Will record labels control digital-music lockers?

For nearly a decade, Robertson, the often controversial cofounder of MP3.com and Linspire, has toiled to store music in the cloud, the term used to describe the seemingly limitless amount of data and services accessible with a Web browser. But in the past, Robertson's efforts have led him into epic legal battles with the music industry. That's where he finds himself once again. In November, EMI filed a copyright suit against him and his music service, MP3tunes.com.

More recently, Robertson has had to watch competitors generate headlines with an idea he helped pioneer. On Monday, Lala.com launched a service that enables customers to upload songs into digital music lockers (or the cloud) and then stream the tracks to Web-connected devices. Before launching, Lala obtained licenses from each of the top four recording companies. The differences between MP3tunes and Lala are many but chief among them is this: Robertson doesn't believe services such as his are obligated to obtain licenses to help consumers store legally owned music.

There's potentially a lot at stake here--that is if you believe all our gadgets will one day connect to the Web, and that people will access music from celestial jukeboxes via whatever device is handiest. How Robertson's legal case is decided could help determine who owns the keys to digital lockers.

EMI says issue is piracy
Little in EMI's complaint indicates that the label objects to the storing of music in lockers, digital or otherwise. As a matter of fact, the document reads like a run-of-the-mill piracy complaint.

EMI, the smallest of the top labels, alleges that Robertson has set up his two operations, MP3tunes.com and Sideload.com, to deliver a one-two punch against copyright. According to EMI's complaint, Sideload finds and organizes links to pilfered music files on the Web. MP3tunes then enables those pirated files to be stored, copied, and downloaded to devices without paying a dime to the music creators.

"Next to each Sideload song is a small "SL" icon," EMI wrote in its complaint filed in U.S. District Court in New York. "When users click that SL icon, MP3tunes makes a full permanent copy of the desired work and stores it in a locker assigned to that user at MP3tunes.com."

"If EMI is right, their argument indicts every single online storage service and ISP in the world." --Michael Robertson, MP3tunes founder

The record label accuses MP3tunes of then handing users the ability to share access to their music lockers with anybody. According to EMI, MP3tunes only requires customers to submit an e-mail and password to access their music. EMI lawyers argued that such lax security enables a locker to become a "virtual drop box for this illegal distribution."

Robertson dismisses EMI's claims and said Sideload is nothing but a search engine just like Google and Yahoo. The Digital Millennium Copyright Act protects service providers from responsibility for any crimes committed by users, Robertson said. He claims EMI's lawsuit is designed to camouflage the record industry's true goal, which is to prevent him and anyone else from storing music in digital lockers without first paying licensing fees.

"This is about what users are allowed to do with their music," Robertson said. "Are they allowed to put it on their phone and their game devices or on multiple PCs without paying the labels each time? I say they are. Consumers don't want a corporation deciding for them what they can do with their property."

To help prove that MP3tunes violates copyright law, EMI is focusing its legal attack on the way MP3tunes stores music, Robertson said. Before I get to that, there are some things about Robertson readers should know.

Is MP3tunes different than MP3.com?
First, this is certainly not his first court fight. He was one of the cofounders of MP3.com, which attracted a huge following in the late 1990s partly by doing what MP3tunes.com does now. MP3.com's Beam-It program enabled users to load CDs into online lockers and access the songs from Web-enabled devices. The problem was 10 years ago many people were still limited by 56k connections.

It just wasn't feasible to upload music this way, Robertson said. In order to speed up the process, MP3.com purchased $1 million worth of CDs and created software to scan a user's hard drive. The software detected whether a user owned copies of songs found in MP3.com's library. If they did, the service gave the user access to its copies.

The labels zeroed in on this. Universal Music Group alleged in a copyright suit that MP3.com was unauthorized to use its songs as a data base. In a landmark decision, the judge agreed and MP3.com eventually paid UMG more than $53 million. Then the company, which had raised $370 million in a 1999 public offering, merged with Vivendi. Later, its domain name was sold to CNET, publisher of News.com.

"The court found that MP3.com had engaged in willful acts of copyright infringement," EMI wrote in its latest lawsuit, adding that Robertson ultimately started MP3tunes.com as a "vehicle to achieve a comparable infringing purpose."

Again, Robertson shrugs off EMI's charges. He said his company is clean. Technology has improved and he doesn't have to create a central music library. Users can create one for him by uploading their own songs. But wait. Is it legal to manage a central music library without permission from the copyright owners regardless of who stocked the library with songs?

Unauthorized performances
Let's step back for a second. It's incorrect to think of digital music lockers in the same way one thinks of a high school locker, says Robertson. Music uploaded into the site isn't tucked neatly into some walled-off area. Songs from every customer are loaded onto the same hard drive, he said. But it's important to note much of of the music is never actually stored, Robertson acknowledged. It would be inefficient and expensive to store numerous copies of, say, The Beatles' classic "Yesterday" or AC/DC's "Back in Black."

