Update: More details of the scheme are here.
Musicians themselves may just be crazy, but the music labels are dangerously stupid, and need to be stopped before they can do any further damage to the music industry. Case in point: Warner Music, fully aware that the days of charging for recorded music are coming to an end, is now pushing for a music tax.
This isn’t the first time someone has called for a music tax. Peter Jenner argued for it in Europe in 2006. Trent Reznor said the same thing last year (as did the Songwriters Association of Canada). Mathew Ingram has other examples.
But Warner Music is doing more than just talking about a music tax. They’ve hired industry veteran Jim Griffin to create a new entity that would create a pool of money from user fees to be distributed to artists and copyright holders. Lawsuits against their customers aren’t working (The RIAA sent out 5,400 letters in the last year, says Portfolio, settling with 2,300 of those individuals and suing 2,465 who didn’t respond).
The goal? $5 per month from everyone, or fees of $20 billion per year. That’s double the current size of the recorded music industry ($10 billion).
Akamai’s David Barrett has an interesting angle on the issue (he says he wants to make it clear that he is speaking as an individual, not for Akamai). He calls the plan “tantamount to extortion, because it forces everyone to join,” and “It’s too late to charge people for what they’re already getting for free.” I agree – the music tax is little more than a classic protection racket.
As I wrote two months ago, a music tax will be the last stand of the music industry, and their last attempt to preserve the hierarchy that exists today. Here’s what I said then:
Music Taxes Will Kill Music Innovation
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.
If this happens, it will put an end to the endless creative/destructive energy that is reshaping the music industry today. Good musicians will always find a way to make money. Others may have to follow their passion as a hobby and (shudder) get a day job to pay the bills. But if a music tax is put in place, that innovation will die, and with guaranteed revenues and profits, the need to innovate, market and compete will also die. A music tax is a sure fire way to destroy an industry that is just beginning to really blossom.
Yes, blossom. As terrifying as these days must be for music industry players, it’s clear that a golden age of creativity and innovation is ahead of us, all led by the Internet as a nearly perfect distribution mechanism for their product. Music labels must die. Hopefully, before they do any more damage.
What industry wants to be associated with taxes? Yea, they do want to die.
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Rightly said Michael,
“Music Taxes Will Kill Music Innovation”.
Haha… what happened to “Die, Music Labels, Just Die”?
That’s crazy but, well, in Italy we already pay a similar tax.
We pay a commission to S.I.A.E., the italian intellectual property rights agency, for every writeable DVD (or other storage) that we buy.
@chris… I saw that post title too, its what compelled me to read this
Pathetic. Once again, if the music industry is allowed a tax, the movie industry should be allowed a tax. If the movie industry is allowed a tax, the porn industry should be allowed a tax. If porn can tax everyone, so can the software companies, book publishers, open source programmers, indie musicians and on and on and on… until everyone is paying hundreds of dollars per month for services and products they don’t even want or use.
There’s no rule that says that the music industry or music executives are special. For decades, artists have served at the pleasure of fat cat music businessmen who did nothing but squeeze everyone and everything they could for profit. The music industry deserves to die and be reborn in some other form and the suits kicked off their pedestals and few who are allowed to keep their jobs made to serve the artists who make the music and fans – the only people in the music industry who truly matter.
In a way though…it’s a shame that the music industry is being crippled. I certainly don’t support the RIAA or the other ridiculous actions of music industries and labels alike, and I download music myself; but I must admit that if I were an artist, and my songs were being freely downloaded merely because nobody could stop the activity, I would be quite upset. I know you talk about (shudder) the fact that musicians could just get day jobs, but understand that making music IS the job of a musician. I am sure that the quality of music would drop significantly should we stop paying musicians. I guess what I’m saying is…man! I accept that we’re moving into a new technological period, where things are going to be different…but doesn’t something about this feel…wrong? There have got to be some new and innovative money-making ideas around the corner; otherwise, I truly think the quality of “mainstream” music will lessen, and we’ll be listening to podcast and Myspace artists for the rest of our lives.
Well if Obama or Hillary (or both, God forbid) are elected president, this is the type of crazy crap that could be a reality. Remember- democrats want to RAISE YOUR TAXES, republicans -as much as you may hate Bush and his cronies- want to keep your taxes low.
Bob – “logic” is not welcome at techcrunch. Please take your “sensible and cogent arguments” and go elsewhere. You don’t want to upset Matthew Harrington!
