January 1, 2009 Who is really behind the curtain?
This is a piece I wrote that just ran this week on KCRW.
The big end of the year news report on the record business is - the
song remains the same. The RIAA, or Recording Industry of America has
finally agreed to abandon its strategy of suing fans that illegally
download or share music. They have a Plan B. Plan B is getting the
Internet Service Providers, or ISPs to enforce their rights.
After 5 years of meteoric declines in revenue, with thousands of
employees affected in all areas of the record businesses, the
industry’s big shift in strategy is to go from filing lawsuits against
downloaders, to filing objections with ISPs, who then are supposed to
file grievances with the consumer. Sounds like the record industry has
just created a new bureaucracy and the attorneys who run the RIAA
bought themselves another 5 years of job security.
Are we really moving the ball forward here?
This strategy will never work because it fundamentally does not
address the consumers’ experience of using the web.
Consumers download and stream as much information as they can get
their hands on - and they will continue to do that. There’s no way to
stop it as the internet is built to explore. The only way to solve
for illegal downloading and peer to peer sharing is to embrace the
internet’s unique abilities and monetize accordingly.
The illegal downloading solution is actually painfully simple. Create
a win-win platform for ISPs to deliver music seamlessly to consumers
as part of their internet service. Give consumers the worlds’ music
library, free with their internet. It’s not an opt in - everyone
would get the library with their service. Add $3 a month to their
internet bill. That’s it. $3. and they’ll access every song they’d
ever want. Do this and you’ve eliminated illegal downloading, piracy,
sheriffs, bad guys,…and everyone who should get paid, does.
The RIAA’s new solution simply transfers the job of sheriff from the
RIAA to the ISP. Just how long, and how much time do you think ISPs
will spend chasing their own customers?
We have to accept the fact that the internet provides “seemingly free”
media, and that sharing it is an important part of the web
experience. The question should not be how to stop illegal
downloading, but rather how to create an economic model that embraces
the values of this wonderful medium.
America is entering an important time in history representing new
visions and new explorations. It’s time the record business woke up
and faced the great opportunities lying at their feet.
This is where the piece ends. But if I had more time, I would have delved into the point that if I were an artist signed to a 7 album deal (or even a 4 or 5 deal) and it began anytime after 2000, I would be enormously frustrated that the caretakers of my hardworking career seem to be working in opposition to my own success - ie: suing the folks who want my music - and yet I would feel legal bound to support them.
While I fully support artists and labels for doing what they feel they need to to protect their assets from being ripped off, I cannot abide an industry that turns its back on solving the problem with urgency. After all this time, the RIAA’s solution is beyond embarrassing.
Reader Comments (19)
And who would determine who gets how much and when? What would this do to independent artists who now enjoy an income directly from their fans? An income which would go away once those fans start getting "taxed" for downloads and stop supporting anyone out of pocket because they're getting charged for that now.
All this proposal does is give labels carte blanche to funnel all of that money to where they want it to go with zero oversight. Never mind the log analysis every single ISP will have to do in order to report what was downloaded how often and via what method. I used to work as a Linux admin for a small ISP, and I can tell you, having to set up that kind of logging system would kill that business.
The only way this could possibly be fair is if those logs were published publicly directly by every ISP. That still won't solve the "indie artist supported by fan generosity" problem, but it would help to keep the labels honest.
In economics the only thing than can be charged for is scarcity. The supply of digitally recorded music is infinite, therefore the scarcity is zero and the price should be zero. The RIAA is trying to create artificial scarcity via legal means. But since the supply of digital music is infinite, the policing needed to artificially protect that supply is also infinite. That's why they are trying to shift the infinite cost of policing onto another party - the ISPs.
The world has changed. We simply don't need the RIAA and record companies any more to determine who get on the scarce record store shelf space. The new shelf size is infinite. Everyone gets on it.
Bands should admit that recorded music is advertising for a truly scarce resource - concert seats. Use free recorded music as advertising to maximize your exposure and then capture 100% of the revenue from live performances.
im tired of the RIAA. what have they done thats benefitted music and the recording industry? hand out gold plates? maybe they should do their job and administer mp3 quality standards instead of sucking up to major record labels.
The RIAA's original task was one of technical standards: They were the ones who defined the EQ curve applied to the signals before cutting vinyl (and subsequently the inverse curve used during playback to compensate). In fact, it's called the RIAA curve, and phono preamps are often called RIAA preamps for the same reason. That's the only one I know of for sure, but I wouldn't be surprised if they also set standards for things like tape deck bias and all that.
