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Monday, November 3, 2003

can you slay the riaa by killing the cd?

for today’s music business model exploration, i think the blame goes to dave “mr blog” beckemeyer who left me a trail of breadcrumbs to follow to how to slay the riaa and the follow-up exploring the one-track mind. (this made it to the top of my to-post list because the trail of breadcrumbs is pretty thin at this stage, and it’s not a clone-of-something-with-a-twist, so there is some interesting new thought here).

introducing… the plan

to boil this one down dramatically, the concept is this: the cd is a relic of a dying breed of recording industry dinosaurs that are simply clutching to it because they fear for their very existance and it’s what they know. so let’s get rid of the cd, embrace the single, commoditize the music and watch the beasts dry up and fade away. then, joined arm-in-arm, we all cross the threshhold of the new net-enabled commodity free-music nirvana.

a few points of agreement…

right up front, i want to emphasize a few points of agreement… there is some good stuff here.

i’ve commented that it’s often about individual tracks, and gary’s model focuses on individual tracks – singles. so i’m generally down with that.

gary also mentions the desire of musicians to “get their music out and be heard.” i think this is a fundamental driver, with a long, long history that goes back to banging on logs. so yes. those of us with musical skill and just enough ego to share it want to do exactly that: find an audience.

that desire to find an audience does have an important economic repercussion, and it’s something that does become fairly obvious – weedshare even built their model around it. in order to find an audience, your music must be free, somewhere. you have to give it away and let them fall in love with it. then they will feed you.

there are a lot of ways to give it away – you can put it on the radio or on mtv, or you can busk on a street corner. you can “pay your dues” as an opening act, or you can hand cd’s to every “big label a&r person” and event producer you can find. artists are creative people, and there are a thousand ways to give it away. they’re also smart people, so they know they have to give it away.

probably the most important point we agree on is that the musicians are working “day jobs” or “odd jobs” to pay for their musical habit.

and, just to emphasize some strong points of this model, i agree with several of the prescriptions – i think studios should be flexible (but i think most of them are). i think the cost of production could be kept lower (although i use the 4-track beatles recordings as my example, and gary uses the sam phillips example).

i also agree with the emphemeral nature of music…

…and then there’s the bad news

as you might imagine, i’ve also found some flaws – both major and minor – in this model.

we begin to part paths at the success metrics in the music business. there are two big ones that a lot of musicians hang on – “we’re signed” and “we have a cd.” the former is often the kiss of death. the latter is a lot more flexible.

then the the biggest rift between us is in this plan to commoditize.

the problems with commoditizing music

right up front, gary directs us to the information technology business as a model for “how to drive an unwanted competitor out of the game.” i have a couple issues with this as a model applied to music.

first, in the business of information technology, it’s feasible to produce “work-alike” code. i don’t think such a thing exists as “work-alike music.” i stand by the premise that every performer is a monopoly. elvis-impersonators may be elvis-like, and in las vegas they probably do fall in to the “commodity” realm, but elvis is dead (or on a secret mission for the cia), and is still charting and still the #12 top earning music act of 2003. commoditize as much as you want, you can’t put elvis out of business.

second, and probably more important, if you do succeed in commoditizing something, you may strangle your competition, but you also destroy your own potential revenue from that commodity. it’s a short-term anti-competitive tactic, and one that takes substantial resources to execute. i guess the classic example is the microsoft-netscape browser war. sure, microsoft choked off the revenue stream from navigator, but they also gave up revenue from explorer. microsoft can afford to do that while netscape goes on a crazy ride of mergers and acquisitions to try to stay in business. but, ultimately, microsoft abandons the now-revenue-less business and satisfied with having wrought havoc on its competitors, turns its attention elsewhere. strangely enough, mozilla comes up and fills the gap. in the long run, it’s an interesting debate about the net effect – was value created or destroyed?

third, and this is probably where it hurts the most – i don’t think people consider music a commodity. it’s personal. it’s meaningful. it’s emotional. if you can commoditize those things, your audience has no soul, and if they have no soul – no connection to your music and your performance – then you are, fundamentally, irrelevant. let the machines make the music, we’ll just go about our business.

it’s not the cd’s fault

one point that i’ve already made is that the death of the cd is greatly exaggerated. while my crystal ball seems a bit hazy in the short-term (with the pullback on the universal price-cut), i hope i made my points in that post. what i need to add in the context of this model is that down here at “ground level” the cost of a cdr is rapidly approaching the point where even dollar-per-track distribution on cd is viable. sure, you might be wasting 600 megs of storage on a cd to distribute one track on this archaic polycarbonate platter, but the economics have always been the same no matter how much content is put on the disc.

it’s not the cd that gave us the “10-track album format,” it was the vinyl, long-playing record… the cd is an excellent medium for what it does, and it’s been tweaked and prodded along since it was introduced. it’s also ubiquitous, and aside from some copy-protection schemes that break the rules, well-standardized and interoperable. having access to that kind of distribution tool is an amazing advantage and something we can thank the recording industry (in concert with the tech industry) for creating. if you want to talk about distribution of music (or anything else, for that matter), a 650-meg chunk of data that you can take anywhere and be very confident you can read is a big, big deal.

