The Music Industry’s Last Stand Will Be A Music Tax

Seems to me, they should do like other sites and get their revenues from advertising. Provide their music free on their own sites and have big name advertisers paying for eyeballs. I realize this would go against their legacy of not working for ‘the man’, but that seems to be the way everything is going now (for instance, the sponsors of each of the NCAA bowl games).

Regarding Trent’s latest venture: In an interview he himself stated that they don’t know how many people have downloaded the free album first, and then went on to purchase it. I think this is a major consideration and should be researched further - I could very well imagine that a majority would download the free version to sample the album, and, if they like it, would continue to buy it. Hence, I don’t think the 18.3% would be very accurate - at least I would hope so!

“Asking the government to prop up a dying industry is always (always) a bad idea.”

Mike, you’re spot on.

I can understand Trent Reznor’s disappointment about only 18% of people choosing to pay for the album that he put out there, but I have to wonder how many people would have payed $5 for the album if that was the set price. I suspect the number of paying customers may have remained unchanged but the number of non-paying customers may have gone down significantly.

There’s another way to tax free music online. It is called advertising.

If the future of music is through concerts and other community, does anyone know of an idea where to see a band in concert, you must provide electronic proof that you “purchased” their music online or at a store? Hmmm…

You have a very silicon-valley perspective about this topic. Not all media can/should/will be free just because of the implications of free distribution. While very sensible, I don’t think your assumptions about personal behavior will hold in many cases. Music (and video, etc) still have a value associated with them. The only evidence that I have is that even while file sharing has exploded in recent years, so have for-pay services. And for all we say about digital music, people do still buy CDs - albeit fewer people than before. So I don’t think the market evaporating as you imply. But I think it is certainly destroying itself along the lines of intellectual property ownership. It will reconstruct itself under different IP lines. Unlike what everyone thinks in Silicon Valley, monetizing “popularity” doesn’t really work sustainably. There are very few examples where this is the case. Music will always cost something. You just will have to pay someone different in the future.

Did you bother to read Chris Anderson’s post about Trent Reznor? The man nearly three times more money than he did on the last release.

A solution for passing out a music tax that preserves incentives is to pass it out proportional to live performance revenues. In that form Internet music truly becomes an advertising vehicle who goal is to achieve the highest live revenues possible. Since the current establishment doesn’t control the venues they won’t be able to lock out new talent.

Basing it on live performance revenues means that every single band has a crack at the tax money. The system is also easily audited and hard to scam. There would even be a great side effect - lot’s more live concerts to see, no more going ten years without a tour.

Piracy is not unique to the music industry. It happens for every digital good out there, yet that hasn’t stopped, say, software vendors from selling their products. We tend to over dramatize the music situation, but I can’t see any hard figures anywhere (except for RIAA’s accounts of the phenomenon). There’s people who buy and people who don’t and as long as it stays like that (regardless of proportions) there will be absolutely no way that the labels will let music be free.

Advertising as revenue source for music is an interesting idea, but I don’t quite see it happening either. It seems a bit cheap and implies you’ll get a considerable amount of music ‘buyers’ getting their stuff from a centralized location (which won’t happen).

I dunno. We pay a tax on TV and radio content, and plenty of people don’t use either. I’d gladly pay $5/mo to not feel like a crook.

I’m reminded of a scene from “The Agony and the Ecstacy” where Michelangelo is being comforted by friends after the Pope refused to let him finish the Sistine Chapel. They were bitching about how the rich and powerful didn’t appreciate what it meant for an artist’s work to be seen (or, in the case of music, heard). One man says, “But we’re artists. We’ll always be a slave to another man’s nickel.”

I’ve always found this to be insightful in understanding the music business. The artists want to be heard. The business wants to make money.

As for wanting a government bailout, that’s not hard to believe from a business that thinks suing its customers is a good model.

Sorry “TexMex4Me”, music just doesn’t work that way. Ad supported? Can you imagine going to an art museum and seeing ads next to a Picasso because it is ad supported? I would rather pay the $25 to get in. Besides, music is already ad supported, have you seen those Outback ads with the “Of Montreal” song “Let’s Pretend We’re In Antarctica!”? I am sure you have, ad supported used to be called selling out.

There are two conversations here: real vs. fake music.

What I call independent music (or real music) has managed, against all odds, to become a major force on the artist side of the music industry. Fake music (i.e. The Backstreet Boys, Creed, or Panic! At The Disco) are, by nature, products that were meant to be bought and sold. Selling out was implied. The issue is that out of no where “real music” (with little to no budget) has managed to spread itself far and wide, b/c the musicians just want their music heard (just like any real artist just wants their work displayed).
Unfortunately, “fake music” can’t keep up or get paid. There has been a large cultural backlash (ala the 1960) where people have simultaneously realized a.) music should be free (and I am not sure I agree, but I am also not sure what a fair price is) and b.) the music that you have been force-fed for decades kind of sucks.
The music industry has seen the market buying their music decline due to technology’s price point (zero dollars) and has seen the interest in their music drop due to technology (and it’s ability to proliferate better music to more people for free).

