Cost of Touring Undermines Free-Music Theory

Free-music subsidized via tour income - widely utilized as an excuse in the justification of music piracy - has always been a long shot, unchallenged concept; but the rising cost of gasoline has recently shed light on just how difficult it is to make a living by touring - even in the best of times. Adding insult to injury, artist's creativity is now further taxed with deriving new ways to hit the road without going bankrupt in the process.

From Luciana Lopez, The Oregonian

Tune up the bikes and scrape up the french-fry grease: It's summer touring season for bands. As gas prices climb ever upward, musicians have had to get creative at something more than their music. Portland band Blind Pilot, for example, is traveling under pedal power, and nationally touring psych-rockers Apollo Sunshine are converting their van to run on vegetable oil. There's an easier way to save gas money, though: Portland rocker Michael Dean Damron is just flat-out canceling dates.

Different solutions, but all applied to the same problem: how to balance the need to tour set in motion by declining CD sales against the skyrocketing cost of gas, which makes touring more expensive and less profitable.

Link

Ambulance Chasing

Cayocosta

If Trent Reznor (or anyone else) wants to do it the right honest way, he or she should support piracy and/or condemn the music industry in such a way that provides no opportunity for personal financial gain while doing so. Otherwise, all you have is self-interested, populist bullshit contrived to make money via capitalizing on the hype of the moment - all the while (wittingly or otherwise) selling their brethren down the river.

Why Advertising Supported Free-Music Ain't Gonna Happen

Cayocosta

Lots of hype and bluster about ad supported free-music solutions lately. Well, it ain't gonna happen, and here's why:

Two ways to offer ad subsidized music: streaming and downloads.

The problem with downloads is that once the track is downloaded, the ad is no longer attached; unless the ad is audio and embedded in the tune - which would kill the idea.

Which brings us to DRM. DRM protected tracks with proprietary players would allow ads to be served while tracks are played. But again, limiting the use of tracks to certain players would kill the concept.

Streaming on dedicated players that serve ads is not a bad idea, but limited in application as a live internet connection is required to stream in real time. Thus, ad-supported streaming is DOA.

Remember, the industry is competing with free, unfettered mp3 downloading and listening (albeit illegally).

Beyond all this is the amount paid to the content providers.

For downloads, Amazon and Apple are charging .80 to .99 per track and netting back 70 cents or so to the labels. There is no way ads can generate anywhere near as much.

Now, why would the industry accept mere cents on the dollar when they are already receiving 70 cents per track for paid downloads?

Why then would the industry voluntarily kill the remaining CD business and developing paid download business - for a fraction of the music's market value?

Then there's the precedent. Should the industry allow music to be free - subsidized via anything else - it would be nearly impossible to return (if so desired) to charging for downloads.

Hence, for free-music subsidized via advertising to work, the industry would:

1.) have to accept much less than the market value of music.
2.) hasten the decline of its remaining CD business.
3.) render obsolete its burgeoning paid download business.
4.) have to accept sharing fractional revenue with third parties (portals).
5.) once and for all, establish that recorded music no longer has any intrinsic value in the marketplace.

Humbug.

In the interim however, should a tech player offer millions of dollars for the rights to stream (no downloads) content under an ad supported platform (imeem, for example), the labels will rightly take the money and run.

Generation L Innovates the Wisdom of Mobs

Chris Castle talks about the symbioses of the mob mentality and the tech sector with regard to music piracy.

From Music-Technology-Policy Blog:

So when the mob decides to take away copyright, it’s not only the case that they can do it because they are huge in number and their anonymity is—interestingly—defended by the Electronic Frontier Foundation, the hardware manufacturers and others in the anti-copyright crowd whose funding is harder to determine.

It’s also the case that the mob--call them Lessig's mob--in fact believes they are morally right to do so, that the ability of the mob to rise up and violate property laws en masse is not only defendable but is in fact transcendently correct.

Link

Manics Accuse Radiohead of 'Ruining Music'

Radiohead perceived as selling out industry for PR stunt by peers.

