You Can't Regulate Just One Industry And Leave The Other Alone

The big news here in the UK this morning (lead story in the FT and I just saw the minister of culture on the BBC) is the deal between the broadband ISPs in the UK and the music and film companies on downloading.

The ISPs have agreed to send warning letters to thousands of their customers who are the most active downloaders of music and films. The UK government will do their part by discussing legislating regulations on the ISPs if the warning letters don’t work.

The most commonly discussed legislation would be a "download fee" applied to every ISP bill which would be paid to the music and film companies.

All of that is well and good, but I read nothing in the FT piece and heard nothing in the BBC interview about regulating the music and film industries to force them to make their content easily and readily available over the Internet.

Of course there are people who don’t want to pay for their music and films, but I believe that vast majority of downloaders are people like me who would gladly pay if the content was available to purchase when I wanted it in the format I want it.

Let’s take The Dark Night. Let’s say that I’d really rather watch it at home on my big screen. I know I can get it on bit torrent so I do that. If it was available to be purchased the same day it went live in the theaters, I’d be happy to pay $20 for the right to watch it at home. But the film companies want to maintain their release windows so it’s not available. So its to bit torrent that I and thousands of others go.

Last month I wanted to purchase a new music album from a band I like. I went to emusic and amazon mp3. It wasn’t available. It was available exclusively on iTunes in DRM format. Screw that. I can’t play DRM’d music on my Sonos or Request systems. It’s of little to no use to me in DRM format. So I bought the CD on Amazon but also downloaded it on limewire so I could listen while I waited for the CD to show up.

The solution to the downloading promblem is not simply to plug the hole at the ISP level. First, its not fair to impose a fee on every ISP customer when not everyone downloads. It would be fair to impose a downloading fee for those who want to download, and maybe it will come to that. But we all know that it will be very easy to hack around that technology.

The real solution is to give the customers what they want which is simple, easy, affordable, instant access to the content they want at a reasonable price. When and if the content owners do that, they will be on their way to solving the download problem. If they don’t do it themselves, we should regulate them and force them to do it.

#My Music#VC & Technology

Comments (Archived):

  1. agawley

    Hey Fred<rant>I heard this story on Radio 4 this morning too. What puzzles me is why the government is involved. Are the (largely american) music & film companies now suddenly a (british) national treasure. This is surely a commercial issue and whichever way it is resolved it should be through a commercial agreement between users and the media cos (maybe the ISPs need to be involved to levy a fee, maybe they don’t…).It is so boring hearing their ‘woe is me’ story over and over again when they seem incapable of making a single commercial move to take advantage of the massive interest in their products that has been driven by the internet.</rant>Alex.

  2. david cushman

    It’s almost as if no one had ever coined the phrase ‘the because effect’…If I was in a band I might even consider sueing the record labels for this extraordinary intervention in social-graph driven marketing.expanded on this here: http://fasterfuture.blogspo

  3. Mike

    ‘The most commonly discussed legislation would be a “download fee” applied to every ISP bill which would be paid to the music and film companies.’This is a terrible idea, I hope the government steers well clear of it. Even if my parents did know how to download music I doubt they’d want to do so on their basic broadband package- why should they pay extra?Maybe we should all pay an additional tax on clothes and cigarettes to reimburse the manufacturers for their losses due to piracy too?

  4. danvers

    Like Alex, I turned on Radio 4 this morning (translation for US citizens: a sort of superior PBS, listened to by most intelligent Brits) to hear this story. For once I actually agreed with lefty musician Billy Bragg who was defending the right of consumers to listen to music in the way that they want it and who pointed out that there are different revenue models beyond paying to own a CD – e.g. commercial radio.The intervention is the typical hamfisted response of the Labour government to what is essentially a market problem. They have basically weighed in on the side of the content owners and told the ISPs to get their house in order, by threatening legislation. How is this supposed to assist in developing “digital Britain” is beyond me.You can listen to the Radio 4 item here:

  5. ojbyrne

    Canada has had a “compulsory levy” for a while – a tax on all ipods, blank cds, dvds, etc that goes to music companies to cover losses due to “pirating”. And yet now we’re getting a new law that will fine downloaders and impose a DMCA-like anti-circumvention clause.

