A Modest Proposal

There has been a lot of press recently on the after effects of the decision against the major record labels in their case against Morpheus and Grokster. Much of the speculation has centered on the record labels potential use of proactive search and destroy programs against consumers. Most of the information coming out is aimed at the casual P2P user as a form of FUD (fear, uncertainty,and doubt). The record industry wants you to believe that they are the bogeyman who can lock your computer or erase parts of your hard disks if you continue your copyright infringements. For the most part, it’s all BS.

Technically all of the shadowy types of measures they are leaking to the press (see the NYT article – Registration required) are already available in the form of viruses, trojans, etc. Orin Kerr at The Volokh Conspiracy has some legal advice for the record companies, and was where I saw the NYT article first. There is nothing revolutionary being discussed, rather it is that the potential threat comes from multi billion dollar conglomerates as opposed to teenage hackers. There is almost no chance of the record companies crossing the line into proactive destruction of your computer property, there is only the perception that they are able to do it. If you believe that the record companies or their agents may launch such an attack against you, your file sharing behavior will change, so the logic goes. When that day comes, the record companies will have scored a partial victory in the war against music trading. Imagine if everyone on Kazaa stops sharing, figuring the other guy would share. When that day comes the service stops being effective.

So the premise is that the record company would like to index your computer for illegal media (MP3’s) and remove them. Here is my offer to the record companies. I will opt-in to a piece of software that ensures that my computer does not store ill gotten music or media under one condition: You have to pay me!

My payment, of course, would be in music or credits to CD stores, online music services, etc. Basically I agree not to participate in music trading for a payoff. I am making a rational economic decision based on an examination of the music economy as it exists at this instant. There is a continuum in the music industry between free MP3’s available on the P2P networks and the $15 to $19 CD I can get in the store. If I like a single song and want to listen to it, the marketplace leaves me little choice but to go to a P2P service to get it. It’s not like I can walk into the CD store and pay for one song. If on the other hand I want to get the latest Dave Matthews album, I must make another choice between spending all of the time necessary to get every track off the P2P networks or just stopping by the store and paying the full price for the CD. Given that I have a job and kids, I do have a monetary value attached to my free time. Downloading and burning a CD could take at least an hour of my time, hence in most cases I would opt for the CD purchase (especially if the price were lower). Obviously students and teenagers have a much lower monetary value attached to their free time and may be less inclined to stop using P2P.

So if I let the record companies (and/or the movie industry) certify my PC as copyright infringement free, I expect that they will pay me for that privilege. Why? Say, for example, that I “steal” 50 albums a year at a loss to the record industry of $750 per year. Keeping my PC copyright infringement free would lead me to spend some portion of that $750 dollar loss on actual recorded music. For this example lets say that by participating in the “program” I buy $250 worth of CD’s that I would not have otherwise bought. At this point the record industry has made incremental revenue gains of $250 with the added benefit that I cannot share the music with millions of my closest friends. Forrester estimates the record companies are loosing $3.1 billion dollars a year to 1 million or so users of P2P systems. In that case I would be costing them about $250 a month as an average user (sound a little high to me). So if the net benefit of my departure from the P2P field would be $3250 dollars a year, what would I really like from the record companies in return? How about a cut of the profits, by way of some free songs? The exact number and frequency are really not the point, market conditions and rational self interest will determine at what point I agree to “buy” the monitoring program. Is it one song a week, month, year? There are any number of levels that will satisfy various percentages of the P2P community.

If participating in the slow demise (one PC at a time) of the P2P networks earned me the opportunity to make one legal mix CD every couple months I would probably sign on. A lot of other casual users might sign on as well.

My premise is that the record companies are only really aiming at the casual user of the P2P systems. Hardcore users with nothing but time on their hands would probably be immune to any offerings. So as a casual user myself, why do I use P2P systems? It is most certainly not to get whole albums, rather it is to make “mixes” of favorite songs or artists or genres.

Anyone who has used P2P knows that getting a whole album is usually a less than satisfying experience. Whether it is poor sample rates, missing songs, or cutoff recordings, you usually spend a lot of time to make an album copy and the result is not always a great copy. Here’s the secret the the labels just flat out don’t understand:

The P2P services flourish because there is no good way to get a legal compilation of songs you want from the record industry!

Face it, no one wants a lot of the songs on most CD’s. If I hear a Coldplay song I like, I might want to put it on a mix CD for the gym or the car, but at no point will I actually go buy their CD or spend the time necessary to download the entire album. So if you take it as a given that I will never buy a Coldplay CD, what if the record industry had a way to make money from me if I wanted a Coldplay song? This seemed to be the idea behind Apple’s entry into the music field with the IPod service. As a side note, if retail music stores stocked only the top 100 CD’s and had a machine that made on demand CD’s from the catalog of recorded music I suspect that they would do as well or better financially as they do now.

So if the record company is going to pay me to opt-out of P2P wouldn’t that cost them a lot of money? No. If the payment was in music that I could get for free from P2P it’s pretty much a zero sum game for the record company. I would not be spending money on that Coldplay song either way, and there is only a small out of pocket royalty cost to the label (which I’m sure they would negotiate out of future artists contracts). Think of it like your friendly neighborhood drug dealer giving out samples of the goods, an investment of goodwill for a potential future paying customer…

Update: Charles Hill likes my idea, I think :-).
HobbsOnline A.M. weighs in.

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