From World Entertainment News

Welsh rockers Manic Street Preachers have slammed Radiohead for ruining the music industry.

Radiohead stunned the record business last month by releasing In Rainbows as a digital download and allowing customers to choose their own price - but bassist Nicky Wire insists the move further damaged the current fragile state of the industry.

He says, "Fair play to Radiohead for doing something different. It's certainly great for publicity but I think it kind of demeans music.

Link

Platitudes and Piracy

Cayocosta

Some interesting posts at Velvet Rope highlighting how the music industry is typically (and falsely) accused of being slow to adapt. Of course, record companies can't adapt to piracy, as there is no way to successfully compete with free. After all, it's been eight years since Napster - a period where anyone could have entered the music business with a new-model solution - yet no one has successfully done so.

Might as well chastise the majors for their failure to devise a viable perpetual-motion machine.

Link

The Free-Music Model and the Middle Class Artist

Cayocosta

There currently exist several disparate proposals for new-music models, and from this speculative collection, that which I have chosen to address herein is particularly, the free-music doctrine; with my intention being the illustration that while this concept is not specific to record companies, should they in fact choose to migrate to such a practice, the resulting precedent would force most every artist, including those operating independently, to commensurately acquiesce; with the resulting fallout ultimately manifesting itself in the exacerbation of an already systemic marginalization of the middle-class artist brought on by an equivalent phenomenon, music-piracy.

To clarify, my use of the term "middle-class" is meant to represent those professional recording artists whose popularity places them in the range (slightly above or below, year to year) of being economically self-sustaining.

Free Music

Professional music can never be truly free, for by its very nature people are employed within its scope, resulting in a capital cost generated to render it available for consumption; and for this reason should someday recorded music not directly command a fee, its cost nevertheless will have to be absorbed by something else - for example, even if distributed without charge and subsidized via advertising, the price of that which is advertised will have to include a share of the cost of the music delivering the message. Otherwise (or should the advertising allocation be insufficient to provide a viable surplus revenue over cost) professional music would no longer represent a viable trade.

Thus, it's not necessarily only the industry that currently faces problems, it's professional music that too, is in trouble; for no matter what happens to the corporations historically responsible for its availability, a cost will always be incurred via the creation of professional music that must be offset - along with a surplus facilitating income – to warrant its continuance.

To reiterate; the cost of professional music must be absorbed along with a surplus to facilitate income for those in its employ; as such, whether a song is free and touring earnings cover the loss, or the song is paid for directly in an amount sufficient to warrant its creation, it makes no difference – its cost must be recouped.

Middle Class

There currently exist artists so popular (largely due to industry support) whereby the loss of income attributable to the sale of music would be of little consequence as it could be easily made up for through touring, endorsements and merchandising.

What remains indisputable however, is the fact that under a free-music platform the overall likelihood of artists being able to earn a living would be reduced (because potential income has been reduced) consequently the line at which success is delineated would be higher, thus freezing out a larger portion of the professional music middle-class.

Theory

The free-music doctrine is predicated upon an increase in popularity due to the unfettered distribution of music and subsequent viral promotion of the artist, and hence an increase in income generated from alternative sources thus offsetting lost revenue once derived from music sales.

In my opinion, the biggest stumbling-block to this theory is that if the free-music concept is indeed valid, artists should have voluntarily chosen this method en-masse already. For it stands to reason that since file-sharing has been (and continues to be) so prevalent (which can be considered an underground real-world free-music trial) the shift to a free-music model should have occurred organically (indeed, virally) already - in other words, if the free-music paradigm actually does result in increased income, artists would have realized it by now and fled their paid-music programs (and/or traditional labels) for this otherwise nascent archetype.

Ultimately, the free-music theory appears to fall prey to its own premise (that viral propagation will lead to increased patronage) as it has failed to propagate virally as a successful platform itself over the last few years; therefore, while logical as a no-other-choice option for new artists struggling for initial visibility, its viability as a new-music panacea for all others is highly questionable.

