Looney_Tunes

I’ll never fully understand technology bloggers when it comes to music policy. Here’s an obviously stupid idea: Warner Brothers, the label, comes up with a scheme to add a surcharge to ISP bills to allow, supposedly, “legal” use of music file sharing services. Stupid, yes.

Here’s the response from Michael Arrington (Techcrunch): “It’s clearly good for the music labels, who are facing their imminent extinction.” He claims that this is the plan the “labels” (actually one label) don’t want you to know (except that they’re sitting down for long interviews with Conde Nast Portfolio).

Gizmodo’s Matt Buchanan just regurgitates and further oversimplifies Arrington’s argument, and adds a picture of a kitten at gunpoint, concluding: “And as Arrington points out, it would basically freeze innovation in the industry, meaning labels would be able to ream them that much harder. Not to mention, thanks to the fine print, we’d probably no longer own our music. But that’s the whole point.”

Apparently, “imminent extinction” means multi-billion dollar industry. (In fairness, the industry often — inexplicably — argues the same thing. I wish I were part of an “extinct” multi-billion dollar industry.) And apparently you can’t even talk about the issue of how music will be distributed and paid for without focusing on the desire of said industry to destroy your life and the fact that it’s still completely doomed.

And we’ve already seen Arringtonisms like recordings are worth nothing, and musicians should really owe websites cash for promotion (the Web 2.0 Payola plan, evidently).

But what happened to the obviously stupid idea? I agree with these sites that the plan is bad — I just think, ironically, it’s bad for even more reasons than they think. I’m not actually sure anyone read the original source — I think they were too busy being enraged, or looking for appropriate kitty pictures:

Fee for All: Jim Griffin will lead Warner Music’s fight to tame the Web’s lawless music frontier.

Forget about artists. Forget about copyright holders. Screw the musicians. This is ridiculously stupid even for the labels, partly because they’re unlikely to agree on the idea — meaning the idea is extinct on arrival. “Freeze innovation”? I guess — if the labels actually pursue this. But the blogosphere has become so rabidly anti-label, it’s fighting them instead of pointing out the planet-sized holes in the logic we’re being fed:

 

  • Griffin is freaked out by pay-what-you-will sales schemes. Despite the fact that Nine Inch Nails and Radiohead just had enormous success with voluntary payment schemes — and despite the fact that part of that scheme was charging an unprecedented high price for physical media (the opposite of what everyone has been telling you), Warner’s hired gun is afraid music will become a “tip jar.” Translation: the major labels don’t want artists selling direct to their customers. Ironically, he talks about peer-to-peer services, when that’s not the point. Obviously they want you tipping them, not tipping artists who’ve dumped their contracts.
  • They don’t seem to know where the money is going. Griffin specifically doesn’t want government involvement. Bloggers like to call this a tax. But that’s the problem — it’s a tax for whichever labels are involved, and not the labels that aren’t.
  • The plan is vague — and three years off. Again, if you read the article: “Bronfman has asked Griffin, formerly Geffen Music’s digital chief, to develop a model that would create a pool of money from user fees to be distributed to artists and copyright holders. Warner has given Griffin a three-year contract to form a new organization to spearhead the plan.” Wait, three years? One label managing the process? A pool — of what? For whom? And that means –
  • It’s likely to cause more infighting. That distinction between “artists” and “copyright holders” isn’t just semantic — organizations like ASCAP and BMI collect performance fees that go to publishers and writers, not artists, meaning this whole thing could start a fight between various forms of copyright and different collection agencies. These are the same parties who couldn’t agree about Internet radio; how will they agree about a blanket fee on all Internet use, one that would apply a water utility model to music?
  • No one will know what the money represents. I’ve personally spent a lot more than US$5 this month on music. And I’ve consumed quite a lot, too, via radio and Shoutcast streams — some of which are legally licensed, some of which aren’t. Now, instead, all that usage represents $5. How do you know what I downloaded? Or listened to? Or how I’m any different from someone else with $5? How is this more money for labels if I’m spending less?

