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By Frank Rose

Having failed to stop piracy by suing internet users, the music industry is for the first time seriously considering a file sharing surcharge that internet service providers would collect from users.

In recent months, some of the major labels have warmed to a pitch by Jim Griffin, one of the idea's chief proponents, to seek an extra fee on broadband connections and to use the money to compensate rights holders for music that's shared online. Griffin, who consults on digital strategy for three of the four majors, will argue his case at what promises to be a heated discussion Friday at South by Southwest.

"It's monetizing the anarchy," says Peter Jenner, head of the International Music Manager's Forum, who plans to join Griffin on the panel.

Griffin's idea is to collect a fee from internet service providers -- something like $5 per user per month -- and put it into a pool that would be used to compensate songwriters, performers, publishers and music labels. A collecting agency would divvy up the money according to artists' popularity on P2P sites, just as ASCAP and BMI pay songwriters for broadcasts and live performances of their work.

The idea is controversial but -- as Griffin and Jenner point out -- hardly without precedent. The concept of collecting a fee for unauthorized use of music was developed in France in 1851 as a way of reimbursing composers whose work was being performed without their permission in cafes and the like.

The practice spread to the United States in 1914 and currently applies to radio airplay and webcasts in addition to live performances. In a 2004 white paper, the Electronic Frontier Foundation called for it to be applied to file sharing, but the Recording Industry Association of America immediately dismissed the proposal.

Things are different now. "The labels are beginning to like the idea of an access-to-music charge," says Jenner, who once managed Pink Floyd and the Clash, "because they're increasingly aware that their current model is broken." U.S. music sales, which peaked in 1999 at nearly $15 billion, dropped to $11.5 billion in 2006. Last year's figures are still being tallied, but with CD sales cratering and online sales overwhelmingly dominated by singles, the only question is how far they'll fall.

Meanwhile, the industry's antipiracy efforts appear more and more futile. Digital rights management, long touted as a solution, has been all but abandoned. And though the RIAA is said to have threatened or taken action against some 20,000 suspected file sharers, the market-research firm NPD Group reports that nearly 20 percent of U.S. internet users downloaded music illegally last year. The score to date: 0.02 million alleged P2P users down, 40.98 million to go.

At the music industry trade show MIDEM last year, John Kennedy, the head of IFPI -- the RIAA's international affiliate organization -- offered modest support for the kind of licensing fee Griffin and Jenner propose. "It's a model worth looking at," he said at a press conference. "If the ISPs want to come to us and look for a blanket license for an amount per month, let's engage in that discussion."

The tone at the January 2008 MIDEM in Cannes, France, was more combative. Longtime U2 manager Paul McGuinness said in a widely reported speech that it was time to hold ISPs responsible for the file sharing deluge. McGuinness wants network operators to cut off those the industry deems offenders -- an approach France's Sarkozy government is already pushing in that country. "If ISPs do not cooperate voluntarily," McGuinness declared, "there will need to be legislation to force them to cooperate," McGuinness said.

Behind closed doors, however, MIDEM attendees discussed the prospect of collecting money from ISPs instead. An invitation-only meeting on the subject drew about 50 people, including representatives of IFPI, Sony BMG, T-Mobile, the giant European ISP and mobile-carrier Orange, and performing-rights organizations like BMI. The response, according to Jenner, "ranged from 'What do we do now?' to 'It sounds good, but can it possibly work?' A lot of people are like rabbits in the headlights: They're terrified they're going to lose their jobs. No one dares to feel that this might be the solution."

Even so, notes Shira Perlmutter, IFPI’s head of legal policy, “none of our members are ruling anything out. These companies are all very open to creative new ideas that would allow customers to do things they want -- including using file sharing technologies.”

Not everyone sees the two approaches as an either-or situation. "I love Paul McGuinness' idea," says another scheduled SXSW panelist, Dina LaPolt, a Los Angeles attorney who represents Mötley Crüe and the estate of Tupac Shakur. "And I love the idea of trying to make ISPs pay artists and make up for all the free crap that's going on. I support both, so long as artists are getting paid for their work."

