Valuing Music

In the NY Times, Billy Bragg suggests that the social networking sites that have developed their audiences by hosting music should have to consider paying royalties for that music: The Royalty Scam

In our discussions, we largely ignored the elephant in the room: the issue of whether he ought to consider paying some kind of royalties to the artists. After all, wasn’t he using their music to draw members — and advertising — to his business? Social-networking sites like Bebo argue that they have no money to distribute — their value is their membership. Well, last week Michael Birch realized the value of his membership. I’m sure he’ll be rewarding those technicians and accountants who helped him achieve this success. Perhaps he should also consider the contribution of his artists.

TechCrunch’s Michael Arrington suggests that recorded music has no value and that artists should be happy to be able to take advantage of free hosting. These Crazy Musicians Still Think They Should Get Paid For Recorded Music

Recorded music is nothing but marketing material to drive awareness of an artist. Websites that bring that music to listeners are doing artists a favor. In fact, they’re doing them a favor that they should (and will) be paid for. Young artists and songwriters in particular benefit from these services – Until a few years ago they had almost no way to break into the mainstream without getting a label to promote them. Now those walls are being torn down, and Bragg has the audacity to complain about it. (via pho): These crazy bloggers still think they understand the music business “While Bragg makes some interesting points, I disagree with him. Musicians and labels that upload their music to social networks ostensibly know what they’re doing and understand that there is no agreement for royalties.”
Why shouldn’t songwriters and recording artists ally in order to host music only on social networking sites that agree to pay royalties?

Radio Performance Royalties

President Bush Visits Nashville, Discusses Budget (Doesn’t know that artists and labels earn no royalties from terrestrial radio broadcasts, unlike songwriters and publishers.)

Q Mr. President, music is one of our largest exports the country has.
Currently, every country in the world — except China, Iran, North
Korea, Rwanda and the United States — pay a statutory royalty to the
performing artists for radio and television air play. Would your
administration consider changing our laws to align it with the rest
of the world?
THE PRESIDENT: Help. (Laughter.) Maybe you’ve never had a President
say this — I have, like, no earthly idea what you’re talking about.
(Laughter and applause.) Sounds like we’re keeping interesting
company, you know? (Laughter.)
Look, I’ll give you the old classic: contact my office, will you?
(Laughter.) I really don’t — I’m totally out of my lane. I like
listening to country music, if that helps. (Laughter.)

Maybe creating a performance royalty may not be a bad idea if radio listeners do buy less music than non-radio listeners. The NY Times reports, Radio Listeners Seem to Buy Less Music: “Very roughly, an hour’s worth of radio listening per person per day, over the course of a year, corresponded with a 0.75 drop in the number of albums purchased per capita in a given city.”
Here’s the full paper on SSRN: Stan Liebowitz, The Elusive Symbiosis: The Impact of Radio on the Record Industry (March 2004)

“The reason for the weaker copyright protection on sound recordings relative to movies appears to be that radio broadcasters have argued, and it is generally accepted, that radio play benefits record sales and thus there is less need for radio broadcasters to purchase the rights to broadcast the sound recording. This impact of radio play on record sales is commonly referred to as a ‘symbiotic’ relationship between these two industries and is often mentioned by radio broadcasters as a reason for keeping rates low, at hearings to set copyright payments. Yet there appears to be no systematic examination of this relationship. In this paper I present evidence indicating that radio play does not appear to benefit overall record sales.”

