Open music model

{{short description|Economic and technological framework which foresees the playback of prerecorded music as a service}}

The open music model is an economic and technological framework for the recording industry based on research conducted at the Massachusetts Institute of Technology. It predicts that the playback of prerecorded music will be regarded as a service rather than as 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 indicated that US$9 per month for unlimited use would be the market clearing price at that time, but recommended $5 per month as the long-term optimal price.{{cite thesis|title=Advanced Peer-Based Technology Business Models|author=Shuman Ghosemajumder|publisher=MIT Sloan School of Management|date=May 10, 2002|hdl = 1721.1/8438|type=Thesis|author-link=Shuman Ghosemajumder}}

Since its creation in 2002, a number of its principles have been adopted throughout the recording industry,{{cite web|url=http://www.i-runway.com/blog/on-demand-music-streaming-to-battle-piracy/|title=On-Demand Music Streaming to battle Piracy|author=Gautham Somraj Koorma|publisher=iRunway|date=November 27, 2015|access-date=March 27, 2016|archive-date=January 28, 2020|archive-url=https://web.archive.org/web/20200128195220/http://www.i-runway.com/blog/on-demand-music-streaming-to-battle-piracy/|url-status=dead}} and it has been cited as the basis for the business model of many music subscription services.{{cite magazine|url=http://espresso.repubblica.it/affari/2014/07/01/news/spotify-il-business-folle-sbarca-a-wall-street-1.171553|title=Spotify, il business folle sbarca a Wall Street|author=Marco Consoli|magazine=L'Espresso|date=July 3, 2014}}{{cite web|url=http://technologie.gazeta.pl/internet/1,104665,18056619,Dla_uzytkownikow_streaming_muzyki_jest_spelnieniem.html|title=Dla użytkowników streaming muzyki jest spełnieniem marzeń, a dla wytwórni – źródłem obaw|author=Karol Kopańko|publisher=Gazeta.pl|date=June 5, 2015}}

Overview

The model asserts that there are five necessary requirements for a viable commercial music digital distribution network:

class="wikitable" ! # !! style="width: 20%;" \| 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 open 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 multiple means, not a closed system
5	Open competition	multiple such systems must exist which can interoperate, not a designed monopoly

The model was proposed by Shuman Ghosemajumder in his 2002 research paper Advanced Peer-Based Technology Business Models at the MIT Sloan School of Management. It was the first of several studies that found significant demand for online, open music sharing systems.{{Cite journal|last=Alagoa|first=Hans|date=2015-11-09|title=A Review of Digital Marketing Influences on the Music Industry and a Vision of the Industry in the Next 5 Years.|url=https://papers.ssrn.com/abstract=2688210|language=en|location=Rochester, NY|doi=10.2139/ssrn.2688210 |ssrn=2688210|url-access=subscription}} The following year, it was publicly referred to as the Open Music Model.{{cite web|url=http://opensource.com/life/11/11/drm-graveyard-brief-history-digital-rights-management-music|title=The DRM graveyard: A brief history of digital rights management in music|author=Ruth Suehle|publisher=Red Hat Magazine|date=November 3, 2011}}

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 vendors, 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 for the price of $5 per month (${{Inflation|US|5|2002}} in {{Inflation/year|US}}), based on research showing that this could be a long-term optimal price, expected to bring in a total revenue of over US$3 billion per year.

The research 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 The Pirate Bay).

The research showed that consumers would use file sharing services not primarily due to cost but because of convenience, indicating that services which provided access to the most music would be the most successful.

