Imagine a hot-dog venture where the supplier demands the HIGHER of: $1 per hot dog sold OR $2 for every customer OR 50% of all revenues. Plus a two-year minimum order payable in advance. Such economics are the stark reality every digital music subscription service must confront.
Record labels demand: pay the largest of a per-subscriber minimum, per-play costs, or a percentage of total company revenue. Labels receive an equity stake. Up-front minimum payments are required. Every contract has strict NDAs prohibiting disclosure of terms.
With most businesses, if a supplier makes unreasonable demands you can turn to other providers. Since copyright law gives record labels a government-granted monopoly, no such option exists with music. The subscription digital music business is a poignant illustration of what a monopoly leads to.
--MR
