New EMI Boss Says 'Downloads May Be Good'

warrior_s writes "Douglas Merrill was just installed as CIO of EMI (one of the big four that forms the RIAA). The ex-Googler recently stated it is a 'poor business model to sue your customers. I don't think that's a sustainable strategy.' Quoted by the Guardian, he was referring to Warner Music, EMI, Vivendi Universal and Sony BMG's current practice of trying to use legal systems around the world to force their customers into buying products rather than using the free P2P networks and independent music sites and services. 'Previously, the music industry has rubbished studies that claim file sharing can have a positive effect on music sales. "I think people will pay," Merrill said. "There is evidence that people we think are not buying music are buying music. They're just not buying it in formats we can measure."'"

Comments

Tag

[esocid]

Suddenoutbreakofcommonsense?

Re:Tag

[Anonymous Coward]

I'm pretty sure there was a race for this to be the first post. I know I was a participant

Re:Tag

[zappepcs]

I doubt it. More likely he was the first to walk through the poison ivy, it's just a rash. Wait till all the others start stomping through the poison ivy that is P2P... then call it an outbreak.

Not sure how good an analogy that is, but seems good. If they make enough PR stink about this, it might just get them some business. Plan A was not working. Rest assured that plan B will be as friendly as the DMCA, on steroids.

I hope that the real truth of it is that they looked at NIN and Radiohead and did some math to come to the conclusion it is more profitable to give 'name your price' downloads and take some theft than it is to hire an army of lawyers for decades.

On the optimistic side, perhaps this will lead to a la carte music purchasing AND more than top 100 artists available?

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[JordanL]

I think it's fitting that Captain Obvious replied to a post quoting Captain Obvious.

Re:Tag

[gyranthir]

Pretty much, that's pretty heady for a Music exec to say though, better watch out or he might get it cut off.

Re:Tag

[Technician]

Suddenoutbreakofcommonsense?

Maybe.. I think that they noticed that the #1 seller of music is now by download. Apple has passed Wal * Mart as the number 1 music retailer. That only happened after Apple started offering DRM free tracks and still sold music.

They still hate high quality P-P distribution and they believe everyone should buy their own copy. Trying to sell it crippled at high prices is their problem that they haven't figured out yet.

The market is ripe for bulk (wholesale) prices. There are loads of 30 and 60 Gig devices. They are trying to trickle the product at a buck a drop. Nobody is saying fill-er-up. They go elsewhere for that. If they wanted to sell stuff, how about the entire Beatles catalog as a zip for $80. Aerosmith, Led Zepplin, Pink Floyd, Styx, Abba, Slipknot, Atreyu, Prince, or just about anyone with a fan base could clean up with the right price of the package deal for the back catalog. They are stuck in the 8 track or LP mentality of providing only 20 minutes per side at a buck a track even for back catalog stuff.

This is readily apparent when you pick up some of the buck a DVD old TV shows. Someone had to go to the expense of creating a new theme song to put on these DVD's because the labels wouldn't release the rights to the original sound track. Is that stupid or what? They had an oppertunity to sell the music, but instead didn't because they were too stupid to negotiate a deal. They got $0 for 0 copies sold. How is that a deal for them. It was much cheaper for the TV content folks to simply create a new theme song.

Pick up a copy of any of the Andy Griffith, Beverly Hillbillies, Pettycoat Junction, or other oldie buck a DVD TV show for examples of this in action. Hit a torrent and find the original theme songs. They are not even close. I think the music folks wanted to charge more than the retail price of the DVD just for the rights to the songs. If anybody knows the details on this, let me know.

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[Gen. Malaise]

... It's 95%. At least. I don't know anyone that is going ever pay $0.10 for a recording ever again. Do you have a source for this other then your ass? Mind citing it please? You may want to take note that the largest music retailer is now Apples music store which last I looked, was selling tracks at $0.99 cents each. This begs the question, How many people do you know?

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[riceboy50]

I couldn't disagree more. I use allofmp3.com as an example because people were spending substantial aggregate money there en masse in order to use a convenient, non-crippled, reasonably-priced, easy-to-use service. If the industry could manage to open a store exactly like it, they would make plenty of money from the moral majority who don't mind paying for things. But they expect market forces to answer to their demands.

Re:Tag

[edwdig]

Come on, do you know anyone that would actually pay for music today? Someone that uses the Internet? Naa, I didn't think so.

Honestly, I don't know anyone that still does get their music through file sharing unless they have absolutely no extra money. It stopped being convenient years ago. It's not worth dealing with the fake songs, mislabeled stuff, and crappy rips.

Besides, once you get a full time job you tend to value your time higher and your money lower. It also tends to make people appreciate the work put into making the music.

Re:Tag

[Firethorn]

Besides, once you get a full time job you tend to value your time higher and your money lower. It also tends to make people appreciate the work put into making the music.

This.

I've been considering joining a pay music site with the announcements that at least some songs will be available without DRM restrictions.

The two I'm aware of are Apple iTunes and Amazon, at least for the major labels. If I sign up for one, it'll be on the basis of overall cost, selection, and convenience. Note: I don't own an iPod.

Anybody have experience with both that can make a recommendation?

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[bigstrat2003]

PLEASE. The notion that no one buys music if they can obtain it illegally is absolutely ludicrous. I, and many others, have this crazy idea that it's good to support artists who produce work you enjoy, and so I buy their music (/movies/software/whatever else) if I like it. Even if only a small amount is getting back to the artist, it's infinitely more than the $0.00 that goes to them if I pirate.

Re:Tag

[English French Man]

Maybe I am retarded or something, but I use the internet, *and* I still by CDs... and I don't really see a problem with that...

Re:Tag

[RealGrouchy]

Speaking of commonsense, wouldn't "duh" be just as appropriate, at a fraction of the lenth?

Whatever happend to "duh", anyway? I never see it around as a tag anymore.

- RG>

Re:Tag

[Garridan]

Come on, do you know anyone that would actually pay for music today? Someone that uses the Internet? Naa, I didn't think so. Did you read this today? ITunes was responsible for 19% of music sales in January. These are people who buy music on the internet.

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[esocid]

Maybe you should ask the band whose entire discography I just bought after I downloaded one of their albums. I liked them so much I decided to support them. And guess what, I don't have dial up. You fail.

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[Mopatop]

Rubbish, everyone I know still finds file sharing more convenient. Even before I switched to private trackers, eMule and the like are still more able to get me what I want between now (9:31pm) and when the shops open.

On a more personal note, the kind of music I want to listen to - progressive & breaks - can't even be found on most high-street stores. Even going downstairs to get my wallet constitutes unreasonable effort compared to P2P. As I work from home, the same applies to anything that involves leaving the house.

Re:Tag

[Anonymous Coward]

Strange, I never got mistagged stuff from waffles.fm or what.cd... In fact most of the rips have logs. I have absolutely NEVER had a fake song either. Maybe file sharing is inconvenient for you if you are an idiot who still uses Kazaa to get his music.

Re:Tag

[RemyBR]

Honestly, I don't know anyone that still does get their music through file sharing unless they have absolutely no extra money. It stopped being convenient years ago. It's not worth dealing with the fake songs, mislabeled stuff, and crappy rips.

Unless if you live in a country where the music (or movies for that matter) that you like the most are not available, even if you're willing to pay the abusive import taxes, that can easily double or triple the original price.

Besides, once you get a full time job you tend to value your time higher and your money lower. It also tends to make people appreciate the work put into making the music.

While I strongly agree that a full time job will make you value your time, it'll also make you value your money, once you know exactly how hard it is to earn it.

Re:Tag

[FredFredrickson]

I've noticed this (about the replacement music), I noticed on Bonanza and Dragnet.

Anyway- my guess is it made royalties directly to the authoer of the music that much cheaper. you're right though- it's not like they were collecting a ton of money on those themes anyway - I'd assume.

Re:Tag

[bishiraver]

Come on, do you know anyone that would actually pay for music today? Someone that uses the Internet? Naa, I didn't think so.

I do. My coworkers do.

Maybe the people you work with at Walmart or Fry's or oh.. wait.. Infinadyne. Frontpage work well for you?

Re:Tag

[cp.tar]

I get my music through file sharing. And I could even spare the money.
However, I cannot get an iTunes account, as it is not available in my country.

So I suffer the crappy rips, the mislabeled stuff and everything else, for I have neither the spare cash nor the desire to buy every single album to get the songs I want.

It's an adventure, at least. Music sharing is like a box of chocolates: you never know what you're goin' to get.

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[Anonymous Coward]

Well said.

Once you earn on a regular basis, you want to be quickly served, and don't want to download 10 mp3 to get 1 that won't be fake or 64 kbps.

Same goes with movies, games and other software. There comes time when you value customer service, patches, updates and so on. And having cracked executable makes patching it really hard...

Re:Tag

[Anonymous Coward]

This changes with 3rd part hosting sites and blogs with previews before a full download etc. More people pay for a download but it's naive to think that downloading free music is any less convenient. As time goes on the ways people trade music change. I think artists need to engage more online with their audiences much like Trent Reznor from NIN has done recently. This creates a more human connection between the core fans who will be willing to fork out cash for band gear, and interesting media additions to the music. Artists need to focus on that core instead of the mass of fans to regain trust that was lost with the big labels.