Oh, yeah, and the story itself is misleading. Take this quote: “Compact disc sales are plummeting as online music downloads skyrocket.” Read that, and you’d assume CD sales are being replaced by music piracy. In fact, online music purchases are skyrocketing.

Or this one: “[the recording industry] has shrunk to a $10 billion business from $15 billion in almost a decade.” That leaves out explosive growth in the 90s that made the business $15 billion in the first place, suggesting that original growth may not have been sustainable. Industry analysts look at those one-dimensional numbers, and isolate the factor of piracy, without considering radical changes in music taste, genre, and consumption at a time when the market is globalizing and becoming more differentiated — that is, no more pop superstars, which is what the majors were built to handle.

So, let’s review things no one seems to want to talk about:

  • The industry is still huge and profitable, even if they’re not a great stock investment.
  • Online music sales may eclipse physical media in the long term, meaning all this Chicken Little nonsense is going to be meaningless.
  • Music consumption patterns are changing, which may have a deeper impact than piracy.
  • The real reason to be specific of a plan from one label isn’t that that label is evil — it’s that it may be starting an illogical, empty plan with no allies and no real practical implementation.
  • You really can’t assume the industry will act even in its own best interests.

Now, where’s the picture of a kitten that embodies that?

No, I think the one at the top pretty much sums it up.

Updated: Greg Smith points out that Canada has proposed similar taxation, which I suppose is analogous. And it’s even the same amount — $5, on ISPs. (Well, Canadian dollars, but still.)

Interesting to note, however:

  • The Canadian plan would be government-controlled. Warner apparently wants individual labels to organize the program.
  • The Canadian plan is being organized by songwriters and creators, not labels. That’s a big deal, as US labels would need buy-in from copyright holders.
  • Canadian record labels actually think the plan won’t work.

I’m just not convinced this passes the laugh test, as far as plausibility is concerned — not with legal, paid downloads growing, and new signs that a subscription model may also take, plus progress on licensing fees.

  • http://myspace.com/k1Ru k1Ru

    Damn!!! send them running for their money!

    this is just as bad as when the drummer of metallica shut down napster…

    it's like the fossil fuel shortage of record labels…

    new versatile mediums are bubbling their way to the top..and i like it

  • http://www.toilville.com peter

    You gotta keep in mind that arrington is speaking from a Venture Capital, boardroom position when talking about media ownership. He approves because its a way for entity x to reap additional cash source y from consumers of media, in this case ISPs, who would pesuably pass the tax on its customers. If you think of it in purely corporate terms it makes sense.

    The problem is (and I know Im talking to the Choir here) is that creative arts derived IP isn't the same as that which comes through technological innovation. We haven't decided as a society what this difference is, nor what is the value of bits in a industry that weighs data by its quantity, not quality.

    To an ISP at the moment, 1gb of mp3s should be be worth about as much as 1gb of email headers. What the labels would like to do is a create opinion weighted value classification of which bits should be worth more, so they can justify taking a cut. The labels are correct in assuming that without creative IP, a fat pipe is nearly useless, but then again, who will consume your content, when everyone else gets their music from the Internet? Ask NBC how much money they are making in online sales after cutting out of ITUNES.

    I guess only time will allow whoever survives this upheaval in the delivery models of music, so we have to wait patiently until these companies come to some kind of cold war truce in regards to who pays what for what.

  • http://www.createdigitalmusic.com Peter Kirn

    I'm sorry — I should be clear. Arrington doesn't approve. Nor does Gizmodo. And I'm not trying to bash Arrington; I enjoy TechCrunch. What I see is a lack of any analysis of the actual proposal, just knee-jerk reactions to the labels. So we don't actually disagree — I'm just seeing *greater depths of stupidity* in this proposal. ;)

  • http://www.muloka.com/ Louis

    Exactly! Thank you for responding to this! I had similar thoughts when I read Arrington's article.

