http://blogcritics.org/ A sinister cabal of superior bloggers on music, books, film, popular culture, politics, and technology - updated continuously. en Copyright 2005-2007 by the authors Fri, 4 Oct 2002 20:21:26 EDT http://backend.userland.com/rss Blogcritics.org custom software http://blogcritics.org/ Phillip WinnSunday, August 26, 2007, marks the switch of all Blogcritics.org article feeds from full-content to short-content. This is the result of several converging factors, and is unfortunately a permanent decision (as permanent as any decision can be on the web, that is). We are aware of all of the reasons that this is a Bad Idea, and we are aware that some of you will be quite upset about having to click on something to read the free content, and we're sorry. Unfortunately, despite great effort, full-content feeds are not currently economically viable. Two other factors are involved: full-content feeds have resulted in an unprecedented level of content theft, with BC content appearing on many websites, usually spam sites, without attribution or permission. This duplicate content causes a cascading set of problems, not the least of which is that search engines generally aren't favorable to duplicate content, and don't always guess correctly. Finally, our RSS advertising partner is strongly in favor of short-content feeds. We hope that you'll continue to subscribe to BC via RSS, and when an article grabs your eye, it's only a click away, still free on the BC website. Thank you for your understanding. Administration0@blogcritics.org Sun, 26 Aug 2007 12:00:00 EDT http://blogcritics.org/archives/2002/10/04/202126.php Martin DevonI've been told many times that my brain just isn't wired the way other people's brains are. Maybe that's why I was struck by this item in the Onion that Andrew Sullivan linked to:The Recording Industry Association of America filed a $7.1 billion lawsuit against the nation's radio stations Monday, accusing them of freely distributing copyrighted music."It's criminal," RIAA president Hilary Rosen said. "Anyone at any time can simply turn on a radio and hear a copyrighted song. Making matters worse, these radio stations often play the best, catchiest song off the album over and over until people get sick of it. Where is the incentive for people to go out and buy the album?"According to Rosen, the radio stations acquire copies of RIAA artists' CDs and then broadcast them using a special transmitter, making it possible for anyone with a compatible radio-wave receiver to listen to the songs.Funny parody, isn't it? That seems to be the general reaction to it, but as I said, my brain is wired a bit differently. I look at it and think, why is it so absurd? Exactly why should radio stations be able to make money by playing free content? The record companies are the perfect villains these days, but... for the sake of simplifying the argument, let's say that all the royalty issues got settled, and the record cartel got broken up. Furthermore, let us assume that there were twenty record companies that shared 50% of the market, with little Indies sharing the other 50%. Finally, for this argument let us pretend that artists got 50% of the net receipts that record companies got.Could you then explain why radio stations shouldn't pay to broadcast content? Let's look at the closest analog to this situation -- television. Why shouldn't NBC broadcast Friends, ER and Scrubs for free? After all, every time that they show an episode of Friends it is a free advertisement for the Friends DVD Boxset¹. Every Buffy episode is selling Buffy DVD's. Sure, there is so much more money in the broadcast rights and the syndication rights. So what?Why do you think that the radio megamedia companies make so much money? ² The investments in physical plant have already been made, the upkeep isn't that expensive, and the content is free ³ (or sometimes they even get paid to play it). The only difference between radio and television profit schemes is due to how they evolved. There were LP's before music on the radio got big. On the television side, show were playing for many years before the advent of video recorders.So why is the Onion article so funny? I can see that it is. Sort of. I guess it depends on your frame of reference... _________________________¹ A noprize to the first person to correctly explain the difference between a Boxset and a Boxed Set (yes, they are two different things).² No, I'm not talking about Internet radio. While I do believe that the record companies have a right to charge radio stations for content, I'm not happy about their actions vs. Internet radio stations. In my opinion they should have worked with fledgling Internet radio stations to help them build up the market, and guarantee a future revenue flow instead of charging the kind of rates that shut them down. But shotgun to the feet is often the default stance of the RIAA companies to new technology.