MP3tunes keeps a copy of a particular song and distributes that one to customers over and over again. This means, however, that the files users load onto the site are unlikely to be the same ones they hear when accessing their music. Every company handling digital information operates the exact same way, Robertson argues. Nonetheless, EMI claims that MP3tunes is not authorized to distribute music this way and is violating copyright law.

"If EMI is right, their argument indicts every single online storage service and ISP in the world," Robertson said. "We didn't invent this technology. That's a default feature in every single storage system."

Robertson has a point. How much sense does it make to store 10,000 copies of the 10,000 most popular songs? If the copies are exact, what's the difference whether I'm listening to my bits or someone else's as long as I legally purchased the music? Don't I own the right to hear the song?

EMI's attorneys will almost certainly argue that a user purchases a set of bits and they only own the right to those bits.

The label is also likely to compare MP3tunes to MP3.com and claim that in both cases Robertson operates a music data base without permission from the copyright owners. The only difference is that MP3tunes didn't actually make any of the copies on the site.

It will be interesting to see whether that's enough of a distinction to satisfy the courts, especially when Robertson has acknowledged customers of MP3tunes, like those of MP3.com, aren't listening to their own music files.

First Blood is Spilled at Record Industry Hearings - The War is On!!!

By Moses Avalon (more articles from this author) 2002-09-28

September 26 - Los Angeles. Absent the penalty of perjury, Major Label lawyers testified to a panel of senators in Los Angles that most artists are happy with their recording contracts. The panel, held this past Tuesday, was assembled to entertain arguments as to whether legislation might be necessary to keep major record labels honest when reporting to their artists the amount of money earned on their exclusive record contracts. If enacted, this would be the beginning of government regulation of the music business; a concept that, ironically, artists are initiating.

Tuesday's panel was an informal Joint Hearing of the Senate Committee and Senate Select Committee on the Entertainment Industry. Lawyers and spokespersons from both sides were invited to air their points of view.

Major Labels emphasized that artists, by and large, are "happy with the current system," and based this on the fact that so few artists audit their labels or sue for breach of contract. Meanwhile, artists representatives indicated that this was only the case because many feel intimidated or, in the case of older, more powerful stars, believe that an audit would be useless. The following three points were the center piece of the day's comments:

1) By contract, artists are prohibited from showing royalty statements to third parties. Normally this would not include their managers, lawyers, consultants, or others who could aid them in getting paid, but apparently this is not necessarily the case. Senator Kevin Murray, leading the initiative for artists' rights, claimed the that Cary Sherman, Chief Counsel for the RIAA himself, said to him in an interview, that RIAA members (the major labels) would sue any artist that broke ranks and shared information with the Committee. This claim was rejected by Sherman but supported by others in the room. Don Henley, among them, outwardly dared his record company to sue him for bringing royalty statements to the hearing. He presented his most recent royalty statement for "Hell Freezes Over," which showed the panel that even though his contract called for a no more than a 10% "reserve" on sales of records shipped, Universal Music had held back more than that for eleven pay periods (roughly under three years) and that, even though his contract calls for no free goods in Europe, they had deducted $87,000 in free goods charges to Europe.

2) All boiler plate recording contracts stipulate that manufacturing records are exempt from an audit. Senator Battin took particular interest in this point, wondering how can an artist get an accurate account of sales if they don't know the number of units produced to start with.

3) Even after an artist has gone through the audit and has found recoverable money, they are expected to negotiate a settlement with the record company. Furthermore, their auditors are required to meet with label executives BEFORE they can release findings to their clients (Wow?!?). The net result is that, even after an audit, the artist can expect to get only a fraction of what they are owed. Most would rather not rock the boat.

Another interesting contractual speed-bump is that most contracts regulate who the artist can hire to do the audit. The proverbial "list" seems limited to a small cartel of accountants and financial managers who "understand the way the record business works." The auditor can not be simultaneously auditing the record company for any other artist or any other record company. This makes scheduling the few "qualified accounts" on par with booking Russell Crow for your next motion picture.

Record companies claim that this standard avoids conflicts of interest, makes the audit process cheaper for the artist - as the auditor's time will be minimized - and the company's royalty accounting process will not be held up. But a more likely strategy, as voiced by artist representatives, is that they are trying to deflect auditors from exaggerating their claims, in hopes that the settled-upon amount will be somewhere near what is believed to be owed.

The seasoned artists who testified, admitted that holding out for large advances on second and third albums acts as an enfilade against accounting rip-offs. But it is not always successful. This strategy, however, would exclude artists past their prime and deceased artists, whose money can be kept by the record companies with virtual impunity.

In addition, the common strategy of "renegotiation" after the record is a hit, has meet with opposition as consolidation has caused record companies to get "mean and lean" in the troubled economy. Artists' lawyers have reported that they are having "some tension" with the tradition of getting better terms for their clients after they have a proven hit. In a shocking statement made by Back Street Boy Kevin Richardson, he testified that they have NEVER received a royalty check, and that they only took a large advance after their third hit album in a row failed to earn them a penny in royalties. (Case in point, three albums on a major label is generally about 5 contract years into the term.)

