Playing Whack-A-Mole With The Free Music Crowd
But that's not what you hear from thought leaders like Mike Arrington from TechCrunch and Mike Masnick from TechDirt, as well as others who offer advice and argue positions that are not consistent with themselves -- or with basic laws of business or self-preservation.
This weekend, Arrington wrote again, as he has before, that music should be free.
Specifically, the article is about the royalty rate the record companies charge for playing radio music, and Internet radio service Pandora's claim that it will go under if the rate is not reduced. Arrington says:
For now the labels want to squeeze more revenue out of Pandora and others. But when these companies start to go under and the bird in the hand disappears, they may regret their overly aggressive negotiating stance. It’s time for the labels to die, and anything that cuts off another revenue stream is at least partially good. I’m reluctantly willing to sacrifice Pandora if it quickens the inevitable march of recorded music towards free. Let’s just hope it doesn’t come to that.
So Mike longs for the “inevitable” day when music is free. In the meantime, he argues that the labels' current stance is overly aggressive. But if music is going to be free, isn't any price is too high for music?
From there, we move to Mike Masnick from TechDirt, who recently took Warner Music (WMG) for its stance on music royalties for the hit video games Guitar Hero and Rock Band. His argument makes even less sense.
Masnick regularly argues that the music business should be making money other ways than selling “shiny discs”. And in the Guitar Hero/Rock Band case, Warner wants a greater royalty for using their music in the wildly popular video game. So here, it sounds like Warner is taking Masnick’s advice, right?
But not so fast.
Warner is still wrong, Masnick says. They shouldn't be demanding more money for the use of their music. They should be happy knowing that Guitar Hero is great marketing for Warner Music to sell, err… shiny discs.
So: According to Masnick, music labels shouldn't plan on selling music in the traditional way. But they also shouldn't demand substantial licensing fees from a big, profitable video game franchise, even when that franchise is entirely based around music -- because that franchise helps them sell music in the traditional way.
You can see how this could get problematic.
At least Arrington is more honest. He wants people to stop selling music at any price. If I were a musician or a label I wouldn’t take his advice, but at least he doesn’t hide his agenda.
On the other hand, Masnick says he’s not against selling music. But when you look at his arguments, he really doesn’t leave much on the table. If you can’t charge the biggest media companies in the world for your product, who can you charge? TechDirt is both a blog and a consultancy, so you're supposed to take this seriously -- someone is supposedly paying for this advice. Why?
SAI Contributor Hank Williams is a New York-based entrepreneur. He writes Why Does Everything Suck? Exploring the tech marketplace from 10,000 feet.
While the digital revolution has reduced the costs of a lot of aspects of the music business it has barely touched the massive expense of marketing.
Not to mention...
Artists get paid advances on record sales.
Almost none of them ever sell enough records to come anywhere near covering the advance. Does Mike think that unsuccessful bands should pay back their advances?
Like I said, he's an idiot.
If it makes more sense for musicians to give away their music to generate awareness for their live shows, then that will happen.
Yet, strangely, it's not happening. At all. Because... um... record companies are evil. Or artists are too greedy. Or something.
Well said Hank.
- from http://audiobee.com
(Also, don't forget the cost of staff and bandwidth when calculating potential profits.)
Almost none of them ever sell enough records to come anywhere near covering the advance. Does Mike think that unsuccessful bands should pay back their advances? "
@Zoe: The system is broken: There should NOT be any advances -- just a revenue split of 70/30 (70 band/30 label). Bands don't need advances -- a piece of software like Garage Band is way more powerful than a recording studio of yesteryear -- not to mention if the play a couple of gigs and raise enough money to buy something like Logic, which is sufficient to make a very high quality album.
Bands don't need a record label or and advance to record an album. Once the album is recorded they could sell it themselves, or enlist a label to do it, and that should strictly work on a revenue sharing basis. That way, no complaints from the labels about how they are losing money on advances. They will only be losing money on their own inflated expense accounts and useless executives and A&R people. And pretty soon, artist after artist will discover that they don't need a record label.
In some quarters music will need to be free. In other circles, people will buy it.
As for Pandora, I don't think it's a good idea to assume they're working with the optimal business model -- in terms of revenue, expenses (royalties) or both. If failure is an option, they seem to be embracing it too easily (at least for PR purposes).
"If it makes more sense for musicians to give away their music to generate awareness for their live shows, then that will happen."
