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Napster Helps RIAA Again; RIAA Still Ungrateful (Updated)
(Update one hour later by J : The story was on the AP wire, e.g. here, so it's not the BBC's fault. It was unfair of me to single out the Beeb when they just happened to be the source the submittor submitted this morning.)
The RIAA's figures were released last week, but the AP story was delayed until Monday, when the story would get the most exposure.
CD sales plummeted last year in the U.S. and record industry officials say the figures prove that Napster, the Internet music-sharing service, has harmed their business.Sales of music compact discs fell by 39% last year according to the Recording Industry Association of America (RIAA).
"Napster hurt record sales," said RIAA president Hilary Rosen.
This article reads like it might have been ghost-written by someone from the record industry. It isn't until paragraph ten that journalistic integrity kicks in enough for the AP to quietly mention what they're actually talking about:
Some experts say [sic] the drop of CD singles as being part of an industry-wide slump, due to economic factors and a weak year musically. (Emphasis mine.)
That's right, CD singles. Unit sales for the singles were down 39%, revenue down 36% (they raised prices, of course).
And CD singles account for how much of the RIAA's profits?
Not quite one percent.
Yes, that's right: they lost 36% of 1% of their profits.
And the news media is reporting it as a 39% loss.
The facts are that their "CD sales" are up this year, even over last year's stunning performance. The RIAA increased the average price of a full-length CD from $13.65 to $14.02, and still managed to sell 3,600,000 more of them.
Total profit increase on this, the core of their business, was 3.1%, or just shy of an extra $400,000,000.
But full-length CDs only account for 92% of the RIAA's revenue. They did have weak performance in the other 8%. CD singles, as already noted, dropped revenue by 36%. But the real casualty percentage-wise was cassingles, which lost over 90% of its revenue from last year.
Gee, why could that be? Maybe because nobody wants them?
In fact, the RIAA's only real money-losing format of any significance was cassettes, which, along with music videos, were the only format actually cut in price. Cassette revenue dropped $436 million.
Wait a minute, what am I saying? "Money-losing"? They aren't losing money on cassettes -- they're just not raking it in this year as fast as last year. And gee, why might that be? Again, because nobody wants them?
And it's not like the RIAA is struggling to get by on slim profits. The big picture is that, in the last nine years, they have tripled their annual income.
But they are desperate to spin this as a loss. The actual fact is that their total revenue is down 1.8% from 1999. Last year, they made $14,584,500,000. This year, they made $14,323,000,000.
But how could they blame Napster if they told the truth? What would they say? "Napster is killing us! Our income is down almost two whole percent! We are only pulling in $14,323,000,000 this year!"
That probably wouldn't fly.
Especially because in the three categories which Napster has precisely zero effect on -- cassettes, vinyl, and music videos -- their combined year-to-year loss was $579.5 million.
That's right. In the digital formats which Napster can trade, they are making more money: $318,500,000 more revenue. In the analog and video formats where Napster is irrelevant, they are making less money: $579,500,000 less revenue.
That's the real story here.
But don't trust the press to report this one fairly. Don't trust the RIAA's press release. Go read the RIAA's numbers yourself.
(Hell, don't even trust those numbers -- they don't add up. I was silly enough to type them into a spreadsheet, and someone over there has some problems doing simple arithmetic. Their 1998 total revenue includes the DVDs twice.)
The RIAA is desperately trying to spin this so that they won't look like greedy bastards for turning down Napster's offer of a billion dollars over the next five years.
If they just took that generous offer, then -- in a year that the AP wire suggests might be an "industry-wide slump, due to economic factors and a weak year musically," and in a year for which Bertlesmann admits "we didn't put that much good stuff out" -- their revenue would only be down $111,000,000 from last year. And that would have been $750,000,000 more than they made in 1998.
But that isn't enough for them.
Why would anyone think the RIAA is greedy? They just want what's coming to them.
