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The talk of a broadband music tax is quite old, at least here in Europe.  It goes back to the Fall of 2006.

As I mentioned back then, it also isn’t a new thing.  Many of us already pay something akin to a music tax in the form of a “rights tax” on reproduction media such as blank cassettes and blank CDs.  There isn’t any difference between a blank CD and a blank Flash drive–both store data.

I think the discussion should be about

  • standardising the rules (eg, should all blank media have a rights tax?). [NB: I’m ok if the answer is that there is no rights tax on any blank media]
  • discussing how this tax would go to *artists* (instead of the bureaucratic music companies and opaque rights collecting agencies that keep the money for years and, when they finally distribute the money, have allocation rules that are biased towards “mega acts”).

I want quality music to persist.  I want to pay for it.  I just want it to be fairly priced (eg, how ridiculous is it that a a legal download has the same cost as a physical single) and fairly distributed (eg, to the hands of musicians).

What I don’t like about this debate is that the music labels are leading it.  After all, in their dying days the are surely just trying to protect their interests and not those of the artists, those of the music.

The discussion of a music tax should be used to open the debate on how to build a new music industry, not protect the old one; one where the (smaller) artists have a lot more rights and keep more of the revenues.

Clue Score = How well an industry has embraced the potential of the Internet.
– Press (newspapers and magazines) A+
– Movie (Hollywood) B
– TV (broadcaster) B-
– Radio C
– Music F

I have been helping media companies think through and execute their media strategies since 1998.

This month I began work on a detailed 8-year forecast of the global market for recorded music. The hardest factor to predict (and I am still struggling with it) is the contribution of digital sales. All the research firms’, consultancies; and music companies’ estimates I have seen say ‘yes’ – they have global music sales recovering as early as 2007 with sales anywhere between 2010 and 2012 exceeding 2006 values.

I began my analyses with this same hypothesis. Alas I am coming to the conclusion it won’t happen. The reason is that the music industry have resisted embracing potential of the Internet.

Music has been visibly online since 1998 when eMusic launched. We are at the end of 2007 and all the music industry has managed to do little. They focussed on minimising the down-side of the Internet (ie, illegal file sharing) instead of maximising the upside (eg, greater ease of sampling and buying, selling back catalogue). Today they are wrestling with iTunes, DRM and, because of market failures, illegal file sharing.  It’s not evident how they can remedy things in the short term.

It made me think that, compared with all the media industries I’d worked with, the music industry has done the least necessary to profit from the Internet.

The press has tried hard. They were quick to put their content online. It took them a while to learn to publish for the web, but most figured out. Of course some titles gave too much away (eg, TIME to AOL) but that’s down to execution. My point is that just about every publisher quickly develop some sort of “web strategy”. They weren’t in denial. Some publishers even bought dotcoms in classified and local directories. Many have embraced blogs. And, recently, some titles are beginning to develop social networks. I give them an ‘A+’.

The movie industry realized early on that they’d be in the same hot water the music business was in unless they did something about it. Viant (my favourite work place) was working with movie studios as far back as 1999 to develop Internet business models. Today there are a variety of ways that you can buy movies — not all ideal but proof that they are experimenting. And, they sure know how to use the web to market their fare. That’s a ‘B+’ in my view (I’d give them a A- if they weren’t still enamoured to DRM).

TV has been a bit of a sleeper but has moved fast this year. Broadcasters used the web to put out loads of program information and, generally, did that well. They even offered show-related chat rooms and forums. And, this year, all the US broadcasters developed broadband portals built around their real asset: video. That earns them a ‘B-’.

Radio has been ignoring the Internet. Stations have little to show other than streaming shows and creating email addresses for their DJs. Most stations, until recently, have been dissing podcasting. I give them a ‘C’ because they were quick to offer streaming but have done nothing of note since.

Should the EU raise a “music tax” to be paid by broadband and mobile phone users to compensate music labels (akin to the TV license paid in many European countries)?

Earlier in the month, The Register published an article titled “Big labels are f*cked, and DRM is dead — Peter Jenner” .

Peter Jenner is a music industry old-timer (who was Pink Floyd’s first manager and has also looked after T.Rex and The Clash among others), and is Secretary General of the International Music Managers Forum. His voice is as authoritative as it’s brash.

Jenner says the major music labels “raped their whole business model” to cover profit shortfalls and haven’t got the “got the time or energy” to think about the future of their business.

His analysis of the current situation is accurate:
– “digital music pricing has been a scam where the consumer pays for manufacturing, distribution, and does all the work”;
– “DRM, pay-per-download, and per-device restrictions force users to pay multiple times for a single song”.
(which, taken together, in my view, provide individuals an incentive to seek pirated music)

I also suggest that the RIAA (US), MCPS-PRS (UK) and other national rights bodies are shooting themselves in the foot. By punishing new bona-fide Internet-based business models that promote music with over-bearing the regulations and fees common to traditional media (TV, radio, etc.) they are preventing the emergence of legal alternatives and, in the process, helping the illegal outfits flourish.

Jenner’s recommendation is for EU countries to introduce a blanket broadband license of about €4/month to compensate music companies in exchange of them abandoning DRM and them accepting greater pricing regulation.

There hasn’t been enough debate as this recommendation warrants. The clearest thinking has come from Micheal Arrington of TechCrunch who was highly critical.

I think the idea of a broadband fee is quite sensible.

Competition is unlikely to create an environment without DRM and excessive pricing.
– iTunes controls more than 70% of the music download market and is unlikely to soon loose it’s strangle-hold on the market (over 70% of new US cars have iPod docks and six airlines are now talking about supporting it too).
– Microsoft’s has just introduced a new DRM, instead of the one it already had, for it’s new Zune MP3 player.
– Mobile operators are closed networks where there is no competition for like services.

This tax wouldn’t elimate innovation. Music labels would still compete for a larger share of the broadband license. And, anyway, it is already a tried and tested concept. Many countries (eg, Canada, Holland, Germany) charge a “rights tax” on reproduction media such as blank cassettes and blank CDs. This tax would be no different.

Germany and Sweden have already introduced similar taxes to pay for their public broadcasters.

The danger is that other rights holders would demand a similar tax. Movie studios? Book publishers? Phtographers? In the process they might over-tax individuals to the point of slowing down broadband penetration.