Update On Choruss: Universities Not Talking, Mysterious 10,000 Students Still Nowhere To Be Found

from the still-waiting... dept

We've been pretty big critics of the music tax concept, that was being pushed by Jim Griffin's Choruss along with Warner Music (who had hired Griffin to create this program). Of course, we've only been able to criticize what bits and pieces have leaked out from those who have seen Griffin's presentations. That's because, despite a busy conference schedule, Griffin never seems to publicly describe what Choruss really is. So, every time we hear some new info about Choruss, and explain why it's bad, we get angry emails from Griffin calling me all sorts of insulting names, and insisting that I've mischaracterized Choruss. So, we ask for more details, and we don't get them. Instead, we're given amorphous descriptions about how it's "an experiment." But what is the experiment? Well, it will be lots of things. As soon as we narrow in on an example, however, and explain why it's bad, we're attacked because the plan might not include that particular example. But we haven't yet heard an example that makes sense.

Griffin had agreed (as part of an angry email) to answer questions from the Techdirt community, and we obliged by sending him a long list of questions. Griffin had some personal issues to deal with over the summer, which was totally understandable, but we still haven't heard any answers. I'm beginning to wonder if we ever will.

But the biggest question I had was if he could explain who the "tens of thousands" of students were who Griffin told a conference in June would be using Choruss this fall semester. It seemed odd to find out that so many students had signed up for something when we still weren't being told what it was. As the fall semester started, we asked to hear from students who were using Choruss, and got silence -- which seemed odd. Apparently, it's because those tens of thousands of students hadn't signed up for the fall.

However, as a bunch of you have sent in, now the claim is that six college campuses will be testing Choruss this spring semester, but Griffin won't say who they are and the campuses won't admit to participating. They claim that they're afraid of backlash from folks like us -- but that makes me wonder. If the concept is so good, why not stand up and defend yourself for being a part of the program? If you can't defend the reasons for testing the program, it makes me wonder why you're doing it in the first place.

The article at the Chronicle of Higher Education provides a few new details that don't sound particularly appealing. Rather than (as some had suggested earlier, but since Griffin never made it clear, we just don't know if this was ever true) a system that would let students share files freely under some sort of blanket license, it sounds like "yet another limited music service." It will allow unlimited downloads, but you have to use the Choruss service (again, perhaps the article is wrong, but that's what it says). Similar services have been tried on various campuses and failed, so we're curious to hear what's so special about Choruss that will be different.

It still seems like Choruss is trying to solve a problem that doesn't exist. We're seeing more and more smart musicians put in place business models that work. They work in a way that lets fans choose to send money to the artists they want to support directly, without a big middleman. Choruss appears (from all we've heard) to be an attempt to set up a big middleman that will take big chunks of money and then use some magical process to figure out how to dole it out. But why do we need that overhead? The market is figuring stuff out. It doesn't need another middleman.

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Debunking The Idea Of A Music Tax For The Creation Of New Music

from the just-slightly-better,-but-not-much dept

SteelWolf writes in to let us know about a blog post rehashing the idea of setting up a "music tax" to support musicians through a flat fee charged to everyone's ISP account:

Music is important. It is ubiquitous today with good reason: we just can't get enough of it, and its life-enhancing effect is ever-changing and ongoing.

If it had been possible for the past ten years to download nails, most of us would long ago have acquired all the nails we could possibly need, nail factories would have closed down, their workers and bosses found new jobs for themselves, and it would be a dead issue. But music-making is such an important act that millions do it even though they receive nothing for it. They always have done, even back in the heyday of the recorded music industry, when students bankrupted themselves to get it (I know I did) and bands scrambled to play gigs for next to nothing (guilty, again). So in the scheme of things music is at least as worthy of state subsidy than, say, the automobile industry. Music isn't any less precious than it used to be, it's just that its commodity status has eroded: unlike car workers the customary method of getting (some) artists paid is failing.

I am in favour of a flat fee on each internet connection, collected by ISPs, to encourage musicians to keep producing new work.

Now, I've gone into great detail on why a music tax is a terrible idea in the past -- but that was addressing ideas like Jim Griffin's Choruss plan (which, by the way, we're still waiting to find out who the tens of thousands of students who are supposedly already using it are, but we'll leave that aside for now). This idea, from Chris Ovenden, is slightly different. It is not a "download license" or a "download tax" as it's really a fund to pay for the creation of new music:

I would use such a fund to commission new works directly from up-and-coming and established artists. I certainly wouldn't try to monitor all downloads or anything hyper-impossible like that. If the problem of trying to monetize or prevent private copying goes away, so does the threat of monitoring all communications which is being suggested as a "solution" to the "problem" of filesharing... Keep the amount each person has to pay low, and spread the collected funds widely and evenly among as many working artists as is feasible. The more successful acts will most likely have other income streams and won't need a massive top-up; smaller artists will be grateful to have their next recording project funded. And everyone will benefit from an influx of lots of new work (released under CC license or similar).

This is, obviously a bit different than the usual suggestions for a music tax, but that doesn't make it much better. First as is noted in the comments on his post, if you open the door (even slightly) for this to happen in music, then you have to do it in pretty much every other content industry as well: movies will want their own tax, as will software, photography, newspapers, quilt making, painting, blogging and so forth. Where do you draw the line?

Second, this will still leave people who file share open to lawsuits. While he claims that the "threat" goes away, there's no way that the record labels say that they'll allow all past infringement in hopes of getting a few dimes sent its way from some bureaucracy.

