Does iTunes need Universal?

I'd say the answer is no. And especially not if Universal CEO Doug Morris is after what I think he's after: a cut of iPod revenues.

Sure, it worked on Microsoft. M$ was willing to bend over backwards to procure major label participation in its Zune store, an essential accompaniment to the launch of what many in the blogging community affectionately refer to as the "shiny brown turd." Universal actually held a few cards in those negotiations.

But now they've gotten cocky, and it's going to blow up in their unthinkable faces. Steve Jobs is the first to admit that most iPods contain very low ratios of iTMS-bought music to music secured in other ways. And I don't think you'd have to buy him too many drinks before he happily confided in you that Apple makes almost nothing on the iTunes store, compared to their iPod revenue.

Please believe me when I tell you that Steve Jobs is not losing any sleep over the fact that The Bloodhound Gang's catalog may disappear from iTunes.

The bottom line: Apple has a place in the future of music distribution/acquisition. Universal owns a lot of IP and that'll sustain them indefinitely, but their place as real players in the future remains in question. This latest (mis)step does little other than highlight how much they still don't get it.

[New York Times]

Video games are kicking ass. Music not so much.

Consulting group PricewaterhouseCoopers is predicting that the video game industry is poised to overtake the music industry as soon as this year with regards to overall consumer spending.

Contributing to the success of the video game industry (which is predicted to grow at an annual rate of 9.1%) is gigantic in-game advertising growth.

Contributing to the continued floundering of the music industry: stories like this one.

[ArsTechnica]

IFPI board member talks tough

UK academic and music industry thinker Andrew Dubber recently posted a fascinating email exchange on his New Music Strategies blog that's really a fascinating read if you've got the time.

Long story short: an IFPI (International Federation of the Phonographic Industry, the RIAA is a member) board member took issue with Dubber's link to this post at Download Squad, and emailed to complain about it:

Andrew

Looking at your site I do think allowing indiscriminate criticism of the RIAA is inappropriate for a Government funded institution.

Paul

Dubber failed to see the problem with the link and offered blog space for a rebuttal, and eventually it comes down to the IFPI board member threatening a formal complaint to Dubber's university (the aforementioned Government funded institution, which Dubber's blog is not directly affiliated with). The argument, amazingly, is that because of careless posts by the likes of Download Squad, individual representatives of the RIAA member organizations have been subjected to generalized nastiness from the hoi polloi.

A few things I took away from reading the exchange:

• Even when they get nasty, British people are sickeningly polite.
• Paul does his industry no favors, essentially reinforcing everyone who's ever said the RIAA are bullies.
• Man, that gray hair really is sneaking up on me!
  

The RIAA prepares to do battle with terrestrial radio

Anyone in the radio business claiming to be surprised at this latest development is simply lying for incredulous effect, but the RIAA is now officially setting its sights on terrestrial radio, emboldened by the still-reverberating CRB decision to hike rates for Internet radio stations earlier this year.

The image I have in my head right now is one boney, mangy hyena turning on his boney, mangy companion. A to-the-death battle that neither party wants, but one can see no alternative to.

Record labels these days are trying desperately to dip into a number of remotely music-related revenue streams that have historically been beyond their reach, as physical music retail continues to dry up and shows no sign of ever returning. Live revenue, Internet radio revenue, endorsement and merchandising revenue, don't forget Zune revenue, and now...terrestrial radio revenue.

Terrestrial radio has always forked over some change to the performance rights groups (ASCAP, BMI, SESAC) so that the copyright holder of the song gets paid, but the radio lobby has always successfully argued that the promotional value they provide to the label by broadcasting their records outweighs their dept to the copyright holder of the recording (yes, songs have more than one copyright attached to them). The RIAA, obviously, would like that to change, and they're recruiting some big (greedy) stars to help them sell the point.

It's honestly hard to root for either side here. Neither has had the music consumer's interests in mind for a very long time. I guess if I have to choose I'll root for radio, simply because they're not the agressor and there are still a few good radio stations left.

