About collective licensing and why the music industry has reasons not to like it

In the wake of the Grokster decision, there is a lot of thinking going on about the future of P2P networks and the music industry’s stance towards them. One of the solutions to cope with the problem of unauthorized distribution happening on those networks would be a system of “voluntary collective licensing”, as proposed by the EFF in February 2004:

The concept is simple: the music industry forms a collecting society, which then offers file-sharing music fans the opportunity to “get legit” in exchange for a reasonable regular payment, say $5 per month. So long as they pay, the fans are free to keep doing what they are going to do anyway—share the music they love using whatever software they like on whatever computer platform they prefer—without fear of lawsuits. The money collected gets divided among rights-holders based on the popularity of their music.

Although voluntary collective licensing sounds like a great solution for consumers and musicians alike, the music labels don’t seem very willing to start experimenting with it. The reason? P2P networks are more than just another distribution channel—instead, they fundamentally put into question the labels’ reason of existence. I explain why.

Up until recently, the publishing industry was organized around a “filter, then publish” model. The internet however, has turned this model upside down and gives way to a “publish, then filter” approach. Publishing on the net can be easily done through a variety of tools, such as blogging software, wikis, forums, etc. The filtering part happens through search engines such as Google and Technorati, collaborative bookmarking systems such as and Furl, the Wikipedia revision system, et cetera. (NB: in the case of Wikipedia, this model is not without controversy.) Back in January 2003, Clay Shirky described this shift in the publishing landscape as the “Big Flip” and said the following:

A side-effect of the Big Flip is that the division between amateur and professional turns into a spectrum, giving us a world where unpaid writers are discussed side-by-side with New York Times columnists.

And also:

The music industry is largely untouched by the Big Flip. […]

And that is what it’s all about. So far, the music industry has been unaffected by the Big Flip in publishing and has reasons to keep it like that. If it would give in to a model organized around P2P, it would have far less leveraging power in setting its consumers’ musical agenda. Instead, those consumers would be able to choose from a wide range of songs, going from mainstream music to Long Tail stuff. And in order to make the sifting and sorting easier, we would see the emergence of sophisticated tools for filtering content (again, outside the traditional music industry’s control). Derek Slater:

Rather than just passively receiving music, consumers can actively engage it, altering and adding meanings and impressions of the musical works. When consumers stand beside (or replace) the traditional tastemakers, they also may diminish the control with which those traditional tastemakers had on how we engaged music. Consumers can shape the prism through which they view these works.

To put it differently: a voluntary collective licensing approach to P2P would result in the labels not being THE filter deciding what’s cool and hip anymore, but just ONE of the filters channeling music to listeners. This doesn’t mean that the music labels would become completely unnecessary in such a system; they may become less necessary though, which may result in more uncertainty, but therefore not less revenue. Older productions no label would think of marketing again can suddenly become popular again, resulting in unexpected Long Tail revenue, for instance.

Hence, I tend to think that the record labels’ fight against P2P is not just a fight against piracy and illegitimate copies; it might very well be a struggle against a distribution model that, if it would become mainstream, would force the industry to completely rethink its current business practices.

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  1. hear hear Andreas. speaking from the perspective of a US consumer who is fed up with bad customer service in goods (like electronics and films), I am ready willing and able to put my chips on the line for personal involvement in streamlined services.

    But don’t underestimate the power of brands on your average wary, busy, potentially child-having consumer.

    » Alx on July 8th, 2005 at 16:49

  2. The US Senate’s Subcommittee on Intellectual Property held a hearing on music licensing yesterday. Rob Glaser, CEO of Real, testified among others. Transcripts && webcast here:

    » Alx on July 14th, 2005 at 04:10

  3. Interesting – thanks for the link, Alx.

    » Andreas on July 15th, 2005 at 06:34