Also, the wife of Lester Chambers, of The Chambers Brothers, claimed to have never received a royalty check, nor an advance, in upwards of 30 years. Ms. Chambers claimed that Columbia told her there were no overseas sales to report because The Chambers Brothers records were never licensed to an overseas distributor. She believed them until she started seeing her product on E-Bay and found 22 different foreign pressings of Chambers Brothers recordings, all by foreign affiliates of her label, Columbia Records, a subsidiary of Sony. Similarly, a member of The Olympics, of the hit "Hully Gully," was present and complained that he found his recording on 94 different compilations world-wide, yet has never received a royalty check.

To defend their actions, record companies hired Linda McLaughlin, an economist, to do a study of record industry profits. She testified that, on the whole, record companies get only 9% of profits while artists get 17%. Upon questioning by Senator Murray, she admitted that when calculating the profits artists earned she was including their publishing money earned from song writing, but when calculating the record company's earnings she broke apart the record sales profits and excluded publishing revenue, even when the artist's account was earning money for both the record and publishing divisions of the same company.

She was also asked to produce comparisons to other industries where royalties are accruable to vendors and furnishers of product. Sighting examples like the book publishing industry, where authors are only required to recoup the actual advance they receive for each book, and not money that is spent on their behalf (i.e.: promotion). She had not included such research in her study. Her study was also only limited to US record labels and not foreign affiliates.

In the afternoon session, representatives of artists steered the conversations towards establishing government regulated penalties for labels clearly trying to defraud their artists. A solution that makes everyone uneasy.

Senators on the panel made it clear that Big Brother peeking in their financial records was probably going to make everybody miserable. But the tone was clear: unless the majors labels come up with a system, whereby they agree to a penalty for under-reporting royalties, then the Senators are likely to introduce a bill making the collection of royalties, especially overseas royalties, a fiduciary duty. This would give the artists who are victimized by chronic under-reporting of royalties legal remedies beyond submitting to a 2-4 year auditing process, which normally costs them $30-$40 thousand dollars before the audit begins (Most contracts expressly prohibit artists from hiring auditors on contingency).

An insider present at the hearing commented, "It was kinda pathetic watching all the major suits try and defend the indefensible... it was clear that the Senators want no part of any legislation, but that they feel it's inevitable if the majors refuse to address any of the artists' concerns."

Research and commentary for this piece was provided by Pat Spear.

Why Sell Albums?
Physical is dead... now what?

By Jim Markunas (more articles from this author) 2009-04-14

Welcome to your next browser

Physical is dead! Well... not completely, but think of physical sales as a 1962 Chevy Impala - A niche group of people still want to drive one, but most people would rather roll in a Hybrid.

This begs the question, "If artists and labels stop selling albums, where does the money come from?"

Great question! The internet has opened up a wealth of potential business models from affiliate-oriented programs to ad-supported streaming, just to name a few examples.

Instead of relying on the antiquated notion of selling a square object to consumers for $15.99 a pop, artists and labels should band together to think of new ways to bring in revenue; not just in the digital forum, but in all marketplaces.

A few key points to remember:

* There will be a jump in online sales in the immediate future - According to Amazon.com (world's largest online retailer) and Amway (a company of legal Ponzi schemers), within the next 10 years consumers will be buying 70% of their goods online. This will be an extremely large shift from 35% in 2008.

* This isn't just young consumers buying music and movies in the digital realm - Everything from cosmetics to food is currently purchased online by a wide range of consumers; even my old boss at Disney (an experienced corporate lawyer in his 50s) has admitted to buying his groceries via an "online delivery service."

* The browser is the new iPod - According to Rio Caraeff (EVP UMG eLabs), the album is an antiquated notion in the face of technology that favors portability and instant gratification.

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HFA Collects Almost $307.1 Million In Royalties For 2008
HFA issued over 2.44 million mechanical licenses in the year, 62% more than in 2007

By Mi2N (more articles from this author) 2009-03-27

The Harry Fox Agency, Inc. (HFA) announced that its total 2008 royalty collections from all sources was $307.1 million, a 22% decline from 2007. HFA issued over 2.44 million mechanical licenses in the year, 62% more than in 2007. Over 530,000 of those licenses were for permanent digital downloads of singles and albums, which also increased by almost 47% over 2007. This brings the total number of licenses under HFA's administration to over 16.7 million. The company represents over 37,000 publishing clients, with nearly 2.3 million songs available for licensing.

"2008 was another tough year for the music industry, and HFA was no exception," said Gary Churgin, HFA President & CEO. "The decline in the market had slowed in 2007, but in 2008, as the overall economy suffered, we saw the effects on the music sector accelerate. The retail closings and reductions of floorspace dedicated to music sales will continue to reverberate through the mechanical licensing market in 2009. The growth of digital sales, while still robust, is also slowing, so we do not expect digital to offset the losses of CD sales any time soon."