Re:Tag

[justice7]

Come on, do you know anyone that would actually pay for music today? Someone that uses the Internet? Naa, I didn't think so. Lets see here; I'm listening to a real audio disc i purchased last night. Furthermore, I even have downloaded the torrent, listened to the mp3s, burned them to a disc, played it in my car and STILL bought the album when it came out. Why? Because I can, because i support the artist, and because I like having a physical copy of the media. The same thing goes for games -- you appreciate them more when you purchase them; rather than pirating. Once you finish school; work full time you care a lot more about having quality product and money is less of an issue. Without the mp3 album download, I may not have purchased this CD. Interesting how that works, isn't it?

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[daedae]

>Today, the people that are buying music must be the ones with dial-up Internet connections and are still playing CDs on portable devices. The folks with the 3 or 4 three-inch binders of CDs in their car. Maybe a few people with 8-track players or something. They don't have the opportunity to download music, so they have no choice but to buy and get gifts from their friends that are downloading.
>
>Come on, do you know anyone that would actually pay for music today? Someone that uses the Internet? Naa, I didn't think so.

I've had broadband at school and home for the last 7 years, and almost only ever listen to music either on my computers or Zune, but I still buy a couple CDs a month. Sure, a lot of them are used (local shops or Amazon marketplace), but I also pick up a decent number of CDs on release day. "But why?" I like having a display, I like the art, I like the liner notes... and also, there's virtually no effort involved in getting the music into whatever format I want. Screw this "oh, you can have your file, but you have have keep looking for programs to strip the DRM, and you better hope your hard disk doesn't crash or that your backup CD-R doesn't fail, and you better not want to play it on more than 3 devices."

Right now, if CDs were to go the way of the dodo, I think there'd be more problems than people realize/would admit.

Re:Tag

[Nyeerrmm]

Amazon doesn't really require you to sign up beyond just having an account with them already, which most people tend to for books and such. As far as the service itself, you click a link, it asks are you sure, and you download an MP3 file, eliminating any dependence on any device.

Also, to download albums, and insure that you don't lose the file if your internet connection craps out, they provide a download program that opens a '.amz' file you download. Note that the client is available for Windows, OSX, and yes, many flavors of linux. The Ubuntu 7.10 deb they provide worked fine for me.

The one proviso for them is that its a one time purchase, if you lose the file somehow you can't redownload it. If you can deal with that I definitely recommend it, its easy and so far problem free. Also the lossy quality isn't enough that I notice, and while I'm no audiophile I still hate anything below about 192kbs mp3.

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[Pointy McButterpants]

This begs the question, How many people do you know? Actually it doesn't beg the question; begging the question is a logical fallacy. http://begthequestion.info/

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[c6gunner]

The one proviso for them is that its a one time purchase, if you lose the file somehow you can't redownload it. If you can deal with that I definitely recommend it, its easy and so far problem free.

I don't see why people expect to be able to re-download a file in the first place. If you buy a physical CD and then your house burns down, do you expect the music label to send you a replacement CD?

I mean, sure, it's a nice feature to have, but I'd never depend on it anyway. Just make backups.

Re:Tag

[Spikeles]

Honestly, I don't know anyone that still does get their music through file sharing unless they have absolutely no extra money

Don't forget:

• Song not availiable on the store you like to use - looking at you iTunes!
• Song is availiable but not in your country - looking at you Amazon!

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[Mryll]

As Too Short once said: "If you lose it... you ain't my momma's son... it ain't free... go and buy another one."

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[Anonymous Coward]

While I strongly agree that a full time job will make you value your time, it'll also make you value your money, once you know exactly how hard it is to earn it.

Funny, now that I'm working full time it's a lot easier to earn money than it used to be. I used to have very little money and it was very hard to get more. Now I have lots of money, and the only reason I don't spend tons of it on movies and music and candy is because I don't really need that much of it, and there are other things I prefer to do with the money, including keeping it. But the idea that having a job will teach me how hard it is to get money is just silly. Money was vastly more precious to me back when I got a few bucks a month as an allowance than it is now that I have tens of thousands of bucks sitting in the bank.

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[TheVelvetFlamebait]

What was formerly common sense would say that bending over backwards for people who aren't actually your customers (they're more like your leeches) and encouraging your actual customers to join them is not a sustainable business strategy. I've always been highly suspicious of the "go ahead and share all you want, you don't have to buy a thing" business model, because it relies on the record companies giving away a lot for free, and simply hoping against hope that those people who were reluctant to give you a penny will suddenly turn around and make it all worth their while.

That said, I could be proved very, very wrong, and I think it's very good that we may see some choice in the market in the near future, rather than the simple dichotomy of locked-down big four media, or open indie media.

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[shark72]

"I couldn't disagree more. I use allofmp3.com as an example because people were spending substantial aggregate money there en masse in order to use a convenient, non-crippled, reasonably-priced, easy-to-use service. If the industry could manage to open a store exactly like it, they would make plenty of money from the moral majority who don't mind paying for things. But they expect market forces to answer to their demands."

We're running into a zeitgeist conflict here.

As you know, by law, each track includes mechanical royalties of about eight cents each for the lyricist and composer; this doesn't include the royalties for the perfomer or, of course, the overhead in producing the music.

You'll recall that a few months ago, the record labels were trying to get the law changed so that mechanical royalties are a percentage of the sale price, rather than fixed at eight cents. Their rationale, of course, was that this would allow them to better address a market where prices are falling.

Naturally, this notion didn't go over well on Slashdot at all. If we have our way, the law will go unchanged, and tracks will continue to have royalties of anywhere between $0.08 and $0.25.

Yet we're fond of pointing out that if the record companies were to just sell tracks for a dime each, all their problems would be solved.

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[riceboy50]

Naturally, this notion didn't go over well on Slashdot at all. If we have our way, the law will go unchanged, and tracks will continue to have royalties of anywhere between $0.08 and $0.25. I missed that article, so I can't weigh in, but from past experience here I would imagine the sentiment was that they didn't believe the intention was to cut those costs in order to lower prices, but rather to increase management profits.

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[electrosoccertux]

Culture is always on the move, to be in you want to have the latest fashion and to be hip you want the latest music.

The music industry could lure both the casual pop listeners and the hardcore music enthusiasts by supplying a non-DRM'd subscription model in chunks of 6 months and 1 year (reasonable, to keep people from subscribing for one month a year and that's it). Say, $10/month for the 6-month plan and $8/month for the 1 year plan. This gets you access to all music.

Even more sustainable would be to do this with movies, because they could probably get away with a "basic" service where you only get movies from the last 6-months, and a "premium" service that lets you have access to the entire movie catalog. Most people, me included, would buy the movies-from-the-last-6-months access, because I generally am not interested in seeing many movies twice. The "premium" service would exist for movie buffs who like to have everything all the time.

Such a service would curb pirating very much I imagine. Opportunity cost isn't bad. Work 2hours at minimum wage and get a month of music.

Since everything would be tracked, monies could transparently be distributed to the bands most downloaded, and finally there wouldn't be incentive for the industry to hype any one band, they'd instead be interested in keeping revenue by pushing bands to develop new, artful albums (instead of the mass produced "music" we have now).

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[kesuki]

It helps that modern p2p clients support the onion router, and the I2p network, and packet encryption.

plus there is peer guardian and the like firewalls to add an extra layer of security.

but clients that aren't configured correctly will get you DMCA'ed here in the states, not sure about overseas.

Re:Tag

[kesuki]

Dollar discs are generally put out for content that has lapsed into 'public domain' http://www.topiclink.com/info/article?page=5
according to that site, 16 episodes of Andy Griffith have fallen into public domain 55 episodes of Beverly hillbillies have gone PD

so they pay a bad music composer to make a cheap theme song, someone who's hard up for cash, and probably isn't in any guilds... it's highly unlikely they even approached the rights holders of the theme songs.

Re:Tag

[hedwards]

The music industry could lure both the casual pop listeners and the hardcore music enthusiasts by supplying a non-DRM'd subscription model in chunks of 6 months and 1 year (reasonable, to keep people from subscribing for one month a year and that's it). This doesn't make sense to me "non-DRM'd" music as a service.

That sounds a lot like renting a car without having to show ID or put down a valid credit card ahead of time. Admittedly, they aren't out a physical item, but they've still lost a sale when the person doesn't delete all the files after the subscription is up.

I won't personally buy music which has DRM applied to it, but when it comes to rentals, it seems like DRM is a reasonable compromise to make between not accessing at all and purchasing the music.

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[Technician]

it's highly unlikely they even approached the rights holders of the theme songs.

I would have thought they did approach the rights holder because the original music is on the public domain film. I would also guess they walked away from the table as the asking price was orders of magnitude above the target and the rights holder refused to negotiate anywhere close to what was required to close the sale.

