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U2 Manager Says Google And Its Hippie Friends Should Pay The Recording Industry

from the still-haven't-found-what-i'm-looking-for... dept

While the IFPI and the RIAA have been actively pushing for ISP liability for file sharing, it appears some in the industry are taking it even further. U2's manager for 30-years, Paul McGuinness, gave a talk at the Midem conference where he blamed Silicon Valley's "hippie values" for creating the problem, and demanding that tech companies of all stripes start paying the recording industry. He's talking not only about ISPs, but also Google, Apple, Microsoft, Facebook and basically every other successful tech company. There are so many problems with this, it's difficult to know where to begin, but let's tackle a few of the quotes:
First he blames these companies who have "built multibillion dollar industries on the back of our content without paying for it."
This is a common refrain from those in struggling industries, but it's meaningless. Complementary goods are a natural for building bigger markets, but no one expects one side to pay the other just for moral reasons. The oil industry's success is built on the backs of the automobile industry, but does the automobile industry demand that oil companies have a moral obligation to pay them? Computer makers have built a multibillion dollar industry on the backs of the internet and software companies -- yet, no one says they have a moral obligation to pay those companies anything. Travel guides have built huge business based on hotels and restaurants around the globe, but does anyone think that those travel guides owe the hotels and restaurants money for doing so? Hell, the recording industry itself was built off the backs of complementary goods such as radio, yet when they paid radio stations, it was known as payola and outlawed.
These companies, McGuiness claims, need to help out "not on the basis of reluctantly sharing advertising revenue, but collecting revenue for the use and sale of our content."
Uh huh. And I guess that automobile companies should be collecting revenue for the oil companies. And, home builders should be collecting revenue for the electricity companies. And, airlines should be collecting revenue for the hotel industry. You see, these are all separate industries. They may be complementary, but it's up to each one individually to figure out the business models that work. None should be pressured into saving the other from its own missteps.
"I call on them to do two things: first, taking responsibility for protecting the music they are distributing; and second, by commercial agreements, sharing their enormous revenues with the content makers and owners."
This is beginning to sound an awful like journalists who claim that Google has a moral obligation to "share revenue" with newspapers.
He claims that what all of these companies do is the equivalent of a magazine that "was advertising stolen cars, processing payments for them and arranging delivery."
That makes for a nice soundbite but has nothing to do with reality. First there's the little problem that nothing is being stolen here, only copied. Second, none of these companies are "processing payment" for unauthorized transactions. Third, none of them are "arranging delivery." It would be like the same scenario, but blaming the guys who paved the road on which the car was driven.
"Embedded deep down in the brilliance of those entrepreneurial, hippie values seems to be a disregard for the true value of music."
First, this shows a misunderstanding about the difference between price and value. It also misunderstands the culture of Silicon Valley, which is generally more libertarian these days than "hippie."

On top of all this, McGuiness is whining about this at the same time that U2 is pulling in incredible profits, making $355 million on its last tour. You know what helped fuel some of that? The fact that a new generation of fans are learning about U2 from downloading its music for free. Not only that, since they don't have to stretch their entertainment dollars as far on buying the actual music, they can pay the exorbitant concert ticket prices that U2 is charging these days.

The problem here isn't that others are letting the recording industry languish. It's that just about every other industry has realized that there's plenty of money to be made in the music industry. As we've pointed out, just about every aspect of the industry is doing fantastically well. More money is being made on concert revenue than ever before. More artists are making music than ever before. More music is being heard than ever before. Even more musical instruments are being sold than ever before in the past. Yet, because one segment of the market (the one selling plastic discs) is unwilling to take some simple steps to change its business model, everyone else has to pay up?
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Filed Under: blame, complementary goods, hippie values, morals, music industry, paul mcguinness, recording industry, silicon valley, u2

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  1. identicon
    Debunked, 29 Jan 2008 @ 9:48am

    Prove the Profits

    Mike quote:

    "More money is being made on concert revenue than ever before."

    You are doing only a surface analysis by looking at the concert top-line grosses only. Musicians will ultimately make decisions to tour based on the leftover profits not the gross. What is left over as profits which would have to take into account:

    1. Higher gas and transportation costs (rule number one- the van will break down)
    2. Huge increase in minimum wage costs for loaders/unloader help if it is not a union facility
    3. Increase in liability insurance costs on the promoter side (leaving less money for the band)
    4. Increase in medical expenses (musicians get sick and need treatment on the road- many times without health insurance coverage). If the singer gets a serious cold, or the drummer strains their back loading stuff all income stops.
    5. Where are your numbers for merchandise? Can you even verify if those numbers are up or down? Isn't a portion of this activity under the table to avoid taxes. If so is it fair to not pay taxes? If just local or states sales taxes were enforced that would be a huge drag on sales to have to do the accounting properly.
    6. Someone up above properly mentioned income tax burdens and how one splits profits across state and country lines- these are very pricey to pay and very pricey for the accounting help burden
    7. Many more items could be added to this list but I am running out of time

    Bottom line, Mike, I don't have access to the exact profit numbers because they span the public, private, and underground sectors of the economy. I doubt that you can produce those numbers in sufficient detail to prove out your above quoted statement. And some people intimately involved in the concert business seem to think your analysis is flawed.

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