If Skeletor and Cobra Commander got in a fight, you would definitely want to watch, but you'd know that when it was over, the winner would just become a thorn in your side again.

David Pakman gets it

David Pakman, CEO of eMusic, recently wrote a piece on 17dots.com (eMusic's own blog) that's part manifesto and part elevator speech, but all awesome. Some highlights:

"According to data we analyzed from the RIAA and Ipsos, last year, more than 30% fewer people bought music than did in 2000. This is an enormous decrease. Many have offered theories to explain it — piracy, music quality, you name it — but informed people will tell you that a very big reason is that consumers, inundated with well-priced entertainment choices, think most music is too expensive."

"Most of you know about price elasticity. It’s the basic economic concept that says, for certain goods, when you raise the price, sales will fall disproportionately, and so the increased revenue doesn’t make up for the lack of sales. And if you lower the price, sales will rise disproportionately. Music is an elastic good, and we have now seen that by raising prices, the industry in fact did not make up the revenue, and, in the end, only slowed sales."

"So, eMusic is all about trying to satisfy two concerns that most former music buyers have: a) they aren’t sure what to buy anymore because they don’t hear anything good on the radio, and b) they think music is relatively expensive compared to DVDs, etc. eMusic makes a splendid bargain with our customers: get a better deal on music from us than what you get at iTunes, and we’ll work really hard at helping you discover great music. But in return, you spend more money on music than you normally would. And that’s good for everyone: artists, labels and customers. And here’s the bottom line: the average customer only spends about $12 per year on iTunes; by contrast, the average eMusic customer spends about $168 per year with us. Imagine how different our industry would look if more retailers could serve their customers so fully."

Forgive the guy's usage of "splendid" and the general pitchiness of the whole post; he gets it. For the time being, the big bad RIAA still doesn't want to play with eMusic, but there is a ton of great stuff on there and you can count me in the group of their customers that spends well over $168 a year there.

Bravo, David. Bravo.

(Please take time and read the whole post, here.)

If they're gonna fight dirty, you gotta fight dirty, too.

toothpastefordinner.com

I promise I'm actually going to post about music very soon (like...later today?) but I just came across an interesting bit over at Techdirt that I just couldn't resist posting about. It seems that the RIAA is dropping lawsuits when they find out that their victims defendants are claiming that simply because they pay for the Internet access associated with an IP address, it does not follow that they themselves did the pirating. Which is, you know, a good point. An IP address is not a person. So the RIAA is dropping these cases before they get to court because they'd have to be insane to let a judge rule on this and set a precedent.

So is opening up your WiFi to your neighborhood carte blanche to download like crazygonuts? That's between you and your god, but the best protection is still abstinence. Wait, what are we talking about again?

HAY!!11!! YUO, WE FOUNFD U ST3ALINGT!!

Looks like my Alma Mater is getting a taste of the RIAA's latest campaign to generate ill will amongst its consumers. 12 students at Brown University have been targeted and will be given 20 days to cry uncle and settle at a discount, before the RIAA actually files any sort of law suit. From the Brown Daily Herald:

The University received pre-litigation settlement letters yesterday from the Recording Industry Association of America accusing 12 undergraduates of illegally downloading copyrighted music. The letters give the targeted students a 20-day window to settle with the record companies out of court before they will subpoena the University for the students' names and file lawsuits against them.

The letters are part of a "third wave" of RIAA action that includes 413 letters sent to 21 universities in the United States, according to a press release from the RIAA, an industry group representing the major record labels. The letters inform the students that they will be sued if they do not settle by paying a reduced amount to prevent the issue from going to court.

I know this has been done to death already, but when is someone with some real influence finally going to stand up and tell the RIAA that abusing your customers is bad business? The deafening cacophony from the bloggers seems to fall on deaf ears. I sometimes wonder if it even emboldens these people.