I hate the idea of a music tax as well but just playing devil’s advocate. Aren’t some of the most loved TV series from the BBC which are effectively funded through a tax? I think that would argue that funding by tax doesn’t neccessary mean the death of innovation.
I loath the idea of taxes for music but I think you’re going to have to find a better arguement than “Music Taxes Will Kill Music Innovation”
One of the many reasons I do not miss the music industry..
Won’t happen.
The music industry had a monopoly on distribution. They could collude with radio to force certain artists into popularity – and sell millions of CDs.
The industry will still succeed, but the margins will be smaller.
Americans love terrible music (ex. Brittney & American Idol).
The day the USA adopts a music tax system is the day the fat lady will sing.
This idea is the lowest of low’s and if implemented will send the music industry back to the Stone Age. This is not in the interest of the artists and composers – only the exploiters who want to continue exploiting.
Music is a relationship between the artists/composers and their audiences and never before has the opportunity to connect the two been more efficient and interactive between them. A capitalistic solution can and will be found.
There are companies in stealth mode working on a solution and if successful will provide a model for all to benefit without the need for a music tax.
It’s especially funny to read in light of persistent statements of hypocritical American goverment that this society is the most democratic and fair
MagNet is coming….
@7
Making horse drawn carriages is the job of a horse drawn carriage maker. Should we prop up that industry when there is no more market for it? We used to pay for mail as well but now 99% of all communication is email which is effectively free. I guess we should keep paying the postman though.
Yea, I know those aren’t perfect analogies, maybe with a little thought we would think of some other job that no longer exists as a paid job, at least not by royalties. There will always be jobs for musicians to make music for things that need original music (ads, movies, presentations, …) as well as for performance but there may no longer be jobs for musicians to sell recordings of music. Maybe the postman analogy fits a little. There’s argubly no job for the postman to carry letters but there’s still carrying packages. That’s 1/100th of the letters they used to carry but such is progress.
If the music industry would listen to it’s customers they would realize they have a good product. A product that is not priced correctly. The CD has not been adjusted for current market value. Make it to comparable to downloading, $3.99-$5.99, and you’d have a backup source that can be used with any platform. Lower the price and we will buy again.
The tax will not pass, If people are informed.
Mike, that was a very nice title “Die, Music Labels, Just Die”. C’mon. Put it back.
@Bob:
” I know you talk about (shudder) the fact that musicians could just get day jobs, but understand that making music IS the job of a musician.”
Uh huh, and where do they apply for that job? Who’s their boss?
No, this is not true. It’s a myth, a legend.
If you say that making music is their job, then you have to ask what defines a musician. If anyone who fancies themselves a musician is entitled to have the “job” of making music, then we owe a lot of money for their services.
Being a musician or being in a band is more like running a small business. You have to figure out what your strength is, and what you’re going to make money off of and what you can afford to give away. Some want to do it for a living, and most of them will fail – just like an actual business, just like people who try to make movies, write books, mold clay, draw pictures, and write blogs. If you’re doing it for fun, you have no “right” to make money off of it.
You can charge, true, but declaring yourself a musician gives you no more right to earn a living than declaring yourself to be a pilot allows you to fly an airplane.
See, I understand what you all are saying about “obsolete” jobs – postmen, switchboard operators, elevator attendants – but music doesn’t really fall into the same category. Humans, as far as we know, have been making music ever since we began to evolve. We used to do it to communicate, to survive, to celebrate. Now we do it purely for pleasure–but think about it: is it right that one of our most fundamental instincts could be going down the drain?
To the gentleman who stated that CD prices are too high, here I quite agree with you.
And to the gentleman who tells me to take my logic elsewhere…I’ve no idea what you mean – is it a commendation or a condemnation?
@7 Bob: if anything it would make music better because people who are only in it because they think they’re going to be rich will swan off to do other things, leaving actual musicians to their craft.
@8 Keith: pull your head out of your ass; every republican government since the 70s has increased the US national debt, and the current government is the sole reason that the US as a superpower is now facing decline.
@Josh – no use arguing with Keith. I would just say that the idea of democrats raising taxes to pay for education or health care is a bit different from raising taxes to pay music companies… Unless of course he thinks “liberal = stupid”, but then it’s not even a discussion anymore.
The internet will shield us all from accountability for our outrageous opinions!
