Welcome to Paul McGuinness’ next version of the Internet: policed, censored, throttled and fully under his control (a comment on Paul's speech at MIDEM 2008)

Update: you may also want to read my guest-blog post at Last100:  Gerd Leonhard: Flat Rate or Flat Line - further thoughts on the Music Flat Rate

Here, finally, is my rather long-winded response to Paul McGuinness’ MIDEM 2008 speech.

On January 29, 2008, I sat in an auditorium at the MIDEM conference in Cannes / France, listening to U2’s manager, Paul McGuinness. Paul delivered a chilling speech that, hands-down, accounts for one of the worst moments in my 10+ years at MIDEM (and yes, there were a few others).

I was very seriously challenged to listen to Paul’s entire spiel without jumping up and telling him how much he is barking up the wrong tree, and how much damage he is doing with this performance. But the worst part was yet to come: after Paul's speech a panel of managers ensued that that – apart from a good friend, the ever-sparkling Peter Jenner - was so obviously fanning Paul that I simply had to leave the auditorium in a hurry.

Paul’s speech single-handedly ruined my day, overshadowed an otherwise quite interesting MIDEM and left me with a sinking feeling about the Future of the Music Industry, a topic that I have occasionally addressed in the past;).

Imagine one of the most progressive musicians (Bono), one of the most amazing bands ever (U2), represented by a man that sounded like he has been out snow-camping in Greenland with his buddies from the IFPI, BPI, RIAA and UMG for the past 5 years. Ouch.

So, here are few comments on some of the hand grenades that Paul threw into the audience during this occasion.

To quote Paul: “And as it turned out, the "Safe Harbour" concept [that governs the ISPs’ liability] was really a Thieves' Charter. The legal precedent that device-makers and pipe and network owners should not be held accountable for any criminal activity enabled by their devices and services has been enormously damaging to content owners and developing artists…”

Let me ask you this, Paul: do you really advocate web sites, communities and networks scanned and censored, emails read and screened, Instant Messenger conversations monitored, Skype calls supervised, USB sticks DRM’ed, hard-drives sealed, flash memory cards locked, rootkits and software locks on our computers, a read-only web, the end of remixes, and the implementation of an online police state that without a doubt will only bring us new censorship and the demise of fair use and free speech while the un-paid and unlicensed trading of music will soar to new heights in 100s of new ways that we don’t even know about today?

If, according to the gospel of McGuinness, this should be done with music, how about films? TV? Cartoons? Logos? Images? Texts? Books? Magazines?  Who decides what’s okay to use and what not? You? U2? AllofU? Your new company maybe? Your buddies at UMG? Or someone you assign and control?

Any hope that I may have had about the managers - along with the artists they (I thought) represent, and maybe along with the writers and composers - forcing some real change on the music industry right now were obliterated by Paul’s rant which most of time sounded like it was remotely scripted by RIAA, IFPI, BPI or UMG. Lobbying talk in its most classic form. Any hope that I had for the ISPs and telecoms even wanting to discuss the possibility of a blanket license for the 'feels like free' use of music on their networks was slashed by Paul's incredibly misguided and counterproductive speech.

Says  ueber-enforcer Paul: “A simple "three strikes and you are out - enforcement process will see all serial illegal uploaders who resist the law face a stark choice: change or lose your ISP subscription…”

Paul, with all due respect, this is bizarre. How about a simple ‘one license and you’re IN’ proposal by the industry, led by people who know what's real and what's not, something that would actually turn all those alleged micro-criminals into engaged and bankable consumers, market participants, revenue generators? I can’t fathom why you still don’t you get it – these people LOVE MUSIC. Your artists. Your bands. All you need to do is MAKE IT AVAILABLE without asking for the moon, and without treating them like thieves. This kind of attitude will sink the ship, Paul – and not just yours.

McGuinness’ incessant calls for tougher laws, more enforcement, more internet police, more CONTROL, more special forces that hunt down every possible unsanctioned use of content on the Internet are surfacing though-out this speech, making the MPAA's Jack Valenti's (rip) famous quote on VCR users = criminals sound like a socialist mantra. The death penalty for refusing to buy CDs, anyone? Jail for refusal to love DRM? Digital isolation for employing the web for unregulated uses?

