Music royalties are not the answer in the digital age

((If you’re tagged in this note on Facebook, it’s because I value your opinion and am interested to hear what you have to say. Or because I’m pretending to value your opinion and would be interested in proving you wrong. ;) Either way, you may want to read the first post to get up to speed, if the topic interests you.))

I recently wrote about Billy Bragg’s op-ed piece in the NYT, claiming that musicians deserve a cut of the profits from Bebo’s sale to AOL. I lamented the sense of entitlement his position displayed.

I take that back. I don’t think it’s really entitlement. I think it’s habit, well-intentioned but misguided old patterns of thinking.

In the comments of the ongoing debate that’s sprung to life on Joe Weisenthal’s blog post, Billy writes:

And for the record Blaise, I also view the technology as a blessing rather than a curse – it has the potential to allow more artists to make a living than before.

I’m just concerned that there are enough safeguards in place to ensure that we are able to earn a living – that we don’t go from the old feudal arrangements with the record companies to a new shiny kind of feudalism on the internet.

I responded thusly:

I’m glad to hear you view the technology as a positive opportunity. I think where we differ is in our expectations. I’ve become more and more involved in the free / open source software community where users of the software have the freedom to redistribute software as they please, for a fee or not, and software is often available at no cost. Programmers still make money through the economics of abundance that Mike talks about, through monetizing the scarce goods (i.e. their time for custom software development, support services, brand name reliability like Red Hat GNU/Linux, etc).

It seems to me as if you are arguing that these royalties should exist because that’s what you’re familiar with. That’s how musicians have monetized their music over the last few decades. It seems as if you’ve worked backwards from a conclusion that royalties are the answer.

How are musicians to make money in a digital environment? Well, how did we do it with another huge technology challenge – radio… With royalties! Therefore, digital music needs fair royalties. And thus, the bebo’s were ripped off because they didn’t get their royalties.

That thinking has blinded you to the fact that they made a fair deal (they traded royalties for hosting and exposure) of which the terms haven’t changed, and I think it’s also why you refuse to turn the tables and allow your logic to work in reverse (in terms of musicians compensating Bebo for any of their success).

I reject the idea that royalties are the answer to digital technology. With traditional radio, being a broadcaster is analogous to owning a printing press. Owners of printing presses and radio stations were a small minority of the population, and distribution is on a large scale.

On the Internet, anyone can be a broadcaster or a distributor. And it can happen on a large (e.g. Bebo) or small (e.g. blog) scale. To take the thinking about royalties and copyrights that was developed to manage a few large publishers and mass distributors, and now attempt to regulate everyone in the same way just won’t work. Now, everyone can be a distributor. Enforcing regulation on digital technology is impossible and, more importantly, the benefits aren’t worth the drawbacks.

I’m young and inexperienced, so maybe I’m wrong. But I think the challenge to people who’ve been in the industry for a while is to understand that embracing this new technology can’t simply be a matter of adapting old concepts, like royalties, to the digital world. Digital technology is different in a fundamental way. So, too, does our approach as musicians need to be fundamentally different.

Billy is still dead wrong in too many ways to count on the initial issue he rose. In the case of Bebo, the rights holders made a deal of which none of terms changed with the sale, in the same way that the deal wouldn’t change if an artist got a record deal. Applying royalties retroactively, against the terms of an initial agreement, is flat out stupid and unethical. And denying rights holders the ability to make such an agreement, and therefore sites like MySpace and Bebo to exist (where you don’t need to be selected to be heard), would be unwise.

I think Billy is well-intentioned, but too used to old ways of doing business. What needs to be “safeguarded”? It seems that he fears exploitation in a digital world. If you embrace the economics of abundance, the distribution of your digital goods isn’t exploitation. It’s promotion, advertising for your scarce goods. If you don’t embrace that thinking, how can you even survive in a digital world? 98% percent of music acquired online is through file sharing networks. (Update: If… you believe the CRIA)

Embracing the economics of abundance means recognizing your abundant goods and leveraging them to add value to your scarce goods, rather than attempting to limit the abundant goods with artificial scarcity. The refrain is as follows: There is an inverse relationship between price and supply; as supply increases, price decreases, therefore as supply approaches infinity, price approaches zero. Digital goods are infinitely abundant insofar as they’re digital. But price and value are two separate things; price is a subset of value (monetary value). Since digital goods are abundant, they can be spread easily to add value to scarce goods (which can command a higher price). WIth respect to music, digital audio files are the abundant goods which can be used to add value to scarce goods such as embodied recordings (e.g. CDs), concert tickets, t-shirts, or a musician’s time (e.g. session work). (Credit: Techdirt)

I believe royalty-based systems are ill suited for the digital age. Royalties weren’t meant to be applied to everybody, yet anyone can be a distributor or a broadcaster in the digital world. The answer to monetising music in the face of digital technology lies in embracing the new digital nature of music through the economics of abundance, rather than attemping to create artificial scarcity.

What do you think?

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3 Responses to “Music royalties are not the answer in the digital age”

  1. [...] Royalties were not designed for the digital age. The proposal suggests what essentially would amount to a music tax. There is no way to opt-out and it applies to everyone with an internet connection. Since when are royalties taxes? Since when do royalties apply to everyone? Royalties were meant to regulate a few large distributors and broadcasters. In the digital age, everyone can be a distributor or broadcaster. It just doesn’t work. [...]

  2. [...] It’s the way in which he confuses royalties and salaries that’s problematic. Royalties aren’t always the answer, and though it may be convenient, it’s inaccurate to make an argument about paying people for [...]

  3. [...] communication, the idea of using copyright to restrict content gets weird in a hurry. Royalties are not the answer for the digital age. 9. We have the right to decline participation in business models that require [...]

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