The music industry is screwed not because they have put all their eggs in the record sales basket (which is the case), but because they perfected the art of buffing white-hot shit to a high gloss shine then spreading it like Nutella over the ears and airwaves of America. It is the combo of selling a worthless piece of shit at a non-market driven price that has (and will continue to) screw the music industry.

Getting back to “TexMex4Me”, music is art. I am not sure how we got so far away from that. How do you sell art? How do you price art? It is hard, but ad supported is not the answer, I am sure of that.

a levy also puts a cap on the business. one day, the labels could conceptually figure out how to make money again. the levy would help them in the near term, hurt them in the long run.

i believe that when we get through this sea change, the labels of the future will adapt and be bigger than they are today. we’re in a very transitory, painful period.

Well said. Now, where are all the whiners?

Please show them the examples of many bands that have always existed on the live show/ merchandising revenues:

The Grateful Dead
Widespread Panic
The String Cheese Incident (they even had a travel agency, as well as ticketing)
etc. etc. etc.

Thank you for this post! Music can be nothing more than a business card for the artist as long as governments not help labels to maintain a monopoly through taxes, etc.

Michael great post…..

@Don Jones - “does anyone know of an idea where to see a band in concert”….either there’s a typo or you are not from this planet…..the only proof we need is something called tickets

@Doug….its a silicon valley perspective but here’s the news, this situation is a silicon valley creation and the only reason why people still buy CDs or pay for music and video is because they haven’t figured out how to use torrents (or haven’t heard of imeem.com or videohybrid.com). So its only a matter of time when more and more people get on this bandwagon…..its basic human nature….if I don’t own the thing completely I don’t want to pay for it….

Back in 2003, I used to subscribe to the Pho List. When I stated that the true value of recorded music was going to be zero very soon, I was practically assaulted.

I can’t say I’m happy to be vindicated, but as it turns out, I was only 5 years ahead. So this begs the question, now what?

I seem to remember that the music industry imposed a “tax” on CDRs. Since CDRs are no longer used to copy music however, that tax is logically going to move to the preferred medium which is the network pipe. I see ISP music fees in our future.

Anyone that says the advertising model will work doesn’t understand that I will still use bitorrent, period.

Mike laid it out for you, but you still can’t get it so I’ll say it again:

1) Live concerts
2) Merchandising

@Frank….exactly for example its my dream to watch Pink Floyd live in concert (the entire band together) and I’ll pay anything to watch it, I’ll even buy a t-shirt to prove I was there…..whereas I have the entire collection and not all of it was paid for…..

“The incentives created by such a system are perverse - guaranteed revenue and guaranteed profits will remove any incentive to innovate and serve niche markets. It will be the death of music.”

Everyone has capitalist bs syndrome. People have made music for free since the beginning of time. People will innovate and create music until the end of time–regardless of how whether lawyers and MBAs can profit off of it.

Interesting. Featured article over at MSN Careers “America’s Fastest Growing Salaries” lists Music Directors and Composers at #7 and #8 is Film and Video Editor’s. So there is demand driving salary growth in two industries who have been crying wolf for awhile now. They need to stop acting like a Telco and trying to litigate revenues.

Three issues with having the music, in effect, be nothing more than ads for the concert tour:

1) Age. I would argue that the number of people who attend concerts drops off at a certain age. The is an adult contemporary market, for example, that would make very little money from concerts in my opinion.

2) Not all performers tour. Please tell me where I can see Glenn Gould play the Goldberg Variations and I’ll gladly pay!

3) Geography. Right now, the music industry can make money from people who live places not serviced by band tours. If the music is free, then that revenue disappears.

Since you are so fond of your marginal cost argument with regard to music prices, what do you think will happen to the price of blockbuster movies with many multi-million dollar budgets? Will the price of those fall to $0 too? What alternative revenue streams could they possibly tap?. Advertising surely can’t pay for all that.

Your whole argument really isn’t about marginal costs. It’s about the price of illegal competition. Remove illegal competition and then all of a sudden the price is now a function of a number of other factors, such as overhead cost, marginal cost, demand, and legal competitors.

It seems certain that change is necessary, compelled by the greed of music publishing and distribution. Suggesting that the industry is dead seems a bit of a stretch; after all, musicians still want to create and produce music and most want compensation for their efforts. Suggesting that the artist’s content be free and that income be based upon the ability to pull advertising, values the wrong component.

I can see how a downloading fee could work where subscribers pay a nominal monthly fee for their first download and subsequently all others are free. Combining this simplified model with stiff and enforceable penalties for skirting the modest fee and this might become workable. I would object to the market being driven by a segment of the market that appears to devalue the artist’s product. Let’s not confuse what we can do with what we should do, and this issue appears to pit the gluttonous values of the industry against the criminal values of certain elements of the public.

Yet, the undisciplined Ayn Rand reference to governmental role for industry suggests naiveté.

