This topic has been around for a while now.  We talked about this very problem in a music business class I took in college (only a few years ago, but for digital things, that's a while).  Is the music "flat rate" the answer for the music industry?

I say no.

Here's why.

The flat rate would be essentially a universal internet user tax that would pay for all downloaded music.  That's how I understand it.  There's probably a thousand different variations, but that's the basis.

One big problem is the people who don't get their music online.  They subsidize the rest.  Why should I pay for Jonny's 183 GB worth of music?  I only have 500 MB!

Another problem I see is that the music industry is essentially capping itself.  If the tax is say $2 per internet user, that only pays for 2 songs per internet connection.  If the average user downloads (or just listens) to more than that per whatever time period we use, then the industry loses money.  As a business model, you want to be paid for what you do.  It's bad if you're not compensated as much as you should.  If I continued to do that in say, a bakery, then I would go under.

Now, subscription based services seem fine to me, but they're especially useful for people who do buy/use a lot of music.  If you're going to buy 12 issues per year of some magazine, why not buy a subscription for the year and save some money?  But for the person who only buys 1 or 2 copies over the year, the subscription isn't worth it.  They'll pay less because they skipped the subcription.

By collecting the music fee, you take away that option for higher usage, and essentially make everyone pay a subscription fee.  It's like charging someone $20 to walk in a record store saying "Take what you want."  If you heard that, you'd go a pick out 20 or 30 CDs.  At $15 per CD, the store just lost money!

And the silly thing is, the music industry has been giving away free songs for years.  It's called radio.  In fact, they've paid people to play music on the radio!  Now you're telling me that they can't figure out a way to monetize digital music other than by universally charging internet users?

Personally, I think things like Spotify or Pandora or YouTube are on the right track.  Free music is the ultimate end of the digital revolution.  It's too easy to copy songs digitally and give them away for anyone to truly stop it now.  YouTube is like radio MTV.  Pandora is internet radio.  Spotify is more like a new breed of music, combining social media aspects with radio.  The trick is finding ways to create value in free music.

I don't have an easy answer.  But I do know that by giving enough away for free, you generate interest that will probably lead to sales.  Charging a flat rate seems to be reaching to far, and I think there has to be a better way.

Any thoughts?