(Update one hour later by J : Mea culpa. Three paragraphs up, I originally calculated the numbers as if the billion dollars was all applied in one year; that isn't so. The billion would have been applied equally over the next five years. Actually it probably wouldn't have been applied to year-2000 revenue at all, so it's more of a rhetorical point than anything. Thanks to dachshund for pointing out that it wasn't a lump-sum payment.)
(Update four hours later by J : The AP wire seems to have updated its story, now stating explicitly that it's CD singles, not "CDs," which dropped 39%. I see factually correct versions now at CNN, Salon, Yahoo, and wire.ap.org (search on Napster). The BBC version is still incorrect. In my opinion, the new versions are still misleading. Focusing on a large percentage drop within a subcategory which is a tiny percentage of the whole is a classic example of how to lie with statistics. But compare this to the RIAA's press release, claiming that CD singles had "flat growth in '98 and '99," though 1998 revenue actually dropped 22% -- that's just plain lying.)
get real, RIAA. you did not stay in touch with technology (ie, you didn't move with the times and start distributing individual songs over the net, so napster did that for you, sort of) so you lose some ground.
this is basic economics. you can't fight it, hard as you may try.
all the buggywhip companies either found a new product line to produce or just plain went out of business. is it "progress's" fault for this?
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"It is now safe to switch off your computer."
The RIAA and the average Slashdotter have the same basic mistake - this has nothing to do with profits.
To elaborate - the fundamental moral issue is independent of money raked in. Music companies could be going bankrupt, or they could be worth 300% their current value, and the fundamental issue would remain unaltered.
The question is not profits, but property rights, and anything else is a totally extraneous question.
instead of full albums of songs they haven't be clandestinely programmed into about
You weren't by any chance translating video games from Japanese to English in about 1989, were you?
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#include "stdio.h"
Actually, it is more than a few hours of work. for every song that gets written, there are a hundred more that just never quite seem to work. It took you years to improve your programming skills, and it's taken me years to improve my musical skills (15 so far). Additionally, music is a much more expensive than programming, and musicians are far less likely to get paid than programmers. Also, a musician is totally exposing themselves to their audience. Hopefully not in the pornographic sense, but certainly in an emotional and spiritual sense. The audience can tell if you aren't and will quickly lose interest. That aspect is simply not present in programming and that's why this isn't a very good comparison.
Back to the getting paid thing, I would say that it is fairly likely that your programming skills will earn you over 1,000,000 USD over 15 to 20 years. My musical skills, on the other hand, have cost me roughly 15,000 USD over the last 15 years with absolutely no return at all. This is the case for the vast majority of musicians. If someone were to decide that one of my songs were worth 1,000,000 USD tommorrow, that would put me roughly on par with what you will most likely make in 15 years of programming. The problem, of course, is that while you get to keep your 1M USD, I have to pay 200k to the record company for producing the album, another 200k for equipment to tour in support of the album (not to mention the cost of having to spend a year away from my wife and daughter), and the rest is split up between the band members. My last band had 6 members, which means 100k each. 100k for 15 years of work. You call that a big payoff? You would be surprised how many big musicians have had to file bankrupcy at least once, some even at the peak of their success (TLC comes to mind, but I know there are many others). The honest truth is that the only people making money off of music are the big record companies.
I think what the RIAA is really afraid of is that musicians now have other channels through which to distrubute their music. It isn't really digital music that scares them, but their own impending irrelevence.
Under capitalism man exploits man. Under communism it's the other way around.
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In related news, studies have shown that people who own BMWs are richer than those who own Volvos. According to top economist Richard P. Fudgemocker, "This is proof that the key to financial success is spending money on an expensive car."
Earl Worthly, a certified financial planner, supports Fudgemocker's claim. "I encourage all my clients to buy expensive cars because of the strong link between owning expensive cars and high salaries. Most of the time a BMW, Lexus, or Mercedes is sufficient. But sometimes one of my clients is in dire need of financial assistance, or just wants to fast track. For them, I recommend a Porsche or Lamborghini."
