Recording Industry Making It Impossible For Any Legit Online Music Service To Survive Without Being Too Expensive

from the good-job dept

You just knew it would happen again. Every time the recording industry finally agrees to license a new music service to try to take the "sting" out of "piracy," it demands licensing terms that are ridiculous. From the execs at the labels' perspective, unless you pay an arm and a leg, you don't get to offer music. So, a few companies agree, and then realize it's impossible to make any money and shut down. In the meantime, the whole point of those legal licensed music services (to compete with "pirate" sites and services) is lost entirely. Wired is chronicling how all of the legal music sites are finding it impossible to survive and offer a free music service -- including MySpace music (which beyond not offering much of value in terms of user experience) "is struggling to keep up with its own payments to music copyright holders."

Of course, it's really no surprise that most of these sites have struggled. Beyond the ridiculously high licensing rates that the labels forced on them (often by negotiating through lawsuits), none of these sites put together a well thought-out business model. Instead, they all seemed to think that they could just slap ads on the site and that would be enough. But, of course, when you're listening to music, you're not looking at that website or paying attention to the ads -- and if the ads got too intrusive, they'd just go elsewhere. A real business model would have been setting up something more comprehensive, that gave listeners a real reason to buy associated with the music. Eventually we'll get there, but in the short-term, the graveyard of failed "licensed" music startups will grow, just as more and more "unauthorized" sites grow in popularity.

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No, The Music Industry Outlook Isn't Grim... Just For Selling Recorded Music

from the it-ain't-the-same dept

JJ passed along a short article from a week or so ago, claiming that the "outlook" for the music industry is "still grim" according to some industry insiders at a conference. Except... that's not really true. Once again, it seems like there's confusion between the recording industry and the music industry. Yes, it may be true that the outlook for selling plastic discs or downloads may not look so hot, but that's hardly everything that encompasses the music industry -- and claiming otherwise is not at all accurate. The recording industry has pushed this myth for years, and it's too bad the press continues to parrot the same line. Yet, when studies actually look beyond just selling the music directly, they find that the outlook isn't grim at all. Claiming that the outlook for the music industry is grim is like claiming that the outlook for the transportation industry is grim in 1910 because the market for horse carriages is declining.

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Recording Industry Insiders Complain About Musicians Who Argue Against Kicking People Off The Internet

from the how-dare-they-speak-their-minds dept

Well, well. Last week, we noted that a large number of well known musicians had come out against the idea of kicking accused file sharers off the internet, noting that it would only escalate the problem rather than solve it. But, of course, the industry organizations who claim to represent musicians' best interests can't have that, so this week they're on the attack. The head of a royalty collection society apparently called the statement from musicians "grossly naive and desperately damaging." Yes, but damaging to whom? Perhaps to collections societies, but not to artists. Smart artists know that going to war with fans is never a smart move. But the collection society head went on:

"This is more than unhelpful. It's destructive, I wish I could understand the hostility. But if between us all we don't screw it up, within 12 months we could have some legislation in place. I am quietly confident."

You wish you could understand the hostility? There was no hostility from the artists. The only hostility has come from an industry hellbent on protecting an old and obsolete business model by kicking people offline for sharing the music they love. These artists were coming out against hostility. They were coming out against this war mentality where it's the industry against the consumer.

Meanwhile, another group, the Musicians Union has come out and called the statement from the musicians last week "a bit blinkered" and "counterproductive" and then said:

"I am disappointed they went maverick without looking at the bigger picture. Our position is somebody should be paid for their creation."

Actually, they are looking at the bigger picture, and recognize that kicking people off the internet doesn't have anything to do with getting paid. You get paid by providing something that people want to buy. Kicking people off the internet doesn't make anyone want to pay you. It actually does the opposite. No one is saying artists shouldn't get paid for their creation -- least of all the musicians who spoke out last week. What they're saying is that kicking people off the internet doesn't help anyone get paid.

Honestly, does anyone actually think that kicking people off of the internet is a good business model?

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That Story About Warner Music Paying For A Rappers' PhD? Well... Not So Much

from the fact-checking? dept

We keep seeing claims by newspaper people that bloggers don't fact check and that newspapers do. In fact, in a recent discussion, Washington Post reporter Paul Farhi seemed to blast bloggers for not being able to live without newspaper reporter fact checking:

"I can't imagine a world (or an internet) without the raw factual material that newspapers provide every day, but I guess the bloggers don't really care about any of that. They're mostly about themselves and their opinions, with little thought given to where they're getting their basic facts."

Fair enough. But, as we keep finding out, it seems that newspapers aren't all that concerned about where they get their "facts," either. And sometimes we "bloggers," who are mostly about ourselves and our opinions, have to step in and do some fact checking ourselves.

Case in point: last week, I wrote a post here on Techdirt about how Warner Music helped a famous 80's rapper get a PhD in psychology. The post was based on an article in the NY Daily News by Walter Dawkins. It seemed reasonable to assume that such a professional news organization had fact checked the story. Yet, even before I hit publish, some questions were raised. The article noted that she had received her PhD in psychology from Cornell -- my alma mater. And when I wrote the post up, I initially mentioned that fact (school pride is fun). Yet when I asked some people I know who also went through Cornell's psychology program and would have likely been in a position to have known (or known of) Roxanne Shante, I was told that they hadn't heard of her. Also, multiple attempts to find her dissertation in databases like PsychInfo turned up nothing. Oh yeah, and then there's this: Cornell doesn't offer a clinical psychology degree, and the article clearly states that her work is in clinical psychology.

