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. 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.
Since its creation in 2002, a number of its principles have been adopted throughout the recording industry, and it has been cited as the basis for the business model of many music subscription services.
Overview.
The model asserts that there are five necessary requirements for a viable commercial music digital distribution network:
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. The following year, it was publicly referred to 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 for the price of US$5 per month (as of 2002), 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.
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. One startup in Germany, Playment, announced plans to adapt the entire model to a commercial setting as the basis for its business model.
Several aspects of the model have been adopted by the recording industry and its partners over time: