Sometimes I can’t help but agree with Bob Lefsetz’s thesis that the music industry is well and truly f*cked, and this is one of those times.
As every eMusic subscriber knows, not too long ago eMusic did a deal with ABKCO to sell the early Rolling Stones back catalog under standard eMusic terms (DRM-free MP3s sold at 33 cents per track or even less depending on your subscription plan). eMusic pulled out all the stops to promote the releases, eMusic subscribers were ecstatic, and by eMusic’s account the folks at ABKCO and Universal Music Group (ABKCO’s distributor) were “incredibly impressed” by the amount of business generated—business that was likely almost pure profit from the point of view of ABKCO, UMG, and everyone else involved, and that almost certainly wouldn’t have been generated under the standard iTunes 99 cents per track model. (As I and others have noted many times, eMusic caters to dedicated music listeners who spend a lot of money on music and prefer paid downloads over P2P, but are very price-sensitive.) I’m by no means a Stones fan, but even I took advantage of the opportunity and purchased Let It Bleed and Beggars Banquet (the full albums, not just the singles).
Of course, this being the music industry someone had to spoil the party, and now the Rolling Stones have been pulled from eMusic, along with other ABKCO releases. It’s not clear exactly why this happened. Perhaps there was a unresolved rights issue left over from past legal battles between the Stones and Allen Klein, a senior executive at ABKCO or UMG who got cold feet, or just the old excuse about low-priced downloads devaluing the art. In any case somebody somewhere had both the power and the inclination to torpedo the deal, and did. Presumably Rolling Stones fans (or potential fans) who don’t want to pay iTunes prices will now either stop buying the Stone’s music or will download it via P2P.
Bob Lefsetz and many others have proposed licensing P2P on a flat-fee all you can eat basis; sometimes Lefsetz has instead talked about a eMusic-like model combining a monthly subscription plan and drastically lower per-track prices. I’m not confident that either of those things will ever come to pass. The music industry appears to suffer from a classic prisoners dilemma problem: It’s more rational for everyone to try to maximize their own piece of the pie and screw everyone else, with the result that the industry as a whole ends up worse off than it would be if everyone cooperated. Thus the labels and artists want radio stations to pay performance royalties, the radio stations want to get paid in turn by the labels for promoting music, and the songwriters and publishers don’t want to change their traditional royalty arrangements to move to a percentage-based model.
Sometimes I think the only thing that would save the music industry from itself would be the government voiding every music contract ever signed and every statutory royalty and compulsory licensing arrangement ever established, and forcing the industry to start from a clean slate. Of course the government would never do this; it’s bought into the industry’s line that maximum control of music and other copyrighted material equals maximum benefit to society, even to the point of considering appointment of an intellectual property czar to lead the war on piracy. (I’m sure such an IP czar would be just as successful as our drug czars have been waging the war on drugs.) However where the government does not act the people will act for themselves, and if P2P use continues to grow then for all practical purposes it won’t matter at all what the contracts say and what the royalty arrangements are supposed to be.