Welcome to Spain in 2008! Our congress approved an infamous music tax lat year that has been active since Jan 1st of 2008. In Spain we have something similar to RIAA, called SGAE which is an independent and private foundation. The problem is that right now we pay a tax over all gadgets that may allow piracy of any type. That means that we pay and extra for cellphones, pda’s, hard disks, cds, dvds, usb keys, etc. Depending on the media, prices have increased in 40% with respect to last years prices. Tech shops say that SGAE makes more profit with the music tax than they do.
It’s become so ridiculous that 50 DVDs cost something around €60, but a hard disk of 250Gb costs €55.
Again, assuming that someone is going to commit a crime without any proof is at least unconstitutional! But hey, politics always being brainwashed by the guys with the money. Estimates say that *just* with DVD’s sales they’ll get something around €25M a year in benefits from the music tax.
I hope that congress will revoke the law during this year… because I’m sure that they weren’t very sure of what they’ve done. Now they are starting to see the consequences of the music tax…
Please, keep the US congress away from that tax, I can tell you it’s an abomination first hand.

A “Music Tax” is the stupidest idea ever … so I’m sure it will get a lot of attention in Washington

I congratulate Peter Jenner in being able to reach his midsection with his head, but he is clueless: “Tax everyone now matter where they get their music” is not an answer. I listen to the radio station down the stree and contribute to them every ~4months. My parents have never and will never listen to any music online (or obtain it that way).

Let’s try to get Barak Obama on the record about this because…

1. Pretty good chance he’s going to be the next president.

2. The entertainment industry pretty much owns the Democratic Party.

3. They all want the youth vote now, and young people consider file sharing their right.

It’s going to kill the industry but something has to be done.

I don’t feel guilty about stealing music, because I don’t. So why should I have to pay a tax for it.

In Canada we are forced to pay a levy/tax on blank CDs, just in case we use them to store downloaded music. So much for innocent until proven guilty. And because the price of CDs has dropped the levy is now about 100% of the price of the CD - doubling the cost overall.

There used to be a similar per MB tax on iPods, and there may be again.

As you suggested, guaranteed income regardless of music quality.

Scott M, great point:

2) Not all performers tour. Please tell me where I can see Glenn Gould play the Goldberg Variations and I’ll gladly pay!

Notable bands that don’t / didn’t tour:
The Beatles, Steely Dan, Billy Joel and Elton John took decades off, 90% of hip hop acts don’t have a live show….the beat goes on.

So what’s the TechCrunch proposed solution? It’s all very well slating all the ideas around, but they need a source somewhere.
Even if it’s a bad solution, if it’s the only solution, you’re stuck with it.

Perhaps we’ll just see a spate of product placement:
#Kentucky Fried Chicken and a Pizza Hut!#

So increase the marginal cost. One could, as an example, have ISPs give their users “unlimited” downstream access but place a cap on upstream for home use, with a pay-per-mb charge for overage.

Which would in turn drop torrent use on the network, as most people won’t want to pay an extra $100 a month so that other people can leech free music.

And also reduces the need for traffic shaping and other filtering technologies.

A music tax will require a new bureaucracy to disburse the proceeds. You’d have to audit whatever the share of a given artist should be, be it based on historical data or ticket sales (and there will be plenty of fraud, I assure you). Government bureaucracies are expensive… Of the $5, $4.75 will cover the services of the new army of worthless civil servants, and the balance will be (likely unfairly) chopped up into small payments to the artists.

Face it — music (a type of media that is far cheaper to produce and distribute than motion pictures, TV shows or sophisticated software, I will add) will be free of charge for all this time next year (with a lawsuit from Universal against every breathing human in the world, and every other media company still pending, no doubt). Most musicians don’t make money, and won’t in the future. Some will make a fine living on tickets and merch. Labels will morph into management companies. A&R departments are all but useless, and will disappear long before anything else does.

It’s neither good or bad. It’s evolution. The labels can fight it all they want. They’ve lost all their battles up until now, and the taste of defeat must be all too familiar.

I think part of the problem was setting the $5 ceiling on the price. However, I’d be willing to bet his personal bottom-line was higher than it would have been “the old way”.

A want cannot be taxed. A need may be taxed - and in many occasions it is taxed very successfully.
Why should my granny, that uses the ISP to read newspapers & books online pay for such “Peter Jenner” tax? Tell me one good reason Peter.
I think that musicians, just like everyone else in this planet should get their fuckin’ asses back to work. Stop drinking, sniffing and bullshiting all day long. Cut the middle man (**AA) and go ahead and do live concerts, tv shows, small venue gigs and people will show up and PAY for you. That’s how you make money. If you cannot do that, good luck whining & suing everyone, there are only 1.2B people online today!

We all want something for nothing and I have little sympathy for the major labels, but I have a lot of sympathy for all the musicians out there, they do it tough and maybe 1 in 1,000 make it big.

- The lucky 1 in 1,000 muso’s who do make it big, encourage the other 999 to give up their day jobs. Take away the financial incentive, you’ll find the 999 keeping their day jobs and depriving us of music.

- Are you not the least bit depressed to call the music industry “dying”?

I largely agree with you Mike, and think that a tax situation would be a fairly counter-productive idea, , but I’m wondering, do you see the same thing happening in the software industry.

I mean, it might explain why more companies are moving to an online on-demand model, but isn’t the cost of software distribution really zero as well? Same goes for games, and of course, same goes for movies. Games get around it by working mostly now on proprietary hardware for which copying is still a difficult technical process (not massively, but hard enough for most, unlike music).

