A light at the end of the tunnel? An artist's view of business models in the internet era

The Pied Piper: happier times, when people
trifled with artists' business models at their peril

While lawyers, economists, policy-makers and others talk comfortably in the abstract about the need to find new business models in the music industry in the internet era, there is no-one closer to the issues raised by the need to make money than the artists themselves. In this context, the following reflections are a sobering antidote:

"The direct financial losses and effects of internet piracy to the individual musician and the record industry has been one debated over since the emergence of the internet and its usage as a medium to copy and distribute such material. In his article discussing an open letter to one student by David Lowery, Paul Resnikoff weighed in on how the industry has been impacted, utilizing David’s letter as an example of both direct and indirect effects.

Paul explains that artists cannot simply tour in order to make up for the shortages resulting from low record sales. Only the top tier of artists, often backed by major labels in the process, will make any profit from this even during dwindling record sales. The sheer costs incurred in traveling around the world, or even round a mere continent, will often not get covered during the tour, let alone generate profit on top of the costs. Touring was seen as secondary and as mere coverage for losses sustained as a result of low record sales. With constantly falling figures in sales today this alone would clearly not be enough. This is a direct result of the fall of the medium in which music is distributed; people are not buying physical media, but rather switching to digital formats, using either legal or illegal means to acquire it. This produces a challenge which the record industry has failed to address, and as pointed out in the article, digital services such as Spotify will not provide an adequate remedy to the situation as things stand in terms of the average musician. Other ways of funding have emerged, such as crowd funding services, like Kickstarter, which provide means for artists to raise funds to record music and distribute it. However such services will only provide funding to a lucky few and would not answer this issue on its own. This might not be in terms of funding alone, but due to the influx of content and the resulting lack of visibility.

Paul attributes this to the attitudes of both consumers and companies. The younger generations born slightly before or during the rise of the internet are used to free access to material and thus buy less music, both in digital and physical formats. One can say the generations with this opportunity see it as a moral right to which they are entitled. One cannot simply pin this on younger people, however, as the sale of media has also dropped among older generations. Both tend to enjoy their media via other means, such as Spotify. Companies like Google and other aggregators do pose problems for individual musicians and the industry at large. A large company is purely interested in profits, not the personal plight of the artist trying to earn his bread through his work – they provide content which is paid for, morals have no place in business.

The sphere in which musicians compete has also changed. TV shows such as X-Factor, which pump out act after act, year after year, under a humongous marketing machine are overtaking the market from the average artist. How can an individual compete with such a Goliath? Odds are they cannot.

Albeit increasingly bleak, and no matter how negatively Paul portrays the prospects of anyone trying to make it in the music industry being, this writer still sees light at the end of the tunnel. Consumers will adapt, and above all, distributers and musicians have to find new ways to benefit from the ease of access and various digital formats in which media can be handled. Once affordable and accessible ways to consume media emerge, consumers will flow towards them and amounts of media pirated should fall, although cannot be fully avoided. Cassettes did not kill the music industry as then was feared, and neither will the internet in the age of the CD".

This note has been prepared by Jani Ihalainen, a Finnish native and recent law graduate of the University of Derby. Jani, who has a keen interest in copyright law, is happy to deal directly with questions. You can email him here.

The Music World: More than Copyright and Licenses

In thinking about the music world, we usually divide it into two parts. There are the lofty heights of musical creation (aka copyright), on the one hand, and the less elegiac world of commercial exploitation (aka licensing), on the other. Listening today to a podcast on the life and works of Duke Ellington, the legendary US composer and orchestra leader, reminded me that there is an essential space in the music world that bridges copyright and licensing, in which neither copyright law nor unabashed commercial considerations prevail.

The podcast about Duke Ellington was one in a regular series--"Jazz Profiles"-- produced by the U.S. National Public Radio, and it took me back 40 years to a smallish hall in New Haven, Connecticut, where this author, as a college student arriving from the wilds of the American Southwest, somehow found himself at a concert given by the Duke Ellington Orchestra. It was one of the unforgettable experiences where musical legend was melded with the musical experience of the moment, and the memory of that evening provided the impetus for my jazz odyssey from that time to the present.

What struck me in the podcast was a brief description of two aspects in connection with Ellington's musical creations, particularly in the 1930s and 1940s. The first aspect was an observation that, at that time, Ellington preferred not to reduce at least some of his musical compositions to writing, for fear that it would ease the task of would-be imitators. So he urged his orchestra members to memorize the musical work at hand.

In other words, Ellington had turned copyright on his head, seemingly using trade secrets to try and protect at least some of his musical works. What an interesting notion--musical as artistic confidence. Reverse engineer my musical creation, if you like!

Try to reverse-engineer this!

The second aspect addressed the complex relationship between Ellington and his orchestra members about their role in the composition of his works. Apparently, Ellington made liberal use of the musical input of his musicians, usually without adding them as "co-composers" of the resulting work. According to the podcast, some grumbled, some settled for monetary compensation, and some seemed to receive credit of some kind.

We can teach students all we want about copyright ownership and attribution, but the reality of how ownership and attribution play out reveals a degree of complexity that pure law cannot capture. This is especially so when music becomes more of a collective activity, where the composer is also the arranger and also the orchestra leader. The genius of 18th and 19th century composer gives way to more complicated relationships between multiple actors in the creation and performance of music. In that space, neither copyright nor licensing is fully informing.

P&G enters the music business

The New York Times reported last week that hip-hop and R&B producer Jermaine Dupri, who runs the urban music division of the Island Def Jam Music Group, is also looking for fresh talent for a new label financed by a company new to the music industry. The new player in question, surprisingly, is Procter & Gamble. According to this article, P&G

"... is part of a wave of companies getting into the music business to promote their own products, essentially becoming record labels themselves.

Procter & Gamble ... is joining Island Def Jam in a joint venture called Tag Records, a label that will sign and release albums by new hip-hop acts. It is named after a brand of body spray that P.& G. acquired when it bought Gillette.

... At a time when online file-sharing is rampant, record stores are closing and consumers are buying singles instead of albums, getting into the music business might seem like running into a burning building. But as record labels struggle to adjust to a harsh new digital reality, other companies are stepping up their involvement in music, going far beyond standard endorsement contracts and the use of songs in commercials.

These companies — like Procter & Gamble, Red Bull and Nike — are stepping outside of their core businesses to promote, finance and even distribute music themselves.

A few months ago, Bacardi announced that it would help the English electronic music duo Groove Armada pay for and promote its next release. Caress, the body-care line owned by Unilever, commissioned the Pussycat Dolls singer Nicole Scherzinger to record a version of Duran Duran’s “Rio” that it gave away on its Web site to promote its “Brazilian body wash” product. The energy drink company Red Bull is starting a label that is expected to release music before the end of the year.

And at least some of this music is credible: a hip-hop song that Nike released by Kanye West, Nas, Rakim and KRS-One was nominated for a Grammy Award for best rap performance by a duo or group.

Unlike Starbucks, which got into the music business to sell CDs at its stores, these companies want to use music to promote products they already sell.”

The article develops the theme, demonstrating a surprising twist in the tale of the search for viable business models for promoting and recording new musical works in the post-traditional copyright era. One might consider that this marks a return to patronage, but with the brand-rich IP portfolio owner replacing the church, state or nobility [Source: Miri Frankel, Beanstalk, NY].