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[Bashae]

The replacement CD would cost a little money to manufacture and ship. A redownload is practically free - it only costs a little bandwidth. That said, both music CDs and mp3 are easy to back up.

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[kesuki]

getting a hold of the rights holder, arranging a meeting and discussing license fees is a long arduous process. since (usually) the right holder is a major company... it's so much faster to just hire someone to make new intro themes. that's why i said it was unlikely the contacted the right holders, since they knew their price point for the rights was probably below 10 cents a disc and they knew the right holder would want 50 cents a disc or more.

Colour me surprised

[MrNaz]

Here I was thinking that not even big business could afford the salary of Captain Obvious. Either I was wrong or he's doing pro bono work these days.

Re:Colour me surprised

[Cctoide]

Almost: he's doing pro-Bono work.

In other news:

[Mandovert]

To fight sudden climate changes, Satan sent a team of hundred best lawyers to RIAA.

Duh

[explosivejared]

poor business model to sue your customers

It's sad that has taken this long for "insight" like that to surface in the industry. You would think that would be an important topic in business 101, but I guess not.

Re:Duh

[Em Adespoton]

What it took was investors, via the board, hiring a CIO from outside the industry who had a clue. Now the trick is: will he actually be able to change things? He's only the CIO, not the CEO or CFO. It's good PR for EMI, but his views don't necessarily translate into company policy change. PR must love him though -- he can help offset all the negative publicity Legal is sending their way (at least in the short term).

Re:Duh

[lurker4hire]

It's more than that, as the CIO he's going to be on the hook for figuring out how to measure those sales (generated by P2P traffic) that they just can't currently measure well. So he might just have some decent pull on the future direction of the label... ...i hope

l4h

Re:Duh

[nine-times]

He's only the CIO, not the CEO or CFO

It depends on the company, but the CIO can have quite a lot of power. Particularly if you assume that distribution is generally moving towards going over the internet, and therefore a large portion of the "record company" business will then consist of providing the IT services for online distribution. Sure, the distribution portion of the business has been taking a back-seat to marking/branding, but the CIO might still have quite a lot of sway within the company.

Re:Duh

[Anonymous Coward]

"You would think that would be an important topic in business 101".

I'll give you a better example: At the Harvard Business School, they never tell you the purpose of a business is to turn a profit. Never explicitly say it.

Ok, yes, it's obvious to you and me, but it's just as obvious to me that a lot of folks missed that crucial little tidbit.

Re:Duh

[TheRaven64]

EMI is the only one of the big four that has had any of my money in the last year. I have impulse-purchased a few things from them via iTunes Plus. I have looked on iTunes a few times for other things, seen that they are only available with DRM and decided to buy the CD later then forgotten about it. Since EMI are the only label that gives me what I want (DRM-free music at a reasonable bitrate in a sensible format) at the time I want it, they are making money from me while the other three are not. Eventually they have to realise that making money is better than not making money...

Re:Duh

[frission]

do notice that it's EMI that hired him...the same record company that Radiohead split from when they made In Rainbows. I guess they realized their mistake.

Re:Duh

[Disco Hips]

there have always been people like this in companies such as EMI, they just don't get heard through all the red tape noise. Hopefully "Duggie" will change things.

Re:Duh

[Anonymous Coward]

He's not even CIO. The dolt who wrote the summary misidentified him. He's president of digital business, and he'll report to several others.

Basically, this site is worthless -- never trust anything vetted by an editor here. The comments are worth the price of admission.

Re:Duh

[meatmanek]

On a related note,

I have heard that at Abercrombie (could have been another store), the sales associates are not allowed to confront anyone about suspected shoplifting, even if they saw the person hide the products in a purse or bag, for fear of offending the customer. I don't work at Abercrombie or know anybody who does, so I don't know if that's true.

I suppose, because of the high profit margin and product loyalty, the loss of a customer would be more costly than the loss of a few articles of clothing. A customer could likely steal 10 items for every item they buy before the company stops profiting.

Wow

[jbrich]

Now that is a surprise! I wonder just how long it'll take before EMI just tells the RIAA to get out and stay out. I believe I like this guy!

Re:Wow

[BigJClark]

Reward this, by searching out the EMI catalog and buying a CD of a band you like. This type of thinking needs a reward to reinforce it.

Where's the money?

[Thelasko]

There is evidence that people we think are not buying music are buying music. They're just not buying it in formats we can measure.

If they're buying, where's the money going? Is he referring to advertising? I'm confused.

Re:Where's the money?

[nine-times]

I think what he's trying to get at is the assumption that illegal downloaders don't buy music. He's saying that they *are* buying music, but just not in a way that we can track along with the download. In other words, "pirates" are also legitimate customers, but the record companies can't measure how much of their sales are going to "pirates".

At least that's my guess as to what he means, because otherwise I can't figure it out.

Re:Where's the money?

[LiquidCoooled]

Actually, I would put it another way:

I have 2 main sources to listen to the same music:

I can download it.
I can listen on the radio.

Both of these have the same result: brand recognition and advertising for the band.

When that band comes on a concert tour I will gladly shell out £100-200 for a decent pair of tickets and a night out.

Re:Where's the money?

[no_opinion]

Right, the industry already tracks all sold formats. What they're not tracking is (the gullible) people paying monthly p2p "subscriptions" or people paying usenet subscriptions. Those people are not buying music, they're buying access.

Re:Where's the money?

[MobileTatsu-NJG]

If they're buying, where's the money going? Is he referring to advertising? I'm confused. I can think of a couple of ways:

1) Somebody downloads one album. Likes it so much, they're first in line for the next album that comes along.

2) Somebody downloads a bunch of different individual songs. Likes them. Buys an album or two from which one of those songs came.

It's all based on the idea that if somebody is excited about music, they'll spend money on it.

Re:Where's the money?

[Captain Spam]

I think you've got it, but to try to make it a bit clearer:

If someone buys a song/album, they industry counts it as an $X gain in their records. That's the normal part.

If someone pirates a song/album, the industry counts it as an $X loss in their records. This is where they get their annual "zomg teh big scary internets are costing us eleventy hojillion dollars a YEER!!!! i <3 my private jet" statements from.

But, if someone pirates a song/album and then turns around and buys it because he or she likes it, the industry counts it as BOTH a $X loss due to piracy AND a $X gain due to the sale. That's what he's talking about. They have no way of knowing if the $X gain was due to the $X "loss" from actually listening to the song(s) first, so it goes down in both records, even if the $X gain should replace (not just neutralize) the $X "loss".

That, if I am not mistaken, is where the big scary loss figures come from. They assume that it keeps inflating the "loss" column, instead of what it should be doing, erasing from the losses. This is how they can cry over the so-called massive losses sustained from piracy while raking in ever-growing profits year after year. It's either a culture of stupidity that makes them unaware/unwilling to realize this, or a culture of greed that makes them think they can somehow translate their imaginary "loss" into profits by litigation.

Just my interpretation of it. It's probably the same as what you were thinking.

Re:Where's the money?

[CSMatt]

Flea markets? eBay? There are plenty of people who claim to buy media secondhand because they don't want to support the lawsuits.

Re:Where's the money?

[ChoppedBroccoli]

I think its a vareity of alternative revenue streams that are often overlooked.

1. Advertising (in two forms - being exposed to revenue generating targeted advertising as well as the free promotion/advertising a band can achieve through internet music sharing)
2. Concert tickets
3. Merchandise (like t-shirts, posters)
4. List probably continues, please add your thoughts here

I have been exposed to many bands through word of mouth from friends, streaming radio, sites like pandora or last.fm, etc. I also don't buy CD's. What the music industry doesn't consider is that I have paid lots of money over the last 5 years to go see bands I've discovered through non-traditional means that I would otherwise never even heard of live in concert, purchased their t-shirts and posters, and been exposed to targeted advertising and other bands similar to the bands I like through the internet and concerts. Recently, I have even started buying custom remix tracks a la carte from Amazon from some of my favorite bands because they are unqiue and hard to find otherwise. If you ask the record industry, I'm just another unpaying music listener since I don't go to Walmart and buy 5 CDs a month. If you ask me, the record industry doesn't even have a clue as to how I spend my money on music.

Re:Where's the money?

[dlim]

Used CDs?

Re:Where's the money?

[Dekker3D]

or 3) Somebody downloads just about every song an artist has made, adores most of them and buys some albums just to show them some support.

i've got a couple of albums lying around without ever doing anything with them, just for that reason. if i want music, i'll download it. if i want to show my support to a band, i'll buy their album.. or, better yet, i could go to their concerts but that's kinda hard for me to do since i don't have the time or money to actually go to one.

Re:Where's the money?

[electrosoccertux]

But, if someone pirates a song/album and then turns around and buys it because he or she likes it, the industry counts it as BOTH a $X loss due to piracy AND a $X gain due to the sale. I think a more accurate representation would be that person pirates [band]. Then, they're in Walmart and see the newest album from [band], and, in their desire to have it to listen to immediately on the way home, and desire to support the band, buy the CD.

