Monday, August 31, 2009

Monetizing music

I actually don't think levies on memory is a terrible solution to the collapse of the music industry.

Let's play with some rough numbers, just for fun. Let's say you had a music consumer who used to spend an average of $150 a year on music--10 albums annually at $15 a pop. Now a compulsive downloader, he doesn't spend anything but his annual music downloads have a retail value of $4,000.

Right now, the music industry seems to think it's entitled to the $4,000. But if illegal downloading were to end tomorrow, so would his massive music consumption so he's soon be back to the $150 of spending again. So the question is not how to prevent this guy from downloading every song ever recorded, but how to extract $150 or more annually from this guy, no matter how much music he gets. It would be better if he paid more for more music, and there are probably ways of doing that, but for the moment we're just trying to restore an acceptable level of financial remuneration to the system. I think "the same as before" is more acceptable than zero.

But I'm not even sure "the same as before" is possible when your starting point is zero. So let's be even more realistic. I've read reports that artists have make as little as 30 cents per album, that $1 per album is a good deal. So under the new business model, why don't we give the artist $3 per album. With downloading as part of the new distribution model, let's keep marketing and administration costs to another $3 per album. Now our music fan is paying $60 for his 10 albums. Pro-rated as a fee applied to media that can hold music files, that's not an outrageous amount of money.

How do we get a little closer $150? License file-sharing services that meet certain criteria. Better search function, better speeds, fewer ads and spyware programs and less bogus files would lure people from illegal file-sharing to legal file-sharing. Or, because those terms are a little moralistic, unlicensed file sharing to licenced file sharing.

Even someone obsessed with "free" would give serious consideration to a monthly fee of $7.50 to legally download all the music he wants in a way that's as convenient as iTunes and that actually gives money directly to the artists he likes, much like how libraries pay fees to the creators of works that circulate. In fact, in paying for high-speed Internet access, he's already accepted the premise that downloading media files is going to cost him something each month. Why not 10 or 10 percent more, especially if he's getting value for it and is no longer a "criminal"?

The thing is to keep the price low. $7.50 montly is a much less dramatic departure from zero than, say, $30. Again, the industry is obsessed with the $4,000 worth of songs on his hard-drive, but they've got to let it go and focus on the conversion rate, rather than on their idea of justice.

By charging a (mandatory) fee on storage devices and by charging an (optional) monthly high-volume file-share fee, we can bring the same $150 a year back into the music industry. But, with online distribution and a de-emphasis on corporate systems, we've eliminated many of the "suit" and retail positions, giving the more of that money to artists instead. We give indie bands comparable access to larger acts, if they can do a good job of getting their name into the memories of music-searchers. If we have a system of licensed file-sharing services, we can keep track of who is getting downloaded and split the storage fee and monthly fee in a fair way. The distribution/marketing system becomes the finance department.

The corporate suits, though, are not interested in exiting stage right and so obsess over the $4,000 in "lost revenue," not realizing that that money is never going to be available to them, no matter how many court cases they launch. They've got to start with zero and build up, not start with "He's got our whole catalogue on his hard-drive!" and seek revenge.

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