Music Verses The Net- Are You Helping the Wrong Side Win?

By Moses Avalon

PROLOGUE: In March EMI, facing serious strategic challenges, became the first Major label to issue DRM-free (no copy-protection) downloads on iTunes . To facilitate this, Apple's CEO broke his promise to maintain uniform pricing of 99 cents: DRM-free will cost about 30% more than other sales. Response from the other three competing Major labels was shock and disappointment. Will they be forced to also do DRM-free to compete?

Two weeks later, the U.S. Copyright Office decided that Major labels will be allowed to charge higher rates to webcasters for streaming music. Response from Tech Companies was shock and disappointment. Will they have to pay labels more to provide the public with a radio service they don't even charge for?

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What would the perfect music business look like?


Would it be one where distribution is a given to anyone who thinks they have talent? Or do you think there should be some form of filter because Joe Average doesn't have time to sift through millions of MySpace pages? A filter is what we have had with the Major label system since the 1960's. It's one many trying to squeeze through its bottleneck resent. Now, technology is putting that system to the test by giving artists and consumers new choices. But is the price for choice too high? Is it at the expense of an entire industry that has supported tens of thousands for over seven decades and produced some of the greatest music ever recorded?

Although creators of commercial music are artists, it is because of sequencers and samplers they are compelled to become, to some degree, "techies" as well. And since technology has aided pop music production, many of us think they have complementary agendas. The reality is that the tech world and pop music are at war and these two super-powers are vying not only for control of music distribution but also for the loyalty pop music's creators. One side is trying to make a complete fool out of them.

THE PREYED UPON AND THE PREYED

In one corner we have the "Tech-Masters," as I call them: computer/gadget makers and internet service providers. They use pop music as a loss-leader to attract new consumers. They may be music fans, but they resent record companies the same way we resent paying the monopolistic electric company for a necessity we can't even touch.

In the other corner, the four major record/publishing companies. To support the huge bets they place on artists, they need to protect their inventory-- copyrights.

To Tech-Masters, music copyrights are an inconvenience; a road–block to their master plan—selling gadgets and internet services to everyone and their grandmothers. If they cannot rely upon record companies to license them music cheap, their logical alternative is to avoid paying for it at all by challenging copyright law, BUT… only as it applies to art—not their software. It's a delicate trick but one to which they have committed undisclosed millions. If we let them, they will eventually turn pop music into the free toy at the bottom of their proverbial cereal box.

And here's the scary part; the Tech-Masters are getting you, music's creators, to help them.

IN DRM WE TRUST

The recent Tech-Master campaign is "DRM-free music" which is tech-talk for downloads that have no copy protection encryption. DRM is a software mojo that prevents or limits the copying of a song-file. Consumers love the idea of DRM-free because it means they can wax record company and distribute many copies of your work at will while only paying for it once. Is it good for the music business?

Tech-Masters think so. They want record companies to stop whining about P2P piracy and license their catalogs without this stingy, confining DRM thingy. They try to persuade the Majors with arguments like "If people can make copies, they'll buy more music. Remember cassettes in the late 1970s?"

Labels don't agree. Back then, people could not make 100s of copies with a mouse click. Tech-Masters retort, "But CDs have no copy-protection, what's the dif?" Labels sigh and shake their heads, "First off, the only reason we don't have copy protection on CDs is due to complex technical issues and second, CDs cost us about 60 cents and we sell them for about $10. Downloads have a narrow margin and invite theft via illegal P2P."

So, if gentle persuasion isn't working what's the Tech-Master's next step? It seems to be shaming the Majors via a winning of the public's hearts & minds: dehumanize the enemy; make the public think record companies are too dumb & greedy to see the "logical" path for the future. Eventually, they hope, Majors will cave. The plan is working.

The vast majority of music business stories in the press are negative. They focus almost exclusively on the RIAA's litigation and label firings. Why don't we hear about the good side? The tech industry grosses about $85 billion a year, eclipsing the music business with its $15 billion. While the Tech industry spends tens of millions in advertising with the mainstream press, ask yourself when was the last time you saw a big add spread for a new album release. Advertising revenue influences editors more than anything else. That's not conspiracy paranoia. It's a fact.

But the "objective" press (deliberately or not) ignores the bigger issues at stake for artists if labels falter:

If the Tech world loses this campaign, they will simply have to pay a bit more for their loss leader item. Since they tend to bundle music with other products this expense will not be felt in any significant way by the consumer. It will just shave the tech industry's gross a tiny bit to about $87 billion.

But if art loses this war, that is to say, if record companies/artists lose their ability to control who gets to license their work and at what price, the music business, as we know it, ends. Music itself will suffer as an art form and the Tech-Masters will absorb the labels, bundle their catalogs, and in a few years you'll buy a lap-top and it will come pre-loaded with an entire Juke Box of Classic Rock, Rap, Jazz, whatever.

This may sound great if you're a consumer, but if you're a music company you will make only a small licensing fee and your artists and songwriters will see a paltry fraction of this sum. The trickle down effect for studio owners, producers, lawyers, managers, etc, will naturally be devastation.

As a music professional, if you're not pissed off, you're not paying attention.

Fortunately it's not too late to stop this insanity.

JOINING THE COLLECTIVE

A truly successful Orwellian "hearts & minds" campaign means also turning YOU, the very person who relies on copyrights to earn a living, into someone who thinks that technology's need to progress should be senior to author's rights. This too is a tough trick but the Tech-Masters are succeeding. How? Because we love to bash our own industry! It's cathartic. We just love to opine about the "dying record biz." The momentum has caught many of us. I read this recently in a chat room, "I can't see it being anything but good if the top four record companies went out of business. The whole industry needs a fresh start." Many on the page agreed.