Whether ISPs will be willing to ante up remains far from clear, especially since many users can be expected to protest the extra charge. One option would be to introduce different service tiers and impose the surcharge only on customers who buy enough bandwidth to make file sharing feasible. But for ISPs, other music-industry demands could be far more onerous.

In the weeks since MIDEM, antipiracy zealots have been using McGuinness's speech as a rallying cry. Last month the British media reported that a government white paper was about to call for legislation to force ISPs to move against suspected file sharers. As it turned out, the white paper merely included a vague call for "voluntary, preferably commercial solutions" by April 2009.

Just Monday, the four majors sued the largest ISP in Ireland in an attempt to force it to block illicit downloads. Attorneys for Eircom retorted that it was not legally obligated to monitor its network traffic.

AT&T has been looking into content-sniffing technology that could turn it into a spy agency for music labels and film studios, but most ISPs seem distinctly unenthusiastic about the idea. They have good reason to be.

Technology experts say it would be impossible to reliably inspect trillions of packets for pirated material, especially if file sharing networks resort to encryption mechanisms. Legal experts point out that any attempt by an ISP to monitor its traffic in this way would jeopardize its status as a common carrier. It could also leave the ISP open to lawsuits from subscribers who get cut off without good reason. And financial experts say it would cost a bundle to implement.

But the bottom line is, it simply won’t work. “Ultimately there is no real hope of eradicating copyright-infringing technology,” says another SXSW panelist, Eric Garland, CEO of BigChampagne, which tracks the popularity of music online. “You can push piracy around, discourage people from doing it in this or that venue, but I don’t think in even the most Orwellian scenario you could reduce massive infringement in a comprehensive way.”

So, which will it be: A last-gasp assault on piracy, or a truce that would bring in money and benefit everyone except the lawyers?

At this point, the music industry seems too dazed to decide -- and several nights in Austin probably won't help. Though Jenner and McGuinness are on opposite sides of the debate, their good cop-bad cop routine could ultimately prove synergistic. Pay up, the music people are telling internet providers, or we'll sic Washington on you -- and London and Paris and anybody else we can find.

"Behind closed doors, however, MIDEM attendees discussed the prospect of collecting money from ISPs instead. An invitation-only meeting on the subject drew about 50 people, including representatives of IFPI, Sony BMG, T-Mobile, the giant European ISP and mobile-carrier Orange, and performing-rights organizations like BMI."

See? "Behind closed doors" ...what did I tell you? VCL is going to be defined by RIAA insiders. It's going to be rigged from the beginning to severely limit, if not outright exclude any competition. The RIAA oligopoly we have fought for so long will suddenly gain utter control over the music-on-the-internet marketplace.

We need to fight it. But I am afraid that all the independent artist can do is to make sure to join whatever "rights society" or "collection agency" that gets set up to distribute the money. Unfortunately, we'll have no other choice except to be excluded completely from the market ONCE AGAIN!

Fred Von Lohmann, are you listening? You and others who have been pushing for this sort of thing are about to experience a ton of regret. MARK MY WORDS!

"One option would be to introduce different service tiers and impose the surcharge only on customers who buy enough bandwidth to make file sharing feasible."

Yup, it gets deeper and even more insidious. Net Neutrality will get tossed out the window too!

"In a 2004 white paper, the Electronic Frontier Foundation called for it [access-to-music charge] to be applied to file sharing."

What in the world was EFF thinking of??

That's what I said when I first read it back then.

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Here's ars technica's take:

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By Nate Anderson | Published: March 13, 2008 - 01:15PM CT

With P2P file-swapping still proceeding almost unchecked and CD sales swirling down the toilet, music labels have shown an increased willingness to consider new business models over the last couple of years, even going so far as to drop their once-ubiquitous DRM. One intriguing idea that has been bandied about is levies: pay your ISP, say, five bucks a month,and you can legally listen to all the music you can find. Though such an arrangement raises plenty of questions (should the levy be compulsory, or can people opt out of it?), stakeholders across North America are at least open to the idea.

