Voluntary or compulsory levies for music downloads, or neither?

Reported on Ars Technica on the 19th, in the New York Times and International Herald Tribune on the 25th, and the Guardian on the 26th, the Isle of Man plans to introduce a compulsory €1 charge on all ISP subscriptions on the island to allow unlimited music downloads via peer-to-peer systems.  The idea of charging consumers at source via a monthly fee channelled through ISPs and distributed to composers and publishers by a collecting society (or societies) is not a new one: in 2004 the Electronic Frontier Foundation produced a White Paper mooting voluntary collective licensing.  The concept, they say, is simple,

the music industry forms several “collecting societies,” which then offer file-sharing music fans the opportunity to “get legit” in exchange for a reasonable regular payment, say a total of $5-10 per month

and it has been done before, with radio.  The problem, from the music industry’s perspective, is that there is no guarantee that consumers would pay a voluntary levy.  A safer bet is a compulsory ‘tax’ on monthly ISP subscriptions.  The Songwriters’ Association of Canada proposed this a couple of years back, suggesting:

an amendment to the Copyright Act which would establish a new right: The Right to Equitable Remuneration for Music File Sharing.  We define Music File Sharing as the sharing of a copy of a copyrighted musical work without motive of financial gain.  Since the new right is limited to activities that take place without motive of financial gain, parties who receive compensation for file sharing would not be covered by this right. Therefore, this new right is distinct from rights licensed by legal music sites like iTunes and PureTracks.  The new right would make it legal to share music between two or more parties, whether over Peer to Peer networks, wireless networks, email, CD, DVD, hard drives etc. Distinct from private copying, this new right would authorize the sharing of music with other individuals.

In exchange for this sharing of their work, Creators and rights holders would be entitled to receive a monthly license fee from each internet and wireless account in Canada.

The first and most obvious problem with this system, were it to be implemented, is that it would set a precedent for other lobby groups – film, television, even newspapers – to demand simiar levies for their content.  A second, and equally obvious issue, is that people who don’t download music would be taxed unfairly.

The idea of propping up the music industry is anathema to some:

Forcing people to buy music whether they want to or not is not a solution to this problem. The incentives created by such a system are perverse – guaranteed revenue and guaranteed profits will remove any incentive to innovate and serve niche markets. It will be the death of music.

Music industry revenues will be a set size, regardless of the quality or type of music they release. Incentives to innovate will evaporate. There will only be competition for market share, with no attempt to build the size of market or serve less-popular niches. Forget labels building new brands and encouraging early artists to succeed – they’ll bleed existing big names for all they are worth and work hard to keep anything new – labels, artists, and songwriters – out of the market. New entrants just means more competition for a static amount of money. Collusion by existing players will run rampant.

Soon labels will complain that revenues aren’t high enough to sustain their businesses, and demand a higher tax. It will go up, but it will never go down.

As I said before, Asking the government to prop up a dying industry is always (always) a bad idea. In this case, it is a monumentally stupid, dangerous, and bad idea.


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.

These reactions seem to infused rather with bitterness at the music industry’s greed in the past.  But the point is well-made by both that a static yearly revenue for the music industry would very likely stifle innovation and lead the industry’s big players to try and shut out newcomers.  A voluntary license would at least have the advantage of being competitive – encouraging the industry to continue to innovate and seek out new artists in a bid to increase its uptake.

Whether or not the Isle of Man goes ahead with its compulsory levy remains to be seen, but, realistically, a music ‘tax’ of this nature doesn’t seem to be a viable or fair way to keep the recorded music industry alive.


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