So, I went searching, and found (first) a video interview where she claimed to have attended Cornell Medical -- which is still Cornell, but is a separate organization based in New York City, rather than up in Ithaca with the rest of the school. So... perhaps her degree was from there. But, then I came across another report claiming that she only got her masters at Cornell, and then returned to Marymount Manhattan College -- where she went as an undergrad -- for the PhD.

I thought that this made some amount of sense, and let the post go out. I figured that perhaps the Daily News reporter got confused about where she got her PhD, but he must have at least fact checked the rest? I should have known better.

After the post went up, some additional comments came in highlighting some other problems with her story, and so I decided to do some of the fact checking it appeared that the big professional reporters at The Daily News did not do. I contacted the administration at Cornell, and received the following response:

We've had everyone from the Graduate School to Alumni Affairs and Development to the Psychology Department search their databases, using every possible configuration of her names, and no one has found any evidence that Ms. Shante ever attended Cornell University.

Oops. Still, others pointed out that there were two references in two separate publications, The Cornell Chronicle and The Cornell Daily Sun, both to a conference held on campus that Shante took part in, though both seemed to be based on her own statements. The Daily Sun is independent of the university (though run by students), but the Chronicle is an official school publication. It's quite telling that the Chronicle article does not follow the established style guidelines of Cornell official publications in referring to an alum: it does not provide a year. It's typical to say things like "Ph.D. '08." That's done for others in that same article. But Shante's Ph.D. claim is not accompanied by a date, suggesting that the reporter was unable to confirm it. There's also an odd list of "Notable Cornell alum" that lists her, but the link is for "Class of '91," which she certainly didn't attend. Also, once again, her listing doesn't include a date.

From there, I contacted the administration at Marymount Manhattan College, and specifically contacted Dean Marguerita Grecco, who is named in the original Daily News article as supporting Ms. Shante, and sending the tuition bills to Warner Music. Despite multiple attempts to reach Dr. Grecco, she refused to respond at all. However, I was able to get a rather curt response from someone else in the administration, claiming that the only information he would give me is: "Roxanne Shante attended classes at Marymount Manhattan College during the fall semester of 1995." That did not answer my questions about what degree(s) she obtained (if any), and only seems to raise more questions. Did she attend classes there beyond that one semester? The school won't say.

Oh yeah, it's worth mentioning: Marymount Manhtattan College does not offer a PhD program in psychology. Only a bachelors.

So, the original article claimed that Warner Music spent over $200,000 on this woman's education. I reached out to Warner Music to ask them who they sent that money to. Admittedly, all of this happened back in the '90s, when Warner Music was owned by Time Warner. It no longer is. It's got new ownership and new management. Yet, despite the fact that folks at Warner Music aren't particularly big fans of this site (I have no clue why), they went digging through all sorts of records to see what they could turn up. From that, they sent over the following statement:

"Roxanne Shante's story is a compelling one and we wish her all success in her good works. With respect to the specifics of her recording agreement, we are not in a position to comment definitively because her agreement was with an independent record label known as Cold Chillin' Records, and the transactional file is more than 20 years old. Our examination of that file however has not revealed any evidence of any 'education clause' in any agreement. That is not a commentary on Ms. Shante's label or on the existence of such a clause. In fact, our view is that artists' compensation can be put to many good uses; if Cold Chillin' guided this artist's compensation to education expenses that would certainly be a worthy one."

So, even if there was an "education clause," Warner Music can't find any record of it. Instead, it appeared to just have a rather typical distribution deal with an indie label that she was signed to. Next up, the article claims that Shante is running "an unconventional therapy practice focusing on urban African-Americans." Unfortunately, searches of the NY database of such professionals has yet to turn up any evidence that she's listed. Admittedly, the interface for that system is not particularly user friendly, but various attempts to find her under various names (both her stage name and her birth name) turned up nothing. In searching around, I could find no business listing for her therapy organization.

Also, I could not find ways to contact her. I did try via a MySpace page that is supposedly hers, but it's not clear if it's really her page, and I have not heard back. Finally, I contacted the NY Daily News, and asked either for additional backup material, an explanation, or to let me speak with the original reporter, Walter Dawkins. As of publishing this, I have not heard from either of them.

I should note that this is yet another great example of how wonderful the Techdirt community is. It was via the comments that many of these questions were raised, and it allowed me to go in search of the details (or lack thereof). I've said before that what makes this site so much fun is the discussion we have in the comments, and this is yet another bit of proof. Update: Looks like friend of the blog Ben Sheffner was doing similar research over the past few days as well, and got Shante to admit the PhD doesn't exist, but she fails to explain pretty much anything else.

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Recording Industry Helps Rapper/Single Mom Get A PhD, Though It Tried To Weasel Out

from the see,-sometimes-they-do-some-good dept

Update: Further reporting on this suggests that almost none of this story is true. The Daily News appears to have done no fact checking whatsoever.

Michael sends in this excellent story of a major record label actually doing right by one of its (former) artists... though, the story really doesn't reflect that well on Warner Music. It's the story of Roxanne Shante, one of the first female hip hop stars, who came out with a hit song in the 80s (when she was 14-years-old), leading the way for other female rappers. Of course, like so many other artists, she found out that the big record labels weren't so great after all. After two albums, when she realized that her label was basically stealing from her, she called it quits from music. At age 19, however, she remembered that Warner Music has put a clause in her contract, promising to "fund her education for life." She figures they put that in as a "throwaway, never believing a teen mom in public housing would attend college." But, attend college, she did. She didn't just get a bachelor's degree, but went all the way through to a PhD. in psychology.

