Over in Billboard ($), the magazine’s executive editor, Bill Werde, is coming out strongly for an ISP tax on file-sharing as a way to compensate the failing record industry. His starting point is a MIDEM address by Paul McGuinness, U2’s manager, who Werde notes was one of the handful of folks in Steve Jobs’ kitchen when the deal was struck to introduce a special U2 iPod nearly four years ago.

And so it was important, I think, that he’s also the guy who, a couple of days later used a keynote slot at MIDEM [to attack] the Internet service providers (ISPs), telecoms and tech companies that have been happy to profit from, or at least abide by the losses of the music business.

Werde goes on to talk about a proposal along these lines introduced by the Electronic Frontier Foundation.

The EFF plan noted that charging “the 60 million Americans who have been using file-sharing software” $5 per month would net more than $3 billion of annual “pure profit” to the music industry. Not a shabby start for offsetting losses, but no one from the business is keen to listen to the EFF. McGuinness was the perfect man to sell the idea—not just to the outside world, but, especially, the music business.

In 2004, top label executives would tell me off the record that there’s no way you’d be able to get everyone with a stake at the same table and agree on a rate that consumers and ISPs and the music business could find palatable. Now, after three years of dramatic decline, more of those same folks—the ones that are still around anyway—are realizing they may have little choice, if they hope to avoid a swan dive of their own.

This is probably a pipe dream; such a sensible compromise is entirely out of keeping with everything the record industry has done in this arena for the last decade. To make things worse, the EFF calls for many sensible provisions. Music fans could use any software they wanted to swap whatever recorded music they wanted, all under the auspices of that dollars-per-month model. If they didn’t voluntarily join the program, they could get sued. The group also wanted a transparent, nonprofit group to oversee the money.

The big reason the industry will never go for it is that, as the EFF probably apprehends, such an arrangement will still, in the long term, reduce the industry’s impact in the music business markedly. Right now, the vast majority of the music swapped online is major-label product. As bands and artists get the hang of internet distribution, this percentage will ineluctably go down, and the amount of money going to the unaligned will go up.

Beyond that, it will remove what stigma remains from online file-swapping and, as informal friends- or dorm-based “nodes” spring up, it will make it easier for one online contact to pass music around on the sneaker net. (I’ve written before about how this will work; with the now-standard PC DVD burner, you can put fully half of the Billboard 200 album chart on one CD.) There’s even the possibility that, at a certain point, online file-sharing may start to dry up.*

There’s another argument against it, what I think of as the “let them stew in their own juices” argument. It doesn’t have law on its side, but it does have a sort of blunt moral force. The main reason the record industry doesn’t like file-sharing is that it muscles in on a hegemony they have long held. The record industry is like the Sopranos; ripping off artists is its job, and it doesn’t like faceless computer programs or emo college students muscling in on the family business.

Consider this Reuters report on a recent suit against Universal from a group of famous artists and artist estates, including Count Basie, charging underpayment of royalties. Universal denies the charges, it’s just a suit, and the company deserves its day in court. All that said, there’s a comment I have heard again and again from artists lawyers; that in a career of auditing record companies, often over a period of decades, it is almost never the case that the artist wasn’t owed money. The companies also make it punitively difficult to find out whether they do owe the artists money, as of course they would. This systemic theft is built into the structure of the industry at this point; it’s a good potent reason to hasten the end of the companies as financial conduits between artists and fans.

* As new generations of fans come online, the diversity of the genres swapped (now largely rock and pop) will gradually right itself, as jazz, then country, then, I don’t know, Christian rock will all ultimately find its online presence match its offline appeal. Isn’t there the possibility that a critical mass will be hit at a certain point? As computer storage and download speeds increase, you will soon see zip files of the complete Stones catalog, and then a complete “classic rock” catalog, swapped. It’s possible we might see a situation where an ever-increasing percentage of the population carries a complete historical collection of whatever their favorite genre of music is around on their computer, with actual swapping correspondingly declining. On the other hand, by that point the ISP fees will become forgotten and folks may continue to pay them, even if they don’t actively collect music online any more.

Previously: The Year in CD Sales: It couldn’t have happened to a nicer group of people.