  • http://www.hisboyelroymusic.com Tim

    Well as you pointed out the big problem with all this is getting labels and publishing companies (majors and indies) to agree and figure out how to split the money up in a way that's fair to all involved. The only way it could really work would be if you could track every single download and dish out the monies according to track popularity, which would be a huge undertaking. Plus it would have to put the majors and the indies on even footing (ie. every song has equal value) which i don't think any of the majors will go for.

    As a consumer I don't mind the idea of a buffet music subscription plan (even if it was an add-on to my internet bill or phone bill), but as a producer I don't see how that would work practically on a large scale even if the controlling powers were 100% ethical and honest about how they divided the money. And I think we know what chance there is of that happening…

  • http://www.jchot.com J-chot

    I'm sorry, I don't buy this "digital revolution" bullshit. I don't understand why my hard work should be free.

    stupid socialist bloggers. do any of them actually make music that people like?!

    buy my album when it comes out on http://www.fantasyviolencerecords.com

    so I can buy diapers for my son judah (who is actually due in may, but the album will be dropped sometime then anyways.)

    CAPITALISM, YEAH!

  • http://www.myspace.com/djnewmiracle newmiracle

    lol and then you proceed to link to your site that has your bootleg 50 Cent breakcore mixes. I hope that Trina and Lou Albaino aren't on your album either, in the interest of intellectual honesty.

  • http://www.createdigitalmusic.com Peter Kirn

    Maybe we should have a blogger tax, to help regain all the lost productivity blogs cause. Of course, then I'm not sure what would happen to me — would I reap the dividends of my own lost productivity and proceed to blog more? It's a logical paradox!

  • http://www.jchot.com J-chot

    it's my re-arangement that's the product.

  • http://www.jchot.com J-chot

    besides, that crack dealer has enough people paying him.

    50 cent has a long history of selling bootlegs.

  • http://em411.com milf litter

    hey, somebody post witty responses on this blog

  • http://celibacyclub.com celibacyclub

    why cant the labels just get together and make a sevice, called allrecords or something, that cost 5$ a month, for the ability to download everything ever recorded. i might pay for that. the 5$ tax wether i do it or not is just going to make me angry and want to get some sort of revenge.

    seems this plan will save big labels that make crapy records, and hurt musicians trying to make it without compromising there integrity.

  • Not that tax thing a

    U2's manager also rambled on about taxing ISPs in a rant a few months back. It's a totally bizarre concept. The music industry deserves a $5 tax directly from the ISPs? What about the movie industry, the publishing industry or.. oh I don't know.. the plumbing industry or just about any other industry that has been in some way changed by the internet? Just because your business model is tanking doesn't give you the right to extort some new revenue.

    Besides it's logisitically impossible.. who gets this tax money? Only the majors? Everyone? If they're going to split it with all the music producers globally, I can't wait for those cheques for one millionth of one cent. How do you keep track? Does everyone get a millionth of a cent? Or do you get 10 millionths of a cent for going platinum on iTunes? What about my parents who don't listen to music on the internet? You're going to tax them too? Genius! Now I can make money producing music from people who don't even listen to music!

    Someone should stop smoking so much crack.

  • http://nwrecords.com gbsr

    its quite funny that metallica shut down napster back then in the first place; what were THEY doing on napster in the first place? downloading illegal music, no doubt.

    i for one am happy at all these stupid ideas people comes up with to fight piracy and copyright infringement which obviously threatens our society as a whole *cough*.

    it just means that they are understanding that they cant go on with their payola type plans any more, because there is a digital revolution going on. last.fm made the great call of introducing a royalty program, here in sweden an organisation called stim (basicly a copyright registration service) are offering a similar solution. ofcourse the antipiracy people fought it with making the great desicion of using a copyrighted text on their antipiracy organisation website without the copyright holders permission. yep, theyre stupid indeed. just hold on a year or two and theyll give up, theyre at the last peice of string now trying to make the public support them.

    this idea seems more like a collective punishment if anyhting. tax people for thing they might do, just in case.

