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Window of Opportunityby George Ziemann -- August 4, 2008 Last week, Cory Doctorow explained why the major labels' continued refusal to license for the Internet is suicide, prompting my friend Shmoo (Mike Steely of Electric Gypsy and Boycott-RIAA) to warn that "Licensing would only save the evil recording industry YET AGAIN." Of course, that was Doctorow's point. "The original Napster had a fine proposition: they would charge their users for signing onto their network and write a cheque for as-many-billions-as-you-like to the record industry every quarter. After all, they had the fastest-growing technology in the history of the world at their disposal, 70 million internet users in 18 months, and they'd found that the average American user was willing to spend $15 a month for the service. The record industry sued them into a smoking hole instead... "It's historically inevitable: whenever technology makes it impossible to police a class of copyright use, we've solved the problem by creating blanket licenses." Shmoo's complaint is just as straightforward: After 8 years of being a general pain in the ass, the majors will suddenly declare blanket licensing and take all the money, while the rest of us, who've been offering up tunes throughout the music inquisition, will be ignored if at all possible. Game over. We lose. While I completely understand Shmoo's viewpoint, I have to ask... If blanket licensing is the logical solution that everyone and their brother agrees would probably save the industry, why haven't they already done it? If it's such a great idea, why would they launch an endless legal battle against the world instead of simply taking the easy money? I've been pondering this question for several days and even made the effort to locate someone explaining the point of view that licensing was an inherently bad idea. I found Stan Liebowitz, a professor at the University of Texas in Dallas, who had taken this task upon himself in 2003. Liebowitz belongs to the School of Management, which is very important because he's all business. He sees (or at least saw in 2003) the licensing issue from cash flow point of view, just like he sees everything else. From this perspective collective (or blanket) licensing of mp3 files on the Internet is a bad idea because the record labels will never get paid enough money to compensate for what they lose in sales. Plus, there's no way to track it properly and the record labels will cheat and game the system. I'm not saying that this is a realistic perspective. Liebowitz gives no consideration to music's role in sales. This is best illustrated on Page 16, where he looks at the period beginning in 1978. He is seemingly perplexed by the lack of economic indicators to explain the sales drop. Here's a hint: disco. Here's what else Liebowitz thinks: "Begin with a case that is often understood -- payola. Payola is the pejorative word used when record companies pay radio stations to play particular songs. How would an outside analyst determine the proper payment for the use of the records? Typically, in the economy, firms pay for their use of inputs. Radio uses music as its main input. Yet radio stations do not pay for the CDs that they play. Quite the opposite -- there is a history of record producers paying radio stations in order to play their records. Further, radio is a substitute for listening to recorded music and the recorded music industry would almost certainly benefit if radio could be restricted or eliminated. Although payola is a practice that governments have tried to ban, it is in fact indicative of competition between record companies." I won't waste your time pointing out the immense amount of fail in that paragraph. Just making sure you understand the "all business" point of view, to which the major labels have almost always strongly adhered. Back to our original discussion, there are two distinct issues here. Blanket licensing can provide a solution to "the problem" of music on the Internet, including the pointless lawsuits and the very idea of "illegal music." Whether it would save the industry depends on your definition. The "recording industry" includes everyone that makes recordings, from Paul McCartney down to Shmoo and I. If independents somehow take over the reins and dominate popular music, it would still count as "saving the industry." That doesn't mean EMI or Warner Music will necessarily be a part of it anymore. If it's not too deep, take a look at the article about Kondratiev Cycles. Prosperity breeds complacency, and economic downturns tend to be creatively inspirational for music as a whole. As the economy slides rapidly down into a shithole, music should be forging a new direction and preparing for the inevitable turnaround when we hit bottom. The window of opportunity is open right now because the RIAA has fallen and it can't get up. They really don't know what to do but licensing is a last resort because they do not see it as an additional source of income; they see it as an unacceptably poor solution that will never pay enough. When they agree to blanket licensing, it means they are on the ropes and can't afford to fight any longer. A major advantage could be taken at this point in time by anyone who sets up a viable alternative, willing to license a collective of independent work for less than the majors refused to accept. This is exactly why the broadcasters formed BMI in 1940. They were tired of fighting with ASCAP. What the broadcasters offered was never enough, so they found something else to play, namely all the music genres and artists which ASCAP considered to be unworthy. This is more or less the same position the independents are in now. Licensing does not mean saving the cartel, it just means means putting in place a payment system for Internet play. Assuming that they will get it all (the very thing that concerns my friend Shmoo the most), it has been deemed insufficient. That payola described earlier as "indicative of competition" was actually a way to bar competition from anyone outside the cartel. Ten years ago, unless you could afford a half million dollars for airplay, you couldn't compete, so you weren't going to get paid broadcast royalties. They can't do this to the Internet. We're already there. The best they can do is refuse licensing and make individual deals. As long as they maintain this, they cartel is the only ones to get paid. Universal made some sort of deal with YouTube based on advertising revenue. The majors are already collecting. No one is talking about paying indies, though. Blanket licensing give the indies a chance to dip into the pile of cash and take as much of it away from the majors as possible. Until then, the cartel gets it all. So if that's what you're afraid of... |
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