All Things Digital

Back in 2000-2001, when the Recording Industry Association of America was still trying to recover from its CD price-fixing scheme with poorly reasoned justifications for CD price inflation (”Listen, if CD prices were governed by the Consumer Price Index, you’d be paying $33.86 for them instead of $12.75!”), a little company called Napster came calling. Napster had pioneered a new Internet distribution model for digital media that was revolutionizing the music industry, and it hoped to partner with RIAA member labels to create a subscription-based service.

At the time, Napster had some 20 million users worldwide and was essentially the de-facto file-sharing standard. Had the RIAA labels agreed to the alliance, they might have turned peer-to-peer distribution into a new and powerful business model, one with low distribution and marketing costs and a fast developing user base. But they didn’t. They chose another route.

Big mistake. Along came Gnutella. And increased broadband penetration and cheaper storage. Along came Kazaa. And then came BitTorrent. And, well, look at the industry now.

Given such history, it’s difficult to look at the recording industry’s plan to have a monthly fee added to consumers’ internet-service bills and not shake your head in wonderment.

Portfolio.com reports that Edgar Bronfman Jr.’s Warner Music Group (TWX) has indeed hired veteran industry consultant Jim Griffin (no relation to Peter, right?) to quarterback a plan under which consumers pay an Internet-access surcharge of $5 a month for the collective right to freely share music. Those fees would be pooled and divvied up among artists and their labels.

“Ideally, music will feel free,” says Griffin. “Even if you pay a flat fee for it, at the moment you use it there are no financial considerations. It’s already been paid for.”

Ah- charge everyone for all music. So it is Monetization Without Representation. OK. But what gives the music industry the right to tax all broadband users because it suspects some of them might illegally share its content? And if the music industry deserves that right, then doesn’t the film industry deserve it as well? And the publishing industry? And any other industry that might benefit from such a tax?

As David Barrett, engineering manager for peer-to-peer networks at Web content-delivery giant Akamai (AKAM), notes Griffin’s plan is problematic. And desperate.

Said Barrett:, “It’s too late to charge people for what they’re already getting for free. This is just taxation of a basic, universal service that already exists, for the benefit a distant power that actively harasses the people being taxed without offering them any meaningful representation.”

The concept is simple: The music industry forms a collecting society, which then offers file-sharing music fans the opportunity to ‘get legit’ in exchange for a reasonable regular payment, say $5 per month. So long as they pay, the fans are free to keep doing what they are going to do anyway–share the music they love using whatever software they like on whatever computer platform they prefer–without fear of lawsuits. The money collected gets divided among rights-holders based on the popularity of their music. In exchange, file-sharing music fans will be free to download whatever they like, using whatever software works best for them. The more people share, the more money goes to rights-holders. The more competition in applications, the more rapid the innovation and improvement. The more freedom to fans to publish what they care about, the deeper the catalog.”

–Excerpt from “A Better Way Forward: Voluntary Collective Licensing of Music File Sharing,” Electronic Frontier Foundation, April, 2004

Turns out that the Electronic Frontier Foundation was simply ahead of its time when it suggested that the recording industry adopt a voluntary collective-licensing model for music. Because the record labels are finally warming to the idea.

During tomorrow’s South by Southwest “Mobility, Ubiquity and Monetizing Music” panel, Jim Griffin, managing director of OneHouse–a digital entertainment consultancy that works with three of the four major labels–will argue the case for a file-sharing surcharge.

Like the “File-sharing Monetization” proposal recently pitched by the Songwriters Association of Canada and the EFF plan that the industry dismissed back in 2004, Griffin’s proposal would have Internet Service Providers add a flat-rate fee to their monthly charges to underwrite the cost of unlimited music downloads. The resulting funds would be divvied up among songwriters, performers, publishers and music labels.

“It’s monetizing the anarchy,” says Peter Jenner, head of the International Music Manager’s Forum, who will join Griffin on the panel. “The labels are beginning to like the idea of an access-to-music charge, because they’re increasingly aware that their current model is broken.”