Sometimes I just really get this feeling that the overwhelming thought here is that technical people don’t believe that creative people should be able to sell their work for any money at all, while the technical people are still fine to sell their work. That technical is worth more than creative.

Absolutely the bloated music industry sells most of its product for too much and is wrong to expect the same margins from online music (where they certainly don’t have the same costs they used to), but why shouldn’t artists (especially on their own) be able to sell their work for $2 or $5 or whatever? Even though piracy exists and will continue exist, I think Radiohead were quite happy with what income they did get from their experiment anyway, so why not repeat that.

Mainly, just because piracy exists, I disagree that this means music should be sold for zero. It’s like saying that because shoplifting exists, any product should be free as well. And while I certainly think suing individuals for song copying has been absurd (and a major reason this argument exists), pursuing organised piracy operations is not.

I am happy to pay a smaller but reasonable amount for music because I believe musicians I like deserve this, and the right sales models do show enough people agree with this (even if many download freely, why tell everyone they should?) And while you’re right that the industry is likely to get more money from sources other than music sales, I don’t see why they should expect nothing from music sales.

(Note: Since the only music online I buy is from emusic.com, and mostly the only CDs I still buy are from local independent artists, my views on the fairness of all this may differ from many others. The absolute mainstream music industry is a bloated mess that I pretty much ignore now.)

Why should there be any organized “solution” to this? It’s one industry’s problem, not the country’s. Let disruptive technologies disrupt.

If it gets so bad that free music drives away good artists that people want to see, someone will figure out new business models to bring them back.

Maybe artists themselves will figure it out - aren’t they supposed to be creative?

great news.com story about this. you linked but didn’t mention by name. naturally. tut, tut, michael. don’t be so small about this

Maybe someone can help me out here, but I would love to know how a “tax” based system supports new artists. Take for example, my buddies and I create a band put some of our songs up on a myspace page, and start to get a decent following.

Who decides the point where I become a “real” artist and deserve a cut of the ISP tax? The RIAA? If everyone’s music is free, at what threshold to you go from up and coming to actual artist? Will you still be forced to sign with a major label to get a cut?

The whole ISP tax idea is bad across the board. If it happens it will simply become a way for established labels and artists to keep getting paid for sub par work while new artists still have to use the new emerging channels to build a career.

There’s precedent for talk about a consumer electronics tax. In the 80s, amidst the rise in home recording, the movie industry proposed a tax on VCRs to generate a dedicated stream in revenue. Of course, no member of congress would touch the idea, since uttering the T-word is political suicide.

Dear Trent,

I know you are disheartened, but the market has spoken: that album as mp3 is worth $5. There is little you could have done to get more money. The trade-off is less potential fans. Is that what you want? You did not have take an advance from a label. You did not have to kiss anyone’s ass. You gained insight.

Yes, and a music tax is dumb. Just like a blank CD-R tax, Universal Music’s Zune Tax, Canada’s iPod tax. I know you hate dealing with the labels in regards to money, do you really want to argue with a telco about what your fare share is? There is no way to guarantee that this money will go to artists. You effectively would make the telcos into an evil record label that even you would want to be a part of? I know you don’t want this.

John John, money doesn’t’ drive art.

People play music and make art out of love, not a desire for an income level. It is being heard, not getting paid that drives 998 of the 999 who dream.
Dance has been dead (from a financial standpoint) for over 100 years, yet ballet still exists and people still go out dancing for a good time.

Actually the market has not spoken. If the market had spoken a CD would be $5. The reason people don’t buy CD’s has to do with the cost of the product. If the market were working correctly the labels would lower their price to increase volume. They refuse to do so and are reaping their reward. If *any* of my elected representatives voted for such a thing I’d be first in line to sign a recall petition.

BTW - I meant recall any legislators voting for a music tax, rather than the market working the way it should.

18.3% chose between a “free legal copy” vs a “$5 legal copy”. This is a big difference between an illegal free copy and a $5 legal copy which drives different consumer behaviour. Your prediction is based on completely flawed assumptions about the market where there is no “free legal copy”. Reznor is upset over nothing. He asked who would pay $5 when the artist says you can legally have it for free? The answer: 18.3%. The right question should be who would pay $5 vs downloading an illegal bootleg copy for free? I suspect the answer would be much higher than 18.3%. Just ask our friends at iTunes.

I’m wondering if the decline in music quality, and the decline in music revenue, are feeding off each other.

On one hand, a CD like Josh Groban’s sells 3.7 million copies. Proves there’s a market for a CD from Josh Groban, who has a wide demographic with plenty of older folks who have disposable income and don’t download music illegally. And it proves when you provide great content … people are willing to pay for it. Might not be some of your cup of tea, but it is for 3.7 million others.

So you could say there’s not enough great music out there to make people say “yes, I’ll pay ten bucks for that”.

Or is it that the artists, and potential artists, having seen the writing on the wall, no longer have enough incentive to make great music? Some may be hip to the idea of making money via live concerts and swag. Others who like to spend a lot of time in the studio, and not much time on the road, I’m guessing we won’t be hearing much from them in the future.

