Industry information that you can actually use

  March 2002


Global Summit in New York Kicks Ass

Industry "leader" Issues Warning

Napster looking Healthier Than Majors in On-line Distribution: Artists 

    Will Sue If Placed Online

EMI States the Obvious But Nobody's Listening

Best Music Industry Joke Ever is Written



This is not news...

News is allegedly objective. This is anything but. This is about
interpreting the news into information that you can use. The key to predicting the
future is in interpreting the past. In real terms, this means understanding
how the big players interpret their mistakes and their recent acquisitions.

And they make some big ones of both. Let's take a look. But first:

Hats off to Steve Zuckerman and his Global Entertainment Summit in New York this month. I have attended many music biz gatherings in my tenure but this one really got me by the throat. Any person could pay $50, walk in off the street and find themselves rubbing elbows with top quality managers, lawyers and consultants. Normally you'd only find a gathering of music industry pros of this caliber at Scores' happy hour.

My panel was well attended as was the keynote speech of Fred Davis. I like Fred and thought he had some great things to say, but I will say this to those who thought that he was dodging a few bullets in the Q&A: is his dad not Clive Davis? What do you expect?

Polar Levine of popCULT wrote a rather interesting review of the Summit and mentioned my panel: "Moses Avalon prowled the stage like Mick Jagger in his seminar on decoding recording contracts. Pugnacious and prepped to the teeth with well-researched data, Avalon is sure to become, along with Courtney Love, Shawn Fanning, Lawrence Lessig and Steve Zuckerman, one of the stars of the ensuing battles over the future of music distribution."

Thanks Polar, but I don't have Mick's lips or a tenth of his cash.

The entire article is readable on http://www.popcultmedia.com

One face that was expected but not present at the Global Media Summit, was that of Miles Copeland. Apparently he was profiled at the airport: security takes exception to people traveling first class without a spine. (Joking! Miles was not profiled.)

But he did manage to get to SXSW and issue a somber statement about the state of the industry. This excerpt was taken from Jon Pareles' article, "Miles Copeland, president of Ark 21 Records, warned that the CD business could be destroyed entirely in three years by the availability of free music on the Internet. 'We have a serious problem with the industry,' he said. 'We don't have a way to solve it. They're grasping at straws.' "

Interesting, because the CD pressing plants have reported an increase in production for smaller runs. Smaller independent artists have not had a hard time moving product at $13 at live venues. So, I think what Miles is talking about when he claims, "We don't know how to solve it," is "We don't know how to solve the problem of major labels spending millions of dollars on promotion to get people to buy millions of records by mediocre artists so that we can keep paying ourselves fat six-figure-a-year salaries and million dollar bonuses."

Despite mega-licensing deals and corporate integration, the Internet will not be presenting complete "legal" catalogs of music available for downloading anytime soon. The digital "super highway" promised years ago is still years away, proving one of my old axioms: technology may run at the speed of light but it also runs at the speed of bureaucracy.

This past month several top managers sent memos to the VPs of Business Affairs of several Major labels implying that if their clients' music was used as part of a promotion for the new on-line music services like PressPlay and MusicNet, that they would sue for breach of contract.

As predicted, there is a strong likelihood that the music downloaded on these "legal" versions of Napster might go uncompensated for. In other words, labels would sell the music on these services and not pay the artists. But that can't be true, because that's exactly what the majors sued Napster for. They claimed that Napster didn't compensate the label or artist and should be shut down. And even though Sue Zeidler of Associated Press keeps characterizing Napster in her articles as "shut down", they are anything but. True, several rulings have crippled them, but so far no judge has found legal grounds to dismantle the company completely. This significance evades the mainstream press because it focuses attention away from the FACT that other versions of Napster can build a legal foothold on these rulings. (Sue, are you getting free concert tickets for your pro-label spin, or what?)

Meanwhile, mega mangers, Jim Guerinot (No Doubt, Offspring and Beck) and attorney, Gary Stiffelman (Eminem, Aerosmith and TLC) have estimated that their clients will make less than two 1000ths of a penny ($.0023 ) for each "sale" or download of music on the major labels' versions of Napster. This is far less than the amount Napster offered to pay artists in their attempt to settle out of court with the RIAA several months back. Word on the street is that a boycott by signed artists may be the trend until the Big Five (soon to be the Big Four) come up with a more solid royalty plan for these "services."