³ OK, not free. they do have to pay royalties to the songwriter(s), but they don't pay any performance royalties, which is what the RIAA is looking for. Music1095@blogcritics.org Fri, 4 Oct 2002 20:21:26 EDT http://blogcritics.org/archives/2002/09/25/190019.php Martin DevonThe acrimony between the record labels and the artists is flaring up again. The artists say:At a state hearing in Los Angeles, the musicians said they had sold millions of songs or albums only to receive sparse royalties or to be told they actually owed their respective record labels money to recoup advances.In their own defernse, the record companies say:Charles Ciongoli, senior vice president finance for Vivendi Universal's Universal Music Group, the world's largest record company, said "the facts tell a far different story than some of our detractors would like to admit, and are not nearly as headline grabbing as the acrimonious accusations of a few who irresponsibly label us criminals and thieves."Much as I hate to agree with "the Chuckster," he does have a point. While it is true that both sides would benefit from clearer and cleaner contract language, the recording artists get far better press than they deserve. There is plenty to be critical of the RIAA member companies for, especially on the legislative front, but there are two sides to every story. The record companies do much worse on the Royalty end than most people realize.To illustrate this I will re-post an item I wrote in July. It sparked quite a bit of debate when I originally posted it on my site, so I figured I'd re-post it here to piss off a whole new audience. I've edited it slightly from the original.* * * Funny moneyYup, it sure is a great rant that Courtney Love wrote. Her thoughts on where the music industry is going are really interesting, and some sections are quite heartfelt:Artists will make that compromise if it means we can connect with hundreds of millions of fans instead of the hundreds of thousands that we have now. Especially if we lose all the crap that goes with success under the current system. I'm willing, right now, to leave half of these trappings -- fuck it, all these trappings -- at the door to have a pure artist experience. They cosset us with trappings to shut us up. That way when we say "sharecropper!" you can point to my free suit and say "Shut up pop star."Here, take my Prada pants. Fuck it. Let us do our real jobs. And those of us addicted to celebrity because we have nothing else to give will fade away. And those of us addicted to celebrity because it was there will find a better, purer way to live.I agree with her position on work for hire and the cluelessness of the majors vis a vis the web ¹. The rant is long, but well worth reading. Don't let her do your taxes, though. Love's music biz accounting is horrible, even if you use her numbers (which I wouldn't). There is plenty of reason to hate the record companies without making shaky arguments. Shaky arguments you say? Shall we take a quick look-see?This story is about a bidding-war band that gets a huge deal with a 20 percent royalty rate and a million-dollar advance. (No bidding-war band ever got a 20 percent royalty, but whatever.) This is my "funny" math based on some reality and I just want to qualify it by saying I'm positive it's better math than what Edgar Bronfman Jr. [the president and CEO of Seagram, which owns Polygram] would provide.Actually, Seagram sold to Vivendi, and Jean-Marie Messier ² is the CEO of the group that owns PolyGram, not Edgar. Oh yeah, I forgot, Messier just resigned. Fair enough - I suppose it is kind of hard to remember who the players are without a program.What happens to that million dollars?They spend half a million to record their album. That leaves the band with $500,000. They pay $100,000 to their manager for 20 percent commission. They pay $25,000 each to their lawyer and business manager.Why are you spending $500,000 to record the album? The top-flight studios are expensive because they provide highly pampered services. In the old days there was a reason to spend that money but now I have friends whose home studios are more sophisticated then Abbey Road was when the Beatles recorded Abbey Road. You don't have to spend near $500,000 getting a high quality album made these days.That leaves $350,000 for the four band members to split. After $170,000 in taxes, there's $180,000 left. That comes out to $45,000 per person.Why is the manager getting 20%? Managing "high maintenance" bands, they earn it, but really, why should they get an equal share? Also, what difference does it make that 50% ³ goes to taxes? Love makes it sound like it is the record company's problem that she pays here manager 20% or that she has to pay taxes. They pay taxes too. Besides, don't most artists support politicians that want to raise taxes? Note that although a solo artist has to pay taxes to, he doesn't have split his money with band members either.That's $45,000 to live on for a year until the record gets released.You don't need a business manager and a band manager to turn $1,000,000 dollars into $45,000. Either hire managers that know what they are doing or fire them both and pocket their fees.So far the record company is out a million bucks, they don't have anything to show for it, and they have a pissed off artist who thinks they are being screwed. Sounds right so far.The record is a big hit and sells a million copies. That only happens sometimes. For the average company that will happen one time in ten. Using the numbers in this example the company is out ten million bucks in expenses that they have to dig out of to make a profit from one hit album.