The consumer, not the corporation, drives the market. This may not always have been the case and 10 years ago Warner Music may have been able to make a stink-load of money on a CD full of dreck with one hit mixed in. This will never, ever, EVER be the case again. Ever. Ever ever ever. Stop suing your customers and listen to them. You'll make a lot more money.

EMI’s DRM annoucement: on second thought…

So while I stand behind my earlier statement that it's a step in the right direction and certainly something that'll ruffle the feathers of EMI's major brethren, the more I think about the price hike, the more my mouth tastes like batteries. So I'd like to back off my original excitement just a smidge.

Sure, the files are of a higher quality, but Steve Jobs might wake up one day soon and realize what a Pyrrhic victory it's been to sacrifice the universal $.99 pricetag in order to set this DRM-less ball rolling. The majors have long demanded variable pricing for their wares on the iTMS and Jobs has, until now, heroically resisted. Even if the extra $.30/song eventually brings the rest of the majors into the ring, it's going to cause more than a few of the last remaining music buyers to heed the heretofore unheeded siren's call of the pirate bay's waters, depths from which few sailors ever fully return. These songs should ALWAYS have been DRM-free. And they probably always should have been 256kbps, too. Why should the cost of the RIAA's missed opportunities be passed on down to the consumers?

Why can't the majors, just once do something right without insulting its customers in the process? Can you imagine how many people would be rushing to give their money to EMI if they had made this announcement with a price DECREASE?

I'm reminded of that most torturous brand of word problem from 8th grade algebra class where you have a quadratic function and one axis is price and the other is profits and well...something tells me the curve doesn't peak at $1.29. But hey, it has been a while since I took algebra. This might be a job for indexed.

Holy freakin’ heck! EMI FTW!

EMI announced today that they will be making their entire catalog that's already available online (The Beatles being a notable exception) available WITHOUT DRM. It's not a total victory because for the time being, iTunes will have a per-track price premium for the unprotected songs, presumably to be justified by the higher sound quality accompanying the DRM-free files (full albums will automatically be sold without DRM):

Apple's iTunes Store (www.itunes.com) is the first online music store to receive EMI's new premium downloads. Apple has announced that iTunes will make individual AAC format tracks available from EMI artists at twice the sound quality of existing downloads, with their DRM removed, at a price of $1.29/€1.29/£0.99. iTunes will continue to offer consumers the ability to pay $0.99/€0.99/£0.79 for standard sound quality tracks with DRM still applied. Complete albums from EMI Music artists purchased on the iTunes Store will automatically be sold at the higher sound quality and DRM-free, with no change in the price. Consumers who have already purchased standard tracks or albums with DRM will be able to upgrade their digital music for $0.30/€0.30/£0.20 per track. All EMI music videos will also be available on the iTunes Store DRM-free with no change in price.

This is a step in the right direction, and you should expect to see other majors scrambling to catch up now that one of their own has broken from the fold. I'm looking at you, Edgar.

DRM

A few of my favorite blogs have touched on this topic today (Idolator did twice) and at this point it honestly seems like pretty low-hanging fruit to me to even comment on it, but as long as record companies continue their blind assault on the city walls of common sense, I figure every voice counts.

Forget the moral highground. Nobody is buying it. Everyone knows that the RIAA is comprised of some of the slimiest swindlers in the history of commerce and when Mitch Bainwol (or his latest mouthpiece Ric Keller (R-FL)) open their mouths to reveal several rows of razor-sharp teeth and play the morality card, it's laughable. But I'd rather not waste the keystrokes on moral theory.

The current reality is that Pandora's Box has been opened and nobody, not even if Voltron and Optimus Prime worked together, is ever going to be able to shut it, morality be damned. And here are the record companies, clinging to DRM like that kid in kindergarten whose parents hated him enough to let him bring his "blankie" to school. I know it's a scary new world out there, guys, but DRM is not going to protect you. It just makes you look fucking stupid.