Volvo dealers are outraged by this news. Many Volvo customers have attempted to return their cars. "I can't believe I bought a volvo, jeaprodizing the 20% raise I received at my job!" said Mary Edgerman, a recently promoted manager at UA-Corp. "I owe it to my familty to buy a far more expensive car. What if I got a pay cut because of my Volvo?"
Most major auto manufacturers predict a shift to higher end cars, trucks, and SUVs. An anonymous Marketting executive at GM confirmed that prices will drastically increase for their entire line of Cadillacs. "It's scientifically proven that expensive automobiles are the key to financial success. At GM, we offer even more financial stability by raising the sticker cost. We're banking on a 10% increase in sales, but 15% wouldn't suprise us either."
Film at 11...
Of course, you also have to take inflation into account. If you don't grow by that rate then it is effectively a loss. Also, we're talking revenue, not profits. I don't care if they take in $100,000,000 US, if the costs are sufficiently high the revenue is moot.
an all time low.
Je t'aime Stéphanie
Okay, let's say you're in a band. First thing you have to do is practice, learn to play well together -- but of course, you only have to do that once. Then you'll spend a few months or more writing and perfecting songs. Then, depending on how much cash you have and whether or not you have label backing, you'll spend quite a while in the studio recording it. We're already way beyond 'a few hours', but it isn't necessarily as time-consuming as a full-time job.
Okay, the CD is recorded and pressed, singles sent out, and so on. It's a hit. The singles are on seemingly infinite loop on radio stations. Now the band sits back and watches the money roll in, content from their 'few hours' of work, right?
Um, no.
All of a sudden, everyone wants to see the band. They're being booked for interviews by TV shows and magazines. And then the tour: several months of flying or driving from point A to point B to point C, doing shows every few nights, sometimes even every night. And in between you're making little station ID recordings for radio stations, making more guest appearances, doing more interviews, or stewing in your hotel room. Once it's all over, you get a few months to try to regain your sanity, and then you do it all over again.
Doesn't really sound like 'a few hours of work' to me.
I'm not trying to justify the kind profits the music industry makes, especially not the labels. Just realize that most bands who try to make a living off of music are working their asses off, whether they're massively popular or not. Go watch "Meeting People is Easy"; it's a movie about Radiohead, basically following their first tour after OK Computer got so popular. I don't call that the easy life people seem to think music stars have.
You cannot declare that X has affected Y to degree Z, unless you can observe Y in the absence of X.
In other words, unless someone can open an interdimensional portal to some alternate universe in which Napster doesn't exist, all of these claims of revenue being up or down in particular areas are meaningless. There are a countless number of other factors that could be influencing sales of CDs, cassettes, music videos, etc. Saying that Napster is solely responsible for any of it is absurd.
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The most valuable commodity I know of is information. - Michael Douglas as Gordon Gekko, Wall Street
It seems that actual manufacturing costs are almost meaningless, because it is _promotion_ that costs all the money.
This is a little startling, but bears up to examination- even in the 80s, independent promotion was something like 60% of the labels' expenditures. It might be more well known as payola- the more things change the more they stay the same. If I remember correctly, CBS (the biggest label in the business at the time) attempted to break the back of the independent promotion network using Pink Floyd's 'The Wall' as a weapon: Floyd was touring and were launching the tour in California, and had a killer single, "Another Brick In The Wall pt. 2". CBS tried to get radio play on top 40 stations in LA for the track without paying off the independent promoters- and were frozen out completely, no airplay at ALL for Floyd. Eventually the band was made aware of what was happening and asked why they weren't getting radio play, and on being told, kicked up a stink and told the label, "So pay them already!" CBS did, and within 6 hours Floyd was being played on the radio...
This is not to justify the state of affairs- the independent promoters were linked with organised crime and if you want a _real_ cartel, try organised crime- but it is important information on where the money _really_ goes. I believe it is quite true that not all that money goes to RIAA execs' pockets. They have to pay off a staggering number of sleazy operators- in fact, even the rack jobbers have been consolidating into a power structure so now the labels have to spend money selling their CDs into stores like Wal-Mart! They entertain the reps from rack jobbers, have bands give command performances for them, and all this also costs money. It's revenge of the middleman, taken to the most incomprehensible extreme.
