Clearly it is easier to distribute media over the internet than to manufacture physical items and then deliver them to warehouses and shops and expect people to make a journey to the shop to pick up the media. The difficult part is control of any usage of that media when it is released into an unmanaged environment. The internet creates a utility like the electricity or phone network.
In the face of recent advances in media duplication and distribution technologies, people in the recorded music business have behaved in the same way as P&O Shipping did when the aeroplane was invented and Kodak did when digital storage of film took the market. Another example is Singer sewing machines. They all clung to their established business models and refused to completely re-invent themselves at moments of technologically enabled change. It requires a really radical business manager to survive such disruption, although some companies seem to have managed it. Xerox is one example. It always seemed to me that most of the very senior people in the recorded music business had an extremely limited understanding of the capabilities of digital technology. When they did partly understand the digital paradigm they abused it somewhat and tried to model their old business ideas to fit their understanding, just as makers of early motorcars made them look like horse carriages.
Peer-to-peer downloading is not the problem; indeed peer-to-peer techonology provides great efficiencies. The business model is the problem, and trying to make 5% of the market pay for the 95% that have not fully bought into an outmoded business model exacerbates it.
A government mandated collective licensing regime could be a way to compensate copyright owners for uncompensated downloads over the internet, but in general, I am not crazy about government mandated regimes in relation to entertainment other than for issues such as light censorship of obviously socially harmful material (How to build a WMD for one example!). The next question is which government would mandate it and how could it be effectively policed. In Europe there have been suggestions of a ‘three strikes and you are out’ system to cut people off the internet if they are noticed illegally downloading copyrighted material. The ISP would be forced to monitor and then cut off their customers. ISPs are not happy with this and consumers like it even less. There are grey areas where a consumer can go to a reputable looking website (which may be based in a copyright-challenged country) illegally selling mp3 songs for 30 cents each and assume that they had got a legal bargain. Copyright holders and consumers need to work out an equitable exchange of value between themselves.
One option is a system in which users voluntarily “opt in” to pay a fee in exchange for copyright holders’ agreement not to sue them for uncompensated downloading of content, but it sounds a bit like a protection racket.It may be marginally better than a government mandated system, but would all copyright holders buy into something like this? Who would guarantee safe passage? If a person downloads one song a month and another downloads fifty songs a month should they both opt to pay the same fee?
I think creators and rights holders could be compensated simply: devices have the intelligence to translate bits arriving over the internet to something that humans can understand and enjoy so the device could easily keep a note of the content consumed and charge appropriately. Charges will have to be accepted as a fair exchange of value by consumers, perhaps 1c or less each time a song is listened to or an important in-depth news item is read and a couple of dollars every time a major film is watched. The cost should be incorporated into a data plan or the cost of the device so that as far as possible the consumer can enjoy rich multimedia at a fair price on the device of their choice. By spreading the cost over all devices, the cost of entertainment, which breathes the life into those devices, can be minimised on a per device basis. If 75% of all consumers spent a few cents a day the market would be much healthier than trying to make 5-10% of consumers pay a few dollars.
There is a lot of complexity, a lot of silos, a lot of NIH, a lot of disbelief, some technology IP, much investment in models that may or may not happen but which block new ideas, and an enormous amount of disruption to be overcome. It will not be easy but digital music must embrace the abundance of the new world and not try to maintain scarcity to enable monetisation. Scarcity can be used for live concerts and associated physical items such as T-Shirts, personalised events, etc.
People in the recorded music industry should continue to strive to develop long-term artists who write and make wonderful and creative music. It is technologically easy and cheap for anyone to make a new song. It is hard to make a top ten hit.
If the people involved are creative and have good business advisers then the recorded music business, the live music business, and the music licensing business can be wonderful. Businesses often consolidate and then parts of that business specialise and re-split. Any global recession may be a boon to fresh creativity.
Boogie on, music will never die, humans need it too much. Social sharing of music and playlists will be key. Look to service enabled consumer devices to be the tills and the communication systems.