Open Music Model
Encyclopedia
The Open Music Model is an economic and technological framework for the recording industry based on research conducted at the Massachusetts Institute of Technology
(MIT). It predicts that the playback of prerecorded music will be regarded as a service rather than individually sold products, and that the only system for the digital distribution
of music that will be viable against piracy is a subscription-based system supporting file sharing
and free of digital rights management
. The research also suggests a price point of US$
5 per month for unlimited downloads
as the market clearing
point. Since its publication, a number of its principles have been adopted throughout the recording industry.
The model was first articulated by Shuman Ghosemajumder
in his 2002 paper “Advanced Peer-Based Technology Business Models.” The following year, it was coined and proposed as the Open Music Model.
The model suggests changing the way consumers interact with the digital property market: rather than being seen as a good to be purchased from online vendor, music would be treated as a service being provided by the industry, with firms based on the model serving as intermediaries between the music industry and its consumers. The model proposed giving consumers unlimited access to music downloads for the price of US$
5 per month (as of 2002), based on research showing that this would be the market clearing price, expected to bring in a total revenue of over US$
3 billion per year.
The research conducted at MIT
demonstrated the demand for third-party file sharing programs. Insofar as the interest for a particular piece of digital property is high, and the risk of acquiring the good via illegitimate means is low, people will naturally flock towards third-party services such as Napster
and Morpheus (more recently, Bittorrent
and Piratebay).
systems based on digital rights management
. A startup in Germany
, Playment, is working on adapting the entire model to a commercial setting as the basis for its business model.
Criticisms of the model included that it would not eliminate the issue of piracy. Others countered that it was in fact the most viable solution to piracy, since piracy was "inevitable". Supporters argued that it offered a superior alternative to the current law-enforcement based methods
used by the recording industry.
Several aspects of the model have been adopted by the recording industry and its partners over time:
Massachusetts Institute of Technology
The Massachusetts Institute of Technology is a private research university located in Cambridge, Massachusetts. MIT has five schools and one college, containing a total of 32 academic departments, with a strong emphasis on scientific and technological education and research.Founded in 1861 in...
(MIT). It predicts that the playback of prerecorded music will be regarded as a service rather than individually sold products, and that the only system for the digital distribution
Digital distribution
Online distribution, digital distribution, or electronic software distribution is the practice of delivering content without the use of physical media, typically by downloading via the internet directly to a consumer's device. Online distribution bypasses conventional physical distribution media,...
of music that will be viable against piracy is a subscription-based system supporting file sharing
File sharing
File sharing is the practice of distributing or providing access to digitally stored information, such as computer programs, multimedia , documents, or electronic books. It may be implemented through a variety of ways...
and free of digital rights management
Digital rights management
Digital rights management is a class of access control technologies that are used by hardware manufacturers, publishers, copyright holders and individuals with the intent to limit the use of digital content and devices after sale. DRM is any technology that inhibits uses of digital content that...
. The research also suggests a price point of US$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
5 per month for unlimited downloads
Uploading and downloading
In computer networks, to download means to receive data to a local system from a remote system, or to initiate such a data transfer. Examples of a remote system from which a download might be performed include a webserver, FTP server, email server, or other similar systems...
as the market clearing
Market clearing
In economics, market clearing refers to either# a simplifying assumption made by the new classical school that markets always go to where the quantity supplied equals the quantity demanded; or# the process of getting there via price adjustment....
point. Since its publication, a number of its principles have been adopted throughout the recording industry.
Overview
The model asserts that there are five necessary requirements for a viable commercial music digital distribution network:
# | Requirement Description 1 Open file sharing users must be free to share files File sharingFile sharing is the practice of distributing or providing access to digitally stored information, such as computer programs, multimedia , documents, or electronic books. It may be implemented through a variety of ways...
with each other2 Open file formats content must be distributed in MP3 MP3MPEG-1 or MPEG-2 Audio Layer III, more commonly referred to as MP3, is a patented digital audio encoding format using a form of lossy data compression...
or other formats with no DRMDigital rights managementDigital rights management is a class of access control technologies that are used by hardware manufacturers, publishers, copyright holders and individuals with the intent to limit the use of digital content and devices after sale. DRM is any technology that inhibits uses of digital content that...
restrictions3 Open membership copyright CopyrightCopyright is a legal concept, enacted by most governments, giving the creator of an original work exclusive rights to it, usually for a limited time...
holders must be able to freely register to receive payment4 Open payment payment should be accepted via all prior means, including credit cards and cash 5 Open competition multiple such systems must exist which can tie together, not a designed monopoly MonopolyA monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
The model was first articulated by Shuman Ghosemajumder
Shuman Ghosemajumder
Shuman Ghosemajumder is a Canadian technologist, entrepreneur, and author. He is the former click fraud czar at Google, the author of works on digital distribution including the Open Music Model, and co-founder of TeachAIDS.-Early life:...
in his 2002 paper “Advanced Peer-Based Technology Business Models.” The following year, it was coined and proposed as the Open Music Model.
The model suggests changing the way consumers interact with the digital property market: rather than being seen as a good to be purchased from online vendor, music would be treated as a service being provided by the industry, with firms based on the model serving as intermediaries between the music industry and its consumers. The model proposed giving consumers unlimited access to music downloads for the price of US$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
5 per month (as of 2002), based on research showing that this would be the market clearing price, expected to bring in a total revenue of over US$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
3 billion per year.