I don't know when the gold/platinum certifications started.
yes at last year's Canadian Music Week there was a lot of discussion about holding the ISP responsible. the irony was that the conference was sponsered by Canada's largest ISP, Rogers, and the thought of this proposal would make them cringe instantly.
they would probably enjoy being a part of this if they were guaranteed lots of new income, but i think they are benefiting enough as it is to ever want to go there. especially because of what Darren mentions that it's just too cumbersome.
I do agree though that ISPs are swimming in money that the media industry has generated and it's unfair.
in my opinion, i think the labels have to take matters into their own hands. i think we need to see more subscription services. if you like universal records, they should offer a $20 all you can download site. if you like a smaller label like ninja tune, same thing. the hard part is figuring out how to divi that money up though.
I think we all have some serious choices to make.
http://www.ultrameek.wordpress.com
"Do this and you've eliminated illegal downloading, piracy,
sheriffs, bad guys,...and everyone who should get paid, does."
I don't think it's exactly that easy.
The problem with a $3 surcharge for music is it's followed by another $3 for video, and then another $3 for faster Facebook access...
I think the solution is to do nothing.
Drop the lawsuits. It's not working.
Forget ISPs. Asking them to police their customers is like asking highway road crews to ticket speeders.
No blanket fees. It won't be fair to customers and it won't be fair to indies who'll have no leverage in the system.
How about this: ACCEPT the fact that revenues are going to drop due to format substitution, file-sharing and other factors, and develop products that customers would actually be willing to pay for:
- GREAT songs
- relevance, authenticity, meaning
- artist careers that actually last more than a few years
- multiple unencumbered listening and format choices
- more flexible licensing terms (stop squatting on your catalog, work with new music-driven startups, allow more sampling and remixing -- in general stop trying to squeeze every penny out of every usage.)
...and who knows what else. I don't know the answer, but I suspect a $3 surcharge for a service you may not ever use is not a way to cultivate fans....
Can we really force people to pay more for something they may or may not use? Like it or not, most people don't care about music that much.
I do feel the solution will be something similar to what you're describing. Make it easier to buy than it is to steal.
Who do you think would have to be involved to create a new consensus?
How much of a disconnect is there between this conversation here, and what's going on at RIAA headquarters or the executive suite at EMI? If it's a big disconnect, where and who do we look towards to bridge that gap?
How much of a critical mass would independent musicians need to create, with numbers and capital, to effectively out-vote the major labels?
The concept of turning music into a cell phone bill that everyone in the states pays and every artist gets paid for is alluring, but at this point I believe it will always be a niche product. We already have Napster and Zune offering unlimited music for a lot price per month. Zune offers OWNERSHIP on the first 10 songs each month. People still don't wnt to do it, because they want to OWN their music.
This concept could possibly work in China/Asia, where music is already seen more as a communal art (hence high piracy rates), but for the US/UK where you have had ownership for over 100 years, I just don't see this in the cards anymore. Great idea, it would be nice if we could solve it by turning the record industry to a PRO, but it isn't happening due to A. the consumer and B. I don't trust Sony now, I certainly don't trust them with a utility inflow of cash (IE labels will get even more fat and lazy, who has seen an efficient electric company)?
Someone mentioned Scarcity, and I think that is the word to keep in mind (Terry McBride wrote a great blog on this last summer). The solution is not just to give up and have all music on the net for free. The solution is to spread the word like crazy at first, build a fan base, and then create exclusives. Check out what a band I am promoting is doing:
http://www.teamilluminati.com/downloadnow
Try and get the free album out now, create a membership like fan club where they find value, and now we got 100+ people in the door on a frickin Tuesday night right after Christmas. We still have some kinks to work out, but it's a start.
Also, I would like to note that the stategy DIFFERS BAND TO BAND. What works for one artist won't always for another. Also, here's Terry McBride's blog (June 20th 08):
http://www.nettwerk.com/terrysblog/2008_06_01_archive.html
Also, @david hooper, Radiohead made it FREE to buy it, and piracy was still astronomical. But then, Radiohead made a ton of publicity and money (I assume) off the promotion so who cares? But worth noting that people even pirate when it is free.
Well it looks like someone is on the same page with you ..
http://www.musictechweb.com/blog/2008/12/29/why-the-riaa-should-start-a-business-model-instead-of-policing/
Back in the work action -
So the facilitation is actually rather simple, and all currently operational in other sectors.
Treat each download as a stock price for the day of the download. This means the value of the song will change from day to day, depending on the number of subscribers in the pool and the number of downloads from that song.
ISPs anonymously report downloads to a third party, non profit reporting entity. Spidering technology confirms actual download sales per day. Artists, publishers and labels receive their appropriate portion of the funds.
