Friday, September 12, 2008

Re-Examining a Tax on File Sharing

I've been thinking about this quite a bit lately.

I think we can all agree that the current media marketplace is broken.
The music and movie industries refuse to deliver on a system consumers want, namely something transparent and easy to use. When we get close, with services like Netflix, iTunes, or Amazon, there are either too many odd restrictions on how we can use our purchase, or there's a severely limited catalog of content.
Consumers have since resorted to file sharing, which offers a nearly unlimited catalog, no restrictions on use, is fairly easy to use, and depending on file, is as fast or faster than "legit" purchasing. Through the inactivity of the media industry, consumers have created the market they want to use. This is how people want to do business.

So why not monetize it?

It's become apparent, that left to their own devices, Industry solutions are insufficient, sometimes so broken the only reason for releasing them seems to be confusing the customer, scaring them away from digital distribution. The thinking being, if it's "too hard" to buy online, then we'll just go back to buying the discs.

If The Industry wont do it, why not internet service providers?

I know they're trying to deliver their own video on demand services, and have recently been instituting data caps on broadband subscribers, but they could stand to make a lot more money this route. The idea has been considered before, and a similar plan might go into effect in the UK, but the efforts all seem to stop at the idea of decriminalization. All of these ideas seem to involve a minimal annual fee ($20-$60) to "look the other way" for those that file share. Basically it would turn the whole internet into one giant Netflix. Unfortunately it seems that EVERYONE would be subject to this tax, not just those that engage in file sharing.

Of COURSE people wont like that. Why should we all pay for the actions of some. It would be similar to the levy imposed on blank CD's in Canada. It did decriminalize trading music via burned discs, but EVERYONE had to pay for it.

If we've learned anything from marketplace economics, we should be touting this as a feature (not shaming it), and then charging monthly for it. Let's borrow Netflix. If ISP's offered an optional "File Sharing" plan that you could choose to sign up for, and charged a fair rate for it, it would generate substantial revenue, and wouldn't be a burden on those not using the service.

Let's fudge some numbers.
Roughly estimating 110 million households in the USA, approximately 55% of households have high speed internet, or about 60.5 million households.
Let's set the "Digital Media Downloading" plan at an additional $25 a month.
I'd be willing to bet that by the end of the first year about 30% of broadband subscribers would sign up.

This would generate over $450 million a MONTH.

Almost half a billion dollars a month, and other than a hit to bandwidth, consumers would take care of everything. With file sharing you don't have to store a product on your own servers, the consumers do it. You don't have to advertise file sharing, the consumers do it for you. You don't have to rip music or movies, consumers do it for you. You don't have to troubleshoot or provide tech support, consumers do it for you.

In what other industry could you generate $5 BILLION annually for letting your customers do all the work?


  1. Only issue I see with this plan is that a good chunk of the people that share music illegally, don't believe they are technically stealing. Thus, there is no moral or practical reason to volunterely pay more for a "filesharing plan" when they don't have to.

    If ISP's meter and automatically place people they view as file swappers on the added plan, it might work. But then, as a voice guy, I also might get charged extra thanks to a plethora of mp3/wav traffic to and from my server each week. I'd have to prove I wasn't filesharing and then life gets annoying. Evidenced by my battle last week with Hotmail, who blacklisted me because they thought I was spamming since I was forwarding all of my email to a Hotmail account and it was seeing all the spam that came with it. It was a long drawn out process to prove I wasn't doing anything wrong. Not cool.

  2. Oh I'm not saying there wont be problems. I'm just saying it's bull that no one can find a way to monetize p2p. I would say the problems created by a move like this pale in comparison to the current problems we face, and we'd be making money to boot. Instead of wasting money on suing fans for distributing a product, producers could be getting paid for it.

    We would also have a legitimate competitor to "free" file sharing. Which would also give courts a little more leverage to go after thieves and ACTUAL pirates.
    To think ISP's can't tell the difference between legit use and abuse is a little naive, especially with all the court cases out there involving ISP's throttling p2p and monitoring individual's traffic.

    I would say your traffic in business MP3 and WAV files is nothing compared to the amount of content I stream over Netflix (I'm a sucker for documentaries and old tv shows, they have Knight Rider/Buck Rodgers/Old BSG/ I could go on). If there are problems however, it could finally lead to some innovation in the home business services market, which I feel is also WOEFULLY ignored.