Another juicy quote from his speech: “President Sarkozy's plan, the Olivennes initiative, by which ISPs will start disconnecting repeat infringers later this year, set a brilliant precedent which other governments should follow…”

Paul, with all due respect (again), this is an utterly ridiculous concept, and this kind of web-police idea will never fly (and what’s worse, I think you know it!). Even if it were technically feasible to ‘filter’ (as you call it) all so-called unlicensed music from all the networks, everywhere, where would we end up?  Digital networks utterly devoid of music because it hasn’t yet been made available by the same people who don’t yet know what IM, RSS, social networks widgets are, or full of ‘secure’ music that is licensed on terms that are an insult both to the users and the companies that serve them  - just like we’ve had, until now: loaded up with copy protection and bizarre usage restrictions, and nothing but hurdles for the consumers.

Or maybe you'd like a world where only a privileged few can legally provide music, where distribution is safely back ‘under control’ and 4 or 5 companies run the show? Well, I guess, as long as you are working nicely with one of them it won’t matter, will it? Just in case you haven’t noticed it, Paul, you seem to be advocating some kind of Police State here, a regime, a cartel – somehow it’s hard to believe that you can represent Bono with a view of the world like this.  And why do you want tougher laws and a ubiquitous web police? Apparently because you are still, after all these years, unwilling to change the way you have been doing business for 31 years, i.e. under your control, your way or the highway, pay to play. Power. Control. Enforcement. Is that it?

Among the many things that you just don’t seem to get (or that remain cleverly hidden?), Paul, is that the very system you are so used to, that holy operating paradigm of Total Control, is broken at the core, and that more policing, more stringent laws, more criminalization and more attempts at putting CONTROL back into the system, will not make it well again - these attempts at reviving the comatose paradigm are doomed for failure. And the worst part, Paul, is that your artists already know this, I bet.

Again: a true, new, voluntary collective license (i.e. legal framework for national Music Flat Rates) would mean that everybody can legally use music and that everybody pays, somewhere (either with real cash or with attention) - but without the pain of constant needling for a $ per song, without the granularity, and yes, without all that control you seem to be so fond of. Music that is as 'freely' (but NOT for free!) available and as omni-present as water or electricity, with everyone paying and everyone using, and with ubiquitous coverage, accessed via a large number of entry-points (Net, Cable, Wireless, Satellite...), using many different devices, and in many different shapes and incarnations.

It is a fair and equitable system where all users, and / or their service providers (who you seem to hate so much for not wanting to pay you), happily and automatically make small, 'feels-like free' payments to be able to access a large pool of music, without restraints, all-you-can-eat, anytime, anywhere. A system where the works of any creator and rights holder can easily be found and discovered, used and compensated for, simply by virtue of BEING IN THE POOL, and in the essence, proportionally to the actual use of their works. Sounds an awful lot like Cable TV or like Radio, does it not?

Paul, allow me to call upon your common sense. PLEASE start supporting the fact that we need a new LICENSE that can create this flat rate because everyone will, by default, have access to music, in the connected, digital-natives-ruled world that is quickly coming upon us.  Not new sticks - new carrots is what we need.

Let’s face it, Paul and whoever whispered in your ears before your MIDEM speech: the user has won, hands down, in the 10-year old battle of "Us (the record industry) versus Them"; the system as we know it is bursting, the dam is broken, and everyone is gearing up for the new models. Google will offer 'free music' in China, Asia and African nations are pondering alternative compensation systems for music, and not a court in the (free) world will make Internet service providers directly responsible for the exact nature of the 1s and 0s they are carrying (unless, maybe, you also want to do away with free speech, fair use and all that other ‘hippy’ stuff you seem to be alluding to).

No matter how much you liked the way it was 15 years ago, Paul, what you said (paradoxically) in your own speech is coming true right now: "Access" is what people will be paying for in the future, not the "ownership" of digital copies of pieces of music” .  You are right on this, but where it all goes horribly wrong is when you start talking about whose fault it is: the ISPs and all those California anarcho hippie geek tech companies that have been allowing people to use all that music for free, and making billions on back of other people’s work. Give us a break, please. What really happened is that they could not and would not be licensed under terms that would allow them to stay alive, and so… they didn’t, and they weren’t. They had (and still have) the simple choice of shutting down or be illegal - because after a mere 10 years the music industry has not gotten around to offering licenses that actually work, yet. And where have you, and the BPI and the IFPI been during all that time, how did you / they try to change that and create value, rather than destroy trust?

All those great inventions of technology (e.g. the original Napster1.0) could have been used to the great benefit of the artists and the other creators – but the threats to the middleman did not allow that. Staying in control was (and apparently, still is) more important than making money for the artists – after all it was only the middlemen who ever really cared about CONTROL, to begin with.