The research conducted at MIT
MIT Sloan School of Management
The MIT Sloan School of Management is the business school of the Massachusetts Institute of Technology, in Cambridge, Massachusetts....
demonstrated the demand for third-party file sharing programs. Insofar as the interest for a particular piece of digital property is high, and the risk of acquiring the good via illegitimate means is low, people will naturally flock towards third-party services such as Napster
Napster
Napster is an online music store and a Best Buy company. It was originally founded as a pioneering peer-to-peer file sharing Internet service that emphasized sharing audio files that were typically digitally encoded music as MP3 format files...
and Morpheus (more recently, Bittorrent
BitTorrent
BitTorrent is a peer-to-peer file sharing protocol used for distributing large amounts of data over the Internet. BitTorrent is one of the most common protocols for transferring large files, and it has been estimated that it accounted for roughly 43% to 70% of all Internet traffic .Programmer...
and Piratebay).
Industry adoption
The Open Music Model predicted the failure of online music distributionDigital distribution
Online distribution, digital distribution, or electronic software distribution is the practice of delivering content without the use of physical media, typically by downloading via the internet directly to a consumer's device. Online distribution bypasses conventional physical distribution media,...
systems based on digital rights management
Digital rights management
Digital rights management is a class of access control technologies that are used by hardware manufacturers, publishers, copyright holders and individuals with the intent to limit the use of digital content and devices after sale. DRM is any technology that inhibits uses of digital content that...
. A startup in Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
, Playment, is working on adapting the entire model to a commercial setting as the basis for its business model.
Criticisms of the model included that it would not eliminate the issue of piracy. Others countered that it was in fact the most viable solution to piracy, since piracy was "inevitable". Supporters argued that it offered a superior alternative to the current law-enforcement based methods
Trade group efforts against file sharing
Impact of illegal downloading on the film industryArts and media industry trade groups such as the Recording Industry Association of America and Motion Picture Association of America strongly oppose and attempt to prevent copyright infringement through file sharing...
used by the recording industry.
Several aspects of the model have been adopted by the recording industry and its partners over time:
- The abolition of digital rights management represented a major shift for the industry. In 2007, Steve JobsSteve JobsSteven Paul Jobs was an American businessman and inventor widely recognized as a charismatic pioneer of the personal computer revolution. He was co-founder, chairman, and chief executive officer of Apple Inc...
, CEO of Apple Inc., published a letter calling for an end to DRM in music. A few months later, Amazon.comAmazon.comAmazon.com, Inc. is a multinational electronic commerce company headquartered in Seattle, Washington, United States. It is the world's largest online retailer. Amazon has separate websites for the following countries: United States, Canada, United Kingdom, Germany, France, Italy, Spain, Japan, and...
launched a DRM-free music store. One year later, iTunes Store abolished DRM on most of its music.
- Open payment was relatively straightforward to implement, and the iTunes StoreITunes StoreThe iTunes Store is a software-based online digital media store operated by Apple. Opening as the iTunes Music Store on April 28, 2003, with over 200,000 items to purchase, it is, as of April 2008, the number-one music vendor in the United States...
offered gift cards, which could be purchased with cash, from its launch in 2003.
- In 2011, Apple launched its iTunes Match service with a subscription model, supporting file-sharing between a user's own devices. However, the subscription price of of $25/year does not include the price of acquiring content, which would still have to be purchased on a per track basis from the iTunes Store.
- Variations of the model's suggested $5 per month all-inclusive subscription have been adopted by a number of platforms. In 2005, Yahoo! MusicYahoo! MusicYahoo! Music, owned by Yahoo!, is the provider of a variety of music services, including Internet radio, music videos, news, artist information, and original programming...
was launched with that price point. The combination of a subscription model and digital downloads (as opposed to streaming) did not come until later. In 2010, RhapsodyRhapsody (online music service)Rhapsody is an online music store subscription service, launched in December 2001, and available in the United States only. On April 6, 2010, Rhapsody officially declared its independence from RealNetworks. Downloaded files come with restrictions on their use, enforced by Helix, Rhapsody's version...
announced a download ability for their subscribers using iPhones. In 2011, SpotifySpotifySpotify is a Swedish-founded, UK-headquartered DRM-based music streaming service offering streaming of selected music from a range of major and independent record labels, including Sony, EMI, Warner Music Group, and Universal. Launched in October 2008 by Swedish startup Spotify AB, the service had...
introduced a $5 per month premium subscription in the United States. The MicrosoftMicrosoftMicrosoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...
ZuneZuneZune is a digital media brand owned by Microsoft which includes a line of portable media players, a digital media player software for Windows machines, a music subscription service known as a 'Zune Music Pass', music and video streaming for the Xbox 360 via the Zune Software, music, TV and movie...
offers a subscription service for music downloads known as a Zune Pass, at $10 a month.
See also
- Comparison of online music storesComparison of online music storesFor streaming services, see list of online music databases.The following table lists online music stores that carry a selection of songs by many record labels and artists. The stores listed below access passive databases and require access through a computer or some allow access and downloads...
- Disk sharing
- Fan-funded music
- File sharingFile sharingFile sharing is the practice of distributing or providing access to digitally stored information, such as computer programs, multimedia , documents, or electronic books. It may be implemented through a variety of ways...
- File sharing timelineFile sharing timelineThis is a timeline of events in the history of file sharing.-Before 1970s:* Punched tape used to as data storage device for CNC machines and Teleprinter communication...
- File-sharing program
- Peer-to-peerPeer-to-peerPeer-to-peer computing or networking is a distributed application architecture that partitions tasks or workloads among peers. Peers are equally privileged, equipotent participants in the application...
- Record industry
- Subscription business modelSubscription business modelThe subscription business model is a business model where a customer must pay a subscription price to have access to the product/service. The model was pioneered by magazines and newspapers, but is now used by many businesses and websites....
- Threshold pledge systemThreshold pledge systemThe threshold pledge or fund and release system is a way of making a fundraising pledge as a group of individuals, often involving charitable goals or financing the provision of a public good. An amount of money is set as the goal or threshold to reach for the specified purpose and interested...