Churgin continued, "However, despite the decrease in royalty collections, we were able to continue to bring new opportunities to our clients such as commission-free licensing from lyrics provider Tunewiki, as well as developing more options for our online offerings such as Songfile® and publisher reports, all while continuing to pay more than 92 cents on every dollar collected straight to our publishing clients – better than any other rights organization in North America, if not the world.

"The focus of 2009 for HFA will be implementing the new schedule of mechanical royalty rates from the Copyright Royalty Board, which set compulsory rates for interactive streams, limited downloads and ringtones, and continuing to find new opportunities to add to our clients' and HFA's revenue beyond the traditional mechanical."

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Musicload Pulls Its Weight Amongst Giants
Germany is an interesting market where the rapid shift to DRM-free music could result in even more shifts in market share

By Eric de Fontenay (Founder & Publisher) (more articles from this author) 2009-04-22

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From a macro-level, the U.S. online music retail market can appear somewhat stale, monolithic, what with the dominance of Apple across so many sectors. Fortunately, the same can't be said for our brethren across the pond where linguistic and cultural differences usual result in a more fragmented and competitive marketplace.

Germany is an interesting market where the rapid shift to DRM-free music could result in even more shifts in market share. Deutsche Telekom's digital music service Musicload recently completed its shift of six million songs in the DRM-free MP3 format a month sooner than planned. Timing is key with iTunes and Amazon having a significant presence in the market. Research consultancy Strategy Analytics recently found that most German broadband users prefer Amazon for online media purchases.

"As Amazon launches its MP3 download store in Germany, it is putting tremendous pressure on the market leaders, Apple iTunes and Musicload from Deutsche Telekom," said Martin Olausson, Director of Digital Media Research at Strategy Analytics. "We are expecting a fierce battle for supremacy in the German online music market in the months ahead and our research suggests that newcomer Amazon may very well come out on top".

In the midst of this simple fact - MP3 has won, DRM (at least for online music) is dead - as well other shifts such as the emergence of mobile music, I spoke to Joachim Franz, Vice President of Musicload, on the evolving German online market.

Do you believe that the end of DRM for music will have a significant impact for Musicload and the industry as a whole? Or are we just playing catch-up?

The switch to DRM-free MP3 will have a strong positive impact on market growth and help develop digital music download towards mass market. With DRM protected content, Musicload customers had lots of technical difficulties, actually 70% of all incidents in customer care related to DRM.

Musicload's DRM-free media files are also free of digital watermarks, which identify the buyer's personal data for tracking purposes in cases of illegal file sharing. "Watermarks send the wrong signal to honest customers. We assume that music fans who buy their songs from us will not distribute them illegally. As a result, we decided against using watermarks."

How difficult was it to convince the rightholders in Germany to make the move?

Musicload is offering 'real' MP3, which runs on all digital music devices, fully interoperable, including iPod. Thus, Musicload has argued in favor of DRM-free MP3 music to the labels and had started aggregating MP3 content in 2006 with Four Music and EMI, with others following. By March 1st of this year, all six million songs from all four major labels were switched to MP3. It makes us especially proud to be the first digital music store in German-speaking countries to close the chapter on copy protection.

How is Musicload able to effectively compete against international heavyweights like iTunes and Amazon?

Musicload is the best known music download portal in Germany, with 79% brand awareness. With respect to sales figures, Musicload is in a good position at #2 in the German market.

What distinct advantages does Musicload bring to the German market?

Musicloads offers several distinct advantages: German language editorial staff, with a good, credible and specific knowledge of the german-language music market. Interoperability - being device-agnostic - is a clear strength of Musicload, especially over iTunes AAC-format, which is not fully device agnostic. DT-customers can pay comfortably via their phone-operator bill. Musicload rolled out to Austria and Switzerland in summer 2008.

Verizon recently announced a tiered pricing for MP3s, but I noticed that Musicload has been using a tiered system. How is the pricing determined? Would you say that music downloads are elastic, ie., relatively price sensitive?

Musicload has always had tiered pricing, allowing for full flexibility. Musicload is very successful with a 'Buy X songs out of Y songs for Z EUR' feature, eg 10 out of 40 carnival-songs for 6,66EUR.

Yes, I believe in price-elasticity and variable pricing for the future. Frontline, new music and superstars will attract a high price, while back-catalogue will be attractively pitched to consumers at a lower pricing level.

The iPhone has catapulted Apple into the mobile market while Nokia uses it's position as a handset manufacturer to launch a service like Comes With Music. As a part of T-Mobile/Deutsche Telekom, how is Musicload positioning itself for the mobile market? Or will we even be speaking of online and mobile as separate and distinct markets in the near future?

The high volume market in Germany is in fixed line, therefore mobile is not yet the full focus of Musicload as a mass market provider. As of today, T-Mobile operates a separate music offering for mobile, which is called Mobile Jukebox. Migration of this service with Musicload will likely be completed within 12-15 months.