  6. Silverbrow

    Unsurprising this happened following the BSkyB – Universal tie-up earlier this week. They agreed to an ‘iTunes busting’ service that will be DRM free and unlimited streaming. Sky didn’t have to pay anything. This must be the payoff.

  7. Hank Williams

    How would a compulsory requirement to download movies at a “reasonable” price without distribution windows generate sufficient money to pay for $150 million movies? Call me skeptical, but I just don’t think what you might define as reasonable prices, particularly with unencrypted content, will generate the money necessary to make these films. If your thesis is wrong, as you would have to admit is at least possible, that would literally be the end of the blockbuster big budget movie. I don’t know for sure that I am right, but gosh, if I am, is that really what we want and is it worth the risk? — Yes I know the artsy people will say who needs batman anyway, but I, being uncultured, love a big budget summer blockbuster :).

    1. gregorylent

      🙂 hankwilliams… batman could have been better with a smaller budget, so much waste and union and hidden costs go into blockbusters… your point is good though … theaters are not going to be hurt much, it is the straight to dvd market, or post-theatrical run dvd market that will take the hit … but the force cannot be stopped, how to deal with digital/economic realities?

    2. fredwilson

      The studios get a portion of the box and its only $10/ticketIf it cost $20/download they’d keep it all and make a lot more

      1. Hank Williams

        But the reason they have distribution windows is so that they can sell you a movie ticket and then sell you a DVD or on demand play later. They make their profit by double dipping, and also, typically at least 2 people (and often a family) go to see a movie so your $20 sale would be presumably for a whole family. Also as far as I remember a substantial majority of the ticket price of a movie goes to the studio. The theaters make money on the concessions. I forget the studio/theater ratio but perhaps someone here knows what it is.

  8. Kevin S

    What is a reasonable fee? Anyone who makes a good should have the right to sell it at whatever price they want. That is the free market at work. Just because something is easy to steal does not justify the theft. If a farmer wants to charge $3 per egg would that make it right for you to just walk into the hen house and take it?I also don’t agree that you should find it acceptable to download and watch The Dark Knight at home. Once again just because you can do it with little chance of getting caught does not mean that it is ok. That is no different than shoplifting a DVD at a store.I do agree that content owners should consider selling a content license instead of content on a specific medium. It seems fair that I should be able to buy a movie and watch it on whatever tool I want, whether it would be a dvd player, my cell phone, psp, nintendo ds, etc.

    1. fredwilson

      I think some have overreacted to my use of the word reasonable. I am not suggesting that pricing be regulated. I frankly would prefer no regulation. But if the ISPs are going to get regulated then so should the content owners. That’s the point of my post

  9. gregorylent

    100 comments easy on this issueon the left, isp’s and “content providers” …. on the right thousands of startups with streaming or heavy data use business planswhere is the bandwidth going to come from?

    1. fredwilson

      Moore’s law

      1. gregorylent

        fresh off a plane, he type’s moore’s law, and that works for me, thanks

  10. Rogel

    Do you really believe that we need to use the coercion power of the state to regulate the music industry? wouldn’t it be more efficient, and moral, to let the market forces regulate the music market by itself?

    1. fredwilson

      Yes of course. First, this is the UK not the US we are talking about. Second I only am suggesting tit for tat. If the music and film industries are lobbying for regulating the isps, then they should be regulated as well since its their inability to amend their business practices that has led many of us to download

      1. Rogel

        The only problem is that regulations, by their nature, tend to protect monopolies and set higher barrier on new entries. Therefore I’m afraid that the movie and music industries might welcome suggestion to regulate them…

      2. slowblogger

        I am a bit more relieved now. I was very surprised to read “we should regulate them” in your post.Many talk about consumer rights, but the free market is about agreement between buyers and sellers. If the supplier sells a stupid product, call him stupid. But that does not mean you can steal his products or ignore your agreement with him.

