Moses Exposes(3)

In March, EMI, facing serious strategic challenges, became the first major label to issue DRM-free (not copy-protected) downloads on iTunes. To facilitate this, Steve Jobs, CEO of Apple, broke his promise to maintain uniform pricing of songs ($0.99 per song): DRM-free downloads will cost about 40% more than other sale
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In March, EMI, facing serious strategic challenges, became the first major label to issue DRM-free (not copy-protected) downloads on iTunes. To facilitate this, Steve Jobs, CEO of Apple, broke his promise to maintain uniform pricing of songs ($0.99 per song): DRM-free downloads will cost about 40% more than other sales. Response from the other three top competing major labels was shock and disappointment. The question loomed: Will they be forced to also offer DRM-free downloads?

Weeks later the U.S. Copyright Office decided that major labels will be allowed to charge higher rates to webcasters for streaming music. The response from webcasters was, similarly, one of shock and disappointment. Are they soon to be forced to pay labels more to provide the public with a radio service they don’t even charge for?

What would the perfect music business look like? Would it be one where distribution was a given to anyone who took the initiative to record music? Should there be some sort of filter to save us the time of sifting through millions of Myspace pages looking to discover new, good music?

We’ve had this filter in the form of the major label system since the ’60s, but it’s one many of us who have tried to squeeze through its bottleneck have come to resent. And though the advent of new technology has put that system to the test and given us all new choices in how to create, record, and distribute our music, does it come at too high of a price? Is it, ultimately, diluting the musical pool?

It’s not just the amateurs who have adopted the aforementioned technological tools to aid them in the creation and circulation of their music: Commercial musicians are increasingly taking the same approach. At face value, this could lead one to conclude that the agendas of the tech-providers and musicians alike are complementary. But the reality is that the technological distribution world and the world most commercial musicians reside in are at war.

In one corner we have what I will call the “Tech Masters”: In short, computer/software makers and Internet service providers. They use pop music as loss leader to attract new consumers. They may be music fans, but they resent the current system of record companies the same way you and I resent the monopolistic electric company. In the other corner we have the four major record/publishing companies. To support the huge bets they place on artists, they have to protect their inventory. They have to copyright the music they release. They don’t much like the Tech Masters, as they deem them a threat to the return on their investment(s).

To the “Tech Masters,” these music copyrights are an inconvenience — a roadblock to their master plan of selling gadgets and e-services to everyone and their grandmothers. If they cannot prevail upon record companies to license them music for cheap, their logical alternative is to avoid paying for it at all by challenging copyright law . . . but only as it applies to art (never their software). It’s a delicate trick, but one toward which they have committed serious dollars. And if allowed, they may eventually turn music into the free toy at the bottom of their proverbial cereal box — which may not be very good for you or me. And the scary part is that we, the creators of music, may be helping them.

The recent “Tech Master” campaign is DRM-free music (downloads with no copy protection encryption). Consumers love the idea, as it allows them to copy (and distribute) many copies of the album you may be getting points from while only really paying for it once. The “Tech Masters” love the idea as well. They think it’s good for the music business, and they envision a perfect world where record companies have long since stopped whining about P2P piracy and license their catalogs to the “Tech Masters” without DRM confinement. And they’re trying to convince the labels that this is good for their business as well. I mean, remember what cassettes did for the bottom line in the late ’70s?

Labels aren’t falling for it. In those days, people could not make hundreds of copies with a few mouse clicks. And while Tech Masters do retort, “But CDs have no copy-protection, what’s the difference?” the labels sigh and shake their heads. The only reason most CDs aren’t copyright protected is due to complex technical issues (endorsed by the “Tech Masters”) and because, at a cost of $0.60 per unit to manufacture, CDs have a huge profit margin while downloads have a much narrower margin and invite theft via illegal P2P.

So, if gentle persuasion isn’t working, what’s the next step for the “Tech Masters?” Shaming the establishment via an aggressive campaign of winning of the public’s hearts and minds, of course. Dehumanize the enemy; make the public think record companies are too dumb and greedy to see the “logical” path for the future. Eventually, they hope, majors will cave. The plan is working.

The vast majority of music business stories in the press are negative. They focus almost exclusively on the big bad RIAA’s litigation, label firings, and attempts at musical monopolization. But what about the other side? Remember, this “tech industry” grosses about $160 billion a year, eclipsing the music business’ paltry $15 billion. This is big business as well, and there are big issues at stake for people like you and me if the “Tech Masters” prevail and the labels falter.

