Grokster in Talks to Be Bought By Mashboxx

Carl Bialik from the WSJ writes "The Supreme Court's ruling in Grokster has driven the P2P company to enter talks with Mashboxx, 'an upstart that is attempting to establish a legal peer-to-peer music company, according to people familiar with the matter,' the Wall Street Journal reports. Mashboxx would let users sample free but charge for downloads. The WSJ adds: 'To encourage the file-sharing companies and their users to go legitimate, the labels are seriously considering dropping such claims, some record executives say. In fact, say people close to the talks, Grokster is negotiating a settlement with the RIAA. The RIAA and Grokster declined to comment.'"

Comments

Ruling?

[xtracto]

Does anyone know what was the supreme court ruling? I am curious.

Re:Ruling?

[AviN456]

Read all about it here http://yro.slashdot.org/article.pl?sid=05/06/27/15 5212

Why P2P?

[garcia]

What I need someone to explain to me is why I should have to forfeit my upstream to a company for downloads?

If I'm paying I shouldn't have to share shit. It's not going to help w/the costs of the songs. If anything, the RIAA will want to increase the costs just so that there isn't anyone saying that P2P is acceptable (legal or not).

Apple and allofmp3.com have it the right way. Pay for the songs, download them w/o sharing, and be done with it.

People shouldn't be charged twice for shit. P2P was popular because it was free and no other reason.

Re:Why P2P?

[BewireNomali]

Apple has it right for a company that sells consumer electronics. they don't make any money off song sales. Therefore, this model is not appropriate for a music company.

Ringtones sell for 3-5 bucks and sell pretty well. this suggests that songs are underpriced, or at least priced significantly less than the market will bear. To that end, it seems that Apple is artificially depressing the cost of music, to the detriment of music companies.

I can't speak for allofmp3.com, but ITMS is probably a loss leader as opposed to a viable revenue generation model for sales of music.

Record companies can't make money at a dollar a song. Peer networks would help because they kill bandwidth costs and presumably pass saving on to the consumer.

Re:Why P2P?

[Anonymous Coward]

People who buy ringtones are morons.

Re:Why P2P?

[prefect42]

Why can't a record company make money at 50 ukp a song? Let's assume they sell it as a 256kbit compressed download. Assume just less than an hour for the album and that's 100 Mbytes.

That's just not a lot for something with a cost of around 5 quid.

Streaming radio stations seem to cope...

Re:Why P2P?

[squoozer]

What I don't understand is how they can fail to make money at $1 a track. Everyone bangs on about how little the artist cough pretty face cough gets paid. so that must therefore mean a large portion, lets say 90c (and I think that 10c to the artist is generous), of that $1 is being spent on other things.

What could possibly cost that much? Recording studios don't come cheap but it's not like they have to be lined in gold. Porduction costs a bob or to. Bandwidth, yep that costs a little as do the servers. I still can't believe that comes to more than 40c though leaving 50c.

My money is on that 50c being spent on marketing the pap to the masses. The record companies want more money per track to market their rubbish to us more not because they are short of money. The true cost of producing the mouse must be peanuts compared to the cost of the marketing and flying over paid execs about.

Re:Why P2P?

[drgonzo59]

Record companies can't make money at a dollar a song.

If more artists distributed their songs electronically, and stopped giving everything to the record company CEOs, $1 would not be too bad. Sell a million songs - make $1 million bucks. Sell a million albums and make $10 million. Heck, I would pay $3 a song if I knew most of it goes to the person who wrote it not the to some rich executive that contributed to the creation of the song as much as my chair contributes the creation of my programs, yet somehow the record companies get the bulk of the moeny today.

Re:Why P2P?

[mrchaotica]

Therefore, this model is not appropriate for a music company.

Either that, or being a music company is not an appropriate business model!

Re:Why P2P?

[BewireNomali]

That's all academic. Apple, which has no marketing costs for artists, nor padded expense accounts, makes no money from ITMS.

Re:Why P2P?

[PHPfanboy]

This is total nonsense.

Ringtones sell for stupid prices because they are external fashion statements and are bought once a month if that. I have hundreds of CDs for example and thousands of mp3s.