This is my last word on this, but I truly believe those who claim that musicians don’t have a “right” to make money are people who are either jealous or people who haven’t made it. Of course musicians have a right to make money! The entertainment industry is massive, enormous. If nobody liked it, it would dissolve. But the fact is that people DO like top 40; they DO watch American Idol; they DO listen to Spears and Aguluera. I do…not because some radio station foisted them upon me…but guys, TOP 40 is TOP 40 for a reason…it’s the most popular kind of music, hence it ranks “top”! I seriously don’t think podcast, myspace and youtube people quite compare. If you do, that’s great, but you’re a minority.
Capitalism and Democracy is about free enterprises and the freedom to innovate for all to prosper – taxing the music business is a totalitarian and communistic system aimed at controlling everything and making everyone pay for it to benefit but a few.
Are we going backwards here people? Think about it.
@23 Bob: no one that I can see is saying that musicians don’t have a right to earn money. Everyone has that right. They don’t have a right to be given money just because they’re musicians though. Seriously, music existed long before the record industry was born, and it will live long after it’s dead.
#7 Bob.
Their are many many other ways. Touring, T-Shirts, etc etc etc. Exposure creates many opportunities beyond music. Ask Gene Simmons, whom isn’t particularly talented musically…
Tax is a ludicrous idea that will never work. Hell, even a demoncrap politician wouldnt have that sized balls. Except Stretch Pelosi of course but in her case it isnt her genitalia it’s her pure stupidity…
Let me be the 100th person to say that
advertising on TechCrunch should be FREE because the cost of hosting the ads relative to the money made from the ads is negligible and always tending to $0.00.
A wise man once told me that “it is all in vain.”
TechCrunch will continue to charge for ads while expecting musicians to give away the music for free (and charge for ads?)
Not everyone is an ad salesman.
Some people don’t believe in selling ads for a living.
No offense to anyone making a living off of ads.
I thank TechCrunch for promoting our freedom of speech, in all its forms, especially the ad-supported form.
‘)
josh says right. i fail to understand how anyone without a stake in the recording companies racket could possibly confuse musicians with recording companies. in a sense it is endearing them to see them fight tooth and nail for that diminishing plot of land they had staked so well. they lost the fight a few years ago when they started suing old ladies for music downloaded by their kids or grandkids. of all inequities in the world it is nice to see one get dismantled. of course this is just an interlude.
#22 Araron.
You mean the healthcare system and the educational system that the Demoncraps broke?
Kids. They think they know everything when they are 20 and have only seen the cycle of stupidity once.
Once you turn 40 you realize that this crap is an endless cycle. Demoncraps break it then Republicans get elected to fix what the demoncraps broke.
The problem now is the spectrum has shifted hard left. Hell Bush is a stinking Lib compared to crats in the 50’s. The current demoncraps are pure socialist fascists. Open youre eyes it’s nearly too late…
“tantamount to extortion, because it forces everyone to join,”
Does this mean we can get rid of the NEA? I haven’t received an opt-out on that yet…
As bad as this idea is, as antithetical as it is to anything I believe, I have a hard time buying the outrage people feign over it when so many support ideas just like this for so many things I detest. Every day I pay a little for:
- someone’s abortion of a pregnancy I didn’t cause
- someone’s painting I didn’t ask for or get to see
- someone’s teacher that made a kid slightly dumber
- someone’s belief that I’m making the world warmer
- someone’s tariff to ‘ balance’ the market
- someone’s subsidy to ‘protect’ an industry
So spare me the over-the-top rhetoric. This is absolutely par for the course for today’s pathetically protectionist, economically illiterate leftists (and populist-right morons too).
I dont see anyone mentioning that this is basically the same idea as what the EFF has actually proposed in their whitepaper on the music industry. The only difference being that this would be mandatory through legislated mechanisms.
As long as the dollars go to the artists and not the labels, I think its an ok idea.
I take a minority opinion. Let the creators (artists and their helpers) decide whether to release their music as paid or free. It is always better to have choices and currently what is lacking is the ‘paid’ choice.
One thing I found very interesting at the end of the portfolio.com article: “Apple is reportedly negotiating with the major record labels to offer consumers free access to the entire iTunes library in exchange for paying a premium for Apple hardware.”