it’s not the cost of production

this model focuses almost entirely on the production budget. to address this, i’ll refer to the hypothetical numbers put together by steve albini, simply because they’re available, reasonable and include the whole package – everything from the recording to the tour “supporting the cd.” i direct your attention to the “the balance sheet”:

Record company: $ 710,000
Producer: $ 90,000
Manager: $ 51,000
Studio: $ 52,500
Previous label: $ 50,000
Agent: $ 7,500
Lawyer: $ 12,000
Musicians (4): $ 16,125

the total net revenue from this hypothetical cd adventure – $989,125.

here’s where gary’s model shows some cracks – even with the outrageous hourly rates and insanely expensive gear, studio and production dollars only run about 15% – and about two-thirds of that is “producer.” this is what these bands are trying to do – the ability to execute anywhere near this is a whole different matter.

and, by the way, the record industry is probably happy to cut recording costs, but they also have to impress their artists while they’re taking them to the cleaners, so putting them into an expensive studio may be more about artist expectations than label accounting. the label knows that they can spend all the money they want in the studio and it’s coming out of the artists’ pocket first.

is the promotion model broken?

i love music [mov from pink martini], and i love musicians, and bless them all for taking a chance with their music. [mov from sarah mclachlan].

but, fundamentally, they are taking a chance, and they [need to] know that. it’s a confluence of skill, talent, promotion, art, mood, environment, experience and two dozen other things that bring an audience to a performer and a performer to an audience. no formula or method fits every circumstance – not even the “tried and true” promotion model gary describes and disparages.

gary rightly points out that these musicians “sign up for seminars, tutorials, conferences and programs all of them laying out the “tried and true” just as they have known and it still doesn’t work.” here i have to say that, as much as i love and respect them for getting out there and doing it, it shouldn’t always work. most of them suck. they’re horrible.

there’s also more to it than musicians that suck. there are millions of people playing guitar today. some of them are incredible, and some of them you know about, but most you don’t. even if you’re steeped in guitar lore, there’s still some girl who can drop santana’s jaw with her skills, but she’s living in 7th floor walkup in lower manhattan and has paralyzing stagefright, so nobody even realizes she exists. there are other people who take the instrument in new directions, but the public taste is fickle, and after a brief moment in the limelight, fade back into relative oblivion (albeit with an expanded group of die-hard, lifelong fans).

stanley jordan and carlos santana are amazing guitarists, both. and very different. and both were grammy-nominated – recognized by their peers. carlos had his time once, and the world left him behind for years, then finally came back with more love and money than ever. stanley had his time once too, and we haven’t come back to him yet. so even if they don’t suck, it’s not always going to work.

the “tried and true promotion model” doesn’t work for everybody, every time, but it does work for some people, sometimes. it’s not broken, it’s just not a universal panacea. that’s ok. there is no such thing.

no model is right for every circumstance. no model should work for performers that suck. even the most deserving, talented and amazing performers can pick the wrong model. and, finally, when everything comes together – talented, amazing performers with the right model and the resources to execute it – the public may have no taste for their music. c’est la vive!

breaking into distribution

i don’t want digress too far into distribution issues, but i do have to comment on this assertion: “the riaa controls the only economical means of distribution of the 10-track cd.”

i think this is only true at the hundreds-of-thousands-of-unit-sales realm. only at the top of the curve.

besides, i already touched on the power of the cd as a medium for distribution (look up 🙂 ).

why 10 tracks?

next assertion: “i’ve seen so many bands with 5 good songs that they pad with 5 not-so-good tracks just so the whole process of the cd production is efficient, which is important given the cost of that process”

here, we have a shared observation, but pick on different mechanisms to explain it. a clash of the economic theories, if you will. i’ve seen this too, but i don’t think it has much to do with production efficiencies. i think it has to do with consumer expectations, and that’s a much different nut to crack.

it costs just as much to produce, package and distribute a 1-song cd, a 5-song cd or a 25-song cd. there’s no “production efficiency” to be gained when you reach some magic threshold. but, if you’re charging $18.99, the music-buying public expects more than a couple tracks.

recording expenses are different, of course. it will cost roughly ten times as much to record ten songs, but once they’re recorded, you can distribute them in any medium. better to have the option – after all, someone might just like that crappy 8th track.

blah blah blah….

i’ve rambled long enough for now. the summary looks something like this: this model comes at music from the perspective of technology and with vengeance. some of it is valid, some of it can apply to some musicians, but it doesn’t do much to improve the economic situation of the musicians or find value in music and focuses mostly on knocking down the empire.

good luck, red leader. start your attack run…

updates (several): lots of broken links and mismatched quotes. sorry for the mess.

posted by roj at 10:55 am