Here's the bottom line: Someone, somewhere, is going to beat your DRM no matter what. They're going to have fun doing it, they're going to brag about it to their friends, and the day after they've posted it on their torrent site of choice, it'll be on every torrent site. The Idolators have an interesting argument today that this might not even be such a bad thing. Your energy and funds would be better spent on something, ANYTHING, other than a battle that you will definitely, without a doubt, not win.

How about artist development? Just a thought.

Save Internet Radio

This is a brain-dump. Please excuse its untidiness.

Perhaps by now you've read in one place or another about the recent decision [pdf] by the US Copyright Office to hike Internet Radio fees. If you have, you surely already know that if this decision is allowed to stand, it puts the kibosh on the ability of any small-time webcaster (like PulverRadio) to remain viable going forward, AND it levels an absurd and crippling retroactive fee for all performances dating back to January 1, 2006. Put bluntly: Internet Radio as you know and love it is F'd.

Here's a quote from SaveOurInternetRadio.com that illustrates with some simple numbers what we're dealing with here:

Under this royalty structure, an Internet radio station with an average listenership of 1000 people would owe $134,000 in royalties during 2007 - plus $98,000 in back payments for 2006. In 2008 they would owe $171,000, and $220,000 in 2009.

I bet if you've ever thought about this you already have a hunch, but the miniscule revenues the banner ads and affiliate links you see on this site don't amount to very much. Certainly not enough to stay afloat with that kind of burden.

In theory, the Copyright Office heard arguments from all sides, and made its decision after carefully considering all the facts. But the decision they made is to comply fully with the proposed solution from SoundExchange, an organization originally spawned from the dank, cavernous belly of everyone's favorite malicious overlord, the RIAA. To be completely accurate, SoundExchange is not officially affiliated with the RIAA any longer, though I hear they still share some villianous personnel high up the food chain. But, as Walter Sobchak once famously said: "Oh, come on Donny, they were threatening castration! Are we gonna split hairs here?"

There's an important distinction to be made between the copyright for the song and the copyright for the recording of the song. The songwriter owns the copyright of the song. The record company usually owns the copyright of the recording. When read about huge artists scoring record deals in which they get to "keep their masters," that's what's being referred to. The reason this is important is that both Internet and terrestrial radio stations pay royalties to the songwriter. But Big Terrestrial Radio doesn't pay a dime to record labels for broadcasting the copyrighted recordings. That's right, the new fees being imposed on Internet radio (and the fees we've already been paying to SoundExchange don't have a counterpart in the terrestrial world. Huge stations owned by huge corporations like ClearChannel don't have to pay the record companies. This can all be traced back to a decision by Congress in the 90's to distinguish between analog and digital broadcasts at the behest of the RIAA.

The RIAA. The myopic, heel-dragging, deep-pocketed, well-lawyered RIAA. Who deem it appropriate to insulate themselves from competition via legislation rather than meet it on a level playing field. Who extort monies from their own customers via bogus lawsuits, since they have so completely lost touch with reality that they're unable to provide a product the consumer wants in a form its willing to pay for. Who are now lashing out at legitimate Internet-based music services in a short-sighted money-grab that might kill one of the last remaining bastions of LEGAL music discovery left on the Web, driving consumers further and further down the rabbit hole of illegitimate file acquisition.

Who benefits from this?

Terrestrial radio? They're already done-for. They're pushing HD Radio, for God's sake. A more expensive product with inferior programming and an imperceivably higher aural definition. Yeah, that's going to make people listen to the radio again.

The Big Four who comprise the RIAA? Nobody could be more clueless. They've abused their customers (and now, their allies) for so long that they will NEVER rebound. And this is another step that will make less of their music available to the law-abiding public (if there even exists such a thing anymore). Sure, there will always be people buying old catalog. Pink Floyd will sell forever. But the major labels slipping further and further into irrelevancy, and everybody knows it but them. The argument that people may be waiting for their favorite song to come on PulverRadio so they can digitally record it, edit it to eliminate station ID's, ID3 tag it, and add it to their music collection is asenine. Your favorite song is only a few clicks away at The Pirate Bay. There, I said it. Go nuts.

