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  • The music industry

    Mar 31st 2004
    From The Economist Global Agenda

    The recording industry has launched a wave of lawsuits outside America in a bid to curb illegal file-sharing on the internet, which has contributed to a steep decline in music sales. The industry is cutting costs, consolidating and—finally—getting to grips with legal online distribution

    DESPITE a wave of hostile publicity, the 1,500-plus lawsuits launched by the music industry in America since last September seem to have had some success. Final figures for 2003 have yet to be released, but preliminary estimates suggest that the decline that has seen worldwide music sales fall by more than a fifth in the past four years (see chart) was arrested in the second half of last year in America. Heartened by this, the industry’s lawyers launched a second wave of lawsuits—this time in Canada, Denmark, Germany and Italy—on Tuesday March 30th.

    This is just one of many defensive measures being adopted by an industry that is feeling the pressure. There has also been a round of actual and attempted mergers and alliances, and a wave of restructuring, in a bid to improve efficiency. EMI has tried to merge with Warner Music, and was also linked with Bertelsmann’s BMG music arm. But BMG instead got together with Sony Music, while Warner Music was bought by a private-equity consortium. On Wednesday, the still-partnerless EMI said it will cut 19% of its 8,000-strong workforce and slim down its portfolio of artists in order to save £50m ($91m) a year.

    None of these actions has done anything to change the public's view of the music industry as one that gouges its customers. One reason that the illegal sharing of music files online is still so widespread is that music-lovers know how little of the price of a compact disc goes on its manufacture, or to the artist. Musicians, too, are becoming fed up. In an interview with BBC radio at the weekend, Simply Red’s Mick Hucknall described recording contracts as an “absolute disgrace” which belonged to “a Dickensian era”. He was particularly annoyed that musicians pay for recordings, but the music companies retain the rights to these. He suggested that this “immoral” system be replaced by a leasing type of arrangement, in which the artist gets control of the music once his relationship with the record label ends. Mr Hucknall has set up his own company and plans to re-record old output and release it in competition with existing recordings. Another pop star, George Michael, has said he will release his songs free on the internet, to remove himself from “all that negativity” surrounding the pressure to produce new records that comes from major labels.

    When it comes to the internet, the music companies have, after years of burying their heads in the sand, finally got the message. The industry has at last given its backing to online music stores, such as Apple Computer’s iTunes and Roxio’s Napster 2.0 (not to be confused with the company killed off by the music industry for aiding illegal downloads). Even so, the number of 99-cent tracks sold by these companies remains dwarfed by the free downloads still available using the likes of KaZaA and Grokster. The industry has failed to shut down file-sharing companies whose peer-to-peer software has legitimate applications. However, behind the scenes the big labels are understood to be in talks with these pirates, to see if they can agree on a way to extract payments for songs.

    According to the International Federation of the Phonographic Industry, the lawsuits against file-sharers in America had a “healthy effect on the industry”, the Wall Street Journal reported. From an initial 250-odd cases, the industry has now sued more than 1,500 alleged file-sharers, of whom around 400 have settled. This provided the impetus for this week’s suits against 247 users in Canada and Europe. One Danish case allegedly involved some 50,000 songs; Denmark has seen a whopping 50% decline in sales of CDs over the past four years.

    Despite the industry’s official optimism about its legal strategy, it has limitations. Even after lowering the bar to go after those who have shared hundreds of songs—rather than thousands—the big labels have still sued less than 0.1% of illegal file-sharers; the lawsuits have made many of the others think twice before downloading illegal music, but plenty have continued regardless. Moreover, the strategy has created public-relations problems, exacerbating the public view of the industry as rapacious.

    Meanwhile, there are signs that the industry is looking at more imaginative ways to arrest the decline in music sales. Universal Music and Sony Music are both working with their stars to remix songs into shorter versions, up to two minutes long, that can be sold through mobile phones. A.T. Kearney, a consultancy, reckons this market could account for almost a third of all music sales by 2006 if it is priced attractively. There’s the rub: songs on handsets are currently being sold for a pricey $4.50 a time in Britain and $3 in Germany. Anyone for illegal ringtones?
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  • #2
    This is actually an area I take a lot of interest in as a Music Business/Industry major.

    IMO, the RIAA and the Big 5 record labels really shit the bed in the infancy of file sharing -- they could have been pioneers and distributed music electronically and LEGALLY, but instead they chose to panic and soil the sheets. Now the industry is fucked, and the RIAA is to blame for it's rapid decline.

    iTunes Music Store, Wal Mart, the "legal" Napster... they all have the right idea. Too bad the RIAA showed up to the party 5 years too late.

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    • #3
      I think the way music is created packaged and marketed NEEDS to change. How long has the American public been held hostage to the musical preferences of a select few? How many more divas du jour or boy bands or Nelly clones do we really need?

      I listen to very little of the music we get on the radio now. The indy stuff is much better, and so is the old AOR music.