We are already offering a hardware-service bundle of Musicload Nonstop (unlimited flat-rate streaming service, full catalogue, 8,95EUR/month) with a wireless audio device (internet radio) - think of Real a Rhapsody-Sonos bundle (www.my-noxon.de)

 

Copyright Industry Hails Rare Court Victory
Statements from The Progress & Freedom Foundation, Copyright Alliance, MPAA, IFPI and Swedish Independent Music Producers Association

By Mi2N (more articles from this author) 2009-04-21

"This verdict, sentence, and damage award delivers a simple message about the activities of the Pirate Bay: 'Good riddance to bad rubbish.' I commend Sweden for upholding the rule of law, and urge it to act swiftly to terminate the site's illegal activities."

"This verdict is also an affirmation of the rights of the hard-working, law-abiding creators whose efforts to help both American and European economies escape from global recession were being undermined by the sort of socially destructive freeloading encouraged by sites like the Pirate Bay and the distributors of piracy-adapted file-sharing programs. This verdict also shows that civilized nations can and should enforce copyright owners' exclusive right to make their works available over interactive networks like the Internet."

"American prosecutors should also note that the Swedish court stated that this "crime has been committed in a commercial and organized form." U.S. law provides powerful tools that can halt organized commercial crime and dismember criminal syndicates. It is high time to deploy those tools against distributors and operators of piracy-adapted programs and sites."
Tom Sydnor, Senior Fellow and Director of the Center for the Study of Digital Property at The Progress & Freedom Foundation

"We at the Copyright Alliance welcome enthusiastically the steps taken by the Swedish court system against four defendants in the Pirate Bay case. Jail time and a significant payment of damages are entirely appropriate, given the sweeping harm the defendants' illegal file-sharing operation has done to creators from numerous creative industries.

"We also recognize that this struggle -- against those who would seek to coordinate and enable on a massive scale the theft of creators' rights -- is ongoing. This court action will not bring to an end massive illegal file-sharing. But it is critically important for creators to continue to fight for their rights, and to applaud legal systems that seek to uphold their rights.

"The most important step creators can take is to continue to educate consumers on the indispensable role copyright plays in the creation of the works that are so valued on these infringing networks. Most consumers recognize that creators have rights, and that those rights empower creators to create. Those consumers also welcome the increasing array of creator-sanctioned, legal opportunities to access creative works. With continued vigilance on the legal front and continued outreach on the educational front, creators and consumers both win."
Copyright Alliance Executive Director Patrick Ross

"We welcome the court's decision today because The Pirate Bay is a source of immense damage to the creative industries in Sweden and internationally. This is an important decision for rights-holders, underlining their right to have their creative works protected against illegal exploitation and to be fairly rewarded for their endeavors. This decision will help to support the continued investment in talent and in new online services, and the creation of new films and television shows for enjoyment by audiences around the world."
Motion Picture Association of America (MPAA) Chairman and CEO Dan Glickman

"The trial of the operators of The Pirate Bay was about defending the rights of creators, confirming the illegality of the service and creating a fair environment for legal music services that respect the rights of the creative community. Today's verdict is the right outcome on all three counts. The court has also handed down a strong deterrent sentence that reflects the seriousness of the crimes committed. This is good news for everyone, in Sweden and internationally, who is making a living or a business from creative activity and who needs to know their rights will protected by law."
IFPI Chairman and CEO, John Kennedy

"The court has delivered a simple and clear judgement, which is that people and businesses engaged in creative activities have the fundamental right to be rewarded for their work and to be protected from massive copyright violators like Pirate Bay. The criminal conviction of the Pirate Bay operators will not only hearten the music and film community - it is also a huge shot in the arm for legitimate producers and entrepreneurs, who are trying to create a thriving legitimate online business based on proper respect of copyright. The court has also understood that a criminal conviction in itself is not enough, and that if creators' rights are going to properly protected, a deterrent sentence was needed reflecting the seriousness of the crime."
Ludvig Werner, Chairman of IFPI Sweden

"This a great verdict for Sweden's independent music labels which are trying to build their business by licensing legitimate services and getting it to fans in the way they want. The Pirate Bay has no place in this legitimate business and the court has made that clear. They had no respect for creators or artists or the labels who invest in them. This was the right verdict and the whole creative should be happy with the outcome."
Jonas Sjöström, Chairman of SOM (Svenska Obereoende Musikproducenter/Swedish Independent Music Producers Association)

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American Media Services Survey Shows Popularity Of Internet Radio, Even As Regular Radio Continues Holding Its Audience

Internet-only radio is rapidly gaining acceptance as another way to listen to music, according to a national survey that American Media Services released today.

The latest AMS Radio Index shows that more than a quarter (27 percent) of Americans say they have listened to Internet-only radio on an Internet site. This includes nearly half (47 percent) of young adults 18-24 and about a third (34 percent) of those under the age of 50.

