How to destroy the music business
This will only take a second
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! ®