Good idea - bad execution
I believe Universal is right in seeking a royalty on electronics sales. "Free music" is really not free at all. The electronics business, including Apple, is making a fortune from so called "free music" - because you need to buy a computer, blank CDs, and an MP3 player to enjoy the "free" music.
The Audio Home Recording Act already imposes a royalty on digital tape recorders, but not MP3 Players or computers. But when the AHRA was passed in 1992, the personal computer was only just making its debut in the US, and the MP3 player had yet to be imagined. So while the Act compensates copyright owners and artists for lost sales because of copying, the income generated by the levy has been negligible because AHRA does not apply to the new generations of technology, including personal computers and MP3 players.
So why hasn't the Act been extended to include this new generation of technology? The principal reason is that the major labels have not pushed for it. But wouldn't the record labels want to collect royalties from the manufacturers who are raking in money from sales of electronic equipment which is being used to acquire and listen to music without compensation to the labels?
Perhaps the main reason is the way royalties are distributed under the AHRA. The first third of royalties go to music publishers and writers. Then four per cent goes to side artists. The balance is paid 60 per cent to the labels and 40 per cent to the artists.
Maybe the record companies are afraid to push the extension of this Act to MP3 players and computers because they don't want to set another precedent of splitting proceeds on a 60:40 basis with the artists they represent. The standard artist royalty is only 10 to 15 per cent.
Moreover, under the AHRA the artists are paid directly. By targeting a successful individual manufacturer like Apple, Universal is aiming to recoup red balances (the amount it spends on production and marketing) on each artist's account. Most artists never recoup production and marketing costs so when the record labels collect money from their music, they "allocate" royalties to the artists' accounts but actually keep the money.
It is estimated that 235 million computers were sold throughout the world in 2006. If the labels collectively went after the electronics industry, consider the income it could generate from a significant royalty on the combined millions of computers, MP3 players, and MP3 capable cell phones sold each year.
If Universal, just one of four majors who collectively produce and distribute approximately 80 per cent of recorded music, could get $1 per Zune, the labels together may be able to get $4 to $5 or more for each computer and MP3 player, that could add up to an extraordinary amount of money that could compensate for lost sales due to "free music".
Since we have seen Universal's leverage against Apple is weak, it will probably never get any money from the iPod or iPhone. But if it sat down with the other major labels, the electronics business, and members of congress, it could work out a deal to extend the AHRA. And wouldn't getting 60 per cent of something be better than zero per cent of nothing?
Even if they actually had to pay the artists? ®
I use my iPod for Podcasts
So tell me again why I should pay Universal to listen to science podcasts?
Anyway, it's bad public policy to levy the player as a proxy for music listening royalties.
Firstly, it is anti-competitive. Imagine how a new firm (such as Virgin Records once was) would ever appear in the future digital music market.
Secondly, it's far too complex. There are substantial differences in record company market share depending on where you are -- English speakers don't listen to many Japanese-language recordings, some English-language groups are unaccountably "big in Japan", dragging their record company's market share with them.
Thirdly, it prevents the evolution of the market. Flickr and YouTube don't make money by levying product. What makes digital music so special that it will always need the particular form of intermediatary known as a "record company"?
Fourthly, levying the iPod denies artists subsequent revenues. Music preferences change as people age. But the revenue via the hardware purchase will always be frozen to my preferences at the time I purchased the player. Since art follows money, those annoying boy bands so appealing to teenagers will exist forever.
"Steve Jobs says it is Apple's goal to sell 10 million iPhones in 2008, the first full year of sales. This means that the goal is to get one per cent of the £1bn strong mobile phone market. If Universal could negotiate £1 from every unit Apple plans to sell, it'd make $10m."
Chuck in a pear of bananas and you've got yourself a meal!
This isn't 1985, you know.
Exactly, and I don't see why it makes my argument crap.
Quite the opposite, I fully agree with a levy for photographers, authors, graphic designers and all.
Note that, however, you got it completely and fully wrong.
"illegally reproduced" is absurd to use as a reply to my comments, since by definition, the levy needs to be a counterpart to it being LEGAL to reproduce.
Also, where did you ever see that it should be authors or graphic designers or whatever who get to raise a levy? Where did youi see me say that U2, Britney Spears and Korn should each raise a levy? You reply in bad faith I'm afraid.
What I do support (as well as so many theoretical articles if you read economic scientific paper) is a levy for the industry, so that there is a pool of revenue for the music industry to be shared among all artists (and if need be, the ones whom they work with/for).
I thank you for raising the subject, however badly: yes, indeed, such a levy should also be raised for the authors as a whole (the proceeds having then to be split among them by an organization, just like for the AHRA, how to rightly split the money being another issue down the line). At least the day when all the categories you cited will be concerned with widespread adoption of the marginal-cost tarification, which is not currently the case.
In the meantime, because there are no individuals actually BUYING nice pics (and professional wouldn't usually do it illegally), there is nothing to compensate, as there is no switch to a different business model for pictures. If some day there is and it's good for the society to allow photographs to live by paying them while allowing everyone access to everything rather than having to see just one or two pictures because you pay for each one, then fine, it'll be time to have a levy for them too.