If record companies and artists want to tap a money crowd, play to the Boomers. All the reunion tours and albums are examples of this. Bands are coming out of retirement to ride one more gravy train, while the gravy is still there.

The Economist has in its edition for this week an article about the music industry too.

The music industry - From major to minor
- Last year was terrible for the recorded-music majors. The next few years are likely to be even worse

http://www.economist.com/displ.....d=10498664

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Have you checked your Warner Music stock lately?

So will this happen to books too — as they go digital? Or are people who read more ethical?

I do not agree that music should be free. But I do agree that it may end up the only way to distribute if the music industry, and entertainment as a whole, does not find a business model beyond ad support. If you provide a compelling experience with a low entry fee and a good set of features, including online/offline synchs, then users will pay for it and will shy away from piracy. But when piracy is easier than legit … it does turn you off to being legit .. does it not?

Maybe I am being naive and I think that most humans are in the end honorable and that will pay if the offer is right.

It will destroy internet music, such as pandora.

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http://www.bywifi.com — Mobile Transcoding of Videos and Web Pages for Mobile Phone and PDA

I read the Cnet interview with Trent and he’s obviously got a lot of conflicts about this stuff but you can see that they don’t really know a number of things.

Trent assumes that everybody that went to the Niggy Tardust site was part of his or Saul’s fanbase because they weren’t spending extra on publicity, it was just them putting out the word.

But it was on many tech blogs, music industry blogs and hip hop blogs and that’s just blogs I follow. I haven’t checked elsewhere.

So Trent’s missing some data here and he doesn’t seem aware of that.

I also wrote at ProHipHop a post that basically came down to the fact that when I went to the site I was offered two choices:

Get it free
Or pay $5 and support the artist

Up until that point I had intended to download it and see what it was but assumed I would come back and pay the $5 because I figured I’d like it well enough that I wouldn’t mind that [though if I hated it, no, I wouldn't buy it].

But the setup made me feel like they were pulling a guilt trip and that by downloading it for free that was a signal that I didn’t want to support an artist who I don’t even know as a musician. I know Saul as a spoken word artist and actor.

So I didn’t download it and I haven’t heard any tracks and may never hear them because I was offended by the setup of the download options.

The fact that Trent’s talking taxes tells me he did not really learn from this process.

But, straight up, the idea that you’re going to get recorded music for free and just pay to see shows is nuts.

There really is a Silicon Valley attitude, all by people who seem to have a lot more money than any of my artist friends, that follows a logic that is going to be devastating for the arts.

I do think it’s beautiful that people have a belief that humans will do the right thing.

I wish I could see that in the world in the world in which I live.

Tech crunchers:

First let me say I am completely against iTunes and never will pay them $.99 for a song, but I think you guys are missing the point. Thanks to the executives and new technologies the industry is in a bad position. The industry wasn’t able to adjust to the trends quick enough and now the general public has devalued the work of a musician. Yes, the industry is largely to blame but there are some starting to try to identify the issue and propose solutions. Trent appears to be one of the ones on the forefront. He is also fed up with the industry, the labels and the greed. He is being creative and trying new things to understand how the disruptive technologies are disrupting the industry. He took a relatively unknown act, his last work sold 33k copies, and tried something new. His hope was that people would appreciate the value behind the work and be willing to pay a small fee. They said here it is you can have it for free. 154k people found the link downloaded the music. Keep in mind there was no formal advertising to promote this release. This is a perfect example of an artist working to find a new way to bring their music to the people. The catch is at the same time they asked if you would be willing to pay $5 to download the music that is very high quality. From his blog Trent says, “is it good news that less than one in five feel it was worth $5?”. The point is for $5, less then cost of a pizza, half the cost of what it would have been through current channels. The best part about it is all the proceeds went directly to the artist. There isn’t a label or executives taking their cut. The artist was simply asking for a nominal fee of $5 to support their work. People need to get out of the mindset that music is free! The artist does need to make a living, it’s not free to record music, the bandwidth to download it isn’t free. Music shouldn’t be controlled by big record labels, it shouldn’t be controlled by bureaucracy, it shouldn’t be taxed and it shouldn’t be controlled by advertisments. If you think the music industry is bad now, it will be twice as bad if we force it to be run by advertisements. Only a select few musicians will get their music played because we will have people who control the advertisments picking the bands and artists we should hear. I feel music should be sold and distributed via the internet similar to what RadioHead and Trent Reznor are doing Unfortunately people are going to have to start placing value on the work musicians do and paying a fair market value for it. If we don’t begin to place some value on music we will be left with a system worse then we have now. I would pay $5 for the download just on principal alone.

My problem with Reznor’s argument is this: How many people went ahead and downloaded the album, listened to it, and simply did not like it? Based on his model I do not think he intended payment if you did not like it. Sure there are folks who downloaded, loved it, and STILL did not pay.. but don’t write it off without thinking of some other factors.

