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Sandy Pearlman’s 5 cent downloadable songs solution

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Producer-manager and now academic Sandy Pearlman has an outrageous idea for saving the recording indudstry by making millions from untapped resources.

Pearlman was apparently the first person to use the term “heavy metal” in print, during his days as a journalist with Crawdaddy magazine. Long associated as a producer with Blue Oyster Cult and their hits “Don’t Fear The Reaper” and “Godzilla“, Pearlman also recorded the second album by The Clash and once managed Black Sabbath. His music industry credentials are extremely credible.

But at the same time, it signals a colossal change in the nature of the industry with too many unpredictable outcomes. I do agree with the principle of selling more music to more people at lower prices that the common 99 cents per track we see how from iTunes, etc.

Here’s an interesting idea from yesterday’s Globe & Mail. There are pros to it. People utilize computers and the Internet to acquire music, so why not tax them? The cons are obvious, though. Not everyone uses the Internet to download MP3s. Artists will not likely agree to sellings songs for 5 cents each! Even if this system was in place, people would still download music totally for free through existing means.

What would 5 cent downloadable songs do to the bricks and mortar aspect of the music industry? Would sales of CDs plummet so much that the format will go the way of the cassette? Will they stay in existance but sell for one to two dollars?

This revolutionary idea is too drastic with too many unknown outcomes in order for it to be taken seriously. The music industry will never adopt it. They might, however, try to implement an Internet tax based on the type of data consumers download. But that, too, is an old idea that didn’t amount to anything, maybe based on privacy considerations. Big brother can’t watch everything you download.

From Canada’s Globe & Mail newspaper.

Would you pay 5 cents for a song?
McGill academic has a plan to end file swapping and save the music industry

Wednesday, March 9, 2005

An academic at McGill University has a simple plan to stop the plague of unauthorized music downloads on the Internet. But it entails changing the entire music industry as we know it, and Apple Computers, which may have the power to make the change, is listening.

Peering out from under his de rigueur cap, music-industry veteran Sandy Pearlman, a former producer of the Clash and now a visiting scholar at McGill, spoke with a kind of nervous glee while describing his idea at the Canadian Music Week conference in Toronto last week.

Pearlman proposes putting all recorded music on a robust search engine — Google would be an ideal choice, but even iTunes might work — and charging an insignificant fee of, say, five cents a song. In addition, a 1 per cent sales tax would be placed on Internet services and new computers — two industries that many argue have profited enormously from rampant file-sharing, but haven’t had to compensate artists.

The assumption is that if songs cost only 5 cents, people would download exponentially more music. Daniel Levitin, a McGill professor also associated with the project, said that a simple computer program, such as those already in use on Internet retail sites, could track people’s purchases and help them to dig through what would become a massive repository of music on the Web.

The extra windfall for musicians and those who own the publishing rights to the songs could be in the hundreds of millions of dollars, or more, Pearlman said his study predicts.

It may all sound like a pie-in-the-sky idea, academically elegant but impractical. Or is it?

The head of the British recording industry, who also spoke at the conference, made much the same point: music companies need to get used to the idea of selling more music to more people more often, but for less money. It was a notion repeated often during the conference.

Users of file-sharing services made roughly 25 billion unauthorized downloads last year, dwarfing the legitimate music industry, and it’s only getting worse. Some upstart technology companies are trying to figure out ways to profit from file-sharing, but the potential market is limited.

Pearlman added that nothing concrete is in the works with Apple beyond talks, and he has not yet spoken with Google. Still, Apple is listening, and this is the company that has already changed the industry by creating, many believe, the best working model for on-line downloading services.

Pearlman argued that his plan isn’t a revolt against the industry. It’s merely a pricing decision. Apple should simply be charging 5 cents instead of 99 cents a song, he said. This would bring in millions upon millions of more customers. And he believes that the best place to test this would be in Canada, which has laws he regards as being more supportive of artists and accommodating to an initiative such as this.