Record companies don't have any distribution costs or physical production costs with digital music. You are a RIAA fanboy, nothing more, nothing less.

Re:Why P2P?

[garcia]

Ringtones sell for stupid prices because they are external fashion statements and are bought once a month if that.

No, ringtones sell for stupid prices because of vendor lock-in. If the cell phones were capable of playing music samples that were user created it's highly unlikely that people would purchase ringtones.

Thus, why cell phones don't typically have an easy way to add your own music and also why the prices are so high for what amounts to nothing more than fair-use clips.

Re:Why P2P?

[nickname225]

Apple makes no money on it's ITunes sales - because they pay hefty license fees to the Music Companies. The music companies make lots of money on Itunes sales. And Apple makes money on Ipods and they are all happy.

Re:Why P2P?

[jacksonj04]

Sliding scales. Buy one song a month it's $3, buy more than two they drop to $2.50 etc down to $0.50.

Surely the overhead in transactions will be dealt with in the 'first' songs for the month, and the rest can be straight to the artist.

Re:Why P2P?

[nEoN nOoDlE]

Ringtones sell for 3-5 bucks and sell pretty well.

keep in mind, people have thousands of songs on their hard drives, but only a couple of ringtones on their phones. The usage is not consistent so therefore the price can't be.

Record companies can't make money at a dollar a song.

Ridiculous. Record companies have been making money - and lots of it - at a dollar or less a song when the songs were on CD and tape. And at least the consumer got a hard copy of a product. In the case of digital music, it costs the record companies even less since there are no shipping, packaging, or production costs after the music is recorded.

Re:Why P2P?

[MightyMartian]

The problem here is that record companies often pay for or lend artists the money to make records (that means studios, producer and session musicians). There is also the promotional aspects (particularly advertising and touring). Some artists are managing to break through and do this themselves, but it's a new kind of music business.

Re:Why P2P?

[slavemowgli]

Record companies can't make money at a dollar a song.

Um, excuse me? That's the biggest piece of drivel I've seen on Slashdot in a *long* time.

Re:Why P2P?

[Jerry Coffin]

Apple has it right for a company that sells consumer electronics. they don't make any money off song sales.

That doesn't seem to square with Apple's financial statements. Their latest 10-Q says they made 241 million US dollars on "other music products". That category covers:

Other music products consists of iTunes Music Store sales, iPod-related services, and Apple-branded and third-party iPodrelated accessories.

Given the looks of the other parts of that, I'd guess the iTunes sales accounts for over $200 million US dollars per quarter.

According to the same statement, Apple's total net sales for the quarter were 3 520 million dollars, so iTunes accounts for between 5 and 6 percent of total sales. Given the profit margin on iTunes versus hardware sales, I'd guess that iTunes accounts for a substantially higher percentage of their profits.

To make a long story short: Apple does make money on iTunes, and fair amount of money at that. Even if we ignore percentages for the moment, $800 million US/year is certainly not a negligible amount of money. It's also worth noting that this currently has a growth rate of 230% annually, so unless the growth stalls out completely, it'll be well over a billion (milliard for non-US residents) US dollars next year.

In fairness, yes, Apple also makes a lot of money by selling iPods, and quite a bit of the cost of running iTunes is probably amortized over other parts of the company, so they can undoubtedly run iTunes profitably at a price per song that would kill almost anybody who was only selling music. --
The universe is a figment of its own imagination.

Re:Why P2P?

[Anonymous Coward]

Apple has it right for a company that sells consumer electronics. they don't make any money off song sales. Therefore, this model is not appropriate for a music company.

If Apple doesn't make any money off song sales, then where does my dollar go? Answer: It goes to the record company.

Apple's model may not work for a record company, but Apple is not a record company. They're a retailer. They take a cut of the sale and pass the rest on to the record company. The business model is sort of like that of movie theaters, which rent the film prints to directly serve the consumer, and agree to send a portion back to the rights holder.

Your argument is built on false predicates. Don't pretend that the money disappears just because Apple doesn't keep it.

Re:Why P2P?

[Agrippa]

"What I don't understand is how they can fail to make money at $1 a track. Everyone bangs on about how little the artist cough pretty face cough gets paid. so that must therefore mean a large portion, lets say 90c (and I think that 10c to the artist is generous), of that $1 is being spent on other things."

