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.

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