This desperate need for Control, Paul, emanates from your words, loud and clear, and it is this outmoded paradigm that will run the ship into the cliffs; for you can, in the future, no longer retain all control and still make it work for the user. It is THEM who are in charge now – can’t you hear??

And about those ISPs you want to force into submission and turn into assistant deputies of the MP3 police: they had to be / play ‘dumb pipe’ because there was (is – thanks to all those great people you support with your speech) no way for them to avail themselves of a valid, legal, fair license – just like the Radio operators (remember RCA and CBS… anyone?) almost a hundred years ago.

On to another great McGuinness nugget: “for ISPs in general, the days of prevaricating over their responsibilities for helping protect music must end. The ISP lobbyists who say they should not have to police the internet are living in the past -- relying on outdated excuses from an earlier technological age”
Paul, take a good look in the mirror: isn’t it the music industry that is relying on ‘everything outdated’: outdated licensing schemes, outdated copyright versus broadcast definitions, outdated business models, and outdated hard-ball antics such as yours at this year’s MIDEM - a speech that created fear and friction where openness and collaboration would be urgently needed. How disappointing.

But you take it further, bizarrely: “I think the failure of ISPs to engage in the fight against piracy, to date, has been the single biggest failure in the digital music market” to which I can only respond with “the decade-old failure of the music industry to license the inevitable sharing and use of music on digital networks has successfully deprived artists and writers of billions of dollars of income”. And why? Because the middlemen (a club of people to which you are confessing strong allegiance) don’t want to be lose control over their part of the value chain.

This - KEEPING THE POWER- is the real issue and this is what I took home from your speech. I, for one, can’t possibly imagine that your client (U2 / Bono) would agree with your bottom lines here: let’s police all of the Internet, all the time, everywhere, so that we can get some control back and run this show like we used to. Oh yes, with a small caveat: we’ll talk about that trendy flat rate after you cough up those billions of dollars you owe us from messing up our game. That’s just not enough, Paul. Sorry. This is not about rigging things up so that they still are all nicely confined and 'under control'.

The bottom line is that the proposed voluntary collective license i.e. the Flat Rate for Digital Music is probably the only approach that will really work, going forward. It will provide digital music amnesty, offer the ISPs and their users insurance against inadvertent copyright infringement, afford compliance, generate very large pools of money, and build a safe, stable and growing system of music consumption and creation.

Leaving no minefield untouched, McGuiness moves on to talk about the Mobile Music sector: “a lesson for the mobile industry internationally. Don't go the way that many of the ISPs have gone. Mobile is still a relatively secure environment for legitimate content -- let's keep it that way…”

Paul: I hate to tell you this but there is no such thing as the mobile Internet, the mobile web, or your envisioned ‘secure’ mobile music world. For many people in the developing countries, “Google” will be their first English word, and they will experience the web only on mobile devices (fka ‘cell phones’). 

If you think that content security will be a top concern for the makers of those estimated 4 Billion devices that will be sold in the next 18 months, think again. And if you think all mobile device manufacturers will be paying a nice hefty fee for the use of all music (which is a must) locked up in only those authorized ‘handsets’ – akin to what your buddies at UMG have received from Nokia – then you are indeed chasing an illusion (come on, now, really, a content-levy for cell phones – just like CDs and DAT tapes???)

Here is the thing: the Music Flat Rate is only the Tip of the Iceberg. The Flat Fee Music concept I keep describing in my books and presentations will only be the very tip of the iceberg of what will happen in digital music commerce if we truly embraced this new ecosystem; in fact, I would say that while flat rate-derived fees would be quite substantial (and of course, recurring!!) they would still only represent less than 30% of the total revenue potential that this new approach would unlock. Some of the other revenue streams could be things such as on-demand live show recordings, interactive webcasts, exclusive pre-releases, advertising revenue shares, special products and many different kinds of new audio-visual products - the list of options is getting longer every day. A budding new $100 Billion industry.

But Paul asks: “So, to conclude -- who's got our money and what can we do”; to which I want to shout back: stop vilifying the users or the companies that empower them (ISPs, search engines, or social networks) – that is a dead end street. You won’t control them, ever; you’ve lost that battle already, GIVE IT UP.  The new money is in the Network; all you need to do is license it. Assemble all your friends from the BPI, the IFPI and the major labels as well as the rights societies, and offer an irresistible blanket license for any and all music streamed, downloaded aka used on digital networks, and see the new money roll in for everyone. 