If Apple pays labels (that is, ultimately to musicians) based on downloads, that is close to my idea of alternative free model, even though I did not expect the hardware manufactures to increase the hardware price.
http://slowblog...other-free.html
We should understand that whether you are charged by Apple or the label is economically not very different. All of them need to make money to exist. There is no particular reason why you should prefer paying $110 to apple and zero to labels than paying $100 to apple and $10 to labels. If you don’t think labels worth existing, that’s a different topic. But as long as they add value, they should get paid, too. Personally, I think many musicians will look for help of others who will take care of non-music works so that they can focus on creating and performing music. I don’t know whether the they will look like current labels or different (smaller?), but they will be there. It is called division of labor, which I also wrote about most recently.
By the way, I don’t like the term ‘tax’. Someone made a mistake by calling it tax rather than paid subscription. That sounds terrible.
First let me say I’m not in favor of a music tax and I believe the music industry should innovate to accomodate the new methods of marketing and distribution made possible by technical innovations. However, I think Mr. Arrington’s flippant comment that good artists will always find some way to make money is too simplistic. Without a method to exercise ownership over their creations artists will always have trouble getting the true value for their work. DRM has been proven inadequate to address this issue. But in the absence of a method to protect the true value of their creations the incentive to create could drop so precipitatiously as to decimate the industry. A new method to effectively reward artists to sufficiently motivate them to create while reducing the cost and increasing the convenience to consumers needs to be seriously considered. The music tax is one attempt, albeit a lame one. But rather than just criticising and advocating the destruction of the current music industry, shouldn’t we acknowledge that artists deserve fair value for their creations and help them to invent new methods to extract it in the context of technological innovations?
well my wife is an artist so I can see this from all angles…. and I can see some merit in all of them.
But I don’t think there’s a rat’s chance in hell of an entertainment medium being a compulsory tax. Teachers/govt/medical are all valid to get tax dollars. In the case of the BBC, it’s TV-license (tax) is an abnormality (but a good one… quality shows).
Pro’s of a tax:
- musicians (and engineers, producers, A&R etc) actually get paid (a rarity nowadays). Can actually continue to make music.
- people can control directly what music they like (as in the tv ratings for the BBC) and get’s produced.
- musicians strive to produce the music people want to hear, so they can get their share of the tax.
Cons:
- music becomes boring because too many are trying to please the masses (a-la what the record labels do now). On the other hand there will still be an indie scene, just like now.
- I don’t want to part-fund music like Britney. I’d rather pay direct for music I like, at the store. Maybe I don’t like music at all and shouldn’t have to fund it. If you don’t own a tv in the UK you don’t pay the tv license.
- Stores would shut down??
I dunno. I just know it’s only fair to pay for what you like, whether you download it or watch/listen to it at a friends house or on the radio. We have two (soon to be 3) babies to feed. Mandyleigh isn’t money-hungry at all. She just wants to be able to support our family, and afford to be able to make another album. People can download the free mp3’s and see if they like them, and if they do…. buy the album. It helps keep her music going and helps her get to the next stage up the ladder. Simple as that. I don’t think she would want a tax on music to pay for her songs though…. she would rather know people liked her stuff enough to pay for it themselves.
Michael, I have said this before and I’ll say it again: you don’t get the music thing, and it would be great if you devoted a bit more time to this issue before you call it a protection racket. While I am totally with you on not trusting the big labels – incl. WMG but excluding Jim Griffin, personally, and un-decided on the new EMI – I think the flat rate would mean music essentially ‘feel like free’ music for the consumers (since their per user music fees will easily be covered by next-generation advertising, data-mining, upselling etc) and bring some real money back to the artists and writers which is what matters most. The fact that WMG is starting to push this is a HUGE admission of the utter failure of their past approaches, and a positive sign of some real change coming; and that change may be a lot larger than they are bargaining for here. Whether they (or any other major) can survive this shift to ‘music like water’ remains to be seen, but it is not a protection racket — it’s the END of their CONTROL (not that they had a choice, really … but still!) Read my blog post about this, here: http://www.medi...rs-new-web.html
I find Michael’s argument amusing. He argues that “Music Taxes Will Kill Music Innovation,” but fails to realize that the death of the majors will also kill music innovation.
The music industry has been robbed from for years. They have a right to be pissed off.
Look you little brats, were going to get that money out of you
ONE WAY OR ANOTHER……………
Gerd and I have had this argument before – and while I’ve mellowed a little and lie in what I like to think of as the more reasonable area between Michael Arrington and Gerd Leonhard on this matter, the astonishing thing is that this all starts from the position of entitlement on behalf of the record labels.
