Fighting Over Crumbs

A bunch of different stuff is coming my way concerning the future of digital music. There is the ongoing internet radio/royalty situation. There is the iTunes royalty situation. And there is this new outfit, The Featured Artist’s Coalition, that has got a bunch of known acts to sign on to their charter; a nebulous document that puts forth the objective that people who make music should get paid for it.

It’s all a bunch of scrambling; clutching at straws. People are all trying to position themselves to get a piece of a pie that is not big enough to feed the party.

This, from PcMag, is the bit I keep seeing about Pandora founder Tim Westergren and internet radio.

I spoke via e-mail with Pandora founder Tim Westergren, who told me that Internet radio stations such as Pandora had been contesting a Copyright Royalty Board (CRB) decision from March 2007 that dramatically increased the royalties Internet radio stations were forced to pay. He pointed out that Pandora would, under the CRB rules, have to hand over $18 million of its expected $25 million 2008 revenue to cover royalty fees—a price that could force the company out of business.

Now, Tim seems to be a good guy and Pandora is promoting music; that’s a good thing. This makes it look, once again, like the music industry or musicians are greedy and they are efforting to stop the development of this emerging industry by demanding $18 million of the $25 million. The truth is that $25 million sounds like a lot but, in this context, it isn’t. Pandora has around 35 million users.

35 million people tuning in to what is an advertising supported business and the ad revenue is $25 million. It doesn’t cut it. Traditional radio is dying and internet radio is part of what is picking up the slack but, like all web based advertiser supported endeavors, the ad revenue is inefficient compared to the traditional counterpart.

This piece from the Telegraph is entitled “Apple iTunes closure threat averted” (once again, we must save this emerging revenue stream).

Eddy Cue, vice president of Apple iTunes, had told the Copyright Royalty Board that if iTunes was forced to absorb any increase in the royalty rates, “the result would be to significantly increase the likelihood of the store operating at a financial loss - which is no alternative at all”.

Apple said that it was “pleased” by last night’s decision, which guarantees that the royalty rate for songs purchased online will remain at 9.1c per track for the next five years.

You aren’t going to win a popularity contest by jumping Eddy Cue’s and iTune’s asses because, once again, they are actually promoting music and making some money right? The reality is that the money iTunes brings in to the music industry is a far cry from being a drop in the bucket of the revenue decrease. Paid downloads are not replacing traditional physical sales and, they won’t. Unpaid downloads already have.

And then we have this Featured Artist’s Coalition that includes a batch of established artists who have benefitted from the traditional music business. From the Coalition’s charter…

We believe that all music artistes should control their destiny because ultimately it is their art and endeavours that create the pleasure and emotion enjoyed by so many…

… So we will campaign for laws, regulations, business practices and policies that protect artists’ rights.

We will stand up for all artists by engaging with government, music and technology companies, and collection societies. We will argue for fair play and will expose unfair practices.

Laws, regulations, business practices and policies; blah blah blahhhhhhh…..

Here’s the thing; what has happened to the music industry isn’t technological. The reason that the music business went down is cultural. People, in mass, decided that they did not want to pay for music. People, in mass, have decided that the value of music is nil.

Like any mass movement, people were frustrated with the status quo.

There are two critical results of the failure of the music industry.

1. The small players have been hit harder than the big players.
2. Creativity has suffered.

Radiohead, Madonna and Motley Crue are still in business but, not one artist, of the many that I know personally, that were selling 5-10,000 CDs every release 6-8 years ago, is. The names that carry mass appeal and have branding legs are in the game but, the underground/alternative, which is also necessary to force creativity, is not viable.

All of the news, in the past few weeks, about the Copyright Royalty Board, the saving of emerging industries and Pollyannic proclamations is nothing more than what is left of the establishment fighting for crumbs that fell from the all you can eat buffet.

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Tags: branding, internet radio, Music Business, royalty rates