State of Mind of The Art

Spotted on: Techdirt

A new idea has surfaced in the music business this year: giving away tons of free CDs. First Prince did it through UK newspapers, causing quite a stir in the industry. Now Big Head Todd and the Monsters are giving away 500,000 copies of their new album to radio stations and fans, splitting the cost with radio to get the copies out there. The albums will be available as giveaways from radio stations, and on the band’s site. The album is available as a free download for fans, and according to the BHTM site, the physical album is “Available SOON from our merchandise store for just $5 or FREE with any merchandise purchase of $15 or more.”

At first glance this appears to be another groundbreaking model for the industry. BHTM used to be on a major label, and has the industry recognition and viability as a touring outfit (they are preparing for a 60 city US tour as we speak) that comes with major label artist development and promotion.

Looking closer, even at dirt cheap prices (including postage), the investment here would be a minimum of $200,000. Apparently, fans are jumping at the bit to get the free album, a testament to the credibility of BHTM. But what does this action say for the rest of us in the industry? Although not as widely recognized as Prince or Radiohead (and few artists are), BHTM has the credibility and resources to launch this kind of campaign. For the rest of us who have not had major label development, access to create a quarter million in investment, tons of willing radio contacts, and the ability to book a viable 60 date US tour, this tactic may not be fruitful in the short term.

Based on the flopping CD sales over the holiday season, CDs are set to lose major amounts of retail shelf space next year, except in major retail outlets like Wal-Mart and Target. Consider that without retail shelf space, physical distributors will rapidly become obsolete. These days, selling 100,000 copies of a CD gets you high up on the charts. Give the sorry state of CD sales, it appears that musicians will need to have some kind of sure money maker (like touring) to buffer this kind of massive promo giveaway, unless one is willing to invest tens of thousands of dollars and ’see what happens’.

So what about the horde of mid level musicians that don’t have the clout to give away half a million (or even ten thousand) CDs? It’s a brilliant marketing ploy, but without the ability to book a viable tour with sweet guarantees and juicy crowds or the guarantee of radio play it becomes a major loss leader in an industry that is rapidly losing revenue streams.

Giving away albums to generate buzz has become the modern equivalent of the single. Let the fans hear the music, and give them the opportunity to support the band live, or by buying merch or CDs. This tactic will drastically undercut the Big Four’s ability to set prices and control music distribution over 2008.

Bottom Line: It is beginning to appear that the only way to transform the music business is to devalue music and start again with a whole new model, where art is free and the money comes from something else.

Spotted on: Recording Industry vs. People

The record industry is at it again, seeking to further limit our use of our catalogs of recorded music. In a current Arizona case, Atlantic vs. Howell, RIAA is now claiming that ripping our own CDs onto our computers for our own use is copyright infringement.

We already have DRM, which limits our enjoyment of music to a platform (iTunes and Windows Media Player are the prime examples of this). This new motion would force us to buy the same song over and over again, to listen to it in our car, on our stereo, on our computer, and on our portable MP3 player.

Is it any wonder that record sales are crashing and burning? Music is not a necessity, and people buy it because they want to enjoy it. The more we are backed into a corner, told that we cannot copy or back up our own music, the greater the backlash toward the record business and the faster album sales slump.

Maybe there’s a totally different angle we’re missing. If the RIAA and the big labels see that their model has failed perhaps all of this litigation is an attempt to squeeze every last penny they can out of us before they collapse under their own weight. All the claims of protecting copyrights and artists may be a sham. The more ridiculous the legal environment about copyright infringement becomes, the more damage is done to artists.

Within five to seven years, there won’t be major labels like there are now, and we will be free to buy the music we want one time and convert it to any format we choose.
However, the resentment that the RIAA is generating toward buying music may be around far longer. Mainstream media outlets tend to only trumpet the loudest voices (in this case the RIAA), and most of the alternative opinions and methods of distributing music are relatively unheard.

Without all of the DRM, root kits, and legal controls of our music catalogs, music will continue to be made and bought. The more restricted our music catalogs become, the less willing we will be to buy it. And who loses is the artist. Musicians make a living off their music. If people are unwilling to buy it, musician will not be viable career. And this backlash hits independent artists even harder. As music loses its value at the mainstream level, it loses it on the underground as well. Artists and labels that do not believe in DRM or controlling the use of their music suffer from the same public opinion that people have toward major labels. The only difference is the major labels positions are available on the newsstand, and to lobby for laws. In fact, indie labels are the second largest entity selling music, and are left with the same restrictions and laws set by the RIAA and the Big Four.

Bottom Line: The continued attempts to regulate music is the biggest source of the current collapse we see in music sales, and the devaluation of music as a commodity.

Spotted on: Digital Music News / ArsTechnica  

As if throttling Bit Torrent, blocking access to sites like AllofMP3.com and PirateBay, and endless industry litigation aren’t eroding net neutrality enough, the IFPI is taking it a step further.  The IFPI is an international version of the RIAA, and the recently sent a memo to the European Union about file sharing.

The IFPI wants to see Europe’s internet monitored, managed, and controlled.  They are presenting a “complete solution to piracy”.  This three step process looks something like this:

1.  Scan the entire internet for audio files, and block files that don’t match up to a database of music.  This practice is called content filtering.  Although it seems benign, the practice of monitoring the entire internet is a slippery slope toward full scale surveillance.  Aside from harming commerce and academic research, having a huge government database of people’s web activity can be used for more malicious purposes then chasing down people who are illegally downloading music.