Because you are forgetting (or don't know about) the fact that publishing companies, which are seperate from the record companies, also get their share of the revenue. Each publishing company gets to negotiate their own rate structure for the use of their songs.

Then, depending on the artist/track, there can be multiple other parties (other than the record company/publishing company) with percentage total ownership of a track who also need to be paid.

The whole music industry is one big clusterfuck of entangling relationships.

.agrippa.

Re:Why P2P?

[utnow]

Apple isn't making money off of selling the music because the record companies are charging such high fees for apple to have the ability to provide them. On average apple (last i heard) was making 3-5 cents per downloaded song. Apple isn't making any money off of it because they're just acting as the middle man and passing all of the profits off to the record companies who are doing quite well at 95cents per song. (roughly $12 for 12 songs and there are no distribution costs.. basically the same cash they would see selling the songs on CD)

Every small record company that I've heard talking about the profitability of putting their artist's songs on itunes have raved about how much money was coming in (surprisingly large amounts).

With all of this in mind... I'll pay my 1$ for a single song, which I think is fair. And I refuse to have my bandwidth used to help make them money.

Re:Why P2P?

[d34thm0nk3y]

Grokster in Talks to Be Bought By Mashboxx

Yes, but are they in talks like a pirate??

Re:Why P2P?

[stryc9]

The only reason that ringtones sell for more than music downloads is because there is no other convievable way for the majority of non-techy people out there to get the tones onto their phone.

Personally I bought a datacable and use bitpim to transfer midi's to my LG phone, but that is well beyond most people.

If there were an easy free alternative to paying for the tones to get sent to your phone people would be doing it.

The $1 per song on ITMS is just enough to make it cheaper than the time it may take me to find a decent copy of a song on P2P. Any more than that and I would never do it.

Re:Why P2P?

[DirePickle]

Record companies can't make money at a dollar a song? When the only distribution costs are the bandwidth for a 5 meg file?

And yet, they can make bajillions of dollars by selling a CD for $15 by way of the brick-and-mortar store middleman? Even after the costs of pressing, packaging, shipping, and minimum wage employees?

Re:Why P2P?

[shark72]

"What I don't understand is how they can fail to make money at $1 a track."

Your understanding is correct. The GP stated that record companies aren't making money at a buck a song, but that doesn't make it true.

Of the $0.60 - $0.70 or so that the record companies gross per iTMS sale in the US, you're correct that a significant amount of goes to marketing. The same can be said for the iPod itself, as well as most product Apple makes, as well as most products made by most computer peripheral companies. The difference between gross margin and net margin is a killer.

Re:Why P2P?

[Anonymous Coward]

> why I should have to forfeit my upstream to a company for downloads?

Because, overall, it makes the downloads faster for everyone, including you. If everyone helps others, *you* benefit, because *you* are an "other" to everyone else.

Re:Why P2P?

[Anonymous Coward]

"Ridiculous. Record companies have been making money - and lots of it - at a dollar or less a song when the songs were on CD and tape. And at least the consumer got a hard copy of a product. In the case of digital music, it costs the record companies even less since there are no shipping, packaging, or production costs after the music is recorded."

I don't think that's entirely true.

In the olden days of CD people had to buy a bunch of songs at once and payed on *average* less than a dollar. But if songs are sold on an individual basis quite a few songs won't be sold. Because they kind of suck.

So the record companies average return per produced song might well be a lot lower if each song is sold seperately for one dollar rather than bundled with an average cost of less than a dollar.

Not that I think that's a bad thing, but it does lend some merit to the argument that a song for a dollar doesn't look very good to the record companies.

Re:Why P2P?

[drgonzo59]

That's a valid point. Perhaps the two schemes can co-exist. The record companies could use a little pressure and competition. As some artits will become more wealthy and more popular, the musicinas can perhaps directly purchase advertising and distribute the songs directly through some pay-per-song service and also make more in return. If I knew that my favourite band is getting most of the money, I am willing to pay a nice premium. Perhaps, some artists can even set up a donation scheme, much like the author of Bittorrent, to suppliment the sales.

Re:Why P2P?

