“How Much Would We Pay For Music Like Water?” or “Could Music Be A Pure Public Good?”

Gerd Leonhard’s Music Like Water theory is my favourite prediction for music’s future, particularly in the short term. I haven’t been able to find an actual rundown of the numbers, though; an estimate of what it would mean for the consumer is often relegated to “a fixed monthly fee” or “a couple of bucks a month.” That’s where this research comes in.

I took it upon myself to get some numbers and make a rough estimate on what this would cost consumers. Assuming that the music industry would look to match the 2007 sales figures with the fixed cost (since the system can theoretically drive physical purchases down to $0, as unlikely as that is), nearly $7.5 billion would need to be raised in the US (source: RIAA) and $431 million in Canada (source: CRIA).

Since the plan would only affect internet subscribers, it usually involves tacking a fixed cost onto households’ monthly internet bills. And, given that there are 62 million US homes with service (source: Clickz, from the 2003 US Census), the cost would have to be equally distributed among them; the same goes for the 5.2 million wired homes in Canada (source: Internet World Stats, a 2004 estimate). Dividing the desired revenues by the number of households, you realize that:

Unlimited access to music in the US would cost $120.90 per year per household, or $10.08 per month.

Unlimited access to music in Canada would cost $82.88 per year, or $6.91 per month.

Again, note that these are only rough estimates, since some other factors could drive the price a little bit up or a little bit down. Examples are:

• Licensing costs for foreign imports/exports
• The figures above include only RIAA figures; non-RIAA revenues should be factored in too
• Actual revenues would be supplemented by hard-copy purchases, which may actually go up (see: vinyl sales are climbing)

Regardless, the brightest future for music sales lies in the domain of pure public goods.

The internet has pushed music to the point where the only efficient distribution system is unlimited and en masse; if given the option, a huge number of people will choose to download illegally, freeloading on the current system. Because the internet allows music to have unlimited distribution with no way to stop freeloaders from leeching the system (in economic terms, non-rival and non-excludable), it only makes sense that music distribution joins the ranks of national defense, police, and free-to-air TV as a pure public good.

And, for you industry naysayers out there who may be worried about a fixed revenue stream hampering profits, remember that the cost of digital storage and communication, particularly in the cloud, is plummeting to $0. Which means that all of this money will cost you little, if anything, in terms of distribution, freeing up your resources to (finally) innovate elsewhere.

This plan is win-win-win:

• Consumers get unlimited access to music without being hit by exorbitant prices or questionable practices
• Record labels and publishers get paid for doing their job, and are given the chance to find new relevance in today’s market
• Artists get fairly reimbursed for the music they make

And now, to figure out how funds would be allocated to the rightful recipients…