Of course, Warner Music, already having done plenty to try to cheat her out of her contract, worked hard not to pay. But the dean at, Marymount Manhattan College, where she attended for some of both her undergraduate and graduate degrees, read over the clause and simply kept sending bills to Warner Music. Warner (so nice of them, as per usual) ignored the invoices until Shante threatened to go public with the story of Warner Music Group not living up to their contract promises on something so basic as funding her education. In the end, Warner Music had to pay up around $217,000 for Shante's education, and she's put the doctorate to good use, launching a therapy practice focused on urban African-Americans, experimenting with new ways to get them over the taboo associated with therapy. It's nice to see how Warner Music actually did some good in the world, even if it had to be dragged there kicking and screaming.

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Moby Explains RIAA Mindset: Please Make The Future Die

from the moby-and-mossberg? dept

It's a bit of an odd pairing, but musician Moby was recently interviewed by Walt Mossberg, and among other things they discussed issues like file sharing and the RIAA's strategy. Moby, of course, has complained about the RIAA's strategy in the past, calling for it to be disbanded following the Jammie Thomas verdict. He's also found success experimenting with giving away his music, so his positions probably don't come as a surprise. He says he has no problem with people downloading his music (though he likes it when they buy it as well), as he's "honored" that people want to listen to his music, and if they download an unauthorized copy: "more power to you." On the RIAA, he can't understand why they're doing something that so clearly alienates fans, but then does a pretty good job explaining why, noting that the current business model of major labels:

"underpins the failure of major labels--they think, it used to be this way, so it ought to be this way." Their ethos is, "Please go away. Make the future die."

Not much new, but the quote is definitely a succinct way of explaining the position held by some at the major record labels over the past decade. Rather than deal with reality, they just want it to go away.

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Once Again: The Music Industry Does Not Equal The CD Business

from the get-that-straight dept

A bunch of folks have been sending in Charles Blow's NYTimes column about the supposed "death" of the music industry. However, Blow makes the most basic of errors: he appears to equate the music industry with the recording industry. He accepts RIAA numbers of when "sales peaked," not realizing that he's only talking about sales of a segment of the wider music industry. Yet as recent studies both from outside and inside the music industry have shown, the overall music ecosystem has been getting larger in terms of dollar volume. Money may be shifting away from CDs, but it's not shifting away from music-related commerce. But, I guess that's what happens when you rely on just the RIAA for your data...

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Is Streaming Really Replacing Downloading?

from the perhaps-in-some-cases... dept

Lots of attention is being paid today to an article in the Guardian about a new study claiming that illegal file sharing has collapsed in the UK and is being replaced by streaming music found on YouTube and through services like Spotify. The premise of the article is that now that kids have alternatives, they're willing to dump unauthorized file sharing and get by with streaming. While I don't doubt that it may be true in some cases, I'd take these findings with a pretty large grain of salt for a variety of reasons:

• It's not based on actual usage data, but on survey data.
• As more and more attention is being paid to people getting sued and fined for online file sharing activities, people are certainly going to be less willing to admit on a survey that they participate.
• This is especially true in the UK, where there's been a tremendous amount of attention on the recent Digital Britain report, which claims, as a goal, to reduce illegal online file sharing activities.

That said, it wouldn't surprise me at all to find out that some users have modified their behavior due to the ease of use from online streaming platforms. When I was in the UK, I got to play around with Spotify, and I could see how many people might start using that as a replacement for file sharing much of the time (and demos of Spotify's mobile app that include syncing features when there's no internet connection make it look quite compelling for even offline music playing).

However, even if we take what the article says as proof, it seems quite likely that the industry will muck this up too. Already, we've seen that Spotify is running into licensing problems, and the company is nowhere near being able to turn a profit. And, of course, the industry is pushing for increasingly unsustainable webcasting rates. That's why YouTube and PRS still haven't come to an agreement over all that streaming music in the UK, and even as PRS has tried to lower its rates to make a deal, some of the record labels are actually demanding the rates be pushed back up.

This is how the legacy industry kills anything even remotely positive. The second that the industry sees anything that's working, it suddenly smothers it by demanding to get a bigger and bigger cut. We've seen it for years. As soon as iTunes started to be successful, the labels pushed to get a bigger and bigger cut from any sale (and to push the prices of each song higher). More recently, with the massive success of video games like Guitar Hero and Rock Band helping to promote music (and making musicians a ton of money), the labels have been demanding a bigger cut as well.

Rather than understanding how to create and foster a healthy music ecosystem, it seems that some of the major label bosses have learned how to do one thing only: squeeze each tiny baby lemon as hard as possible until it's dry, never giving it a chance to actually grow. And then they wonder how come each new revenue stream doesn't make as much money as their old way of doing business.

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Moby Says 'Disband The RIAA' For Winning $1.92 Million From Jammie Thomas

from the representing-the-artists?!? dept

As a whole bunch of you have sent in, the musician Moby has put up a blog post where he suggests the RIAA should be disbanded for its $1.92 million win over Jammie Thomas. While (unfortunately) he gets a few of the facts wrong (they didn't sue her for $2 million, but it's what the jury chose -- though it is accurate that the RIAA has clearly suggested it has no problem with the statutory rates for infringement in the past), his overall point is sound. It's ridiculous that the RIAA thinks this is the proper strategy:

argh. what utter nonsense. this is how the record companies want to protect themselves? suing suburban moms for listening to music? charging $80,000 per song?

punishing people for listening to music is exactly the wrong way to protect the music business. maybe the record companies have adopted the 'it's better to be feared than respected' approach to dealing with music fans. i don't know, but 'it's better to be feared than respected' doesn't seem like such a sustainable business model when it comes to consumer choice. how about a new model of 'it's better to be loved for helping artists make good records and giving consumers great records at reasonable prices'?

i'm so sorry that any music fan anywhere is ever made to feel bad for making the effort to listen to music.

the riaa needs to be disbanded.

