Article 43


Thursday, April 03, 2008

Internet Music Tax

Music Industry Proposes a Piracy Surcharge on ISPs

By Frank Rose
March 18, 2008

Having failed to stop piracy by suing internet users, the music industry is for the first time seriously considering a file sharing surcharge that internet service providers would collect from users.

In recent months, some of the major labels have warmed to a pitch by Jim Griffin, one of the idea’s chief proponents, to seek an extra fee on broadband connections and to use the money to compensate rights holders for music that’s shared online. Griffin, who consults on digital strategy for three of the four majors, will argue his case at what promises to be a heated discussion Friday at South by Southwest.

“It’s monetizing the anarchy,” says Peter Jenner, head of the International Music Manager’s Forum, who plans to join Griffin on the panel.

Griffin’s idea is to collect a fee from internet service providers—something like $5 per user per month—and put it into a pool that would be used to compensate songwriters, performers, publishers and music labels. A collecting agency would divvy up the money according to artists’ popularity on P2P sites, just as ASCAP and BMI pay songwriters for broadcasts and live performances of their work.

The idea is controversial but—as Griffin and Jenner point out—hardly without precedent. The concept of collecting a fee for unauthorized use of music was developed in France in 1851 as a way of reimbursing composers whose work was being performed without their permission in cafes and the like.

The practice spread to the United States in 1914 and currently applies to radio airplay and webcasts in addition to live performances. In a 2004 white paper, the Electronic Frontier Foundation called for it to be applied to file sharing, but the Recording Industry Association of America immediately dismissed the proposal.

Things are different now. “The labels are beginning to like the idea of an access-to-music charge,” says Jenner, who once managed Pink Floyd and the Clash, “because they’re increasingly aware that their current model is broken.” U.S. music sales, which peaked in 1999 at nearly $15 billion, dropped to $11.5 billion in 2006. Last year’s figures are still being tallied, but with CD sales cratering and online sales overwhelmingly dominated by singles, the only question is how far they’ll fall.

Meanwhile, the industry’s antipiracy efforts appear more and more futile. Digital rights management, long touted as a solution, has been all but abandoned. And though the RIAA is said to have threatened or taken action against some 20,000 suspected file sharers, the market-research firm NPD Group reports that nearly 20 percent of U.S. internet users downloaded music illegally last year. The score to date: 0.02 million alleged P2P users down, 40.98 million to go.

At the music industry trade show MIDEM last year, John Kennedy, the head of IFPI—the RIAA’s international affiliate organization—offered modest support for the kind of licensing fee Griffin and Jenner propose. “It’s a model worth looking at,” he said at a press conference. “If the ISPs want to come to us and look for a blanket license for an amount per month, let’s engage in that discussion.”

The tone at the January 2008 MIDEM in Cannes, France, was more combative. Longtime U2 manager Paul McGuinness said in a widely reported speech that it was time to hold ISPs responsible for the file sharing deluge. McGuinness wants network operators to cut off those the industry deems offenders—an approach France’s Sarkozy government is already pushing in that country. “If ISPs do not cooperate voluntarily,” McGuinness declared, “there will need to be legislation to force them to cooperate,” McGuinness said.



Monetizing File-Sharing: Collective Licensing Good, ISP Tax Bad

By Fred von Lohmann
Electronic Frontier Foundation
March 20, 2008

Last week at SXSW, music industry veteran Jim Griffin broached the idea that file FILE SHARERS PAY A SMALL FEE THROUGH THEIR ISPS IN EXCHANGE FOR UNLIMITED FILE SHARING. There is a great deal to recommend an idea like this (as we’ve been SAYING SINCE 2004), but there’s a right way and a wrong way to go about it.

We are big fans of a collective licensing solution for the music file-sharing dilemma: music fans pay a few dollars each month in exchange for a blanket license to share and download whatever they like; collecting societies collect the money and divvy it up between their member artists and rightsholders. It’s not a radical idea—that’s roughly how we pay songwriters for radio play, concert hall performances, and the music playing in your favorite restaurant.

But this should not turn into, as some have called it, an “ISP tax.” Any collective licensing solution should be voluntary for fans, artists, and ISPs alike. We don’t have a compulsory “restaurant tax” for songwriters—there’s no reason to have a compulsory “Internet tax” for file sharing. It should give fans what they want, rather than trying to withhold things from them—after all, artificial scarcity is what got us into this mess. And it must give artists the freedom to choose among competing collecting societies, which is the only mechanism that will guarantee the kind of transparency and efficiency that much of the current music industry lacks.

Voluntary for Music Fans. People who do not share music shouldn’t have to pay for a license they don’t need. After all, we don’t have a “music tax on restaurants.” Restaurants are free to experiment with no music, public domain music, or CC music, as they see fit. Internet users should have the same freedom. But this means that there will still be some enforcement against those who don’t pay but keep downloading. That seems fair, and enforcement to get people to become paying subscribers will look very different from today’s “mount a few heads on spikes to scare the rest” approach being used by the RIAA and MPAA.

Voluntary for Artists. Artists shouldn’t be forced to participate if they don’t want to. That said, the vast majority of creators and rightsholders will likely opt in, rather than opt to sue individual Internet users. After all, 99% of all songwriters are members of one of the three performing rights organizations (PROs) we have today. It sure beats having to find and sue every radio station every time it plays your song.

Not a Collecting Society, but Collecting Societies. Freedom of choice for artists only means something if they have options to choose among. Competition is critical to keeping collecting societies honest and transparent. If you compare the three PROs that service songwriters in the US to the unitary, government-backed collecting societies in the rest of the world, our system wins hands down on these fronts.

Voluntary for ISPs. There is no need to force ISPs to offer blanket sharing licenses to music fans. Some ISPs will voluntarily bundle the license with their offerings ("buy the all-you-can-eat music package for $5 more"), some ISPs may choose not to. Universities might choose to buy campus-wide licenses in bulk in order to stop the RIAA’s college litigation campaign. Software companies like LimeWire might choose to bundle the license fee into their software, paid either by subscription fees or advertising. At the end of the day, it’s the individual fan who needs the license, and she should have lots of ways to buy it.

All the Music, From Anywhere. Music fans have made it clear that they are going to use whatever software they like, to download anything that can be found in any “Shared” folder on the planet, including the unauthorized concert recordings, the rarities, the old b-sides, and the alternate takes. It’s time to figure out who should be paid for them, rather than wishing for a world where you can somehow make them disappear.

Technology Agnostic. Linux, Mac, Windows, iPod, cell phone. Downloads, streaming, buffered streams. Music fans want their music in whichever format, on whichever device, works best for them. Once you’ve paid, it’s nobody’s business where your music comes from or where it ends up. It should go without saying that DRM is has no place in this future.

Protects Privacy. Paying for music sharing shouldn’t entail giving up your privacy. While the collecting societies will need to have some metrics of popularity in order to divide up the revenue pie, we should take our cue from television, where we divide up huge advertising revenues by relying on sophisticated sampling systems like Nielsen’s. Sampling and surveys are good—a perfect census of what every person listens to is not.


Posted by Elvis on 04/03/08 •
Section Privacy And Rights
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