Which, of course, brings up the third problem: you still have a bureaucracy, and how does it determine who to distribute the funds to? How is it possibly fair for someone -- rather than the fans themselves -- to determine who gets the money.

And that brings up the biggest point of all: this isn't needed. At all. There are plenty of ways for artists to set up a smart business model that allows fans to support them directly and to fund their future works. Why make it more inefficient by adding unnecessary and market-distorting middlemen? The only situation where this makes some sense is if there weren't ways for artists to go direct to fans with their own models. But there are -- and it's getting easier every day. So, instead of a "tax" give fans a "reason to buy" and it becomes a better situation for everyone involved.

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Bad Idea Redux: Revisiting The Music Tax

from the not-this-again dept

I was going to ignore this, but people keep submitting it. A student blogger for ZDnet has decided that he's solved the RIAA's problems: just tax every internet connection at $1 per month. This is, of course, unworkable and unwise for a variety of reasons. First, the recording industry would laugh (and laugh and laugh) at the idea that $1 from every internet connection would come close to covering what it (falsely) considers to be "losses" from file sharing. Remember, this is the same recording industry that's continually trying to raise the price per song downloaded to over $1. But, more importantly, there are so many problems with a music tax idea, that it's taken up multiple posts here.

However, now that the fall semester is starting, we're curious about the "tens of thousands" of students that supposedly had signed up for Jim Griffin's Choruss -- which is an effort to put just such a plan into practice, though on a smaller scale, just on university campuses -- and, as Griffin constantly reminds everyone -- with a variety of experimental business models rather than a single one (despite them all seeming to reflect this sort of "let's create a big pool of money" concept that makes little sense to us). Last we'd heard from Griffin, back in June, he promised to answer all of the questions folks here had asked him about Choruss. I just emailed with him before posting this, and due to some unforeseen -- but perfectly understandable -- circumstances, he has not yet had a chance to go through the questions, but promises to do so soon. In the meantime, it would be great to hear from any students arriving on campus this fall, and finding out they're a Choruss campus. To date, I've heard from students at two schools, both (happily) telling me their campuses had turned down Choruss, but I haven't heard from anyone who's actually seen the program. But, surely, with tens of thousands of students signed up, at least someone here knows one of them. It would be great to find out from their perspective what's happening.

In the meantime, though, I take solace in the fact that nearly every comment on the ZDnet post points out why the idea is a bad one. This is an improvement. A few years ago when people talked up the idea of a music tax, many people seemed to like it -- but these days, it appears that more and more people are recognizing what a bad and unnecessary idea it is.

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Jim Griffin Explains Choruss; We're Still Left Wondering Why It's Needed

from the still-don't-see-it dept

Last week, we had a bit of a back and forth with Jim Griffin, who's trying to build Choruss, a recording industry-backed service to have certain gatekeepers (universities initially, then ISPs, then...?) act as gatekeepers, who would effectively pay a per user fee, which they'd likely pass on to users, to allow those users to file share (sorta -- as the record labels would still likely try to shut down file sharing networks and still push for "three strikes" laws). I got to see Griffin present his "vision" for Choruss at the Leadership Music Digital Summit and spent some time chatting with him after (no punches were thrown -- it was quite friendly). That said, having heard from him directly, I'll say I'm still quite skeptical and somewhat worried about where Choruss is heading, and many others I spoke to in attendance felt the same way.

First, Griffin's point is basically this: for the past 150 years or so, any place that "used music to draw a crowd" eventually ended up paying some kind of license for it. It started with restaurants and then moved on to concert halls and radio and movies and television. So, to Griffin, setting up a similar licensing scheme (which he continues to say is voluntary, not compulsory) is simply the next obvious step. He paints himself as a technology supporter -- and I have no doubt that's true. He also points out that "piracy" isn't necessarily the biggest "problem," out there, though he still says it is a problem. He notes that there's a lot more competition for everyone's time and entertainment dollar spend. From his vantage point, the real problem is that all of the different rights holders are sitting around yelling at each other (it's true, it happened on an earlier panel) rather than agreeing to take a dollar and split that dollar. So, while they all fight, that dollar goes somewhere else. So, based on that, the solution is simple: set up a process to get the dollar, and then let everyone fight over that dollar behind the curtain, rather than out front in dealing with consumers directly. I've heard a very similar vision from folks like Fred von Lohmann over at EFF.

While I've been tough on Griffin, I will say that I believe quite strongly that he earnestly believes this is the best solution to the "problems" facing the recording industry. I don't think he's trying to create a pure money grab for the record labels or create what becomes a "music tax." The problem is that that's exactly what such a program is likely to become.

To defend against those claims, Griffin repeatedly says what he said earlier: this is just an experiment! He says that later this year a bunch of universities will launch with Choruss (in fact, he claims that more universities wanted to sign up than they could handle) -- but each may be using a different model. So, one university may require every student to participate. One may be opt-in. One may be opt-out. One may set up their own centralized file sharing server. Even how they measure what files are shared will be a variety of experiments: one may use technology tools. One may simply use self-generated "diaries" (like the old Nielsen/Arbitron systems). Payments may be based on downloads on one system and "plays" on another. The pricing may be different at different universities. Basically, it's just a series of tests, and supposedly we'll all "learn" from it and move on from there. In fact, he's hoping that since these tests will be done at research universities, that professors there will help study the results. So that's why Griffin has been upset about some of the coverage (including ours) that didn't highlight the fact that these are tests that could go in a variety of different directions.

