14 July 2010

Should the Music Industry Pay ISPs for Piracy?

In the wake of its “success” in pushing through Digital Economy Act, the British music industry is hoping to move on to the next stage: using it as a lever to get more money out of the system (even though the music industry is currently thriving).

The UK royalties collector PRS For Music has just published a rough blueprint [.pdf] for how this might be done, entitled: “Moving Digital Britain Forward, without leaving Creative Britain behind”. It's a fascinating document, and merits close reading.

As the title suggests, there are essentially just two players in this analysis: the music industry, and the ISPs (the public are obviously irrelevant here). The ISPs are no longer lowly bit-mules, mindlessly obeying Net neutrality by conveying digital files hither and thither without a thought as to their content, but are to be regarded as “Next Generation Broadcasters”:

operators of networks that connect supply with demand in a market for media.

That's important, of course, because it reframes the debate about file-sharing in terms of old technology: radio and TV. It permits the argument to be made that such “broadcasters” have to pay for the privilege of broadcasting all that content – just like the radio and TV broadcasters do.

The paper makes a very good point about the increased capacity networks that are being built:

One of the few studies to be published comes from MoneySupermarket, who found that more than a third of consumers surveyed believe the advent of high-speed, next-generation broadband services would encourage greater piracy and make it easier to illegally download content. The report concluded that: ‘Illegal downloading is already a big problem for the likes of the music and film industries ... with superfast broadband packages set to become commonplace, the problem seems likely to get worse.’

I think that's true, but the analysis dismisses too easily the main reason for this:

Perhaps, like iTunes, these legal venues could increase the range of content on offer, but this increase comes at a high cost when already at a significant disadvantage to “free”.

That's a vicious circle: music companies won't offer more content to compete with free, unauthorised sites because it would cost too much, which means that there won't be so much authorised content as unauthorised, which means that people will continue to be forced to opt for unauthorised downloads, which music companies aren't willing to compete with.

The report even mentions iTunes, which backs up this view: for once iTunes made available most of the content previously only found on unauthorised sites, it started raking the money in. And yet the report chooses to ignore this rare data point, and stick with its circularity – the reason being, it has a Cunning Plan. The ISPs – sorry, Next Generation Broadcasters – must pay:

If changes in the scale of unlicensed media can be measured, we can put a price on this spillover to bridge the value gap. Simply stated, at some date a price would be placed on the indexed measure of unlicensed media on ISP networks. If at a later date the measure of infringement increases, the value transferred (from ISP to rightsholders) would increase accordingly.

Conversely, were the measure of infringement to decrease, the amount transferred would decrease accordingly. The options for pricing such spillovers should be the subject of further research.

They should indeed: I think this is a splendid idea – if we could make just one tiny tweak.

For this to be fair, we must of course make sure that we capture all the effects of unauthorised file sharing so that its true economic effect is measured. That is, we shouldn't be measuring anything so crude and vague as the flow of allegedly unauthorised copyright materials across a network. After all, it's impossible to say whether some of that flow might be permissible uses, and then there's the question of whether people would have bought the equivalent content etc.

Instead, what needs to be ascertained is the knock-on economic effects of that file-sharing in the *real world*. And of course, one very important aspect that has to be included in that is the fact that those who share files buy more, not less, music. As Mike Masnick explains through a splendid series of links:

Study after study after study after study after study after study has shown the exact opposite -- noting that people who file share tend to be bigger music fans, and are more likely to spend on music.

So I think we should try out this report's suggestion that ISPs should pay for the consequences of their users' actions – provided the recorded industry pays the ISPs if it should turn out (as those six reports linked to by Masnick might suggest) that file sharing actually *increases* the sales of recorded music. What could be fairer than that?

Follow me @glynmoody on Twitter or identi.ca.


JonoPrice said...

In addition, they don't seem to realise that as soon as people are paying for it, it stops being unauthorised.

Flat rate music and movies for all, without DRM! Where do I sign up?

Glyn Moody said...

@Jono: I get the impression that their logic is yes, it's paid for, but it's still unauthorised because you're paying a fine for downloading unauthorised files, etc etc etc

Miles said...

Just when I thought the Digital Economy Act couldn't get worse. Please tell me these PRS proposal don't stand a chance of becoming law?!

Is this on top of disconnecting people arbitrarily and sending threatening letters?

An encrypted connection is looking increasingly desirable. The music industry should realise the £10 a month people will be paying to avoid these draconian schemes is £10 a month that won't be spent on their products.

Valdis said...

Taxing ISPs for "content" is as much ridiculous as paying tax to help Microsoft fight with viruses (see http://www.pcworld.com/businesscenter/article/190581/microsofts_charney_suggests_net_tax_to_clean_computers.html)
Why anybody else should bother when some can't do his business properly?

Glyn Moody said...

@Miles: we're just at the kite-flying stage now, but I predict we'll see more of this soon...

Glyn Moody said...

@valdis: unfortunately both are seriously considered in some quarters.

everything i earned, i earned in kindergarden said...

i only skimmed, but weren't you implying that the "music industry" needs to negotiate their payment to isps for providing distribution services?

Glyn Moody said...

@everything: not really, I was just pointing out that if the music industry thinks the ISPs owe them for losses caued by piracy, it's only logical that they owe the ISPs if it turns out that piracy actually drives additional sales...

The Music Void said...

Since the passing of the Digital Economy Act 2010, the assent of which evoked a (not entirely) resounding cry of joy from the music industry, its swift passage into law appears to have caused some turbulence amongst ISPs, and all for valid reasons.

More on this available: http://www.themusicvoid.com/2010/07/swings-roundabouts-and-lashings-of-legislative-lamenting/

Glyn Moody said...

@TheMusicVoid - thanks for the link