Record Labels Unveil Greed 2.0

theodp writes "Unsatisfied with $2.49 ringtones and as much as 70 cents of each 99 cent iTunes download, Newsweek reports that record labels want a bigger cut of digital music profits. One example: If you type in 'Madonna' - a Warner act - at the Google Video site, and the results are accompanied by ads, Warner wants a share of those ad dollars." Even more ridiculous demands than those put forth in previous stories.

Re:Stop listening?

[Saeed al-Sahaf]

Because this is "below the radar" of most consumers who wouldn't seriously care anyway, because life is very complicated, and they have other things that they percieve as more important to care about. Seriously, the "average" person just shrugs and expects it as the normal course of things.

Re:Stop listening?

[Ucklak]

Because we're the nerds that know that this crap is going on. Regular Susan and Average Joe don't know about this nor do they care.
If anyone is going to stand up to them and make a difference, it's the artist. Without the artist, they have no content.

I think I may be serious that one day, you won't be able to hum or sing a tune without paying a fee.
I mean look at 'Happy Birthday to You'. Royalties have to be paid if it is broadcasted or distributed in any fashion.

Re:Wrong

[Anonymous Coward]

ROFLMAO! I haven't heard an 'Allo 'Allo reference for years! Damn.. back come the childhood memories in a major flash-flood...

Re:The RIAA is irrelevant.

[ericdano]

No true at all. There are a ton of small studios around that can and do produce some great sounding music. You can also invest $5K or so in your own equipment and get the sound that you want. People don't have to record to 96Khz+ using Nuemann mics. You can get great results using just Shure stuff. Hell, my favorite stuff from Evanescence [evanescence.com] was done using average stuff. Their engineered stuff sounds.....engineered, and not as good to me.

So, studio time myth is busted. Marketing though is where the RIAA and Labels could help you....

Re:The RIAA is irrelevant.

[IANAAC]

For example, if you write a hit song, and someone else TAKES it......what happens to you?

You're confusing the RIAA with organizations such as ASCAP or BMI, among others that do the actual protecting.

Boon for some, bust for others

[aztektum]

The problem for todays new pop stars is that they really aren't musicians in the first place. They rely on the up front $$ that the record companies throw into marketing them, paying for talent coaches and producing the hell out of their music so their cd's sound good.

That said, I agree that online distribution is a boon for independent musicians that are in fact actual artists.

Too late. That dumbass company's name is Yahoo.

[mbius]

Whats even worse is that some dumbass company is going to capitulate and then they'll all be forced to cave.

TFA: "Labels scored a victory in music videos, however, after a battle that was sparked by the grandson of Doug Morris, Universal Music's CEO. Early this year Morris noticed his grandson repeatedly watching a video of 50 Cent, a Universal artist, for free. Morris investigated and discovered his labels were supplying the videos free of charge to promote record sales. Yet Yahoo, AOL and other sites were awash in ad revenue because of the huge audiences the videos helped draw (recently Yahoo CEO Terry Semel revealed that Yahoo expects to stream 5 billion videos this year.) Morris demanded payments--a fee for each time a Universal Music video was played and a cut of the ad money. Yahoo balked, and Morris pulled Universal's videos. After weeks of declining traffic, Yahoo capitulated. One Universal Music exec estimates revenue from the new agreement to be worth $10 million or more to the company. Warner Music is now trying to extend the concept to the emerging video-search business."

Re:no suprise

[TheWanderingHermit]

Yes, you are right. And this is just one thing that is contributing to the mediocrity of popular music. But I'm actually glad to see this. The record companies keep claiming they are protecting royalties for artists, but I don't think there's anyone out there who believes that. Anybody who watches the music business knows artists are making money, but that the big guys are making more. Napster triggered a fear reaction, and now the RIAA is getting carried away with trying to overreact to everything and not just protect their revenue and old business models, but they've gotten so carried away they are overreaching.

That's good. While it might cause higher prices for a while, the more they do this, the more their greed shows, and the closer they get to going too far and finally, through their own actions, forcing the entire industry to collapse -- leaving room for the real artists (not the sex symbols like Spears and such) to actually make a living on the work they create.

Ringtones are expensive because of carriers

[ThinkFr33ly]

It is not the record labels that make ringtones expensive. Typically around 50% of the cost of the ringtone goes directly to the phone carrier. Some charge as high as 60%.

Most ringtones fees are billed directly to a user's cellphone bill. This dramatically increases sales because people buy more impulsively. To have this privilege, companies that sell ringtones must give a MAJORITY of the revenue from the sale directly to the cellphone company itself.

Of the remaining dollar, about 20 cents goes to aggregators that provide SMS/PSMS (premium sms... billing messages) integration (the guys who let you send text messages to cellphone networks.)

Of the 80 cents that remains after that, 20 cents will usually go to the content providers... or, for the lucky ones who have the resources to create and managing the licensing of their own ringtones, they get to keep that 20 cents.

Around 30 cents of the remaining 60 to 80 cents go to the record labels.

In the end, the people who actually run the ringtone site get between 30 and 50 cents per ringtone sold. Minus advertising. (Which is almost always a LOT more than 30 to 50 cents per sale.)