He didn't address any of the questions we raised in that last post, in part because he doesn't have the answers to many of them yet (it's part of what he hopes shakes out from the experiments). However, there are still plenty of reasons to be quite wary of this plan. For all of Griffin's belief that this is the an experiment worth trying, I think it's built on faulty premises and will quickly go down a dangerous road. It's just too tempting to take this concept in exactly the wrong direction.

The faulty premise: that licensing is a way to "handle" the issue (even if he still doesn't want to call this a license). Licenses have always been a way to duct-tape on a temporary solution to a new technology. Adding yet another such license is simply layering on yet another layer when it's simply not needed. Griffin complains that "we cannot tolerate a society where paying for art, culture and knowledge is voluntary," but that's missing the point. It assumes, incorrectly, that paying for the content directly is the only way to make money off of that content. As we've been showing over and over again (and many others at this very event are demonstrating) that's simply not true. There are lots of ways to make money, and many of those are enhanced by having the music be available for free.

Griffin addressed that briefly, suggesting that those other models still work on top of Choruss, whereby Choruss acts as sort of a "basement floor" on top of which those other models can be built. That sounds great, but it sounds to me like a social welfare program, separate from what the market would allow. And once you build such a system, as we've seen over and over again, the folks who control it keep asking for more and more. So even if these are experiments and who knows where the final model will go, given who's backing it, it's not hard to guess: they're going to demand to make it about as close to compulsory as possible. ISPs are going to offer it and will simply add to everyone's bill. The program doesn't work at all if they don't do that -- and that's simply going to piss off a lot of people, just at a time when musicians actually have been showing they can win the trust (and money) from true fans.

Griffin suggests that ISPs won't have to make it mandatory, but will be able to "upsell" people to tiers that include the Choruss tax covenant not to sue license whatever it's called. He uses, as an example, just how difficult AT&T (he didn't name them, but it's clear who he meant) has made it to sign up for naked DSL. He interprets this to mean that the ISPs are good at upselling users. He ignores the fact that AT&T worked hard to hide the option and when that was revealed a rather angry outcry went up among AT&T customers who felt cheated.

When challenged on all this by an audience member -- Dave Allen, member of the UK band Gang of Four, who has now gone on to a second career helping musicians build real business models around their brands -- Griffin used "the cable model" as a way that this all makes sense: i.e., even if you don't like sports, you get ESPN in your basic cable package. Allen smartly shot back the fact that customers hate that and are increasingly looking at alternatives like Hulu and Boxee, that let them get away from such deals. All Griffin could do was insist that such bundling would "come back."

But Allen really got to exactly the heart of the problem with Choruss: it's a plan based on what's best for the existing stakeholders, not the customers. There are plenty of business models out there (and I've been hearing about a bunch more from musicians as I chat to them at this event) that work by creating a true win-win relationship between the musicians and the fans. They're models under which everyone benefits. Choruss doesn't work that way. It seeks to perpetuate the old model, where you have to "get" money out of others in order to "allow" them to do something. It's not about creating win-win models where everyone's happy to take part, making a willing transaction where they feel better off. The examples Griffin gives -- of older licensing models, ISP upsells and cable TV bundling -- are exactly the sorts of things that have always pissed off fans, and it seems likely that Choruss will do the same, no matter how much Griffin hopes to have it avoid that fate.

Instead, there are tons of models that don't involve anyone feeling angry or ripped off -- and those embracing them are finding them to be quite lucrative (in many cases more lucrative than older offerings). Griffin says that Choruss won't interfere with those other models, but that's unlikely (at best). If people feel they're getting ripped off by having to pay a university fee or ISP-fee (tax) for music, they're going to be less willing to participate in these sorts of new business models, already feeling pissed off and that they've "given" already... often under duress. That's not the model on which to build a successful industry.

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Dear Jim Griffin: Let's Have An Open Discussion About Choruss

from the we're-waiting... dept

Yesterday, we wrote a highly critical post concerning the details around Choruss, the recording industry's latest plan to get universities or ISPs to hand over a chunk of money in exchange for "covenants not to sue." On a private email list (which has been forwarded to me by a few members of that list), Mr. Griffin responded by claiming that my "report is factually incorrect in every respect."

I certainly hope that's true!

The points I've raised are that the industry will continue suing file sharing networks, that they'll still pursue three-strikes policies, and that Choruss will be expensive, diverting a chunk of money away from other legitimate business models, which many musicians have been establishing successfully, by adding yet another middleman. Is he saying all of these assertions are false?

Actually, Griffin doesn't address or refute any of these points at all. With respect to the last one, he actually confirms it, by claiming that Choruss will be costly to run.

The only "factual" point he disputes is a rather minor one: concerning whether the program would also cover publishers and songwriters rather than just the labels. He insists that it will, noting that Warner Music owns one of the largest publishers. That's true, but hardly eases the worries. It just suggests, again, that this is a plan for Warner and its subsidiaries, rather than for building a better system for all stakeholders. And he doesn't explain how the system can cover the necessary rights at the price points being discussed. In fact, by noting how costly the program is to run, and how it will lose money at first, it certainly sounds like he's saying "this program will start out cheap, but then we'll jack up the fees."