I think the RIAA are probably doomed _because_ so many middlemen (promoters, radio, rack jobbers) can and will take a big chunk out of them as the brick and mortar scene gradually, slowly fades... it's easy to get all haughty about fat RIAA execs slurping drinks in Ibiza but the reality seems to be that they're struggling to hang onto _moderately_ wealthy status- they're pulled too many different directions and have to pay off way too many middlemen, who cannot be made to go away.
I could almost be sympathetic. Almost.
It's simple. They're control freaks.
More to the point, they recognize Napster as a long-term threat. They know that as long as they control the mainstream distribution channels, they can continue to make obscene profits. But Napster
- Provides people access to independant artists and groups, who as they become more well known, become poised to seriously compete with the groups that RIAA memebers control. And as the armchair economists are all so happy to point out, more competition leads to slimmer profits.
- Makes people seriously think twice before popping down $15 for a CD. Now, as long as bandwidth, mp3 quality, and hard drive space are issues, they're still going to buy the CD, which is why the RIAA's profits haven't been hurt yet. But those things are techincal issues which are becoming less and less of a problem every day. Soon enough, people will stop buying as many CD's, and the RIAA's sales will plummet.
So, in short, the RIAA's claims about lost revenue are FUD, but they know that if Napster survives long enough, they won't be.--
The most valuable commodity I know of is information. - Michael Douglas as Gordon Gekko, Wall Street
Which is rather ironic if you think about it. Teenagers are the demographic to which the RIAA companies most rabidly market. Why? They are the ones that will purchase 1.1 million copies of the new N'Stink album in the first week.
You live by the teen, you die by the teen.
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We want some answers and all that we get
Some kind of shit about a terrorist threat
- Ministry
Why would RIAA want Napster to make them billions when they can make N*billions themselves by knocking Napster out of the picture?
It's 10 PM. Do you know if you're un-American?
The RIAA and the record cartels want to completely control the distribution methods of their products. Before, they could threaten manufacturers not to make DAT tapes, and not support Mini Discs, but now, they can't do shite about MP3's.
They can no longer control the price of their "product", and that threatens their ridiculously high margins.
Why should an industry that is worth $40 billion USD only be provided with product by, oh, let's say, less than 50,000 musicians. And let us also say that less than 1,000 of those musicians make more than $1,000,000 USD per year.
Where does the rest of that money go?
Another question I'd like to ask:
You musicians out there, do you feel it is your right to be able to live for the rest of your life off of a few hours of work (songwriting/recording)? And don't bullshit me that it's not a few hours of work, because it is. Programming is the same thing. Sure it make take me years to improve my skills, but the chances of me ever getting paid $20,000,000 USD for one song/program are next to zero, while no-talent boy-bands (that's right N-Sync, Backdoor boys, I'm talking about your dumb asses) rake in the dough because the cartels control the distribution of nearly all music. Do you like the fact that your industry is more akin to a lottery than to art?
Well, not exactly. The Napster settlement was actually 1 billion over several years, totalling $150 million/year divided out amongst the big 5 and indie labels. It would have made a dent in those numbers, but not as big as you say.
I'm not defending the RIAA, just trying to explain why they rejected the offer. $30 million per label per year isn't a lot of money, compared to what they're afraid they'll lose to Napster. Of course they're going to lose a lot more due to bad decision making, but they are a fairly short-sighted profit-driven industry.
The BBC site has feedback forms which seem ideally suited to this sort of crap.
I would argue that this article constitutes a "factual error", but you could also just send a good, old-fashioned complaint.
Or, maybe a "suggestion" about where they can stick their doctored statistics.
Give 'em hell. A few thousand complaints should show them that we won't let propaganda like this proliferate.
- BMO
You are reading - "taking" - my words right now.
