Music as a Service

by Katharina Scholtz

There’s been quite a bit of discussion in the last few days about Warner’s move to “monetise the anarchy of the internet”. Having unsuccessfully tried to sue people for illegal file sharing, they seem to be realising that their next move must be to work within the current peer-to-peer sharing system. Their solution: add a $5 charge onto fees people pay their Internet service providers, and pool this money to distribute amongst rights holders through an independent body.

I chatted to a friend about this, whose first reaction was that $5 is pretty cheap for all the music he can eat (er...listen to). A big problem though, as he pointed out, is that there’s no guaranteed way to monitor how much music is downloaded from individual artists, and therefore how the money would be divided. This is just the first of many objections.

Michael Arrington at Tech Crunch discussed the idea that this kind of system would kill innovation in the industry, because there would be guaranteed revenue regardless of the quality of the music, and that new talent wouldn’t be sought for or encouraged.

Peter Kirn is of the opinion that we don’t need to worry about the effect on innovation, because the system would never get started. He points out a number of flaws in the plan, one of them being that reaching a point of agreement between the record labels is going to be a major obstacle. Arguably, with a system like this, smaller record labels could be given more of a fighting chance because they would immediately have access to the same distribution channel as a giant like BMG.

Interestingly enough, this exact suggestion was made a while ago in Canada, but by musicians. They suggested that the system be implemented by the government. CRIA president Graham Henderson, however, described the idea as a “pipe dream”, one that would take focus away from “the real issues that will help us resolve the industry's problems." In Canada the record labels hate the idea. So why the different reactions?

To be honest, I’m not entirely sure. For one thing, the CRIA probably focused more on the unresolved practical implementation issues - which I’ve briefly discussed. It makes me wonder if Warner has something in mind to solve these issues; they’ve already invested money in the plan and, as has been pointed out, have hired Jim Griffin to take it forward.

Warner is trying to earn revenue from a massive and completely free distribution channel that already exists. Perhaps the Canadian record labels didn’t like that this kind of system means they should reduce their cut of the profit, seeing as the distribution is no longer something they are producing or controlling.

With the $5 charge suggested by Warner, the music industry would apparently be earning 20 billion dollars, doubling what the industry is making now. Perhaps Warner don’t think that they would have to take a cut in profit? Without distribution costs music should get cheaper though...right?

However this plan works out, it does show that record labels are trying to step up. Douglas Merrill leaving Google for EMI is just another indication that things are happening. We’ve all known for a while that the industry has to change, and I don’t think it’s unfair to say that most people would like this change to involve record labels disappearing, or at least having less power (Radiohead’s direct to the people release was discussed endlessly). So we’re left to see whether this is a change in the trend away from record label power, or just a pointless last grasp for a solution.

2008/04/04 | permalink | comments (0) | trackbacks (0)

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