No Such Thing As A Free Lunch In The Music Industry

Given what I had written about them, I had no right to expect my lunch companions to be friendly. But apart from one fraught moment (of which more later), the spokesmen for the international music industry were perfectly amicable.

I had written several columns and editorials arguing that the internet had deprived the record companies of their purpose, that the bullying of teenagers who downloaded free music smacked of desperation and that the industry's only hope of survival was finding a new business model.

Determined to convince me that I was wrong were Jay Berman, chairman of the International Federation of the Phonographic Industry, John Kennedy, the entertainment lawyer and music executive who takes over leadership of the IFPI in January, and Barney Wragg of Universal Music International.

As we nibbled on sandwiches and take-away sushi at the London headquarters of the IFPI, I told its leaders what I thought their problem was. In the days when music was recorded on vinyl, cassette tape or compact disc, the record companies performed an indispensable service: manufacturing products and distributing them.

Now that consumers could get perfect copies of recordings over the internet, artists could reach their public directly. There was no need for an intermediary. If the music companies did not exist, would anyone think of inventing them?

Yes, my lunch companions insisted. Someone still had to discover and market stars. It had proved hard for novice performers to build careers on the internet without the aid of record companies. Mr. Kennedy said he had feared more artists would attempt to make their names over the web. "But careers are still made in the physical market place. The idea that we would have no role at all hasn't happened."

All right. So most artists still needed a music company to get started. But how could companies get consumers to pay for their music when millions of teenagers, and even their parents, saw nothing wrong with downloading it free of charge?

The IFPI's own figures showed how widespread internet piracy was. In France, 36 percent of people aged between 15 and 19 obtained music illegally. In the UK, 7.4 million internet users had downloaded music without paying. In Germany, the figure was 7.3 million.

I told the IFPI people that I fully accepted the music companies' moral and legal right to protect their copyright. What I contested was their ability to do so. With 800 million illegal music tracks on the web, how could the music business make a dent?

The industry's answer has been to sue the miscreants. As we spoke, the IFPI was preparing to launch 459 legal actions against European music pirates. I observed that this was not many, given how many pirates there were. Also, did not chasing youngsters through the courts make the industry look vindictive? It was at this point that my hitherto amiable hosts sucked hard on their teeth as if struggling to control their tempers.

"Look at how long it has taken us to plan these proceedings," Mr. Kennedy finally said, when he had settled back in his chair. "We are the nicest litigators in the world." The industry only pursued the most egregious offenders - the "major uploaders", who copied and distributed hundreds of files - and even then, it did so only after they ignored requests to desist.

Oh yes? What about the 12-year old American girl who was forced to hand over $2,000? "Could I point out to you that that particular 12-year old had a credit card, a broadband connection and thousands of illegal files?" Mr. Berman said.

Mr. Berman said the industry realized it could not wipe out all illegal downloading, just as it had failed to eliminate physical copying of cassettes and compact discs. What it wanted to get across was that downloading without paying was illegal and that there were lawful alternatives.

Was it not an indictment of the industry that it had taken an outsider, Steve Jobs, to create iTunes, the best-known of those legal alternatives? Mr. Wragg said that music companies were not best-placed to be retailers. Individual music companies' websites had not been successful, because they contained only that company's labels. People preferred to browse through a website that contained many companies' artists, just as they could in a record store.

I pointed out that in spite of the success of iTuunes and other legal sites, music sales were still falling. The best that the IFPI could say about the first half of 2004, was that they were falling more slowly. Didn't the industry have to come up with new ways of making money, such as promoting artists' concerts in return for a percentage of the profits?

Mr. Wragg said companies were increasingly doing so, but he added that the internet was in its infancy. New ways of doing business were still emerging. For example, South Koreans with personal weblogs wanted to offer a list of songs that visitors to their sites could listen to - and were prepared to pay a subscription to music companies to get them. (It takes all sorts.)

Mr. Wragg added that broadband providers used to imply in their advertising that the ability to download music illegally was one of the perks of the service. Broadband prices had now fallen, however, and providers, looking for new sources of revenues themselves, were asking music companies for the right to market legal music sites to their subscribers.

Did our 90-minute chat convince me? Partly. The industry certainly realizes that it was caught napping by the internet. It is hoping that legal downloading will become popular enough to sustain a profitable industry, even if revenues remain sluggish. Music executives will continue to search for new ways of pursuing those who threaten their profits. That will not make them any more popular, but, for all my lunch companions' civility, I do not think popularity is what they are after.

INTERVIEW WITH SCOTT MORGAN

FRIDAY JULY 9TH - ANN ARBOR, MICHIGAN

FOR AMERICAN RUSE RECORDS

ARR-
At this stage of your career… you said you’ve been doing this since… 1961 you started playing guitar… What do you think about the music business? I mean, “the state of rock & roll”, or whatever you want to call it… A little sad right now I’d say. What are your thoughts?

SM-
I keep hearing the quotes about record sales being down $20 billion a year or something ridiculous… For it to be down $20 billion a year, means that it had to be up really high, like $60 billion, or I don’t know what it was, but... they’re selling a lot of records. They’re making a lot of money. But, I think the problem is, they’re not really trying to make good records, they’re trying to make records that’ll sell. I think that’s the whole problem.

ARR-
Have you got the solution? Where’s the magic bullet?

