State of Mind of The Art

Spotted on: Ars Technica

The major labels are very outspoken about the evils of piracy, and aggressively pursue those who chose to download music and not pay for it. That being the case, there is great ironyin the fact that up to 47% of Sony-BMG’s software is pirated.

Recently, a tech support call for a program called Ideal Migration (a Windows server management tool) was made by a Sony BMG employee, and the product code given was pirated.

The ensuing drama included a seizure of some of Sony-BMG’s assets.  Paul Henry, The CEO of the maker of the software, was quoted as saying “I think piracy is linked to the policy of a company. If the employee has the necessary funding to buy the software he needs, he will. If this is not the case, he will find alternative ways, as the work must be done in one way or another.”

Bottom Line: A company that is using pirated software should not be surprised when their products are pirated.

Spotted on: Hollywood Reporter

“Music publishers, the record labels and digital music distribution outlets began a three-way legal wrestling match Monday over just how much songwriters and the publishing houses should get paid for digitally delivered music.”

At stake in this debate is mechanical royalties for internet streams. Major labels, Apple, and Yahoo want the royalty rate for artists to be lowered. The big publishing houses are currently promised nine cents a song, a figure that often gets negotiated lower, and the consortium against them wants that rate moved to 8%. Apparently, publishing revenues are up, while major label revenues are down. The Digital Media Association is upping the ante, pushing for the royalty rate to be dropped to 4%.

On the other side of the fence, the National Music Publishers Association wants the rates raised to 12.5%.

The driving concern here is the financial ‘burden’ that paying these royalties puts on the large companies that offer music. The claim is that streaming media should be treated like terrestrial radio.

Bottom Line: Without content, there is nothing to stream.

Spotted On: ArsTechnica

The RIAA’s head, Cary Sherman, wants to put encryption on our computer that will force us to decrypt music before listening to it. In other words, the filter will scan all your incoming data and then either allow or deny your ability to listen to it. since this idea likely won’t be popular (who’s going to willingly put a filter on their computer that blocks the files they are downloading?), the next suggestion is to put the filters in our modems.

Despite the predictable public backlash against these tactics (in an environment where the RIAA already has public approval that rivals the US Congress), some ISPs are moving ahead with these filters. The technical specifics are a bit thick, suffice it to say that various file encryptions can bypass these filters unless entire protocols are blocked.

Here’s a video of Mr. Sherman lauding the glories of filtering:

Bottom Line: Being out of touch with your consumers’ needs does not improve your financial picture, or your credibility.

Spotted on: Techdirt

Although the details are sketchy, the US Justice Department is looking into whether a subscription for the Big Four labels is an antitrust violation. Back in 2001, there was an antitrust investigation against the major labels for…. a subscription service. According to The Register, the Big Four have already been served notice this time around. Although the details are sketchy, it is apparent that the Dept. of Justice has an eye turned toward the industry (again).

Investigations around “Big Music” have been ongoing for the last few years. In 2000, the Federal Trade Commission settled with the major labels on price fixing and unlawful advertising practices relating to “Minimum Advertised Price” policies.

Super producer Rick Rubin has said “The subscription model is the only way to save the music business. If music is easily available at a price of five or six dollars a month, then nobody will steal it.” He also said, “Until a new model is agreed upon and rolling, we can be the best at the existing paradigm, but until the paradigm shifts, it’s going to be a declining business. This model is done.”

While a subscription service may stem the tide of file sharing, will it provide any kind of sustainability for artists? CD sales are falling end over end, but digital sales are brisk, and touring and merchandising are still viable revenue streams.

Everyone agrees it’s time for a new model, and noone seems to know what the new model will be. The sky may be falling, but music is still a multi-billion dollar business. The future lies in creating a model that generates positive public perception, convenience, and collectibility. The platform may be shifting wholly to digital music, but that doesn’t necessarily mean people won’t buy music anymore. The advent of the “360 deal” shows that the industry is embracing a new kind of marketing, where the band is the brand, not the content. At the end of the day, it’s all about the music, and people will pay for convenience and for music that they love.

Bottom Line: The paradigm shift at the heart of the music industry is upon us.

Spotted on ArsTechnica

The RIAA wants to expand copyright law, with the apparent intention of having more technicalities to prosecute.  The new law on the table is for album compilations.  Specifically, having each track count as separate count of infringement.

Goggle’s top copyright lawyer was quoted saying the parties pushing this bill have an “unslakable lust for more and more rights, longer terms of protection, draconian criminal provisions, and civil damages that bear no resemblance to the damages suffered”.

Bottom Line: Fining someone upward of $9,000 for a track with a value of a dollar may not be fair, but lawmakers still seem to align themselves with this kind of enforcement.