Industry adoption

The model predicted the failure of online music distribution systems based on digital rights management.{{cite book|chapter-url=http://dl.acm.org/citation.cfm?id=2602197|chapter=Collective Copyright|author1=Emanuele Lunadei |author2=Christian Valdiva Torres |author3=Erik Cambria |title=Proceedings of the 23rd International Conference on World Wide Web |publisher=International World Wide Web Conference 2014|date=May 18, 2014|pages=1103–1108 |doi=10.1145/2567948.2602197 |isbn=9781450327459 |s2cid=16332051 }}

Criticisms of the model included that it would not eliminate the issue of piracy.{{cite web |url=https://www.scribd.com/doc/120018441/Music-Distribution-Technology-and-the-Value-of-Art-in-Society|title=Music Distribution: Technology and the Value of Art in Society|author=Sungwon Peter Choe|publisher=KAIST|year=2006}} Others countered that it was in fact the most viable solution to piracy,

{{cite web|url=http://www.iplawintheus.com/open-music-model/|title=Open music model|author=Andrew Traub|publisher=US Intellectual Property Law|date=November 25, 2009|url-status=dead|archive-url=https://web.archive.org/web/20110101061826/http://www.iplawintheus.com/open-music-model/|archive-date=January 1, 2011|df=mdy-all}} since piracy was "inevitable".{{cite web | url=http://www.cse.tkk.fi/Datacommunications/Doctoral_dissertations/Lic-Yrjo_Raivio.pdf | title=Mobile Services and the Internet: A Study of Emerging Business Models|author=Yrjö Raivio|publisher=Helsinki University of Technology|date=December 4, 2009}} Supporters argued that it offered a superior alternative to the current law-enforcement based methods used by the recording industry.

{{cite web|url=http://mujlt.law.muni.cz/storage/1234798737_sb_06_myska.pdf|title=Flat Fee Music|author=Matěj Myška|publisher=Masaryk University Journal of Law and Technology|date=December 2007|url-status=dead|archive-url=https://web.archive.org/web/20110718175953/http://mujlt.law.muni.cz/storage/1234798737_sb_06_myska.pdf|archive-date=July 18, 2011|df=mdy-all}} One startup in Germany, Playment, announced plans to adapt the entire model to a commercial setting as the basis for its business model.{{cite web|url=http://www.playment.net/solution/index.html|title=Playment – Our Solution|author=Playment|publisher=playment.com|access-date=June 15, 2010|archive-url=https://web.archive.org/web/20120619232353/http://www.playment.net/solution/index.html|archive-date=June 19, 2012|url-status=dead}}

Several aspects of the model have been adopted by the recording industry and its partners over time:

{{quote box

|width=40%

|quote=Why would the big four music companies agree to let Apple and others distribute their music without using DRM systems to protect it? The simplest answer is because DRMs haven't worked, and may never work, to halt music piracy.

