I recently attended a conference on digital music and was not surprised to learn that prominent industry experts disagree about the future of downloading and interactive streaming. I was surprised to learn how many times a participant would invoke the purported tastes of “the consumer” in asserting which of the two business models would eventually prevail in the music industry.

There are some hard economic truths for anyone who believes he can predict what “the consumer” wants. First, there ain’t no such thing as “the consumer”. All we have are CONSUMERS. And the tastes of consumers may VARY considerably.

With regard to music services, some people may favor permanent ownership, while others actually prefer the ease of immediate access and full sampling. Consequently, we should avoid predicting what “the consumer” wants and start preparing the market for even competition.

In this regard, service price matters. Every person is affected to some considerable degree by the prevailing prices of competing goods. To distort the price of one with higher sales taxes, while leaving the other untouched, obviously hinders fair competition. True of taxes, the same concept is also true of disproportionate royalty payments.

We are then left pondering what to do about copyright royalties generally paid to songwriters and publishers for use of their compositions on download and interactive streaming services that vie for the same basic customer base. Download reproductions of musical compositions now are generally compensated at full royalty rates that are established for tracks on CDs. This is somewhere in the vicinity of 6 to 8 cents per individual download.

But how should streaming be compensated? 8 cents per shot??? Surely a stream is not the same as a download reproduction. Any ideas??

I will offer my thoughts in my next writing.