How would you even go about dividing the money?

middlemen are dead. they will be differentiated because they cannot survive the web. artists, writers, musicians will finally benefit. they might not sell as much but they will keep more of the proceeds. they will have to diversify into accessories, t-shirts, tours, books, special versions, etc. in order to survive. the days of cutting a record and waiting for it to sell are over.

there will also be money to be made in arranging, storing, organizing the music out there. apple has started to take advantage of this with itunes and the ipod. in a market with a product with 0 cost and almost unlimited demand, sorting, aggregrating, and organizing becomes the value added.

advertising will generate some revenue but not enough. music is not an information based product and thus will not support high levels of advertising.

Ahoy,

I normally don’t agree with MA, but in this case I think he is right… up until the death of music part. Sure, this will guarantee revenues for the record labels and is an insane idea… but if you think they will stop trying to sell CD’s and concert tickets? No way, they want their cake… (and they want to eat it too.)

All this does is pad their pockets. People will still buy CD’s and they will still goto shows. The one thing that will change is now everyone has to pay a tax on top of paying for concerts and CDs and t-shirts and all the other musical goodies that we all love…

I gotta hand it to the labels though — this is audacious enough to maybe work and if it does they’ll make a ton of money at the cost of every consumer online. The only thing worse would be the tax being something that ISP’s charge only customers who want to download music — basically allowing the ISP’s a way to make money from file sharing and trash net neutrality at the same time.

Over and out,

dan

I worked in the Music Biz for 8 years in a mailroom with a bunch of other young upstarts and all of us saw this coming! It’s the major players’ egos that brought this on.

They knew what was coming too but their inflated egos thought they could bury this ‘digital fad’, as one exec told me one time.

Now they’re getting their just rewards, but alot of good people have gone down with this ship.

Time to build a new one.

In the “Future”
Brands will control their OWN distribution, monetization, and pricing of Brand assets - music is one asset of the Brand. When the Brand has control, they will adjust to the market accordingly like every other business.

p.s.

MagNet is coming.

I meant to say: the market has spoken: the album is worth $1.09 (28,322 paying x $5 = $141,610 / 154,449 [total downloads] = $1.09). But even that is not the true market value becuase:
1. No one was allowed to pay more than $5
2. No one was allowed to pay less than $5
3. No one was allowed hear a preview (if one was just curious he/she was counted as a download)

Now the site is saying that the downloads are no longer free, only for the first 100,000 people. But that is not accurate, becuase as of 1/2/08, 126,127 downloaded for free.

I think Trent is being kind of passive/aggressive about this experiment, and that is too bad. @55 when you report the options were:
“Get it free” Or “pay $5 and support the artist” this reeks of passive/aggressive. And his comment “…downloaded and put in your car and put in your iPod and put up your ass if you want and…”

Put them in your ass? There are some bad feelings about this experiment. He just needs to chalk it up as a learning experience and move3 on. Time will heal the wound.

So, the Radiohead numbers are not real, this experiment was flawed as well. Who is going to do this the right way, not care too much about the results, not freak out and change things in the mid way through, and release the real numbers? Here is what the next band needs to do:

1. Make full previews available for streaming
2. Do not put artificial caps on the dollar amount
3. Allow for physical orders
4. Don’t change anything halfway through
5. Be 100% transparent with the numbers
6. Don’t freak out

Obviously, the current business model for the Big 4 no longer works. I don’t think iTunes is the long term solution either. In this new age of distribution, music has turned into bits of data and created what some of us know as The Long Tail. There will always be methods to making money through music, but the industry is unfolding before our very own eyes and nobody has figured out how to match what used to be LP->cassette->CD sales. Will there ever be another monopolizing industry standard that the consumer accepts? Excited due to all the open possibilities and questions up in the air, frustrated trying to find the answer to help stabilize this mess.

ISPs changing their model and offering broadband plans that fit your needs is the answer; any bytes you go over you pay for!

This creates a true legit content Utopia on the Internet and a new economies of scale!

When all content is on the net and cable subscriptions are way down, this will happen anyway!

i agree that this is a stupid idea
artists can receive money from live events and personnal jobs ( how much is it to receive madonna at home for a birthday ? or have a personnalised song for a new advertising ? )

im in France.
we do pay tax for blank cd, dvd, hard disks etc… to give to the majors.
we have a law that authorize personnal copy in the family range.
on last year the gov has voted a law to forbid the copy of protected content.
so we pay tax to be able to copy but its forbidden to copy…

the worst in this all story is the excuse to enter in private life…
in France they want to make a law to allow internet connection scan to see if we copy music…
i imagine the time when we will have to show dna to preserve music industry…

we can easily imagine that all of these ideas are coming from economists and not artists themselves.

Very good atricle…and holds vision.

I agree to your persistent point that music will come evantually become free, but i like to think that artists wont have to rely solely on concert money, only that they will or different vendors will have to come up with more creative ways to earn money than the direct flow from listeners.

#45 contrary to your condescending belief, most musicians are not tortured artists who wish to struggle for their art and live starving in bedsits. In fact, most of them want to a have a relatively normal life, get married, have kids and provide for their family.

Reducing the financial well from which they draw (by insisting that their work is provided to us free) will reduce the creative talent pool.

Of course, those of us who spend our lives tapping away on keyboards listening to the Eagle’s greatest hits might not even notice. How sad.

Italy taxes live music, and indeed, the tax does a terrific job of killing the small, local, independent music scene.