SM-
After a while, I think people are just going to get tired of paying money for crap. They’re going to want, come on you know! Don’t just give me some cooked up in the studio, expensive, crappy can of Campbell’s soup or something! Come up with something new, something good. Something with some imagination, something with some soul, some heart in it, something you believe in. Whatever.

ARR-
When do you think this whole trend…

SM-
It’s not just the record labels, it’s the whole thing. It’s the radio, and MTV, and corporate media, and corporate agencies. It’s just a big mafia of music business.

ARR-
I don’t understand, I guess, why things are the way they are.

SM-
Well, because for one thing, the people that run the business aren’t necessarily the people that love the music. At all levels. Let’s say you’re a journalist. You might not be able to make money as a journalist writing about what you like, you might have to write about whatever they tell you to write about. If you’re a DJ, you’re not picking those records, you’re not playing the records that you play in your car, or at home, you’re playing what you’re told to play. And I guess if you’re in A&R at a record label, you’re putting out the records that the suits approve of. So the people that really love the music aren’t making the decisions, and that’s a bad development in the music business.

ARR-
That leads me to another question… what do you think about the internet, and I guess not necessarily specifically MP3’s but the ability for any band anywhere to start advertising their music and getting exposure. What do you think about that?

SM-
It’s great.

ARR-
Do you have any problems with file sharing, of MP3’s?

SM-
No.

ARR-
You don’t have a problem when you go to Napster and look up your songs?

SM-
No. As a matter of fact we put our stuff on Napster.

ARR-
I’m the kind of guy that when I buy a record, I want the whole package.

SM-
Exactly. This is the Alanis Morissette theory. And it all holds up, and everybody knows it’s true in the music business, that she makes a record for her corporate record label, she’s going to get a get a dollar for every copy. OK? Fine, that’s all fine, that’s cool. But if she does a concert somewhere, she’s going to make a lot of money, hundreds of thousands of dollars, and sell maybe hundreds of thousands of dollars of her merch. And it’s all her money. So, to her, and I think the Grateful Dead will look at it the same way, and a lot of other bands, it’s really to their advantage to have people know their music, even if they get it for free, because they’re going to come see the band, they’re going to be fans.

ARR-
What do you think of people taping shows?

SM-
Fine, I just want a tape.

ARR-
Obviously not for resale.

SM-
No, no. We’re talking about sharing, file swapping, that sort of thing. It’s just like if you made me a cassette, what’s illegal about that? If you made a cassette of your favorite music, or I did the same for you, I don’t get it… why should that be illegal? It’s just stupid. It doesn’t make any sense!

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The complete interview can be found here, and if you want to download an MP3 file of the interview (hahahah!!!) you can click here to download it.

thanks!

In the days when music was recorded on vinyl, cassette tape or compact disc, the record companies performed an indispensable service: manufacturing products and distributing them.
Now that consumers could get perfect copies of recordings over the internet, artists could reach their public directly. There was no need for an intermediary. If the music companies did not exist, would anyone think of inventing them?

Ah but this business model assumes that there is no monopoly from Big Media controlling just which bands and performers are seen on tv, heard in movies and radio, and given "listening booth" display in stores. There is still a lot of money being paid to expose these bands.

Payola on radio has been illegal in America since the 1960s (although it stretches back to the earliest days of radio and existed in other areas of the music industry before that, including the sheet music trade and songs sung from the stage in vaudeville). Paying for better placement in a store is NOT a crime (just look at Coke and Pepsi's deal with grocery stores). Even the placement of songs in tv shows and ads were exempted from the payola scandals.

Add to this Clear Channel's monopoly over the civic venues in most major cities and "the beast" will get a cut of your advertising, ticket sales, concession sales, etc.

I don't mean to single out Clear Channel (I know that they have a ticket franchise); Viacom owns MTV and the second largest share of radio stations (Infinity Broadcasting).

Warner Brothers' record division recently splintered off from the rest of the company (in the 1990s they swallowed up a piece of many of the "indie" labels out there).

An established artist who will no longer get radio airplay for his new material (like Prince or the Rolling Stones) does not need to be on a major label. They have the touring infrastructure, fan base, etc. to continue under their own momentum.

I don't know that another Iron Maiden could come into existence through constant touring and no radio airplay. The band lists on tours are too controlled by industry types. I hear that the 2 bands that toured with the Sex Pistols in 1997 had to pay the band several thousand for every show they played; since WB was behind at least one of the acts, they might have felt the money was well justified. Certainly the bands (Gravity Kills and some other crap pseudo industrial pop band) were not there because of talent or fan familiarity with their music.

Someone still had to discover and market stars. It had proved hard for novice performers to build careers on the internet without the aid of record companies. Mr. Kennedy said he had feared more artists would attempt to make their names over the web. "But careers are still made in the physical market place. The idea that we would have no role at all hasn't happened."

There are plenty of "stars" who have been overlooked in this industry for a decade or two. Bands that have and continue to influence other bands. "Grunge" was the last movement to see rock artists bubble up from clubs and small labels to national prominence (although the door was quickly closed on genuine acts making it into label rosters).

The Beatles would be rejected by today's labels. Heck, they were rejected by labels numerous times in their early days. Today, they would be rejected BECAUSE they had material out under several labels. The labels want COMPLETE ownership of an artist's back catalog and the only way that happens is if the band has NO backcatalog (or in the case of the White Stripes no binding contract with the label that formerly released them).

We are still in the era of Monkees-like marketing where the audience will be introduced to a new (possibly fabricated) band rather than exposed to a band with a growing fan base.

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