  11. jensbest

    I am a big fan of cinema. Living for a while in rural spain I really missed the big screen….until having a big screen at home and…ehm…recieving movies from a friend who had the newest movies from a secret source…ehm.Well, now being back in Berlin, Germany, having 500 big screens and seeing even the most-non-mainstream-movie in minimum one of them, I am happy to pay for this event.And now the thought:Why not giving movies in the cinema for FREE. Yes, paying for no ticket, just collect money in another way in or around the event. OR let the people pay whatever they want AND have some additional refinancing models. Well, I know many Cinema-Temples already added high-priced popcorn, restaurants and all the rest to it. But why not enhancing this way of ROI?Many shopping malls give reduced prices to cinemas because for them cinema is only a people-attractor to the mall. Let the cinemas in bloody malls owned by retailers and other shopping companies. Like “Visit a movie, get reduced clothes. Something like that.Sell the DVDs right away when people leaving the cinema. Did u like the movie? Get the DVD with special content for $XX.Dear movie INDUSTRY stop thinking you can sell me the SAME movie twice. If I pay for watching The Dark Knight in cinema, I wanna have the right to see it again and again and again. I m a y b e doing this already – for free.This thoughts are focused on mainstream cinema, niché movies will always have fans paying the respect (and money) to their admired artists.PS: Here a great idea for a start-up for free. Take a movie related site like or in Germany. Let the users have a plastic card where all their “movie rights” are on. With this card I can go to cinema, video rental store or DVD retailer and get free or price-reduced deals. As the readers here are aware of online biz strategies I am sure u get the message…..oh and by the way TV is dead (long live TV)

    1. gregorylent

      dvd at the door is an interesting idea

      1. jensbest

        or for a start getting the dvd cheaper when bringing the cinema-ticket to the retailer. In the end it’s about creating a long-term connection to the movie-fan, to the regular guy going to cinema. Think about the different user-profiles of movie-watchers. A hard to scan market because the direct connection to the movie-watcher gets lost via all the different distribution ways. And we not talking about a casual product like….chewing gum, we talk about an emotional product par exellence. we talk about movies.And adding another remark pointing to the former post about meetup. How cool could it be, having several references in the “real world” by being registered in a movie-community. “Oh, you are a community member. Well, for you its only $9,[email protected] if you ever make a hulu-card after reading this I want life-long premiere invitations to all movies

        1. gregorylent

          you just put out enough ideas for three startups … there is really going to be innovation beyond what most minds can see …

          1. jensbest

            let’s start one for a start. i am in a good mood today. i cover europe

  12. kidmercury

    “Of course there are people who don’t want to pay for their music and films, but I believe that vast majority of downloaders are people like me who would gladly pay if the content was available to purchase when I wanted it in the format I want it.”gotta disagree. music and movies, but especially music, is all about socialization and sharing. people want to share their music with their friends; they want to be the person who gets the social credit for introducing a cool new band (or movie). charging for media, no matter how little you charge, automatically ruins this, because it introduces a business model based on selling copies, which creates obstacles to sharing.this is the big problem IMO with the media industry, even the new media people. the answer is free. not a small amount, not make up your own amount. FREE. because free enables greater sharing, and sharing is what people want.the business model issue is the big dilemma, i.e. how do you make money giving away music for free. i think niche social networking is a big part of the answer — i.e. using free content to build niche communities (like blogs do).of course, let us not lose sight of the real issue: this is really about greater regulatory control over ISPs, which is about greater regulatory control over what gets said on the internet.

  13. Brett

    good least w/ the launch and strong design of, we as consumers have a ray of hope for the future. prior to launch hulu (which i don’t use) i felt as though film and music companies may not be up to the grand task of delivering their content in a pleasurable way online.something of this magnitude and scale would take an extraordinary amount of planning. id be surprised if we dont see a ‘tax first-deliver later’ roll-out model.

  14. Jonathan Karon

    Following up on Kevin S’s point, how about compulsory patent licensing at “reasonable prices as determined by the infringers”, or “mandatory open sourcing of all software”?I don’t like DRM and I hate the current music and film industry business models, but copyright (at least in the USA) is, say it with me, a government-granted limited monopoly on original works of authorship and includes the right to control distribution of copies or phonorecords of the work to the public by sale or other transfer of ownership, or by rental, lease, or lending.Until you fundamentally revise section 17, US Code, it is flat out illegal to provide a copyrighted work for distribution on BitTorrent (and downloading := uploading in torrent-land). Just because i really like my neighbor’s kitchen doesn’t mean I can cook in it while she’s at work.In my better moments I like to believe we are still a nation of laws. So let’s work on section 17, and in the mean time let’s not act like we have self-serving rights we don’t have.

