Mathew Ingram is bringing up important considerations with regard to Jim Griffin's plan to Tax ISPs for music data on their networks. I have talked with Jim about this at SxSW, and he hates the term tax, he calls it (I'll paraphrase) "an agreed upon and negotiated fee (without government intervention) with an ISP, which will eliminate the threat of being sued by the RIAA et al." In this sense Mike Arrington is correct in calling it "Protection Money". However, as the courts have determined ISPs are NOT liable for the data transmitting through their lines. So unless the government legislates away this protection, what exactly is the incentive for an ISP?

It is either a tax:
If government does legislate away the ISPs' protection ordered by the courts to support this initiative, then I would say it MUST be a tax.
If so Mathew rightly points out that this a slipper slope for all cultural industries:

"What about the movie companies, and other media companies? What about photographers who claim their work is being stolen?"

And I would add what about other digital content, including software?
Not only do we need to ask, how much is a poem I read on the Net. But how much does Yahoo get for me using Flickr?

Or it's collusion, and quite possibly extortion:
With all major record companies teaming together there is obviously a serious anti-trust issue here.

The fact that Jim has mentioned that he would go after the Universities first, and then the ISPs gets my back up a bit. Why not the ISPs? Well they have no incentive as per above. But Universities are not ISPs, and this at least on the surface has the danger of sounding extortionist (please excuse the inflammatory language, I'm trying to make a point not accuse or imply that anyone is a crook.) Universities are probably the most concerned about students and the institution being sued (successful or not). As such going after the most 'fearful' wether they are in the right or not, certainly would sound like 'protection money' would it not?

An ISP Music Tax, taxes the WRONG people

I have brought this up before, and I said it to Jim directly. The biggest issue I have with this scheme is that it taxes the wrong people. Jim is trying to recover money from the declining sale of CDs, but he is not targeting the people who buy CDs, he's targeting everyone. When he talks he talks about music being purchased now or in the 1990s he always talks about "the average" (or mean) and consumers only being charged about 3-5 dollars per month. However, looking at the average is a red-herring. The fact is MOST people (Mode not Mean) spend 0 (ZERO aka NOTHING) on music in any given month or YEAR. In fact the Median spent on music is also ZERO. The vast majority of the North American population does not spend money directly on music. Jim's plan in effect forces the majority of the population to subsidize a small group of people like me who do buy music. Forcing anyone to subsidize my hobby and entertainment preferences is misguided. Should I subsidize people to play golf? I know a few people who would like that. ;) (Joey!)

Now although I do not agree with Jim's approach to this issue, I have never met a man so open in discussing his plan - especially one so controversial. He will talk to anyone about it - in detail. You won't sway Jim's opinion, but he will listen to you and give respectful responses. You will either be swayed to Jim's way of thinking, which I admit is seductive, or you will reach an impasse where Jim understands your view, and will offer a respectful "we disagree", which is exactly correct. We disagree.

Music on the radio (and later MTV) has always been free for fans. Advertisers paid for it on the fans behalf. In fact the record labels were willing and eager to actually pay to have their songs playing for “free” on the radio, but that was deemed illegal.

Record company execs monetized those free plays by selling packages of convenience in the form of discs and tapes so that fans could have, on demand, the music that they liked. Those packages also had collection and connection value to fans, which the industry has all but forgotten. Not surprising, I guess, since the industry is predominantly run by lawyers. (See Rule #1)

The MP3 is now the most convenient medium for music rendering the convenience of tape and disc packages irrelevant. The problem I see is that the industry is trying to treat MP3s as the replacement for the packages they once sold. They want to now sell MP3s: just the audio files, but they have never sold audio files. They gave audio files away for free on the radio. Record companies and performers sold packages. It should not be surprising when people view these naked MP3s as FREE. It's just a type of radio. It's not what fans buy.

Wow, I'm still somewhat shocked that there are people who believe that subscriptions are the answer. The problem is marketing. Rhapsody (and formally Yahoo!) doesn't know how to properly market the service. Yahoo! Music is the number 1 music site on the Web. If they can't market a music service I'm not sure who can. Still I even heard from one of the smartest guys in the industry that if Apple would offer subscriptions as part of iTunes that will be that, subscriptions will come of age.

Sure. Apple might increase subscriptions, but only a small fraction of people (possibly even myself if the price is right) will ever choose to have subscriptions. The reason subscriptions are only popular with a small fraction of people is not due to lack of marketing it's a result of PURE economics.

I wrote about this 3 years ago in a post called, Why Music Subscritions Fail:

"Having [a music subscription service] tell me I have 1 million songs at my finger tips for $9.95/month is irrelevant. I will never listen to a million or even 100 thousand different songs in my life time. And I only have the capacity IF I am lucky to discover 100 new songs that I like and will listen to more than once this year.

So a subscription model will cost me about 120 dollars during that year for those 100 NEW songs. And I have to pay again for them next year unless I discover another 100 NEW songs I like. So as a rational person, I would rather pay for the 100 NEW songs once for a total cost of about 100 dollars.

Now if the subscription model was less than 100 dollars you have me interested, but forget about my wife as a customer. She discovers about 3 new songs a year that she likes, so the subscription for her better be under 3 bucks."

It is also for the very same reason that imposing a flat tax/levy on ISPs and subsequently on all users regardless of their music listening habits would be viewed as EXTREMELY unfair taxation and doomed to kill any government which tried to levy it. I believe that the only acceptable levy would be so close to the margins (cost of delivery) that very little/meaningful money at all would ever make it back to an actual artist. In that situation what would be the purpose of the levy again?