      With the ability now to record and produce CDs on a desktop, the big record companies are being left in the dust. Their scrambling and lawsuits against kids and old people is going to blow up in their faces, just as it should.

      Savvy marketers will soon catch up and create distribution systems that render the record companies' exclusive distribution systems obsolete. More people will be exposed to more different kinds and better music. This can't be anything but a good thing. Screw the record companies. Consider all of the file sharing as payback for Richard fugging Marx.
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      • #4
        What they haven't mentioned is that the RIAA companies have cut the number of artists published and the # of CDs printed each year over the past 5 years.


        They expected these drops, and incited them themselves.
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        • #5
          How long has the American public been held hostage
          I was never forced to buy a cd or tape I did not choose to buy.
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          • #6
            This reminds me: I need to see what CDs I need to get....

            "Can't buy what I want because it's free...
            Can't buy what I want because it's free..."
            -- Pearl Jam, from the single Corduroy

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            • #7
              Originally posted by lazydaze@Mar 31 2004, 04:43 PM
              How long has the American public been held hostage
              I was never forced to buy a cd or tape I did not choose to buy.
              I've not either. But when I go to the very limited number of outlets to buy music and find an even more limted selection of worthless music, all the while there being great music made that I'm never exposed to because of the death grip on the distribution systems by the big record companies, I feel as though I'm being held hostage.
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              • #8
                There were musicians before the RIAA, there is non-RIAA music now, and there will be music if and when the RIAA ceases to exist.

                Why is the music industry even allowed to have a organization that consists of the major companies of a certian market? In most if not all other industries the biggest companies are prevented from being entangled at all with each other and the big music labels were allowed to join together and form the RIAA? WTF?

                As long as there's an RIAA I see no reason to support the major labels.

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                • #9
                  Originally posted by kicksave@Mar 31 2004, 04:54 PM
                  Why is the music industry even allowed to have a organization that consists of the major companies of a certian market? In most if not all other industries the biggest companies are prevented from being entangled at all with each other and the big music labels were allowed to join together and form the RIAA? WTF?

                  I don't know. That is a good question. Any of you know how they are able to do that?
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                  • #10
                    Originally posted by Crackless McCracken+Mar 31 2004, 03:47 PM-->
                    QUOTE (Crackless McCracken @ Mar 31 2004, 03:47 PM)

                  • #11
                    Originally posted by lazydaze+Mar 31 2004, 04:56 PM-->
                    QUOTE (lazydaze @ Mar 31 2004, 04:56 PM)
                    Originally posted by Crackless [email protected] 31 2004, 03:47 PM

                  • #12
                    Ahha, they hate you. Its you.

                    You can't buy directly from the band? I would assume if its great music they have a record, or least a CD.
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                    • #13
                      Originally posted by lazydaze@Mar 31 2004, 05:01 PM
                      Ahha, they hate you. Its you.

                      You can't buy directly from the band? I would assume if its great music they have a record, or least a CD.
                      No I don't think the record companies hate or have any grand conspiracy going to keep me sheltered or anything.

                      Back in the day we had a circle of friends with whom we shared music. In the new century technology has made it so that circle of friends is global, and instead of a dozen or so friends to share music with it is now possible to share the music with millions. The record companies want to prevent that for purely financial reasons.

                      These companies have been exploiting musicians and songwriters for decades, virtually since the creation of the recording industry. Their interests lie strictly in the financial realm. And that's fine. I am all about the free market. But personally I am more interested in seeing as much of the art distibuted as possible without the big record companies poking their nose in and regulating it.

                      The artists for the most part make their money touring and marketing their image. Most bands don't make enough off of a first recording to pay back the record company for studio time and packaging, etc. The more their music gets exposed to the public, the better off they are in drawing audiences to live performances.

                      The same record companies who have exploited artists since day one are now trying to pretend to be concerned about artists losing money, when it is their own bank balances they are really concerned about.

                      If they are truly concerned about the state of their industry that they have monopolized for all these generations, they should think about putting out a better product instead of trying to stick it to file swappers.

                      Im curious lazy, do you work in the recording industry? I'd be interested to get the perspective from someone who works in the field.
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                      • #14
                        IMO, the quality of pop/rock/r&b music has been on the downhill slide since the advent of MTV.

                        It used to be, that to get a song significant playtime on the radio, one had to have some talent. With MTV, all one needs is a freaking gimmick.

                        Do you think such putzes as Cyndi Lauper, Madonna, and George Michael would have made it before videos?
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                        • #15
                          Originally posted by The Kev@Mar 31 2004, 05:20 PM
                          IMO, the quality of pop/rock/r&b music has been on the downhill slide since the advent of MTV.

                          It used to be, that to get a song significant playtime on the radio, one had to have some talent. With MTV, all one needs is a freaking gimmick.

                          Do you think such putzes as Cyndi Lauper, Madonna, and George Michael would have made it before videos?
                          Boy aint that the truth? It's just that reason that we had atrocities like Milli Vanilli.
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