These "pro music" websites who celebrate negative views on the Majors are not friends to anyone who makes a living with music. (One example that has me puzzled is Downhill Battle. They purport to be doing artist advocacy while simultaneously insisting that you never buy Major label music. The site is owned by software developers www.downhillbattle.org) Many of these sites peddle a covert pro-tech agenda with half-truths about the music biz. The most recent one is yet another attempt to make us feel that resistance is useless: income from declining CD sales is NOT being offset from digital sales. Sounds bleak. Even a poorly researched and very tech-biased article in the Wall Street Journal agreed. So it must be true.

But it's not.

Tech-Masters don't want you to know that according to the annual reports of Universal, Sony and Warner, the music biz had one of its best years ever, revenue wise. Or that sales from the mobile space and other new licensing sources has and will continue to put billions of new revenue into our space. They don't want you to know this because it would deflate their argument for DRM-free.

Instead, they focus journalists on how Majors are dial-up dumb, lazy and hurting artists by price-gouging internet radio stations out of existence (more on this next month). They highlight the hollow statistics of bad first quarter CD sales. (Which are always low. It's just after Christmas duh!)

They are hoping journalist don't ask the fiscally logical question: in the face of a recession, where automobile and many other industries are showing sales slumps, plus a radically changing technology landscape and all the negative publicity, Majors are still showing respectable numbers. So just how dumb are they? Who cares if sales of CDs are back to 1992 levels? That was still a very profitable time for music and anyone who says that companies like Sony and Universal cannot survive a shift in sales paradigms is either lying, misinformed, brainwashed, selling a book, or a sour-grapes ex-record executive caught in the downsizing that this changing landscape requires.

My personal favorite Tech-Master sophistry is, "Illegal P2P file sharing hurts (tech owned) music subscription services too. It drives up our cost and we also have to compete with free." This is true Machiavellian genius; compete with free for a service that is a loss-leader to them in the first place? How dumb do they think we are?

Reality: it's because of techies that illegal P2P exists in the first place and if illegal P2P prevails, record companies will be forced to issue DRM-free music to compete. Which brings us to poor, almost defeated EMI and their decision to take the advice of Tech-Master, Steve Jobs.

Steve is the classic Tech-Master. According to his annual report, he does NOT make any significant money off of music sales--iTunes is a break-even division for Apple. Like all Tech-Masters he uses iTunes as a loss leader to promote the sale of his cash cow-product-- iPods. He could care less if Majors make a profit.

If EMI's DRM-free move catches on, the other Major's will eventually be forced to do the same. If Jobs turns out to be right and sales go up, up, up—great, I'll personally issue a mea culpa. But if he's wrong, the Majors will not be able to re-cork the Genie. Their catalogs will be permanently devalued and they will eventually be forced to sell out on the cheap. On that day, you can bet, Tech-Masters will be waiting with their checkbooks.

SO WHAT? WHO NEEDS THE MAJORS? LET THEM DIE!

Nice fantasy. Sometimes I share it. And in terms of karma there might be some justice there as well. But then I wake up and realize something: The benefits would not outweigh the utter financial chaos it would cause to Indie artists.

Major Labels are the "banks" of our industry. They loan money to 1000's of artists, who then spend it in 1000's of studios and with 1000's of producers, who hire 1000's of engineers, who buy gear and invest in new artists, who sign with labels, and so on.

Even if you're an independent or emerging artist, you are in the wake of this economy. Big artists draw people into music outlets/venues and thus expose them to new music. Also, the big spending by Majors pushes down the off-peak rates on studio time, materials, and CD replication. It also creates the upside potential to justify investment in emerging artists.

The fantasy that "if Majors die a Phoenix will rise from the ashes" is very unlikely. The higher probability is that in order for there to be a viable music industry at all Majors need to stay in business.

WHO SHOULD YOU BELIEVE?

So called experts and analysts who applaud EMI's "wisdom" and curse the RIAA's defense of copyrights are just sucking up to the Tech-Masters who give them a media platform. Then disgruntled music executives grant interviews and ignorantly agree just to relieve their angst. This bandwagon effect is helping Tech-Masters load the gun they have pointed to our heads.

Think people! Have you ever heard a technology spokesperson agree with labels or argue in favor of copy protection? NEVER! They argue for DRM-free music to make a more "consumer friendly experience." They are arguing that the consumers' rights are senior to the artists'. Let me repeat that: they are arguing that the way consumers buy music is MORE IMPORTANT than the rights of the people who create it.

As creators (or their advocates/vendors) one would think we would refuse to help and insist on arguing with anyone who tries to convince us that unprotected music is better for the music business or that because the law requires Tech-Masters like AOL, Yahoo or Microsoft to cow-tow to a group that you also find repellent --the Majors--that Tech-Masters are somehow the "victims" in all this. That is asinine.

The enemy wants your work for free. To seduce you, they offer gadgets. To convince you to abandon faith in your industry, they peddle hopelessness. It's as simple as that. Don't give in. Because, if you think the bottleneck was tough when you had to deal with only four Major record companies, imagine what it will be like under three or four Tech companies, run by people who value silicone over a melody!

It's time we started thinking like artists again. Not computers, or computer makers.

This is winner take all. Should choosing sides really be that difficult?

Moses Avalon

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