It should also be mentioned that in my empirical experience (and for reasons beyond the scope of this document) there appears little public interest in free-music made available by new artists devoid of the cachet of record company representation.

Pressure

Similar to a limited free-music business model from a financial standpoint (because it circumvents all methods by which music can be reliably recompensed - short of a tax of some sort, or other external subsidization) piracy’s net effect upon artists is the same in that it manifests itself in the form of downward pressure on potential surplus revenue across all other streams of income; and devoid of an equilibrium being established by the artist, the result will be that music is no longer tenable in so far as a profession.

For example, in direct response to falling music sales, the propagation of the 360 deal highlights the increasing attempt by record companies to make up for the associated loss of income by way of their participation in revenue subordinate to some (if not all) other income opportunities available to their artists. Consequently, artists under such contracts will find it much more difficult to reach and sustain a position of operating in the black, as they will be receiving a greatly reduced net share of the total income they generate.

In light of the above, it is of little relevance whether an artist is under contract with a record company or not, for this free-music cause and effect is a universal economic force, applying to all artists equally.

Moreover, it is quite likely that in the effort to maximize revenue (including ancillary) derived from live performances, a potential exists for major record company monopolization of smaller venues which could result in a dearth of opportunity for independent artists to effect the same.

Summary

Madonna, The Eagles, U2, etc., are not intimidated by the free-music model, for due to their popularity and associated success (due largely to major record company representation) proceeds attributable to the sale of recordings surely represent just a small portion of their respective aggregate income; rather (and more importantly) it’s those artists at or near, and just below, the tipping point of profitability whose livelihoods hang in the balance.

What this means is that should the industry choose to distribute music free of charge, the best-case scenario would be that we will find ourselves with fewer mid-level choices amidst a shrinking roster of professional artists; a condition to which piracy, strictly by the numbers, must have already contributed.

RCRD LBL: Don’t Buy The Hype

Cayocosta

Seems everybody’s pretty quick to jump the gun in the race for a new-music model lately as each new startup is routinely being touted in the press as the potential savior of the industry - which should also raise the question of how much of this mass speculation is no more than opportunistic hype - with the latest case in point being Rcrd Lbl.

Nothing New

Music-licensing and Internet sites featuring free mp3 downloads subsidized via advertising are nothing new. Rcrd Lbl - besides having possibly the worst name in the history of business - has simply combined the two.

Despite its flamboyant introduction, Rcrd Lbl is not a business specifically designed to make money through advertising while providing free music downloads; instead the company focuses on traditional music-licensing for the bulk of its income and appears to consider advertising revenue as supplementary - for artists will not even participate.

Instead, under this new "model," artists are (reportedly) offered between $500 and $5000 in exchange for the exclusive right of Rcrd Lbl to license a track to third parties (as well as the right to give the track away for free) with the stipulation that upon such licensing, the resulting revenue is split.

(Unfortunately, it remains unclear as to the artist’s share of licensing income, as well as whether or not advances are recoupable, and if Rcrd Lbl rights include the ability to license a track to any advertiser without consent - potentially effecting an endorsement against the artist’s will.)

Record Label?

Nothing appears to have been mentioned regarding this startup actually making records, consequently it’s unlikely this business plan is even a candidate for a limited solution for the troubled recording industry. Josh Deutsch, chairman of Rcrd Lbl admitted as much to the Wall Street Journal when he offered, "I'm not saying Rcrd Lbl is the answer, but it's an answer to [the question of] 'How do you monetize music?' "

Again, monetizing music via licensing is nothing new, and Columbia’s use of Google advertising on it’s website could technically be considered as having beat them to that particular punch. So, what’s the big deal?

Blog Format

Considering Rcrd Lbl boasts as having signed 50 artists to date, the blog format does not appear to have been a good choice, for artist visibility is already limited with only a handful of acts featured on the front page; moreover, there exists a possibility the company’s credibility could be jeopardized should customers decide their blogging represents self-interested propaganda.

