“…almost all labels were owned by one of five companies: BMG, EMI, Sony Music Entertainment, Universal Music Group, and Warner Music Group. A new emphasis on quarterly results discouraged label executives from nurturing new bands and focusing on long-term development.”The article is mostly about Nettwerk, a record label that leaves copyright to the actual artists, while it handles distribution in multiple formats (CD, iPoD, ringtones, P2P networks, YouTube, etc., along with promotion of concerts and radio play).No Suit Required. Terry McBride has a maverick approach to music management: Take care of the fans and the bands, and the business will take care of itself. by Jeff Howe, Wired, Sept 2006, p. 180
What’s this got to do with ISPs?
Well, there are local ISPs that do grass-roots distribution, there are tier 1 ISPs that do long-haul, and there are telco ISPs that try to do both while controling what gets distributed, including lobbying Congress to completely do away with net neutrality. The first two are vaguely like concert promoters and music publishers. Telco ISPs are roughly equivalent to old-style record labels. Not only in trying to control the content, but also in being more interested in selling plastic discs not music (record labels) or minutes or bytes (telcos) than in promoting new and better and more diverse content or in rewarding those who actually create the content.
Regarding how the traditional labels operate, the article continues:
Musicians generally make very little on the sale of their records. The costs of production, marketing, and promotion are charged against sales, and even if they go multiplatinum and cover those costs, their cut of any extra revenue is usually less than 10 percent. On top of this, the labels typically retain the copyrights to the recordings, which allows them to profit from the musicians’ catalogs indefinitely. “It’s as if you received a loan for a house,” says Ed Robertson, one of BNL’s lead vocalists, “But when you finish paying off that loan, the label says thank you and keeps the house.”And, funny thing, this model isn’t just bad for artists, it’s increasingly bad for business. Because the label makes most of its profits from recorded music, much of the money spent marketing an artist benefits third parties like concert promoters and music publishing companies. In addition, copyrights to a piece of music are usually divided between a label and a publisher, which collect royalties every time the work is recorded, performed, or played publicly. “What other business splits up its key assets and sells them to separate businesses that wind up in conflict with each other?” asks Duncan Reid, a venture capitalist who now helps run UK-based Ingenious Music.
So what did the traditional labels do when they perceived online P2P networks as eating into their sales of plastic discs? They started suing their music lovers who were using P2P networks. Often these lawsuit recipients, ranging from underage teenagers to grandmothers, were the record companies’ own customers: many people listen to cuts online and then buy the CD.
What are the telcos doing now that they perceive they might not be able to reconstitute the old Frankenbell monopoly or at least a duopoly with the cable companies? Lobbying Congress to legislate the continued end of net neutrality. (They already got the FCC to abolish the old net neutrality requirements in August 2005.) This isn’t just bad for content providers and for free speech; it’s bad for the long-term competitiveness of the telco ISPs, since ISPs in Japan and Korea and elsewhere are thriving at customer broadband speeds 10 times faster than in the U.S., and are already starting to expand overseas.
What’s the last desperate act of a dying oligopoly? Sue the customers! Or try to legislate the monopoly! Either way, game the legal system instead of giving the customers what they want.
Nettwerk actually defended one of the targets of the RIAA lawsuits,
“The lawsuits are hurting my bands,” he says, “If you could monetize the peer-to-peer networks, everyone would make more money.”while giving music lovers new music in multiple forms at reasonable prices, letting musicians retain their own copyrights, handling concert promotion and music publishing rights along with the disc and online distribution rights, and making profits for both musicians ($5-$6 per CD instead of $1-$2) and Nettwerk at the same time, plus letting users remix and feed back into the loop. The big labels are starting to copy what Nettwerk and some other mavericks are doing; this is good for everyone, I think.
Which is better risk management for a company doing business on the Internet? An oligopoly of a handful of companies controling content and taking care of its own next-quarter profits? Or competitive net neutral long-haul and access provision providing what its customers need for their businesses?
What does the Internet need? Frankenbell resuscitated? Or new blood?
-jsq
PS: Frankenbell courtesy of a NANOG t-shirt of some years ago.