If a boycott was to ensue, the likelihood is that the majors would ignore cease-and-desist orders from artists, causing an all-out war. Remember that there are clauses in most artist contracts that allow the label to hold all royalties in dispute until disputes are settled, and other clauses that allow the label to put an artist on "suspension" if they refuse to be good little boys and girls. This caveat will likely put a choke-hold on those artists without a publishing and touring cash flow to rely on.

At the same time, majors, after spending all this cash on these services will face a huge PR disaster as their artists speak out against them.

This should be fun, if you like a bit of mud slinging (and who doesn't). I'm reminded of military defense contractors and liberals arguing about the use of "Smart Bombs" on CNN during the Gulf War, wherein contractors claimed that new technology made war "benign."

Remember, the problem with Smart Bombs is that there are still many dumb people using them, Internet technology notwithstanding.

Hillary Rosen of the RIAA refused to comment on this subject but that could be because I never asked her for one.

HITS, the industry "trade" magazine that performs the same propaganda function for major labels as The Ministry of Information did for the British Government, poked a bit of fun at Mr. Henley for his noticeable absence at the Grammy Awards last month. So he poked back. In the sprit of good humor (which HITS is famous for) they printed his razor-sharp retort which begins "Dear Loathsome Trade Hacks." It makes for a great read. Here's your link: Don Henley's Comments.

http://www.hitsdailydouble.com/news/newsPage.cgi?news03277m01

It's refreshing to hear top level executives who are paid in the millions-per-year to state the obvious now that their jobs are on the line.

This week EMI's two new highly paid, high rolling consultants, Alain Levy and David Munns revealed their new, innovative and revolutionary worldwide restructuring plan: "fire slackers and spend less on crap." By September of this year 1,800 "nonessential personnel" making anywhere from $35,000 to $200,000 a year will be out of job. (One wonders why they were hired in the first place if they were "nonessential.") To help trim the fat further Levy plans to make sure that thousands of record store clerks making about $10 an hour are fired by selling off their support venture, mega record-store HMV. EMI hopes all the above will save themselves about $150 million a year and reduce their $1.34 Billion debt. (Maiah Carey's $28 million buyout is looking like a bargain now.)

In a press release, Levy, who is rumored to be paid over $1,000,000 a year plus bonuses, was quoted as saying some rather radical things about the business. Such as:

"There are some real challenges facing the music industry at the moment," and "Many industry executives have forgotten it's all about artists and music," and this stunner, "[There is] a tendency [in the business] to buy marketshare rather than achieve it."

Enlightenment hits. Is anybody listening?

I guess these two ARE the most qualified guys to get rid of "nonessentials." They seem to be the experts on the subject.

BEST MUSIC INDUSTRY JOKE EVER

This is REALLY not news, but is seems only appropriate to follow the last story with this one: the best "inside" joke about the music industry has been created. This parable was first sent to me by the noble Samm Brown, who, along with John Braheny, hosts what is probably the best LA based radio show on the music biz ever. Samm Brown's For The Record can be heard on KPFK 90.7 FM, Tuesday's at 10PM.

Enough plug. Here's the joke.

A man in a hot air balloon realize he was lost. He reduced his altitude and
spotted someone below. He descended a bit and shouted "Excuse me, can you
help me? I promised a friend I would meet him an hour ago, but I don't know
where I am."

The man below replied " you're in a hot air balloon hovering approximately
30 feet above the ground. You're between 40 and 41 degrees north latitude
and between 59 and 60 degrees west longitude."
"You must be a Record Producer" said the balloonist.

"I am " replied the man, "How did you know?"
"Well", answered the balloonist, "everything you told me is probably
correct, but I've no idea what to make of the information, and I'm still
lost. Frankly you've not been much help at all. If anything, you've delayed
my trip."

The Producer responded, "You must be an A&R executive."
"I am ", replied the balloonist, "but how did you know?"
"Well", said the Producer, "You don't know where you are or where you are
going. You have risen to where you are due to a large quantity of hot air.
You made a promise which you've no idea how to keep, and you expect people
beneath you to solve your problems. The fact is you are in exactly the same
position you were in before we met, but somehow, it's my fault."

OBITUARY



EMI, a significant Big Five Label, is not dead but on life support.  
Many cuts and streamlining don't breed confidence.  Deathwatch is on.

More to follow.

Peace out,

Mo

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