....LMB: "Shockwaves"....

January 23, 2003

I posted an article earlier today about a recent court victory by the Recording Industry Association of America (RIAA), a lobby group for major record labels. In quick succession, I found an additional three articles also about the RIAA which make that victory look insignificant in comparison.

The first of these three was about the RIAA capitalizing on their latest legal victory by demanding that ISPs pay damages to the record industry for the music illegally downloaded by the ISP's customers. As the article points out, this is sheer fantasy. The completely accurate analogy is quoted in the article, that "Blaming ISPs for giving these hardened criminals the bandwidth for perpetrating their heinous file-sharing acts is akin to blaming the highway department for creating roads that are used by dope smugglers."

I don't think the RIAA has a legal leg to stand on here. At best, they could hope to use this demand as leverage to coerce frightened ISPs into taking steps of their own to prevent file-sharing (or at least scare them into a cash settlement). But still, seems like a long shot.

Actually, let's break away here for a minute to discuss the record industry itself. You can read these next four or five paragraphs, or you can listen to this interview I did with Rage Against the Machine (and now Audioslave) guitarist Tom Morello. He's a savvy fellow who's been in the business for about 15 years. That twenty minutes of audio might better explain what's going on than I'm about to.

In succint terms, record labels--the entities which "release" a band's album-- are loan sharks. When you sign a contract with a record label, they will give you an "advance" which is actually a loan. You might get a $100,000 advance to pay for the studios and producers to record your album, and you have to pay back every penny to your label.

Record contracts usually guarantee the artist 10-15% of the profits from their album sales (meaning that the record label, who has not written a single lyric or sung a single note of the music, receives 85-90% of the profit). The record label helps itself to 100% of your cut until you have paid them pack, while simultaneously taking their 90%. So if your 10% amounts to a dollar an album, then your band must sell 100,000 albums before you make a single penny.

I remember being shocked years ago hearing about world famous musicians going bankrupt. Everyone knew that rock stars were rich, how could they have spent all that money? Because of this loan system. Bands go into debt to record an album, and receive additional advances/loans to pay for concert tours, to film videos, etc. If your record doesn't sell well, you can not only make no money, but end up in the hole.

And what's worse, is that labels hold the artists' futures in their hands. Artists sign contracts for multiple albums, and the record label can choose to release/not release, promote/not promote your album as they see fit.

So let's say you have a four record deal. You go into debt for album #1, and it does poorly. You remain in debt. You borrow some more money to record album #2, but the label is no longer confident in your sales power. They release your record, but don't put much effort into promoting it. Like a self-fulfilling prophecy, your album sells poorly. Your debt has increased. You borrow even more and record album #3. The label decides to not even bother releasing it. So what the hell do you do now? Any songs you record now will be the property of your label. You can no longer make your career as a recording artist.

There are other factors, like copyright and merchandising and such, but I'm not going there today (for more info about the inner workings and ecnomics of the record industry, I highly recommend the Rap Coalition website. RC is basically a quasi-labor union and business education center for rap artists. Good stuff there).

I point all this out mainly to: 1) inform, and 2) show how despicable it is when the RIAA self-righteously condemns file-traders for depriving their artists of money (maybe they just don't like competition on that front). They are about sucking consumers and artists dry, and to pretend otherwise is just vile.

Anyhow.

Now we get to article #2, The Year the Music Dies. This article points out the dire straits that the record industry is in. Record labels serve three main functions, and other players can now perform those functions.

1) Capital. The advances/loans given to artists is often necessary to pay for things like recording and going on tour. This is the primary leverage that the industry still has. But the more artists come to realize the economic situation involved (getting a loan in exchange for 85-90% of all profits made on future sales of their album), we might see artists turning to alternate financial sources and releasing their albums themselves. Also, the costs of recording keep decreasing as recording technology and software drops in price.

2) Promotion. With their vast capital, marketing know-how, and connections with the media, record labels (especially the majors) can pack a real punch in raising an artist's profile and convincing consumers to purchase the artists' albums. But we sink into a catch-22 here: massive promotions are needed to generate massive sales to pay for the massive costs of a massive record release. But what if the costs were much lower...? See below.

