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3/28/2008
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Warner Music Pushes ISP Tax For Music Downloads

Fees collected from the customers of ISPs could generate $20 billion annually, which would be divided among artists and copyright holders.

Warner Music Group is reportedly considering a plan to have Internet service providers add $5 a month to subscribers' bills for unlimited access to music on the Web.

Warner has hired music industry veteran and consultant Jim Griffin, who ran the technology department at Geffen Records for five years, to spearhead the initiative, Condé Nast's Portfolio.com reported. The plan would provide a way for Warner and other record labels to get some compensation for all the music downloaded illegally, mostly through peer-to-peer networks.

"Today, it has become purely voluntary to pay for music," Griffin told Portfolio.com in an exclusive interview this week. "If I tell you to go listen to this band, you could pay, or you might not. It's pretty much up to you. So the music business has become a big tip jar."

Indeed, record companies have watched CD sales, the bread and butter of the industry, plummet over the years while the number of music downloads on the Web have soared. Record companies, however, don't make a penny from a significant percentage of those downloads, which amount to billions of dollars in lost revenue each year. In December, for example, the Center for Democracy and Technology listed 34 sites that the group says advertise, describe, or promote themselves in ways that imply the availability of mainstream music to which they have not obtained the rights.

Griffin said fees collected from ISPs could generate $20 billion annually. The money would be divided among artists and copyright holders. As a possible option, people who didn't want to pay the fee could agree to receive advertising.

"Ideally, music will feel free," Griffin told Portfolio.com. "Even if you pay a flat fee for it, at the moment you use it there are not financial considerations. It's already been paid for."

Griffin expected ISPs to embrace the plan, since it would free them from any liability for music files obtained illegally. He also said the $5 fee would be applicable in some countries, while others would be charged substantially less, based on the average income of the residents.

Griffin has received a three-year contract from Warner to form an independent company that would negotiate collective licensing deals for record companies and handle collection and disbursement of the money collected. "We hope all of the rights holders will come in and take ownership with us, and Warner will not control it," Griffin said. "Our goal is to create a collective society for the digital age."

Griffin's comments got support from Public Knowledge, a Washington, D.C.-based public-interest group focusing on protecting consumers' rights in the emerging digital culture. Gigi Sohn, a communications lawyer and co-founder of Public Knowledge, said Griffin had been urging the industry for years to move in this direction, arguing that suing people, many of them college students, is not the way to stop illegal downloading.

"Why not try a fee of this type and get something for music shared online, as opposed to the nothing that they [record companies] receive now," Sohn said. "Griffin was right then, and he is right now."

The Electronic Frontier Foundation, a civil liberties advocate, has also supported the use of collective licensing for music file sharing, providing ISP customers had the option of not paying the fee.

Griffin, however, has his critics. Blogger Michael Arrington of TechCrunch called Warner's plan a "music tax on U.S. residents. The effects on innovation in music would be disastrous if such a scheme were ever to become reality," Arrington said in a posting on Friday. "It's clearly good for the music labels, who are facing their imminent extinction. For everyone else, though, this is the worst possible thing that could happen."

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