P2P can reward labels and artists without curbing user freedom

In 1998, a young man with a shaved head wanted an easy way to search music files online – and inadvertently ignited a time bomb by creating Napster. The music industry roared into litigious battle, shutting Shawn Fanning’s company down and slapping lawsuits against the succession of peer-to-peer (P2P) networks that sprang to fill the void, as well as the fans who used them.Nearly a decade later, P2P and digital file-sharing are permanent fixtures. Artists feel caught in the crossfire: without compensation for their works, they can’t survive. But suing the fans who love their music is destructive and ultimately futile. "The model Napster wanted to create in 2001…was to write a billion-dollar cheque and set up an ad-based system," says Terry McBride, CEO of Vancouver-based Nettwerk Music, an independent artist-run label. At the time, recording companies balked. "The labels…should have taken the deal, because what they recently signed with YouTube is exactly the same deal," he notes.The explosion of user-generated content has broader implications for all creative works online, not just music. Artists have their own views about how best to bring peace and harmony to the endless P2P music wars – and are starting to take action. The Canadian Music Creators Coalition (CMCC), an Ottawa-based lobby group, was launched last year to give artists a collective voice in how their works are used. Steven Page, frontman for the Barenaked Ladies and spokesperson for the CMCC, says his misgivings about lawsuits began years ago when he saw his name listed as a plaintiff in the Grokster case. "Fans think the labels are speaking on our behalf," he says. "That’s not necessarily true and it’s damaging our careers as fans become more cynical."Enforcing and bolstering decades-old copyright legislation doesn’t reflect the current realities of the music business, Page adds. P2P file-sharing is how a legion of fans experience their music, and is evolving into a phenomenal promotional tool. "We can’t punish fans for the fact that technology has moved forwards, and we can’t pull them backwards into the past," says Page.While the CMCC isn’t advocating that music should be free, its members believe every method of monetizing and legitimizing P2P file-sharing should be explored. And, many musicians’ associations agree with the CMCC’s position. "The things the CMCC is saying dovetails naturally with us," says Haydain Neale, frontman for Jacksoul and president of the Toronto-based Songwriters’ Association of Canada (SAC). "We’re definitely getting together with these guys to hash out the details."While there is agreement in principle, the devil is in arriving at a consensus on the operational details. Snippets from past models – usage regimes for radio and television, the current blank media levy – are being examined to see how they might cover cyberspace.Monetizing the nuts and bolts of P2P – "boxing air," as one pundit put it – will be tricky. Digital rights management (DRM) technology – the tool most often used presently by record companies to control how content is used – is loathed by a large and vocal consumer segment. Both Page and Neale agree consumers should be able to listen to purchased music as they see fit, but DRM’s tracking mechanisms are extremely useful and could be instead put to use to help divvy up royalties.The billion dollar question is: How will the pot of money be collected? The most obvious solution – charging an access fee at the P2P network level – is too simplistic, says Neale: "My gut reaction is that’s short-sighted. Each service is trying to come up with its own solution, all with a different pay scale, and no one’s looking at the big picture, which is covering traffic from the top down."Page points out consumer demand for digital multimedia content is driving expanded bandwidth, so perhaps the bandwidth providers might be the best gatekeepers of artists’ interests. "What I’d love to see is a tracking system that goes into the P2P network to see what people are sharing, and distribute funds to artists based on an access fee at the ISP level," he says. "If we compare it to TV, instead of us paying CTV for content…we pay Rogers for what we watch on cable."Neale agrees. A nominal monthly fee of $1.00, for instance, tacked onto ISP subscriptions would go a long way in creating a fair pot of money for artists, he says: "We’re working on some numbers deals, but it wouldn’t have to be much more than that to cover off what’s floating around in the music industry in Canada. Let’s not beat up on a bunch of kids clicking and getting excited about music." Radio’s licensing regime is often cited as another possible model. When it went commercial in the 1930s, radio was greeted with hostility by music publishers upset about losing royalties. So, compulsory licensing to collect royalties from radio stations was introduced, which eventually created a thriving new industry. "Companies like BMI that make money from compulsory licensing and who’ve been aggressive in licensing to online radio stations have seen their revenues skyrocket," says Eric de Fontenay, founder of MusicDish, a NY-based provider of online services for artists.But looking to historical precedents may not work in some respects, warns Neale. He says some have suggested using the same pay scales used to cover off cassette tape copying in the past – the blank media levy – for iPods and similar digital devices. But he points out cassette quality degraded with time and recopying, so consumers had an incentive to buy new albums. Not so with digital music files, where copies are as good as originals. "The knee-jerk reaction is to do what’s been done in the past, but this present is so different," he says.Even in its free, underground and unfettered form, artists agree P2P is a powerful promotional tool. "I don’t want to change teen culture," says Page. "People listen to more music now that they ever have in the history of music. By trying to change that behaviour, we’d just be pushing their attention to things like YouTube and games. The last thing we want to do is push them away from music."McBride believes creating a bigger and better legitimate P2P model that is genuinely attractive to fans is the best solution to counter piracy. "iTunes has two million tracks, Limewire has 12 million. Who has the better selection?" he asks, adding the real riches lie in monetizing the social networking aspects of P2P. "In North America, two-thirds of all commercial goods are sold based on peer recommendation. And what is P2P but people sharing and recommending products?"Companies are already tinkering with this community-based model. MySpace is working with SnoCap, Fanning’s new startup, to launch a music download service that would let musicians or their fans sell music directly from their profiles. And Amazon.com, the mother of all online peer recommendation services, is reportedly eyeing music downloads but is holding out for a DRM-free service. McBride has a more radical vision based on emerging micropayment technology, where people in e-mail or IM conversations could recommend and purchase music from each other. "You wouldn’t have to leave the conversation to buy the music from me for say, 25 cents, with five cents going into my PayPal account and 20 cents to the copyright holder," he says. "So the fan becomes the retailer, which means you’d have hundreds of millions of retail accounts."De Fontenay echoes this idea, pointing out consumers, not killer apps, are most often found at the core of blockbuster Web businesses. "If you look at Internet stats for eBay, YouTube and so on, the companies aren’t doing anything that incredible – it’s people using relatively simple platforms to create their own buzz."

P2P can reward labels and artists without curbing user freedom

Broadcast | February 7, 2007

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