CBS gets (back) into the record business

It’s apparently cheaper for a television network to run a record label than to license recordings.
Variety reports: CBS spins digital record label: “CBS will launch a digital record label in January, signing artists with the goal of breaking them via television show placement, iTunes and the Eye web’s broadband channel. CBS Records will be launched primarily utilizing the existing infrastructure of CBS Entertainment and CBS Interactive. It will operate as a newly created unit within the entertainment division based in Los Angeles. The label will debut with three artists — Boston rock act Senor Happy; Will Dailey, a John Mayer-ish singer-songwriter, also from Boston; and P.J. Olsson, an established indie-rock artist — and is looking to sign another five acts in the first year.”
With music licensing costs increasing and the costs of recording and distributing albums dropping, it may make more sense to sign an artist to a recording contract instead of paying a license fee for placing a song into a television show (particularly a recurring use, such as for a theme song.)
Television shows are now distributed across multiple platforms– broadcast, cable, DVD, video on demand, iTunes, Xbox, streaming on the web– and more. From the perspective of the studios, it may make more sense to just buy the recordings instead of licensing particular uses. This way, the studio sees a piece of the record sales generated by the promotional value of a television placement.

Entertainment miscellany

Links presented without comment:
Wall Street Journal: Moguls of New Media: “As videos, blogs and Web pages created by amateurs remake the entertainment landscape, unknown directors, writers and producers are being catapulted into positions of enormous influence.”
Jeff Pulver: Jeff’s Quick Guide to TV on the Net (TV/IP): “During the past twelve months, as the momentum for Broadband TV has snowballed, an increasing number of media companies have decided to take their content and make it available for viewing on the Internet. In some cases, the content offered is “re-runs” of prime time content, in other cases the Internet is being used to channel “vintage” programming (re-runs of old programs) and there is an increasing number of cases in which new content is being developed by media companies for just the broadband Internet.”
Paul Boutin, Slate: The myth of the living-room PC. By : “Computer makers have been trying to find space next to the couch for years, but so far all of these attacks have been repulsed.”
New York Times: Internet Is Seizing the Spotlight in the Live-Music Business
The Hollywood Reporter, Esq.: Audioslave’s Cornell Claims Negligence Against Attorney, Accountant: “Audioslave frontman Chris Cornell has filed suit in Seattle against his former divorce lawyer and accountant, claiming they negligently allowed his ex-wife to co-own his musical works rather than simply have the right to half of the royalties.”
Ray Beckerman, How the RIAA Litigation Process Works
The Future of Music Coalition will hold its: 2006 Policy Summit 2006 on October 5-7 in Montreal.
Coolfer: Hawthorne Heights Sues Victory Records: “In March of this year Victory Records was chest-thumping all the way to a a #3 and controversial debut on the album chart with Hawthorne Heights’ album If Only You Were Lonely. Now, as reported by, Hawthorne Heights has sued Victory Records and label head Tony Brummel, claiming Brummel and Victory of ‘taking advantage’ of the band and ‘severely damaging the band’s reputation and relationship with its fans.'” (Complaint)

Digital Music, Mobile Phones and Pricing

In the NY Times, David Pogue reviews Sprint’s new mobile music download service. Unlike the disappointing Motorola ROKR iTunes phones, Sprint’s new offerings enable users to download songs directly to their phones over the air. Also, in contrast to iTunes, the pricing seems designed by committee to allow every possible intermediary to get a piece of the pie.
At Last, Phone Some Tunes to Yourself

Unless they’ve just spent four years in a sensory-deprivation tank, surely Sprint’s executives know that the iTunes Music Store and its rivals have solidly established the sweet spot of customer acceptance at $1 a song. What makes Sprint think it can charge two and a half times as much and still make people happy?

Well, that $2.50 per track offers something that iTunes doesn’t– right? Better sound quality? Nope. The mobile downloads are about one-fourth the quality of iTunes downloads. At least Sprint allows buyers to download a version to their PC in Windows Media format, which is incompatible with iTunes or on an iPod (and may be Mac-compatible around the time that, oh, hell freezes over.)

The PC copy arrives in a far higher-fidelity format (WMA, 128 kilobits per second) than the songs you get on your phone, which have been heavily compressed to conserve memory-card space. (To be precise, the phone songs are in AAC+ format, at a toe-curlingly low 32 kilobits per second.)
As a final shock, you can’t use your downloaded songs as ring tones. If you love a certain Beyoncé track, you’ll have to pay $2.50 for the ring tone, and another $2.50 for the whole song. The average music fan is to be forgiven for concluding that the whole enterprise reeks of greed.