But even as new media, such as Internet-only radio, continue to gain in popularity, regular radio is maintaining its audience. In the latest AMS survey, 73 percent said they are listening to the radio about the same as or more than they did five years ago. Dating back to the initial AMS Radio Index in January 2006, the number saying they’re listening to the radio as much or more than five years earlier has remained remarkably steady.

"Our latest survey shows the continued vibrancy of radio," said Edward F. Seeger, AMS chairman. "Online radio is an increasingly important medium. Regular radio is holding its own. The two media offer choices that are compatible and complementary of each other."

The way of receiving online radio is also rapidly changing. Nearly half the homes in America now have WiFi, or wireless internet service, the AMS survey found. Home WiFi service increased from 37 percent in the September 2008 survey to 48 percent in the current survey.

And in the wireless world, vehicles could be the next frontier – for both Internet connections and audience growth for Internet-only radio.

* There is an increasing desire among Americans to have Internet service in their vehicle. The number expressing interest in having this service in their vehicle has increased from 37 percent in the September 2008 AMS survey to 46 percent in the latest AMS Radio Index.
* Among those who have listened to Internet-only radio, nearly half (46 percent) expect to listen to it in the future on an Internet connection in their vehicles, and nearly three-quarters (74 percent) say they would listen to Internet-only radio more if their vehicle had an Internet connection.
* Even among those who have never listened to Internet-only radio, nearly half (48 percent) say they would be prompted to listen to it if they had an Internet connection in their vehicle.

Generally, they prefer to have access to Internet-only radio at no charge. However, nearly a quarter (23 percent) said they are willing to pay a monthly subscription charge of $8 or less to listen commercial-free.

Other key findings of the latest AMS Radio Index include the following:

* Nearly six out of 10 (59 percent) say they notice music while shopping either always or most of the time.
* About half (51 percent) say hearing brief advertisements for special offers in the store or ads for other area stores would make their shopping experience easier.
* Men and women were equally disposed towards in-store ads. Age mattered more than gender: 72 percent of those 18-24 and 60 percent of those 25-34 said in-store ads would make their shopping experience easier.

 

         The Problem With Music
                 by Steve Albini

Whenever I talk to a band who are about to sign with a major label, I always end up thinking of them in a particular context. I imagine a trench, about four feet wide and five feet deep, maybe sixty yards long, filled with runny, decaying shit. I imagine these people, some of them good friends, some of them barely acquaintances, at one end of this trench. I also imagine a faceless industry lackey at the other end holding a fountain pen and a contract waiting to be signed. Nobody can see what's printed on the contract. It's too far away, and besides, the shit stench is making everybody's eyes water. The lackey shouts to everybody that the first one to swim the trench gets to sign the contract. Everybody dives in the trench and they struggle furiously to get to the other end. Two people arrive simultaneously and begin wrestling furiously, clawing each other and dunking each other under the shit. Eventually, one of them capitulates, and there's only one contestant left. He reaches for the pen, but the Lackey says "Actually, I think you need a little more development. Swim again, please. Backstroke". And he does of course.

Every major label involved in the hunt for new bands now has on staff a high-profile point man, an "A & R" rep who can present a comfortable face to any prospective band. The initials stand for "Artist and Repertoire." because historically, the A & R staff would select artists to record music that they had also selected, out of an available pool of each. This is still the case, though not openly. These guys are universally young [about the same age as the bands being wooed], and nowadays they always have some obvious underground rock credibility flag they can wave.

Lyle Preslar, former guitarist for Minor Threat, is one of them. Terry Tolkin, former NY independent booking agent and assistant manager at Touch and Go is one of them. Al Smith, former soundman at CBGB is one of them. Mike Gitter, former editor of XXX fanzine and contributor to Rip, Kerrang and other lowbrow rags is one of them. Many of the annoying turds who used to staff college radio stations are in their ranks as well. There are several reasons A & R scouts are always young. The explanation usually copped-to is that the scout will be "hip to the current musical "scene." A more important reason is that the bands will intuitively trust someone they think is a peer, and who speaks fondly of the same formative rock and roll experiences. The A & R person is the first person to make contact with the band, and as such is the first person to promise them the moon. Who better to promise them the moon than an idealistic young turk who expects to be calling the shots in a few years, and who has had no previous experience with a big record company. Hell, he's as naive as the band he's duping. When he tells them no one will interfere in their creative process, he probably even believes it. When he sits down with the band for the first time, over a plate of angel hair pasta, he can tell them with all sincerity that when they sign with company X, they're really signing with him and he's on their side. Remember that great gig I saw you at in '85? Didn't we have a blast. By now all rock bands are wise enough to be suspicious of music industry scum. There is a pervasive caricature in popular culture of a portly, middle aged ex-hipster talking a mile-a-minute, using outdated jargon and calling everybody "baby." After meeting "their" A & R guy, the band will say to themselves and everyone else, "He's not like a record company guy at all! He's like one of us." And they will be right. That's one of the reasons he was hired.

