State of Mind of The Art

Spotted On: The Guardian

“When the history of our digital times comes to be written, one of the questions that will puzzle historians is why the record companies missed the significance of the internet.”

What a great thought (and a very catchy headline). Here is a summary of the article, with some commentary.

Since World War II, the record industry had a total monopoly on the recording, packaging, and distribution of music. They controlled the careers or artists, the way the music was disseminated, and dictated terms to music retailers. When the CD came around in the early 1980’s, and as the article says “recording studios converted the sounds made by musicians into bitstreams - long sequences of ones and zeroes - while, at the consumer end, CD players converted those bits back into high-fidelity sound.”

The sales model for this era was to create the plastic disks and packaging, ship them distribution houses, and then off to retailers. While this model proved to be profitable, the overhead costs were astronomical, with up to 50% of the retail price of a CD eaten up by production costs.

The internet was poised to change all of this for major labels. It presented the opportunity to drop production costs to the floor, while expanding profits. But the internet was ignored at first, and then it was treated as a realm for legal prosecution. Even bands chimed in, complaining about the evils of the internet. This practice got so widespread that the RIAA began prosecuting teenagers and single moms. And as the industry resisted the internet, CD sales bottomed out.

To put it simply, the major labels did not want to let go of CDs in the face of an evolving marketplace. Rather than adapt to the climate, they attempted to maintain the status quo. The writer of the article states “The obvious hypothesis - that the senior executives of all the record companies were idiots - has always seemed implausible to me. Or it did until I read the recent interview in Wired magazine with Doug Morris, chairman and CEO of Universal Music Group.”

Because CDs were so profitable, the music industry turned a blind eye to what was next, and settled into a short sighted approoch rather than looking at the big picture.

Bottom Line: The record industry can turn itself around virtually overnight by embracing and adapting to technology. Welcome to the Future.

Spotted on: Digital Music News

The folks at Forrester Research recently published an 18 page paper on the decade long decline in music sales. The article points to the idea that the shift in music sales is permanent, thanks to the Internet. I haven’t read the paper, but thanks to the blogosphere, information abounds.

The Forrester paper predicts half of all music sales will be digital by 2011, but that the boost will not make up for lost revenue in CD sales.

The paper predicts that subscription services will only grow “modestly”, and (no surprise here) that DRM will die.

In other words, technology is the future of the music business.

A synopsis on Cnet points to some of the concrete data in the report:
“A Q3 2007 survey of more than 5,000 U.S. adults with online access showed that 94% of them still listen to the radio, and on average spend 43% of their overall audio-listening time with radio–far ahead of #2, CDs, which occupy only 20% of listeners’ time.” - Radio and streaming audio are still powerful tools for listeners, and in the era of choice, people are exercising their freedom to choose.

“…the survey showed that 62% of the subjects listen to music files on a PC, while only 43% of them listen to music on an MP3 player. Even 48% of them listen to Internet radio.” - True convenience isn’t defined by product availability or features, it’s defined by the individual.

The paper also suggests that corporate sponsorship and advertising will become a major factor in platinum music success.

While this is a comprehensive analysis of the music industry, it’s not really new information. Technology has become the key to the future of music, and I believe that the future of music will be more artists selling less albums. Labels will have less investing in broader catalogs, and artists’ will become more business minded, using the resources of labels instead of being exploited by them.

Bottom Line: The music industry isn’t collapsing, it’s evolving. Welcome to the future.

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: CNET
Trent Reznor released sales numbers for the new Saul Williams release on his blog. The album “The Inevitable Rise and Liberation of NiggyTardust” was produced and released by the Nine Inch Nails mastermind with a forward thinking model: Download the album for free, or pay $5 for a higher quality MP3 version (a la Radiohead). According to the numbers released, approximately 18% of the downloads were sales.

This number is likely slightly lower than reality. There is no information to measure how many people downloaded the album for free then went back and bought it. CNET interviewed both Trent Reznor and Saul Williams, and their opinions are quite different.

The album has been out for two months, and the major campaign of videos and touring begins in the next few weeks. The album sold almost 30,000 downloads and gave away another 120,000 with almost no marketing campaign, and no publicist. Although the album hasn’t gone digitally platinum, this experiment is a positive sign. Williams’ music does not neatly fit into a pigeonhole. While the sales model is similar to Radiohead’s In Rainbows (which is no longer available as a free download), these two artists are not in the same position, and the IRLNT test will be a gauge of what mid level artist can expect from this model, at least for this year.
Having 20% of your listeners buy your album may not seem like a large amount, but it’s hard to measure who they are, how they know Saul Williams, and whether they were pre-existing fans or not. Consider that an album’s life span is long - upwards of two years, and over the next eight to ten months we will see how this model works when promotions are put into play.
Bottom Line: Whether or not this model of selling albums works is still unclear. As time passes, and more artists try this model, we will see whether audiences will pay for something they can get for free.

Spotted on: Passably News:

Have you ever heard of Pretexting? It’s a manipulation technique often used to fool organizations into disclosing private information. In December of 2006, a California Law was proposed: “…any person…obtaining or attempting to obtain…personal information about a customer or employee contained in the records of a business …by making false, fictitious, or fraudulent statements or representations…”. Although the bill was unanimously endorsed by members of the CA Senate, the MPAA stepped in and had the bill killed (see Wired Magazine, “MPAA Kills Anti-Pretexting Bill”, 12/1/06). To put it simply, the MPAA and RIAA demand the right to lie to us in the name of Copyright Protection.

It seems the RIAA and MPAA are willing to allow privacy laws to deteriorate for all of us to protect their profit margins. The question on my mind is: Why should the MPAA and RIAA get special freedoms to prosecute people for file sharing?

Back in 2003, the MPAA and RIAA filed for a permanent Antitrust exemption. The bill was sponsored by Sen. Orrin Hatch. It contains a revision to The Copyright Laws of the US in Title 17 of the US Code. Here’s the revised copyright law of the US according this (thankfully non-passed) bill by Sen. Hatch (the revision is underlined):

For purposes of this chapter … any reference to copyright shall be deemed to include the rights conferred by section 106A(a) except that the court in its discretion may determine that such parts are separate works if the court concludes that they are distinct works having independent economic value.

These are the tactics of the MPAA and RIAA are using to transform entertainment. Creating exceptions to copyright laws and the having legal permissions to lie, cheat, and sue us into buying media for the prices they set, and in the forms they dictate.

21st century entertainment is not based on mafia style coercion by transnational media conglomerates. An outdated business model cannot survive by excusing themselves form laws the rest of us have to follow. Corporations are legally recognized as people. People cannot have laws rewritten for their personal benefit.

Polyvibe Records‘ response is our forward thinking business model. We do not take our artists’ copyrights. Our prices are set by the perceived value of our audience. Our digital albums are 100% MP3. And best of all, we make sure our artists’ are taken care of financially and personally. Taking copyrights from artists, then prosecuting others for sharing them is in the past. The future is ours.