Industry information that you can actually use
February 2003
Future of Music Conference Considers Artists Irrelevant to Future of Music.
BMG and UNI want new world order. One where artists don't have Lawyers.
TECH-HEADS & LAWYERS FREAK OUT ARTISTS AT FUTURE OF MUSIC CONFERENCE
Alternate title: CAN'T WE ALL JUST GET A HARD DRIVE?
Take some of the most informed minds on the subject of DRM (Digital Rights Management), let them openly chat for several days and what do you get? You should get serious progress towards resolving the controversies on how artists will be paid from the internet. The Future Of Music Coalition conference in Washington DC this past January made a noble attempt to deliver exactly that. It came close at times, but in the end, the fact that of the 60 panelists, the vast majority were technology lawyers and only 7 were artists sent a message that the future of music has little to do with music itself and more to do with the digital distribution thereof.
Future of Music Coalition (FMC) (http://www.futureofmusic.com/) is a consortium of attorneys (and a few non attorneys) who assert an artist-oriented, anti-RIAA position to policy makers in Washington. And while their exact agenda is sometimes hard for me to follow, one thing is very clear: they are to be commended for their zealous support of the rights of the individual artist above the rights of major labels.
This event in DC was the most important series of panels I've heard in years. I strongly recommend the webcasts, which may be the only publicly available archived source of this valuable information. This stream is worth the steam and is free at http://www.multicasttech.com/fmc2003/.
But as I watched from the comfort of my home I couldn't help but ask, "Do these panelists know they are being video taped?" As you'll see in the two articles below, record executives and technology pros alike proposed some logic-defying ideas, prompting me to make them the fodder for this month's Moses Supposes.
My chief complaint stems exclusively from the fact that the conference suffered from a pathological high-tech bias. As if the "future of music" is somehow surgically and insufferably linked to the technology industry and that CDs and other hard media will definitely, for sure, be going away any day now. The problem lies in the professional breakdown of the panelists themselves. Of the 60 or so participants, 30 are lawyers, 24 are technology executives and a combining of the two groups leaves some 45 persons of the 60 who derive their living directly from the tech industries.
As a result, the conference yielded only one bottom line statement that was on point: file-sharing is not going away and there's nothing we can do to stop it.
Zzzzz.
PANELIST KABALA
The linchpin of this tech-agenda is grounded in a single, highly suspect yet seemingly ubiquitous statistic generated by the RIAA: that CD sales are down 12% due to illegal file sharing. The FMC panels assume that this must mean the Internet will be the manna of recorded music revenue in the future.
This is not logical. A drop in sales (even if we can concede that it is due to the file sharing, which I do not) does not mean that the Internet will be the answer to the industry's woes. Remember, only 12% of the world owns a telephone, but a far greater percentage of the globe still buys records. (Many are bootlegs, but that is beside the point.) And somewhere around 50% of major-label sales are realized overseas, mostly in areas where the necessary rip 'n 'burn gear is still far out of reach for the average consumer. (See the piece below on Foreign Sales for more on this.)
Not touched on by panelists is the opinion of this writer: that the jobs of record executives and every other role in the biz, are SAFE -- just not as many of them as in the past. Downsizing will take up the slack of the lost revenues, and the world (and the CD) will continue to spin as it has in the past -- with artists being signed to deals where they can never recoup advances and labels still selling tens of millions of CDs per year while they chant their "We're losing money" mantra.
When the recession ends (at the conclusion of the war we're about to wage) magically, so too will the lost revenue. And the people who happen to have jobs at that time will be heralded as the geniuses who turned the industry around.
It would have been interesting to see how the panels would have evolved had the FMC board mixed the battery of law professors, technocrats and the peppering of artists with an economist, an artist rights advocate and a litigator or two to talk about the future of music.
Let the Future of Music Coalition know how you feel on the points made above: mbracy@bracywilliams.com.