Yet, Pearlman went further. He said that since this plan puts the onus on a massive Internet presence to distribute all the music in the world, why not have such computer companies as Apple and such major Internet companies as Yahoo simply buy up the world’s four major record labels? Pearlman was careful to add, though, that he doesn’t see his plan killing off demand for CDs.

The recording industry is against Pearlman’s plan. Richard Pfohl, general council for the Canadian Recording Industry Association, refuted Pearlman on numerous points at the conference forum, arguing that the plan would violate every international intellectual property law that Canada has signed in the last 100 years. It would also obliterate musicians’ choices on how their music could be sold by conscripting them into a 5-cents-a-song system. And it would destroy record companies’ incentive to invest in new acts, Pfohl said.

Pearlman said that Pfohl misunderstood the idea. Then again, another record-industry type, casually speaking to Pearlman after the talk, had perhaps the most succinct counter suggestion. Why not charge 10 cents, instead of 5, and double the revenue?

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About Triniman

Almost weekly, Triniman catches new movies, and adds one or two CDs to his collection. Due to time constraints, he blogs about only 5% of the CDs, books and DVDs that he purchases. Holed up in the geographic centre of North America, the cultural mecca of Canada, and the sunniest city north of the 49th, Winnipeg, Triniman blogs a bit when he's not swatting mosquitoes, shoveling snow or golfing.
  • Interesting approach – any kind of creative solution has to be considered equitably if it means a way out of the current mess of IP torts.

    This model can be applied somewhat more easily by using a radio license sort of blanket fee – charged as part of the ISP fees, perhaps, with an opt-out. Actually, that is what the Rhapsody model is really, at a higher price level since there is little competition. So nothing new here, really.

    At the same time, Pearlman’s idea of the major computer companies buying up the labels is foolhardy and not a solution to this problem – there is no reason to believe that the change of ownership will make any difference to the corporate policy. IT companies are strong protectors of IP (and TCP too:) ), and their own business model depends on it. What they are good at, though, is using innovative and easy licensing models to make money and still enable usage of their products, unlike the music industry – licensing models like shareware, freeware, and even adware can be borrowed by other industries to great benefit.

  • JR

    I thought “Burnin’ For You” was produced by Martin Birch.

  • Yes, you’re correct. Martin Birch produced 1981’s Fire of Unknown Origin which contained Burnin’ For You.

  • Eric Olsen

    I have said all along that somewhere around 5-10 cents ($1-2 per album) per song is the price point that would begin to feel like “free” and therefore remove the incentive for file sharing, with its numerous downsides (digital and spiritual). Downloaded songs are not the same as recorded music on a physical medium and should not be priced the same or anywhere near it. The point is to go for volume, to make it as painless as possible, and everyone benefits.

    Very important story – thanks T-man!

  • sean

    I give credit to Pearlman for taking a proactive approach here. At least his business plan does not include suing his potential customers to teach them a lesson as its centerpiece

  • Tre

    Guys, I have a fever, and the only cure is MORE COWBELLS!!

  • Doubling from 5 to 10 cents won’t double revenue. Not on a luxury item like downloaded music, where every penny of price increase will decrease your customer base by a significant number.

    The ideal for the music industry is to charge $2-$3 per song to everybody who will pay that much (buying 10 song new release CDs costing 20-30 dollars), while also charging $1 per song to everybody who will pay that much for the convenience of iTunes, and selling still more bits at $0.69/song (or whatever) to people who end up at Yahoo or Napster or Rhapsody or the other vendors less sexy than iTunes.

    Every economist knows revenue is maximized if you can make price levels curve to follow the demand curve. Trouble is, in most businesses that’s impossible to do perfectly. But maybe the Internet will make it possible.

    I’m sure the record industry wouldn’t mind collecting a nickel a song from everybody on the file sharing networks, if they can figure out a way to do it without losing their revenue from CDs and iTunes and elsewhere. But most of them will never publicly admit that, because revealing such ideas defeats the whole purpose of milking customers for as much as they’re willing to pay.