The Reg’s Orlowski On Online Music Business Models

How the music biz can live forever, get even richer, and be loved

In ten years’ time this will be moot. Digital distribution will make almost everyone in this room richer; publishers, songwriters, network providers. You’ll discover that technology is a tool that monetizes the consumption of music, rather than a tool for preventing people from listening to music. In ten years, you’ll have CDs that play themselves. The electronics will by then be so cheap that the thing you hold in your hand – a book, for example, or whatever package those songs are in – will be able to transmit its contents to the nearest speakers. If you’re around then, it will get very interesting – because the technology will do what all good technology does, and have made itself invisible. You won’t have Steve Jobs to complain about any more – or any other technologist. You should start thinking about that and maybe I’ll see you next year to talk about it. But that’s another reason to be optimistic. You have the recordings.

[…] You’re also underestimating China. If Nokia doesn’t make such a [wireless music sharing/broadcasting] device, then someone else will. Or they’ll make a dongle. Then you’re back to square one. Does China have the will to do this? Ask Qualcomm or Ericsson. Or Intel or Texas Instruments.

[…] So how are you going to monetize your rights, then? You need to be paid and you have shareholders to answer to. When file sharing becomes ubiquitous, and unstoppable, that’s the question they’ll be asking.

But this is an opportunity.

So here’s a modest proposal. Stop trying to prevent file sharing, and start counting it. Lobby to raise some money from somewhere. It could be a tax, it could be a fee on your phone bill, it could be a broadband tax, it could be an hifi or iPod tax. (Germany taxes CD burners) But the figures for these are very low. The United States alone could subsidize its movie and recording industries for two dollars a week per household out of general taxation. That’s everything. Permanent income for life – assuming people watch or listen to the stuff – for a rounding error.

If we compensate only a small part of what you say you’re losing – say twenty per cent of your revenues, then that’s $27 (£15.25) a year; 51 (28p) cents a week. For less than a bag of crisps per household per week, the record industry’s piracy problem will have disappeared.

Wishful Thinking

I find it hard to believe that Apple Corp. and Apple Computer will find such a win-win outcome — particularly in the face of the kind of numbers being discussed: Apple vs. Apple: Perfect harmony?

Music industry sources have said representatives of the surviving Beatles are at last discussing ideas for digital distribution with online companies but are asking for as much as $15 million for six months of exclusive rights to the music. That high price has some observers betting that Apple Computer might be the only company ready to pay, particularly if the payment comes attached to a legal settlement in which millions of dollars are already changing hands.

[…] Even a $15 million payment to Apple Corps would be difficult for a digital music company to recoup quickly. Songs that sell for 99 cents online typically require about 75 cents in payments to the associated music labels and music publishers. Nearly 15 cents typically goes for overhead, leaving online song stores with a margin of about 10 cents per song at best.

That would require a store to sell 150 million songs to break even on a $15 million payment to Apple Corps–a steep goal, even if the deal was ultimately responsible for a blitz of publicity.

But of course, it may all depend on how big a Beatles fan Jobs really is.

The Governator Acts!

Jail time for California file swappers?

California Gov. Arnold Schwarzenegger signed a law Tuesday establishing fines and potential jail time for anonymous file swappers. The new law says that any California resident who sends copyrighted works without permission to at least 10 other people must include his or her e-mail address and the title of the work. Swappers who do not include this information will face fines of up to $2,500 and up to one year in prison.

Minors can be fined up to $250 for their first two offenses, and a minor’s third offense can bring a $1,000 fine and a year in county jail. The law provides exemptions for people sending works to immediate family members and for the transmission of works inside a home network.

Text of SB 1506; Slashdot discussion: New California Law Bans Anonymous Media File Sharing; SFGate article: Governor signs Internet piracy bill [pdf]

Later: Wired News’ Law Sends Sharers to Slammer