He claims that Choruss "cannot credibly be claimed to be a money grab -- the costs will exceed the fees," but that's highly misleading on several accounts. First, as noted, it confirms just how expensive the program will be. Second, if it's a pure money loser, than why would anyone be involved with it at all? Obviously the idea, and the whole reason why Warner Music is backing it, is that it expects this to be a money maker, eventually. Claiming that it's costly simply confirms my original point, that inserting yet another costly middleman is the last thing that we need in the process. And this just suggests that any early pricing is, once again... bait and switch. The eventual prices will have to be increased once people are locked in.

That seems to confirm my initial complaints, rather than show how they're "factually incorrect."

Mr. Griffin, (on a private email list), again tries to refute the claim that they haven't included the stakeholders in the process, by noting:

"the calendar is a clear refutation: The coming week has Choruss at SXSW, a music conference in Nashville and the music educator's conference in Boston. We've done appearances and podcasts with Educause, dozens of public meetings at colleges and a keynote at Digital Music Forum."

Yes, after coming up with the plan in back rooms, without input from the actual stakeholders, Griffin has started going out and presenting the plan to others. But there's been no open discussion with those of us worried about the inevitable consequences of his plan. There's been no explanation of why this is actually needed. There's been no attempt to actually respond to the numerous questions that we've raised about the plan and no attempt to bring the actual users into the discussion:

• Why do we even need such a plan when plenty of musicians are showing that they can craft business models on the open market that work?
• How does adding yet another middleman make the music market any more efficient?
• Will the recording industry promise to stop trying to shut down file sharing systems if this program gets adopted?
• Will the recording industry promise to stop pushing for 3 strikes if this program gets adopted?
• How will the program prevent the gaming opportunities, where artists set up scripts to constantly reload/download their songs?
• Why should music be separated out and subsidized while other industries have to come up with their own business models?
• Why should those who don't listen to much music and aren't interested in giving their money to the recording industry be required to participate if their university or ISP decides to make them?

Finally, Mr. Griffin takes a personal swipe at me, saying that no "responsible professional" would write what I've been writing. I've the highest respect for Mr. Griffin, who I do believe is very capable and very smart -- and most certainly has the best of intentions with Choruss. But it's a bad plan and he seems unwilling to address the many, many questions raised about it, other than to brush anyone who disagrees with him aside, and focus on talking to friendlier audiences. If he wants to brush me off as not a "responsible professional," that's fine. I'm willing to let anyone judge me on my work, not on what Griffin says about me. But the very least he could do is actually address the points that I've raised.

To date, his form of "discussion" has been to have Warner Music PR send me a statement saying that it's "premature" to issue any criticism of his plan. That's not discussion and that's not addressing the many, many questions raised by his plan.

But, there's some good news. That "music conference in Nashville" where he'll be presenting about Choruss next week is the Leadership Music Digital Summit... which I happen to be keynoting. So, I'd love to sit down with Griffin and see if he'll actually answer some of these questions, rather than continue brushing us off as being "factually incorrect in every respect," without actually addressing the fundamental questions raised.

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Choruss' Music Tax Plan: Bait-And-Switch

from the ah-the-fine-print dept

Back in December, when we revealed how Warner Music, through consultant Jim Griffin and his new organization "Choruss," were quietly pushing a music tax on universities, Warner and Griffin snapped back angrily, telling us it wasn't fair to criticize the plan, because it was still being "discussed." Yet, as we then asked: where is that discussion and why isn't it taking place with the actual stakeholders? To date, the answer has been a near deafening silence. Despite having reached out to both Griffin and Warner Music directly, neither has shown any interest to actually engage in any form of conversation.

Now we're beginning to learn why.

While we discussed, in detail, why any such music tax is problematic, the details coming out make it clear that this is much worse than originally imagined. In fact, it's so bad that it can be described accurately as a bait-and-switch program designed to make people (1) pay lots of money (2) believing they're now free to file share and then find out that (3) file sharing systems will still be sued out of existence and (4) the users themselves, despite paying, will still be liable for massive lawsuits. It's basically a plan to give the record labels tons of money, handed over by universities (so users have no chance to opt-out) without actually changing anything.

After months of silence on what he was working on behind closed doors and in backrooms, Griffin recently gave a prepared speech supposedly revealing some "details" on the plan -- but as IP attorney Bennett Lincoff points out, what Griffin and Choruss are proposing is to pull the wool over universities and the public's eyes. The plan, as we originally pointed out, isn't a license: it's merely a covenant not to sue -- and that leads to all sorts of problems.

First, considering that the RIAA has been cutting back on lawsuits, that's not particularly meaningful. It'll still pushing for 3 strikes policies that will cut users off from the internet, even if they've paid up through Choruss. Furthermore, as was made clear in the speech, the RIAA won't stop trying to shut down file sharing systems. So, people who think this is a good idea because it will let them use The Pirate Bay or Limewire may discover after getting locked into this program that the lawsuits continue and those services keep getting shut down. Next, since it's just a covenant for the labels not to sue, rather than a license, it doesn't cover all of the other rightsholders, such as songwriters and the music publishers -- meaning that those who file share will still be wide open to lawsuits from those parties.

This is quite a scheme that the record labels and Griffin may pull off:

• Convince universities to buy into the program with no input from students. Universities will buy into it because they think they're "helping" deal with the "problem" of file sharing... and to avoid Congress forcing them into such agreements
• Universities pass the cost on to students (of course), so students are forced to pay for this
• Record labels get a big chunk of money for no good reason
• New expensive bureaucracy (Choruss) gets set up to siphon more middleman cash away from musicians
• Record labels don't do anything different, since they already have started moving away from suing individuals (sorta)
• The public thinks that file sharing is now legal
• Record labels continue to sue and shut down favorite file sharing networks, leaving only crappy, limited and expensive "approved" systems
• Individuals who paid up start getting sued by other rightsholders not covered by this agreement and not getting any money from it

And most of the press will eat it up as a revolutionary agreement whereby the record labels "legalize" file sharing.

