I'm All For Pre-Paid Music...But Not This Way

Posted by: Peter Burrows on March 28

Readers of this blog know I think music subscriptions are a far better value than download stores, and I wrote this post about why Apple should cut a deal to enable it to sell pricier iPods that come with access to all of the labels’ music.

But now it seems talk of such talks between Apple and the labels may have been a red herring for an even more audacious idea: a plan by Warner Music that would require ISPs to charge $5 per subscriber per annum. That way, those subscribers could happily use their Net connection to get any songs they want, with no fear of being sued.

The price is right, for sure, for anyone that likes music. But this is not at all the way to go, as many have pointed out (here and here, for example). The plan, which would doubtless require the support of Congress and would then have to survive legal challenges, would be tantamount to a government-mandated tax. As Michael Arrington at TechCrunch puts it very well:

The rollout plan will hit colleges and universities first, who will simply add the fee to tuition bills so they won’t have to worry about getting dragged into lawsuits. Then Griffin will approach consumer ISPs. If an ISP joins, their users will not have the option of not paying, even if they don’t download music from the Internet. So, basically, the tax is only voluntary if you define avoiding it as not going to college, or using the Internet.

Note: The Griffin he mentions is Jim Griffin, who is evangelizing the idea for Warner. Portfolio spoke with him about the plan, here.

I’ve got to give points to Warner at least for trying to jump ahead of the downard spiral of music sales. While the $5 tax would create a massive immediate windfall (it would create a $20 billion pool, to be split up among players in what has become a $10 billion industry), this is pretty much an admission by Warner that the best it can do is maintain record industry revenues at $20 billion or so.

But what business does the music industry have trying to set itself up as some kind of new, entertainment utility? I’m no economist, but it seems to me that real utilities—like water or electricity—are for commodities that are essential and not available by any other means (since few of us have wells or hydro-electric dams on our property). Music fits neither of these definitions. It’s not essential, and it’s available in many ways. You can buy CDs, listen to the radio, go to concerts, or buy or subscribe to music via any number of services via the Net, such as iTunes. The fact that the music industry has yet to figure out a mix that can keep it solvent isn’t consumers’ problem. It’s their problem. (By the way, label executives: If you want to know how mandatory programs will go over with the Web-literate masses that are your future, just ask Facebook about Beacon. At the least, this $5 payment needs to be an opt-in option, at the consumer rather than the ISP level).

One last thing: it seems this $5 per person tax has already been proposed by the Songwriters Association of Canada. Here’s what some of neighbors to the North think of that.

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