Music Ally

Morning! First session of the Sunday at MidemNet is part two of the music industry and ISPs debate – with this being the debate part, as opposed to yesterday’s set speeches.

Music Tank chairman Keith Harris is kicking things off with a short presentation – they’re working on a draft report based on their Let’s Sell Recorded Music events in the last six months.

“The music business has been in the vanguard of this new digital environment, and the people in the vanguard are the people who get shot at first,” he says, promising that the key now is to muster an “army of thinkers” to decide the best way forward.

On-stage are six panellists: Pete Jenner of IMMF (”I am a leading bullshitter”), Nicholas Lansman of the UK’s Internet Service Providers Association, Geoff Taylor of the BPI, Feargal Sharkey from UK Music, consultant Gerd Leonhard, and STIM’s Kenth Muldin. So all four of yesterday’s speakers, plus Jenner and Taylor.

Sharkey kicks off. What’s the responsibility of the ISPs? He says that’s the wrong lingo to use, but he agrees with Harris that the music industry has been first in the firing line. “I think where we have a responsibility it affects all of us – those involved in the world of technology, those involved in the world of ISPs, and those involved in the world of music,” he says.

“In 2009, we’re at a particularly interesting threshold in the UK… In terms of broadband provision, the market is saturated… We’ve got 24 million households, and 65% of them have already got a broadband connection. And there is an argument that the remainder may never have a broadband connection unless the state intervenes and pays for it.”

And: “I think it’s time we buried all these quite witty soundbites and utopian visions, and start growing up…” He is sitting next to Gerd Leonhard, who raises an eyebrow at that.

Now to the audience, and Playlouder MSP’s Paul Sanders – moderator Ted Cohen is roaming the crowd getting input. “Our role has been to try and provide a commercial connection between ISPs and the music industry.”

And now over to Ron Berry from the Isle of Man government, which has 100% broadband penetration, and is launching a proposal this afternoon for a blanket fee for ISP-based music licensing. “At the end of the day, we’re not going to stop piracy,” he says. “Embrace it… Had the music industry embraced [the original Napster], we’d have a very different medium today.”

Over to Geoff Taylor, who thinks that’s a very encouraging development. “If all the ISPs across Europe were interested in taking licences, we’d be in a very interesting position… and we wouldn’t face many of the problems we face today. But our doors are not being battered down by ISPs looking for licences.”

“If ISPs take the position advocated in the Isle of Man, we’d be in an enormously better position,” he continues. “For the future, ISPs will need services that will allow them to differentiate themselves, and which will add margin.”

So he thinks licensed deals are the future, unsurprisingly. “A large part of this problem can be solved through licensing, but there may be some ISPs who don’t want to get involved, and continue to take the ‘mere conduit’ absolutist position, and there has to be legislation in place to deal with those.”

Over to Lansan, who comes back with the point that not every broadband user wants to download music – he cites silver surfers emailing their family as an example. “There are parts of the audience who will spend a lot on music and entertainment, and parts who will not,” he says.

On licensing, he says his members are “desperate for a simple licence”, but that they aren’t available – for example large ISPs wanting a cross-border European licence for this kind of initiative. “And there may be some countries like the Isle of Man who like that licensing option and other countries who want to go down a different route. So there’s choice for the consumers, choice for the countries… I’m not sure that this one-size fits all that you’re suggesting would work.”

Now WMG’s Howard Singer, from the audience, who agrees with Leonhard’s claim yesterday about compensation, not control. “Warner Music is incubating an effort with Jim Griffin to address that with network providers in the US, starting with universities [Choruss]. Just because the licences are difficult doesn’t mean we shouldn’t do it.”

Over to Leonhard, who goes big picture, saying that the traditional monopoly nature of businesses is going away – “doing something in a dominating way doesn’t work any more, whatever business you’re in… it’s about finding a way we can all create an ecosystem.”

He also asserts that when you take content online, its value (in theory) becomes 20% of its offline value. “It’s happening everywhere, it’s going to happen to books, to TV shows… This is an ecosystem we have to create, it has to be done together, and it requires permission. We are lacking the permission to investigate this ecosystem.”

Tom Fredericks from Clinton’s, in the audience, asks would panellists support some limited scaling back of the safe harbour and ‘mere conduit’ immunity, along the lines of what’s been done to protect people from child pornography?

Taylor says safe harbours go to the heart of what ISPs think is their businesses, and that to try to remodel this would “provoke quite a bitter dispute between ISPs and rights-holders which would last for a number of years”. He also claims that the current laws DON’T absolve ISPs of their responsibility, if their customers are continually breaching copyright.

“I think that’s a better track than trying to reinvent the whole basis of ISP liability,” he says.

Lansan comes back, pointing out that ISPs are always the “easy point to get at” for anything that’s wrong – suicides, child pornography, piracy… “All laws offline apply to the internet,” he says. “Laws for defamation, illegal pornography, child abuse… all apply online, and there are procedures in place to approach ISPs and ask for notices to take down content that is illegal.”

He says there are plenty of examples where the music industry has approached ISPs with these appropriate notices, but that it’s an expensive process, often with a PR backlash.

“I sincerely believe the interests of the music industry and the interests of the ISPs are closely linked. We might have been slinging mud at each other a few years back, but… now I am positive that a deal can be done. If you’re starting at disparate ends, it takes a while to work towards the appropriate price point, the appropriate method, the best licence.”

And no, he doesn’t think rolling back safe harbour provisions is a good idea. No surprise there.

Leonhard comes back, with a comment about restaurants and chicken – ISPs telling consumers what they can’t do, is like going to a restaurant and only being told that you can eat chicken. “As a consumer, you want your choices, you’re going to go where the choices are.”