BMG COMES CLEAN: REVEALS THAT: THE RIAA LIES, ARTISTS SHOULD DUMP THEIR LAWYERS, AND THEIR "NEW DEAL," REALLY ISN'T
Late last year BMG, the world's third largest record company, announced that they were going to take the lead in artist contract reform. A new deal affecting royalty streams would be spelled out in their offers. They alluded that they would now allow manufacturing records, which document exactly how many units of a particular title is produced, to be made available to an artist questioning the accuracy of royalty statements. This may seem a given to those who have not had the pleasure of auditing their record label, but it ain't. You don't, as an industry practice, get to know how many units are manufactured. Just how many are "distributed."
Despite the fact that no artist has been signed to this new template -- nor has the company allowed journalists or advocates to see it -- BMG spent a tidy portion of its fourth-quarter PR budget informing the industry of its bold innovation. So much so that their chief competitor, Universal, "leaked" a similar statement that same month.
But, on the Future of Music Coalition's "Major Labels: Can they Innovate," panel in Washington DC this past January, Jim Cooperman , BMG's Vice President of Legal and Business Affairs, now admits that they are merely "re-clarifying" the terms of their old agreement, NOT creating a new deal that is more favorable for the artist. "You're not going to make more money [with this contract]. I say it right here on record, the goal is to make it more clear." Not make more money.
Regarding "manufacturing records" and whether or not the artist will ever get to see them in future BMG audits, Cooperman added, "As of right now that is not official company policy."
The segment concluded with Copperman defensively responding to a question alleging how fraud in royalty statements would be addressed. "There is no fraud," he clarified. "People just make mistakes."
So, BMG's "new deal": more clarity about how much you are NOT making, and still no way to see exactly how many units are being made (which means you have no way to know how many were given away, which means you have no way of knowing how many you should be paid on) and no fraud. Just "mistakes."
SO WHO NEEDS A LAWYER?
With a finger in the air, Cooperman expounded proudly that in spite of the "mistakes" and lack of manufacturing records, a new world order was necessary for the survival of the business -- one where "it shouldn't be the lawyers forging the relationship at the label. It should be the artist. We at BMG want to change that."Panelist, David Benjamin, Senior Vice President at Universal, echoed these sentiments, saying that artist representation "polarizes the artist from the label."
What are they implying? We're not sure. Since lawyers generally only interface with labels in an agent-like capacity, the statements would seem to imply that artists should negotiate their own deals or risk getting less than favorable treatment. This absurd concept read like a veiled threat to artist's reps: back off, until the economy rebounds.
RIAA LIES REVEALED
The RIAA has been stating for years that their members distribute 90% of the music in the free world. This statistic justifies their credibility in Washington, as they claim that they therefore also represent 90% of the artists. But Cooperman stated on the record that only 20% of the releases last year were done by majors.
He also offered another interesting contradiction: that out of approximately 37,000 releases last year, only 126 went platinum, 257 went gold and 134 achieved multi-platinum status. That's .1% of all releases to move beyond the 500,000 unit mark. Combine this with the RIAA party line that "only 5% of all releases turn a profit," and you get a head-scratching conundrum. For both statements to be true it would have to mean that the remaining 4%, or 1,480 albums, turned a profit without selling high volume (something record companies have claimed is virtually impossible to do). Or it must mean the opposite, that 75% of albums that sell over 500,000 don't often make money either. Which defies all veracity.
WHO NEEDS RECORD STORES - WE ALL HAVE THE INTERNET, DON"T WE?
To listen to panelists on this year's Future of Music Coalition conference you would probably assume that every one on the planet will be owning a computer in the next year or two, or will at least need to if they want to own music; a fundamental bias among vociferous technocrats whose argument is a global one. And since a global hit is what everyone wants in the record biz, the subject of one of the most important and misunderstood items on how much do artists make on CDs often boils down to "Foreign Sales."