But this is the keyword where I think it ends for you, Paul: EVERYONE.  It seems to me like you don’t want an equal and fair remuneration for every artist and every company that represents artists – you seem hell-bend to stay solidly in control of the financial fate of your artists, to create primary benefits for the company that owns their rights (Universal Music Group). If all could be arranged between the top-selling artists and the biggest labels (and maybe that technology company you invested in…?), you’d be a happy man, right? 

But sorry, Paul, to break this news to you: it’s too late for that. The USERS now run the show, no matter how much you dread the idea.

And one more thing we need to clarify: beyond the proposed Flat Rate comes a huge tide of new revenues from what I like to call ADVERTISING 2.0 –targeted, customized advertising-as-content represents an explosive growth opportunity that many analysts have described as 100x as powerful as the current advertising market. A revenue share from next-generation, personalized and targeted advertising would dwarf any money that we could make just selling 'copies' of songs, and could indeed more than pay for the music in the network.

But Paul said: “it follows from the U2/Apple deal, the principle that the hardware makers should share with the content owners whose assets are exploited by the buyers of their machines…”

To which I would like to respond that the key to monetizing music is ON THE NETWORK not in the devices (or at least, to a much lesser degree). The music is on / in the network, and the money is in / on the network. The solution is a Network License not some private flat rate that one major schemes with one hardware manufacturer. It is not too hard to fathom that if you scaled the Nokia / UMG concept to all devices and all music it would be financially utterly infeasible for the device makers as well as their customers – and you would still be complaining that it’s not enough! The money is in the network, Paul – it’s as simple as that. 1 Euro per week per user would do it, and 1 Euro is also feasible in terms of raising the cash from advertising, sponsorship and upselling - resulting in a very powerful ‘feels like free’ model for the consumers.

Finally, Paul ventures out even further: “the ISPs, the telcos, the device makers. Let's appeal to those fine minds at … Silicon Valley, Apple, Google, Nokia, HP, China Mobile, Vodafone….etc, and the bankers, engineers, private equity funds, and venture capitalists who service them and feed off them to apply their genius to cooperating with us to save the recorded music industry, not only on the basis of reluctantly sharing advertising revenue but collecting revenue for the use and sale of our content. They have built multi billion dollar industries on the back of our content without paying for it…”

This kind of ridiculous whining about other people making billions of dollars of the back of artists is usually reserved to industry lobbyists, Paul – what in the world happened to you??  It is nobody’s job to ‘save the recorded music industry’ but OURS i.e. those that are in this industry (counting myself in here, for now) – why would any of these people be responsible for the recorded music industry’s future?  While I understand the emotional part I fail to see your business logic here, Paul. We could have provided licenses to all those companies and people a long time ago. We could have collected a revenue share. We could have used their networks to upsell to other music services. We COULD HAVE.  But then there is people like you and all those incumbents you so happily count as friends that would rather stay in total control than collect those new monies, and that would rather call the police than to change their outdated assumptions and business practices.

Here is my bottom line to you, with all due respect for your great work with your artists, Paul: get with the new program or at least move out of the way, and plant your poison pills somewhere else.

Nobody wants the Internet you are calling for, and nobody will want that secure safe controlled and policed music machine you long for.

Image above from from: http://www.noddegamra.co.uk/u2-manager-hits-out-against-file-sharers/139/

Comments

[Jon Smirl]

A variation on flat fee licensing is to get the music industry out of retail. License the cell networks, myspace, etc at a wholesale level based on aggregate traffic. It's really the access that matters, let the users download from these sources for free without DRM. Once they don't need to worry about archiving and preserving their music, they'll delete it and redownload it much more often. Each time they come back is another opportunity to monetize their attention. In this model the RIAA only needs to go after commercial entities that aren't licensing and those entities are fair game.

The billions of unprotected CDs (still being made) combined with zero copying costs have made it completely impossible to control the users any more.

p2p is totally dependent on network effects between a large number of users to function. With organized high quality music available from the licensed commercial entities for just the cost of your attention I think the whole chaotic p2p system would simply fall apart.

[Bruce Warila]

Gerd,

Great post. Very passionate. Best post I have read from you in a while.

This seems very seductive: "without the pain of constant needling for a $ per song, without the granularity..."

I just can't reconcile this concept to everything that can be digitized. A flat fee for books, magazines, etc..

I still believe that further innovation will solve the problem. I can't believe that the MP3 is the digital product that the music industry will use for the next ten or twenty years.