Now can you understand why Griffin and Warner Music aren't open to any real conversation and will slam anyone who actually offers to take part in a conversation? A real conversation might bring out these issues, and that's the last thing the record labels want. They want everyone to believe they're working to make file sharing legal, when all they're doing is constructing a massive wealth transfer from people to the labels providing almost no benefit to consumers at all.

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Another Reason For Record Labels' Interest In A Music Tax: To Screw Apple

from the don't-think-it's-not-in-their-minds... dept

Despite early resistance, in the past few years, the record labels have warmed to the idea of a "music tax" put on ISPs. There are numerous reasons why this is a terrible idea, but you can bet there's one big reason why the record labels love it that they won't talk about: it would (they think, incorrectly) harm Apple. The recording industry has been amazingly jealous of Apple's success over the past few years -- even though its own demands for DRM caused much of the problem. It locked Apple in as the dominant provider and gave it tremendous market leverage -- such that no big record label risks rocking the boat and getting thrown out of iTunes.

And, despite the recent agreement to dump DRM and allow some form of variable pricing, the NY Times notes that the big record labels still have a strong hatred for Apple. While the article doesn't discuss it at all, you can bet that a big part of the desire to come up with a music tax/collective license/whatever they want to call it these days to make it sound palatable is that it will harm the iTunes lock on the market. That might be true, but the record labels may find it's more difficult to get rid of Apple than they believe. Apple's real profits are in the iPod, not the music -- so if they can suddenly offer music for "free" via iTunes as well, that would likely help sell more iPods, which would actually increase the use of iTunes as the dominant interface for interacting with the iPod.

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More Details On Isle of Man's Music Tax Idea: One Euro Per Year

from the better-and-better dept

We wrote earlier about comments made by a politician from the small island of the Isle of Man, suggesting that the government there implement a music tax on its broadband subscribers. The Register's done some more digging, and spoken to the island's e-commerce minister, who suggests the implementation of a one euro per year music tax (thanks to TD reader Ben Robinson for pointing it out in the comments), with an opt-out available to those who don't want to pay. While that sounds great for consumers, it's almost a laughable amount. As another commenter on our earlier post pointed out, one euro per year probably won't even cover the cost of the bureaucracy to collect and redistribute the tax. The minister told El Reg, "If you take a Euro a year from millions, then that's a lot of revenue." Perhaps, but it pales in comparison to the billions the music industry currently earns. For instance, the UK has some 16.5 million broadband subscriptions -- charging each one of them a pound or euro per year would pale in comparison to the one billion pounds the record industry in that country currently generates. Also, while it's nice that the minister recognizes that people shouldn't be forced to pay the tax if they don't want to, why must it be an opt-out system, rather than an opt-in one?

Let's take that a step further: why should the government get involved at all? If the record labels are interested in developing some sort of blanket licensing system, let them do it, and figure out how to collect and redistribute the fees. Of course, they've shown little interest in voluntary systems, preferring to go directly to ISPs or to universities. Currently governments, ISPs and universities don't force people to buy CDs; they shouldn't start forcing them to pay for music downloads either.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Why Would A Tax Haven Adopt A Music Tax?

from the ironic,-don't-you-think dept

The latest record label revenue-generation scheme that's come into vogue is the music tax -- charging every ISP subscriber a flat fee that would give them a blanket license to download music from any source, even P2P networks. In theory, it sounds great, but it's a flawed idea for many reasons, not least of which because it necessitates a massive bureaucracy to levy and collect the tax (which the music industry likes to refer to as a "voluntary license"), then determine how to distribute it (or some tiny portion of it) to artists and other relevant parties. So it was a little surprising to see a government official from the Isle of Man voice his backing for such a tax on his island. The announcement was particularly ironic, given that that Isle of Man is a tax haven.

However, it seems that the government official was just offering up suggestions for the music business; Techdirt's own Mike Masnick was in the session at the Midem conference where the comments were made and says they appeared to be meant as suggestions from the official on how to best show off the Isle of Man's broadband infrastructure. Even with that in mind, it's not clear how levying a mandatory tax on every broadband subscriber shows off the network at all, as opposed to the island's tax collection prowess. What's interesting is that even the BPI -- the UK equivalent of the RIAA -- doesn't like the idea, preferring instead to cut deals directly with ISPs, hoping to maximize profits rather than rely on government-established rates. While ISPs selling out their customers to the music industry is pretty deplorable, at least in that scenario, customers have the opportunity to vote with their wallets and go to another provider. But when the government levies a tax on every broadband subscriber, solely to prop up the music industry's ailing business model, that opportunity doesn't exist.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Why A Music Tax Is A Bad Idea

from the let's-go-through-the-details dept

We already had a post discussing how we find it troubling that Warner Music has not been more open in discussing its proposed "voluntary license" plan. It was a neat little rhetorical trick by Warner to claim that we weren't being fair in slamming the proposal so early, when the company itself had kept the plans secret all along. Would they have preferred until they rolled out the "completed" plan for us to point out its problems?

