Here’s an idea: rather than cripple online music startups with royalties, or burden them with equity arrangements, why not give them a prize for for doing the one thing the major record industry has failed to achieve for itself: make money out of music online?

In Wired Magazine’s Listening Post, Eliot Van Buskirk asked the question ‘Should Music Startups Give Equity to Copyright Holders?’. The question was prompted by a white paper (PDF) by MCPS/PRS chief economist Will Page and PhD student David Touve, which proposes that instead of charging royalty fees to innovative web based startups, they should offer an equity arrangement.

In other words, give the startups the option of letting the record industry own part of your business instead of charging licensing fees.

It’s an interesting idea designed to get past the dilemma that music startups either ignore copyright (and live in fear of lawsuits) in their early stages, or they are entirely crippled by it.