I wonder if a way for them to capitalize on this concept would be to offer cheap subscription to DRM free music more than 5 years old. This way they're not exactly losing money (because albums do most of their sales within the first 5 years), but they're gaining viewership which is free advertisement for the current albums out. IE, you find a band you love, listen to their current albums, want more, but the 3 most recent albums are 5 years old, so you go out and buy that album.

Re:Where's the money?

[Secret Agent X23]

I think what he's trying to get at is the assumption that illegal downloaders don't buy music. He's saying that they *are* buying music, but just not in a way that we can track along with the download.

I don't know if this is what he means, but here's something I've noticed: People I know who pirate music (or movies) to any significant extent, whether it's downloading or burning CDs or whatever, generally spend as much as they can afford on legitimate copies of the stuff they really want. What they pirate is simply music (or movies) of a lower priority, simply for the sake of accumulating more music (or movies). I don't claim this is typical, though. It's just what I've seen.

Re:Where's the money?

[nine-times]

Yeah, in my experience (and we are getting off topic here), there is some portion of the "pirate" community that is basically OCD, and want a "complete collection". I've seen people spend loads of time downloading movies they don't watch, and music they don't listen to. Also, there's a portion that will pay to buy the CD (or whatever) if it's something they really like, but will download stuff they want to listen to once but probably wouldn't have bought anyway.

Feel that?

[Anonymous Coward]

That was hell freezing over...

Business model

[esocid]

"We should do a bunch of experiments to find out what the business model is."

Um, I believe people have been screaming it at you for the past 5 years.

1. Flat fee all you can download buffets.
2. No DRM.
3. Multiple quality formats.
4. Wide variety of artists.
5. Profit!

Sorry had to throw that last one in there.

As a side note I don't think my ordered list worked. Bug?

Re:Business model

[CSMatt]

That's already being implemented.

Re:Business model

[nine-times]

Well it's a bit more complicated than that. What people have clearly wanted is

• FREE all you can download buffets
• No DRM
• Any format or encoding bitrate they choose
• Every piece of music ever recorded

But clearly that's not a viable business model by itself. Even a low flat fee without DRM, as you suggest, might result in everyone joining for 1 month, downloading the entire library (causing huge bandwidth expense for the business), and then cancel. That's certainly not unthinkable, considering how cheap storage is these days.

I think you'll continue to see services that offer either subscription with DRM, or purchase without DRM. (or both) This will continue until such time that "record companies" as we know them will no longer exist, and a completely different business-model is used to support artists/producers. (e.g. give music for free in order to make money touring and selling merchandise)

Re:Business model

[esocid]

No, that is an ISP tax. That is different because people who don't even utilize it will have to shell out for it, which is like forcing everyone to pay for car insurance regardless of whether or not you own a car (man these car analogies just keep flowing). There should be an online service, like allofmp3.com used to be but with all of the aforementioned stipulations, and maybe more that customers would want.

Re:Business model

[cp.tar]

A relatively low flat fee would more than offset the hassle of downloading everything you could possibly want just to save a bit of money. The time it takes is much more expensive.
I say that as a person who copied his girlfriend's entire music library, some 40 gigabytes, then deleted most of it, and still hasn't found the time to relabel and sort it.
If I could pay a nominal fee to download when I think of something, I'd probably download a few albums or several songs each month after the first (I'd download a bit more at first to build up my library some).

I surely wouldn't go through all the things I'm going through now.
However, since nothing of the sort is available to me, I do what I can.
Should any of the artists come to my country, I can go to a concert. That's about it.

Re:Business model

[nine-times]

A relatively low flat fee would more than offset the hassle of downloading everything you could possibly want just to save a bit of money.

The question there, though, is whether there is a fee low enough that you'd pay it to save yourself the hassle, but high enough that record companies will feel is profitable enough to make their business worthwhile. It's not a viable business model until you determine a fee that hits that sweet-spot for both parties.

Personally, when the internet first hit, I imagined some kind of "entertainment service provider" would sprint up. Basically, you pay a fee for the service, and in return you get access to books, TV shows, movies, and music. I imagined this sort of thing replacing cable companies. Every now and then I revisit the idea and think it'd be great for the customers. Imagine paying a flat fee for the internet, and if you chose, paying an additional fee to another company (not necessarily your ISP) for access to high-speed servers with pretty much every piece of entertainment known to man. On top of that, you could run a recommendation system that could suggest cross-media matches. "You like this movie? Then you might also like this book!"

It'd be great, and if they had a good enough catalog, kept up to date, for cheap enough, then I feel confident people would pay for it. But it won't happen any time soon. Even if someone could create a business model that would keep it profitable, the licensing issues would be a legal nightmare.

Re:Business model

[ZachPruckowski]

The problem is that that's an ISP tax, and it's label-by-label. At $5/label, that's $20 on a $50 internet bill, doesn't provide any services (still have to deal with P2P hassles), doesn't compensate artists, and doesn't cover indie labels or unsigned artists. The best bet would be some sort of fee-collection organization. Because music downloads through some sort of central authority can be monitored and recorded easily, it's possible to have a census-based system which is totally fair to artists (as opposed to a survey-based system like radio).

Mistake

[Necreia]

April Fools was Monday

Re:Mistake

[Anonymous Coward]

Someone must have been pranking you well. Because it was Tuesday

Finally....

[greggcz]

Finally someone realized the truth, took a while though...

Only about 10 years too late!

[Gat0r30y]

Wow, the music industry decides fighting the inevitable isn't a viable business strategy, and only a decade too late!

Re:Only about 10 years too late!

[pxuongl]

actually, and sadly, i think that these changes in attitude have more to do with: 1) people starting to successfully counter RIAA litigation 2) the success of music stores like itunes and amazon thank it has to do with them deciding anything or reading any of the writing on the proverbial walls.

Re:Only about 10 years too late!

[Anonymous Coward]

Just like humans with global warming!

- Morbo

Re:Only about 10 years too late!

[cdrguru]

Success of iTunes? What are they 20% of the music SALES and 0.001% of the music downloads? I'd hardly call that a success. The iTunes music store is a add-on that is designed to help the clueless iPod owner stay legal. The fact that they too are irrelevent to music downloads in general and only relevent to the few music sales that are still occuring is interesting but not useful.

Re:Only about 10 years too late!

[pxuongl]

your statement is contradictory or very encouraging depending on how you see it....

If you're 20% of all music sales and only .001% of all music downloads total, that means that you can potentially, just by capturing 1% of all downloads, increase your sales by 10,000%!

that's one way of interpreting the numbers. another way of interpreting it is that you have no idea what you're talking about.

in what world do you live in where having 20% of music SALES constitute a failure? Walmart, the #1 music retailer has about 19% of all music sales.

And if you count recent stories being accurate, then Apple would be the new #1 seller of ALL music, having recently surpassed Walmart.

so please, how can you doubt the success of itunes?

Re:Only about 10 years too late!

[pxuongl]

oops, 1 too many zero's... i mean 1000%

Re:Only about 10 years too late!

[ajs]

Wow, the music industry decides fighting the inevitable isn't a viable business strategy, and only a decade too late! No... the music industry hired someone who already knew that. This does not mean that the music industry has learned their lesson. They just knew that hiring someone with Google on their resume was a PR win.

The good news is that this guy was hired to be their CIO. The only time you hire a CIO and send him on a press tour is if you plan to introduce new tech to solve your problems. We'll see what they come up with, and perhaps it won't suck.

Then again, I doubt he's going to be allowed to turn EMI into YouTube.

CIO != CEO

[Stanistani]

As a Chief Information Officer, how much impact will he have on membership in ruthless, asinine combines? It's not really in his job description to be influencing EMI's membership in RIAA.

We can hope for an influence, but there is no real mechanism there.

Re:CIO != CEO

[eean]

I'm guessing being a CIO of a media company is kind of a big deal...

It would be his job to implement new technologies to sell their product etc.

Re:CIO != CEO

[Anonymous Coward]

You're looking at it backwards. His appointment is a reflection of the changes being made to EMI. EMI is in the hands of people who actually want to make money, and it's breaking up the oligarchy.

Re:CIO != CEO

[Stanistani]

It is a big deal, but the CEO would be the one to make EXECUTIVE decisions about whether to pull out of the RIAA (or urge different tactics), not the CIO. Just as you would not expect the CFO (Chief Financial Officer) to build a new vision of DRM for their products - it's just not his/her turf.

Re:CIO != CEO

[kesuki]

that depends, on if he gets called out for having made statements like that by his bosses now that slashdot is publicizing it... most likely he was hired because he was a big-shot with a great resume from working at google. His hire most likely is because nowadays in the music industry there are a lot of artists who buy off the shelf hardware and software, and put up 6" of insulation in their favorite spare bedroom to record music (and replace the door with a solid, insulation filled door, etc) instead of going to some very expensive recording studio and they transfer all these lossless files called 'wave files' or 'FLAC' files and they send all these files over the internet, of course, so now the music labels need really good IT guys because it's so much cheaper for an artist to convert a bedroom, than to fly to Nashville or LA, etc etc...

the times they are a changing...