He continues, saying that the music industry’s desired rules are “just not reasonable”.

Back to Sharkey, who starts by saying he gives “much respect” to Leonhard. He’s about to rip him a new thingummy! “I don’t think that imposing one vision on all of humanity is the way to go,” he tells him. “It’s slightly arrogant to come and tell two very successful industries that they don’t know what they’re doing.”

Jenner jumps in. “Two very successful industries? We’re talking about the record industry, which is in the fucking dumper!… the reality is that people are downloading for free, we’ve got to compete with free. That is the issue. We’re not competing with a $1 download, we’re competing with free. That is the issue we have to address… I can’t see that anything going on at the moment with the record business is going to solve what’s going on out in the market.”

Leonhard again: “Control has not worked. End of story. Let’s switch from control to providing permission.”

Cohen chips in – why is music the only world where control gets thrown out of the window? Muldin now comes in, pointing out that right now, file-sharing sites can’t go legit – there’s no licence that covers legal file-sharing. “ISPs is not the end answer of anything, but today, ISPs are maybe the only route to license the illegal file-sharing that takes place today.”

And he cites research from Sweden that 70% of illegal file-sharers are willing to pay for it. But comes back to his point that alongside licensing, there needs to be legislation to attack illegal file-sharing – even if you offer a licence, some P2P sites won’t go for it, and need to be dealt with.

Leonhard again, coming back to yesterday’s theme of all the people – brands, handset makers, advertisers – who are willing to subsidise consumers’ music usage.

Jenner again, who says “there’s no indication that the record industry is close to making it simple” on the licensing side, claiming that in the US, “if you hae a song with 27 different songwriters, you have to get 27 different licences”, while in Europe there’s the issue of getting 33 different licences to cover the whole territory.

“We have not shown any indication in the record industry that we are willing to adapt a simple system that makes it easy for ISPs to license and pay,” he says.

Question from the audience: someone suggests that it’s not correct that the industry is competing against free – they’re competing against fairly hard-to-use services like BitTorrent.

Lansan comes back: “The problem with BitTorrent is that it’s actually easy to sue. They’re offering lossless files, a good user interface… if we can produce something that competes and charge a fair price for it, and do some of the work in parallel by writing to consumers, you’re going to be on at least the right path.”

Someone mentions the success of iTunes, which provokes a response from Jenner, who says it’s still not replacing the net decline in recorded music sales. “There’s an enormous range of possibilities open – Trent Reznor comes in at seven price points – people are willing to pay for things in different ways, but we are not meeting that challenge.”

Leonhard again: “The value is not in the file, it’s around the music. A copy is a mere copy, we’re not going to make money with just the copy.”

Another question from the crowd – we know the problem, and we know the solution (a licence), so will we get a deal this year, or having the same discussion again next year.

Sharkey: “Some of us have stopped having this repetitive conversation. In the weeks, we are potentially weeks, and if not months, away from some of these services being rolled out… There’s an awful lot of progress being made.”

He admits that the music industry needs to have a look at how easy those licences are to get, and that’s something under discussion between UK Music and the ISPA.

Over to Lansman, who says the dialogue is taking place and is constructive. “I am optimistic, but time scales are an issue here. I’m not sure if next year we’ll be having this conversation – it would be nice if some ISPs came to MidemNet and had those conversations with you. But I don’t think we’re going to solve this in a year. It will take time… We’re talking about several years here, not for the deals to be done. We’ve got to persuade customers to change their methods, and to do that, the more compelling the offering, at the right price, the more people you’re going to convert from P2P to legal services.”

Muldin now, who says nothing will kill P2P – it has to be licensed, and then sanctions against illegal file-sharing. “You can’t change people’s behaviour on the internet – consumers will win in the end. ISPs may not be the only vehicle to do this in the future, but right now, co-operation between rights-holders and ISPs is necessary.”

Jenner totally agrees, he says. “We have to move away from the idea of licence, and towards the idea of compensation. The idea that every track to every service has to be individually licensed is a nonsense… It is naive to think that government hasn’t got a role. I don’t see how we can expect everyone to play the game if government has a completely hands-off attitude. And if they do, I think they’re going to witness the collapse of the content industries, and I don’t think they’re willing to do that.”

What about privacy? How will we track consumer behaviour and usage, without infringing their privacy? Jenner says it should be about counting the traffic on the network, not individual consumer usage.

Taylor now: “Nationalising the music industry on the internet is not the way… My personal view is that it is going to be more complicated to try to design a single collective licence for the internet than it is to let the market do what the market does, and strike individual agreements.”

He cites Sky in the UK, TDC in Denmark, and the services in France as examples. “It is more likely to happen through the operation of the market I believe than the creation of a collective licence.”

Jenner comes back, saying a collective licence isn’t one-size-fits-all. So different services could offer different licences. But Taylor says developing those licence schemes will take a long time, and that “the market is more nimble. We would all love it to be much quicker…”

Radio has cropped up repeatedly as an analogy for a possible licensing model, incidentally. Jenner likes it, Taylor isn’t so sure, contrasting the revenues generated by radio in the UK with those from recorded music.

Now the panel are arguing about whether there’s a licence for on-demand streaming – Leonhard says not, Taylor shouts “What about Spotify? We7? Last.fm?” It’s getting quite feisty.

Sharkey points out that “80% of what we’re all saying is the same damn thing… What we’re disagreeing about is the final 5% of the puzzle.”

Now Gary Churgin from Harry Fox Agency, in the audience. “There are two aspects. One is the collaboration between all the players who have a stake in the pie… we’re not there to destruct, we’re there to construct.” He says a series of interim steps as opposed to a big bang may be the way forward. “It’s a matter of putting our heads down and getting the work done.”

And that’s it for the session.

Tags: midemnet

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