This isn't new territory for Moby. Way back in 2003, he got angry after finding out that some of his songs were being used by the RIAA to sue people, and stated: "I'm tempted to go onto Kazaa and download some of my own music, just to see if the RIAA would sue me for having mp3's of my own songs on my hard-drive."

Still, we're seeing more and more artists react poorly to the RIAA, who still claims to represent them. Why is it that our politicians still buy that clearly incorrect story?

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Digital Britain: Few Surprises As It Looks To Prop Up Content Industries

from the government-doing-what-government-does dept

The final version of the UK government's Digital Britain report, its blueprint for updating the country's tech-related laws and infrastructure, has been released today, and it doesn't look like it holds too many surprises. Like the interim report that was released earlier this year, it's full of a lot of vague language, and as the UK's opposition party points out, seems most interested in propping up failing old-media business models. Two aspects of the report are grabbing the most attention. First, the government will start a 50p (about 80 cents) monthly tax on landline phones in order to build out broadband networks in rural and other unserved areas. Second, and more controversially, the report says the UK's communications regulator must cut file-sharing by 70%, and calls for ISPs to help accomplish this by keeping tabs on their users, sending them notification letters when they download infringing material, and giving up their details to content companies (with a court order) so they can be sued. It stops short of creating a rights agency run by the copyright cartel, as had been rumored, and while it doesn't endorse the use of a three-strikes policy, it does say that regulators will have the power to force ISPs to use other technical means (such as throttling connections, traffic shaping, and even blocking certain sites, services and protocols) to try and stop persistent infringers.

The report pays a lot of lip service to the fact that content businesses need to update their business models to the changing digital environment, but it really does very little to help facilitate this, instead preferring to make stopping piracy the central focus. The government seems to have fully bought into the entertainment industry's propaganda -- that it can't do anything until piracy stops, that it can't move forward as long as there's file-sharing. The reality isn't that the industry can't move forward, but rather that it won't. And, after all, if the government is willing to get involved and offer the industry special protection to prop up its ailing business models, why should it?

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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How The Recording Industry Changes Its Own Story

from the anything-for-the-money dept

We've already discussed how silly the Performance Rights Act is -- and how it's basically an attempt by the record labels to get their own bailout courtesy of radio stations. There are all sorts of problems with it, and Jess Walker does an amazing job explaining just how ridiculous the Performance Rights Act is. In doing so, he highlights one point that is quite a common trick in the RIAA's bag of tricks, but which doesn't get enough attention: how it changes the story to flip things around to its advantage over and over and over again. Case in point: the RIAA is arguing that it needs to get royalties to performers for radio air play to "even out" the situation, since radio is the "only" platform where performers don't get royalties. For example, they point to internet radio and satellite radio, where artist do get paid.

So, the RIAA claims, this is unfair... after all, why should they get paid for all of those, but not radio?

Except, the RIAA conveniently wants us all to forget history. That's because it was the RIAA who argued that satellite radio, internet radio and other forms of broadcasting were different from terrestrial radio, and therefore required different royalty structures. In other words, the only reason why this "unfair" dichotomy exists in the first place is because the RIAA lobbied for it by claiming that satellite radio and internet radio were different.

Now it wants everyone to forget that and pretend that it's some weird "anomaly" that terrestrial radio doesn't include performance royalties? Don't buy it. This is the sort of thing the industry has pulled off for years -- pushing one country to extend copyright laws, and then moving to other countries and working up a lobbyist campaign about how that country isn't keeping up with other, more reasonable countries, concerning copyright laws. Have you noticed what's happening in Canada these days? That's a direct example of this sort of thing.

Walker also takes on other points to show how silly and dangerous the Performance Rights Act would be. It benefits no one but the record labels. It harms radio stations. It harms independent musicians. It harms big musicians as well (since most of the money doesn't go to them, but to the record labels). Who does it help? The RIAA, of course:

And for what? Imagine, as a thought experiment, that this bill were passed and, simultaneously, payola were made fully legal. Does anyone doubt that more money would flow toward the radio stations than away? Radio remains the primary means by which the music industry promotes its product. By pushing for this fee, the labels are essentially asking their advertisers to pay them for the service of selling their stuff.

Ah, you say, but what about the independent artists who don't get big promotional pushes from the major music labels? Surely they'd benefit from a new revenue stream? Actually, they'll be even worse off. The economic mission of most commercial radio stations is to deliver audiences to the sponsors whose spots are aired between tunes. So programmers have a built-in preference for music whose mass appeal has already been proven. If you increase the cost of playing a record, that just intensifies the incentive: The more you pay to play a song, the more conservative you'll be about which songs you play. The marginal cost of playing each track is the same, but the commercial payoff is greater for established artists.

Generally speaking, the more it costs to run a station, the more risk-averse it will be. That's one reason low-power and Web outlets are more experimental: They don't have as much money on the line. But those stations--the ones that go out of their way to play diverse and unfamiliar material--are precisely the ones that have the hardest time paying the song tax. The proposed law acknowledges the problem by introducing a sliding scale, with the least profitable outfits paying $500 a year. But while that may be chump change for a big broadcaster, it's a pretty big piece of the operating budget for a low-power, volunteer-run community or student station.