Holy Crap

[whisper_jeff]

Holy crap! Someone in a position of power in the Big Four actually gets it.

I forget - is that one of the signs of the end of the world?

Re:Holy Crap

[arotenbe]

Holy crap! Someone in a position of power in the Big Four actually gets it.

I forget - is that one of the signs of the end of the world? No, that's the four horsemen.

Re:Holy Crap

[bounty_hunter.poland]

No, that's the four horsemen. So what, we still got to wait for the other three Big Bullies to get better CIOs?

Sad Mentality Indeed

[eldavojohn]

It's sad that has taken this long for "insight" like that to surface in the industry. Sometimes I wonder how another industry would react if a magical technology dropped in their lap that made duplicating their product instantaneous and nearly free (people already pay their ISPs) to nearly instantly deliver it to customers. What would an automaker think of something like that? They would probably rejoice and drop their pricing to pennies on the dollar.

Unfortunately, this was not how the music industry reacted to this same method of magical delivery. I realize the analogy has flaws but one would think that this would be a gift to marketing and profits. Instead, they've reacted in possibly the poorest way possible. Ignore its existence and sue the hell out of anyone doing it.

Re:Sad Mentality Indeed

[joeyspqr]

No car analogy is ever inaccurate here

Re:Sad Mentality Indeed

[jimicus]

Sometimes I wonder how another industry would react if a magical technology dropped in their lap that made duplicating their product instantaneous and nearly free (people already pay their ISPs) to nearly instantly deliver it to customers. What would an automaker think of something like that? They would probably rejoice and drop their pricing to pennies on the dollar.
  I've already suggested something a bit like this as a thought experiment some time ago - essentially, a 3-dimensional photocopier which costs very little to run. Original in one end, as many identical copies as you like out the other.

I suspect it's more likely the inventor would be quietly encouraged to commit suicide and his invention destroyed. Every single Western country's economy depends on such a machine not existing, if only for the fact that you could use it to reproduce your own currency. While it's nice to imagine a utopia in which society changed overnight to accommodate the idea that suddenly, material goods need no longer be scarce, society doesn't tend to change that quickly.

Re:Sad Mentality Indeed

[Anonymous Coward]

I've thought about this too. It would certainly put the global economy on its head if you could "replicate" any type of hardware like that. Maybe this is the key to a Star Trek like Utopia.

Re:Sad Mentality Indeed

[wizardforce]

What would an automaker think of something like that? They would probably rejoice and drop their pricing to pennies on the dollar.

you're joking right? If automakers could make a car for less than 20$ do you really think they would be selling them at anywhere near that price? more likely the industry would move toward a business model like what Microsoft uses. They're not "selling" anything, they're "licensing" the Ford name and design for example.

Re:Sad Mentality Indeed

[HarvardAce]

Sometimes I wonder how another industry would react if a magical technology dropped in their lap that made duplicating their product instantaneous and nearly free (people already pay their ISPs) to nearly instantly deliver it to customers. What would an automaker think of something like that? They would probably rejoice and drop their pricing to pennies on the dollar. Yes, because you can now buy software for $10 or movies for $2.

The problem with your analogy is that there has never been a high cost of duplicating product in any of these industries. In economic terms, the marginal cost of producing an additional unit is low. However, the fixed costs (paying the artists, recording studio, etc.) here are proportionally much larger. It may cost $1 million to develop a piece of software, and then $5 per unit to put it all in a box and ship it out. Let's say the software costs $50. Now, you create a better way of distribution and the marginal cost is now $0. This doesn't mean suddenly the company is going to be giving them away for free...in this simple scenario, in order to get the equivalent amount of profit per unit (ignoring changes in supply or demand), they would be able to sell the product for $45.

Now let's take a look at the auto industry. Here, marginal costs make up a much higher percentage of the total cost. To make things simple, let's say each car costs the company $10,000 to produce (in materials and labor costs), and they sell the car for $12,500. If you suddenly can lower the costs (due to your magical technology) for each car to $100, then to get the same profit per unit (again ignoring changes in supply or demand) they would only charge $2,600. In one case we only reduced the price by 10%, in the other we reduced it by almost 80%.

The problem is that people in general expect to pay near the marginal cost for an item, but in general do not take into account the fixed costs with producing a particular product. For this reason, it's easier for a person to justify spending $100 on an object they know costs about $95 in materials to produce, while they hesitate to spend $15 on a CD they know costs only pennies to create.

For more information on marginal cost and how it applies, I highly recommend taking a look at the Wikipedia article on Marginal Cost.

Re:Sad Mentality Indeed

[Machtyn]

The problem is not that the automakers could make the car for less than $20, but after the automakers spend millions on research and development and production of a new car, they won't be able to recoup those costs when everyone starts "copying" the model from the first purchaser. (And why not, the first purchaser of the model could also reproduce the car for the same cost as the manufacturer, but didn't spend the money on creation.)

Still, the consumers of the music industry are demanding lower prices because the supply is plentiful and easy to reproduce. Many consumers are willing to put the money down for the product that they demand (DRM-free, quality bit-rate, etc.etc.), but the industry is fighting tooth-and-nail to not sell what the consumer demands. Thus the consumer takes his money and goes elsewhere or finds other means for obtaining what it wants.

Re:Sad Mentality Indeed

[Idiomatick]

Oh god... open source cars. Car analogy definitely not working this time. While there would still be drivers and crashes i don't like the idea of having a car designed by people comfortable with a command prompt.

Re:Sad Mentality Indeed

[Wheely]

Sometimes I wonder how another industry would react if a magical technology dropped in their lap that made duplicating their product instantaneous and nearly free You mean like the industry that used to deliver ice to peoples doors or maybe you were thinking of traveling minstrels. Perhaps you mean scribes or the mummification industry. Maybe you speak of the people who used to walk in front of cars with a big flag.

Things move on, industries lose their relevance others move abroad and the people left behind have to adapt.

In my view it is important to remember there was music before the recording industry and there will be music after it. These businesses are not a music industry, they are a recording and distribution industry. Thanks but we can record and distribute things ourselves now.

Re:Sad Mentality Indeed

[NeutronCowboy]

I doubt it that it would work the same way. For one, material cost is non-zero. For two, most objects are made of several non-plastic components. I certainly will not be able to print a mouse with that technology. Not even a stapler or scissors would work (and that's just from looking around my desk).

What would work, however, is printing out objects with basic shapes that can be made from plastics: garden chairs, book shelves, plastic containers (I'd buy a 3-d printer just for those), etc. Yes, these industries would up shit-creek without a paddle. But it would spawn a whole new industry of 3-d printer makers, designers and shippers of raw material.

As for the example with currency, that's nonsense. Such printers already exist, and they cannot - and are not - used to print currency.

Material goods will always be scarce because they need material to be built. Digital goods have no such restriction.

Re:Sad Mentality Indeed

[compro01]

i don't think he's referring to current 3-D printers and prototype fabricators and such.

we're talking objects-like-files, star-trek-style replication. right-click, copy, paste, and you've duplicated a car from random atoms, at near-zero cost. post-scarcity.

while this is not feasible now (and it may never be), as he said, it's an interesting path to wonder what would happen if we suddenly did have that capability.

Re:Sad Mentality Indeed

[jimicus]

i don't think he's referring to current 3-D printers and prototype fabricators and such.

we're talking objects-like-files, star-trek-style replication. right-click, copy, paste, and you've duplicated a car from random atoms, at near-zero cost. post-scarcity. Thanks for the clarification - that's exactly what I meant.

Re:Sad Mentality Indeed

[Yoozer]

I suspect it's more likely the inventor would be quietly encouraged to commit suicide and his invention destroyed.

The result in Damon Knight's "A for Anything" was that the inventor sent several of his inventions to random addresses. After a brief chaos, the guy with the biggest guns enslaved the rest, eventually resulting in a noble class with cloned slaves, bred for obedience and specific tasks. Non-reproducible items became very valuable.

It's an interesting, albeit somewhat depressing read, because none of the noble clans ever thought of using the duplicator (in this case it basically "stole" the object from a parallel dimension) for any scientific research.

Re:Sad Mentality Indeed

[olman]

To make things simple, let's say each car costs the company $10,000 to produce (in materials and labor costs), and they sell the car for $12,500. If you suddenly can lower the costs (due to your magical technology) for each car to $100, then to get the same profit per unit (again ignoring changes in supply or demand) they would only charge $2,600. In one case we only reduced the price by 10%, in the other we reduced it by almost 80%. Ah, taking lessons from badanalogguy?

First of all, it takes way way big pile of money to design a new car, especially if it's in fact new-new design with chassis and everything and not just minor revamp of last years model.

Especially with the newfangled automatic stabilization and the like.

So if anything, making a car has higher development costs than software. And, well, hell of a lot of embedded software goes into ABS and the like. And it has to work right every time or they will sue your butt off.

For this reason, it's easier for a person to justify spending $100 on an object they know costs about $95 in materials to produce, while they hesitate to spend $15 on a CD they know costs only pennies to create. I bite.

