We have seen before in the new economics of music how the music industry is suffering from the same Analog Dollars = Digital Pennies problem that currently plagues all sectors of the media online. You no longer need to buy the whole newspaper or magazine to read the one or two stories you are interested in so why buy a whole album of songs when you just want to listen to the 1 or 2 hit singles?
Probably the key statistic coming out of this report is the news that the global music business has shrunk by 31% since 2004.
Yes the digital music business has grown by 1000+% and there are now over 400+ licensed digital music services and in 2010 digital music accounted for 29% of global sales. Delivering $4.6 Billion in revenues. But the fact remains the industry as a whole is shrinking rapidly.
“Around the world, 10 million people have already signed up for subscription-based online services from Spotify, Rdio and Deezer, some of which have attracted additional millions of users with free, advertising-supported services.” - New York Times
The question is can the industry recover those lost revenues?
The industry is banking on Governments to assist them in turning the industry’s fortunes around by clamping down on music piracy and file sharing. But is suing the audience really the right approach to solving the problem?
As we discovered in our exploration of the problems plaguing the book industry it is far easier to “tax” the Telcos than it is to build paywalls and prosecute the audience.
The music industry could claw back the lost revenues simply by negotiating with the Telecoms industry to charge each internet and mobile phone subscriber a “free” content access fee.
Assuming piracy is a personal consumer we discover, thanks to Tomi T Ahonen, that there are an estimated 525 Million households in the world with a PC connected to the internet.
To have provided a free global internet service in 2010 the music industry would have had to recover $10 Billion from the world’s Telcos (i.e. the losses since 2004 + the digital music revenues under the assumption why use iTunes when you can get it for free?).
This means the Global Telco Music Tax equation would look like this $10 Billion/o.525 Billion Connected Households = $19 per year per household or $1.59 per month.
The problem is of course what happens to CD sales if the you can get everything for free online?
Assuming the industry needed to make as much as $20 Billion to match the 2004 revenue estimates then the industry needs to find another $10 Billion.
It could achieve that, and probably even more, simply by adding the same $1.59 tax to mobile phone subscribers.
Of course applying this tax in the developing world could prove difficult so let’s just concentrated on the industrialized world. Here Tomi T Ahonen estimates the number of individual mobile subscribers to be 1.05 Billion and the number of internet households at 315 Million.
Based on these subscriber figures even if the music industry rounded the Music Tax down to just $1.50 and then taxed just the industrial world’s Telcos monthly to provide their 1.3+ Billion internet and mobile subscribers with free music they would be significantly better off than what they are today. (i.e. 1.3 Billion x $1.5 x 12 Months =$23.4 Billion)
The Telcos would simply add $5 to the monthly bill (i.e 34U74Me) and everybody is happy… assuming of course the industry’s piracy data is correct the Telco’s customers want access to free music to share with their friends.
Posted on January 26, 2011
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