Nor is it the only cost the law will impose. "The record labels are completely out of touch as to how college radio stations operate," Warren Kozireski, president of College Broadcasters Inc., recently complained on his organization's website. "The extensive record keeping requirements that will be required by the Copyright Royalty Board alone will add hundreds, if not thousands of dollars to the true cost of a performance fee." It's relatively easy to do that book-keeping if you have a narrow playlist and rarely deviate from it, as is the case with most large commercial radio stations. But if you have a library of thousands of albums and 45s, many of which were never reissued on CD, and if you allow your DJs to choose which ones they play--or even to bring in still more music from their personal collections of rare soul or jazz or bluegrass or electronica obscurities--then tracking the data suddenly becomes a full-time job.

Worse yet: Though the rhetoric around the proposal focuses on the benefits to musicians, much of the money won't make it to the artists in the first place. In part that reflects the fact that the fees go not just to the performers but to the copyright owner, which frequently means the record company. But it also reflects the corruption in the industry, which legislation like this has probably abetted.

As we've seen time and time again, if the RIAA supports it, it's not good for consumers. It's not good for musicians. It's not good for anyone but a small selection of record labels. Hopefully, Congress recognizes this for the pure money grab it is and shuts it down.

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Study Says File Sharers Would Ignore Warning Letters; Recording Industry Gets The Wrong Message

from the let's-try-this-again... dept

The fight in the UK over how the recording industry will deal with future business models continues. The industry has been pushing hard for ISPs to start kicking people offline, believing (oddly) that pissing off a lot of people and making them lose their internet connections will magically make people want to buy music again -- rather than the reality: which is that it will piss off even more people and make them even less inclined to spend money on the industry. Yet, UK politicians have so far stood firm against a three strikes policy, sometimes claiming that merely sending warning letters should be enough to scare unauthorized file sharers straight. So, of course, it didn't take long for a new industry study to come out saying that a high percentage (around 67%) of file sharers would likely ignore such letters unless they were backed up by other measures, such as a three strikes regime.

So, of course, the industry is using this to demand more than just warning letters be mandated by UK law. But, once again, it appears the industry is getting the wrong message. Rather than realizing what the study is actually saying -- that unauthorized file sharing won't stop -- it seems to think that if it just finds that magic legal bullet, suddenly file sharing will go away and people will start spending again. What they should have recognized is that this study says that people will go to great lengths to file share, even if they know it's illegal, because they do not believe it is wrong or unethical. And, as such, if the industry reps were thinking this through, they might realize that this represents a giant opportunity to build business models around embracing such fan activities, rather than trying to hold back the tide.

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Last Chance For The Old Recording Industry... But Plenty Of Excitement In The New Music Industry

from the time-to-be-optimistic dept

I spent Monday at the wonderful SanFran MusicTech Summit and I have to admit that I came away quite optimistic. You may recall earlier this year that my takeaway from MidemNet was how optimistic people were becoming -- but how much the old school industry folks then took that optimism and twisted it into something bad (saying things like "we have to stop treating our fans as criminals, but we need to stomp out piracy at any cost!"). In contrast, I have to say that after the SF MusicTech event, I'm back to the optimistic viewpoint, though I recognize there's still plenty of shaking out to occur.

Terry McBride, whose insights always are worth thinking deeply about, made a comment that this was "the last chance for the music industry" to stop screwing things up and pissing off customers, and that it was time to get it right: meaning stop treating customers as criminals, stop focusing on the sale of things that people don't want to pay for and stop worrying about copyright (he even agreed with David Bowie's comment that copyright was over). I agree with much of what McBride said, with one exception: this isn't the last chance for the music industry. The music industry is doing great -- with more music than ever before being produced and available to fans, and more musicians than ever before being able to connect directly with fans and put in place a business model that works for them, instead of getting worked over by a major label with a dreadful contract. Instead, I'd argue that it's the major labels who have one more chance... and even that may be iffy given how badly they've screwed some stuff up in the past decade.

But much of the rest of the event showed why there's so much reason for optimism. There are so many different startups entering the space these days that it's honestly difficult to keep track of them. And while the market is certainly confusing, we'll start to see some clear leaders shake out of the pack in the next few years. But, combine it all and these startups provide all of the tools that any musician today needs to record, perform, build a fan base, manage a fan base, tour, manage a tour, connect with fans, communicate with fans, transact with fans, promote, distribute, analyze and share. Basically, absolutely everything that you used to need a record label for is showing up from a hodge podge of startups. They don't all necessarily work well or work together, but that'll change over time. On top of this, there are additional tools that let you do things that simply weren't possible before, such as providing better, more detailed recommendation systems and analytics. Among the cool or compelling companies I saw or spoke with at the event were Band Metrics, Topspin, Bandize, 100000Fans, Instinctiv, Jamendo, Drop.io, thesixtyone... and those were just the ones that I'm remembering off the top of my head. There were at least two dozen other interesting startups as well.

Again, this doesn't mean there's no room for a label anymore -- but the role of that label changes. Some bands won't need labels at all, and will be able to manage everything themselves using these tools and services. Others will rely on label reps to help piece all of the different services together, so they can focus on the music. But the routes around the old system are growing at a phenomenal rate. On top of that, there were some major label representatives who actually seem to recognize all of this, even if not all of their colleagues agree.

So while I am still nervous about what the old guard and its lobbyists will do to laws around the globe, the next generation is clearly growing up from below. It's quite messy right now, but it's coming. Fast.

