Original URL: http://www.theregister.co.uk/2009/01/21/manx_p2p_one_euro_a_year/

Manx P2P for 'one Euro a year'?

Minister floats blanket music tax

By Andrew Orlowski

Posted in Media, 21st January 2009 16:25 GMT

Exclusive The Isle of Man's e-commerce minister says he wants to legalise P2P music file sharing - taking just one Euro a year from broadband subscribers.

Tim Craine told us today that such a scheme would be voluntary. The Manx government is hopeful that blanket P2P schemes would be rolled out in other countries - including the UK.

"If you take a Euro a year from millions, then that's a lot of revenue," Craine told us.

"There is an opt-out for people who don't want a compulsory charge. We would envisage an opt-out - there would be a public reaction against it," he explained. "But you have to compete with free."

"You have to create an entry level that tempts people off illegal downloads or this just isn't going to work. We've got to be aware of how we sell this, and what the public reaction is going to be. We've got to convince the public this is a positive move."

While the initiative may make the Isle's much-admired telecomms infastructure attractive to potential service providers, there are perils. Ripping up copyright law and shredding the exclusive right to copy a sound recording - in defiance of the rights holders - would also drag the Isle into a mire of international lawsuits.

Then there's the gap between blanket income and what the artists and recording rights holders receive today. Currently the UK record business is worth around £1bn a year. But with just a Euro a year from 16.5m connected households, then a compulsory P2P regime would raise just £15.48m. And with Bittorrent legalised, that's about all they can expect: there would be little incentive for punters to buy CDs or shop at Amazon or iTunes.

How would they bridge this gap, we wondered?

Craine hoped it would come from "value added services" - but it isn't clear what these may be.

"It may be that there's a sliding scale on quality, or the breadth of services you need access to," he suggested. "The Euro a year is a suggestion, it's a starting point, and the labels and artists we need to work the model through."

What's music worth?

The plans - devised by music manager Peter Jenner - met with widespread opposition from within the industry when outlined at a recent Music Tank event last year, as we reported.

"At first sight, the Isle of Man project seems a very different proposition from these commercially-negotiated licensing deals like Comes With Music and the music service run by Danish ISP TDC - namely a state-imposed blanket tax on music," a spokesman for recording industry group IFPI told us.

"An experiment in a small territory such as the Isle of Man might be quite interesting from an academic point of view, but applying a compulsory license in larger markets is not going to prove a workable solution.”

Other music business sources poured scorn on the Euro-a-year fee.

"This proposal was made in Cannes, where a bottle of wine in a half-decent restaurant costs €45. So one Euro a year is all that music is worth?" asked Paul Sanders, whose PlayLouder MSP service is designed to bring legal P2P on an opt-in basis.

Sanders told us the belief that "value added services" would make up the missing 98 per cent of revenue was wishful thinking.

"I think Peter Jenner has underestimated the investment required and the complexity of developing compelling value added services, and the scale and difficulty of creating a platform which can support them," he told us.

"It seems naive in the extreme to discount your core asset - the music - and then just hope that services come forward which actually do generate new value and also deal responsibly with the supply chain and accounting back to the creators."

"Beyond that, as a strategy it fundamentally misunderstands the role of Value Added Services in the ISP business model. VAS is not a free for all; no ISP would risk their quality of service and core network on untried and untested applications on the off chance that they might make some money for musicians."

"A more rigorous approach would serve both industries far better as they start to explore commercial opportunities together."

We'll bring you more reaction as we get it. Now tell us yours.

Your reaction

It's just a publicity stunt, says one Manx voter:

Oh god no! Please for the love of god stop giving Manx Politicians a sounding board. Theres a long history over here of them throwing out proposals which have absoloutely no chance of working anywhere in a wider society purely for the purpose of getting themselves noticed off island. And at a time when the UK government is constantly throwing out comments about taking on the tax havens such as the Isle of Man, generating big ripples like this is moronicity of the highest order. €1 P2P on a broadband subscription on the Isle of Man would raise the princely sum of €80,000 a year. Assuming every single man, woman and child on the Island had a broadband connection (so realistically its only 1/3 of that amount based on an average of 2.8 people per house). Craines proposals are also based on the "much admired" manx telecoms system. This would be the system which island wide goes down in a heavy storm or strong wind, and currently costs 2-3 times the average cost of similar broadband packages in the UK.

Here's another unchuffed voter:


As a Manx resident who doesn't download pirated games/music/video, I object to the proposed tax (as an ISP end user, my fees will go up no doubt). If they do pass the bill, then I guess I'll have to change my ways and get my VFM.

My ISP is Manx Telecom, and they already throttle P2P, BitTorrent especially, making it useless for downloading Linux DVD ISOs, OpenOffice.org etc). So FTP or Jigdo/WGET the only way to get them.

Here's an intriguing view from the labels, challenging the fatalism of the idea that we have to "compete with free". Bollocks, says our friend:

You often see this line spouted by futurists and so called visionaries that the music industry has to ‘wake up’ and compete with free. But that’s a pretty ambiguous statement – often made from a cozy chair on the sidelines and with no understanding of what it takes to run a music company. The reality is that everyone I’ve spoken to in the record business does understand that they are competing with free, and has been for some time. Where the industry is trying to compete is in value-added, and by trying to maintain investment in new bands and innovation in digital marketing and distribution as consumption patterns change. But clearly it cannot compete on price – because no amount of online advertising will compensate for the massive costs and risks associated with developing an artist, especially when the licensees launching legit services know they too are competing against free content.

If the Manx experiment ever gets off the ground it might be good for beta testing consumer reaction to a bundled ISP download service, but it’s not a business model - certainly not at 1 euro a year.

Anyone with a fairly rudimentary understanding of how to use the internet can currently opt out of paying for digital music, knowing that – for the time being – absolutely nothing is being done to stop them. While the labels are hopeful that ISPs will launch services that charge subscribers at the point of access, that’s ultimately up to the ISP, who may not see a commercial incentive when most of their customers are happy with the free music already on offer, thank you very much. Not an easy situation to be in, but the business has been doing – all things considered – a pretty good job of it, if the IFPI’s figures of 20 per cent of global revenues coming from digital are anything to go by, even if market leader iTunes is (as I suspect) making a bigger dent in CD purchasing than in p2p use.

What would make the most difference is legislation to force the ISPs to turn off the free music tap, because everyone knows they can – they just won’t, not on a voluntary basis, anyway. Whatever happens, the major labels will be fine – they’ll just cream revenues off the (vast) catalogues they already own from whatever digital models emerge, and make their models less reliant on the future value of recorded copyrights. Right now, they’re still pumping money into new bands. But this is unsustainable long-term. With no credible alternative investors on the horizon (I hear the banks are in a spot of bother) it’ll be alternative acts and developing acts that rely on the investment and services of labels that will suffer worst.

Keep them coming. ®