[celimage]

Ideally that is the way it should be. However, people still are influenced by the media in purchasing music. Despite the ability to get it direct from indie artist for free or without protection. People prefer to risk penalties and strive to acquire label music because of label promotion.

I mask my ignorance by mocking Mashboxx's name

[Anonymous Coward]

Good for Grokster. I've never thought their P2P stuff to be very exxtreme so far, but this should really move them into the XXIth century.

Yeah, Right!

[Nom du Keyboard]

Grokster is negotiating a settlement with the RIAA.

Yeah, right. I doubt there is a single P2P company out there that has near the amount of money to spend that the RIAA will demand for compensation.

Re:Yeah, Right!

[SimilarityEngine]

From the linked article:

Talks with other companies have proved successful in the past, when the RIAA reached a settlement with Israel-based iMesh Ltd. for $4.1 million in July 2004. The Israeli company agreed to migrate to a service that would protect copyrights.

It's not just money they're after, it's complience.

Re:Yeah, Right!

[shark72]

"Yeah, right. I doubt there is a single P2P company out there that has near the amount of money to spend that the RIAA will demand for compensation."

As previously mentioned, the RIAA settled with another company for $4MM and the agreement to move to permission-based distribution. When the courts froze Kazaa's assets they had about $30MM cash in the bank (I don't recall if this is US or Australian money; either way, it's a lot). I'm sure the RIAA will demand all of it.

Grokster?

[Conspiracy_Of_Doves]

Does anyone still even use Grokster?

Re:Grokster?

[Anonymous Coward]

No.

Grokster hasn't been worth using since 2002 when it started requiring that Cydoor be installed. Sure, you could replace the spyware DLL with a dummy file but every time you upgraded Grokster you had to monkey with it.

Silly Names

[L. VeGas]

Can anyone explain to me why P2P companies / applications have such silly names?

Grokster
Napster
Kazaa
Mashboxx (now with two x's!)
EDonkey
etc.

Say what you will about Microsoft, at least their name makes sense.

Re:Silly Names

[aztec rain god]

Just how is microsoft small and soft?

Re:Silly Names

[HermanAB]

Huh? Make sense like ME, NT, XP, Excell, Outlook and Bob?

Re:Silly Names

[ScentCone]

Can anyone explain to me why P2P companies / applications have such silly names?

Because despite the uber-nerd population of slashdot that sees things through their own particularly technical/net-savvy lens, the vast majority of the people who pumped up the usage of Napster, for example, were your basic teenage pop music fans that wanted for free what they used to have to spend their lawn mowing and baby sitting money on (that is, CDs). You can read up on Napster history, but it doesn't take much familiarity with the wildly unoriginal nature of many geek types to see why they embraced the "ster" suffix to evoke the original underground-ish atmosphere of the original.

Mostly, though, the whole notion of trafficking in commercial products outside of the channels through which the producers of those products are selling them presents an air of edginess and secret-societyness. The services/protocols/clients that are created to try slipping, once again, around copyrights, simply won't take with their deliberate users unless they convey a hipper-than-thou feeling that includes a sort of synthetic cyber-branding coolness to it. Basically, if a company like that has a name that would in anyway interest, appeal to, or convey credibility the parents of most of the users, it will flop. Hence, only in total irony will we ever hear of "National Bank Of Music" or "Home Music Depot" or some other normal-consumer-oriented name. That the creators of some of these systems feel an urge to sound exotic, or slightly dangerous says a lot about the packaging they feel they need. In most cases, though, I think it's the equivalent of wearing Xtremely Baggy Pants, even to the point of not being able to walk up and down stairs, just so a certain audience will feel an immediate clannishness about it. Or, for other users, the odd name makes them feel like they're headed into some mysterious land of free riches, as long as they know the secret word.

No doubt many such names are based on particular inside jokes, obscure acronyms, or other things that can't translate to a wider audience without either explanation or guesswork.

Of course you might have once said the same thing about "Amazon" or "eBay," in a very luke-warm sort of way. "Amazon" at least conveys a sense of adventure (in reading, orginally), while millions of readers would no doubt be stumped trying to explain the derivation of "eBay" (fwiw, it was orginally "AuctionWeb" and was part of a site owned by Echo Bay Technology... and the rest is history). At least frameworks like BitTorrent are actually labeled something related to what they are, not that that's necessary, but labeling something deliberately to make you have to guess what it is, or need to be part of the secret club, suggests a certain adolescent sensibility... oh, wait.

