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>Date: Sat, 2 Mar 2002 00:33:20 EST
>Subject: pho: Timothy White Takes the Labels to Task
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>Pretty scathing indictment from Billboard's Editor-in-Chief................
>
>
>http://www.billboard.com/billboard/musictomyears/index.jsp
>
>The Music Industry's Web Of Intrigue
>
>
>
>Imagine an industry that has allocated (and mostly spent) more than $4
>billion in funds on ventures that have thus far made back less than $1
>million���globally. Think about it. Spending $4 billion to earn under $1
>million. If such calamitous business practices seem like a scenario for a
>possible "industry meltdown," you've reached the same conclusion regarding
>the profitable prospects of online digital music sales as OC&C Strategy
>Consultants, a London-based international financial advisory firm for
>media industries. In a new study titled The Digital Dilemma���Making
>Music, Losing Money? OC&C merged comprehensive fact-finding discussions
>with more than 50 players in the U.S. and the U.K.���including music
>labels, online music retailers, digital-rights management execs, and
>digital intermediaries or digital service providers���into a damning
>report, concluding that "paid-for digital music still accounts for less
>than 0.01% of sales in any market."
>
>Legitimate download services and digital subscription models sanctioned by
>the music business have resulted in a monumental loss of both money and
>time for a hard-pressed industry. One of the functions of this trade
>publication is to inform readers of where best to put their money, and
>since 1999, this columnist has examined the faulty business-cum-cultural
>reasoning behind online music enterprises for corporations and individual
>copyright holders (Music to My Ears, Billboard, Aug. 7, 1999), as well as
>offered commentary on the "paucity of both Internet profits and online
>listening audiences" for legitimate downloads and cited "insights from a
>prior era about interim technologies and their transitional worth" (Music
>to My Ears, Billboard, Oct. 9, 1999). Music and media execs have recently
>told Billboard they do not expect any profits in online digital music
>sales for at least two years. Technical and financial experts this
>columnist canvassed during the past three years have privately concluded
>there may not be any profits in this realm during this decade���if
>ever���and have pulled their money from it.
>
>The Web and technology have their uses (this publication goes to press
>electronically each week), but the mere existence of either entity is no
>guarantee of diverse viability. The 1899-1926 pre-history of popular radio
>provides instructive parallels, being a purportedly "revolutionary"
>communication medium that remained limited in its applications even when
>it later reached full functional maturity. By the time the originally
>headphone-tethered "ham" (a merger of the words "hobbyist" and "amateur")
>radio evolved to feature the widely accepted on/off switch and the
>loudspeaker���whereby consumers needed no preparatory skills for maximum
>enjoyment���it had receded into the background of public life. Unless,
>that is, it had something of unprecedented substance to offer���in which
>case, the airwaves seemed even more invisible as a vehicle for imaginative
>programming that transcended its context.
>
>Myopic technologists and greedy software manufacturers always argue that
>the medium is the destination���and they're regularly mistaken. Music
>downloads, for example, are primitive trinkets that miscomprehend both the
>transient "personal broadcasting" allure of file swapping and the more
>lasting, pride-of-ownership appeal of quality physical product. The
>do-it-yourself perspective is never the most evolved or lucrative point in
>a product's life cycle; rather, the nobody-does-it-better position is, and
>short-sighted record companies will regret relinquishing claims to
>practical superiority. In fact, the music industry has spent the past two
>decades diminishing the experience of recorded music, whether reducing the
>size and merit of most CD packaging to the point where it's too paltry to
>invite lasting curiosity or proffering the often thin and tinny sound of
>digital music as if it's a "perfect" product.
>
>A casual survey of top artists this writer has recently visited in studios
>revealed that analog recording is regularly preferred due to the myriad
>aural attributes of that process, regardless of whether the final music is
>(however reluctantly) poured into a digital mold for buyers. Until the day
>that U2, Yo-Yo Ma, or McCoy Tyner are willing to trade their master tapes
>with any passerby for either the downloaded, burned, or commercially
>purchased copies of those same recordings, you can be certain that
>corporate pronouncements about the vast marketplace value of digital music
>are all saddle and no horse.
>
>Conventional piracy and the middle-class larceny of large-scale online
>bootlegging via CD burning or other means should be prosecuted. But years
>of ongoing reportorial inquiries have yielded anecdotal reasons for the
>proliferation of peer-to-peer file swapping. Chief among them are the
>frustrations of commercial radio, which plays little that's surprising
>beyond certain singles or format-restricted remixes of those
>singles���neither of which are usually available for individual purchase.