That is why almost all ringtone sites sell subscriptions, not single ringtones. They're hoping you don't use all your ringtones that come with your monthly subscription, and that you continue your subscription for more than one month. Otherwise, it's just not profitable.

But the point is that record labels only get between 10% and 15% of the cost of a ringtone. Of that 10% - 15%, the artists get some portion. (Usually 2% to 5%.) It's the carriers that take the VAST majority of the money.

If you want ringtones to be cheaper, bitch to the cellphone companies not the record labels.

Because what they do is expensive

[jfengel]

What the RIAA does (or rather, the RIAA member companies) is extremely expensive. Their job is to make artists well-known enough to sell a lot of music. If you want to make a living making music, you have to sell a LOT of music. At $10 a CD, you need to sell 1,500 CDs just to get yourself to the poverty line, and that's before you've paid for producing, printing, pressing, much less the advertising that makes people want your CD in the first place. You can tour like crazy but getting thousands of people to cough up $10 for your CD is going to be a challenge, especially when there are literally thousands of bands like yours out there. So real number is more like tens of thousands of CDs. If you want to get rich you'd better sell a million of them, and unless you're REALLY friendly you haven't got a million friends to sell CDs to.

So the RIAA spends money: they lobby radio stations (and paying them, even though that's illegal) to play your music, they advertise your tour on TV, they give away free t-shirts, etc. All on a national level, because if you want to sell tens of thousands of CDs you need to adverise to many, many people.

What they have in the end is a brand. They've spent a lot of money on you, and 20 artists like you who didn't catch fire. Once they have your name on everybody's lips, they want a cut of everything that makes money from that brand. They didn't create the music, they created the fame, and it's the fame (not the music) that's bringing people to Google to search on your name.

I'm oversimplifying like crazy (of course the music is relevant to make the brand appealing) but you get the idea. More importantly, it's not like they're not already wildly profitable (even accounting for all of their failed attempts), and they're not taking nearly as big a risk as I'm suggesting. For example, a lot of the start-up costs are taken out of your royalties. You the artist don't see squat until you've paid back the immense costs of producing that album. (In addition to marketing costs, RIAA companies own very expensive equipment, managed by very expensive engineers, operated by very expensive producers and mixers. A musician will tell you that those things are critical to making an album you're going to want to buy, and those who aren't with the labels spend a lot of their own money to buy the equivlent themselves.)

But perhaps your real question is, "Why do they risk alienating their customers so much?" That, I can't say for sure, except to say that I assume that somebody in a room somewhere has done a cost-benefit analysis and taken a guess that maximizing the profit on their brand is worth the customers who are alienated. They may be right; Slashdot readers (and posters) are exquisitely sensitive to the sort of manipulation that the RIAA does but many less technologically aware people aren't.

Ultimately it is all about greed; their job is to make the maximum money. They walk a careful line; some industries do very well by appearing to be generous. Instead, they've chosen to try to milk every possible dollar. But that's "greed" in the "trying to maximize your value" sense, not "greed" in the stealing-from-other-people sense. They want the benefit of what they've created, even though it seems awfully miserly of them (and even counter-productive) to go about it the way they are.

I imagine that they get that cynical as a result of manipulating people into buying the music in the first place, music that a lot of people think isn't very good but which a lot of people spend money on and which many go out of their way to download. (The vast majority of bands would love to have you download their music, because it means you've at least hard of them.) Since they think that they can create the desire to buy music (and their CD sales figures show that they can), the seem to think that they've got the formula licked and can risk alienating their customers because they'd rather buy the CDs from the RIAA than risk jail or take a chance on a band they've never heard of.

Re:The RIAA is irrelevant.

[Mad Marlin]

No, they should be for the recording industry, because they are the Recording Industry Association of America; and they seem to be doing everything in their power to protect their member's interests. If it disagrees with the interests of the musicians, then so be it, as far as they are concerned. Presumably there is some "Musician's Association of America", but they have apparently been doing a horrible job for decades.

Re:Welcome to US Capitalism 101

[Cerdic]

It's likely that you're not referring to subsidies, but rather to the fact that people are "allowed" to keep a good deal of their money and property without being tortured and murdered.

I'm talking about subsidies, the lobbyists who get special favors in the form of laws that the rest of us don't get, relaxed environmental regulations, etc.

Also, how often does it happen that a multi-billion dollar corporation makes it a year without paying any taxes at all? More often than it should. And people with lots of money to invest can easily walk away with zero or little in taxes. Look at John Kerry and his extremely wealthy wife. He paid a higher tax rate than she did! Using various tax shelters, she only had to pay 11.5%.

Re:Desperation

[damiam]

Apple Computer is legally barred from entering the music business by their settlements with Apple Records. Although there has been some speculation that Apple Computer might buy Apple Records and reinvent it as an "indie" label.

Re:The RIAA is irrelevant.

[Matt Perry]

Studio time is expensive, man.

