After Limewire settled with the major labels last week, many of us questioned how much of that money would go to actual artists. Many people, quite reasonably, pointed to a quote from a few years ago from the RIAA's Jonathan Lamy saying, "Any funds recouped are re-invested into our ongoing education and anti-piracy programs." That line got a lot of attention, and I wondered if the labels would be forced to actually give some money to artists, and it appears that may be happening. Lamy came out and said that his quote was about something else -- the RIAA's lawsuits against individuals (hurray for suing fans!), rather than this lawsuit against Limewire. Now, the major labels are starting to step forward and say that yes, yes, yes, they'll give some of the money to artists. I'm guessing, at this point, that it's purely a crisis management type situation, where the labels are realizing they need to show that they're giving some of the money to artists (in part because all these stories mean that the artists themselves have started asking). So now that the labels promise to give some of the money to artists, let's see if they ever say how much actually goes to artists...

A few months back, we noted that Hadopi, the French bureaucracy in charge of sending out "you're an infringer" notices and then kicking people off the internet under that country's three strikes plan, was receiving 25,000 notices from record labels per day (there was some confusion on that story, as I originally believed Hadopi was sending out 25,000 notices, but it was only receiving that many). Only a few months later, and the labels have now ramped it up to 50,000 per day, which was the target amount that they had set back in September. However, it appears that the record labels are upset that, while they're sending Hadopi 50,000 notices per day, Hadopi is only sending out notices on about 2,000 per day. The industry wants Hadopi to just do what I had thought they were doing originally and rubber-stamp all their notices and pass them on. It hopes to get up to 10,000, but the industry is still pushing for 50,000 per day, which is insane when you think about it.

Think about how many mistakes are being made when you're sending 50,000 notices per day. Over the course of about five years, the RIAA apparently sued less than 20,000 people -- and still made a lot of mistakes. US Copyright Group got a lot of attention for accusing a few thousand people of file sharing particular movies -- and also appears to have made a lot of mistakes. Yet, here, with Hadopi, the labels are accusing 50,000 people per day, and are upset that Hadopi isn't just rubber stamping all the notices? It appears that the record labels don't care at all about what happens if they accuse totally innocent people.

This is unfortunate. Nearly two years ago, we wrote about the indie music label Asthmatic Kitty, which seemed to take a really forward looking attitude towards the new music market. In that interview, the label noted the reality of the new world, and why it was important to focus on reasons to buy, rather than assuming that people would just pay to hear music. This is what was said at the time:

I operate under the conviction that people buy records because they want to own them, not because they want to hear them. It is too easy these days to hear a record without having to buy it. I don't resent that fact, rather I feel we at Asthmatic Kitty embrace it through streaming albums and offering several free mp3s (even whole free albums). And why do they want to own it? They want it to illustrate to others their taste and identify who they are as a person. I also believe they want to be part of something bigger than themselves, they want to belong.

Our job is no longer to sell folks things they want to hear. They want an experience and to identify themselves as part of a community. Ownership then becomes a way of them supporting your community through investing in that community. Fostering that in an honest, transparent and "non-gross" way takes a combination of gracefulness, creativity and not taking oneself too seriously, while still taking art and music seriously.

Apparently, however, they do resent Amazon for making music available cheaply. Reader Colin points us to a recent article about how Asthmatic Kitty has sent out a letter to fans of artist Sufjan Stevens, complaining that Amazon's pricing is too low and asking people to go to Bandcamp and pay more instead. They do admit to being somewhat conflicted about this, at least:

"We have mixed feelings about discounted pricing," the label explained.

"Like we said, we love getting good music into the hands of good people, and when a price is low, more people buy. A low price will introduce a lot of people to Sufjan's music and to this wonderful album. For that, we're grateful.

But we also feel like the work that our artists produce is worth more than a cost of a latte. We value the skill, love, and time they've put into making their records. And we feel that our work too, in promotion and distribution, is also valuable and worthwhile."

While they're certainly not attacking Amazon or fans, the whole email does feel a little off. The simple fact is, if people want the music (as the label seemed to recognize last year), they can find it somewhere for free. Amazon's prices are meaningless when it comes to the "value" of the music. Price and value are not the same thing. Rather than complaining about the price that Amazon sets on the album, why not give people additional reasons to pay directly at Bandcamp -- such as providing valuable extras if they do. Or discounts on other merchandise. There are all sorts of positive ways to get people to find it worthwhile to spend money without making them feel guilty and bad for paying a price that is legitimately offered by a retailer.