>The record industry has adopted the off-putting and commercially poisonous
>habit of telling consumers what they want rather than answering their
>needs and complaints. Recent studies show that even hardcore fans have
>scant knowledge of the latest releases by established acts. The
>satisfactions of album-length releases have been systematically obscured
>in the marketplace by limited public exposure on either radio or TV. Many
>of the songs receiving the most aggressive pushes are designed to appeal
>to the prurient interests of nominal/cursory listeners. Such tacky
>sideshows rarely translate into a stable consumer base.
>
>At a time when specious accounting practices in the business community are
>being assailed, the Recording Industry Assn. of America was touting
>Shaggy's 2000 Hotshot release as the best-selling album of 2001 with an
>alleged 5 1/2 million units sold. Actually, that figure was, at best, the
>sum of shipments in 2001���an archaic and hype-prone method when compared
>with SoundScan's hard tallies of 4.81 million units purchased of Linkin
>Park's Hybrid Theory vs. 4.52 million units for Shaggy's album.
>
>Meanwhile, imagine the other ways that the $4 billion lost on online music
>ventures might have been spent: for example, on salaries for seasoned
>employees with the expertise (and sufficient budgets) to sign, market, and
>distribute the physical products of serious artists whose unique talents
>could have blossomed into worthy catalogs of recorded music.
>
>Instead, the heavily funded online sphere has become a web of intrigue for
>any businesses intent on siphoning cash while eluding the operating
>guidelines and logical expectations that generally govern the rest of the
>capitalistic landscape. (Attention stockholders of the tech persuasion:
>When was the last time you saw cash dividends?) Clumsy phrases like the
>"complex economies of developing e-commerce" arise whenever excuses are
>being made for MusicNet and Pressplay, the major-labels' widely panned
>online digital music rental sites ("Hitting All the Wrong Notes" was the
>headline on TIME's Feb. 25 evaluation), which are more likely calculated
>to increase corporate ownership of the tracks than extend services to
>fans. MusicNet and Pressplay are proving as reluctant to cut credible
>deals with artists and publishers for copyrighted music as was the illicit
>Napster file-sharing enterprise that the majors battled to disconnect.
>Somehow, it's easy for corporations to find $4 billion for murky digital
>goose chases but hard for them to accept the basic cost of doing business.
>At least the Copyright Arbitration Royalty Panel, in its Feb. 20
>recommendations to the Library of Congress, called for direct payment to
>artists of non-subscription Webcast digital royalties, but such payments
>should extend to all digital modes of music delivery, broadcast, and
>distribution. Show all parties the money.
>
>Almost as disappointingly elusive as online music profits are the rising
>number of out-of-power music and media executives who once undermined
>artists' cases for copyright and contract issues before assorted industry
>and governmental bodies, only to sometimes flip their positions after
>parachuting from their respective posts. This was evidenced by a recent
>statement from former BMG U.K. & Europe president Richard Griffiths, just
>hired as international president of a U.S. artist management firm, who now
>amazingly asserts, "In the record business, people are realizing that
>record companies only care about selling records, therefore they don't
>care about long-term careers."
>
>Indeed. And Congress, the Department of Justice, European parliaments, and
>investigative agencies in Brussels or elsewhere should realize that the
>overwhelming majority of long-term careers in the music industry are those
>of the artists, whose creative legacies last far longer than the
>opportunistic policies of most of the music executives and corporate
>entities associated with them. In the digital revolution, cynics fought
>crassly for market share and the spoils of venture capital. In the
>American Revolution, citizens fought courageously for the right to be
>law-abiding corporations unto themselves if they so chose. If one
>creator/copyright holder seeking legitimate protection and compensation
>for his or her music cannot prevail against an array of high-handed
>holding companies seeking to avoid fair play and honest obligations, we
>are facing a threat to our social democracy that will equal or surpass the
>industry meltdown we may yet invite.
>
>-- Timothy White
>
>
>
>
>
>Philip S. Corwin
>Partner
>Butera & Andrews
>1301 Pennsylvania Ave., NW
>Suite 500
>Washington, DC 20004
>202-347-6875 (voice)/-6876 (fax)
>pcorwinATbutera-andrews.com
>
>"Luck is the residue of design." -- Branch Rickey
>
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