A flat rate music tax (it’s just not like water, Gerd – I’ve read everything you’ve ever written, and I still don’t entirely get that metaphor) is based on the presupposition that the record labels ARE the music industry, and are the source of music.
The record labels don’t have to die, as Arrington wishes – and nor are they simply entitled to a premium added on top of the service charges of an entirely different industry – but they do need to completely ditch a whole lot of baggage, learn to operate in the new media environment, and just evolve.
And can I please encourage people to stop calling the major record labels “the music industry”? They’re just one small part of a rich and vibrant eco system. The record labels claiming to be the music industry is like the lions claiming to be the zoo. Stop playing their game and letting them trick us into thinking that their losses are the ‘fate of the music industry’. It’s just nonsense.
Interesting.
totally not my point, Dubber – should have been clear from my writings.. I am not at all concerned with the fate of the big labels, and I think that the new music industry may have little use for them in their current form and thinking. Rather, all these developments are pointing to the continued empowerment of the ARTISTS and the USERS, and the future of the major labels is not the key issue here. This is about the MUSIC industry not the RECORD industry, and the fact that we are moving towards an open ecosystem – whatever that means for all the participants.
If they’re so keen on all you can eat for $5 a month, why don’t they just do that now, instead of all the protected tracks going for a buck a pop?
I quite agree with d’Artagnan. the word tax is repulsive, and the proposed amount is insane. however if my ISP gave me the option of downloading all the music I wanted with no restriction for say, another $ or two a month, I’ll jump right in.
that being said I will still buy CDs. you have to admit they make better gifts than an itunes gift certificate.
So a tax is not a good idea. You appear to support free downloading. The question is, how do you see the music industry making money in the future? Surely the proposition that all musicians will simply self publish is a non-starter. They certainly wouldnt make the millions they do today. So what’s the plan Michael?
I have a question – there is a band producing a new record, new CD. A guy walks into their studio and says – I am from orgnization X&Y and we protect artists against fraud and intelectual property theft.
We demand from you 30 cents for each song on your record – from every copy you sell – and you have no other option than to accept. (?!?)
This acutally happens here in EU /Slovakia/ – the organization is called SOZA and it is nothing more than just legal mafia, and this happened 2 days ago.
Do arists experience something similar in other parts of the world as well?
People like you, Michael, are the stupid side of this story. Why don’t you simply analize the situation? Why don’t you simply try to see what can be fair or not, putting yourself in the shoes of all the people that are working hard to make music and to save this industry? The problem is that people like you goes always to the easy argue… You and people like you are part of the problem.
ok, once and for all :
in Europe, the “tax” you’re talking about doesn’t concern only music, but actually any form of e-products susceptible to be pirated and downloaded through P2P.
the tax will not be applied directly on consumers, but on ISPs !!! And ISps will simply charge more customers using, say, aver 3Gb of bandwidth usage, because it’s way enough for regular internet usage.
I know it’s a way to get back to old ages when ISP were charging by the bandwidth usage, but look at what comcast is doing lately. That’s where we’re going. And to be honnest, it is logical, after all, since ISPs server farms costs are directly linked to their overall bandwidth usage.
so michael, forget about these “terrible” music labels and their “socialist” ideas, that’s not the real problem. the problem is to keep musicians with at least some leverage and freedom to live from their art.
and the way this “tax” on ISPs will be implemented in Frande, is that it will be regulated by the Minister of Finance and the treasury will collect these taxes. Then the Minister of Culture will fund musicians independantly, somehow the same way it was done in times when music was not even recorded.
weird, desperate, i lose all respect fro bronfman
luddites
no tax they could possibly impose the man on the street could possibly outweigh the value a large music pirate gets from downloading several albums a week or a month. The marginal cost to the label or piracy isn’t being compensated. So big music pirates still come out winners, saving money vs. using iTunes, emusic or amazon mp3; despite this draconian scheme
The Electronic Frountier Foundation has proposed a Voluntary Collective Licencing scheme for a long time .
The proposed fee should be just that voluntary and if you do not opt in to pay the $5 a month to your ISP then you are still open to legal liability from the record labels if you do opt in then they cant sue you ….Its still extortion but has the backing of the EFF
.
http://www.eff....ic-file-sharing
If we pay $5 per month, then the full catalog must be available for distribution by any entity that pays the access fee.
Universal licensing terms.