You are not compensating me one bit. Oh, I am wounded!
Seriously...if someone got a hold of one of the minidisc recordings of my band's practice sessions and found it so intriguing that they made copys for their friends, or put it up on Napster, I'd have no problem with that at all. (Providing that it was properly credited as our work.)
Do you make any money for making love to your SO? Why continue to do it, then?
Come to think of it, my dogs aren't making me any money. Hell, they cost me hundreds of dollars in vet bills a year. Guess I ought to sell their furry butts.
Tom Swiss | the infamous tms | http://www.infamous.net/
Tom Swiss | the infamous tms | my blog
You cannot wash away blood with blood
The slashdot community should know better than anyone that what matters most is information. Not inconsequentials like truth and accuracy. The RIAA is winning the war of information. My mother mentioned this report to me before it was posted here. False stories get headlines, retractions and corrections get small paragraphs at the bottom of page 3.
Most likely Napster is dead already. But this isn't completely a cause to mourn.
Most recent revolutions in digital media that have solid-media business shitting themselves have come from bored or curious teenagers and college students. CSS was cracked by a 16 year old. Hotline was created by a teenager. Napster (a conceptually modified Hotline, though no one mentions it) was set up by Sean Fanning when he was 20 or 21. Even Netscape was lead by Marc Andreesen before he graduated college. (please be gentle with slight factual errors, that was recounted from memory)
How long will it take before the uncontrollable throng of adolescent geniuses that big business hates and fears comes up with something better than Napster? About three months probably. Maybe less.
The RIAA has introduced a new market force. The capitalist mantra has always been "competition fosters innovation". This is the beginning of litigation fostering innovation. I'm sure this isn't what the RIAA and MPAA really want. Napster basically had a monopoly on peer-to-peer MP3 sharing. If that is monopoly is shut down, the marketplace will be thrown open to innovation, however a pure copy will not work. The RIAA lawsuits have established a clear technological baseline. Every spawn of Napster will have to start that much higher. And they will.
Even if the media outlet is not owned by any subsidary or company of RIAA or MPAA, they are going to be biased because they have a strong urge to make sure copyright controls stay as 'strong' as they are. If, say, the Napster or DeCSS case overthrew strong copyright protections, then a site like NYTimes could easily watch as a free outlet scoops up all the articles for the day and posts them themselves; the work done by NYTimes writers, but benefits reaped in by another. Of course, I do believe that a significant fraction of media outlets do respect fair use issues, which is why DeCSS in general gets a more favorable light by some of these compared to Napster, since the media themselves rely heavily on fair use for publishing.
But again, this all boils down to statistics and how well you can spin them. I agree with others that there is no control case here: you need to compare the change of sales in a situation with and without Napster with all other conditions being the same, which is practically impossible. So we can spin them to say they're invalid, or RIAA can spin them to say they lost 1/3rd of their profits. The only somewhat justifiable comparison is to show the change in sales over the last twenty years on a year by year basis, incorporating the number of potental buyers (weighted age-group averages) and number of CDs available (again, weighted interest averages). I would suspect that the trend is higher, and if not only that, mimics the general trend in the GNP or other consumer price levels, such that you'd see the dip from Reagen-omics and the increase from the latest improved economy.
Which all means that CD sales haven't been affected at all by Napster, much less any other factor more-so than the economic levels.
"Pinky, you've left the lens cap of your mind on again." - P&TB
"I can see my house from here!" - ST:
Larazus,
.MP3 format and the new Open Source music formats now in development, which stores high-quality music at a rate of one megabyte/minute or less.
With the price of 30 gigabyte ATA-100 hard drives approaching US$120, the issue of disk storage for music is no longer an issue. Especially with
This is why somebody should be kicking the RIAA around and tell them you can make a profit on online music sales if you price it at a rate of eight US cents per minute (US$4.80 per hour). With online sales, you can subtract out the major overhead of stamping out CD's, manufacturing the packaging and shipping the completed CD's to retailer.
Raymond in Mountain View, CA