Re:Silly Names

[slavemowgli]

"Microsoft" sounds like "tiny and malleable" to me - not exactly a name that makes much sense, either. "IBM" (International Business Machines) does, but that's about the only computer company I can think of right now whose name is actually a reasonable description of what they're doing.

Re:Silly Names

[generic-man]

They sell microcomputer software. When they started, the term "computer" implied "mainframe," so "micro" implied that they sold software individual workstations.

It's not true that everything they've sold has been for microcomputers (BZZT WRONG XENIX! BZZT WRONG WINDOWS ADVANCED DATACENTER SERVER!) but software for micros is Microsoft's bread and butter.

Look to the upstarts

[highcon]

The new companies will be the ones who are able to make the new paradigm work. It will take a while to sort itself out, but soon a few companies will come around that do not base their entire business model on hyping physical copies out the door. I would be extrememly surprised if one of the established recording industry behemoths were able to make this transition; the bigger the organization, the greater the inertia.

No DRM

[drgonzo59]

My problem is with DRM. I got some song of iTunes and I thought (I clicked through the agreement and what not) that if I buy the song I can play it anywhere like any other music file, especially on my Linux machine. Oh no! My windows drive died so I never reinstalled and am using Ubuntu, BUT I could not play the songs I payed for. Of course, I found out DVD Jon's site with his FairKeys and DeDRMS programs and removed the DRM from my songs, but I had to go through all that trouble to play songs that I already payed for!

For me at least,the main advantage to iTunes was an accessible and convient way to download music and $1 is the price of convinience more than anything. I could go to any P2P network and find and download the music for free, but the time it takes usually is worth more than $1 (at least for me). So if there was a site that you can get your music in plain mp3 or ogg or other non-DRM-crippled format, I would pay $1 just to save time. I don't know how they can do it with a P2P network though, but the underlying mechanism doesn't matter as long as I can get my songs faster.

Re:No DRM

[xtracto]

Go to www.allofmp3.com it is a site that you can get your music in plain mp3 or ogg or other non-DRM-crippled format,.

It is quite cheap and alternative OS friendly as you only need a web browser (dunno if it works on Lynx though...).

A full album (9 tracks) in OGG Q10 (about 186 MB) will cost you like $4. Nice deal uh?

Re:No DRM

[laffer1]

OH come on.. just burn them to an audio or mp3 cd. iTunes lets you do that and you can play them anywhere. Just because you were too stupid to change the format isn't apple's fault. I've never tried it but you might even be able to use itunes under wine or vmware. This is such lame fud. Its no different if you buy a windows media based solution's songs. Hell i think apple is better because you can burn unlimited cd copies of your songs.

Re:No DRM

[Anonymous Coward]

I'm having the same problem on my Atari!!! DAMN YOU APPLE!!!

Discouraging

[Doc Ruby]

Where did the Supreme Court find that Grokster was guilty of "encouraging illegal infringement"? I know they found Kazaa guilty of that (though it's clear to me the evidence didn't support that finding). But I haven't heard that Grokster was found to have "induced". I smell a VC PR weasel.

Re:Discouraging

[Anonymous Coward]

The Supreme Court did NOT find anyone guilty of copyright violations. All it did was overturn the lower court decision finding Grokster not guilty of Secondary copyright violations. They sent the entire case back to the District Court to redo the case and this time look at the issue of active inducement. Also, Kazaa has not been found guilty in the US, only in Australia.

Re:Discouraging

[Doc Ruby]

Strictly correct, but not quite apropos. The Supremes found Kazaa had encouraged illegal infringement, as their basis for sending the decision back to the lower court for reconsideration addressing that factor. The lower court, if finding consistent with the Supreme Court (of course it will) will redecide their Grokster decision to find Kazaa guilty. Or, if technically impossible due to the structure of that lower court charge, Kazaa will merely be quickly sued by RIAA under that precedent.