The Consumer? If I need to explain to you how this is detrimental to the consumer, I question how you found yourself on this site.

Please, if you have a few minutes, sign a petition, write your congressperson, mailpoop the RIAA, or simply get more informed on this issue (a few links below). It's important.

**UPDATE** Commenter Chris suggested wisely that I include this list of RIAA labels: Sony, Universal, Warner Brothers, EMI (Capitol, Virgin etc). Don't give them your money.

Mikey McClenathan
Program Director
PulverRadio.com


[Save Our Internet Radio]
[Radio and Internet Newsletter (RAIN)]
[Save Net Radio]

SanDisk CEO Eli Harari replies to Steve Jobs

In an open letter (that reads kinda like a sales pitch) on the SanDisk website, Chairman and CEO Eli Harari responds to Steve Jobs, although he never mentions Jobs, iTunes, or iPods by name:

As a loud debate continues over how digital music is sold and used by consumers, SanDisk believes there is another way to address this issue—an approach less confrontational than that voiced by others in the industry.

The answer is to protect the interests of everyone involved, not to chastise rights holders for trying to safeguard the entertainment they create and support.

As a leader in the digital music industry, SanDisk has always supported freedom of choice for consumers. At the same time, we believe that entertainment companies and artists must be compensated.

Consumers deserve fair use of the digital entertainment they purchase, with the freedom to enjoy content on any device they own. SanDisk’s approach is to let consumers decide how and where they acquire and play back their music.

Proprietary systems, in short, aren’t acceptable to consumers. In recent months, there has been a rising chorus of complaints in Europe about the anti-competitive nature of closed formats that tie music purchased from one company to that company’s devices, and tie that company’s devices to its music service.

SanDisk is already offering an alternative with its Sansa line of MP3 players, which connect to many major online music stores, including Rhapsody, Napster, URGE, Yahoo! Music, emusic and Best Buy Digital Music Store. Users purchasing songs from those services can also play them on many non-SanDisk devices. SanDisk and our partners have full support from the four major music companies, and we believe our offering is no less secure than closed systems.

What’s more, the decision on using digital rights management (DRM) should rest with the music industry, not with device makers.

Time and again, we have seen that open choice prevails. The “walled garden” approach may offer a smoother user experience in the short run, but ultimately restricts user choice. Protecting music doesn’t require confining consumers to a single company’s service or devices. It’s time to tear down the walls.

SanDisk is looking at the big picture, by creating solutions rather than conflict. Building an infrastructure to give consumers fair access to digital content while protecting content creators is vital for the long-term health of the music industry, as well as to our business and to our competitors. SanDisk stands committed to making this happen.

Truth be told, I've been incredibly happy with my ARCHOS since I retired my old iPod a while back. I agree with Harari here about walled gardens. But I think he misses the big picture that Steve Jobs was painting: that DRM simply doesn't work ANYWAY, and that clinging to it is hurting all the content owners, stores, and hardware in this space.

Come on. Really?

Every time Steve Jobs opens his mouth (or types something, I guess) it's awesome for bloggers. And his latest missive about DRM apparently has ruffled some feathers over at Warner Music:

Warner Music chief executive Edgar Bronfman Jr. said in a call with analysts that the argument to drop copy protection also known as digital rights management (DRM) is "without logic and merit. We will not abandon DRM."

Oh Edgar, perhaps you should take a look at Warner Music's SEVENTY-FOUR PERCENT DROP IN PROFIT LAST YEAR and re-think your logic and merit.

This reeks of arrogance and myopia. The walls are CRUMBLING AROUND YOU. These majors are laying off their staffs, placing all their eggs in the baskets of a few huge-selling acts (EMI on Coldplay ring a bell?), and fiddling as the city burns. Get with the program, Edgar. The old ways aren't working any more.