P2P

As with any free-music/advertising model, there is nothing preventing tracks from becoming widely distributed via P2P networks, which could result in disappointing advertising revenue via the circumvention, in this case, of the Rcrd Lbl site itself. (Possibly this is the reason they have chosen to place their emphasis on licensing as opposed to advertising; and if so, constitutes further evidence the free-music/advertising concept is weak.)

Summary

Rather than a new-music panacea or record company in the traditional sense, Rcrd Lbl appears to be just a music-licensing marketplace featuring free promotional mp3 downloads of the tracks being offered – a one-stop of sorts whereby organizations can license music for use in television, commercials and film; and for artists in search of such opportunities, a showcase for their work.

Not a bad idea from a purely licensing perspective, and it stands to reason that we could see additional startups (devoid of any record company baggage or blog pretense) emerge based on a similar concept but with a more concentrated focus on improving and/or enhancing the music-licensing experience for both artist and licensee - perhaps partially facilitated via the inclusion of an auction.

With regard to Rcrd Lbl itself, in my opinion their manifestation of the entity as a free-music record label (and blog) compromises the ultimate capability of what is essentially a licensing mechanism (and appears to be no more than an attempt to leverage the current climate of sensationalist anti-label rhetoric surrounding the industry) and as such we may witness their being trumped by a more focused competitor in very short order. Moreover, in that Rcrd Lbl is a sister company to Downtown Records, the specter of nepotism may prove to be a major deterrent for outsiders considering participation, thus further limiting the company’s attractiveness.

Why Music-Piracy and DRM Ultimately Don't Matter

Cayocosta

With all the conjecture regarding the new-music model lately, it struck me as strange that no one appears to be considering where we’re really headed, and what the implications for the industry might be once we get there. The following is nothing new, yet appears to have been largely misplaced due to the recent resurgence of free-music myopia:

I won't venture to guess when, but it's probably safe to assume that within the next several years, increased wireless bandwidth, reach, and the propagation of wireless Internet devices will facilitate the inexpensive, real-time, high bit-rate, streaming of music just about anywhere; consequently rendering the digital download obsolete, and along with it, any impetus for piracy.

Beyond the iPod:

Rather than downloading and storing files on an iPod or similar device, all that will be necessary for a user to access his or her personal library of music will be the creation of Internet-based play-lists that are universally read by any connected device capable of reproducing sound.

Want to play your music selections at a party? Just access your library URL from the stereo, and from there select one of your play-lists or singles. While driving? Same thing with the radio. While jogging? Same thing with your cell-phone or personal player.

What will these scenarios all have in common? An Internet connection (wireless or land-line) and a subscription to a music streaming service.

Streaming Service:

Containing virtually the entire history of popular music, and paid for by way of monthly plans offered to the consumer by any number of providers, a music streaming service might, for example, charge twenty-dollars per month for unlimited access; and even less under tiered-pricing designed for less frequent users.

ASCAP, BMI, SESAC and Harry Fox:

Under such a system, all royalties generated by personal use (as well as for both terrestrial and Internet radio, potentially) would be accounted for automatically; which raises the ancillary questions of whether or not performance rights organizations will be relevant, and mechanical royalties applicable.

Piracy and DRM:

It follows that due to the convenience, prevalence and anticipated nominal cost of music subscription services, the use of P2P file sharing would drop significantly; if not (for all practical purposes) cease entirely. At such a point, piracy would literally be not worth the while, and likewise the point of DRM, moot.

Furthermore, with parents paying the subscription for the benefit of their households, those who most frequently engage in P2P file-sharing (teens and adolescents) will find themselves having no remaining musical purpose for it; and in essence, they will have been granted their wish - music will be free. Additionally, educational institutions might be offered steep discounts to subscribe their entire campuses, thus finally putting an end to RIAA lawsuits.

Summary:

None of this technology is new, it’s all been around for years. The only barrier to the above scenario becoming reality, is that streaming is not yet convenient enough - for high-speed Internet connectivity is not ubiquitous across all potential listening devices and environments.