It makes sense that the mobile phone and the music player should come together– after all, they are both portable computers designed to reproduce sound. The first notable effort, Motorola’s ROKR with Apple iTunes software is an anemic entry. Slate’s Paul Boutin examines: Off Their ROKR: Why Motorola’s new iTunes phone is a flop. “The iTunes phone is a case study in form failing function. On paper, it’s a reasonable combo device. The price is OK—$250 plus a service plan from Cingular. The sound quality is the best I’ve ever heard on a cell phone. But for a gadget meant to break new ground, the ROKR sags behind the curve.”
Unfortunately, there are too many entrenched interests that need to be placated in order to get into this market. Phone manufacturers can sell products only at the whim of mobile network operators, who control access to subsidized phone deals. Mobile operators want a piece of the transaction– they don’t want their customers to move data on and off their phones any way but through the mobile network, on a pay-per-byte basis.
The music phone also faces competition from Apple– who has a good thing for its bottom line with iPod sales. Apple does not want to cede the iTunes market to the phone– because licensing software to hardware manufacturers is a significantly less profitable business than selling hardware. Hence, the 100-song limit keeps the ROKR from competing with any of the iPods. The phone manufacturers do not want to have to pay Apple a licensing fee for each handset.
Wired magazine’s Frank Rose explains in detail: Battle for the Soul of the MP3 Phone: “Consumers want an iPod phone that will play any song, anytime, anywhere. Just four little problems: the cell carriers, the record labels, the handset makers, and Apple itself. The inside story of why the ROKR went wrong.* (*And what it will take to make a truly rocking music phone.)”
The same considerations that kept the ROKR from, well, rocking, are the same considerations that has Sprint selling songs for $2.50 per track. If that especially-inflated price point is at all successful, the Big 4 will be using that as leverage in their negotiations with Apple over renewing the iTunes Music Store licenses that expire in April.
As legitimate digital downloads are becoming a larger part of the music market– 6% of record industry sales according to IFPI, labels are trying to figure out how to maximize the value of this market. One way is to introduce variable pricing for digital downloads– both more and less than the $0.99 price point. Back in August, the NY Times reported on the negotiations between the labels (who want variable pricing) and Apple (who wants to continue simple pricing): Apple, Digital Music’s Angel, Earns Record Industry’s Scorn. Rolling Store also reported: Apple, Labels Feud Mounts: “Apple’s iTunes contracts with the labels expire next spring, and, at this point, neither side is budging from its demands”
It is important to remember that the legit services are competing not only with each other at the $0.99 (and higher) price points, but with P2P at $0/track. The higher the prices for legitimate services are, the more effort a listener may exert to download for free. For most people, the opportunity cost of pirating a track is worth more than $0.99.
SharkJumping discusses price elasticity: Music Label Unhappiness with ITunes – a Price Elasticity Debate: “digital download purchases are utterly price elastic when measured over a period of time across a large group of consumers – that means that demand for the product is closely related to the price – increasing the price will actually drive down revenue since fewer people purchase the product, while decreasing the price actually increases the overall revenue since many more people purchase the product, more than making up for the lower price per unit. ”
Barry Ritholtz: Music Industry Attempts Price Increases (or Hari Kari, Part II)
if the labels manage to crank up ITMS prices, expect those pricey legal downloads to plummet in volume. That’s just basic economics — if a free alternative exists, and consumers already think your product is overpriced, than you are in for a heap of trouble if you try to raise your selling price point.
Chris Anderson: Could the labels actually be right? “There’s plenty to like about variable pricing. For starters, it’s almost always the most efficient way to maximize markets of disparate goods and customers.” “The reason is simple Long Tail math: there’s a lot more music in the Tail than there is in the Head, and labels are generally more willing to experiment with discount pricing outside of the top 1,000 than they are with their hits. Those niches represents most of the music available today, measured by number of titles, and because they’re only modest sellers individually they’re less likely to create channel conflict with CD retailers, who tend to only stock the hits.” “Imagine, for starters, that Apple introduces a three-tiered band of pricing: $1.49, $.99 and $.79 (that would no doubt soon expand to include $.49, but below that the transaction costs of credit card processing and the like start to loom large). Tiered pricing–gold, silver, bronze–is still pretty simple for consumers to understand, yet it introduces a valuable new dimension of demand creation.”
Prices are not set in a vaccuum. Any legit music service is ompeting with $0/track prices on P2P. But why do people buy from a legit service? Not just for the psychological satisfaction of rewarding copyright owners, but because P2P has an opportunity cost, too. Only if someone’s time is worthless does P2P provide a better value than iTunes. Searching for a track on a P2P network is time-consuming and can produce results of varying quality.
Interestingly, Apple already uses variable pricing in the iTunes store. Labels have some price flexibility and can set the price of albums so that the average price of a track on an album will be higher or lower than $0.99/track.
iTunes Japan already has variable pricing for individual tracks. Looking to see what’s popular in Japan, some songs on the the Japanese Top 100 chart cost ¥150 ($1.32) while others cost ¥200 ($1.77).

