What price MP3? The hidden cost of streaming music.

MP3 is widely associated with web distribution of music, and the movement to free music from the constraints of physical delivery. Free music is often considered synonymous with MP3. But MP3 is not free.. There are patents on MP3 so if you want to sell hardware or software to code or decode MP3 you need to pay a fee.. and if you want to run a commercial streaming music service based on MP3 you also need to pay a fee.

Looking just at the latter case… a quick look at the MP3licensing site shows that if you gross more than $100 000 dollars a year you need to pay a 2% licensing fee. Now MP3 is really nifty stuff so you might think two percent is not that unreasonable… but let’s think about my streaming business. Let’s say after all my costs are in I might be aiming for a profit of ten percent on turnover… That means that a two percent license cost eats a fifth of my profit. Or put another way… four days a week I work for my shareholders, and one day a week I work to pay off the MP3 license fees.

So… Free music anyone?

“Ogg Vorbis is a completely open, patent-free, professional audio encoding and streaming technology with all the benefits of Open Source.”
So why isn’t everyone using .OGG?

And don't forget.... The Pirate Party & Piratpartiet are working for patent reform

(NB: I haven’t checked out the norm for profit levels for streaming music businesses.. treat this as an example, and if you have real numbers let me know)