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Newspapers, The Recording Industry And A Misplaced Sense Of Entitlement

from the how-it-works... dept

Earlier this month, the Guardian's Henry Porter wrote a poorly thought out opinion piece attacking Google for not simply handing money over to the recording industry, declaring that Google "creates nothing." This is beyond wrong, it's dumb. If it were true, there would be nothing to worry about, because no one would care about Google. It seems clear that Porter didn't bother to read the widespread criticism about his piece, because he's right back at it, with a column all about "the good old days" of local newspapers, that concludes with yet another misguided attack on Google:

The crisis in local news is not just about "the business model", a phrase I am coming to loathe. It is about the fabric of a society and the careers that grew out of local journalism and have made so many contributions both to journalism and national life.

This is something that new companies such as Google, with all their wealth and lack of obligation to anything beyond their own exhilarated sense of entitlement, will never understand. Why would they when they can sell advertising around journalism that has been provided for free by increasingly desperate newspapers?

This is, of course, a pretty pathetic response. Tim O'Reilly points us to a great "off the cuff" piece by famed baseball statistician Bill James, who in researching a crime novel he's writing also ended up researching the history of the modern newspaper and noted that it was actually quite similar to today's blogging pioneers:

Writing the crime book ... the modern newspapers started about 1836. There were newspapers for a hundred years before that, but they were relatively expensive. In 1836 somebody "invented" the steam-driven printing press ... not sure tying together a steam engine and a printing press can really be considered an invention. But anyway, paper was cheap, so putting together a little engine and a little printing press enabled anybody with a small investment to start his own newspaper. Every significant city by 1845 had dozens of little newspapers, which were much closer to Blogs than to modern newspapers.

One of the first things they did was start writing crime stories, exploiting crimes for money. Then there was 100+ years of newspapers getting bigger and bigger and more organized and more expensive to produce. What were basically one-man shows, and then the better ones hired assistants and then business managers, they added sports sections, cartoons, advertising salesmen and then advertising departments. They invented wire services (about 1890), and then there were syndicated columnists and syndicated features. The newspapers drove each other out of business for 100 years....

We're back to 1836 now, in a sense; everybody who wants to has his own "newspaper", and it's tough to know who is good and who is reliable and who isn't, but the same processes are still running. The blogs will get bigger; the good ones are hiring a second helper and a third and fourth, and we'll spend a century or more sorting things out and re-creating the market. It's hard, but it's not a bad thing. It's a good thing.

But an even better response to Porter's accusation that Google is the entitled party comes via Michael Scott, who points us to a great discussion of Porter's statement by the blog TechnoLlama, who points out that Porter appears to have the whole story backwards:

Is it not the old media the one that has an "exhilarated sense of entitlement" that prompts them to bemoan their loss of prominence with the public? People vote with their feet (or more accurately, with their clicks), and if some local newspaper does not fulfil those functions, then it will disappear.

I'm pretty good at stating the bleeding obvious, but this has to be repeated. We are currently undergoing a shift in media consumption of cataclysmic proportions, the lines are being drawn between what Lessig calls the Read-Only and Read/Write cultures (RO and RW respectively). As the advertising well dries up, the old RO media is left hurt and bewildered, wondering where have all the punters gone. Then they see clips of Susan Boyle on YouTube accumulating 100 million views, and it dawns on them. YouTube and Google have stolen all of the viewers! The parasites do not create anything, yet profit handsomely from stolen content. They try to negotiate, but Google is not budging as it has the upper hand. Then they talk about lost profit, and expect some form of compensation. Soon there will be talk of yet more legal action.

The problem for the RO crowd is that they have it completely backwards. In the age before YouTube, Susan Boyle would have been viewed only by those who actually watched the show (just over 8 million UK viewers). It would have been a water-cooler moment, with people commenting on it. But the fact that it was posted on YouTube and went viral made it a global story, it enhanced the ratings for the show, and in general enhanced ITV's position with advertisers. But all that the RO crowd can think of is loss revenue from those 100 million clicks.

Indeed. I've been amazed to read stories in the press claiming that somehow Boyle and the show Britain's Got Talent somehow is a sad story because the show and/or Boyle didn't "monetize" the traffic with ads, and I'm wondering where these people are coming from. Both Boyle and the show got tremendous amounts of free publicity from YouTube that they never would have received just a few years ago, thanks entirely to YouTube. The fact that the site was able to help promote the whole thing without the TV producers having to pay for advertising, bandwidth or distribution is revolutionary, and a massive change in the way things used to be.

And people are complaining?

The only sense of entitlement is coming from the old school players -- the newspapers and the recording industry -- who fail to recognize revolutionary technologies that are changing their markets, and enabling tremendous new opportunities. These old school players seem to feel entitled to their old business models, even as they fail to embrace the new opportunities and fail to provide what consumers clearly desire. There is no sense of entitlement from the new generation. The philosophy of entitlement comes from the old guard, that seems to think that because they made money one way in the past, the rest of the world has to ignore the possibilities of new technologies in order to let the world pretend that it still needs to do things and pay for things the old way.

That's the only sense of entitlement I'm seeing.

It's not in people participating in news stories by sharing them, spreading them, linking to them and commenting online. And it's not in people sharing music, listening to music and promoting music online. It's in the old industries that refuse to admit that new technologies make things more efficient, and it's in pretending that all new efficiencies must be illegal or immoral because money can no longer be made via outdated business models.

