Shaking the money tree

In a talk given at Cornell University last week, Steve Worona of EDUCAUSE said about business models for distributing intellectual property that “every few years the entertainment industry has to be dragged kicking and screaming to the money tree and have it shaken for them.” His point that the first reaction of entertainment company executives is to “tamp down” new technologies in order to protect out-dated business models is certainly borne out by recent history. Back in the 1980’s, of course, the industry fought hard against the growing use of home video recorders, both in the Supreme Court and in Congress, even as a new business model that would eventually make billions for the studios was being developed in spite of their opposition. No less an advocate for the old ways than Jack Valenti eventually realized that the movie industry lost that battle because they were perceived as anti-consumer. Nevertheless, the recording industry continues to make the same mistaken, even going so far as to sue they very consumers on whom it relies.

Are there alternatives? Worona’s talk is very persuasive in its discussion of why old models (based on counting copies) do not work for new technologies (which replicate bits) and how it is possible to develop new models that really can “compete with free.” I have written about such models before, and also noted in a post last week this article by Tim Lee about an alternative path for copyright law that could support such new ways of profiting from intellectual property without crippling technological innovation. Some of those alternatives deserve further discussion. (and a lively discussion is continuing on the Cato Unbound site).

First, it is worth noting the survey, reported by Ars Technica, that suggests that young people are willing to pay for music if it is offered on terms that seem reasonable to them. Although I can imagine the skepticism this will generate within the content industries, it at least suggests that innovations, rather than lawsuits, are worth a try; both may be risky, but the rewards will be greater from the latter.

Lee’s article briefly catalogs a variety of business models, in several different content industries, that rely on new ways to make a profit. One that caught my eye was the Web service called Imeem, which combines a legal music downloading service with social networking opportunities. Revenue is generated through advertising, and the music is licensed using revenue-sharing agreements with the four major record labels. Users can create and share playlists and download music from those shared lists for free. As Lee says, “It is only a slight exaggeration to say the Imeem deal amounted to a de facto legalization of online file sharing, provided that the labels get a cut of any associated revenues.” Is this the future of the music business? I don’t know for sure, but I do know that I, as a music lover who has never obtained a music file from any online source other than iTunes, will now be looking on Imeem first; legal, ad-supported free music  certainly works for me.

In his talk at Cornell, Worona suggested that, when a business learns that it will have to compete with free – with someone offering the same or substitutable product at no cost – the appropriate response is not to call the FBI, as the recording industry has done, but to call its own marketing departments. That is what Imeem has done, and they are giving the money tree yet another shake; let’s hope the music industry is paying attention this time.