The question is why Grokster's directors think they will also be liable under that lower court redecision. Because the Supremes did not find that Grokster encouraged illegal infringement. Perhaps Grokster's directors don't want the risk. With your more precise legal mind, what do you think is Grokster's problem?

I for one...

[da5idnetlimit.com]

welcome our new P2P Darknets Overlords....

All the packets marked as http, mix in some encryption, use Freenet code as a basis and Bittorrent/TOR for distribution ...

You won't have the same p2p as we know it, but at least we won't have to get some news about RIAA members pursuing file sharers AND buying the data from p2p trade analysts...

For the upstream part, maybe you could gain "points" that would win you free mp3s, extra video, etc... At least, they won't ask me to give bandwith "for my own good"...

But I think you're right. iTunes and allofmp3 got it right.

Me ? I stream radio from the net.
I have access to all the music I want, and didn't get to buy a cd in ages ...

Also I rent dvds, learned to cook, and keep my money for the important things (eh...taxes ? insurance ? 500 gig hdd ?)

I even get japanese Anime and "best of the world" selection of tv series ...As long as I'm watching TV, at least I get to choose what I see... Being polyglot helps, but so many people sub what I want that didn't get to learn japanese yet.

Of course I don't get the knowledge about the latest innovation in washing powder, but, hell, you have to lose some...

Bad Math

[brunes69]

If it costs X dollars to create, market, and distribute a CD with 20 songs on it, than it costs X/20 dollars to create each song on that CD. Since you would be hard pressed to find a CD priced at much less than $1 x the number of tracks, a song can be sold at less than a dollar and make a profit. Even if you want to argue that some songs cost more than others to produce, because of music videos and whatnot, that cost as it stands right now is offset by the profit of the CD as a whole. So therefore the online sales would do the same. As well, you need to account for the fact that the record company is now selling the music directly, cutting out the middleman (the retailers) and thus making even more money. So your argument is pretty much nonsense.

Re:Bad Math

[Pharmboy]

Wow, you don't get it. First, most albums have 10 songs, not 20. Secondly, there are typically 2 to 4 songs on an album, and 6 to 8 "filler" songs. Best case, 6 good, 4 crap. No one will buy the 4 crap.

Also, this assumes that every song has the same production cost. They don't. Cost to produce a single song can range from $1000 to $1 million. Literally. Boston did their debut album on a basement rig using a 12 track and 2 inch tape (although that was pretty nice basement gear in 1976-) Big names use big studios, which cost more.

Its not that $1 is too little, it is just your arguement is totally flawed, and has no founding in economics. Its just words.

The *real* problem is the industry itself, which has evolved over the last 20 years much slower than the technology that is used to utilize it. It is a dead business model, but they are clinging to it for all they have. This isn't a shocker.

AOL tried to hold on to their old biz model, but changed in time. MS was late with internet capability with 95. US car makers saw it in the 70s/80s, when Japan kicked their royal asses (AMC died, Chrysler almost died). But they held on to their old biz practices the last minute.

Most companies or industries that will not adapt as fast as their market, die. No matter how "powerful" the RIAA seems with their lawsuits (and MPAA, for that matter, but thats different), what you are hearing is a death rattle. Either they will radically change, or they will become irrelevant because someone(s) will create a whole new model and leave them behind.

Poor Analysis

[BewireNomali]

Lol. My argument is not nonsense. Your analysis is flawed.

I reiterate. Apple, which incurs none of the costs of a record company, MAKES NO MONEY AT A DOLLAR A SONG.

How can a record company then take the same model and make money, especially considering that said music sales would comprise its main business?

Re:Poor Analysis

[Wesley Felter]

Apple supposedly make no money because they are passing ~75 cents per song to the record companies. This money is pure profit for the record companies.

If the record companies started selling music directly to customers at $1/song, they would likely make about as much as they do now.

no money off song sales?

[vlad_petric]

I hardly consider 33cents/song no money, especially since there is very little overhead per purchased song. Sure, they make more money from ipod sales, but iTMS is definitely running a profit.

Ringtones

[Joe Random]

If the cell phones were capable of playing music samples that were user created it's highly unlikely that people would purchase ringtones.

Some can, and I don't. More specifically, my phone (an LG VX6000) can play MP3 ringtones -- once you've purchased the correct USB cable and scoured the Internet for the necessary software, that is.

