy for scribes, blacksmiths, or elevator operators? Perhaps it’s because you’ve made a living in the present-day incarnation of the “music industry” that you feel so strongly about it. Likewise, I could say that my heart is broken by people who harbor a belief system in which they feel entitled to a recurring stream of compensation for work that they’ve only had to do once (writing a song, recording a performance, etc). I toil away every day with my eyes, hands, and mind, and if I don’t work, I don’t eat. I tend to think part of your petulance comes from the notion that this gravy train of compensation for work done once is going away.
Philosophical issues aside, bits are never going to be harder to copy again. Modes of human expression that can be boiled down to bits will be easy to copy. Basing a business model on bits being hard to copy is just dumb. There’s no “bullshit” about this– it’s just reality.
For my part, I hope the whole “music industry” does collapse, because I think the idea of “industrialized” art is toxic. Artists make art because they’re called to do it– for love, for catharsis, or whatever calls them. The idea that an artist can make their entire living from their art is a modern one, and certainly not some kind of natural law. I’d much rather live in a world of art-for-love than art-for-profit.
[...] Great discussion about royalty rights on Prof. Jon Taplin’s Blog. Just thought to share… January 16, 2008 Link [...]
Evan-Its one thing to ask young musicians to make “art for love”, but I have a hard time seeing how that idea could apply to the movie or television business. The investment needed is too great. If you want “the industrialized art” industry to collapse, you may find yourself left with “Mentos and Coke” videos on You Tube.
J.F.-I agree copyright has been distorted by corporate forces. The European concept of “Author’s Rights” is far more germane to our current digital economy.
@Jon: Maybe we end up w/o a movie or television “business” as it exists now, then. I’m not too broken up by that. I think that you, Rick Turner, and others are too stuck inside the box of how things have been. Those times may just be over, and those ships may have already set sail. I’m not too disappointed.
I’m sure there are new business models there for television and movie “industries”, too. If people want to “consume” such things, entrepreneurs are out there who will discover business models to finance them. Believe me, if I could think of one, I’d be trying to cash in on it… *smile*
We can’t legislate away reality to preserve businesses that are no longer viable. Trying to create financially viable business models that rely on bits being hard to copy, or that rely on making sharing “wrong” are just as dumb to me as business models that rely on water not being wet, or gravity suddenly disappearing. All philosophy aside, bits are increasingly easy to copy, and people seem to be wired to like to share ideas.
Great discussion here, BTW. Keep up the good work re: the blog.
Evan has a great point. Technology moves forward inexorably. Trying to get paid for products in an age of bits and services is a sure fire way to lose your shirt. Musicians are in for some painful changes, but the market can and will support great art in one way or another.
Live performance is always cited as the solution for musicians today, and it needs to make up a bigger chunk of the artists paycheck. Look on stubhub, ebay, or any other secondary market in concert tickets, and you will see prices double and triple what the face value is, if not even more. There is value here that’s being eaten up in arbitrage, that musicians need to do a better job of capturing.
To your point, Jon, about aging artists being unable to perform, there are two ways to think about that. Transition periods will hurt some people. It sucked for those blacksmiths the first time cars came around, but there isn’t anything you can do about it. On a more positive note, the tip jar concept I talked about above still helps. It needs to be set up as a third party, I can’t see Aretha Franklin asking for handouts, but if people had an easy, transparent way to say “Thanks, you rock” with cash, I think some would. Trent Reznor tried this with one of his artists, and Radiohead tried it, and although the results aren’t good compared to the old way, Chris Anderson of Long Tail fame shows that its actually better money for the artist. (http://www.longtail.com/the_long_tail/2008/01/how-not-to-do-1.html)
True, these albums grossed less than those released through the major labels, but the artist kept every dime, instead of a dime on the dollar. That sounds like a pretty good future to me.