We recently wrote about Tom Silverman's interview where, in the course of "predicting" the future of the music business, he took some potshots at services like TuneCore for being just for "hobbyists." In that article, he basically said that TuneCore users were just "clogging" the system:

80 percent of all records released are just noise -- hobbyists. Some companies like TuneCore are betting on the long tail because they get the same $10 whether you sell one copy or 10,000. Who uses Photobucket and Flickr? Not professional photographers -- those are hobbyists, and those are the people who are using TuneCore and iTunes to clutter the music environment with crap, so that the artists who really are pretty good have more trouble breaking through than they ever did before.

As I noted in my original post on the interview, I thought Silverman was making a big mistake in dismissing those "hobbyists," since a bunch of them seemed to be making a decent living -- and the numbers were growing. I also found the "crap" comment to be pretty obnoxious. We see that type of comment here all too often. We'll point to some unique content creator who is doing something impressive, and the response (often from angry industry insiders) is that "yeah, but the content is crap." It's a funny sort of reaction. It's as if these people are so afraid that others with better business models will drive them out of business that they need to pre-emptively mock the quality -- even if the content seems to be exactly what a certain market is looking for. There are lots of content creators that we talk about whose content I don't personally care for. But my personal opinion on the quality of the content is meaningless. It's a question of personal tastes, and if there's an audience for the content, then, clearly something's working right.

I wasn't the only one who felt that the "cluttering with crap" comment was out of line. TuneCore's Jeff Price (who has been having quite a back-and-forth with Silverman lately) issued quite the sarcastic apology, while mocking the idea that only Silverman gets to decide what is quality music:

We're sorry that the fact that people are buying music from TuneCore Artists is stopping people from buying music that Tommy likes. If Tommy could only control what music you get exposed to you would be more inclined to buy his music. It's actually a brilliant strategy: limit choice, force the releases you want to sell down people's throats, control what music is exposed by the media outlets (like radio and MTV) and then take all the money from the sales that come in. Oh wait, my mistake, that's the way it was in the old music industry, and 98% of what the majors labels released failed. I guess limiting choice does not make music sell.

Price also points out that Silverman's claim that this is "clogging" the market is ridiculous. It's not like people can't find what they want. If that's a problem, it's a problem of filters, not a problem of too much music. I tend to listen to some fairly obscure music in some specific genres, and sure there are acts in those areas that I don't think are very good, but it's pretty easy to quickly figure out who is good and who is not and move on. Claiming that "bad" artists somehow hurt good artists is ridiculous. You hear it all the time in various industries, but it's the same silly story all over again. More content creators don't take anything away from good content creators. Good content creators can and do still thrive.

The record labels have been trying out all sorts of schemes for a while now to try to get ISPs over to its side in propping up their old business models, and the latest is pretty laughable. BPI at the behest of Universal Music, commissioned a study which suggests that ISPs can make a lot of money by offering music services to their users. No doubt. But that leaves out some rather pertinent details. For example: many ISPs have very much wanted to offer such music services, but have been blocked by the likes of (uh oh...) Universal Music and BPI. Funny how that works.

The problem, of course, is that the ISPs want to offer music services that people would actually use, and the record labels want to handicap the services to the point at which they're completely lame. So there's a bit of a stalemate there.

But the bigger issue is (reading between the lines here) what the record labels are really saying to ISPs here is: break net neutrality. That's because they're not talking about just any music service. After all, there are lots of music services out there that people can sign up for no matter who their ISP is. But what the labels seems to be suggesting here is that ISPs specify one special music service that locks in customers. That's why the report highlights that a music service can "reduce churn." Of course, the only way it does that is if it's locked to that single ISP -- and if your music is limited to you only as long as you're with that ISP. In other words: locking it down so that it's lame.

As if to make the point even stronger, though, BPI blatantly tells ISPs to break neutrality:

"It's increasingly clear that it isn't smart to be a 'dumb pipe'. This report shows that the revenue potential of digital music services alone makes sound economic sense for ISPs," said BPI Chief Executive, Geoff Taylor.

Being a "dumb pipe" of course is a well-known code-word in the internet world for a neutral network. So, really what the labels seem to be suggesting here is that ISPs break network neutrality for the purpose of serving up a preferred music service that locks you into that ISP. Apparently, no one who put together the study contemplated the fact that this might piss people off and make them look for ISPs that don't lock them in. Thankfully, it appears that some ISPs aren't biting:

"TalkTalk thanks the BPI for its strategic business advice. Though some may question the value of such insight from an industry which has failed to acknowledge the impact of new technology on its own business models and is pressing the Government to criminalise its biggest customers," a spokesperson told TorrentFreak.

Exactly. If the record labels were really serious about helping ISPs offer up music services, they wouldn't be blocking them at every turn. This report is a typical red herring.