The only missing link to the equation is the legislative action needed to insure the anonymous reporting. Perhaps Obama's new Tech Czar will be able to see that one through.
In reality, pornography (the #1 income generator of downloads) is the reason that ISPs are steadfast trying to maintain internet privacy. Take that issue off the table with anonymous reporting and you can get on with the business at hand. Don't let the porn industry destroy the record business - which is virtually what is happening here. Let the porn industry do its thing, and let the artists, writers and labels receive an appropriate portion for their work too.
Celia, you bring up some great points and actually put some steps to a otherwise slippery slope, and I agree that doing what you suggest could help...BUT I think this is like putting a band-aid on a broken arm. I do not believe that charging $3/month to every could be the change the industry needs. I alone spend far more than $3 per month on music (Im still a CD buyer, laugh all you want) and many I know do as well. I'm not an economist but I dont see how $3 from everybody would fix the problem...rather I would imagine a massive backlash from people not wanting to be forced to pay for this. Would it be a legislative decision or a leap of faith from an ISP? Either way, it still doesnt address the need for bands to find new and creative ways for their fans to buy into them. I think that is the key. Your implementation steps are very interesting though.
Cheers,
Alex
I can actually see the major labels cottoning onto this idea, for a good reason: it's not bad for them. It will, however, put the idependents in a sorry state. This has nothing to do with misappropriation of the money, it's simply a feature of the system. If anyone's interested, I did a detailed breakdown of the model here:
http://thecynicalmusician.com/2008/12/free-music-myths-i-wholl-profit-from-feels-like-free-models/
Sorry but I'm not sure where you are getting these numbers. Majors do not pay 50% to artists. Those numbers are for joint ventures and synch licensing deals and majors doing that many joint ventures. Also, percentages of sales from purchase has nothing to do with downloadability. If music is seemlingly free, they are far more likely to venture out beyond bands who have paid shelf space like mainstream hits. Take away the marketing spin of major labels bands and you've got a far more vibrant music marketplace, with far great equanimity. Doubts? Walk into any indy record store. Finally, if you are going to calculate "mindshare" then calculate all the ripped versions of Arcade Fire, Sufjian Stevens and Fleet Foxes. The reality is far more impressive than the Soundscan numbers.Why shouldn't independent artists get paid for their work.
Don't mean to tear your playhouse down, just don't agree with the assumptions in the math.
The sources for most of the numbers are in the post.
I got the 50% label/artist split from the MMF's Music Management Bible chapter on recording contracts where it is quoted as a typical example of the rate on secondary exploitation of the recordings or in other words, everything that isn't specifically stated in the contract. Since present recording contracts do not cover such a blanket license (for the simple reason that one doesn't exist), it seems to me to be the most likely category to fall under. The book is somewhat dated (the information was current around 2002) and is focused on the British market, so this information may not apply in the US (or any other country) at present, but since artists aren't likely to get anything more out of the labels with regard to such a deal, treat it as yet another optimistic assumption. Any worse deal will only strengthen the position of the labels, which is very much my point.
The fact that people will venture out does nothing to change the general conclusion. It actually makes things worse. Since the amount of money to be distributed is fixed, more downloads overall will decrease the payout per download. Yes, people may download more obscure bands, but they'll also be downloading the big songs from the majors, 'cause there's nothing to stop them. The amount any particular rights holder will earn will depend on what share of the overall downloaded material they hold - the majors win here by such a long shot that no one else even gets a look in. We can delude ourselves that people will switch from the big hits to obscure bands no one has ever heard of, but we'll have a much tougher time finding any evidence to support such an assumption. The available data from research on the Long Tail rather suggests that the emphasis is on the big hits more than ever these days. For that matter, so does research on what is actually downloaded via P2P (You can probably find the reports on the net if you look. I'd post some links, but fraknly cannot be bothered to go digging for them at the moment).
In conclusion, until I see trustworthy data that contradicts these assumptions (the chief one being that people will continue to download major label material in vast quantities), I will continue to stand by what I wrote.
Update: Just to avoid any accusations that I am pulling numbers out of my hat, I took the time to track down the most recent report: The Long Tail of P2P, dated 14th May of the current year.
I won't going into details here, but in short the report examines how real-world legal and illegal download data matches Anderson's Long Tail model. What the researchers found was that while in the legal market 5% of the material accounts for approx. 90% of the revenue, the P2P "market" looks little better, with 5% of the available files accounting for about 80% of the total swaps.
So while, yes, someone may download an independent title to check it out, the majority of downloads will focus on hits, most of which are owned by the major labels. QED