If the “Tech Masters” lose this campaign, they will simply have to pay a bit more for their loss-leader item. As they bundle music with other products, this expense will not be felt in any significant way by the consumer, it will just shave their gross a tiny bit to about $158 billion annually. But if art loses this war, that is to say, if record companies/artists lose their ability to control who gets to license their work and at what price, the music business, as we know it, ends. Music itself may suffer as the “Tech Masters” buy the labels, bundle their music, and sell laptops pre-loaded with entire catalogs of music. This may sound great to a consumer, but if you can look forward to even smaller licensing fees or, if you’re creating/recording music for a “label,” even smaller fractions of that licensing sum. It could be financially devastating for everyone but the “Tech Masters.”

There’s a truly successful Orwellian “hearts and minds” campaign being focused toward you, the very person who stands to gain from copyright laws, in an attempt to persuade you to cede author’s rights inadvertently in the name of technological progression. And it’s working on a huge scale, because we, at large, love to bash the record industry. We think the record biz dying is our key out to being struggling musicians/recordists. And there are tons of people out there, oftentimes our own brethren, trying to convince us that resistance to this shift is futile.

But it’s not.

What the “Tech Masters” don’t want you to know is that, according to the annual reports of Universal, Sony, and Warner, in 2006 the music biz had one of its best years ever, revenue-wise. Or that revenue from the mobile space and other new licensing sources has and will continue to put billions of new revenue into our space. They don’t want you to know this because it would deflate the “Tech Masters” argument for DRM-free downloads.

Instead, to distract you, they focus journalists on how majors are dial-up dumb, lazy, and hurting artists by price-gouging Internet radio stations out of existence. They direct reporters to the meaningless statistics of first quarter CD sales (which are always low. It’s just after Christmas, duh!).

But has any journalist covering this war addressed the fiscally logical? In the face of a recession, where automobile, film studios, and many other industries are showing losses — plus a radically changing technology landscape and all the negative publicity — majors are still showing respectable profits. So just how dumb are they? So what if sales of CDs are back to 1992 levels? That was still a very profitable time for music, and anyone who says that companies like Sony and Universal can not survive a shift in sales platforms is either lying, misinformed, brainwashed, or a sour-grapes ex-record executive caught in the downsizing that this changing landscape requires.

My personal favorite “Tech Master” sophistry is: “Illegal P2P file sharing hurts (tech owned) music subscription services too. It drives up our cost and we also have to compete with free.” This is true Machiavellian genius: Compete with free for a service that is a loss-leader to them in the first place? How dumb do they think we are?

Reality: It’s because of these guys that illegal P2P exists in the first place, and if illegal P2P prevails, record companies will be forced to issue DRM-free music to compete.

Which brings us to poor, almost-defeated EMI and their decision to take the advice of “Tech Master” overlord Steve Jobs — the classic “Tech Master.” Jobs does not make any real money off of music sales. iTunes is a break-even division for Apple, as a loss-leader to promote the sale of iPods. He could care less if labels, or you, make a profit.

If EMI’s DRM-free move catches on, the other majors will eventually be forced to do the same. And if Jobs turns out to be right and sales go up, up, up? I’ll personally issue a mea culpa. But if he’s wrong, the majors will not be able to re-cork the genie. Their catalogs will be permanently de-valued and they will be forced to sell your work for nothing. Who do you think will be smiling at their checkbooks on that day?

“But screw the labels,” you say. In some ways, I agree. We might come the karmic full circle if they fail. But that doesn’t change the fact that the benefits would not outweigh the utter financial chaos for everyone — including the indies — were this to happen. Fact: Labels are the “banks” of our industry. They loan money to thousands of artists, who then spend it in thousands of studios and with thousands of producers, who hire thousands of engineers, who buy gear and invest in new artists, who sign with labels, and so on. Fact: We’re all in the wake of this economy. The fantasy that if labels die, a Phoenix will rise from the ashes is very unlikely. In reality, labels need to stay in business for there to be a viable music industry.

So-called media experts and analysts who applaud EMI’s “wisdom” and curse the RIAA’s defense of copyrights are trying to distract you from the real danger. But “Tech Masters,” and their web/news-proxies, love these pawns and give them a media platform. Then outraged and disappointed music executives grant interviews and ignorantly agree with them just to relieve their angst. This bandwagon effect is helping the “Tech Masters” load the gun they have pointed to our heads.

Question: Have you ever heard a technology spokesperson agree with labels or argue in favor of copy protection? Never! They argue for DRM-free music to make a more “consumer-friendly experience.” They are arguing that the consumer’s rights are senior to the artists, that the way a consumer buys music is more important than the rights of the person who created it.

Much as labels may suck, the “Tech Masters” are not on your side. They want you to work for free. To convince you, they offer gadgets, peddled with hopelessness for the industry that offers at least a slight chance for you to thrive. Don’t listen to them. If you think the bottleneck was tough before, imagine a musical world run by three or four tech companies.

It’s time we started thinking like artists again. Not computers . . . or computer makers.