These A & R guys are not allowed to write contracts. What they do is present the band with a letter of intent, or "deal memo," which loosely states some terms, and affirms that the band will sign with the label once a contract has been agreed on. The spookiest thing about this harmless sounding little memo, is that it is, for all legal purposes, a binding document. That is, once the band signs it, they are under obligation to conclude a deal with the label. If the label presents them with a contract that the band don't want to sign, all the label has to do is wait. There are a hundred other bands willing to sign the exact same contract, so the label is in a position of strength. These letters never have any terms of expiration, so the band remain bound by the deal memo until a contract is signed, no matter how long that takes. The band cannot sign to another laborer or even put out its own material unless they are released from their agreement, which never happens. Make no mistake about it: once a band has signed a letter of intent, they will either eventually sign a contract that suits the label or they will be destroyed.

One of my favorite bands was held hostage for the better part of two years by a slick young "He's not like a label guy at all," A & R rep, on the basis of such a deal memo. He had failed to come through on any of his promises [something he did with similar effect to another well-known band], and so the band wanted out. Another label expressed interest, but when the A & R man was asked to release the band, he said he would need money or points, or possibly both, before he would consider it. The new label was afraid the price would be too dear, and they said no thanks. On the cusp of making their signature album, an excellent band, humiliated, broke up from the stress and the many months of inactivity. There's this band. They're pretty ordinary, but they're also pretty good, so they've attracted some attention. They're signed to a moderate-sized "independent" label owned by a distribution company, and they have another two albums owed to the label. They're a little ambitious. They'd like to get signed by a major label so they can have some security you know, get some good equipment, tour in a proper tour bus -- nothing fancy, just a little reward for all the hard work. To that end, they got a manager. He knows some of the label guys, and he can shop their next project to all the right people. He takes his cut, sure, but it's only 15%, and if he can get them signed then it's money well spent. Anyways, it doesn't cost them anything if it doesn't work. 15% of nothing isn't much! One day an A & R scout calls them, says he's 'been following them for a while now, and when their manager mentioned them to him, it just "clicked." Would they like to meet with him about the possibility of working out a deal with his label? Wow. Big Break time. They meet the guy, and y'know what -- he's not what they expected from a label guy. He's young and dresses pretty much like the band does. He knows all their favorite bands. He's like one of them. He tells them he wants to go to bat for them, to try to get them everything they want. He says anything is possible with the right attitude.

They conclude the evening by taking home a copy of a deal memo they wrote out and signed on the spot. The A & R guy was full of great ideas, even talked about using a name producer. Butch Vig is out of the question-he wants 100 g's and three points, but they can get Don Fleming for $30,000 plus three points. Even that's a little steep, so maybe they'll go with that guy who used to be in David Letterman's band. He only wants three points. Or they can have just anybody record it (like Warton Tiers, maybe-- cost you 5 or 7 grand] and have Andy Wallace remix it for 4 grand a track plus 2 points. It was a lot to think about. Well, they like this guy and they trust him. Besides, they already signed the deal memo. He must have been serious about wanting them to sign. They break the news to their current label, and the label manager says he wants them to succeed, so they have his blessing. He will need to be compensated, of course, for the remaining albums left on their contract, but he'll work it out with the label himself.

Sub Pop made millions from selling off Nirvana, and Twin Tone hasn't done bad either: 50 grand for the Babes and 60 grand for the Poster Children-- without having to sell a single additional record. It'll be something modest. The new label doesn't mind, so long as it's recoupable out of royalties. Well, they get the final contract, and it's not quite what they expected. They figure it's better to be safe than sorry and they turn it over to a lawyer--one who says he's experienced in entertainment law and he hammers out a few bugs. They're still not sure about it, but the lawyer says he's seen a lot of contracts, and theirs is pretty good. They'll be great royalty: 13% [less a 1O% packaging deduction]. Wasn't it Buffalo Tom that were only getting 12% less 10? Whatever. The old label only wants 50 grand, an no points. Hell, Sub Pop got 3 points when they let Nirvana go. They're signed for four years, with options on each year, for a total of over a million dollars! That's a lot of money in any man's English. The first year's advance alone is $250,000. Just think about it, a quarter million, just for being in a rock band! Their manager thinks it's a great deal, especially the large advance. Besides, he knows a publishing company that will take the band on if they get signed, and even give them an advance of 20 grand, so they'll be making that money too. The manager says publishing is pretty mysterious, and nobody really knows where all the money comes from, but the lawyer can look that contract over too. Hell, it's free money. Their booking agent is excited about the band signing to a major. He says they can maybe average $1,000 or $2,000 a night from now on. That's enough to justify a five week tour, and with tour support, they can use a proper crew, buy some good equipment and even get a tour bus! Buses are pretty expensive, but if you figure in the price of a hotel room for everybody In the band and crew, they're actually about the same cost. Some bands like Therapy? and Sloan and Stereolab use buses on their tours even when they're getting paid only a couple hundred bucks a night, and this tour should earn at least a grand or two every night. It'll be worth it. The band will be more comfortable and will play better.