3) Distribution. Here is the number one fear of the record industry. Labels have to pay for the manufacture and physical transportation of millions of compact discs to recoup their advances. So what happens when music can be distributed for practically nothing, say, over the internet? This cornerstone of the label empire is completely stripped away. In the past, artists could never distribute their records on a national or international level because they could never afford it. Now they could pretty easily sell their songs for download online...

I think what we see here is a need for a supreme restructuring of music finance, in the downward direction. The previous reality was that due to the expense of massive distribution/promotion/production costs, you needed the backing of rich and powerful corporations. One RC article claims that it is not worth most record labels' time to have artists who's records sell less than 200,000 copies. So imagine a different world, where an artist makes not 12% but 100% of the profits of their sales, where they record their album with moderately-priced technology, and distribute it via the internet for pennies. And because the costs are so much lower, you need to sell far fewer albums to earn a living.

(Actually, I envision a potential future where you can buy records at a kiosk at the mall, where the proprietor simply downloads the music from a label's server via high-speed internet, and then fast burns it to a blank CD that he has on-hand. More economically and ecologically efficient that producing millions of copies and trucking them from coast to coast)

The article points out that the industry faces this huge challenge, and that in its arrogance and short-sightedness, has alienated all of its potential allies: politicians, webcasters, customers, musicians, songwriters, radio, television, etc. Even, interestingly, the mega-corporations that own the labels. The author points out that a conglomerate like Sony might find that they make more money selling mp3 players which play illegally-downloaded music, than they do from records sold on the Sony record label. What happens then?

And our final RIAA-related article of the day:

Music Industry's Chief Lobbyist Leaving

For several years now, the RIAA's loudest, shrillest voice has been its head, Hillary Rosen. She screamed about Napster, about webcasters, CD-copying, always complaining how the industry was losing money because of the efforts of people who simply love music. Anyone who's taken more than a casual interest in these issues probably has little love for Rosen. And today, she has announced that she will resign from the position at the end of the year [insert thunderous applause here].

Why?

"Rosen's departure comes as the organization sought to soften its image among Internet consumers, many of whom viewed the RIAA and Rosen personally with antipathy over incessant pressure for crackdowns on sharing digital music over the Internet."

This theory backs up the previous article's dire forecast. If the music industry wants to survive, it needs to win back some allies. And Rosen's departure could get music fans back on their side.

Interesting stuff. We'll have to wait and see what happens next.

Posted by Jake at 12:08 AM
Comments

.... i don't understand why more artists/musicians aren't speaking out against RIAA.

Posted by: quang at January 23, 2003 04:05 AM

I guess because most of the established artists are either too nervous to speak out (what other avenue of recording and distribution do they have) or actually happy with the millions that they do have.

Capitalism breeds willing slaves.

Posted by: Eric at January 23, 2003 09:14 AM

You've pretty much hit the nail on the head. What's been happening is that the recording industry is screaming about copyright when what's really at stake here is the survival of its (increasingly outmoded) business model.

Courts and other public institutions certainly are an appropriate means of addressing legitimate issues of copyright. But the public's institutions should NOT be in the business of propping up failed or obsolete business models.

Put another way -- and this is not original with me but I don't know who said it first -- if I can get a Lexus for $1,000 through alternative technological means (i.e., file sharing in the music biz) rather than paying Toyota $50,000 to build and market one for me, why shouldn't *Toyota* embrace whatever technological advance makes it possible to sell a Lexus, profitably, for $1,000?

Posted by: Lex at January 23, 2003 09:24 AM
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Media News

December 01, 2004

Media Mambo

The Great Indecency Hoax- last week, we wrote about how the "massive outcry" to the FCC about a racy Fox TV segment amounted to letters from 20 people. This week, we look at the newest media scandal, the infamous "naked back" commercial. On Monday Night Football, last week, ABC aired an ad for it's popular "Desperate Housewives" TV show, in which one of the actresses from the show attempted to seduce a football player by removing the towel she was wearing to bare her body to him. All the audience saw, however, was her back. No tits, no ass, no crotch, just her back.

No one complained.