As an aside, "Battle without Honor or Humanity" from the Kill Bill soundtrack makes a great alarm. Put that sucker on full volume, and it never fails to wake me up.

Big Corp thought process...?

[Tominva1045]

Help me with this.. is the general thought process at (any) Big Corp Inc. to determine whether or not it will be less expensive to pay a host of lawyers $900/hour to defeat (insert P2P company here) in court or less expensive to pay off the P2P company to shut down and stop file sharing?

This whole thing smells like extortion. Question is, how do they get away with it?

The only ones winning appear to be the lawyers.

Will there be distributed music in 10 years? If so, what will it look like?

Re:Big Corp thought process...?

[Red Flayer]

"Help me with this.. is the general thought process at (any) Big Corp Inc. to determine whether or not it will be less expensive to pay a host of lawyers $900/hour to defeat (insert P2P company here) in court or less expensive to pay off the P2P company to shut down and stop file sharing? "

That would be the thinking, except that the total cost of each option is not so simple. It has to be looked at in terms of the policy applied to all P2P companies, not just one -- after all, someone is sure to fill the gap if one P2P co. stops hosting P2P.

So, if you pay off one company, you'll have to pay them all off. If you get a huge settlement in your favor, that's a disincentive for any P2P network to all distribution of your material.

OTOH, if you settle cheaply with the P2P co, so that they can stay in business -- you've got a situation where you can get your fingers in the pie. We'll settle cheaply if you agree to play by our rules... otherwise, look out.

Extortion? Maybe in theory. Carrot-and-stick? You betcha.

Do we really know this?

[Infonaut]

I reiterate. Apple, which incurs none of the costs of a record company, MAKES NO MONEY AT A DOLLAR A SONG.

I agree with your overall reasoning. But although we've heard it repeated endlessly that Apple doesn't make a dime off of iTMS, and that they just do it to sell iPods, nowhere have I seen any real numbers showing that Apple isn't making any money selling music.

My guess is they're not making big bucks at it, but I wouldn't be so sure they're not making some money. After all, it's to their long-term benefit to downplay any fiscal success their having with iTMS.

Does anyone have any actual reliable numbers that define how much money Apple is making or not making on the iTMS?

Re:Do we really know this?

[WhiteWolf666]

Apple makes *loads* of profit per song.

Something like 94%.

They pay nearly ALL of that to the labels for the license.

Apple doesn't mind, because it locks people into the iPod. iTunes is a vehicle to sell iPods.

RIAA and Co. don't mind, because its pure profit. No recurring production costs. It's simply another revenue stream for something they've already produced. There are fewer production costs associated with giving rights to Apple than producing CDs, and $1 per song is more than the going rate for, say, a singles disc, or a standard album.

Plus, people tend to spend more money in a small payment or micro payment scheme than 15-20$ a pop.

Big Surprise...

[joshsnow]

an upstart that is attempting to establish a legal peer-to-peer music company

Well what a surprise

The recording industry reasserts control over the means of distribution, benefitting not the artists and the consumers, but the big recording companies who own the artists and control the consumers.
This is what happened with Napster and the end game for the RIAA and MPAA etc is to be controlling all means of distribiution of electronic media via the internet.

It's worked with DVDs and CDs to an extent.
If they lowered the price of albums and gave consumers what they want, maybe people wouldn't engage so much in illegal file sharing.

Re:Big Surprise...

[Tominva1045]

benefitting not the artists and the consumers, but the big recording companies who own the artists...

Nobody is forcing the artists to sign with the record companies. Like anyone else they can log on and upload their stuff to any P2P site.

The little secret is that no matter how hip / fly / cool / or off the chain an artist claims to be he still "wants his"- if you know what I mean.

The only price some of the consumers accept is "free"- and that's why they keep going to P2P sites.

Let the flame-war on me begin ;-)

Re:Big Surprise...

[joshsnow]

Nobody is forcing the artists to sign with the record companies

Well, it's very difficult for an artist to gain exposure without a marketing machine (charts, paper and web avertising, billboards for the "big" artists ).

Unfourtanately, the people who provide that service - usually out of advances against projected sales - also tend to own the distribution rights (and possibly broadcast and play rights) to the work being promoted.