    1. fredwilson

      I am all for your two ideas upfront. Patents are awful and must be elinminated. And open source software is better than closed proprietary software. Yes we are a nation of laws but its time to change many of them

      1. Jonathan Karon

        Fred, thanks for all the work required to reply to everyone — it’s very much appreciated.It was about 2001 and an ex-music industry guy and I kicked around a model for digital royalties based on the broadcast royalty model. It looked like this:1. You build a big, independent, auditable service for logging plays by artist and track.2. You write a simple cross-platform library that reports to your service.3. You get all of the major music software vendors to incorporate your reporter into their software and into their portable devices (which cache plays and batch them to your desktop when you sync)4. You collect subscription revenues from individuals or ISPs (imagine the sales leverage of an ISP who can say “get your internet from us and you can download and play all the music you want legally, for $5 a month”)5. You split the revenue into “mechanicals” and “broadcasts”, just like the industry already does.6. You distribute the money to C & P holders based on statistical data from your logging service.Too bad there were too many moving parts. It really would have worked if we had gotten buy-in from the software / hardware manufacturers and we wouldn’t have had 5 years of RIAA lawsuits.

        1. fredwilson

          I like that model and have blogged about it many times

  15. jb

    Fred,I enjoy reading your blog, but this kind of post makes me shake my head. This is the way government works. It is inept, cluttered, unfair and beholden to special interests. You notice it this time, because you understand the issues involved in ISPs and downloading. But almost _every_ action the government takes is inept, cluttered, unfair and beholden to special interests. Regardless of who is in the White House, or #10, regardless of how much you like the people in charge. Governments are inefficient and perverted almost beyond comprehension. Everything they touch, everything they do is almost certainly going to be quarter-assed (not even good enough to be half-assed), take 10 times as long and cost 20 times as much as it should, and will almost always create new bureaucratic empires that can’t ever be removed, and add that much more to the bloat, ineffectiveness and waste.Yes, government does some good things. Yes there are some good people in government. But at the same time, government is best viewed as a extremely large, monopolistic corporation, with a culture of sloth and venal self-interest that extends back a century. It is not something to be proud of, nor to encourage. It is something that needs to be drastically restructured, and that restructuring will not come from people who believe that government is the epitome of goodness and light.

    1. gregorylent

      heavily invested corporates and governments are the last to know anything … it is amazing that they get so much press!!

  16. JB

    Thanks Fred; at a time when the uninformed suggest musicians give away their intellectual property in exchange for CTR and tee shirt sales, you have nailed the issue squarely on its head. The existing distribution model must be modified to fit with its objective; addressing an unmet need in the market.

  17. will

    I think the idea of a Download fee is a brilliant political move but not very fair. There have been two forces bound to collide, the idea of ‘net neutrality’ and the increasing use of broadband networks provided by private ISPs.I do not know if this is the same in the UK, but the US has left the development of the broadband network infrastructure largely up to the private companies. As I have read in many articles before, to download large files like movies through p2p programs requires allot of bandwidth. This will ultimately cause a large inconsistency in service and high maintenance cost if left unchecked.Some suggested that we only charge those who download, well the only way to know that is to violate the privacy of users everywhere to monitor their usage. So the only equitable way to solve this problem is to charge everyone.However, the side effect of this is that by socializing the risk for unacceptable behavior is that it forces a new social consensus on illegal downloading, and will hopefully mitigate the behavior.

  18. ivanpope

    Fred, you know full well that if it comes to this it won’t be a ‘download fee’ but a tax on the ISP industry for the benefit of the music/movie industry. Personally I’ve never downloaded any music and sod it if I’m going to pay a tax for others to do so, just because the music industry can’t get their act together.You seem a bit slap happy. To say that “All of that is well and good” so long as the music industry sort out the availabilty of their content is wrong. If the music industry sort out the availability of their content, then they have a commercial product that I can choose to subscribe to. If they don’ then that is their right, but I’m not paying for their failure thank you very much!

    1. gregorylent

      this issue will be where we learn the most about the “reality” of the edge economy principles… clearly it is buggywhips vs. automobile … but never underestimate the stubbornness of entrenched businessesthese are two points from ….# Group culture is an obstacle to change. Put another way, changing behavior is a far more difficult task than changing tools.# Companies won’t give up something they already have in exchange for a speculative future will be interesting to live the next decade, though having read the book we know where the movie is going

  19. Scott

    This is very Mark Cuban of you

    1. fredwilson

      Ooh. That’s not a compliment

      1. Scott

        But at least you’re not using this as an opportunity to promote your own HDTV channel.