The agent says a band on a major label can get a merchandising company to pay them an advance on T-shirt sales! ridiculous! There's a gold mine here! The lawyer Should look over the merchandising contract, just to be safe. They get drunk at the signing party. Polaroids are taken and everybody looks thrilled. The label picked them up in a limo. They decided to go with the producer who used to be in Letterman's band. He had these technicians come in and tune the drums for them and tweak their amps and guitars. He had a guy bring in a slew of expensive old "vintage" microphones. Boy, were they "warm." He even had a guy come in and check the phase of all the equipment in the control room! Boy, was he professional. He used a bunch of equipment on them and by the end of it, they all agreed that it sounded very "punchy," yet "warm." All that hard work paid off. With the help of a video, the album went like hotcakes! They sold a quarter million copies! Here is the math that will explain just how fucked they are: These figures are representative of amounts that appear in record contracts daily. There's no need to skew the figures to make the scenario look bad, since real-life examples more than abound. income is bold and underlined, expenses are not.

Advance:	$ 250,000
Manager's cut:	$ 37,500
Legal fees:	$ 10,000
Recording Budget:	$ 150,000
Producer's advance:	$ 50,000
Studio fee:	$ 52,500
Drum Amp, Mic and Phase "Doctors":	$ 3,000
Recording tape:	$ 8,000
Equipment rental:	$ 5,000
Cartage and Transportation:	$ 5,000
Lodgings while in studio:	$ 10,000
Catering:	$ 3,000
Mastering:	$ 10,000
Tape copies, reference CDs, shipping tapes, misc. expenses:	$ 2,000
Video budget:	$ 30,000
Cameras:	$ 8,000
Crew:	$ 5,000
Processing and transfers:	$ 3,000
Off-line:	$ 2,000
On-line editing:	$ 3,000
Catering:	$ 1,000
Stage and construction:	$ 3,000
Copies, couriers, transportation:	$ 2,000
Director's fee:	$ 3,000
Album Artwork:	$ 5,000
Promotional photo shoot and duplication:	$ 2,000
Band fund:	$ 15,000
New fancy professional drum kit:	$ 5,000
New fancy professional guitars [2]:	$ 3,000
New fancy professional guitar amp rigs [2]:	$ 4,000
New fancy potato-shaped bass guitar:	$ 1,000
New fancy rack of lights bass amp:	$ 1,000
Rehearsal space rental:	$ 500
Big blowout party for their friends:	$ 500
Tour expense [5 weeks]:	$ 50,875
Bus:	$ 25,000
Crew [3]:	$ 7,500
Food and per diems:	$ 7,875
Fuel:	$ 3,000
Consumable supplies:	$ 3,500
Wardrobe:	$ 1,000
Promotion:	$ 3,000
Tour gross income:	$ 50,000
Agent's cut:	$ 7,500
Manager's cut:	$ 7,500
Merchandising advance:	$ 20,000
Manager's cut:	$ 3,000
Lawyer's fee:	$ 1,000
Publishing advance:	$ 20,000
Manager's cut:	$ 3,000
Lawyer's fee:	$ 1,000
Record sales:	250,000 @ $12 = $3,000,000
Gross retail revenue Royalty:	[13% of 90% of retail]: $ 351,000
Less advance:	$ 250,000
Producer's points:	[3% less $50,000 advance]: $ 40,000
Promotional budget:	$ 25,000
Recoupable buyout from previous label:	$ 50,000
Net royalty:	$ -14,000
Record company income:
Record wholesale price:	$6.50 x 250,000 = $1,625,000 gross income
Artist Royalties:	$ 351,000
Deficit from royalties:	$ 14,000
Manufacturing, packaging and distribution:	@ $2.20 per record: $ 550,000
Gross profit:	$ 7l0,000
The Balance Sheet: This is how much each player got paid at the end of the game.
Record company:	$ 710,000
Producer:	$ 90,000
Manager:	$ 51,000
Studio:	$ 52,500
Previous label:	$ 50,000
Agent:	$ 7,500
Lawyer:	$ 12,000
Band member net income each:	$ 4,031.25

The band is now 1/4 of the way through its contract, has made the music industry more than 3 million dollars richer, but is in the hole $14,000 on royalties. The band members have each earned about 1/3 as much as they would working at a 7-11, but they got to ride in a tour bus for a month. The next album will be about the same, except that the record company will insist they spend more time and money on it. Since the previous one never "recouped," the band will have no leverage, and will oblige. The next tour will be about the same, except the merchandising advance will have already been paid, and the band, strangely enough, won't have earned any royalties from their T-shirts yet. Maybe the T-shirt guys have figured out how to count money like record company guys. Some of your friends are probably already this fucked.

Steve Albini is an independent and corporate rock record producer most widely known for having produced Nirvana's "In Utero".