Incentives and blankets
At MusicTank Paul Sanders explained the difference between a pay-for, voluntary, opt-in P2P service such as his own (PlayLouder MSP) and a free for all low-cost blanket regime, such as Jenner's AMC. The civilised home of the future will have a music service, said Sanders, one that's managed and aware that four people with four tastes all live under the same roof. LimeWire today doesn't give you that. "I can't imagine people opting-out, if the service is good."
It's about getting incentives aligned. If you think PlayLouder is rubbish, you'll be able to take your money elsewhere. Once you're voluntarily paying, you have the right to switch. And because real money is changing hands, that means capital will flow to PlayLouder and its competitors. There were huge problems to be solved in marketing , billing management, but so long as there were happy, paying customers, money would go to solving them.
A lot more was needed, he thought. The entire supply side of the music business needed reform, says Sanders, because the suits don't understand customers. It should think of itself as a factory supplying wholesalers - selling the goods to a wholesale market at the factory gate.
"A good enabler sets a price everyone can afford, then stands back and lets everyone else get on with the selling."
None of this would happen with an AMC:
"You need more than just some kind of waiver that says the BPI won't come after you."
Blanket licenses are a brilliantly seductive answer to music licensing, especially if you're naturally inclined to get the state involved and solve everything for you. The seduction is its simplicity - especially if you have an engineering mindset, where simple is elegant is best. I've been seduced myself. But there are real disadvantages as there are to any solution - and these become apparent after a moment's thought. The drawbacks, as I've illustrated, could be fatal for economic activity around music. It's dogmatic to wish these away.
That isn't to say Jenner won a lot of support for his diagnosis [ see Big labels are f*cked, and DRM is dead - Peter Jenner from 2006] of the music business. It's his prognosis that has zero support. He's unwilling to see how his AMC creates a huge disincentive for anyone to get involved in business around music.
Jenner said talk of incentives "reminded him of the City" and concluded that you can't trust markets. This is a bit juvenile coming from a graduate of the London School of Economics. Jenner is rightfully skeptical of economists fads, and probably right to be wary of Game Theory-based analysis too (the last big fad in economics before the current one, Behavioural Economics).
But I'm sure he understands disincentives - and these were illustrated by Beggars' Simon Wheeler, explaining his dilemma today. The indies have embraced the new technologies, and want to license. There's a problem, however:
"A lot of the business models we've seen aren't business models. They haven't made any money." That's our hypothetical business rumbled then. If he cut the no-hope internet companies some slack: "Our artists would go 'I think I might as well work with a company that might make us some money'."
With the AMC, the music business throws away the last bargaining chip the it has left, setting its exit price as low as it can. The only incentive it creates is for the hypothetical entrepreneur I introduced at the start: talentless, cynical and exploitative. For him, happy days are here again! ®
I'm not really sure what I've just read. The music business is thriving. Perhaps you are only talking about the record (content) business. This, it is true, is going through some drastic changes. It is time for the industry to become customer facing. The consumers have been empowered by the internet. The consumer is king. They do what is best for them. Record labels and copyright holders don't have a God given right to make profit. If the environment changes they have to adapt or become extinct. Natures law. A blanket license would be great. Of course the governments should intervene as the large copyright holders can't sort it out between themselves, as they have now proven. Free markets have their pitfalls too even if we don't like to admit it. Maybe the majors should go cap in hand for a billion dollar bail out and with continue their uninnovative and narrow mind sets. A content tax on ISP & MSP fees, to create a pool of money for recorded music, would sort it once and for all and then we could all get on with our lives.
Time for the labels to think outside of the box. They have to realise that the game has changed for ever. As far back as 1985 business strategy guru Micheal Porter suggested that the information revolution would create new linkages across previously unrelated industries and in the extreme cases cause a redefinition of certain industries. The record industry is one of them. Apple have beaten everyone to it long long ago when labels were squabbling with their customers in the courts. They brought out the iPod and iTunes. iPods rely on illegally downloaded music for sales but just in case they provided iTunes as a smoke screen which also happens to make them a decent profit for virtually nothing. They also started investing heavily into ISP's and developed the new iPod replacement the iPhone. They realised that there was no money left in recorded music copyright owning from a consumer sales orientated perspective and then duly placed themselves at all points on the value chain where there was a profit to be made. Now they are kings. This related diversification strategy has been proven genius. Perhaps if the majors hadn't squandered their capital reserves on court cases against 8 year olds and had instead also invested heavily in the content delivery value chain they would not be in the situation they are in. Now it is too late perhaps, so the only thing for it is to change to a 360 strategy and accept that content development is a necessary evil marketing cost, unless of course a change of heart leads to the acceptance of the ISP tax blanket license.
How to revive the corpse...
1. Make ATM like Automat CD Audio dispensers -- connected to the Net with big pipes, so you could choose your twang from a menu and it would get it from a central archive (lossless if you pay more, lossy for a few cents a song) wrap it up in industry grade packaging, and get it charged on your VIsa (but please insure the better part of the payment DOES get to the Creator/Performer);
2. Have the Internet surveyed by an independent artist supported agency in order to determine what is getting (mostly) downloaded and share royalties collected accordingly;
3. Put out a special 0.1% levy on the profits of every media related operation and add that to the (fair) royalties fund;
4. Police the collection agencies to ensure they are collecting for the artists, not for the industry.
You'll have a flourishing industry in no time...
The Joly Roger -- you know why.
5 REAL reasons for FAILURE
1. Hans wants music, but he doesn't want to pay for it
2. Hans wants music, but he doesn't want to pay for it
3. Hans wants music, but he doesn't want to pay for it
4. Hans wants music, but he doesn't want to pay for it
5. Hans wants music, but he doesn't want to pay for it
"destined to fail" eh, Hans?