We've discussed recently how Spain seemed to be one of a very small number of countries whose legal system seemed to be doing a decent job in responding to copyright issues. It has rejected three strikes, said that broadband is a basic right, said that personal file sharing is legal and even fined "anti-piracy" groups for "bad faith actions." Of course, all of those reasonable moves have made Spain something of a target. Industry lobbyists have convinced the government to propose new copyright laws.

But it's not just the big entrenched players. Reader Tor sends over the troubling news that a group of indie labels in Spain are suing the government for "negligence" in failing to stop file sharing. Specifically, they're really upset about the rulings that have found personal, non-commercial file-sharing is legal. They want the right to sue their biggest fans. Apparently, they haven't been paying attention to how that's worked (i.e., it hasn't) elsewhere:

"The measure would not resolve the most relevant problem, which is the actual impossibility of us taking civil action against those final users who appropriate music without paying, and systematically violate intellectual property rights," he adds.

"We think the Administration is responsible for our plight," says Carton. "We demand that the government take effective measures imminently to protect the rights and interests of the record industry, as well as the intellectual property rights of the agents that intervene in the creative musical process within Internet."

This is pretty disappointing. Last year, I actually bought a bunch of CDs (yes, physical CDs) from an indie label in Spain that I only heard about after a friend sent me some MP3s suggesting I might like a couple of the bands on the label. After checking out their websites (and being able to listen to some of the songs) I ended up ordering a bunch of CDs from the label. Just last week, I bought two more albums (downloads, via CDBaby) from the same label. Yet, according to these labels (and I can't tell if the label whose CDs I purchased is part of the lawsuit), they would have been better off suing my friend. Indie labels should be leading the way here: focusing on giving fans real reasons to buy, rather than suing the government for not putting up more protectionist barriers to pretend it can hold back what the technology allows.

Again, no one is saying that there's no place for music labels any more -- in fact, we think there's a huge place for them if they can help a band that doesn't want to build a business by itself. However, for bands that are willing to go entirely without a label, it's certainly possible to be a success (and, before someone misinterprets this, no one is saying success is guaranteed either). Tim Lash points us to a CNN interview with The Wiggles, the massively popular pop band for toddlers. The whole interview is interesting, but the most interesting part is the explanation of how the band went it alone. Two of the original members had been on a label-signed band before (The Cockroaches) and knew they didn't want to go through it again -- even though this was in the early 1990s, before the web and before all these alternatives had sprung up:

The model for nearly everything we do is self-financed. We own everything and create it ourselves.

We wanted to keep financial and creative control. The Cockroaches' record label had taken some control over their work, and we wanted to avoid that type situation. With our background, we know what's good for children and what's best for The Wiggles. No one else had done what we were doing.

While it sounds like, early on, the band handled the business on an ad hoc basis, they later got help from some business managers who have helped to guide the band's strategies over the years.

Of course, as with all of these examples, someone will certainly pop up in the comments and complain that there's nothing new or different about this story. And that's true. But that's the point. All of this could have been done years before, but it was much more difficult. What modern technology has done is made it much easier for musicians to control their own destiny, if they decide that's what they want to do.

BPI and IFPI, lobbying groups that represent record labels, have been major supporters of Peter Mandelson's Digital Economy Bill, that will grant him powers to change copyright law at will, and to kick people off the internet based on accusations (not convictions) of file sharing. However, it appears that at least some record labels are realizing what an incredibly bad idea this is. EFF points us to the news that the boss of indie label Pure Mint Recordings has resigned from both the BPI and IFPI committee's he was a part of, citing his opposition to the Digital Economy Bill, and both organizations support of the bill:

Hall believes the proposed legislation has been rushed in a bid to get it through parliament before the next General Election, that it is in danger of disregarding some sacred legal principles (regarding process, presumption of innocence and burden of proof) and that it won't solve the record industry's piracy problems anyway.

In his resignation letter to the BPI, Hall writes: "I have enjoyed contributing to both [the BPI's] Rights [Committee] and the [IFPI's] ILC, but increasingly feel that my contributions are falling on deaf ears as an agenda has already been reached that I now consider is unmovable. As you know, I do not think the Digital Economy Bill is a sensible or well thought out piece of legislation. In my view it is being rushed through the last months of a parliament of an unpopular government and it is not legislation that I support".

Referencing clause 17 - the one that gives senior ministers the right to change copyright laws on whim - he continued: "I am particularly surprised that the record industry has chosen to endorse s.17 of the DEB, which I consider is wholly undemocratic and contrary to centuries of good practice regarding the forming of our copyright legislation. I also believe it may set a dangerous precedent going forwards (and could come back to haunt the industry)".