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More Interesting Northern European Analyses Of The Music Industry

from the history-and-data dept

I'm not entirely sure why, but it appears that a bunch of folks in the northern parts of Europe are doing some rather interesting analyses of the recording industry in that region. Perhaps it's the fact that so much attention has been placed on those regions thanks to file sharing services like The Pirate Bay and Mininova (both based there), but either way, we keep seeing studies from such countries that seem worth talking about. Last month, it was a detailed and fascinating study on file sharing in the Netherlands, which suggested (again) that it was a business model issue rather than a legal one, and now a bunch of folks have sent in a study from Norway claiming that those who download are much more likely to buy music than those who don't. We've seen analogous studies saying similar things in the past, so this is no surprise.

Separately, a couple weeks ago someone sent in (and I have to apologize, because I can't find who it was now) a long but fascinating study from Finland on the history of two of the more successful record labels (warning: pdf file) in that country. The key finding shouldn't be all that surprising. Both record labels were more successful when they focused not on how to make the most money, but on experimenting with new business models and embracing the music for the sake of the art, rather than solely as a business proposition. This is a point that often seems to get lost in these discussions. If you focus on doing something you love, the opportunities to make money tend to provide themselves. If you focus just on making money, you often find that you hate what you do... and the money isn't as readily available.

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Yet Another Journalism Professor Gets Nearly Every Fact Wrong In Saying Google Needs To Pay

from the facts?-who-needs-them? dept

With all the journalists declaring that Google needs to pay newspapers, it's amazing how often their arguments are based on simply incorrect statements -- the sort of thing that is the real problem newspapers face. When they make an argument based on entirely incorrect information, no one trust them. For example, reader David Muir points us to Joel Brinkley's article in the San Francisco Chronicle, where he compares the newspaper industry to the recording industry and gets nearly everything wrong. Brinkley is a former NY Times' reporter and a journalism professor at Stanford. This is the sort of person who shouldn't fall prey to getting stories backwards, but he does. First, he claims that Google is using newspapers content "without compensation."

This is wrong. Google is indexing and linking to newspaper content. They're providing a service to those newspapers, by sending them more traffic. If those newspapers don't want that service, it's quite easy to opt-out. The fact that very few do so suggests they do, in fact, value that service, and thus they feel they are getting compensated.

Then, amusingly, he compares the newspaper business to the recording industry, suggesting Google is like what Napster was a decade ago -- and questions where would the recording industry be if it hadn't shut down Napster. Rather than talk to an unbiased party, he goes straight to the RIAA, who of course talks up what a wonderful victory Napster was, and says, without having shut down Napster: "We would be in a world with thousands of pirates."

Um. I hate to break it to both Brinkley and the RIAA... but we're in a world with millions of (what they falsely define as) "pirates." In fact, I'd imagine that the recording industry would actually consider it a real victory if there were only "thousands." But does Brinkley point this out? Does he note that the legal effort to shut down Napster not only failed to stop "piracy," but actually helped advertise it, make it more prevalent, and drive it further underground to sites and communities that were much more difficult to work with?

Of course not. Because why would a super journalist like Brinkley bother with reality in making his case?

Also, it's worth pointing out that the situation with Napster was also entirely different in that it didn't involve the musicians/labels putting the content up themselves, and didn't involve Napster offering up an easy tool for them to remove that content. When it comes to newspapers and Google, both things are true.

This is the sort of stuff anyone familiar with what they were talking about would know. But Brinkley is a journalism expert, so why should he bother to understand what he's talking about before writing an entire column on it?

He then goes on to (falsely) claim that "without newspaper journalism, the nation would have little original journalism left" extrapolating out (incorrectly) the idea that because most journalism originates from newspapers today, it must continue to do so in the future. We're already seeing that's false, as new operations spring up to take over where newspapers are faltering (such as in putting forth bogus opinion pieces comparing Google to Napster).

Then (because he's not done being wrong yet), Brinkley tries (and fails) to respond to the "information wants to be free" line (which he falsely states "information should be free" -- the distinction is important, but Brinkley doesn't bother to even notice) by saying:

Wouldn't that be nice. Wouldn't it be nice if metropolitan newspapers didn't have to pay millions of dollars a year for their reporting staffs? Wouldn't it be nice if Keller's paper didn't have to pay $2 million a year to maintain its Baghdad bureau? Newspapers provide an expensive product. They deserve to be paid for it.

We've debunked this argument probably 50 times in the last year alone, but since Brinkley apparently doesn't do any research, let's debunk it one more time. No one is saying that because information is offered to consumers for free that it means that you don't make money or you don't pay your reporting staff. Brinkley is setting up a bogus strawman (the sort of thing reporters shouldn't do). What they are saying is that they need to come up with better business models (which we've pointed out do exist) that leverage (rather than deny) the basic economics of content, and do so in a way that makes a more valuable product.

Brinkley, of course, never bothers to explain how to make the product any more valuable (hint: it's not by writing columns that are entirely based on incorrect statements) or why people would want to pay for such rubbish. He just insists they "deserve to be paid for it." But if Brinkley's writing is an example of the type of quality found in papers today, is it any wonder people don't find it worth paying for?

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PRS Threatens Woman For Playing Radio To Her Horses Without Paying A Licensing Fee

from the this-is-called-extortion dept

When I was in the UK recently, I was surprised to hear just how much most folks hate PRS -- the collections society in charge of getting various businesses to pay for playing music. PRS is also the group that has caused music videos to be pulled from YouTube after demanding much more money than was economically feasible. But, where PRS really shines is in threatening tons of small businesses. Over the years, we've had stories on PRS threatening car repair shops, because mechanics in the garage were playing their radios loud enough that customers in the waiting room could hear them. That's a public performance, according to PRS. Then they went after a police station because some cops were listening to radios. Then they went after a children's charity for singing Christmas carols without paying up. The group has even been known to call up small businesses and if they hear music in the background, demand payment, including one case involving a guy working at home with his dog. Apparently, that constitutes a "public performance."