How do you explain the phenomenom that the most successfull and long-selling CDs can cost as much as brand new big-name releases do? Something like NiN pretty hate machine used to retail for something like 20â until they dropped NiN back catalogue prices just recently (no doubt a little due to mr Reznor blowing a gasket publicly and telling everyone to steal the albums)

Ditto for Metallica back catalogue and what have you.

How does that fit your theories of poor hungry record companies having to break even and barely being able to scrape by?

Re:Sad Mentality Indeed

[Bob-o-Matic!]

How sad would it be that if you still need to 'right-click' at all in the future where such replication is available.

Re:Sad Mentality Indeed

[HarvardAce]

How does that fit your theories of poor hungry record companies having to break even and barely being able to scrape by? I don't recall ever making this claim. I was only trying to debunk the parent's analogy of having a new and extremely cheap way to reproduce product (i.e. low marginal cost) reducing product price, mostly because the music industry (as well as software and movie industries) have always had an extremely cheap way to reproduce product.

If you look at the Wikipedia page, it talks about how, over time, the price of a particular product usually approaches its marginal cost as the fixed costs have been absorbed by initial sales of a particular product. This fits perfectly into how you (and I) think older CDs should be priced -- prices should go down over time, but this rarely happens with anything on the big labels.

Re:Sad Mentality Indeed

[Anonymous Coward]

I think part of the argument is whether or not the "fixed cost" of producers, A&R, technicians, album artists, and so on and so forth, is actually a fixed cost or just an unnecessary extravagance.

In other words, some people (I being one of them) feel the recording industry is way overstaffed for the digital era.

Re:Sad Mentality Indeed

[kesuki]

"Sometimes I wonder how another industry would react if a magical technology dropped in their lap that made duplicating their product instantaneous and nearly free (people already pay their ISPs) to nearly instantly deliver it to customers. What would an automaker think of something like that?"

Well, based on how the automotive industry has basically avoided biofuels in any country that doesn't mandate it on their citizens.. I'd say they'd react the exact same way.

If automakers had pushed farmers to make cheap high sugar crops to produce cheap ethanol (examples include: sugar cane, sugar refinery slug, sugar beets... corn is perhaps the worst crop to use, but the corn industry pushed for corn ethanol in gas in corn country and they got what they wanted.) or had pushed for cheap biodiesel type crops (I'm less sure of which crops are great for biodiesel so w/e) we might have $2 a gallon ethanol fuel everywhere, remember, Brazil which mandated the switch to ethanol, sells ethanol around $1 a gallon, but they use sugar cane.

but no, the price of oil is always fluctuating, and they weren't sure that they could manage to compete with gasoline at $2/gallon biofuels , because OPEC facing the prospect of losing America would artificially drop the price of gas to $1 a gallon Just to sell their oil over biofuels.

Bush is tied to Big Oil in many ways and I'm certain his policy has helped contribute to America's $4 a gallon diesel prices (that's current price with only about $.50 in taxes on it)

The oil companies are feeling great right now, but even though there are plenty of biodiesel and bio ethanol fuels that cost Less than $3-4 a gallon, because automakers are afraid of the oil cartel they don't even make flex fuel a standard feature on cars (corn ethanol costs about $3.50 a gallon, mostly because you need as much natural gas(controlled by oil production companies) as you need corn... more viable sources of biomass and biodiesel are Cheaper than petroleum at current market prices, but they're still running scared, because opec can alway artificially deflate the cost of oil, if biodiesel or bioethanol take root in a country the size of America...

OPEC is not worried in the least about Canada's 'expensive' tarsand production, even though it means America buys less from middle-eastern countries. In part because Russia has become wealthier, and China's populous has become wealthier (and more likely to own gas powered vehicles) plus India has become a favorite country for American companies to outsource jobs too, which is increasing the amount of gasoline burned in India as well.

So no if nanotech/biotech could turn soil into free cars, with a simple seed that cost $1 to manufacture and it grew in 2-3 months (and grew above ground too) they would likely kill the inventor, debunk his invention as fake, or bad science and destroy all evidence of his invention.

It would probably take them a week after a popular blog talked about the technology to go about killing the researcher. They would be Just as bad or worse than the music industry.

Re:Sad Mentality Indeed

[kesuki]

"Such printers already exist, and they cannot - and are not - used to print currency."

It's because they're designed to not print money correctly. There was a time when a $2000 color copier could make 100% perfect copies of say $20 dollar bills, then they introduced new features into money, to make it harder, the secret service also pushed printer companies very hard to make printers print greens off shade, to make counter fitting not work properly. I think now, that current expensive copiers and printers have a microchip that if it detects money shaped objects, being printed or copied that it instantly shuts down the print/copy operation..

The Secret Service tend to be very persuasive about getting things done their way. You Do Not Want to be waking up knowing your company sells a product that can make 100% perfect copies of twenty dollar bills, or else your kids might wind up as dead as JFK minus the publicity, but complete with the crazed gunman theory to take the fall, a gunman who conveniently dies in being apprehended, or while in police custody like Lee Harvy Oswald did.

Re:Sad Mentality Indeed

[kesuki]

Yes, ice is free in parts of America, for up to 6 months a year, and prior to electrification, there was a healthy industry made up of ice cutters, ice-warehouses, and ice distribution networks.

The thing is even though the Ice was free, nothing else in the network was. So electricity which can magically move energy thousands of miles from where it was produced, over relatively cheap copper(once upon a time) or aluminum lines, had a virtually free distribution network that no ice shipping company could match, and there now is not one ice distribution company that based it's product on free ice, they're all basing it on electrically made ice, because those damn electric utility companies wouldn't charge $20 a kilowatt hour for something that only cost them 5 cents a kilowatt hour to produce, ship and sell. No they sold it for $0.08 cents to $0.22 cents A price that made those $200 electric ice making machines so damn affordable. compared to using mules and men to cut and haul and store 'free as in god' ice. damn ice pirates. damn them all to hell.

s/ice pirates/digital pirates

Re:Sad Mentality Indeed

[Anonymous Coward]

Sometimes I wonder how another industry would react if a magical technology dropped in their lap that made duplicating their product instantaneous and nearly free (people already pay their ISPs) to nearly instantly deliver it to customers. What would an automaker think of something like that? They would probably rejoice and drop their pricing to pennies on the dollar.


That depends.

If the automaker decided to continue with their labourous, difficult, expensive "Assembly lines" technology (come on that's soooo Industrial Revolution Era.) then you're correct, they would probably react the exact same way the Music Industry reacted to the internet.

However, if that sudden cheap magical technology suddenly came about - what would stop the automakers from USING that technology themselves? Then it would be about designing the best car/truck and pitching a better deal.

Re:Sad Mentality Indeed

[petermgreen]

IMO it's not so much about the cost of making reproductions as about the cost difference between making reproductions in bulk VS making them yourself.

The governement grants (supposedly temporary though in the case of copyrights that has become rather a farce) monopolies to those who bear the upfront cost. Some industries use the copyright system, some use the patent system, some unfortunately some industries like software get to double dip and use both systems.

Theese monopolies encourage people to bear the high upfront costs costs of creating new stuff by letting them spread that cost over many units. They could not effectively do this if competitors who dodged the upfront costs were allowed in the market immediately (they could try to keep thier methods secret but I dout it would be very effetive for most modern industries).

The monopolies are enforced through legal action. This is very effecive when the only people who can copy your product at an acceptable price are large companies. However it really doesn't work when anyone at home can cheaply and easilly copy your product.

Suing your customers

[merc]

The ex-Googler recently stated it is a 'poor business model to sue your customers.

Darl McBride was not immediately available for comments.

Best...

[Xogede]

...dept. ever. I suggest that burntheheretic becomes a new tag.

There may be hope yet

[Whuffo]

It's nice to see one of the recording industry "partners" acknowledge that downloading music may have some value. Now all they need to figure out is that music downloads are a fact of life.

Something that even this executive hasn't received a clue about: Where do you and your corporation fit into a distribution system that you do not own, can't control, and add no value to?

Maybe I'm giving this bozo too much credit - since iTunes is currently the number one music retailer, then even this clown could figure out that music downloads "may have some value". I suspect the concept that their target market will obtain their music from the vendor that offers the most convenient product at the lowest price will completely elude him. They'll continue to turn out a substandard product, cripple it with intrusive DRM, and try to sell the digital version at the same price as a physical CD (or even higher).

The record companies need to take a look at the past to see their future. Much as the producers of buggy whips, button hooks, electron tubes (and many more) have had to either find another product to produce or go out of business, the record industry is rapidly sliding into irrelevance. "Record company" - their fate is in their name. Who produces, sells, or buys records these days?

Re:There may be hope yet

[cdrguru]

The lowest price is zero, and they can't live with that. Today, it is free as long as you don't mind not being "legal". Tomorrow, it will still be free and it might even be legal.

Until they come to terms with the idea that society (as defined by the people under 30) have determined that it should all be free, trying to get paid for music is hopeless. Maybe then they can figure out how to get paid for something - just not music.

Worried about crappy music? Well, if nobody is paying then there is no "gatekeeper" anymore. Welcome to the American Idol Rejects Compilation CD! But, it is all free.

