ISP Tax: A Solution For File Sharing?

Andrew Orlowski has written a fascinating article over at The Register, which details how an ISP tax to cover the revenues lost to illegal downloads will destroy innovation in creative industries, specifically with regards to marketing and distribution. For those who don’t know, there has been a proposal floating around for a number of years that a good way to counter-act the effects of file sharing on the internet would be to add a surcharge to everybody’s monthly internet bill. Essentially, everybody would pay a little bit extra every month and those who choose to swap files for free will live without fear of reprisal. On the surface, it seems like a perfectly logical idea, one that incorporates some key realities about illegal file sharing, AKA:

- It happens
- It can’t be circumvented
- The vast majority of people who listen to music are fine with it

So instead of building a building a wall of sand to hold back a tsunami, the music industry would just roll with the tide. After all, changing an accepted practice means that the change would need to be 10x better than the current option, and what is 10x better than free?

To counter-act what seems to be impervious logic, Orlowski presents what he believes is a common situation for a startup in today’s Internet age:

- The founders have little to no creative talent except for latching on to trends         discovered by others
- The goal of the business is to make money

Let us consider paradigm in the context of the music industry:

Folks in this position start their business, utilizing “crowdsourcing” to supply content for them to distribute at no cost. By perpetuating the idea of the Long Tail, or that the real gems are to be found in the most unlikely and under-appreciated spaces, more and more people are encouraged to produce content, thinking that they are the diamonds in the rough. More and more people join in, and the cycle of leeching content from the unwashed Internet hordes that participate in the great creative gold rush continues unabated. However, some serious problems will eventually develop. Like it or not, the vast majority of people who aspire to be successful musicians will not inspire anybody to listen to them outside of their immediate social circles, and those small groups are not homogenous enough to be meaningful to advertisers on a large scale. In addition, the sheer amount of music being created will make the worthwhile stuff much harder to find and eventually users will begin to be frustrated, moving away from using the service at all.

If you work at MySpace, then you should absolutely be blushing right now, because I’m talking about you.

So how do they solve the problem? Larger, more popular content creators must be secured in order to continue generating income, but, as Orlowski points out, there are a couple of problems with this:

A) They will probably (definitely) want money
B) They have the law on their side so we can’t just take it and hope they don’t notice

This means that the business model built on a supply of content for near zero-cost will have to be altered and companies will begin paying for content just so that they don’t lose their traffic. Music sites increasingly rely on tried-and-true big names in order to lure people back to using their platforms evidence this. This is only a temporary stop-gap measure as, ultimately, the crowd-sourced music model of sites like MySpace will fail, which is probably a good thing. There is no consistent effort being put into finding and rewarding the new flashes of raw genius, and those who are looking are having a harder and harder time finding them. This means that getting noticed in today’s landscape is only achieved by the truly determined, which is probably proof of their ability to be successful. An eventual mass realization that quality is more important than sheer quantity would lead to a revitalized creative landscape, one that might return the music industry to being profitable for those who deserve to make a profit.

Unless we implement the aforementioned ISP tax.

As Orlowski points out, without the difficulty of licensing music, then the cycle of creative malaise will only continue, and innovation and uniqueness will continue to be lost in the shuffle. Artists would no longer have to worry about how their music was being used on the internet, and there will be no reward for rising above the fray as everybody will be getting paid whether they innovate or not.

What do you guys think? Is an ISP tax a good thing? Or will it just destroy innovation in the music industry?

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Further reading: Michael Arrington’s great article on Techcrunch.