(How a bidding-war band sells a million copies of its debut record is another rant entirely, but it's based on any basic civics-class knowledge that any of us have about cartels. Put simply, the antitrust laws in this country are basically a joke, protecting us just enough to not have to re-name our park service the Phillip Morris National Park Service.) Take a look at the deals signed by Janet Jackson or Mariah Carey. Cartels don't make those kind of deals.So, this band releases two singles and makes two videos. The two videos cost a million dollars to make and 50 percent of the video production costs are recouped out of the band's royalties. So the record company is out another million bucks, only half of which they can recoup if the record is a hit. Meanwhile all the videos for albums that tank add another 9 million in costs that the record company has to overcome if they are to make a profit.The band gets $200,000 in tour support, which is 100 percent recoupable. Except that the record company makes zero money off of a tour, and a band can make a great deal of money from touring. The record companies front the money in the hopes that the tour will generate album sales.The record company spends $300,000 on independent radio promotion. You have to pay independent promotion to get your song on the radio; independent promotion is a system where the record companies use middlemen so they can pretend not to know that radio stations -- the unified broadcast system -- are getting paid to play their records.True. But that doesn't mean they don't have to pay it. If they don't your record will probably not get enough airplay. That would significantly reduce the chances that your song album will become a hit. All of those independent promotion costs are charged to the band. All of those costs are required to market your release.Since the original million-dollar advance is also recoupable, the band owes $2 million to the record company.Kinda. They aren't going to go after your house if you don't pay it. These expenses are held in a royalty account. As royalties come in they are charged against the recoupable expenses. Once the money is "paid," 2 million in this example, future earnings get paid out.If all of the million records are sold at full price with no discounts or record clubs, the band earns $2 million in royalties, since their 20 percent royalty works out to $2 a record. You mean the band "grosses" $2 million.Two million dollars in royalties minus $2 million in recoupable expenses equals ... zero! All this really says is that the artist has to sell 1 million units to recoup their recoupable expenses. If they sell 2 million units the band would receive $1 million in royalties after expenses. If it sells 10 million units then the "Prada pants" start flowing. If the album sells 22 units the record company is never going to recoup that $2 million. This is called break-even analysis.How much does the record company make?There isn't enough information in this example to tell you. There are many more costs that Love didn't add up, like the cost of all the albums that tanked. They grossed $11 million. And the band grossed $2 million. If you look at just the expenses that Love counted, the record company is "up" $9 million. But they have a whole big machine of people they have to pay to make those 1 million units sell, not to mention a whole bunch of bad (and good) albums that didn't sell that they have to pay for.It costs $500,000 to manufacture the CDs and they advanced the band $1 million. Plus there were $1 million in video costs, $300,000 in radio promotion and $200,000 in tour support.What is the $500,000 manufacturing costs based on? Marginal unit cost? This grossly underestimates the fixed costs involved in running a CD manufacturing plant.The company also paid $750,000 in music publishing royalties.They spent $2.2 million on marketing. That's mostly retail advertising, but marketing also pays for those huge posters of Marilyn Manson in Times Square and the street scouts who drive around in vans handing out black Korn T-shirts and backwards baseball caps. Not to mention trips to Scores and cash for tips for all and sundry. That's $2.2 million in external marketing expenses for this album. This doesn't include the overhead for all the marketing, promotion expenses in the form of salaries, not to mention the cost of royalty accountants, lawyers and most importantly IT people.Add it up and the record company has spent about $4.4 million.So their profit is $6.6 million; the band may as well be working at a 7-Eleven.You mean the band that turned $1,000,000 into $45,000? That's still more than