One of our regular critics here claims that part of what I talk about is killing off the record labels. Nothing is further from the truth, of course. I've spoken repeatedly about how I think there's still a tremendous space for smart record labels that get it to help musicians out in enabling these new business models. Some musicians may be able to do everything themselves, but I think most will end up in a partnership of some kind. That's also why I've discussed some newer labels that I think are doing unique and powerful things to enable artists to better connect with fans, and give those fans a reason to buy.

When I've pointed that out, however, some have responded that this just means I want the same status quo as before. But, again, that's incorrect. The way things used to be, was that the major record labels had all of the power. You basically had to sign a major record label deal to get anywhere, and since there are just a few majors, you were pretty limited -- and all of them took advantage of artists. They could do that because they had all the power, and they had a business model that only worked by putting ridiculous and oppressive terms on most artists, guaranteeing that few ever saw anything beyond their advances.

The big difference today? Thanks to new technologies and new avenues for both connecting with fans and transacting with them, the major labels don't have the same sort of power any more -- and artists can actually take back many of their rights, whether it's retaining the copyright on their songs, or negotiating deals that don't seem quite so much like indentured servitude.

And, in fact, we've been seeing more and more of that lately, with newer labels taking a much more innovative, musician-friendly, fan-friendly approach to things. Ian Rogers has a fascinating post that shows at least one situation, where the power structure has certainly shifted, as he read about how a label, Duck Down, had signed to Blue Scholars, a band. Note the direction. It wasn't that Blue Scholars had signed a label deal with Duck Down. Instead, Blue Scholars figured out a unique way to finance, promote and distribute its latest album. First, they did a deal with Seattle's Caffe Vita Coffee to finance the album, and to handle local distribution. The band is retaining all the rights to the music with control over how it's marketed and sold (and, they note, "given away"). Duck Down, though has been "hired" to help with the marketing.

This makes a lot of sense. Certainly record labels have a lot of experience and connections when it comes to marketing music and musicians. So leveraging those relationships makes a lot of sense. Giving up all control and rights just for that marketing expertise, on the other hand... makes less and less sense. So, no, I don't think record labels are going away. I still think there's plenty of room for them in the wider music ecosystem. But their role is changing, and the power shift is moving much more to artists and away from the labels. Some of the smart ones get it. But a few of the major labels certainly don't like this, which is why they fight so hard against the technology that's making this happen.

The more you learn about the way major record labels work, the more ridiculous it seems. Unlike pretty much every other creative deal making situation, musicians who sign major record label contracts basically hand over all their rights to the label. The label gets the copyright. It gets to determine the type of music the musician plays. It handles much of the marketing and promotion. And... the biggest thing of all is that it handles all the accounting and payments (if there are any). Over the years, that's resulted in many, many accusations from artists that the labels are flat out lying about how much an artist actually earns. That's why you hear stories of artists selling millions of albums and never seeing a dime in royalties or of artists suing record labels because of sneaky accounting tricks to hide how much an album has earned.

Dave Stewart, from the Eurythmics, has written an article for Billboard where he points out that any retailer in the world has access to amazingly detailed technology and tools to track transactions and settle details with credit card company merchant accounts. He notes how ridiculous it is that such systems have been available for nearly thirty years... and he still can't get an accurate transparent accounting of what a record label has sold.

In the past, the major labels could get away with this, because they were the only real game in town, if a band really wanted to get big. But that's changing. This, of course, is the major labels real concern over new innovations and technology. It's not piracy. It's that new technologies take away the biggest scam they've had going for ages: the ability to keep tons of money that never belonged to them. And that's changing. As Stewart notes:

In the future, all incoming revenue streams will be reported in real time, with transaction costs pre-defined and competitive with the market. In the old model, content distributors have been slow and/or reluctant to adopt new media. Distributors frequently take significant portions of creative control out of the hands of the artist, placing restrictions on format, functionality, interactivity and other components. Copyright controls inherently limit the models and methods of release and distribution of artist products. Digital distribution and rights management methods have failed to leverage technological and business advancements to serve consumer, artistic and corporate interests. With many distributors, the feedback loop on consumer usage is also limited. Buyer profiles, habits and usage patterns are not shared with artists, who are then forced to use other means (surveys, focus groups) to determine how their content is being received by the fan. Especially troubling is that, in many cases, artists are not entitled to any control over precisely what happens with their creative work, or to apply some of the new and innovative ideas in the digital landscape due to restrictions from rights holders. Digital media technologies for distribution, asset management, security and monetization have matured to the point that an easy-to-use, scalable, fully featured digital media gateway and financial tracking system is now possible and should be demanded by all artists.