The term is a misnomer because each of the major labels has many international franchises, like McDonald's. Can you imagine being an American McDonald's shareholder and being told that you are being paid less for hamburgers sold in Europe because a foreign sub-distributor had to be paid a 25% fee for the meat and then had to deduct another 25% for currency exchanges? Now imagine that you are being told this even though McDonald's owns both the foreign meat distributor and the bank making the exchange. That stockholder would speed-dial his attorney. But in the music biz it's a day-to-day excuse given by labels and accepted by artists when it comes to royalties from overseas record sales.
On the panel called, "Major Labels: Can they Innovate," Peter Jenner, (once Pink Floyd's manager and now Chairman of International Music Manager's Forum) stated, "Labels sign artists for worldwide deals and then don't release overseas... if [the label doesn't] want to do it, then let me release it overseas." Panelist Sandy Pearlman (producer of Black Sabbath, Oyster Cult and now Vice President, Media Development, Multicast Technologies), added, "No record company is as good everywhere as they are somewhere."
So when signing with a major, why not just withhold your foreign rights and sell them to a label in Europe? Well, it ain't so simple. Jenner clarified the reality: that no major European label will sign an act already signed to a competing major label in the US. So you get a stalemate. Majors often don't distribute a domestic artist overseas, even after they insist on owning the rights to do so. And even if you succeeded in retaining those rights, their competing labels wont pick up an artist not already on their US affiliate. The panel offered this reason: no A&R person wants to be perceived as the loser if the artist is a hit on one coast but not the other.
"It sucks hamster dick," said, Sandy Pearlman.
No solution was offered by the panelists, but most agreed that all majors, who are now suffering from playing both ends against the middle, will likely be sold off to other companies soon as they are unable to control the retail theater since losing an anti-trust battle with the Attorney General last month.
Universal's Benjamin implied that all major retail chains will soon be going the way of the Dodo. "We're all going to be shopping at Wal-Mart," he said. Stores that supported the industry, like Tower Records, are unable to compete with bargain stores who will gladly sell CDs at below cost as a loss-leader item.
Jenner had a positive spin on this, "But, the Wal-Marts [of the world] are only going to carry 30 or 40 titles." Feeling that only the mega-artists will make the bargain stores short list, leaving a profit opportunity for the label/artist only looking to sell only 5000-10,000 units to a smaller audience. "I think the [niche artist] will [therefore] survive."
COALITIONS TO THE RESCUE?
Are there any answers to the ever increasing cancer of retail gout? Labels have looked (or some would say become dependent on) the RIAA and other so called coalitions for answers to these problems burdening the industry. The panel had some rather harsh words to say on this subject.
Sandy Pearlman: "I think [the RIAA] is an unequaled example of delusional thinking." And of Don Henley's RAC, Pearlman said, "I find them aggressively irrelevant [and] the unions are far less effective than they should be."
BMG's Cooperman said, "We need the [the RIAA]; they're invaluable." And David Benjamin shrugged,: "[The RIAA] hasn't made any more mistakes than any other company." (He must be talking about companies like Enron, Worldcom, et al.)
Meanwhile, in the next panel, en titled "Complete Control," Bruce Lehman, President, International Intellectual Property Institute, lambasted the entire record industry: "In 10 Years we wont have CDs. It will all be online distribution," reciting PR from a previous summit that took place in Europe where "new business models" were to be revealed. Lehman lamented that a high-ranking rep of Sony music didn't have any business model to talk about. "Major labels don't have any idea how to solve the problem!"
The last word went to, Mark Cooper, Director of Research, Consumer Federation of America, a group that specializes in consumer advocacy. He was practically standing on his chair when he shouted, "The average consumer is not a criminal! If you offer them a viable way to buy product legally, they would rather go there than to a free site."
However a highly regarded study by the Gartner Group which surveyed 2000 people over 18 years of age, claims that about 85% still believe that its okay to make unauthorized copies of music on to MP3s.
Norah, Norah, Norah, Norah, more Norah, the Chicks and Eminem. Oh, and Bruce.
MO OUT
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