Masnick on the Music Tax

by on December 15, 2008 · 8 comments

I’m more sympathetic to EFF-style voluntary collective licensing than Mike Masnick is, but I have to say that the case he makes here is pretty compelling. I think this is really the key point:

What you’re doing is setting up a big, centrally planned and operated bureau of music, that officially determines the business model of the recording industry, figures out who gets paid, collects the money and pays some money out. The same record industry that has fought so hard against any innovation remains in charge and will have tremendous sway in setting the “rules.” The plan leaves no room for creativity. It leaves no room for innovation. It’s basically picking the only business model and encoding it in stone.

Oh, and did we mention it’s only for music? Next we’ll have to create another huge bureaucracy and “license” for movies. And for television. And, what about non-television, non-movie video content? Surely the Star Wars kid deserves his cut? And, newspapers? Can’t forget the newspapers. After all, they need the money, so we might as well add a license for news. And, if that’s going to happen, then certainly us bloggers should get our cut as well. Everyone, line right up!
This is a bad plan that will create a nightmare bureaucracy while making people pay a lot more, without doing much to actually reward musicians.

The key thing to remember here is that there’s nothing special about the music industry. The record labels have been hardest hit by peer-to-peer file sharing, but their fundamental problem actually has very little to do with BitTorrent. Rather, their problem is the same problem that’s befallen the newspaper industry: the marginal cost of content has dropped to zero, and so the price of content is also going to be driven to zero sooner or later. The only thing that’s different about the music industry is that BitTorrent has sped the process up: prices have dropped faster because in addition to competing with new entrants, labels are also “competing” with pirated copies of their own content.

But that’s just a transitory phenomenon. The long-run trend is that there’s going to be a much larger eco-system of free music, just as the blogosphere is a large eco-system of free punditry. And in that environment, business models that rely on content being expensive are doomed, just as Craig’s List doomed newspapers built on the premise of expensive classified advertising. I think Mike is probably right that implementing a de facto music tax would have the effect of cementing in place an increasingly anachronistic industry structure.

With that said, a music tax would have some short-term benefits. An effective collective licensing scheme would create a much more fertile environment for entrepreneurs to build innovative technologies on top of peer-to-peer technologies, so maybe a music tax is a price worth paying for the benefits of a peer-to-peer friendly legal environment. But before I get behind the idea, I’d want to see a clear explanation of how such an agreement would apply to other types of media, and what the long-term evolution of the industry would be.

  • http://pragmaticgeographer.blogspot.com/ Ben R.

    It would be difficult to imagine major music labels signing on to an equitable deal on a voluntary music tax. If we assume for the moment it is possible to effectively and fairly distribute the income from this tax to the copyright holder, is there any compelling reason for new artists to sign on to a label that takes a lion's share of the profit from this pool?

    You don't need them for advertising. They are, if anything, less effective at finding (or manufacturing) artists/trends than the internet. If you needed funding there are other methods of obtaining venture capital (with probably better terms). And you don't need them to tour.

    If individual artists are allowed to share in this pool the major labels are finished. If they limit it to their music the ISPs in question could run foul of antitrust issues. And if they keep going without effectively monetizing internet music they are dead.

    I'm sort of surprised they aren't trying to compete with free via something like Hulu. It wouldn't be too difficult. Let the user create a playlist and occasionally toss in some targeted audio ads. X number of ads for a given hour of streaming audio.

  • http://thevitaminkid.blogspot.com autodidact

    The major record labels did not fairly compensate artists for LP or CD sales. They are not doing so for legal downloads from amazon or iTunes, either. (Read Weird Al Yankovik's thoughts on compensation for digital downloads if you want some enlightenment there.) I'm not aware that artists have been paid any of the settlement money recovered from the thousands of threatened lawsuits against peer-to-peer file sharers, either. (And when I write of “fair compensation” I simply mean that stories of bands who had to sue just to get what was contractually due are dime-a-dozen. It seems to be almost standard practice to cheat the artists, and a few times they actually get called on it.)

    Last but not least, it is in the major label's interest to find ways to exclude their competitors, the small fry independents. If not exclude, then at least they'll find ways to make it difficult for them to participate and get compensation.

    Put the fox (or the fox's agents) in charge of chickens? Maybe a bad idea. Probably. Don't want to be too dogmatic. :)

  • http://enigmafoundry.wordpress.com eee_eff

    With that said, a music tax would have some short-term benefits. An effective collective licensing scheme would create a much more fertile environment for entrepreneurs to build innovative technologies on top of peer-to-peer technologies, so maybe a music tax is a price worth paying for the benefits of a peer-to-peer friendly legal environment.

    Never. The innovation of a group such as radiohead, shows that such a tax is unneeded.

    And I am enjoying very much seeing the large labels destroyed. They created the anti-freedom group known as the RIAA, and you will not use my tax dollars to deny me the very high value entertainment of watching them destroyed.

  • http://techvideoblog.com Charbax

    Radiohead are not representative of all the independent artists out there.¨

    The music tax is needed. In face there should be a tax for all arts on the Internet. Start with a few dollars in average taxed on everyone each month. Then that tax can get higher once everyone clearly can see the benefit. But even by starting with an averaeg for $5 or $10 per person per month, you've got plenty enough money to revolutionize the Internet culture.

  • Charbax

    Radiohead are not representative of all the independent artists out there.¨

    The music tax is needed. In face there should be a tax for all arts on the Internet. Start with a few dollars in average taxed on everyone each month. Then that tax can get higher once everyone clearly can see the benefit. But even by starting with an averaeg for $5 or $10 per person per month, you've got plenty enough money to revolutionize the Internet culture.

  • Charbax

    Radiohead are not representative of all the independent artists out there.¨

    The music tax is needed. In face there should be a tax for all arts on the Internet. Start with a few dollars in average taxed on everyone each month. Then that tax can get higher once everyone clearly can see the benefit. But even by starting with an averaeg for $5 or $10 per person per month, you've got plenty enough money to revolutionize the Internet culture.

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