  20. qwang

    Piracy used to be fake DVDs/VHS sold on the streets of China, and you received a lower quality product AND buying experience compared to taking the legit path.However, today, piracy is largely cheaper AND better…BitTorrent offers A. a larger selection B. often faster delivery and C. non-DRM’d content. It’s a real shame that paid services offer a clumsier product and experience than the free and illegal path, especially when there’s so much you can do to offer a better product. “You can’t compete with free” simply isn’t true…how do you explain private schools? bottled water? satellite radio? 37signals?I really don’t think it’s about free content with alternate revenue models. People are welcome to explore that path, but the 99c/song, $2/episode, $3 rental, $15/movie price points are completely achievable with the right means of purchase, delivery, and surrounding value-added services (e.g. social sharing) that only a legit service can deliver.

    1. gregorylent

      q dub, nice comment on being able to compete with free

  21. J.D. Falk

    The cost isn’t even the main thing here. Like you said, a file with one vendor’s DRM won’t play on another vendor’s devices — so your only choices are to pirate it, or to not listen.This increasing inconvenience is encouraging thousands of non-pirates to learn how to bypass DRM technology, leading to what appears to be gigantic increases in piracy. Get the inconvenience out of the way, and I bet a lot of those people will stop bothering to be pirates.

    1. fredwilson


  22. Griswold

    I agree with you that the studios need to offer consumers “what they want… at a reasonable price”, but wholly disagree that government is the right tool to accomplish this or that ISPs should become collection agencies for content providers.

  23. Brian

    Fred,Downloading the Dark Knight from bit torrent is stealing. I would like to buy a hot dog buns 2 buns at a time, but that does not give me a right to walk into the super market and pull two out of an 8 pack without paying.Just because distribution is not what you want it to be does not give you the right to steal. Content creators have the right to distribute their work any way they please. They have the right to price discriminate and charge more to people based on their willingness to pay.Lots of content providers in the early 1900s died paupers because taverns and night club owners stole their work using similar arguments.I am the first to admit that the industry needs to improve their distribution, but if they don’t they will lose customers. Content creation is high risk and those that create great content deserve to charge and distribute it any way they please.On the other end, there is no reason the ISPs should have to pay content providers fees. That is just as ludicrous. The only role for the government is to enforce IP laws by prosecuting those that steal.

    1. fredwilson

      I saw Dark Night in the theater last nightI paid $40 and took my wife and two kidsIs it still stealing now?

      1. Brian

        Yes, it is still stealing. I bought a pack of gum this weekend. That does not give me the right to shoplift gum every time I want to.If you want to see it more than once, but another ticket (like I did this weekend). Otherwise, wait until it comes out on DVD.These arguments you state are not new. They are over a hundred years old. Artists have the right to set the price for their work. If you think the price is too high, don’t consume it.I for one am glad creators are finally receiving the wealth they deserve for the great art they are bringing into the world. Until we had strong copyright enforcement in this country, most of them died paupers.

        1. fredwilson

          I am not suggesting I don’t want to pay for art. I probably pay over $1000 per year for music in an industry that says they can’t get people to pay for it. I am saying that it should available in all digital formats to all people.

  24. Andy Freeman

    I think that the media industries lost when they weren’t forced to choose between copyright protection and technical protection (DRM, encryption, magic monkeys). In other words, I think that a owner who claims copyright protection should not be able to use technical protection.

  25. Steven Kane

    Fred, on what basis do you suggest that the “vast majority of downloaders are people like me who would gladly pay if the content was available to purchase when I wanted it in the format I want it”?Radiohead and Trent R. both tried to prove this thesis… and failed.Any case, ignoring all the libertarian fist-shaking, i think download fees aren’t a bad model. Metered pay-as-you-go consumer consumption models seem to work fine (and no one screams about tyranny and kafka-esque nightmares) in tons of analogous industries:electrical powernatural gasheating oilwater & sewergasolineetc…maybe the best solution is to ignore the media-centric aspects of the issue — specific copyrights, specific titles, specific owners — and instead simply view media as an amalgamation of bits and bytes (like water or fuel or power) and yes, compel ISPs and cel carriers (or whatever bandwidth suppliers and utilities) to set aside some revenues for allocation to content providers?hmmm. maybe thats a recipe for a huge unworkable bureacracy?any case, to all the angry rebels and cassandras – chill out. artists and creators and inventors deserve some form of ownership and control over their intellectual property. rather than disrespect and rasberries, how about applauding creative attempts to come up with solutions and build on what works and what doesn’t