The next Wednesday, Rush Limbaugh told his shocked viewers how the woman had appeard in the commercial "buck naked".

Then, the FCC received 50,000 complaints. How many of them actually saw this commercial is anyone's guess.

The article also shows the amazing statistics that although the Right is pretending that the "22% of Americans voted based on 'moral values'" statistic shows the return of the Moral Majority, this is actually a huge drop from the 35% who said that in the 2000 election or the 40% who said that in 1996 (when alleged pervert Bill Clinton was re-elected). This fact is so important I'm going to mention it over in the main news section too.

Brian Williams may surprise America- Tom Brokaw's replacement anchor, Brian Williams, dismissed the impact of blogs by saying that bloggers are "on an equal footing with someone in a bathroom with a modem." Which is really funny, coming out of the mouth of a dude who's idea of journalism is to read words out loud off a teleprompter. Seriously, if parrots were literate, Brian Williams would be reporting live from the line outside the soup kitchen.

In related news, Tom Brokaw has quit NBC Nightly News, and it appears that unlike his predecessor, the new guy can speak without slurring words like a drunk.

PR Meets Psy-Ops in War on Terror- in February of 2002, Donald Rumsfeld announced the creation of the Office of Strategic Influence, a new department that would fight the war on terror through misinformation, especially by lying to journalists. Journalists were so up in arms about this that the Pentagon agreed to scrap the program.

Don't you think that an agency designed to lie to the public might lie about being shut down, too?

This article gives some examples about the US military lying to the press for propaganda and disinformation purposes.

Tavis Smiley leaving NPR in December- African-American talk show host Tavis Smiley is opting to not renew his daily talk show on National Public Radio. He criticized his former employers for failing to: "meaningfully reach out to a broad spectrum of Americans who would benefit from public radio but simply donít know it exists or what it offers ... In the most multicultural, multi-ethnic and multiracial America ever, I believe that NPR can and must do better in the future." He's 100% correct. NPR is white. Polar bear eating a marshmallow at the mayonaise factory white. And the reason it's so white is that it is trying to maintain an affluent listener base (premoniantly older white folks) who will donate money to their stations. This is a great paradox of American public broadcasting, that they have a mandate to express neglected viewpoints and serve marginalized communities, but those folks can't donate money in the amounts that the stations would like to see.

U.S. Muslim Cable TV Channel Aims to Build Bridges- it sounds more positive than it is "Bridges TV" seems to simultaneously be a cable channel pursuing an affluent American Muslim demographic, and a way of building understanding and tolerance among American non-Muslims who might happen to watch the channel's programming. I was hoping it would be aimed more at Muslim's worldwide, but it ain't. Still, I'd be interested in seeing how their news programs cover the issues.

Every Damned Weblog Post Ever- it's funny cuz it's true.

Wikipedia Creators Move Into News- Wikipedia is a free online encyclopedia, created collectively by thousands of contributors. It's one of those non-profit, decentralized, collective, public projects that show how good the internet can be. Now, the Wikipedia founders are working on a similar project to create a collaborative news portal, with original content. Honestly, it's quite similar to IndyMedia sites (which reminds me, happy 5th birthday, IndyMedia!). I'll admit, I'm a bit skeptical about the Wikinews project, though. IndyMedia sites work because they're local, focused on certain lefty issues, and they're run by activists invested in their beliefs. I'm not sure what would drive Wikinews or how it would hang together.

CBS, NBC ban church ad inviting gays- the United Church of Christ created a TV ad which touts the church's inclusion, even implying that they accept homosexuals into their congregation. Both CBS and NBC are refusing to air the ad. This is not too surprising, as many Americans are uncomfortable about homosexuality, and because TV networks are utter cowards. But CBS' explanation for the ban was odd:

"Because this commercial touches on the exclusion of gay couples...and the fact that the executive branch has recently proposed a Constitutional amendment to define marriage as a union between a man and a woman, this spot is unacceptable for broadcast."

Whoa, what? First of all, the ad does not mention marriage at all. Second, since when do positions opposite of the Executive Branch constitute "unacceptable"? This doesn't sound like "we're not airing this because it's controversial", this sounds like "we're afraid of what the President might say."

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