Open Music Model

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.

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 with each other
2	Open file formats	content must be distributed in MP3 or other formats with no DRM restrictions
3	Open membership	copyright holders must be able to freely register to receive payment
4	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

The model was first articulated by Shuman Ghosemajumder in his 2002 paper “Advanced Peer-Based Technology Business Models.”^[1] The following year, it was coined and proposed as the Open Music Model.^[2]

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^[1] (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.^[1]

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).^[1]

Industry adoption

The Open Music Model predicted the failure of online music distribution systems based on digital rights management.^[3] A startup in Germany, Playment, is working on adapting the entire model to a commercial setting as the basis for its business model.^[4]

Criticisms of the model included that it would not eliminate the issue of piracy.^[5] Others countered that it was in fact the most viable solution to piracy,^[6] since piracy was "inevitable".^[7] Supporters argued that it offered a superior alternative to the current law-enforcement based methods used by the recording industry.^[8][9]

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 Jobs, CEO of Apple Inc., published a letter^[10] calling for an end to DRM in music. A few months later, Amazon.com launched a DRM-free music store.^[11] One year later, iTunes Store abolished DRM on most of its music.^[12]

• Open payment was relatively straightforward to implement, and the iTunes Store 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.^[13] 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! Music 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, Rhapsody announced a download ability^[14] for their subscribers using iPhones. In 2011, Spotify introduced a $5 per month premium subscription in the United States.^[15] The Microsoft Zune offers a subscription service for music downloads known as a Zune Pass, at $10 a month.

See also

• Comparison of online music stores
• Disk sharing
• Fan-funded music
• File sharing
• File sharing timeline
• File-sharing program
• Peer-to-peer
• Record industry
• Subscription business model
• Threshold pledge system

References