a clerk earns at 7-11. As I've shown, the record company spent much more than $4.4 million, and that's not even accounting for the time value of money. Even if Love's numbers were correct (which they clearly aren't) they don't say what she thinks they do. All they show is that at 2 million units her band makes $1 million before taxes and the record company makes $6.6 million before taxes. They also show that at 0 units the band makes $1 million and the record company loses $4.4 million. It sounds suspiciously like there are some risk/reward multiples at work here. I can only imagine how much Sony lost on the latest Michael Jackson album. It pains me to Fisk Love over this. The rest of her essay is very good, as are many of her criticisms of the record companies. But we've got enough misconceptions floating around because of sloppy accounting. Let's not add to the problem._________________________¹ It is ironic that she complains about the pathetic state of her label's web knowledge. Geffen was actually a web pioneer, but it lost all the web savvy guys in the PolyGram merger. I'm not surprised that Love had the experiences she did.² This was written in July. As of today (Sept. 25, 2002) Jean-Rene Fourtou is CEO. I could just point to the CEO page of Vivendi to make sure I've got the name right, but who knows how long that link will stay good.³ Of course, 50% doesn't go to taxes. The actual tax rates are here. Music890@blogcritics.org Wed, 25 Sep 2002 19:00:19 EDT http://blogcritics.org/archives/2002/09/20/191519.php Martin DevonIf you ever wonder why musicians are so popular with the ladies, it is because they can sing lyrics like these in a way that melts a woman's heart:Cause if you want love We'll make it Swimming a deep sea Of blankets Take all your big plans And break 'em This is bound to be a while If, on the other hand, I were to sing those lyrics I would get smacked. But perhaps I should test that theory out before dismissing it out of hand.... Culture716@blogcritics.org Fri, 20 Sep 2002 19:15:19 EDT http://blogcritics.org/archives/2002/09/06/020700.php Martin DevonThe Los Angeles Times reports that the mystery is solved:A yearlong investigation by The Times reconstructed the crime and the events leading up to it. Evidence gathered by the paper indicates:The shooting was carried out by a Compton gang called the Southside Crips to avenge the beating of one of its members by Shakur a few hours earlier.Orlando Anderson, the Crip whom Shakur had attacked, fired the fatal shots. Las Vegas police discounted Anderson as a suspect and interviewed him only once, briefly. He was later killed in an unrelated gang shooting.The murder weapon was supplied by New York rapper Notorious B.I.G., who agreed to pay the Crips $1 million for killing Shakur. Notorious B.I.G. and Shakur had been feuding for more than a year, exchanging insults on recordings and at award shows and concerts. B.I.G. was gunned down six months later in Los Angeles. That killing also remains unsolved.Before they died, Notorious B.I.G. and Anderson denied any role in Shakur's death. This account of what they and others did that night is based on police affidavits and court documents as well as interviews with investigators, witnesses to the crime and members of the Southside Crips who had never before discussed the killing outside the gang.Fearing retribution, they agreed to be interviewed only if their names were not revealed.[...]For the Crips, the beating of Anderson was an egregious affront warranting swift and fatal retaliation. Still, the Crips thought, why not make a little money while they were at it? They decided to ask Shakur's biggest enemy to pay for the hit.The gang arranged a rendezvous with Notorious B.I.G. The Brooklyn rapper, whose real name was Christopher Wallace, hated Shakur and had been feuding with him for more than a year.Once tight friends, the two entertainers now ridiculed each other at events, in interviews and on recordings. In one song called "Hit 'Em Up," Shakur bragged about having sex with Wallace's wife and vowed to kill him. The threats between the rappers and their labels, Death Row and Bad Boy Entertainment, escalated into a series of assaults and shootings--one of which resulted in the killing of a Death Row bodyguard in Atlanta in 1995.Fearing for his safety, a friend of Wallace's arranged for the Crips to supply bodyguards for the rapper whenever he traveled west. Over the years, the gang was paid to provide security for Wallace at casinos in Las Vegas, clubs in Hollywood and award shows in Los Angeles. Besides cash, Wallace gave the gang access to stars, groupies and the inner sanctums of the music business.Wallace began flashing Crips gang signs and calling out to the homies at concerts, sometimes even inviting gang members on stage. Privately, he prodded the gang to kill Shakur--and promised to pay handsomely for the hit.On Sept. 7, 1996, the Crips decided to take him up on the offer.They sent an emissary to a penthouse suite at the MGM, where Wallace was booked under a false name. In Vegas to party, he didn't