::smacks forehead::

The RIAA responds to Steve Jobs' open letter regarding DRM that was posted yesterday:

"Apple’s offer to license Fairplay to other technology companies is a welcome breakthrough and would be a real victory for fans, artists and labels. There have been many services seeking a license to the Apple DRM. This would enable the interoperability that we have been urging for a very long time."

The validity of whether it would be "a real victory" or not aside, Jobs didn't offer to license Fairplay. He stated why licensing Fairplay would never work in the process of constructing a pretty decent argument for abolishing DRM.

Honestly (and I'm being candid here) there isn't a word for stupid that is strong enough for the RIAA. How do they even still exist? Who in their right mind supports these buffoons? Even if this is a joke (as the LA Times generously suggests), it's not funny.

(via engadget.)

Steve Jobs doesn't like DRM

Steve Jobs adds a pretty deep, bellowing voice to the deafening chorus of people that are pretty darned tired of DRM:

"If such requirements were removed, the music industry might experience an influx of new companies willing to invest in innovative new stores and players. This can only be seen as a positive by the music companies"

If any one man has the power to bend the will of THE MAJORS (ominous ones, they are), it's Mr. Jobs. He famously refused to be bullied when he set up iTunes in the first place, which is arguably the secret ingredient for its success. (via REUTERS)

In other slightly-heartening-if-you're-into-that-sort-of-thing news, OZZFEST will be free (asterisk) this year.

The Big Bad Wolf is gonna getcha

Honestly, is there anybody left in the world that doesn't think the RIAA is evil? It would take decades of charitable donations to starving children and subway ads with little tigers drinking out of baby bottles with bows tied on their heads to even begin to regain the public's good will. More lawsuits? That's not gonna get the job done. Especially ones like this.

Satellite radio (and internet radio) have battled every step of the way with these bastards. Because presumably there are nefarious do-badders in the world who would record our station directly, successfully edit out all our station id's and fadeouts and me talking over intros all the time, and cultivate for themselves a massive library of music. For FREE. For SHAME. There are about 1000 easier ways to get this stuff, if breaking the law is your thing.

Basically, XM sells a radio that enables listeners to record songs they like for playback later. You may have done this yourself as a kid. I certainly used to tape top 5 countdowns on my boombox when I was about 13. This kind of activity is PROTECTED BY LAW.

But the Judge Deborah A. Batts, who is allowing this case to proceed, thinks that XM's subscription model changes things:

"It is manifestly apparent that the use of a radio-cassette player to record songs played over free radio does not threaten the market for copyrighted works as does the use of a recorder which stores songs from private radio broadcasts on a subscription-fee basis."

O RLY?

How about TiVo'ing something off HBO then? Am I going to buy Entourage on DVD if I have every episode sitting at home on my DVR? But that's video, and I digress.

The Wikipedia article for the Audio Home Recording Act (yeah, I know I linked to the same thing twice) has an interesting note at the bottom regarding this lawsuit:

The AHRA is important in the recording industry's suit against XM radio for Samsung's Helix and Pioneer Inno XM receivers, which allow users to record blocks of satellite radio and disaggregate individual songs. XM argues that the both devices are "digital audio recording devices" under the AHRA, and thus enjoy an exemption from copyright infringement actions for private, non-commercial copying. While neither the Inno or the Helix include SCMS, neither device allows any transfer of songs off of the device, effectively preventing any copying. The recording industry's complaint makes no mention of the AHRA, and argues that by marketing the devices, XM is using the compulsory statutory license to operate a digital download subscription service. Some commentators believe this is part of a larger attempt to undermine or eliminate the home taping rights guaranteed by the AHRA.

Watch out. The Big Bad Wolf is gonna getcha.

(There's a kinda neat program called Screamer Radio that I've written about before on this blog that will record radio streams for you in a very similar way to the devices in question in this suit.)