Music biz seeks fees for access to tunes

By Greg Kot

It worked for television, but will we pay monthly to hear our favorite artists?

AUSTIN, Texas — While most of the 12,500 registrants at the South by Southwest Music Conference were out playing on a beautiful early-spring afternoon a few days ago, the latest plan to save the music industry was being scrutinized at a dimly lit panel discussion inside the Austin Convention Center.

There some of the industry’s brightest minds were gathered: veteran manager Peter Jenner, McGill University professor Sandy Pearlman, Big Champagne Web site founder Eric Garland, entertainment lawyer Dina LaPolt, and consultants Bryan Calhoun and Jim Griffin.

On the table was Griffin’s nascent proposal to have broadband users pay for any music they download through a fee bundled into their monthly Internet access bill. It would allow consumers to download, upload and share music without restriction, and create a pool of money collected from Internet service providers to compensate music copyright holders.

As news of Griffin’s plan spread, it was instantly dissected. It was even inaccurately labeled “a culture tax” by at least one critic on Pho, a contentious Internet mailing list on digital technology that Griffin founded.

“Government involvement in the arts is abhorrent to me, and I do not favor a tax,” Griffin said. “This is a network licensing model” that would function much in the way cable TV billing does.

“Our industry now functions on a tip jar,” he said. “We have to be extremely persuasive to get people to pay [for recorded music] or make it roughly involuntary to pay” in the same way that “sports has made it roughly involuntary to pay with cable TV deals.”

The fee would not apply to broadband users who do not download music. Still, Griffin expects that “70 to 80 percent of users would pay” to gain access to all the music their hard drives could hold.

The proposal would require deals with Internet service providers worldwide, and could potentially represent a huge pool of revenue, even at relatively modest monthly rates (figures bandied about hover around $5 or less per user per month).

The proposal follows one that surfaced two months ago from Canadian songwriters, which sought a $5 government tax on every wireless and Internet account in the country. Both proposals are earnest attempts at adapting to and profiting from customer behavior rather than trying to quash it. In the last decade, the music industry’s primary means of dealing with unauthorized Internet downloading has been to issue threats and lawsuits. A few weeks ago, U2 manager Paul McGuinness called on Internet service providers to disconnect users who trade copyrighted files and urged governments to get involved if they don’t.

But there were signs at South by Southwest that at least some music-industry insiders were getting tired of such tactics. Suing file-sharers, Griffin said, “is shameful.”

His plan would create a live-and-let-live world in which peer-to-peer file sharing would co-exist with iTunes and other legitimate MP3 music stores. With an estimated 750 million people expected to be hooked into wireless broadband networks in Western Europe and the United States alone in the next decade, the potential revenue from licensing fees on Internet service providers could be substantial.

Yet such a forward-thinking plan might already be too little too late for the industry, McGill’s Pearlman said. A portable data base containing all the music ever recorded is imminent, he said. “Once this paradise of infinite storage is entered,” he said, “it will represent the end of all intellectual property rights.”

Apple is reportedly taking the first steps toward that “paradise of infinite storage” by investigating a plan that would give customers free access to the 6 million songs in its iTunes store. Consumers would be asked to pay a premium price for their digital player upfront from Apple, but then would be able to download an unlimited number of songs for the life of the device. To work, the plan would require approval from the 2,000 record labels that service iTunes.

In nearly five years, 4 billion songs have been sold at iTunes. But more than 1 billion music files are traded each month on peer-to-peer networks, representing about 20 percent of U.S. Internet users. Meanwhile, the music industry, a $15 billion-a-year enterprise as recently as 1999, is now at $11 billion and dropping fast, as CD sales continue to plummet.

At past South by Southwest conferences, the key music industry players ping-ponged between anger and self-pity as they watched their business decline. But in recent years, a new hierarchy of power brokers has begun to emerge, with tour booking agents and band managers playing an increasingly more prominent role while connections to record labels become more tenuous. Music-licensing for advertising, TV shows and movies now rivals commercial radio as the most potent outlet for exposing new music, whether it’s Feist on an iPod ad, the Swell Season on the “Once” soundtrack or a Peter, Bjorn and John song on an episode of “Grey’s Anatomy.”

The mantra of industry veterans such as Jenner is “monetize the chaos.” After nearly a decade of declining sales, the industry has yet to figure out how to do that. But the crisis has at last led to some fresher thinking about how to create a legal and economic environment that embraces the current reality, a reality where any song soon will be available any time with the click of a button on a portable player.

As Garland said, “It’s no accident that technology and music companies are sitting down and talking (about new solutions), because the core value of music has been devalued. Strange bedfellows are made by a real cold winter night.”