  • Max

    The idea is like the checkout at a supermarket. Whatever you take through will be scanned and priced accordingly. If it really were as simple as that, then I don't see any reason for anyone to argue against it – people paying for their music is a good thing for everyone.

    However, to implement it in a perfect way, with no negative impact on consumers, artists, ISP's etc is next to impossible. I don't see how:

    a) It can be implemented without severely slowing down the data throughput of an ISP, hence slowing down internet speeds for the end consumer

    b) Accurately scanning files and correctly charging people for music. For gods sake, I put a demo CD of mine with 3 tracks into iTunes and it thinks it's some obscure copyright EP by a Jamaican rasta.

    c) Notifying people that they will be charged properly before they download. You can't walk out of a supermarket with something you can't afford or accidentally took with you, and that's a safety everyone needs

    d) Letting artists release mp3s for free without confusion that the end user will be charged, and being safe that their music won't be charged at the ISP incorrectly

    etc etc etc

    If done right it might ease alot of pain in the industry. But, call me a pessimist, when has anyone ever done something like this right?

  • Max

    ^^ The above is a simplistic view before even getting to who receives the money and how much. There are major problems before we even get there.

  • Fresh Freddy

    What irritates me about all this is that it has been going on for sooooo looooong.

    The music industry has known for 15 years times were changing. The MP3 format has been around since 1993 and widely used for sharing music since 1995. Napster was shut after a lengthy court battle all the way back in 2001. The Microsoft Darknet paper was released 6 years ago in 2002.

    What I'm saying is the music industry likes to paint themselves as blameless victims. All the time sueing Napster, sueing grannies,teenagers and dead people, sueing pirate bay, trying to block Russia's entrance to the WTO.

    All I can see is an industry that has not meet consumer needs and habits. An industry that has consistently lost money for musicians for 15 years. An industry unwilling to change regardless of discomforting facts like those in the Darknet paper. An industry so lucky that its was given the means to generate profit from 50% of all homes and offices in the western world…. and they blew it.

    I think the music industry knows they have lost the battle with MP3. I also think they know MP3 is only a transistional technology and the real future market is in streaming audio. I think that all this litagation and bluster is solely to strenghten their hand when it comes to negotiating streaming music rights.

    Either that or they really are that ineffectual and musicians and consumers have every right to be up in arms.

    To J-Chot I do buy this "digital revolution" but I can't understand why your music is free either. Maybe you should talk to your record company and ask them to sort it out. :)

  • http://www.myspace.com/djnewmiracle newmiracle

    It seems that alot of us in the internet relm always like to say that the majors "blew it" somehow.

    In a way, I don't think digital distribution was their's to blow in the first place. That's why Apple stepped in with iTunes and shocked the hell out of the music industry. It's because people in the music biz AREN'T in the tech biz. Apple IS. I feel like it's the same thing in alot of other business sectors- where computers and digital technology just turned everything upside down. Apple saw the potential because it's in that sector.

    But with these big music labels- they aren't in the tech business, so they don't want to have to do tech things. It's like someone having to learn a foreign language when they're in their 40s. Sure there are alot of good reasons and insentives to 'make the transition' or 'invest in the skills', but when it comes down to it people are lazy. If the majors can just slap some taxes on some thing somewhere- they wind up getting theirs. Industries are like large, lumbering dinosaurs. They aren't fit for fast maneuvering and radical change. They'll just go existinct, eventually.

    Until then, they'll just grab at whatever quick fix or stopgap solution keeps the cash flowing. This is why you see things like this, and other equally strange proposals like taxing CD-Rs or other blank media. They'll throttle p2p traffic. They'll implement half-baked and flawed DRM. They'll do all this stuff because it's easier for them. Meanwhile, we all get screwed on the legitimate and fair uses for these things. And the people working at major music and movie companies won't care that they are stifling genuine innovation and technological advancement of the human race because they still have their 6 figure salary. It's just natural to follow the path of least resistance. Eventually they will adapt or die.