Either way, while we discussed why it was a bad plan in our original post, some are not convinced it's a bad plan. Matt Asay, over at News.com gives his qualified support for the plan, while Nate Anderson at Ars Technica pretty much takes Warner's party line that we're being unfair in criticizing this idea before it's had a chance to air out. Of course, Anderson conveniently skips the fact that Warner wasn't letting the plan air out. These discussions were being held without important stakeholders, where key problems with the plan would not get discussed. Besides, given how many times the major record labels have come up with new great plans that actually made life worse for consumers, I would think the industry has to earn the right to be given the benefit of the doubt. We've been fooled too many times.

Anderson also mischaracterizes our position greatly -- first claiming that we're only kicking the plan because of our "knee-jerk churlishness" and need "to jackboot the music industry in the proverbial groin every time it comes up with a new idea." That makes for nice prose, but pretty much ignores any substance behind our position. In fact, Anderson seems to claim the only reason we dislike the plan is because we called it a "tax" insisting that was the "sum total" of our analysis. This, of course, is untrue -- and Anderson and his co-authors at Ars Technica are well aware of the more than a decade we've put into analyzing music industry business models, including cheering on good models (and even cheering on the big record labels when they do something right). Why Anderson and Ars Technica chose to misrepresent all of that (while throwing in some unwarranted insults), I do not know, but I'll take the blame, and suggest that perhaps we did not explain our position clearly.

So, I'll try again.

Why A "Voluntary License" Is A Bad Idea

Yes, the industry gets upset when anyone calls this a "tax" so I'll use the "voluntary license" term, even though tax is much more accurate. A true voluntary license wouldn't require everyone having a certain provider to opt-in, but that's exactly what this plan would require. In fact, as the slides indicate, eventually it would basically require all ISPs to "opt-in" forcing all of their members to "opt-in." Suddenly, everyone has to pay. That's not a voluntary license. It's a tax.

However, even if we step back and pretend it's really a voluntary license, and even if we grant the premise that all record labels sign up for this plan, you've still created a mess that doesn't help anyone. First, you have to set up a huge bureaucracy to manage this process -- and it is quite a process. You need someone to monitor everything that's happening online to determine whose music is actually being shared and played. You have to somehow create methods to accurately determine -- from the biggest to the smallest -- who actually deserves payment. And, if you don't think that process won't be gamed, you apparently just got on the internet in the last year. As soon as there's the ability to get paid out just because more people are sharing your music, just watch the games that folks take to make sure they get a larger cut. The system will punish honest artists, and reward the scammers.

Next, you have to set up another bureaucracy in charge of managing all of this money, and figuring out how to dole it out (while keeping a cut for itself). Even if this operation is, as planned, a "non-profit" -- don't think it will be cheap. You're talking about a huge operation that is tasked with determining how much money every musician in the world is owed, and then trying to get that money to them. Given the recording industry's history with not being able to "find" some big name musicians, just take a guess how well this will work here? Instead, there's a better than even chance that eventually, the big record labels will note that it's "easier" and "more efficient" for this "third party" bureaucracy to just send a big check to the labels each month, and let them dole out the money to their artists (after taking a cut, of course).

And, of course, there's the whole question of what the rules will be for determining how much each artist will make. Over the summer, we had a look at the sausage making process for compulsory licensing, and it's not pretty. Basically, you get backroom deals combined with senile "copyright board" judges who don't understand the marketplace or technology making final determinations on exactly how much every action is worth. We've already got too many different compulsory licenses to count. All this will really be doing is adding yet another one to the list. It doesn't simplify things -- it complicates them even more. The recording industry, of course, loves that complication. It lets them come in and "handle" things, which most of the time means twisting the rules to its advantage.

Yes, the EFF and Public Knowledge favors some form of "voluntary license," and Warner Music and Griffin are quick to play that up, as if their plan has won some kind of public approval. But the reality is quite different. Someone from Public Knowledge was quick to show up in our comments (where Warner Music still fears to tread, for some reason) to point out that they have not endorsed this plan, but are open to discussions on it. The EFF has also been cautious, noting in the past that it does not support a license that is called voluntary, but is really compulsory. In the end, though, I simply disagree with the EFF on the benefits of any sort of licensing plan. Fred von Lohmann once explained his support to me as such: "A voluntary licensing plan basically gets the issue off of consumers, and lets everyone else fight it out in court."

That sounds nice, but ignores the unintended consequences. The big record labels have shown over and over again that they can twist the process to their advantage. So while it may be true that consumers won't be getting sued any more, it doesn't mean they won't get screwed. The plans will weigh heavily to the advantage of the established recording industry with its leverage in the space. It's a really, really sad situation that we should feel like rewarding the industry for its decade of actively fighting against progress by saying "well, phew, as long as you agree to stop suing, here's as huge chunk of money."

Have you noticed a pattern here? What you're doing is setting up a big, centrally planned and operated bureau of music, that officially determines the business model of the recording industry, figures out who gets paid, collects the money and pays some money out. The same record industry that has fought so hard against any innovation remains in charge and will have tremendous sway in setting the "rules." The plan leaves no room for creativity. It leaves no room for innovation. It's basically picking the only business model and encoding it in stone.

Oh, and did we mention it's only for music? Next we'll have to create another huge bureaucracy and "license" for movies. And for television. And, what about non-television, non-movie video content? Surely the Star Wars kid deserves his cut? And, newspapers? Can't forget the newspapers. After all, they need the money, so we might as well add a license for news. And, if that's going to happen, then certainly us bloggers should get our cut as well. Everyone, line right up!