“Personally, I think a new era of free recorded music and paid live performances is a very good thing.”

It’s quite typical of the music industry that they seem to be trying their very best to put the knockers on a free market for live performances too.

Services such as Seatwave (http://www.seatwave.com) and ViaGogo (http://www.viagogo.com) both operate in the ’secondary ticket’ marketplace, and you imagine that these services - oiling the wheels of commerce, and balancing supply and demand - would be welcomed with open arms by the record biz.

Sure enough though, they seem to want to strangle these services at birth.

MA is right.

at a marginal cost to duplicate of zero, and without effective policing people will only pay for musicians’ time (because it is non-substitutable), but not for their ‘work’.

same way as i pay a plumber for his time. or an actor. or anyone else.

the concept of music (or any other intangible) as ‘work’ that can be multiply remunerated has only ever been a social construct facilitated through technology like the printing press, mass distribution, LPs, etc.

even copyright is a pretty recent invention (18th C)

re music: before scott joplin nobody ever made much money selling sheet music either. didn’t stop mozart, beethoven, or wagner. some of them didn’t have much money, sure, but doesn’t seem obvious to me that the social construct of multiply remunerating authors’ work led to better music.

will less music be created as the construct is undermined? probably.

will it be so much less that it needs to be provided for as a public good? probably not.

will music broadly construed get better or worse as a result? hard to say.

The only effect that the industry’s failures over the last 10 years is to teach kids to stay far away from it.

As a musician who never wanted to touch the industry with a 10 foot pole, I’m often disheartened by the lack of apparent value of musicians (note, musicians, not music) in our society.

I believe this will change (not because of some innovative company, but by the general empowerment of musicians to stand on their own). I’ve given away my music since day one, and over the last few months have been building a free non-commercial service to allow others to do the same:

http://alonetone.com (but watch out, it is brand new and rough around the edges!)

Nice line in double standards…..

If low-life scrape blogs (such as TC) they are stealing.
But, if someone steals music thats somehow ok.

Assuming that a lot of TC readers work directly or indirectly in the tech industry how do you feel about what you work on being stolen?

The software, publishing and other industries are in the same firing line as the music industry.

As large scale manufacturing is relocated to low-cost countries all we have left is intellectual property.

IP and creativity creates jobs and makes money - so should it be free?

Bottom line - do you want to be paid or not?

I think musicians and entertainers in general will fall back into there historical economic place. Not a business that paid well for most until mid 20th century when it was protected by the crossroads of technology and a cartel for 50 years.

Here’s to a welcome return to the natural order. The problem is the music industry does not understand economics. Economics is like gravity, it’s not a good idea… it’s the law.

To the other Marc #24.

Why shouldn’t the cost of movies fall toward zero? I’m sure we’ll eventually see high quality movies made with great CG, great acting and great writing on a shoestring. In fact, it will happen.

Oh yes, it’s all about marginal costs baby.

TO QUOTE NEWS.COM

And then Reznor ended the hoopla last week when he reported on his blog that 154,449 people had downloaded NiggyTardust and 28,322 of them paid the $5 as of January 2. In the blog, Reznor suggested that he was “disheartened” by the results.

–As an internet marker, I’d consider that a good conversion rate. He’ll learn to like numbers like those over time.

Some people like Marc (#75 and 76) don’t understand that MP3s are not sophisticated SW and are not nearly as easy to monitor usage.

Do not start “SW vs. music” debate, it is stupid. If someone uses my SW they are tapping my servers and I can deny their authentication/ authorization. Is it fair? No. But MP3s do not “call home” and I can make SW call home all I want out of necessity or IP enforcement.

MP3s do not have that level of sophistication. This is about reality not fairness. You are arguing the wrong thing. If it were about fairness, I’m sure most of *us* would agree “creative and Techncal are equal”, but MP3s are not technical to enforce themselves. Sorry you don;t understand that.

It’s all about freedom in the future. I think going to the toilet should be regulated too.

for musicians who already made it, this is all correct. but then, even paris hilton will find a way to market herself and make money because she is a brand already.

what about small bands or artists that haven’t made it yet? they’re not able to earn enough from their concerts to live (and even pay for recording their album). no one will pay them that much because they’re simply not known enough. giving away their music for free doesn’t make them more known than before. in fact, most small bands i know have done that for years. are they as famous as radiohead? or nine inch nails?

no. because the major labels paid to promote radiohead and NIN. they won’t be able to afford that anymore. artists will have to promote themselves. without much funding, this will only get them so far.

so i think that new model of “give mp3s away, earn money with concerts” does not work for small bands. you’re missing an important peace: the promotion.

Ooh, ooh, I know!!! Let’s also put a $5 tax on the Cable/DSL bill and pass it on to newspapers since Cragislist made print classifieds worthless. Let’s prop up another dying industry. {sarcasm}. Let FREEdom sing.

buying music is dead. they should give away their singles for free and make money thru ads or make money from performances.

check out http://www.petergabriel.com , this guy is a at cutting edge of music related startups. He is changing music single handedly

——–
http://www.xencasino.com

I buy from iTunes fairly often, though usually just 1 or 2 songs at a time. I read about the Trans Siberian Orchestra on the net, bought some of their stuff on iTunes and then bought tickets for our me, my wife and our two teen-agers to go see them. Great show, BTW. I still buy CDs of really good stuff (by which I usually mean small-volume presses of instrumentals, Celtic instrumentals/voacls, jazz, etc.) especially since some of it is hard to find on iTunes. So yeah, I wouldn’t say the music biz is dead, it’s just that a lot of today’s commercial stuff is lacking in quality IMO.

