Blog Post

The Intricacies Of Label Tax

Sean Ryan, the former CEO of Listen.com/Rhapsody, has done a detailed analysis of what the latest Universal Music Group-Zune “label tax” deal means to the industry and all the hardware and service players in it, as well as users.
The hardware players will have to pay the tax/royalties, whether or not the consumer purchaser ever buys a track from that label. If that label deal is not struck, then the label’s content will not be available to the manufacturer’s store, and since everyone is going vertically integrated these days iTunes, Sony Connect, Real Rhapsody/SanDisk, Microsoft Zune, it gives the labels even more power over the channel, as Ryan explains it.
Another hard dilemma: How do artists and publishers get paid their share? Since we have no idea how to match the UMG payment with any type of usage, how will a label accurately apply it across an entire artist roster? Or even harder, across the various publishers, many of which are not even part of Universal?
All of this makes me go back to the original interoperability argument: if you want to escape the monopolistic behaviors of the incumbents, make your device and service work with every other..that was the power to tax any one closed ecosystem gets diffused among all players, with the end result being too complex for anyone to bother about it.