|source=– Steve Jobs, Thoughts on Music open letter, 2007

}}

The abolition of digital rights management represented a major shift for the industry. In 2007, Steve Jobs, CEO of Apple, published a letter{{cite web|url=https://www.apple.com/kr/hotnews/thoughtsonmusic/|title=Thoughts on Music|author=Steve Jobs|publisher=Apple Inc.|date=February 6, 2007|author-link=Steve Jobs}} calling for an end to DRM in music. A few months later, Amazon.com launched a store single individual DRM-free mp3's.{{cite news|url=http://www.readwriteweb.com/archives/amazon_mp3.php|title=Amazon MP3 Launches DRM-Free Music Store|author=Marshall Kirkpatrick|publisher=ReadWriteWeb|date=September 25, 2007|access-date=June 16, 2010|archive-url=https://web.archive.org/web/20120510024827/http://www.readwriteweb.com/archives/amazon_mp3.php|archive-date=May 10, 2012|url-status=dead}} One year later, iTunes Store abolished DRM on most of its individual tracks.{{cite news|url=http://www.macworld.com/article/137946/2009/01/itunestore.html|title=iTunes Store goes DRM-free|author=Peter Cohen|publisher=MacWorld|date=January 6, 2009}}
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 2010, Rhapsody announced a download ability{{cite news|url=http://www.fastcompany.com/1627779/rhapsody-streaming-music-mp3-playlists-iphone-itunes-apple-ipad-entertainment|title=Rhapsody First Subscription Service in U.S. to Offer Offline Music on iPhone|author=Kit Eaton|publisher=FastCompany|date=April 26, 2010}} for their subscribers using iPhones.
In 2011, Apple launched its iTunes Match service with a subscription model, supporting file-sharing between a user's own devices.{{cite web|url=http://erikras.com/2011/11/16/cloud-music-and-itunes-match/|title=Cloud Music and iTunes Match|author=Erik Rasmussen|date=November 16, 2011}} However, the subscription price did not include the cost of acquiring content, which would still have to be purchased on a per track basis from the iTunes Store.
Pricing close to the model's suggested $5 per month price, or its $9 per month market clearing price, has been adopted by many platforms:
In 2005, Yahoo! Music was launched at $5 per month with digital rights management.
In 2011, Spotify introduced a $5 per month premium subscription in the United States with digital rights management,{{cite magazine|url=https://www.wired.com/epicenter/2011/07/spotify-launches-in-the-u-s-at-last/|title=Spotify Launches in the U.S at Last|author=Charlie Sorrel|magazine=Wired|date=July 14, 2011}} recognized as adhering closely to the model.{{Cite web|date=2019-03-21|title=Napster and the proliferation of OMM (Open Music Model) {{!}} Metal Insider|url=https://metalinsider.net/editorials/napster-and-the-proliferation-of-omm-open-music-model|access-date=2021-11-07|language=en-US}}{{Cite web|last=Sharma|first=Prajwal|date=2021-09-12|title=Why is PinkPantheress' Just a Waste Not On Spotify?|url=https://otakukart.com/pinkpantheress-why-is-just-a-waste-not-on-spotify/|access-date=2021-11-07|website=Otakukart|language=en-US}}
In 2011, Microsoft Zune offered a subscription service for music downloads with digital rights management known as a Zune Pass, at $10 a month.
in 2012, Google Play Music launched unlimited music streaming for a subscription price of $9.99 per month.{{cite news|url=https://www.usatoday.com/story/tech/2015/06/24/first-look---google-play-music-has-1000s-of-free-music-playlists/29220015/|title=First Look – Google Play Music has 1000s of free music playlists|author=Jefferson Graham|newspaper=USA Today|date=June 24, 2015}} Users can upload their own MP3s to the service and download them, but cannot download songs they have not uploaded themselves.
In 2014, Amazon added DRM music streaming to their Amazon Prime service.{{Cite web | title=The Gotchas of the Amazon Prime Music Service {{!}} WindowsObserver.com | url=http://www.windowsobserver.com/2014/06/12/the-gotchas-of-the-amazon-prime-music-service/ | access-date=2025-04-27 | website=www.windowsobserver.com}}
In 2015, Apple announced Apple Music, which would offer unlimited streaming of songs encrypted with FairPlay DRM for a subscription price of $9.99 per month, and compensate artists on the basis of song popularity. Apple reportedly wanted to enter the market with a lower price but was pressured by record labels to adopt a higher subscription fee.{{cite web |url=https://www.theverge.com/2015/6/8/8729481/apple-music-streaming-service-wwdc-15 |access-date=June 8, 2015 |title=Apple announces its streaming music service, Apple Music |last1=Popper |first1=Ben |last2=Singleton |first2=Micah |date=June 8, 2015 |work=The Verge |publisher=Vox Media |archive-url=https://web.archive.org/web/20150609015106/http://www.theverge.com/2015/6/8/8729481/apple-music-streaming-service-wwdc-15 |archive-date=June 9, 2015 |url-status=live |df=mdy-all }}
According to inflation calculated through the United States Consumer Price Index calculator, the $9 per month estimated market-clearing price in 2002 would become US$13.72 per month in 2021,{{Cite web|title=CPI Home : U.S. Bureau of Labor Statistics|url=https://www.bls.gov/cpi/|access-date=2021-11-07|website=www.bls.gov|language=en-us}} closer to Apple Music's family plan price of $14.99.{{Cite web|title=Apple Music|url=https://www.apple.com/apple-music/|access-date=2021-11-07|website=Apple|language=en-US}}