Mike McCready

The Washington Post has a story today that was all the buzz within the music industry yesterday and one that has been the topic of heated debate and controversy on various industry email groups I belong to. It’s about Warner Music Group hiring Jim Griffin, (a well known industry analyst and leading thinker) to lead the drive to have Internet Service Providers charge their subscribers a flat rate (maybe $5) per month to be pooled and divided among the music rights holders, a move that would essentially allow P2P file trading to be unrestricted and unregulated. The story is here.

To be clear, I have tremendous respect for Jim, and for Gerd Loenhard, a leading media futurist and his music-like-water thinking where in his recent books touts that music should be paid for like a utility such as water. It’s everywhere and feels free but is actually getting paid for by someone. This is a healthy debate but one thought keeps coming back to me.

The entities that are suffering the most in the decline of physical music sales are the major labels. We all know that not many artists make any real money with the labels so the suffering of the labels is having an effect on very few artists. The suffering of the labels certainly isn’t effecting the fans. I sympathize with both the labels and those few artists and don’t mean to diminish it one iota.

However, by pushing forth Griffin’s plan we’re likely be short circuiting the natural market forces that will eventually allow new business models to emerge that create a whole new eco-system. In the grand scheme of things the music label model like that of EMI, Warner Music Group, Universal and SonyBMG is less central to the overall music business than it was in the past when they controlled distribution and provided a must-have service. Today there are many emerging business models that for now can co-exist until natural market forces create a new dominant model that will certainly benefit the many. These new models don’t necessarily have to emerge from new entities. No one is saying the majors themselves couldn’t evolve to remain the dominant players.

What would be the harm (other than to the current label model and the few artists) of letting the market play out a bit more and to sort this out before trying to charge this fee through the ISP’s? Some say the ISP’s will jump at the chance to market themselves as proponents of fair trade, like some coffee and diamond companies. But, if the ISP’s want to market themselves as proponents of fair trade wouldn’t it be cheaper for them and better for the many who make a living as copyright owners if the ISP’s simply take measures to curb illegal file trading? Granted, it can never be stopped completely and determined hackers will ALWAYS find a way to trade music files illegally but it can be made so difficult that most people won’t do it. As an example, companies like Norton and McAfee have gotten pretty good at keeping my computer virus free despite the best efforts of hackers. Yes, I’m aware of the ways around the blocking of access to P2P trading sites and how hard it is to differentiate file types but it just seems like something has to be tried before a system is implemented that artificially caps the revenue the music industry can make through recorded music transactions.

Don’t most people in the music business (smaller labels, music industry start-ups, artists and music fans) have more to gain by allowing some of these new music businesses and business models to emerge before artificially regulating the market? Isn’t intellectual property too central to the economy to adopt a model that treats each unique song as a commodity and to just accept the loss of control before anything is tried (other than lawsuits against the P2P sites and music fans) to regain control over Intellectual Property?

In conclusion, if the Griffin plan is implemented it will stop the current market evolution cold in its tracks. Is that good? Might there be more to gain for every non-major label entity by letting the market continue to evolve than by enacting this plan? Might even the major labels have more to gain by letting the market continue to evolve and to find their central place within it?

In full disclosure, I lead a company called Platinum Blue that has a lot of friends and customers at the major labels and we are not eager to see them continue to suffer. There is clearly an important role for them to continue to play, but shouldn’t that be achieved within the current market evolution?

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