Movies and tv have a way out too. Look at Firefly. There’s a show that was doomed, and fans set up their own tip jar to make sure it came back. I don’t know how to scale that to every show, or get that to happen for brand new shows, but I don’t think that we need the new model for everything. Non-pirated tv has a lot of convenience factors that non-pirated music lacks. I’m pretty ok watching TV instead of pirating, but I might not get off my couch, drive to the record store, browse the racks, and buy a jewel cased cd instead of pirating.
This has been a great exchange, thanks for hosting. I’ll be sure to subscribe and check back often.
Evan and Derek-We have to make sure we are not parroting classic neoconservative economic theory in trying to imagine how we will subsidize art and entertainment in the future.
Derek- I for one have never been thought of as one who was trying to hold back technology (check out 2001 entries at http://www.intertainer.com/timeline.html ).
Your taxes pay for the library, whether you have ever set foot in one. The question we are trying to ponder is how we can give all people access to the world’s culture at the lowest price.
You are right–the TV and Movie business are going to have to adapt. But if they adapt by just pumping out the cheapest reality junk, then the society will suffer. If we look to England and see how the BBC works, then we can imagine a public service model for TV that actually produces content that is both popular and good. And there are no commercials.
The idea of a content license fee is a bad one, not because of the way the fee is collected (how much it costs, whether people are actually downloading music or not, etc), but because of the way it would be distributed.
You write that it could easily generate $2 billion per month for legitimate copyright holders. Who is a legitimate copyright holder?
The internet is so often breathlessly praised because it allows independent musicians to effectively market themselves without the need of the labels. We are going to be seeing much more of this, not only because of the ease of doing so, but also because the major labels have squandered their reputations to the point where a growing number of independent musicians will refuse to sign simply because of their perception of these companies as thuggish.
The problem is that these independent musicians are legitimate copyright holders, too. However, if a $2 fee is assessed from each internet user, it provides a perfect rationalization to all users to not pay for anyone’s music—regardless of whether the artist is signed to a major label.
How is the distribution of the fee income handled? Naturally it would go to the largest labels who can lay a claim to it. But what of the thousands or potentially millions of independent musicians trying to promote themselves through their own website? Will there be a way for them to claim a piece of this pie? Simply from a logistics standpoint, it’s absurd to assume that every artist everywhere will be able to benefit from this fee income. But if the income is not going to all legitimate copyright holders whose music is being shared on the internet, it is not serving its purpose.
A fee might help the ailing record labels but it absolutely will harm independent musicians. The impossibility of distributing the fee to all who are entitled to it (based on the reason for its collection in the first place) makes it a poor course of action.
Excellent point Ted, any “tax” would inevitably benefit big corporate players and not independent musicians.
Another thing: why not tax external hard drive makers, webmail providers, web hosts, browser makers, OS makers, and copy machine makers? All of them are vectors for massive copyright infringement. It’s just a bad idea all around.
Personally I think copyright should be more limited like patents, to 20 years or so. Long enough to incentivize creation but short enough to foster a rich cultural commons. This “extend copyright every time Mickey’s about to go public domain” business has to stop. After all, Mickey built his castle on public domain fairy tales.
My idea of a “legitimate copyright holder” is anyone who legally owns a piece of content. There is no reason that watermarking technology couldn’t allow ISP’s to keep a real count of what content went through their routers. ASCAP and BMI using a sampling of users to determine who gets paid, but the technology to be much more granular is already here.
In terms of how long copyright should last, I agree with Nathan. We should move it back to a reasonable number of years and then it goes into the public domain.
[...] Jon Taplin posted about the music industry and he likes the idea of “taxing” ISPs, which of course really means taxing the ISPs’ users, and giving the money to the RIAA (it would have to be the RIAA, how would such a tax be evenly distributed to artists? How would you really know that a given artist was downloaded more than another and break down the earnings?) [...]
The RIAA should have nothing to do with this blanket license, just as they have nothing to do with the BMI fee dispertion. Organizations like Big Champagne already have a very good count of how many pirated copies of songs are moving over the Net. It’s not hard to make sure the small indie artist gets paid alongside the big corporate artist.