2.  Blocking peer to peer protocols.  A protocol is a standard for connecting and sharing data, and P2P networks have their own protocol.  If ISPs systematically ferret out and block these protocols, academics and businesses won’t be able to share large files, either.

3.  Blocking websites that offer illegal content.  Although the practice of blocking sites that offer pirated music is a method of controlling the practice, it is a legal precedent that governments can block web sites.  The power of the internet is its freedom, and blocking sites is a step toward censoring that freedom.  Once governments are free to block one kind of website, where will they draw the line?
Consider that a corporation is lobbying a government to restrict and monitor the internet airwaves.  If the IFPA has their way, they are setting the stage for full scale internet controls and censorship. While the intention of protecting their corporate interests isn’t truly malicious, the methods they suggest pave the way for an internet that is no longer open and free.
Bottom Line:  Setting a precedent for government control of the internet is a precursor to full scale internet censorship.  Considering the human tendency to use any means at our disposal, creating this kind of monitoring and control apparatus is a disturbing action for personal liberty.

Spotted on: CMJ

The RIAA is funded by the big four record labels, to the tune of around $130 million per year for each label. EMI was recently bought by a private group, and are now considering drastically cutting their investment to the lobbying and enforcement arm of the music industry.

Given that the RIAA’s legal moves over the last few years have been disastrous at best, it’s a great sign for artists that the RIAA’s financial base may diminish significantly. The amount of money that the RIAA has spent suing mothers and college students as been astronomical, and has led to a severe loss of credibility toward the record business in the public eye. Let’s take a moment to look at what a world without the RIAA might look like.

Without constant legal pressure to buy, audiences would begin to feel confident that albums they buy are supporting artists’ careers (this is part of consumer confidence). File sharing would continue, but people would be more willing to buy music they love knowing that they aren’t labeled as criminals anymore. The business model of turning artists into products, overcharging for albums, and using hype instead of quality would fail.

The music industry would become a free market, where any artist with great music and dedication could create a viable career. Rather than a few mega platinum artists, we would begin to see a massive amount of artists selling between 50,000 - 200,000 units on releases. This level of sales can cause an artist to be dropped from a major, but on an indie label, this is a great living for an artist, and a massive success for the label. Royalty rates for artists would also become much higher. Some artists already see similar profits selling 200,000 units with an indie label that they would see selling a million on a major.

New contracts would become the industry standard, similar to Polyvibe’s practice of leasing artist’s copyrights rather than owning them. Artists would have freedom to call the shots in their careers. The industry would shift to artists owning their masters, with labels existing to empower artists rather than to exploit them. Album advances would shrink; the amount of money owed to labels would shrink, too. In the major label world, an artist owes almost every penny the label spends on them. Label investment in artists would become the cost of doing business, rather than a loan.

The practice of shelving albums would become non-existent, as artists would have the ability to have promises for release dates in their contracts. Polyvibe currently includes release dates in our contracts, with a provision that if deadlines are not met, we will set a new release date. We even promise in our contracts that if we do not release an album within a set span of time after receiving masters, the artists is free to go elsewhere with their album. This type of provision would be standard fare, as well as other artist protection clauses.

Marketing, promotion, and booking companies would become the major players in breaking artists. The media will flock to what people want instead of what the Big Four tell them to promote. New and far reaching models and methods of grass roots promotion will become the norm. Music quality will again become the primary factor in an artist’s success; promotion and hype will be a second tier service. Radio will begin to offer a wider variety.

Without the ability to force legislation in their favor, major labels would become the victim of a music economy they no longer control. Consider that what allows major labels to force low quality music down our throats at high prices is their ability to grab politicians ears, to threaten us with lawsuits, and their near domination of media exposure and radio. We are now at the tail end of a 60 year monopoly on the music business. Rats swarm off of sinking ships, a perfect analogy for the exodus of mega-artists from major labels (getting off the ship, not the rats). In this new music environment, there will be dozens (maybe hundreds) of popular labels, and everyone will have the opportunity to create success.

Bottom Line: Without the RIAA, the major label business model will be obsolete, and a new paradigm and renaissance for music will appear within five years.

Spotted on: Digital Music News

The XM-Sirius Satellite merger is imminent. Insiders are saying the Department of Justice will approve (and probably this week), followed by the FCC. It doesn’t take a rocket scientist to figure out the competitive advantage here: Consolidate the satellite radio waves completely.

Clear Channel is railing against the “peril” of this merger: “[T]he filing concludes by suggesting that if the FCC approves an XM/Sirius merger, it should also allow Clear Channel to expand beyond its current ownership…of radio stations”.

I want to share a quote with you: “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony [. . . ]” That’s the Sherman Anti Trust Act.

I wan unable to find any information that this act has been repealed. Will an XM-Sirius merger monopolize any part of trade or commerce? If so, it’s illegal.

A perfect storm is brewing. XM and Sirius merge, Clear Channel sucks up even more radio stations to be competitive. With only be two companies left serving radio, will this have an affect on advertising and play lists? Will it lead to further erosion of net radio?

You can see a timeline of the FCC filing history here.
Here’s the DOJ’s Antitrust page. No mention of this merger (yet).
My favorite article: Merger Enforcement Is Alive and Well at the Department of Justice

The Bottom Line: An XM-Sirius merger is a monopoly. If Clear Channel is allowed to expand, then there will be only two companies controlling almost all of the airwaves. Whatever happened to diversity?