So, for an artist to be sucessful, they may percieve that they need to be "signed" to a lebel.

Personally, I wouldn't have a problem with this arrangement - except that the artists are sometimes not paid and more importantly, as a consumer, the record companies can dictate how I use the product they licence. Also, consider how recording companies as opposed to artists and consumers, have benefitted from the following situations;

1. The move from wax LPs to CDs.
2. The failure of Digital Audio Tape to be used for digital audio
3. The takeover of Napster
4. Bias in contracts artists sign

maybe... but maybe not...

[conJunk]

Ringtones sell for 3-5 bucks and sell pretty well. this suggests that songs are underpriced, or at least priced significantly less than the market will bear.

Could be, sure, but I don't think so. People will pay $3~5 for ringtones because *ringtones* are cool. They probably would not pay the same amount for a single for the iPod, and they certainly *will not* pay that much per song for an album.

I think the cost of ringtones says more about the successful marketing of ringtones than it does about a generally under-priced product

Mod parent up and grandparent down

[Anonymous Coward]

GP speculates that Apple makes no money from iTunes with no supporting links and currently sits at +4 Informative. Parent actually reads financial statements to disprove the claim and is stuck at 1.

Bandwidth is almost free...

[Tetravus]

"Record companies can't make money at a dollar a song."

That's a pretty strong assertion to make without offering any supporting evidence. How much does it cost to record a song? If the record companies really can't make money selling songs at a buck a pop, with hundreds of thousands to millions of potential downloads then I'd say they're fundamentally unfit to continue in business.

I had some friends in a band who put out their own album, using the money they earned working in a warehouse... if they can afford to put together what was really a very good sounding CD on just a few thousand dollars, why can't a record company? They've got too much overhead, too many executives, too much marketing. Here's the Vivendi Universal 6K report from '03, being the most recently published report available in english. Unfortunately there's not a lot in there about cost of salaries vs cost of royalties.

For years the music cartels have been protected by their control of the means of distribution. They grew fat and lazy, just like Americas airline companies during the era of regulation. Now, they're being forced to compete with alternative distribution systems, and they can't do it. Just like the airlines they resort to legal protections (in this case endless civil lawsuits, in the case of the airlines bankruptcy protection from creditors) instead of rebuilding their companies.

What we need now is a well funded set of start-up record companies. They could eat the old guard's lunch without breaking a sweat and help to increase the diversity of music available on the radio.

Peer Impact vs Mashboxx

[microbrewer]

Peer Impact is already doing what Mashboxx proposes to do and credits its users for upstream babdwith with a system credit they call Peercash .They have all 4 major record lavbels signed and all of the big independant distributors on baord they also sell protected content from the major labels and unencubered MP3s from the indies in a walled garden p2p network .Soon they will have games and they hope to have movies by the end of this year .

Wayne Russo has been promising a beta release of Mashbox for several months but Pablo Sato from Optisoft(Blubster) pulled out of the deal with Sony so it sent Wayne scrambleing and only now he has a development team in Grokster .Wayne has also badmouthed Peer Impact several times in the media when his own product is essentialy vaporware with one label signed who is Sony who will sell thier digital content to anyone who wants to play in the pay to peer pool.

Re:Peer Impact vs Mashboxx

[microbrewer]

http://www.peerimpact.com/

I'm really discouraged..

[plasmacutter]

If grokster won't duke it out with this case, it leaves the door wide open for the RIAA's abuse of PR to screw over other p2p developers regardless of guilt under the new standard simply because it's untested.

I'm definitely having pains of sympathy for open source, which will have virtually NO legal protections.

OK, but...

[Infonaut]

They pay nearly ALL of that to the labels for the license.

That's what I've heard. But I wonder what the numbers amount to. "Something like 94%" is pretty vague. I'm not bashing on you, I just wish there was some way of finding out a bit more definitively how much Apple actually pockets from iTMS.

My theory is that they're purposely keeping it secret, and letting everyone believe that it's a loss-leader for them. Yes, the labels are taking a huge chunk of the profits from Apple, but once you get sunk costs out of the way, my unsubstantiated hunch is they're making more money at iTMS than people suspect.