The latest (sent in by a few folks) is that PRS has now threatened a woman who plays classical music to her horses in her stable to keep them calm. She had been turning on the local classical music station, saying that it helped keep the horse calm -- but PRS is demanding £99 if she wants to keep providing such a "public performance." And it's not just a one-off. Apparently a bunch of stables have been receiving such calls.

Obviously, this is not a case of random excessive attempts by PRS to squeeze more money out of people. It's become systematic. The group seems to believe that playing music in almost any situation now constitutes a public performance and requires a licensing fee. You just know they're salivating over the opportunity to go after people playing music in their cars with the windows down.

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Live Concerts Can't Support The Existing Recording Industry... But Did Anyone Ever Say They Would?

from the one-piece-of-many... dept

Whenever we talk about the importance of freeing the infinite and charging for the scarce when it comes to music, we end up having people try to simplify that down to "make money on concerts." That's never been true, however. While we do think performances are one scarcity that is worth exploring, and which has proven to be quite lucrative for many performers -- both large and small -- we've never thought that live concerts alone would suffice as the business model. There are other, more important scarcities, such as access and attention, that can be much more lucrative. Still, it's worth exploring how well live concerts alone could do in replacing recording industry revenue, and in a long (80 pages) and thorough paper by Mark Schulz (a law professor), exactly that exploration occurs (thanks to the anonymous reader who sent this in). It's well worth reading, as there's plenty of food for thought. Basically, he points out that free file sharing can help many artists in numerous ways, but he's not convinced that touring alone can help. He goes through a pretty thorough explanation for why touring alone isn't enough -- including the fact that a disproportionate amount of the profits from live performances tends to go to a rather small number of artists, just as the number of musicians creating music is exploding.

While I think the paper is worth reading, and makes a ton of good points, there are a few problems with it. First, I don't know many people who seriously think that touring alone would be the new business model. Most people think that it's one component among a variety of new business models that are available. And, indeed, Schulz is good about mentioning some of the alternative additional business models out there. But, then he sort of ignores them in going back to discussing how touring alone isn't enough. It's sort of a nice strawman, but it's besides the point, since almost no one really believes that touring alone is the model. Then, there's the issue of extrapolating out from the existing "touring" market, most of which really looks at bigger tours, rather than at the market for local bands playing local shows. And, while he does include a discussion on making the live performance business "more productive," I'm not sure he really takes into account some of what's been happening -- such as the efforts Jonathan Coulton puts into building up a critical mass in a certain area before parachuting in for a live performance. The ability to do such things only will grow over time, and not enough attention is paid to them. In fact, we're already seeing live music bring in more money than recorded music in some markets.

So, while it's a very good paper, and I agree with the overall strawman conclusion (touring alone isn't enough to replace the entire recording industry revenue), I'm not sure that's meaningful or really tells the full story. Touring does and will continue to work incredibly well for some bands, it will be a component of other bands' business models, and it won't be a part of others'. But there are plenty of different business models that can deal with that.

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Yet Another 'Savior For The Music Industry' Shuts Down

from the down-down-down dept

Over the last few years, as the recording industry has finally started to at least come to terms with the idea that its market is changing, industry insiders keep looking for "a savior." That's a new tech-focused company that will somehow come up with the magic model that revitalizes the recording industry's revenue stream. You begin to notice a pattern with every one of these: the hype is never based on users flocking to the service. They're always based on a big PR campaign and quotes from recording industry insiders. In the early days, there was PressPlay and MusicNet. Then, there was the "new Napster" and Rhapsody. More recently, there's been SnoCap, TotalMusic, Qtrax and plenty of others. They get buzz, with the stories reporting how the industry is "supporting" these innovative new startups. But they never seem to go anywhere. The latest is SpiralFrog, which got some buzz for being "ad supported" music, which has never made much sense to us. It's now shutting down, just as pretty much all of the other "saviors" have done.

And yet... file sharing sites are thriving.

It all comes down to the same thing: you don't compete with free by being lame. And, all of these "saviors" have focused on paying the record labels first, and giving users a reason to use them second (or sometimes even further down the list). The record labels are desperate for new revenue, so when they make these agreements, they're so costly that it's impossible for any of these startups to make money -- and since they're bound by all sorts of restrictions, the services tend to not be very compelling anyway. That's a recipe for disaster. Perhaps before the press declares the next major label-backed music startup the "savior" for the industry, the reporters should take a look at the littered path of failures.

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Is The UK Turning The Policing Of File-Sharing Over To The Copyright Cartel?

from the inmates,-asylum,-etc. dept

The UK released its "Digital Britain" report a couple of months ago, and it was derided not just because it was very vague, but also because it caved to the interests of the recording industry. The extent to which that's the case is slightly staggering. The British government has now released some details on part of the plan that would create a "Digital Rights Agency" -- a government-backed industry body to tackle file-sharing. The government says that the group wouldn't have any enforcement power, but that it could be "backed up by legislation." That sounds an awful lot like giving the copyright cartel the ability to set the rules on what people can do online, which will certainly only benefit them, and not the public -- just in case you wondered whose "rights" a Digital Rights Agency would seek to protect. The justification for such an approach is pretty appalling. The report says that consumers' attitudes towards content has changed, and that they're not willing to accept limitations on how and where they access it. Smart businesses would see this as an opportunity to change their business model and create new products and services that fit consumers' changing attitudes. But instead, the likes of the recording industry go looking to government to get a legal stick with which to beat customers to fit their outmoded business models.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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