I made a post on what I thought was the essential architecture of a digital music package. The top left section represents the metadata or facts that describe:
1. An artist, or
2. A group, or
3. A song, or
4. An album or music collection

Presently there are a number of options for this:

All Music Group (AMG)

AllMusic.com
Pros: Structured data, highly accurate, deep in content for major artists
Cons: Private, terms and license not open, not offered as a Web service, not timely as most indie and non-English bands are not represented, cannot be updated by third parties

Audioscrobler

Audioscrobler.com
Pros: Web service, timely metadata
Cons: Private, terms and license not open, light on artist content as metadata focused on discovery and social map, cannot be updated by third parties

Music Brainz

MusicBrainz.org
Pros: Non-profit, open, free, structured data, updateable by community, pull web service
Cons: Complex model, incomplete and inaccurate content, difficult to maintain and update, not offered as a Web service No API for updating/writing to the service

Wikipedia

Wikipedia.org
Pros: Non-profit, open, free, in depth and highly accurate data, timely updates
Cons: not structured data, not offered as Web service.

Why are non-profits better for offering a metadata service?

You may be wondering why I listed non-profit entities as a pro, and private companies as a con. My friends are wondering – that’s for sure. The reason is simple, and it has nothing to do with wanting to sit around the open Web campfire singing “Kum By Ya”. It’s pure economics of the new digital world.

Non-profits are simply the stable entity for offering metadata, whereas private companies will be inherently unstable. Music metadata is factual content about known items. As such the cost of acquisition of this data is quite low and falling. The price of metadata, like that of music will approach ‘near free’. Wikipedia already offers better quality music metadata than the other 3 services combined. If Wikipedia data was offered as a structured web service it would be game over.

Check out Wikipedia’s entry on Pink Floyd.

Check out All Music Group’s entry on Pink Floyd

Save for music moods and similar “taste” data, Wikipedia’s is far richer for describing the band's history and relationships.

As for timeliness it’s no contest:
Check out Wikipedia’s entry for local Vancouver band, Art of Dying

Against All Music’s Art of Dying entry.

An indie band has to stop being "indie" before they will be properly covered on AMG.

Why didn’t Music Brainz make it as the default service?
It was staffed by wonderful, incredibly smart, and committed people who understand the need for a free and open metadata service. However, in my opinion Music Brainz is simply way to complex, tedious, and time consuming to update. Wikipedia on the other hand is dead simple. End of story. However, the Music Brainz still has a lot to offer as we discovered.

Building new music metadata Web service

Unless you have deep pockets AMG is out of the question, but Wikipedia does not provide a web service with structured data. So, how can new Web based music businesses effectively use the data?

So to solve this problem we have taken Wikipedia and joined it to Music Brainz to get structured Wikipedia music metadata. That’s cool and useful. At least we think it is.

We will be offering it as a free “for commercial use” Web service in a few months. Sure, we could offer this service at a rate to undercut All Music Group and there would be many takers, but then someone else would come along and under cut us, and so on, and so on, until finally the price was near the cost of offering the service – the margin, or “near free”. So let’s skip all of that rigmarole and go right to free service.

A service like this will help give the hundreds of small music service companies trying to innovate a leg up and an opportunity to innovate rather than trying to collect or pay for music metadata.

Yes there are costs to offering this service: support, hosting and maintenance. We figure the way to pay for this is for companies who hit the service frequently to pay a minimal fee. Hence, ‘near free’. So a new company can use the service for free and make money using it. Once thet grow to the point where they use the service frequently they can help support the infrastructure by paying a small fee.

We are still about 3 months away from releasing it as a service to the public. So, if someone comes along and offers this service before we do, great, we should all use it. The economic rules won’t change.

However, should people take to our implementation, we are going to need some help. Maybe Jimmy Wales can take it over as part of the Wikimedia Foundation. It is using data from his baby after all. Maybe Mozilla or Music Brainz can help and show how this can be managed. We are open to and are actively seeking suggestions.

In my previous post, I described a basic music experience that I would like to have. In this convenient experience there are two types of content with two classifications.

A. The two types of content. Let’s call them:
1. Official Content .
2. User Generated Content , or should I say Fan Generated Content.

and,

B. The two classifications of content. Let’s call them:
1. Free Content. Content that is readily offered without thought to compensation.
2. For Sale Content. Content that the owner wishes to make some financial return. It may be offered for free in lieu of other considerations.

So we have four quadrants:

Quadrant 1: Facts

(Top Left)
The upper right quadrant of Free/Official content. This is the metadata and factoids for the song, album, or artist in question. It can also be the meta-media, which the copyright holder is offering openly for consumption, such as album art, liner notes, possibly even lyrics.

Quadrant 2: Original and Fair Use

(Top Right)
This is original and fair use content generated by the fan. This is the reviews, photos, artwork, opinion, etc. It may even be copyrighted material under fair use provisions.

Quadrant 3: Creative Works

(Bottom Left)
This is the creative content developed by the artist(s). This includes audio, video, pictures, imagery, interactive content, etc. Consumption can be “Free”, and compensated by other modes other than money. This can be any type of content not just the typical song, pics, and video. Think interactive digital items. Widgets if you must, but don't limit your thinking to the common Flash widgets populating the web-o-sphere at the moment.

Quadrant 4: Derivative Works

(Bottom right)
This is content that has been remixed, mashed-up, reused and re-published as a derivative work. The question mark represents content that will be anything that reuses column 1 content. Like quadrant 3, we shouldn't pigeonhole this region to video, pics, audio, etc. Also, let's not forget that other artists can be fans, too.

We believe this is the essential architecture for a digital media package solution.