Two pieces out this week illustrate that fact quite nicely. Wired has a piece up today on Jim Griffin, a proponent of the $5 ISP model, who will appear on a panel tomorrow at SXSW in Austin to continue flogging his idea in public. P2P would suddenly become legal (for those who paid, anyway), with the cash doled out to labels and artists based on the number of times each artists' work was traded each month. Such a system sounds wide open to gaming, of course, but if that problem could be solved, the music industry at least has a good chance at converting millions of file-swappers into paying customers.

Canadian law professor Michael Geist, who has covered such issues for years, notes that other levy plans are also gaining traction in Canada. We've already covered the proposal from the Songwriters Association of Canada that would also bring a $5 fee to Internet connections in return for the right to use P2P services to get music. Download services like iTunes could still charge whatever they like.

Barenaked Ladies frontman Steven Page told Ars last year that he supported such a plan. "Not everyone's an artist," Page said, "but people can now express themselves like artists do, by sharing something that means something to them. If we had a system of compulsory licenses, they don't have to worry about going and getting a license to do it, or circumventing the system."

Nokia has launched its own Comes With Music initiative, where selected products will feature unlimited access to the Universal music catalog (though for a limited amount of time), with the cost of the service built into the price of the device. France's Vivendi has also launched ZaOza, a service that provides unlimited downloads of music, video clips, and games for a $7 monthly fee.

Subscription services like Napster and Rhapsody continue to offer all-you-can music plans, though the tracks from each service come with DRM and haven't worked with the iPod.

Not everyone likes the compulsory license model (the head of the US Copyright Office told Ars last year, "I hope we don't go to a system of compulsory licenses. I don't see how any creator benefits from a compulsory license.") but the music business does appear increasingly open to offering all-you-can-eat music, as opposed to its decades-long practice of attempting to move individual albums.

That access could turn out to be free, as well, at least for users who don't need to carry music with them. Last.fm and iMeem are currently offered ad-supported streaming of music, while P2P service Qtrax claims to have a legal, ad-supported P2P service in the works (once it can get its licenses in place).

For those who want to pay a couple bucks a month in return for owning unrestricted copies of their music, well, that day may come, but it won't come without contention. When Ars Editor in Chief Ken Fisher moderated a panel at this year's CES, several of the panelists agreed that compulsory music licensing might happen... but they couldn't agree how to split up the revenue pie. In a compulsory licensing arrangement, that decision is removed from market control and becomes a political issue, so expect to see even more lobbying in DC should such solutions come to pass.

And of course, if $5 on your ISP bill gets you access to music, can the day be far off when another fee appears for movies? For e-books? For cross-stitch patterns? So long as these plans are voluntary for consumers, they could be a great option for many people. If they become mandatory, though, we could easily see a race for the trough as content owners scramble to grab a government-backed revenue stream.

Bottom line: the whole idea sucks.

Agreed. There is no way in hell that we can realistically get a TRUELY fair way to pay out the money to the artists. The whole thing is gonna get rigged in favor of the RIAA labels if/when they themselves do reach an agreement on how to divi-up our money and start lobbying Congress.

Shmoo -- This is NOT compulsory licensing.

Compulsory licensing would pay everyone (musicians) for music provided over the Internet. This idea is exactly the kind of situation that compulsory licensing would eliminate.

This is a voluntary scheme designed specifically to screw the independents, which I attribute to Jim Griffin, who is not to be trusted. Griffin wants to collect money and pay it out, but only to the artists/labels being shared over p2p.

Even if it paid fairly, most independents are excluded because no one is searching for our stuff on p2p. Artists who are being downloaded from places like DMusic or their own site will not be counted.

This is our punishment for trying to do the right thing and offering our music to the public while the big boys were crying in their soup, calling everyone thieves and trying vainly to "protect" their music.

So the p2p users, which would not listen to us (Boycott-RIAA) any more than the RIAA does, have been working for the RIAA all along, whether they intended to or not.

Yeah, they all stuck it to the man all right. Stuck some more money in his pocket.

There's little satisfaction to be had in being right all along after it's too late to do any good.