How a faux French band wound up in federal court

Dan Crane, who played guitar as “Jean-Luc Retard” in the band Les Sans Culottes recounts the fun of federal trademark litigation over the band name in Slate: Nom de Guerre – How my faux French band wound up in federal court.: “On June 20, 2005, my faux French band Les Sans Culottes showed up for our strangest gig to date: an appearance in federal court.”
This is why intra-band operating agreements are a good idea.

Doing the Math

Washington Post columnist Rob Pegoraro does the math and finds that Napster To Go Doesn’t Add Up

I have been purchasing CDs for about 20 years now, in which time I’ve accumulated about 300 of the things. At an average of $15 each, I’ve spent $4,500. Now suppose that, instead of buying those CDs, I could have opened up a Napster To Go account back in 1985. My total bill would be $3,600 and counting — and although I might have accumulated a larger, more diverse collection, I wouldn’t own any of it.
I have a hard time accepting that. At its best, music has the same lasting value as books or paintings or any other sort of meaningful art: It isn’t a disposable good that you use and then forget about. It’s something that you keep listening to and discovering new things in. When music is good, you want to know that it can’t be taken away from you.

John Gruber looks at the Subscription Small Print:

with a subscription service, you’re renting music, not buying it. So, for example, you could join Napster To Go tomorrow, pay $180 to maintain your subscription during the next year, and during that time, download tens of thousands of music tracks. But if you cancel your subscription next year, all of that music will stop working. It will stop working on your computer, and it will stop working on your little Napster-compatible portable player. (And thus even while you are subscribed, you need to frequently re-sync your player to your network-connected PC, even if you haven’t downloaded more music, just so your player’s DRM software can check the status of your subscription.)

So live

Friday, I caught Soulive at Southpaw, who about 3 hours of funky soul jazz.
The two-person horn section, Rashawn Ross on trumpet and Ryan Zoidis on saxophone (tenor and alto) adds some edge to Soulive’s sound and takes the band to a new level. This horn section fits in with the Soulive sound better than the band’s earlier work with alto sax player Sam Kininger (as on Next). The depth of the tenor sax and the edge of a high trumpet line fit the funky organ and clavinet grooves. The two-man horn section’s tight lines kicked up the intensity in songs like “Aladdin” and “Uncle Junior.” Both Zoidis and Ross contributed some bad-ass solos, as did guitarist Eric Krasno and keyboard master Neil Evans (who does double duty playing the bass lines on a keyboard.)
Other guests at the Southpaw included an MC to rap on, um, one song during the second set and two more horn players (on trombone and alto sax) for the closing song of the night, “Do It Again.” The expanded horn section demonstrated just how well the more compact section is more effective.
Other live Soulive recordings are available for download at (free) or from DiscLogic (paid).