Only at big studios. The audio world is undergoing the same type of change the video world is undergoing. Fast computers and cheap software have removed most of the financial barriers for creative people. There's a lot of boutique studios that are cheap and have top notch audio engineers, most of them run by engineers who used to work for bigger studios.

hiring a producer

You be the producer. Don't you know your own music well enough to know what you want? If you are renting studio time, take advantage of the audio engineer's experience. That is, after all, a large part of what you are paying for when you rent studio time.

studio musicians

There are a lot of excellent musicians online that will record tracks for you in their home studio and send it to you via email. They cost a lot less than paying a session musician to travel to a studio (+ studio time). One person I correspond with on a mailing list used this technique with his last album. He recorded all of the songs using a drum machine. He sent the tracks to a drummer who listended to the songs, recorded new drum tracks, and then mailed the new drum tracks back on a CD. The guy imported the drum tracks and mixed them in. It didn't cost him an arm and a leg either.

whatever you need to get the sound you want) can be really expensive

I can be but it need not be. There's a lot of really great software available for mixing and audio processing. For example, I've been trying out Guitar Rig [native-instruments.com] after seeing it on a friends computer. He plays gigs with a laptop, a preamp, and a firewire audio interface. He uses a foot controller hooked to the MIDI input on his firewire interface to control Guitar Rig. No need for a ton of pedals. That's just the tip of the iceberg. Great software for everything from mixing, recording, virtual instruments, audio mastering, and more are out there and can be had for very little money.

Re:How about this

[Master of Transhuman]

"Ever hear a performer thank their label when winning an award?"

Actually, my favorite band, The Corrs, were dumb enough to do that when they won their first international award in Spain back in the mid-90's.

In fact, they've been slavishly worshipful of Time-Warner and Atlantic Records, praising them in numerous documentary videos.

Today, guess what? Jason Flom, the head of Atlantic and the guy who discovered them, is out, the Corrs have been relegated to Atlantic.UK and gets no release for their new album, "Home", in the US - and their manager, John Hughes, admits publicly that they're looking for a new record deal.

In other words, having been screwed by Atlantic, they are now looking to sign themselves up for another screwing because they don't have the imagination to see that distributing their own music and live concert broadcasts by subscription - in other words, a return to live performance, the basis of music historically - is the way to go. Even though they're probably one of the best live concert acts in the world and their ticket demand at the end of last year's tour, according to Hughes, is the highest it's ever been.

You just can't save some people from themselves.

Re:Straight to iTunes?

[zpok]

There are several ways of bypassing the label thing, but not all of them are successful. Labels do know how to get you good distribution... so starting your own label and getting your songs in iTunes is very hard if you aren't someone "formerly known as".
But I've heard very good things about CDBABY. They are distributors and store keepers. You, the independent artist can sell in their store (cdbaby.com). If you do, you can also opt for their digital distribution deal, which almost guarantees placement with iTunes, Napster and a whole bunch of other shops. Their cut is 9% of what you get per sale, and since you don't have a label, that means 91% of 65 cents.

So instead of only getting about 5 cents you get about 59 cents. Which is nice.

Re:no suprise

[TheWanderingHermit]

You have a good point. I've always compared Shakespear to Hitchcock. Both knew how to create entertainment that rose to a high level, but appealed to people of all levels. Yes, Shakespeare did a lot with cruder themes (like the hilarious exchange about Hamlet lying with his head in Ophelia's lap), but he also created some fabulous poetry and absolutely amazing imagery. Hitchcock knew that as a director, he could do some advanced things, but he had to be sure the audience was entertained, as well. Both had a lot in common that way -- as opposed to, say, Orson Wells, who created a masterpiece in "Citizen Kane", but also made a film that draws on forever. As one film professor once said, he loves to teach CK, because there's so much in it, but that he doesn't like watching it because it is self indulgent in areas and just not entertaining.

So, yes, I picked an example that wasn't the best, but I think the point still stands.

Kinda like Microbrews

[FiskeBoller]

Reminds me of Microbrews. All the major labels put out fuller bodied suds to take advantage of the beer trend. That's how capitalism works. Caveat Emptor.

Permission to "cover" not needed ... pay royalties

[Tsu Dho Nimh]

"But you can't just use a song that someone else wrote on your album without getting their permission."

You sure as hell CAN! The USA Copyright Act provides for what is called a "Compulsory License", which means that if you follow the steps set forth by statute, you can distribute your recording of that song on a CD or over the internet. The owner of the copyright to the song cannot prevent you from doing so.

Note that "permission" is not required. You just have to notify them and pay the statutory required royalties ... The hard part if finding out who owns the rights.

See http://www.cleverjoe.com/articles/music_copyright_ law.html [cleverjoe.com] and also
http://www.copyright.gov/circs/circ73.pdf [copyright.gov]

Re:2.0?

[moonbender]

According to Wikipedia: The first widely-distributed version of GNU Emacs was 15.34, which appeared in 1985. (Versions 2 through 12 never existed. Earlier versions of GNU Emacs had been numbered "1.x.x", but sometime after version 1.12 the decision was made to drop the "1", as it was thought the major number would never change. Version 13, the first public release, was made on March 20, 1985.)