Our boycott's intended (stated) purpose was exhorting people to not listen to, purchase, or download RIAA-enslaved music...but rather to enjoy independent music such as that extolled by DMusic.
It was/is a noble cause. Too bad we couldn't turn the tide.

"And of course, if $5 on your ISP bill gets you access to music, can the day be far off when another fee appears for movies? For e-books? For cross-stitch patterns? So long as these plans are voluntary for consumers, they could be a great option for many people. If they become mandatory, though, we could easily see a race for the trough as content owners scramble to grab a government-backed revenue stream."

Aside from the problem of the RIAA taking over the system and screwing independent artists (as well as their own), this was my other issue with ISP charges.

Besides Hollywood, book publishers and pattern makers, next in line would be magazines and newspapers, software and game companies, etc, etc, etc.

The next thing you know, your $50 per month internet bill is $250 because of all the fees to pay off every provider of content that has a corporation or a lobby behind it.

And you know they'll never be content with just $5 a month. Before long they'd be demanding more.

Right.

Making ISP's collect this is going to make everyone pay for services that only some will use. While that does exist in our society, it shouldn't happen here. Why won't they just do the same thing with the P2P file sharing companies? Wouldn't that make far more sense, not to mention that they may be able to properly tell how to distribute the monies collected, including independent musicians.

This proposal is nothing more that a last gasp money grab by the RIAA and its labels. Hopefully it will be thwarted.

"Shmoo -- This is NOT compulsory licensing."

True, the terms we are using may not be nailed down yet.

I am as pissed and disheartened as you that we warned the p2p community about what was coming down the pike all along to such little avail.

My only true hope is that the RIAA and the Big Media Industry can't come to an agreement on how to divide up all the money fast enough. But I suspect it won't take them too long. They ARE an oligopoly/monopoly after all.

I will continue to boycott and make noise, but when the time comes, I and many other independent artists are going to be forced to join in whatever collective agency comes along to distribute the funds (even tho I know it's only gonna be for crumbs.)

They've been trying to do something like this up in Canada too (I'm pretty sure i've seen stories here about it) but it was proposed by the Canadian Songwriters. I certainly gave my 2¢ worth, and signed a petition against it.

If major label artists feel they need to be compensated better, they should tell the labels to trim some fat off their executive salaries.

Word is that there are currently 40 million p2p users in the United States. According to internetworldstats.com, there are 215 million people using the Internet in America. That means 175 million of us have to pay up $5 a month for something we never used or want to use. This adds up to $875 million a month, or $10.5 billion a year, just from the people who don't use peer-to-peer in the first place.

Add in the $2.5 billion they'd collect from the people actually using p2p and we're up to $13 billion a year, which is about twice what the entire industry grossed from wholesale sales last year.

Griffin's idea is to collect a fee from internet service providers -- something like $5 per user per month -- and put it into a pool that would be used to compensate songwriters, performers, publishers and music labels. A collecting agency would divvy up the money according to artists' popularity on P2P sites, just as ASCAP and BMI pay songwriters for broadcasts and live performances of their work.

The idea is controversial but -- as Griffin and Jenner point out -- hardly without precedent.

After reading the quoted paragraphs, I came to the conclusion that this was Jim Griffin's idea. Don't ask me how.

So I said: "This is a voluntary scheme designed specifically to screw the independents, which I attribute to Jim Griffin, who is not to be trusted. Griffin wants to collect money and pay it out, but only to the artists/labels being shared over p2p."

Mr. Griffin took offense to this remark, particularly my saying that
a) he was not to be trusted; and,
b) he only wanted to pay out funds based on p2p traffic.

Griffin says that b) is not true, does not resemble whatever plan he has, that Wired never actually talked to him, $5 a month is too much, and lots of other stuff I won't go into.

I guess Nate Anderson and Frank Rose were smoking crack together or something and came up with the same idea and decided it would be funny to say it was Griffin's.

My admonition to not trust Mr. Griffin was based on the belief that Nate Anderson and Frank Rose had reported facts. Mr. Griffin denies the accusation.

Go ahead, trust him.