Making file sharing profitable for the music industry.

This was originally posted on the old in 2003. You can find a link to the original story via the Internet Archive.

The RIAA has been attempting for several years to eliminate free online music services such as Napster, Aimster, Kazaa, etc. The problem is new services have been cropping up as fast as the RIAA can shut them down.  How can the music industry keep relevant in a modern age of free, online music.

The Problem:

The problem here is actually twofold.

  1. How does the music business move from a physical business (CDs, tapes, etc) to a digital business (MP3s, Ogg, streaming)?
  2. How do you make money in the digital music business?

The first problem is what is currently causing much consternation in the RIAA and the halls of the big 5 music makers (Universal, Sony, BMG, EMI, and Warner).The second problem though is what will have to be solved if music as we know it will continue.

The Music Industry as spent the last 50 years getting very good at their current business model. They control artists through exclusive contracts. They control production through their wholly owned studios. They control distribution through both subsidiaries such as Sam Goody as well as deals with retailers such as Best Buy. They even control advertising, using agreements similar to payola with many radio broadcasters to limit airplay to the songs they wish to have promoted. In short, the Music Industry has a vested interest in the current music model, they control it.

I tip my hat to the new revolution…

It is in spite of this, or perhaps because of it, that digital music has flourished. In 1999, with the launch of Napster, the digital music evolution began and the death knell of the physical music business was sounded. Disenfranchised by the high and increasing price of CDs, music listeners and avid fans alike gobbled up this new format. Quickly competitors arose both in the form of similar services such as Aimster and Kazaa as well as completely new models such as Gnutella. The result of this was a swift ascension to critical mass. Almost before the Music Industry noticed, these trading services had taken on a life of their own and had spread to the point where nothing could be done to stop them. The RIAA has certainly tried to stop these new competitors using lawsuits, attacks, and legislation in attempts to destroy them and their business model. The RIAA has failed, with each successful attack another competitor has sprung up to fill the void. The RIAA is spending billions of dollars trying to maintain an untenable position. Pandora’s Box has been opened and rather than try to keep hope, the Music Industry is trying to recapture the horrors that have already been released.

Show Me the Money

Lest you think it’s all wine and roses in the digital music camp I’d like to point something out. No one has yet made a fortune giving away music for free. Online music swapping is an idea, not a business model. As most e-commerce companies of the late 1990’s found out, you don’t make any money giving away your product for free. Yet the music swapping industry, and I use that term loosely, has found out people are not yet willing to pay for what they can get for free elsewhere. The Music Industry found this out after launching its own download services (Pressplay from Universal and Sony; MusicNet from BMG, EMI and Warner) and noting that the masses did not beat a path to their door. A similar fate awaited Napster who, following their court battles, launched a pay service in an attempt to stay solvent. Even with Napster’s installed user base they could not get the subscriptions necessary to stay afloat as a legal pay service. If Napster, who at one time controlled the music swapping industry could not go it as a commercial business what hope to the rest have of ever making money selling music online?

I’m just standin’ here sellin’ everything.

Every year the Music Industry spends millions of dollars on advertising. They do this to promote new acts, expand the audience of existing acts, and alert existing fans of new releases. In this way the Music Industry is no different than any other business. It is said that you have to spend money to make money, the only difference with the Music Industry is where the money is spent. While it is true that they spend a large portion each year on television and print ads identifying new releases by their artists that is not their major expense. New release ads can only target existing fans.

The current best way to reach new fans is via radio play. Now according to FCC rules radio play should actually be a profit center for the Music Industry as radio stations are required to pay a royalty each time a song is played. In fact the industry is paying many times more than that to get the songs on the radio at all. Paying money to get a record played on radio was supposed to be banned following the Payola scandals in the 1960s but the simple fact is that similar pay-for-play practices[1] continue to this day.

Where do we go from here?

So how will the Music Industry proceed? Will they continue to fight the music swapping industry or will they face the truth that online music and digital distribution is the future? Only time will tell.

The Modest Proposal:

Make music sharing legal and treat it is as free advertising for album sales, concerts, and merchandise.

It is fairly obvious that in the current market you will not be able to make money selling tracks or subscriptions to download music so let’s not try. Every year the music industry spends millions of dollars trying to attract fans and get the word out to existing fans of new albums. They are missing a vast resource for getting this information out, the music sharing industry.

There is precedent for this. Many independent artists and small labels are already using this as their primary advertising model. Swapping services such as already provide access to thousands of freely available tracks and more importantly links to band web sites where CDs and merchandise can be purchased. This model could and should be expanded upon.

The Simplest solution…ID Tags

  • The Music Industry could team up with the Music Swapping Industry to create a band and song ID tags.
  • Download and sharing of songs with these tags would be legal and encouraged.
  • When played through players equipped to use those tags web sites and custom content could be provided to the user on the screen such as
    • The latest news on the band, upcoming albums, tours etc.
    • A button to click on to order the album the song is on.
    • Tour dates/locations and a convenient button to buy tickets
    • A link to an online store where band related merchandise could be purchased.
    • Perhaps even streaming video of videos for the song.
  • In order to encourage creation of these players, the creators could get kickbacks from album, ticket, and merchandise sales.


  • The MP3 format already contains the ability to include these tags
  • This would provide for the Music Industry another source of revenue for almost no outlay of cash or capitol
  • This would legitimize Music Sharing services and provide them with a way to survive and thrive.


  • The Music Industry would have to admit they were wrong and get into bed with an industry they have been trying to kill since its inception.
  • Clients capable of utilizing these ID tags would need to be created.
  • Being that this would require a central database of ID tags care would have to be taken to ensure that small bands and labels would not be excluded from getting their own tags.


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