Why a music tax is a terrible idea

Warner music is the latest in a long line to call for a mandatory music tax for everyone. This tax would be added to the cost of an internet connection, but would, in theory at least, allow users to download all the music they want. While this may sound like a good idea at first (the EFF has even argued for such a plan), as Michael Arrington argues over at tech crunch, ‘the incentives created by such a system are perverse‘, that it would ‘kill music innovation‘, and that ‘it would be the death of music‘. While I wouldn’t quite go that far, I do agree that such a tax would provide perverse incentives that would hurt (but not kill) the music industry.

Music Taxes Will Kill Music Innovation

Forcing people to buy music whether they want to or not is not a solution to this problem. The incentives created by such a system are perverse – guaranteed revenue and guaranteed profits will remove any incentive to innovate and serve niche markets. It will be the death of music.

Music industry revenues will be a set size, regardless of the quality or type of music they release. Incentives to innovate will evaporate. There will only be competition for market share, with no attempt to build the size of market or serve less-popular niches. Forget labels building new brands and encouraging early artists to succeed – they’ll bleed existing big names for all they are worth and work hard to keep anything new – labels, artists, and songwriters – out of the market. New entrants just means more competition for a static amount of money. Collusion by existing players will run rampant.

Soon labels will complain that revenues aren’t high enough to sustain their businesses, and demand a higher tax. It will go up, but it will never go down.

As I said before, Asking the government to prop up a dying industry is always (always) a bad idea. In this case, it is a monumentally stupid, dangerous, and bad idea.

If this happens, it will put an end to the endless creative/destructive energy that is reshaping the music industry today. Good musicians will always find a way to make money. Others may have to follow their passion as a hobby and (shudder) get a day job to pay the bills. But if a music tax is put in place, that innovation will die, and with guaranteed revenues and profits, the need to innovate, market and compete will also die. A music tax is a sure fire way to destroy an industry that is just beginning to really blossom.

Yes, blossom. As terrifying as these days must be for music industry players, it’s clear that a golden age of creativity and innovation is ahead of us, all led by the Internet as a nearly perfect distribution mechanism for their product. Music labels must die. Hopefully, before they do any more damage.

It is hard to argue with such logic. The sooner the labels realize the economics of infinity, they will realize that unauthorized music downloads can be offer a great benefit to artists and labels alike.

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