There are a lot of back catalogs from old labels like Pickwick and others that would do really well on CD or iTunes, but the labels don’t want to re-master that stuff I guess (it was all on vinyl originally).

What I would like is a music discovery service of some kind that works for the independents. I am sure there are awesome bands out there I would love to listen to but finding them doesn’t seem easy to me. Something easy like “If you like this band, you might like these bands too” or “If you want to explore this genre, here are a few bands to start with.”

@78: It already is. If you don’t think it is, try taking a leak in public, or in a toilet designated for the opposite gender. Or tap the foot of the policeman in the stall next to you.

The music I listen to is mainly bhangra, which has an interesting spin on the “make money off touring” concept that everyone believes in. Modern, English bhangra takes the traditional Punjabi dance music and adds Western musical elements and production techniques to it, most often hip-hop-oriented. And the majority of the bhangra albums I own have a bit of paper inside the CD telling you how to hire the band/producer for weddings. Being outside the Indian culture I find this quite quaint, particularly when the band up for hire does songs with misogynistic or oversexualised rap lyrics. Maybe Trent Reznor could put a similar advert in his albums.

As I mentioned on my blog back in October, we’ve had a solution that solves the innovation problem since William Fisher’s Promises to Keep came out in 2004. He proposes that we keep track of aggregate data about what’s being downloaded, and then distribute the tax revenue accordingly. He even has a plan to transition from our broken system to a new one, and basically buy the record companies out of existence and give the money directly to artists.

I struggle to get some of the concepts being tossed around here to hang together.

What is the product, the band, or their music? If it’s the music, the industry looks like most companies on the planet; those that provide physical or digital products. If the band is the product, you could argue they look like Google. Although that model is not completely transparent since “someone” is always paying for the Google product/service.

Google is a fascinating model and it’s easy to see how this model extends to other digital offerings (including blogs) where advertising “might” provide sufficient income for an individual. However, the model is not for everyone and it does not fit every business instantiation.

What I hear in this thread are frightening parallels to a previous time in industry when it was popular to be vertically integrated, doing everything yourself, which seems to ignore a basic premise that suggests a company (an artist) should focus on their core competencies and do what they do best. Tying business performance (as measured by artist revenue) to one’s ability to sell t-shirts and wow advertisers suggests that the artist has these skills and may also suggest that their creative efforts are discounted in favor of their ability to monetize items that have nothing to do with the music.

Moreover, all of this ignores the importance of creating brand value to attract advertising as a source of revenue. If stratification maintains the current pace, musicians will struggle to reach the critical mass of audience required to establish the brand value necessary to attract advertisers. As an audience member, it’s cool to see one of your favorite bands at a local venue for which you pay to attend but it sucks for the musicians who cannot take that effort to sufficient scale.

I am simply saying that musicians should be paid for filling an unmet need in the market. If they produce music that people want to “own,” then those same people should pay for that right. The musician should not be dependent upon the whims of an advertiser as compensation for their work.

The “give away music free, tour to make money” model/argument makes an incorrect assumption that all musicians, artists, and songwriters should also be touring performers, and this is simply not realistic. It’s quite arrogant to tell an artist to “hit the road” in absecence of royalties, and most of those who make these statements no true concept of the music biz, and have no concept of the costs and effort involved to tour and play live.

Also, what about other types of music-related positions who may rely on royalty income, like an arranger or writer? This person does not tour – they write and score. Are you saying they should also be content to endure a hard life on the road to make a living? Impossible.

What about a talented musician with a physical or mental handicap who puts out a fantastic performance or piece of recorded music? Are you suggesting they should also go on the road?

Like it or not - many musicians/artists/songwriters will go out of business. And the music “appreciating” consumer loses out, because they may never discover the next great artist, because these artists were forced to find some other form of work.

Digital distribution is a great equalizer for many of these people, but I’m just getting sick of the uninformed “hit the road to make money” argument that so many talk about. As an objective argument for an alternative to royalty-based revenue streams for artists, “tour to make money” is pure BS.

The control of a “few” (record industry), is simply shifting to the control of “many” who don’t want to support artists for the music they create. In other words, those who feel a sense of entitlement to “free” music that is not intended to be free.

Mr. Arrington, I fully agree on your views about taxes killing the innovation and preserving the status quo of a few artists.

In Spain, a similar tax already exists. The government just passed a bill by which iPods, printers and mobile phones among others will be taxed. This bill will extend the tax that is already paid on recordbale CDs and DVDs, to other storage devices.

http://tech-talk.biz/2007/12/1.....overnment/

This tax legitimize file-sharing, and make it unlikely that iTunes or Amazon eve have a healthy business with mp3 downloads. Who is to pay for a download, when you are already pa