This is a bad plan that will create a nightmare bureaucracy while making people pay a lot more, without doing much to actually reward musicians.

And, worst of all, it's totally unnecessary.

So What's The Alternative?

But then, as people will be quick to note: what's the alternative? If we don't do this, then how will musicians get paid? This, of course, is a logic fallacy that assumes incorrectly that musicians only make money from the direct sale of music. Musicians that are already embracing business models based on a solid understanding of information economics are discovering they can do quite well (almost always better than under the old model). And, yes, this applies to both big and small musicians.

The basics are pretty straightforward, and if you're new here, you should follow the links to understand them more thoroughly. But musicians get to use their already-created content, which are effectively infinite due to its digital nature, to grow the market for all of the scarcities that surround them. This can include physical goods, but the bigger money is in non-tangible scarce goods that simply can't be copied: access to the musicians, seats at a concert, the ability to create new music and many other opportunities that have the side benefit of more closely tying fans to the musician. And this doesn't need to be complicated. You could set the whole thing up as a subscription fan club with different levels providing different scarce benefits -- and everyone wins.

The simple fact is that these business models are already working for many, many musicians. Hardly a day goes by where someone doesn't show us yet another example of musicians creatively coming up with new and unique business models that embrace these economic principles, and which allow them to make even more money than they did in the past. And, yes, there's still room for the record labels if they want to act as true partners, helping musicians implement these business models and enabling musicians to better connect with their true fans.

Of course, that involves some work. It involves a real change in how business is done. It may not be as easy as a plan that lets the record labels sit back and collect large sums of money with promises to distribute it, but it can be a lot more profitable for everyone in the long run. It's more efficient. It allows true competition to take place in the marketplace, rather than letting the market set the winning model. It lets people share music without worry of a lawsuit (in fact, if the business model is implemented correctly, it gets musicians to encourage more file sharing as it helps build up a larger audience for those scarce goods). Without having to fund those huge bureaucracies, there's also much more money that can go to the actual artists as well. Plus, fans feel better knowing that their money actually is supporting the artists, rather than a central bureaucracy.

But the important point is that this plan is working today for many different players in the music world, including some smarter labels and (most importantly) the fans. The only ones it's not working for are the big record labels who have refused to recognize the opportunities -- and the bands that rely on those labels for guidance. We shouldn't be setting up a system to reward those folks, just as everyone else is figuring out how to succeed.

Let The Market Work

Jim Griffin and Warner Music have been working behind closed doors, trying to craft the perfect business model that preserves their business. During that same period, a large number of folks have been out here, actually involved in an open conversation about business models that are working today. We've seen artist after artist learn (on purpose or accidentally) how to embrace these concepts and how to succeed beyond anything they ever saw in the past.

Let's not kill that off with a plan worked out in the backrooms that will almost definitely have significant unintended consequences. Let's let the market work its magic transparently.

Griffin's complaint about our post (delivered via Warner Music) was that it was unfair of us to criticize a plan so early in the planning stages. We made no such complaint here when we first laid out these discussions so many years ago. We encouraged people to criticize and discuss the plans -- and for people to test them out. That resulted in more discussions and more experiments and adjustments and we're seeing the end result of that now -- with many, many success stories. Griffin's plan allows for no such experimentation. It's an all or nothing plan, and if you accept it as currently laid out, you're going all in when half the rules of the game are being established without the players' knowledge.

That's a bad, bad bet.

If Jim Griffin wants us to hold back on criticizing his plan, why can't he and Warner hold back on implementing their plan that effectively blocks out the market forces that are already succeeding?

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Warner Music: Where's The Conversation?

from the let's-talk dept

Last week, we broke the story about a presentation being given to various universities about a music "tax" plan. The plan presented wasn't any different from what Jim Griffin (who was hired by Warner to pitch exactly this plan earlier this year) has talked about in the past -- but Warner Music Group was quick to contact us and distance itself from the presentation -- despite the title of the presentation announcing that this was Warner Music Group's plan, and two full slides of "comments from WMG," with one of those slides suggesting people contact Griffin at WMG for more info.

This week, a bunch of news organizations reported on the story -- with some, such as the the Chronicle of Higher Education, just repeating what was already known, while a few added to the story. Wired discovered that the planned name of the organization that would handle the "distribution" of funds would be Choruss. It also found out that EMI and Sony BMG have already signed onto the plan, along with Warner, which initiated it. Universal Music is the major label that's still holding out. Apparently independent labels are able to join up, as well, but the terms aren't at all clear yet.

Portfolio stepped up with its own discussion of the topic, highlighting a key point that I made to the Warner Music rep who called me: this conversation should be public. My conversation with Warner Music was off-the-record at their request, but I tried to defend posting the presentation by noting that this information should be discussed among all the stakeholders, rather than settled in a backroom deal like so many efforts by the recording industry. Otherwise, the parties that are left out of the discussion (generally, consumers) are going to get screwed.

In Jim Griffin's response to my post, he complained that: "At this early stage, many ideas may be discussed and discarded, but efforts to prematurely label or criticize the process only hinder achievement of constructive solutions." I would say back, that, at this early stage, if ideas are being discussed and discarded, why not bring everyone here into the conversation, so that we don't feel like the fix has been put on us after the "finished product" is finally announced from high atop RIAA-mountain? We're more than willing to help, right here on Techdirt.