Re:There may be hope yet

[Gat0r30y]

The thing these guys don't seem to get is that cost of entry into the music distribution business has fundamentally changed in a way that increasingly leaves guys in suits out of the loop. The cost associated with producing a record has gone from very large (time in a studio, printing LP's, marketing, distribution) to not so large at all anymore (for instance the Black Eyed Peas record, edit and produce their records with just a mac, and some mic's). Increasingly marketing can be done through other channels, and with the internet, distribution is free and easy (radiohead, Trent Reznor). The money to get a band off the ground isn't what it used to be, all that's left for the big four is Big Box Retail Distribution. Which is certainly still around as a distribution channel but with iTunes the #1 retailer, it seems most people don't look to their local Walmart/best buy to get records.

Re:There may be hope yet

[mc900ftjesus]

iTMS was the #1 retailer for a week because of holiday gift cards. WalMart still averages more sales month to month. Also iTMS is the worst kind of download, DRMed. iTMS is as unfair to the artists as any CD deal ever was and you have less control of "your" music. Apple is just really good at pretending not to be evil.

Re:There may be hope yet

[TheRaven64]

Also iTMS is the worst kind of download, DRMed. Not all of iTunes downloads are DRM'd, and the ones that aren't are most relevant to this article since most of them are from EMI. I've bought a few albums from them in the last six months, 256Kb/s AAC (the same quality I rip my own CDs), no DRM.

Re:There may be hope yet

[edwdig]

iTunes is only unfair to the artist if the artist is signed to a major label. If the artist puts the songs on iTunes directly, they get 70 cents of the 99. That's rather good, as most stores don't have the volume to negotiate credit card processing fees low enough to offer anywhere near that rate.

Re:There may be hope yet

[argent]

Also iTMS is the worst kind of download, DRMed.

No, the worst kind of download is DRMed, time-limited, in a player that's got kernel DRM support.

And your job is... what, exactly?

[roystgnr]

"They're just not buying it in formats we can measure."

You're not writing, composing, or playing the music. There aren't any execs in the recording studios helping to put it on disc. Your only job is to take a cut of the money that someone who isn't you is trying to give to someone else who isn't you... and you can't even be bothered to keep track of how much money you're taking?! Is there anything scheduled in your day planner besides interviews, hookers, and blow?

Re:And your job is... what, exactly?

[Anonymous Coward]

Is there anything scheduled in your day planner besides interviews, hookers, and blow?

In fact, let's forget the interviews.

Re:And your job is... what, exactly?

[Gat0r30y]

Is there anything scheduled in your day planner besides interviews, hookers, and blow? Blackjack?

Re:And your job is... what, exactly?

[matrixskp]

Yes... court case at 11.

Re:And your job is... what, exactly?

[CSMatt]

Believe it or not, record companies still provide vital marketing for their artists even though their primary purpose of distribution has been made obsolete.

Re:And your job is... what, exactly?

[mcmonkey]

Is there anything scheduled in your day planner besides interviews, hookers, and blow?

Blackjack?

Genius! And I just spent my last mod point :(

P.S. Is it just my browser, or is /. extra crappy today? Why are entire threads blockquoted?

He's fucked.

[Oktober Sunset]

Woah, this guy is gunna last about as long as Pope John Paul I

And in other news

[zenderbender]

Douglas Merrill CIO of EMI was just fired from his job!

Wrong position title

[Honest Man]

It should be noted he's not the CIO of EMI, he's the President of Digital Business. http://www.paidcontent.org/entry/419-interview-douglas-merrill-president-emi-digital-business/ http://www.emigroup.com/Press/2008/press40.htm

The Sex Pistols had it first...

[amccaf1]

"Too many people had the suss,
Too many people support us,
An unlimited amount,
Too many outlets in and out,
Who?
E.M.I.! E.M.I.! E.M.I.!"

        -- "E.M.I.", The Sex Pistols, 1977.

And this matters --- how?

[overshoot]

Let me know when he (or anyone else with a clue) makes CEO or some other policy-setting position. I might start buying music from his company again.

Re:And this matters --- how?

[esocid]

That's why I always check to see if I'm buying from someone affiliated with the MAFIAA first. I won't be padding their litigious pockets.

Sombody promote that man!!

[crownrai]

Oh wait, they already did....

high evil gradient

[owlnation]

The poor man...

He's gone from Google -- not evil (as far as we know, pretty much)...

...to EMI - yes, marginally less evil than Sony BMG, but still as evil as an evil thing on a black day in a bad mood -- one of the Four Horsemen of Evil in fact.

What's his name, this CIO? Faust?

Tell me ...

[BoredAtWorkWhatElse]

How's 2013 ?

Just as well he's working for EMI

[jimicus]

The ex-Googler recently stated it is a 'poor business model to sue your customers. I don't think that's a sustainable strategy.'

Well, with an attitude like that I don't think he'd have gotten very far applying for a job with SCO.

Photo industry?

[Comboman]

Sometimes I wonder how another industry would react if a magical technology dropped in their lap that made duplicating their product instantaneous and nearly free (people already pay their ISPs) to nearly instantly deliver it to customers.

Film companies like Kodak and Fuji faced exactly that challenge. Imagine a world where no one has to buy film to put in their camera and no one has to pay for film processing to print their photos. Less than 15 years ago, Kodak made most of its money from camera film and photo processing supplies, chemicals and equipment. That market has all but disappeared and yes, Kodak has had to lay off staff and close plants, but overall the company is still doing well. How? Rather than fearing the new digital technology or trying to sue or legislate it away, they have embraced it. The music industry could learn from that.

Re:Photo industry?

[kesuki]

You still get better photo processing at Wal-mart for digital photos than you could ever get from a $99 printer, even if if it can print direct from memory card and doesn't need a $300-$1000 PC to connect to. Part of Kodak's strategy was to corner the market on printing kiosks, etc through patents etc.

and with the ridiculous price and only 40% filled ink-cartridges etc, it's probably cheaper at Wal-mart too.

Personally, I haven't owned a printer in 7 years, the last thing i printed out at home was an income tax return. now you can send documents in online, you can do the same for digital photos, etc, and pick them up at your convenience .. there really is no need to buy a printer if you live in a town above 20,000 population that has a wal-mart and/or an office store.

unless you're doing something illegal, like downloading kiddy porn, then you probably want to buy a nice expensive photo quality printer, or maybe even a color laser printer, if you think you need to print out reams of photos for your local 'kiddy porn ring'

Definitely not Ivy League

[Hasai]

poor business model to sue your customers?

Must not be a Harvard Boy.
*sniff*

Nothing to see here

[CSMatt]

From the article:

Merrill plans to experiment with ad-supported music download services, pointing to Google's success with targeted advertising, and subscription models. Lucky for him these services already exist.

To the laboratory!

[jgijanto]

"There is academic research that shows file sharing is a good thing for artists and not necessarily bad," said Merrill. "We should do a bunch of experiments to find out what the business model is."

Yes, they should run a bunch of experiments! Perhaps, they could even hire trent reznor and radiohead as outside consultants.

Quite optimistic

[v(*_*)vvvv]

"There is evidence that people we think are not buying music are buying music. They're just not buying it in formats we can measure."' I like this guys optimism. Although I thought they measured *sales*.

not instantaneous, but still sorta magical.....

[zogger]

.....there's two ways to get a broccoli, you can buy one at the store, or get a packet of seeds and make a lot of copies for cheap. Go ahead, share some with friends! I'm in ag, that's where my money comes from,yet I encourage everyone to grow as much of their own food as possible. Because that is just a good idea, cheap good food for everyone is the goal. That's the best this side of another industry that's been around a long time can offer, bioreplicator technology. Go buy your meats directly from the farmer, save bunches. Go to produce stands and farmers markets, save a lot. *Food is the original replicator technology*, buy a heifer, you can "replicate" a lot of beef that way. There are ways to keep it cheap(er) and affordable. (and I am against food patents and seed DRM..that's lame, use open pollinated/heirloom "open source" seeds).

The digital bits for expensive industries-music,movies,software- are out to lunch, just charge very small fees, make it quick, easy, and legal, don't annoy the customers at all, skip the DRM and all that other nonsense, and make some money on HUGE volume sales. Even 99 cents a track is pretty steep, it should be like a dime maybe. And stuff on a cheap plastic disk? Coupla bucks, tops...make it impulse item cheap, sell zillions of copies that way. They are stuck in a pricing model from decades ago when making copies was expensive..it ain't that way now, not even close, drop prices severely or deal with "piracy" as your customer base routes around digital prohibition because it is stoopid to put up with it and constitutes irrational price gouging. Example of how far out to lunch they are, you can get the HARDWARE to replay the music now at the low end CHEAPER than a single plastic disk with some music on it. Tell me that isn't an indictment of price gouging by the music industry, and skewed expectations. They just refuse to drop prices as technology proves they can, that's all, just tired old avarice.

CIO commenting on business model?

[boguslinks]

Is it typical for CIOs to be commenting on their company's business model? Isn't that the job of other C-level execs?

