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The Music Industry's Extortion SchemeThe record labels want you to pay a tax on music. It's not as horrible as it sounds.

By Reihan Salam
Posted Friday, April 25, 2008, at 7:03 AM ET
Illustration by Rob Donnelly. Click image to expand.

What would you do if a bully—let's call him "Joey Giggles"—kept snatching your ice-cream cone? OK, now what if Joey Giggles then told you, "If you pay me five bucks a month, I'll stop snatching your ice cream." Depending on how much you hate getting beaten up, and how much you love ice-cream cones, you might decide that caving in is the way to go. This is what's called a protection racket. It's also potentially the new model for how we'll buy and listen to music.

Let's back up for a second. Four companies (Universal Music Group, Warner Music Group, Sony BMG, and EMI) control a staggering 90 percent of all record sales in the United States, and they're hopping mad. CD sales are in free fall, and the recording industry's revenues have shrunk from $15 billion to $10 billion in less than a decade. Instead of blaming themselves for failing to embrace the Internet soon enough, Big Music has pointed the finger at piracy, shaking down scofflaw MP3 downloaders with capricious, multimillion-dollar lawsuits. This has not strengthened the record companies' position—at this point, they're losing money and everybody hates them.

Now Big Music is mulling the Joey Giggles approach. Warner Music Group is trying to rally the rest of the industry behind a plan to charge Internet service providers $5 per customer per month, an amount that would be added to your Internet bill. In exchange, music lovers would get all the online tunes they want, meaning that anyone who spends more than $60 a year on music will come out way ahead. Download whatever you want and pay nothing! No more DRM! Swap files to your heart's content—we promise, we won't sue you (or snatch your ice-cream cone)!

Michael Arrington of TechCrunch has condemned this idea as a "music tax" and "the music industry's extortion scheme." Though the proposal is not technically a tax—rather, it's a call for "voluntary blanket licensing agreements"—it will certainly feel like one. And instead of paying for roads, schools, and bombs, you would be helping to keep record executives in cigars and the finest silks. As Arrington argues, there is good reason to believe that this huge pot of money will turn the music industry into a lazy near-monopoly that lives off of fat royalty checks. Once the majors get this guaranteed revenue stream, won't they just spend all their time scheming to increase the fee from $5 per customer per month to $7.50? There's also the small matter that not all Internet users listen to or download popular music. If this plan somehow goes through, millions of moms and dads who pay for Net access so junior can browse Britannica Online will find that they are subsidizing the hedonistic lifestyles of America's most-tattooed singing sensations.

Despite all the downsides, something like the music tax simply has to happen. Most of us don't want to steal music. But it takes a saintly person (like me) to jump through hoops to pay for something you can get for free. I use eMusic and Amazon.com, which both offer DRM-free MP3 downloads. Yet cheapskates galore still have their Limewire and BitTorrent and whatever future file-sharing tools savvy Web guerrillas haven't even dreamed up yet.

That's why piracy can't be stopped. Meanwhile, artists aren't being compensated in a sensible way. Sure, some musicians will make a living by playing live shows and selling T-shirts. A massively popular band like Radiohead can give away its music and still make millions. But plenty of other artists will no longer be able to make a living in the music business as royalties dry up, which will leave our culture a little less vital and a little less fun. What we need is a reward system, one that could eliminate middlemen and encourage a massive upsurge in creativity.

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Reihan Salam is an editor at the Atlantic and a fellow at the New America Foundation.
Illustration by Rob Donnelly.
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