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Warner Music Pitches Music Tax To Universities: You Pay, We Stop Suing

from the pay-us-not-to-sue dept

Back in March, we noted that Warner Music Group had hired Jim Griffin, a music industry guy who has been pushing the concept of a "blanket license" for file sharing. The idea would be to get various ISPs to simply add an additional fee to everyone's internet access, have that money go into a pool that the recording industry would be responsible for paying out -- and then let people have free reign for file sharing. This is a bad idea for a variety of reasons. It's basically a music tax -- allowing the record industry to be lazy. Someone else gets to go out and collect all this money and hand it over to the industry to distribute (or, actually, not distribute). It effectively sets the business model of the recording industry in stone, and harms better, more innovative business models by inserting the recording industry (and not the musicians) into a role where they don't belong.

We hadn't heard much about this music tax lately, but apparently Griffin has been focused on getting universities to buy into the plan first. An anonymous reader passed on some details, saying that Columbia, Stanford, University of Chicago, University of Washington, MIT, University of Colorado, University of Michigan, Cornell, Penn State, University of California at Berkeley and University of Virginia have expressed interest and talks are under way. A basic presentation that's being given to these universities is below (if you're reading via another site, click through to see it):

There's obviously something appealing about ending the lawsuits and letting people file share freely. But, it's quite problematic to add an effective "tax" when none is necessary. Plenty of other business models, such as those we've outlined here and elsewhere can suffice to fund the creation of music. On top of that, giving the proceeds of this tax to the very industry that has so badly mismanaged musicians for so many years is a travesty -- sort of like bailing out the failed auto industry or banking industry. The presentation says that a nonprofit has been set up to handle the money, claiming that it's "to be clear we intend to operate with good intentions and not profit as a motive," but given the way the industry has acted in the past, that's difficult to take at face value. Also, this isn't really a license. It's a "covenant not to sue" -- meaning that lawsuits could still result.

Of course, while the introduction frames this as a "voluntary" blanket licensing program, the presentation also mentions that they'll need some way to get all ISPs and universities to buy into the plan, or they'll have to work out a way to "avoid massive leakage." So, basically, it's not voluntary at all. It's either join, or get saddled with significant limitations. In other words: all ISPs and universities need to agree to pay a huge tax to the very industry that hasn't been able to adapt, and then trust them to distribute the funds fairly.

Update: Warner Music got in touch and sent us a statement concerning this presentation from Jim Griffin:

"This presentation belongs to someone outside our company and represents that individual's interpretation of issues discussed at meetings held several months ago. It was not made by me or anyone at Warner Music Group. Of course, we are actively engaged with universities and other parties to seek a constructive resolution to a complex issue - how to assure artists appropriate compensation while enabling the widespread dissemination of their work among fans. Therefore, we are undertaking an effort to develop new voluntary business models that seek something other than - and we believe, better than - a litigation-based approach. This is exactly the type of solution that several universities and their associations have been asking for. We recognize that there are many different potential solutions to this issue, and we are determined to continue to think creatively and cooperatively with other parties in order to find the best ones. At this early stage, many ideas may be discussed and discarded, but efforts to prematurely label or criticize the process only hinder achievement of constructive solutions."

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UK ISPs Move Down The Slippery Slope Of Becoming Copyright Cops

from the slippery-slopes dept

Some UK politicians have been pushing to get ISPs to play the role of copyright cops for an unclear reason. It appears they've bought into the misleading and incorrect claim by the music industry that somehow ISPs are responsible for the record labels own failure to adapt its business model. So despite claims from some ISPs that wouldn't sign up for such a plan, and wouldn't kick users off the internet, a bunch of those UK ISPs are now promising to play the role of copyright cops anyway -- and this even includes the ISPs who insisted they wouldn't go down this road.

It's unclear why exactly they are agreeing to voluntarily waste their time acting on behalf of an obsolete industry's business model, but the misguided threats from UK politicians probably helped move things along. Either way, this starts things down the incredibly slippery slope of making ISPs responsible for policing the actions of users. For years, most governments have realized what a bad idea this is, but suddenly in many countries that concept is falling away, and the end results will not be positive for the internet -- as plenty of perfectly legitimate activities are about to get blocked in an overzealous effort to prop up a few obsolete business models.

Already there are rumors spreading that there is behind-the-scenes maneuvering for the next big step to occur: making all internet users pay an annual "music tax" fee. The original article on this agreement has someone from BPI denying that such a tax is under discussion, but some UK politicians seem ready to introduce it anyway -- and folks like Billy Bragg's manager, Peter Jenner, are claiming victory. And even a music person industry admits that this is a slippery slope (though, he thinks it's in the right direction), saying that this is: "a first step, and a very big step, in what we all acknowledge is going to be quite a long process."

The BPI representative backs this up by noting that his goal isn't to take steps towards ending file sharing, but to end it altogether: "There is not an acceptable level of file-sharing. Musicians need to be paid like everyone else." As for the artists who benefit from unauthorized file sharing? That doesn't seem to occur to the BPI. And, if musicians really need to "be paid like everyone else," how come the rest of us don't get paid for the work we did 50 years ago? How come if everyone else picks a business model that the market rejects, we don't get all the other companies in the value chain and the government to artificially prop up that business model for us? You know, we work pretty hard here at Techdirt to make a living, but apparently "everyone else" just complains that their business model isn't working and has ISPs take care of it for them. Can we now get UK ISPs to send "warning" letters to everyone who reads Techdirt to start telling them they should send us money? That would be a much easier business model.

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