  • http://www.createdigitalmusic.com Peter Kirn

    @newmiracle — I agree, but I think this has already begun to change rapidly. Majors are dropping DRM. They're considering subscription models. Some are even flirting with P2P. And, yeah, Apple is in the tech business — but still largely the hardware business, which means you see equally interesting stuff happening from the likes of Amazon, or Last.fm, or a number of other corners.

    I think the majors got the "adapt or die" thing. The problem is Warner being so far off the mark with this particular adaptation. Oh, well — I expect they got the message. And I think the majors now covet the kind of love (and money), say, NIN just got.

    In fact, to me the challenge is for the "minors" to make their play in a big way, before the majors catch on.

  • http://www.createdigitalmusic.com Peter Kirn

    Oh, and further supporting your argument, newmiracle:
    http://createdigitalmusic.com/2008/02/25/intervie

    Hank talked about ways in which the industry didn't really get selling *records*, either, because they don't know anything about music. Doh. ;)

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  • James DS

    What I thought was interesting is the emphasis on "collective management" rather that individual control of rights. It appears that he is advocating a European style model in the manner of the collecting societies rather than a more US style fragmented rights landscape.

    Another problem that he will face is the US anti-trust and cartel laws. I'm not an expert but I suspect that this is a major barrier…

  • Case

    I think the music tax started here in Canada as they've been talking about the $5/mo ISP tax for at least a year. The odd thing is it raised first by an organization of artists. You see, we already have a music tax [a levy actually] that is on blank CDRs to compensate artists for lost income from downloads. It is then distributed by record sales. A flawed system as i'm sure Celine Dion isn't being pirated as much as NIN, but is sure selling more. BUT.. because of this tax/levy, the Supreme Court of Canada has ruled music downloads to be legal. Uploading [aka sharing] is still illegal tho, so that rules out Bit Torrent. But do to our strong privacy laws[ soon to be eroded by the Conservative Gov't] the CIAA [Canuk RIAA] can do fuck all… so far. They tried to extend this tax/levy to flash/HD based mp3 players but failed. They were looking for ~$30 per iPod.

  • Downpressor

    Here's what all this reveals to me:

    1 People who know nothing about the workings of a particular industry are the first to say how it should be run.

    2 Good things rarely come out of leaked corporate memos. Warner and other large publishers probably run all sorts of ideas around internally. When one of these proposals gets out to the blogotwats everyone feels the need to offer their opinion (see point 1). OTOH, sometimes these things get leaked on purpose to gauge public reaction but that just brings us back to point 1 again.

    Content publishing of any type is a very strange industry. Most product will never recoup costs, but the big sellers cover the rest. You get better odds in Vegas. When you know how much one solid gold hit can be worth you do everything you can legal or not to get it in front of potential buyers. Oh and guess what? Running an indie/small publisher is really no different except your marketing budget is too small for hookers & blow so you end up sending a few cases of beer and 10% of a product order to your distributor for free instead.

    As to a tax/surcharge/whathaveyou, this can be good for a publisher as long as you have good accountants and lawyers and thats why its good for the majors but not so much for the little guys.

    US$5/mo does not sound like much but it adds up quickly. But you can only get a slice of that pie if your lawyer is at the table to negotiate for you and your accountant can work up a statement of how big your slice should be.

    If this sort of thing goes through I am definitely going to see how much work it would take to get my microscopically small share I'd be "due" for my own records and records I publish. If you are involved in this strange business with anything but the purist artistic motives (or you just sample other peoples stuff and dont have a musical/legal leg to stand on) you'd be foolish not to want some of this revenue if it comes to pass.

  • http://www.createdigitalmusic.com Peter Kirn

    It wasn't leaked. Griffin has been trumpeting these ideas, and he keeps telling them to anyone who will listen. And that could be a good thing, except he seems to be more enamored with ideas than with implementation details or balancing the needs of the people affected.

    And sure, you wouldn't *turn down* the money if it happens — and it does add up. I just don't think it's going to happen.

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