Of course, land-line DSL and broadband systems already facilitate streaming - YouTube is a good example, whereby with a reasonably fast connection, playback is both instantaneous and contiguous. However, as land-line access means being physically connected, the application of high bit-rate music streaming is currently limited to (for the most part) these connections. As such, for music streaming to emerge as the new standard of distribution, it must also be viable in everyday mobile situations; therefore broadband wireless Internet access must become prevalent to the point that it becomes commonplace, and the new hardware necessary (wireless car radios, personal players and phones, as well as Internet appliance home stereo and entertainment systems) readily available in the marketplace.

All You Need Is Love

Cayocosta

Been reading The Lefsetz Letter recently. Passionate guy. Today, Bob posted a response to the comScore report wherein among other things, he rehashes the now legendary free music with tee-shirt cure-all for new artists.

Rather then spend 5 minutes of your time reading between the lines of his seemingly relentless anti-industry rhetoric to uncover the nuclear core of his rant; allow me to summarize. What Mr. Lefsetz is essentially saying:

Make people love you because of your music, then sell them something.

Now, the toughest task in the world has got to be trying to make a million people love you.

Moreover, once that is accomplished, the next task is to exploit those that love you by selling them meaningless merchandise with your name on it.

A better (but no less difficult) idea might be:

Make a fortune selling merchandise, then make music for yourself.

Radiohead Blowback Undermines Free-Music Model

Cayocosta

Since comScore's study was released yesterday, a wave of negative sentiment has arisen in the form of editorials denouncing "freeloaders" - the 62% of erstwhile "downloaders", who in lieu of an honor-based contribution, instead elected to pay nothing for Radiohead’s album.

Apparently short-circuited when confronted with their own avarice, much of the self-defense of Radiohead freeloaders rests upon the hackneyed and particularly non-applicable rationale of retribution against corporate greed, artist wealth, and the cost of music.

Consequently it must be considered that the free-music model, heretofore largely premised upon the goodwill of audiences to purchase other goods and/or services, has been significantly compromised; for it has now been clearly established that less than 40% of audiences may entertain artist patronage.

Furthermore, Radiohead’s professional stature and market credibility, coupled with the tremendous press coverage surrounding the release "In Rainbows" likely indicates the comScore results as representative of a best-case scenario.

Real World Free-Music Assumptions

Cayocosta

If it can be established that the free-music doctrine (FMD) is sufficiently profitable:

The labels are not going away; for even if they did, they'd be replaced by other entities that do the same things - for artists will always need capital, professional expertise and support; and there will always be investors and service providers for anything that is profitable.

As such, no matter what these entities might be called, they would - collectively - closely resemble traditional record companies; therefore, labels (or their equivalents) will still exist in a profitable free-music system.

Regarding non-label "spec" deals: it would appear this service would continue, but now recouped via alternate sources of revenue (including possibly, publishing) in addition to any funds derived via music sales and/or downloading - the same multiple sources labels must tap.

"Points" allocations will similarly diversify in application.

However, if the FMD is not profitable:

Then it's going to be a tragedy for everyone: the labels will go down, investment will dry up, and music will devolve into a preponderance of crap recorded in basements and bedrooms. The music "industry" will be over.

The issue of profitability:

Like today; under the FMD, music is only profitable if an artist's fans (and/or advertising sponsors) will pay enough for his or her services to not only cover all associated costs, but to also provide a surplus revenue sufficient to render the endeavor worthwhile.

Therefore, all that is essentially happening under the FMD is that costs normally recouped via music sales (less any advertising revenue offset) must now be absorbed by the artist and/or record company's alternate revenue streams.

Consequently, the prices of whatever goods and or services these costs are applied to, may increase; which raises the issue of market forces - increase in price decreases demand - hence, a potential zero-sum situation may emerge: greater profit from fewer sales equals less profit from greater sales.

Rather than fully underwritten via price increases, it may be safe to assume (in light of the above) that the bulk of the net-cost of the FMD would be absorbed by the artist and/or label.

Thus, it would appear that the overall profitability for both artist and label will be reduced; and it follows that all costs would thereby be cut to as little as possible by all parties - especially at the onset of the FMD's realization.