Part two in an occasional series of essays on digital music
In the last few years, we’ve been bombarded with scandals and greed in both the private/corporate and the public/government sectors. I’m sure that almost everyone of us has felt the deft touch of a corporate hand in our pocket. Maybe we spend an hour calling the phone company asking why our DSL charge has suddenly jumped to $50 when it’s remained at a constant $25 for the last two years (…and we haven’t received a renewal notice…and we know that all our neighbors are paying $15…from the same provider.) We hear that gasoline is in short supply and that it’s costing more and more to drill and refine, yet we read about record oil company profits. (Ka-ching!) The country goes to war over WMDs and then the “intelligence” used to justify the action is found to be wanting in fact and reality. (Oops!) It’s not surprising that a general cynical malaise and feeling of powerlessness pervades the country.
But what does this have to do with digital music? As I wrote in Part 1 of this series, cheap and available broadband connections allow anyone to instantly share files across the globe. Most file traders and downloaders are young high school and college age students, the same demographic that has always been the biggest CD and record buyers. They usually don’t have much disposable cash and it’s easy to see why they would be attracted to the online smorgasbord of easily available pirated music and movies. The internet allows the illusion of invisibility (though they should know better by now) and downloaders never steal directly from the record companies, trading music with each other through various programs and services, collectively known as peer-to-peer. It’s only one step removed from shoplifting yet the guilt that can accompany an ethical lapse doesn’t surface.
Especially when it’s so easy to morally justify, say many online music fans who otherwise are ordinary law-abiding citizens.
Look at the evidence they point to. An overwhelming abundance of news reports from the past year alone, show that the very industry that’s crying “foul” is engaged in a surfeit of alleged in-your-face, nefarious and in some cases, illegal business tactics in an effort to cheat not only their customers but the very artists that provide the companies with their lifeblood of musical product.
The price-fixing scandal that was settled by EMI, Sony, Universal, Bertelsmann and Warner Music included a provision for the companies to donate $75.7 million worth of free CDs to libraries and schools. The companies were allowed to value the CDs at $13.50 each, although many of the CDs aren’t even worth $1.50 on eBay. Many libraries have found that their shipments have included old and basically unheard of pop CDs as well as no-selling titles like Martha Stewart’s Halloween. In fact, the Los Angeles Library received 440 copies of a 2001 CD by singer Mark Wills (who?). Wills’ CD sold just 1,100 copies in 2004 and the LA Library is getting almost half that amount in the settlement? Why weren’t the libraries and schools given vouchers to spend on what they needed most from the companies’ catalogs? The final settlement seems disingenuous and provides an easy way for the recording industry to get rid of all its junk.
Linkin Park recently sued to get out of their contract with Warner Music at a time when Warner was being readied for a public offering on the stock market. The band charged that most of the proceeds of the IPO were going to line the owners’ pockets and that very little was being put back into the company for development and promotion. Music fans listen to things like that and it breeds distrust toward the labels.
Sony BMG (again!) paid $10-million to settle a payola lawsuit brought by New York Atty. Gen. Eliot Spitzer. By offering station managers and DJs gifts, such as plasma TVs and free trips with hotel accommodations, Sony BMG was able to buy airplay for their artists’ songs. No such relationship was ever disclosed to listeners. Three other record companies (the same group involved in the price-fixing debacle above) and several broadcasters, including Clear Channel, have been under investigation as well. Although illegal for the last 45 years since a 1960 law was passed by Congress, a station programmer who accepted the bribes remarked, "I was just doing what everyone else was doing."
Sony (yet again!) fabricated quotes from a fictional critic to use in their ads touting films including The Patriot, Vertical Limit, The Animal, A Knight's Tale and Hollow Man. Theatergoers who saw the films were offered $5 in compensation out of a total $1.5-million payout ordered by LA Superior Court. Hey, if the critics don’t have anything nice to say about your movies, why not make them up and write ‘em yourself?
This week, Warner Music Group settled a payola lawsuit and admitted to improper promotion practices. Warner was one of the companies being investigated by Eliot Spitzer (see Exhibit #3 above). Universal Music Group and EMI Group are still under investigation along with broadcasters Infinity, Entercom and the afore-mentioned Clear Channel. The settlement document noted that it wasn’t always the labels who instigated the pay-for-play and that radio stations regularly requested improper gifts in return for airplay.
The Texas attorney general and the EFF (Electronic Frontier Foundation) sued Sony BMG (OK, who’s in charge over there?) this week for selling CDs with anti-piracy software that also leaves spyware on users’ computers that leaves them open to attack by hackers and viruses. Embarrassed by the “gotcha” moment, Sony executives said they would pull the 52 albums containing the malicious code and recall up to 5 million CDs. Although the code contained a copy-protection scheme to help Sony battle piracy, the intrusiveness of the measure backfired. As one digital media insider put it, “If you can sell music at reasonable prices, consumers will gravitate away from piracy. Eventually companies will stop fighting their customers and just lower their prices.”
With so much attention focused on such blatant and widespread wrongdoing, disingenuous solutions and paltry settlement fines that amount to slaps-on-the-wrists, it’s no wonder that the tide has turned. Young music fans have a taste for revenge and broadband provides them with the knife. Do two wrongs make a right? Never…but in a world where the average citizen feels powerless and without a voice, for them it’s a sweet, if temporary and equally unethical, victory.
In Part 3, we’ll examine what went wrong for the record labels and how their ability (or inability) to adapt quickly to future technology and consumer needs will decide their fate.