attend the Tyson-Seldon fight but had quickly learned about Shakur's scuffle with Anderson. Wallace gathered a handful of thugs and East Coast rap associates to hear what the Crips had to say.According to people who were present, the Crips envoy explained that the gang was prepared to kill Shakur but expected to collect $1 million for its efforts. Wallace agreed, on one condition, a witness said. He pulled out a loaded .40-caliber Glock pistol and placed it on the table in front of him.He didn't just want Shakur dead. He wanted the satisfaction of knowing the fatal bullet came from his gun. 438@blogcritics.org Fri, 6 Sep 2002 02:07:00 EDT http://blogcritics.org/archives/2002/08/31/130151.php Martin DevonIn her Weekly Standard article, RIAA's Hold on the House, Katherine Mangu-Ward looks at the latest RIAA lobbying effort, this House bill (PDF):Both of these reforms--limitation on fair use, and protection of webcasting--would assist the entertainment industry in its continuing legal fights to protect intellectual property. In other legislation, the industry has gone after independent webcasters like AudioGalaxy. This law instituted a royalty scheme for webcasts of copyrighted material. If the Coble-Berman bill passes, the only legal webcasts will be those played from pay-per-webcast or membership sites like Duet and MusicNet, which are made possible by the Recording Industry Association of America.And if these measures don't finish off independent online music dissemination, another bill also proposed last month by Rep. Berman--who received over $140,000 in contributions from the entertainment industry toward the 2002 race for the California district that includes Hollywood--might provide the coup de grace. [...]In the memorandum accompanying the draft of the bill regarding fair use and webcasting, Berman and Coble state that "the development of the draft does not constitute an endorsement of its contents." It is fairly unusual for congressmen to draft bills they do not support, but spokeswoman Gene Smith has been quoted as saying that they wrote the bill at the request of House Judiciary Committee chairman James Sensenbrenner (R-WI).Regardless of Berman, Coble, and Sensenbrenner's individual goals (which remain unclear), the bill won't get beyond the draft stage in this session, to the dismay of the entertainment industry. But watch for its resurrection when Congress reconvenes. This is the kind of legislation that slips into law without anyone noticing, only to wreak havoc later when it is exploited by an enterprising corporate lawyer.If you don't have the inclination to read the bill itself, this summary article will help you stay informed. Culture324@blogcritics.org Sat, 31 Aug 2002 13:01:51 EDT http://blogcritics.org/archives/2002/08/24/000318.php Martin DevonThe music industry is having a hard year, as the Music Watch sales report in the August 24th Billboard Magazine indicates:YEAR-TO-DATE OVERALL UNIT SALESCategory20012002ChangeTotal449,918,000390,378,000 - 13.2%Albums426,753,000382,431,000-10.4%Singles23,165,0007,947,000 - 65.7% The 10.4% drop in album sales is troubling for the record companies from a profit perspective, though the huge 65.7% drop in singles sales is quite striking. Singles have been a "loss leader" used for promotional purposes for quite some time, so the big drop in singles sales does not imply a corresponding drop in profits, but it does shed some light on how the digital age has changed the music business. To a large extent digital samples and web downloads have taken the niche formerly occupied by singles, both officially or otherwise.As bad as this year's sales have been, what really terrifies the music companies is the possibility that next time the 65% drop will be in album sales. Yet according to this study by Forrester that Billboard's Brian Garrity summarizes, the downturn in music sales isn't due to piracy or file sharing. They blame the economy, DVD and videogame sales for the drop. Forrester also forecasts that by 2005 the download business will finally hit its stride because of the adoption of new technical standards that will improve the legal burning and transfer of music to playback devices. They predict that subscriptions/downloads will account for a full 17% of revenues by 2007.***The Forrester forecast is interesting -- it is easy to make fun of a prediction when a research outfit goes out on a limb, but it is stimulating. Certainly a user friendly music subscription service is long overdue, and should be able to find a sizable share of the market. But... $2 Billion of music sales won't happen by itself. It will require the record companies (or someone) to provide consumers with new high quality services at reasonable prices. The Forrester research tells us that the business is out there, but nothing we've seen indicates that the majors have the right mindset to provide the services that music lovers are looking for quite yet. This leaves a great opportunity for the record labels of the future to fill this void. Music214@blogcritics.org Sat, 24 Aug 2002 00:03:18 EDT