Profit??

[Iberian]

Personally I rarely buy a CD. There is maybe one band that I will buy a CD from but no amount of downloading music is going to change that. Though at 10-20 cents a song I would buy a lot more music. At a dollar though there isn't much that is worth that much, especially if it has DRM which I have to remove.

Re:Profit??

[shark72]

"Though at 10-20 cents a song I would buy a lot more music."

Do you have a gut feeling for how much more you'd buy?

Let's say for sake of comparison that a track costs a record label, on average, $0.15 per download (assuming minimal royalties and no overhead). If they're aiming for a $0.20 price, then they might take a penny in profit and get the store (iTunes, Amazon MP3, or whatever) to take $0.04 in markup.

Now let's say that they're selling that same track today for $0.80. On Amazon it's been estimated that the store takes about $0.10 in margin, so the record label is netting $0.55 per track in net margin.

This means that for it to make economic sense for the record label to aim for a $0.20 price per track, then such a price drop must increase sales by 5400%, if my math is correct. In other words, if an average customer buys ten tracks a month, they'd have to buy 540 tracks a month to be of the same value to the record label.

Here's where this breaks down: at $0.80 to a buck a track, I have no problem buying as much music as I want. There's just no elasticity below $0.80 for me. I wouldn't buy any more if tracks were $0.60, $0.40 or even $0.20.

I've no doubt that many people's financial situation is such that there's significant elasticity between $0.80 and $0.20. But enough to grow sales by 54X? Not likely for most people.

manage to get the store (iTunes, Amazon MP3 or whatever) to take four cents in markup, then the net margin for that sale is a penny.

If they're currently selling that track on Amazon MP3 for $0.80

Lynyrd Skynyrd beat them by three years

[AnalogDiehard]

"Too many people had the suss,
Too many people support us,
An unlimited amount,
Too many outlets in and out,
Who?
E.M.I.! E.M.I.! E.M.I.!"

-- "E.M.I.", The Sex Pistols, 1977.

Slickers steal my money since I was seventeen,
if it ain't no pencil pusher then it got to be a honky tonk queen.
But I signed my contract, baby, and I want you people to know
that every penny I make, I gotta see where my money goes.

-- "Working For MCA" Lynyrd Skynyrd, 1974

Customers.

[Anonymous Coward]

"poor business model to sue your customers."

Nice of you to state the obvious for us.

Doug Says:

[Quantam]

"I'm... I'm blind!!"

It's not a case of P2P being good or bad...

[ZiggyStardust1984]

it's inevitable. You can spend money fighting it or earn some money using it.

Ask trent - they made close to 1 m buck in days

[unity100]

just using new methods that prehistoric derelict of ceos are condemning in those music companies.

New EMI

[pavon]

The CIO isn't the only thing new about this company. Back in September Terra Firma, a private equity firm, bought out EMI. These new owners are very cost conscious and have been making drastic changes across the board. These include a new CEO, a new CIO, cutting 1-2 thousand staff (out of 5.5 thousand total), being the first of the major labels to sell DRM-free music on a wide scale, cutting the amount of funding RIAA and IFPI get to prosecute file sharers and threatening to end it all together.

In general the changes have been very consumer friendly, but several big artists have left out of concern that this decimated EMI will not be able to promote their acts as well as they have in the past.

EMI changing it's stripes?

[Xest]

I have to say ever since EMI's take over they do seem to have woken up a bit, they were first to sign up with DRM free online music stores, they've spoken openly about not bothering to pay their subscription or whatever to the RIAA anymore and now this.

It really does seem like at least one of the old music companies is waking up to reality and has been for a few months now.

It's just a shame the remaining 3 of the big 4 still have their heads too far up their own arses.

I'm not going to say I like EMI or anything yet, for their participation in the RIAA's antics it's going to take a long time for those wounds to heal, but they have to be given credit at least because they do seem to be on the right path.

What's comical though is that it took EMI to be bought out by an investment firm before it got a clue, it's such a shame the music industry couldn't figure things out for itself but still let's hope EMI continues on this positive path, particularly as they seem to be the only big music company that's actually acting in a way that might ensure it has a future right now!

EMI music police? Not.

[ashfields]

There is evidence that people we think are not buying music are buying music. They're just not buying it in formats we can measure.

Notice how he said "people are buying music" instead of "people are buying our music". The EMI and RIAA folks must be thinking that they are the music authority.

So just don't buy theirs, and let em rot.

see what downloads did for Vampire Weekend

[DragonTHC]

music downloads launched the career of Vampire Weekend. They're a pretty cool band who might not have made such a good deal with a label otherwise.

mismod

[BitterAndDrunk]

Maybe a /pedantic mod, or an offtopic, but troll? Stupid stupid moderators.

Re:mismod

[Anonymous Coward]

It's flamebait, the numbers were deliberately chosen to anger people, there are no studies out there presently that put the numbers anywhere near that.

Even with favorable assumptions it's still unlikely to be more than 20%.

Same old, same old...

[emotek]

Fighting your customers is an old business model. Worked with the native americans, works with music fans. I suspect the great internet wars of 2010

eMusic!

[Lars512]

eMusic is a tiered subscription service, where you pay monthly and get a number of songs you can download each month. This amounts a cheaper price per-song, and files are mp3s with no encumbering DRM.

The downside is that although they have a lot of music, they don't have major labels or big pop artists. For me, this has actually been a real positive, since it's meant that I've found excellent artists I never would have run into or heard on the radio.

I highly recommend it.

Re:eMusic!

[Firethorn]

Interesting, though is there a way to preview music? I went to the site, all I can get is the promo page.

If what you say is true I'd be venturing off the beaten track. I hope the songs are indexed well. So far all my forays into non-radio music has been negative. I just don't like punk rock and such.

Re:eMusic!

[Lars512]

You need to sign up to download music, but the first month is free (no obligations, or at least it was when I signed up). It's made very easy to preview music. They have a pretty diverse range. The first month I was disappointed with my choices, but since then I put more effort into looking, and I've found probably one or two artists a month that I really got into. I also feel that I've barely scratched the surface. Anyhow, best of luck!

iTunes is in more countries than Amazon

[tepples]

Amazon doesn't really require you to sign up beyond just having an account with them already, which most people tend to for books and such. People who protested their early "spamazon" e-mail maketing policies or their later "one-click" patent shenanigans might not. A lot of them chose bn.com and eBay Stores over Amazon and what are now called Amazon Pro Merchant stores. That accounts for a few people who don't have a qualifying Amazon account, but the requirement to immigrate to the United States first accounts for even more.

Star Trek

[tepples]

it's an interesting path to wonder what would happen if we suddenly did have that capability. True, but the path is for science fiction authors, not for economists who study reality.

EMI is in the lead, but not at the finish line.

[Lunarsight]

EMI is the closest of the Big Four to 'getting it'.

Unlike Warner, their 'apology' didn't seem like spin-doctored crap.

However, EMI needs to take this to the next level, IMHO.

Yes, their current rhetoric is what we want to hear, but they need to make a bold statement before I stop boycotting their music.

I want to see them remove themselves from the RIAA.

As long as they remain affiliated with those slimeballs, it's going to sabotage everything they say.

You must be kidding

[g253]

Honestly, I don't know anyone that still does get their music through file sharing unless they have absolutely no extra money. It stopped being convenient years ago. It's not worth dealing with the fake songs, mislabeled stuff, and crappy rips.

Oh please. Ok, I personnally have absolutely no extra money, but that's not even relevant!
There are tons of recordings for which the only way to buy them legally is to try and find a second-hand copy. There are albums that are out of print, artists that won't sell online. And, of course, there's the DRM issue : what if I want to be able to actually _own_ a record I buy? You know, I'm not asking much, I don't want to make 100 copies, I just want to be sure I'll always be able to listen to it, just like my old vinyls.

And the thing that confuses me most about your opinion : it stopped being convenient years ago?? It's the other way around, dude! When all you had was Napster or KaZaA, yeah, there was a lot of crap, bad labels, bad rips, slow downloads, whatever. So there was a little bit of hassle in not paying. But now? Go to a torrent site, type whatever you're looking for in the search box, click download and you get your record on your hard disk in less time than is needed to listen to it. You can also see the files in the torrent, there are comments, checksums, lots of details about encoding... You can dowload only some of the files, and preview partially downloaded ones.
So nowadays, when an interesting album is released, it goes "Hoo, I want it! -click- -clickclick- Hey!, now I have it!"
How could it possibly get more convenient?
Seriously, I'm asking you. How?

Untraceable Music Sales

[phreakhead]

"People we think are not buying music are buying music. They're just not buying it in formats we can measure." Finally someone gets it. I buy about 4-5 CDs a month, but not one from a music store, online or otherwise. I usually buy them straight from the musicians after their show. Now, of course, not everyone has access to the wide array of great independent music like I do here in San Francisco, but I'm sure there's plenty of music out there being sold every day that the big record labels have no way of tracking. Maybe their CD sales numbers are going down because people are buying more independent music and less manufactured crap.