I beat this drum all of the time (I know) - but there can be (and will be) digital products that can have tremendous value to consumers; that won't be shared like MP3s; and that will be sold for more than $1.

Anyways, thanks for saying what you have said here. It needed to be said. I would not have had the courage or experience to say it like you did!

Cheers,

Bruce

[Julian]

Gerd -

Your rant is worse than even PG's

You are both wrong and the answer is somewhere inbetween

Please if you are to be of any use don't rise to the bait of PG style rhetoric and try and be subjective

Just because we have a supposed freedom, it doesn't mean it is just, or we aren't paying for it

If the world downloaded half as much stuff, my broadband bill would be HALF THE PRICE

But I pay for it whether I use my connection to the max or not

These ideas should make us think, and not just go straight on the defensive as you have done

We need to look at this from all perpectives and all remember that things move so fast that the blogs we write today may become a mockery tomorrow

[Justin Boland]

One of the best articles by you I've read -- I really appreciated the detail and scope you brought to bear here. More than the critique itself, what I really enjoyed was the sheer amount of background knowledge you used to make your case. This provided me with a lot of brainfood, and I thank you.

[Julius]

The internet will change into a wireless network by and for the people. With the rate of technological advancement this will be a true real option, to have a worldwide network WITHOUT one central server or control, that has a DNS system by and for the people. Everybody hosting their own profiles and data. It's not far away people, this will be the future, and they are simply pissing their pants because of THAT. They are trying to stretch old tech as long as they can, to get the last pennies out of it they can get from you.

[oi]

what going happen after they stop the downloads still have low sales because poor quality music they have been making in recent years. Who are they going blame it on next recorders. yes i havn't bought or download mainstream group in years i like alot of underground bands not signed with a major record deal. really the isps shouldn't do just what the riaa wants because they have obligation to us the consumer. allso they forget who paying the bill per month. Paul McGuinness is just trying help them lobby more laws against us like dmca.

[oneplusone]

U2's lost all their hard-won cred by letting this guy act like Bono and Co are the 3rd world. Aren't they rich enough, yet? Bono's humanitarianism is suspect, to say the least.

[oneplusone]

Quoted: "If the world downloaded half as much stuff, my broadband bill would be HALF THE PRICE" from Bruce Warila.>>>

BUZZZZ! Wrong. And to infer that downloaded music is the reason you pay what you do for web is disingenuous, at best. If you want cheap, get yerself some sweet dial-up. Oh, what's that, you want speed, too? Ahhh, then pay for it. Don't point a greasy finger at me and my friends and claim I make you pay too much, because you need your search engine to load faster. I mean how stupid could you think we are?

[DIY-er]

Amen Gerd!

Don't know if you've been reading this.

THE USER-FRIENDLY ALTERNATIVE TO DRM; FATdrop Puts Record Labels In Control With The JOVA Watermarking System
http://www.mi2n.com/press.php3?press_nb=107186

[Antonio Fernandes]

"When The winds of change are blowing, some people are building shelters, and others are building windmills."

Chinese Proverb (taken from Matt Mason's new book, The Pirate's Dilemma, page 57)

Keep on Gerd !

[Noddegamra]

Whilst I appreciate the link, please ask for permission before using my images.

Image from: http://www.noddegamra.co.uk/u2-manager-hits-out-against-file-sharers/139/

[trevor]

Flat rate sounds like a brilliant idea but not so sure that it will fly - a tighter rule for the ISP is not so bad an idea either. If you have the assumption that user no longer has the desire to pay for music; period, then flat rate is good.

I just feel sometimes people can over complicate things, and make the whole situation so much worse than what is really is. People don't what to steal music/content from the owners or the web... but they wouldn't mind paying a little less for it. What's happened over the past number of years is that technology has given us mp3 /player and this has caused a shift in the industry - an external effect that the industry has to respond to. There are many components that have to be tweaked to put the sector back on track - Supply and Demand and Price Elasticity are the two common areas that need rebalancing. Once this is achieved; for instants, a price that the user is willing to pay and a reliable source (itunes) to acquire your music, the industry will start to correct itself.

The web police will only act as a deterrent, (you get life in prison for murder but people still kill) However, people will still choose to steal (possibly reserved for the lower classes and grossly unpopular) but the volume of it will be greatly reduced. For the generation growing up it will be so un-cool to steal and to be visiting bit-torrent sites when music will be substantially cheaper. I hope to god my kids don't decide to steal music that they can download from itunes or their phones for say £3 per album