    1. gregorylent

      radiohead … that reminds me, i still cannot buy “in rainbow” in india .. the shops never heard of it, even the big shops, the chains … how do i find out where to do bit torrents? … oh, google, thank you very much

    2. gregorylent

      and my brain informs me that intellectual property rights are on the way out .. may take a decade or two, but that meme is dying for sure

  26. user239

    i thought copyright was regulation. someday my grandkids will be allowed to consume this media wherever and whenever they want. [insert “great” in front of “grandkids” depending on how many more times you expect mickey mouse legislation to be passed.]i think this is a really creative response to all their whining. how about shortening copyright back down to a more reasonable timeframe? that could encourage copyright owners to get their works into the marketplace sooner rather than later (ties in with comments about release windows).an aside: is anyone able to view comments from disqus on a blackberry? i often find myself reading a post through newsgator’s decent client and wishing i had access to the comments. is there a RSS feed for the comments?

  27. Clayton Nash

    I agree with your premise, but I don’t believe this this the reason the ISPs are doing this.Fundamentally, the ISP operational cost model is driven by the cost of backhaul bandwidth from the exchanges. ISPs who buy from BT Wholesale pay a per bit charge for traffic volume – those who’ve unbundled an exchange pay for the links form the exchange to their internet access points. Once the customer is acquired, this is by far the largest part of their variable costs for customer service.The flat rate plans they sell give the ISPs little chance to realise more revenue from user who use large amounts of bandwidth. This action gives them a legal reason to threaten, and ultimately remove from their network, the users who drive the majority of their costs.A licensed download service or a charge which gave the users the right to download is their worst nightmare – even more users would drive cost into the business which they could not recoup. The ISPs incentives are universally aligned against your proposal.

  28. morgan

    It’s very hard to compete with free. I think your proposal is a threat. If the industry does not set prices at a level that you feel good about, then you will steal the product instead. Typically as prices rise demand drops and prices are set accordingly by the supply side. It’s an agreement. If prices are too high, no one will buy and the supplier will make no money. In the case of the Dark Knight, demand hasn’t dropped. Price has been forced to zero by pirates. Why is it that this so unacceptable with potato chips and bread? Why isn’t Ferrari accused with overcharging for their cars. Why doesn’t everyone hop the fence and steal one? Because they will be shot or put in jail. Food and water are essential and no one has ever proposed that we get them for free. At best, in some societies these things are subsidized by government and only in dire circumstances. What you are espousing is inconsistent with every other aspect of your life and yet you think it’s ok where media is concerned.

    1. fredwilson

      I will bet that I spend more money on media than 99.9pcnt of the population. And yes I do use the P2P and bit torrent networks to supplement our media consumptionMy point is I’d like to never have to supplement and pay even more. But they won’t take my money

  29. shbrown

    I entirely agree. I don’t understand from a business perspective what the content industry is doing: they’re not even offering the product for sale, and then they go around accusing everyone of stealing it. When they’re actually offering the content for sale in a way I can use (e.g. downloadable when I want, DRM-free) and they’re still not making money, then I’ll be highly sympathetic to any regulation they want. Everyone loves blockbusters! Even if we have to publicly subsidize them!Black markets such as piracy are created from inefficient distribution systems. Until they even try to remedy this, I don’t think it’s the public’s role to pay for the business mistakes of content-industry executives.

  30. Michael

    “but I believe that vast majority of downloaders are people like me who would gladly pay if the content was available to purchase when I wanted it in the format I want it.”Absolutely agree with you. There is a site: www. They offer music in 6 formats and you can choose the presets for the most of the formats (no DRM). I think this is the future of the digital music. I wonder why nobody talks about them… most probably they don’t have millions to invest like Microsoft or Apple, but I think these guys are doing great job. I was quite surprised to get know that they are from Latvia.