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Archive for the ‘digital rights management’ Category

It’s happened in the past, and it’s happening right now: a new technology is undermining an existing business model, and the victims don’t even understand what’s happening. The Recording Industry Giants, lead by the RIAA, are frantico-comically filing lawsuits against individual music downloaders, who they hold responsible for the decline in their music sales. But the real threat to their business is coming from a completely different direction, and here’s a great example.

First of all, if you want to understand the economics of the recording industry through the eyes of a successful recording artist, I would recommend the article “Courtney Love Does the Math.” What you will discover is that the artist gets essentially nothing from CD sales — their only source of income in reality is through touring, and even then the label gets a big slice of everything including even the t-shirts. So when the RIAA beats their breast and brays that they’re just defending the poor lowly artists, that’s drivel. They’re defending the record labels’ income from CD sales, of which the artist gets, as Courtney points out, essentially nothing.

I have also heard this from Jim McGuinn of the Byrds: that after all their million-selling songs, and their platinum albums, he gets “sometimes $2 or $3 a month in royalties” from them. (Sidebar: under the guidance of his spiritual adviser, Jim has changed his name and is now known as Roger McGuinn, but it’s the same guy).

Anyway, here’s why the current Recording Industry, and their enforcement goon squad the RIAA, are doomed, and it has nothing to do with music downloading.

In July 2007, The Artist Now Known Again As Prince issued an album “Planet Earth,” and in the UK, instead of selling it in record stores, he gave it away as an insert in the Daily Mail newspaper. Yes, gave it away. Free. As a result of this, the Daily Mail sold 600,000 more copies of their paper that day (above a baseline circulation of about 2,400,000 copies). OK, good news (so to speak) for them .

Prince, for his part, got from the Daily Mail a payment of $500,000. Now, that’s a goodly amount of money, but the key to this is that it represents about eight times the expected royalties from the album, if it had been sold it in regular record stores over a period of years. And this money didn’t involve the whole existing chain of studios and their captive promotion schemes that end up vacuuming up all the proceeds before the artists see a single nickel. So, money from the music consumers to the artist, directly. Well, via the Daily Mail, but without the whole rest of the industry.

Now you might point out that this is an exceptional case — that Prince is a star artist with a loyal following, and that he has his own recording and production studio, so he needs nothing that the labels anyway, but that same formula doesn’t hold for the vast majority of the artists — and to a great degree you are right. Prince is an exception. But — to the studios — this is an ominous trend, a crack in their dam. Prince has found a way to bypass the current stranglehold of the studios, and he’s blazing the path. The whole country didn’t follow Lewis and Clark into the West right the next year, but eventually they did. Not every artist can do what Prince did next year, but it having been done (like the first 4-minute mile), others will now believe that they can do it too, and they will.

And I won’t even go into the issue of how many new artists can actually get their music promoted by the major studios, who live on a very few superstars and leave everybody else in the dust, promotion agreements or no.

Suing downloaders is truly rearranging the deck chairs on the Titanic. The current model of music financials is dead and it wasn’t killed by some woman in Brainerd.  It was killed by artists like Prince.

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