U2 manager still thinks ISPs are freeloading

This month's U.K. edition of GQ Magazine contains a fairly substantial article from U2 manager Paul McGuinness in which he blames Internet service providers and technology companies directly for the falling sales of recorded music. As he notes in the article, he made a speech on this subject about two years ago and was roundly criticized by various "anonymous bloggers." I've never been anonymous, but I did point out some of the factual inaccuracies and weird assumptions in his speech at the time.

I can't speak for anonymous bloggers everywhere, but I've never said that recorded music should be free. It shouldn't! What I have said is that the recorded music industry must come to terms with the fact that it's competing against free. That's reality, and no amount of wishful thinking or legislation will change it. The problem didn't arise with the Internet. It arose with the Redbook CD standard, which didn't have digital rights management or copy protection built in. It has for a long time been trivially easy to rip an audio CD to a non-protected format, then share the resulting file--not only through the Internet, but through simpler methods like exchanging flash drives and CD-Rs.

The other big problem: McGuinness still seems to believe that many broadband customers signed up primarily to download and share digital content. As he asks in the GQ article, "Do people want more bandwidth to speed up their e-mails or to download music and films as rapidly as possible?" The assumption that the latter is true grossly oversimplifies the scope of the Internet. Has he heard of Facebook? Ever try uploading family photos via a dial-up connection? What about Skype--how does that work via dial-up? Video chat? Online gaming? There are 25 million Xbox Live users now. Does he think that most of them signed up for broadband primarily to download free content?

This is all hair-splitting because, as I said last time, I agree with his solution. The only way the music industry can survive is by embracing subscriptions and working with ISPs to offer subscriptions bundled with broadband and/or mobile access.

This is a very easy thing to propose. But it's going to be insanely hard to get done. The system of calculating and paying royalties is absurdly complex--here's a simplified graphic view, and it's still mind-boggling.

There's also a dirty little secret that the industry seldom acknowledges: a system that compensates artists based on how often people actually listen to them will create a different set of winners and losers than a system that compensates them based on CD sales. Think of all the CDs you've purchased for one song, then shelved after a month or two. Those artists (and their managers, record companies, publishers, limo drivers, and so on) liked the old system. They still want to collect $18 from you for that song--or at least $1 if you download it via iTunes or Amazon. So how do you convince them to embrace a new system that pays them a few cents per stream?

Customers will pay for music, but only if it's more convenient or otherwise better than the methods through which they get free music today. iTunes is successful because it's the most convenient way to get new music onto an iPod or iPhone. Create a better system and we'll embrace it!

However, when I look at the state of subscription music services today, I'm not optimistic. Certain popular artists (the Beatles, for example) are missing, and others (like Pink Floyd) might pull their songs as soon as their contracts expire. Some services aren't available on all mobile platforms, so I can't necessarily switch cell phones and keep my subscription; others (such as Spotify) aren't available in all geographies. Sound quality on streaming files is often noticeably worse than the already crummy MP3s we've been downloading since 1999, and streaming is subject to interruptions depending on the vagaries of your wireless coverage (although on-device caching is starting to solve that problem). Song data and album art is often incomplete or missing entirely.

These are not easy problems to solve. But the companies and people who find a way to do it over the next 10 years will be among the new winners in the music industry.