Do you even read the news and follow what RIAA and MPAA lobbyists are doing in Washington? The market is being locked down by lawsuits and legislation. Such strides in how the music industry works is being stifled.
So you're right a free market would work this stuff out. But wait, it't not a free market due to the litigation and ridiculous laws that exist.
I guess the powers that be are too stupid to recognize that great marketing and publicity can help to drive sales. It would be one thing if Pandora and Guitar Hero were not paying anything at all in royalties, but they were. I fail to see what the problem is as it seemed like a great partnership to me.
Now, for some reason, it's not enough and they want more. But no, it's not a reasonable amount - it's an amount so high that it makes the idea of just not using the product anymore and shutting down seem worthwhile.
The simple fact of the matter is that when it comes to the idea of digital goods and the Internet you guys are clueless. Rather than utilize the technology and embrace the opportunities, the choice is made to kill it.
It's obvious that you guys cannot come up with a good plan. Why not let someone else do it for you? The sad thing is that nothing is going to be done at all to actually meaningfully address the many ways that the consumer uses to consume media.
Free music? Pfft, the end result is going to be no music because no one is going to want it. Why? Because it gets easier by the day for more and more people to swear off music completely by turning off the radio and not buying any more music.
I think it's underestimated as to how many people there are out there like me who are so disgusted and fed-up with this nonsense that they would rather do without than deal with this crap anymore.
Terrestrial and satellite radio do not pay as high a rate as Pandora and its kin. (And even terrstrial and satellite radio pay differing rates.)
SoundExchange, which collects the royalties, and is an arm of the RIAA, collects the royalties from songs played EVEN if the label the artist is on is not a member of the RIAA. And if SoundExchange doesn't find the artist to pay the royalties? They get to keep it. (Makes you wonder how hard they search for the artists, if at all.)
At least part of the reason that the RIAA wants to see Pandora and its kin go away is because, with so many non-RIAA-affiliated labels, it gets rid of a competitor to the RIAA and its constituent labels.
If anybody thinks the RIAA, or its constituent labels, really care for the artists, think again. Read this excellent article from producer Steve Albini (http://www.mercenary.com/probwitmusby.html) if you want to see how they operate. If any other industry employed the types of creative accounting that the RIAA (and the MPAA) does, we would be having Enron-style congressional hearings and see Congress enacting laws to regulate it. The labels have never really cared about their artists except for in how many units they could sell. And that points to some proof that the labels believe they're in the business of selling plastic discs.
For better or for worse, the buying public (or music listening public if you prefer) has decided that they don't want to buy plastic discs. In part, that is because the perception (at least) is that when yoou buy an album from an artist, you get 2 o3 or maybe 4 good songs, and the rest are throwaways. (I personally disagree, but then I am not the type to buy Britney or Justin albums.) In part it is because if we buy the plastic disc, we are stuck with it until we give it or throw it away. For guys, it is probably not so much of a problem. But the girlfriends and wives and mothers in our lives, it is. (Never mind their shoe collections.)
It has never been as much about the container the music is held in (whether it was vinyl, tape or CD), it has been about the music. And the more the RIAA and its constituent labels try to force the market into a container the market no longer wants, the more of a problem it creates for itself. For the artists, if you really look at the economics, it has never been about selling plastic discs (or any previous containers). It has been about getting the music out to the public, creating fans who like the music, and getting them to the concerts where they perform the songs live. (And along the way sell drumsticks with the drummers name on them, guitar picks with the guitarists/bassists name on them, tour t-shirts, hats, bandanas, and a whole slew of other products. While the artists don't take all the profits from the sales of the concert and paraphanelia, they do get a much bigger cut of the sales than they do on sales of the albums.
Artists like the Beattles, Led Zeppelin, and U2 may actually have seen some oney from royalties for their sales. But they are the exception. Eevryone has to lug their equipment and go from concert hall to concert hall and sell their merchandise.
You can't set up straw men and knock them down and expect to be believed Hank. You have to look at it objectively. And any objective look will show you, even if it is not what you want to believe, that the RIAA and its constiuent labels are in denial because they don't grasp that they are not, and have never been, in the business of selling plastic discs. And until they accept that and adjust their business models to meet with the realities of the market, they are going to continue to cry foul and push Congress to enact laws to protect their business model.
As Mr. T is wont to say: "I pity the poor fool!"
Woadan
Steve Purdham
CEO - We7
http://www.we7.com
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