Record Cartels - view from outside the Napster crowd

[Malk-a-mite]

Follow the Money: Who's Really Making the Dough?

All notions of musical parasitism aside, record companies perform the critical functions that allow artists to reach the masses. That's fine, you say. The problem with the record companies is that they're too greedy. You see them selling millions of albums at $15 to $18 a pop. Where do the truckloads of cash go if not into some big-shot executive's pocket? What about artist advances and money for marketing and promotional budgets? Where does all that money come from? Who gets what along the way? In this column, we will look at how record companies work and how the money finds its way from the consumers to the artists and everyone else who works to get the music to the public.

Eric Leach is an intellectual property and business law attorney at the firm of Goodman and Leach. He can be contacted at eleach@goodmanleach.com.

Bill Henslee is a professor at Pepperdine University School of Law, where he teaches copyright and entertainment law. Contact him at william.henslee@pepperdine.edu.



We've all know this in some way or another - nice to see others standing up and saying it from a legal standpoint.

[TankGirl]

Thanks for the link, Malk.

For those interested in what happens to the money in the music business see also Courtney Love's speech to the Digital Hollywood conference last summer. Courtney's calculations - not dissimilar to ones by Leach and Hensley - are detailed and interesting and she makes a number of interesting comments about art, money and piracy.

- tg

[JackSpratts]

"Follow the Money: Who's Really Making the Dough?"

typical business school propaganda. nothing like looking down the the wrong end of a telescope - in this case an established but out of date business model. the fact is simple; record companies are no longer needed. they may have been needed at some point in the past to distribute product but that's no longer the case. any musician anywhere can now record - and distribute music to a worldwide audience without the parasitical "help" of a label.

when you see figures that show less than 1% of artists make a profit from their recordings but continue to record because they must to fill clubs, you know the business is one-way in favor of the labels and must change for music to stay healthy.

bands have always been able to make music & records by themselves without selling out to a label. the difference now is they can get their recordings to any listener anywhere in the world without the recording companies getting a penny. that's what terrifies the labels and that's why they're doing everything in their power to stop the p2ps. it's not about the musicians and the artists and it never has been. it's not about the store owners either - not when the labels want to do their own electronic distribution (you should hear the shops on this subject). it's a pure power grab by the labels for the labels, period, and it won't net the artist or the consumer one penny or benefit.

if you have a product that fullfills a need you can charge a fee for it and people will pay. if your product doesn't fullfill a need people won't pay - unless you get a law passed that forces them to.

it's a new take on the old communism which outlawed all individual enterprise and gave it to the state. in this new 'backwards communism' the state outlaws all individual private enterprise and gives it to the conglomerates! listen to the artists.

- js.

[TankGirl]

An excellent post, Jack, and ditto on your thoughts!

Originally posted by JackSpratts
when you see figures that show less than 1% of artists make a profit from their recordings but continue to record because they must to fill clubs, you know the business is one-way in favor of the labels and must change for music to stay healthy.

The 1 % profitability argument makes sense only inside the 'old' music industry and its promotion/distribution infrastructures. For an outsider the facts are pretty clear: it's an outdated, bloated and corrupted industry fighting for its survival against novel distribution/promotion approaches, particularly p2p. Like Jack so well points out, if only 1 % of the artists make it big enough to earn a living and to be widely heard with all the money we spend on CDs then whoever is running the business is making a lousy job at it - at least as far as artists and audiences are concerned. P2p has already proved its potential as a cheap global distribution technology; many of us have similarly tasted its great potential as a peer-oriented promotion (or rather suggestion) media.

- tg

[Mazer]

The article laid out the record company business model in a way that made it sound very legitimate. It was certainly educational, but I think it's also misleading. Like TG pointed out a 1% success rate is horrible. If only 1% of the employees at any other business were able to earn a living, well they'd probably go out of business. And the record companies do treat artists as employees. That's just one example of the many flaws in the music executive philosophy.

The whole business is backwards. The record companies should be bidding for music contracts and the musicians should be hiring the executives for their services. But record companies don't compete against each other, musicians do. We have Billboard magazine to thank for that, and Casey Kasem isn't much help either. So what if the song isn't on the top 100, I still listen to it anyway. Competetion is good for business but not for art.

Maybe the biggest problem is that record companies invest too much money promoting plastic discs with recordings of canned performances rather than the artists themselves. They invest in the product instead of the people. It would probably be easier to sell a catalogue of ten thousand musicians than an inventory of ten billion CD's, but the record companies don't see it that way. They prefer prerecorded songs because they're easier to control.

I remember the discussions we had on the old Nappy forum trying to develop a business model for Napster so it wouldn't have to be shut down. Now that the issue has been brought out into the open online music distribution has more potential for profitability with each passing day. Whether it will be profitiable for record companies is still in doubt, it's their game to lose. Whoever discovers that online business model first is going to be very rich, but I hope we're not trading one music cartel for an other. There's maybe one or two right ways to distribute music in a democratic fasion and a hundred wrong ways.

[TankGirl]

Originally posted by Mazer
The whole business is backwards. The record companies should be bidding for music contracts and the musicians should be hiring the executives for their services. But record companies don't compete against each other, musicians do. We have Billboard magazine to thank for that, and Casey Kasem isn't much help either. So what if the song isn't on the top 100, I still listen to it anyway. Competetion is good for business but not for art.

Maybe the biggest problem is that record companies invest too much money promoting plastic discs with recordings of canned performances rather than the artists themselves. They invest in the product instead of the people. It would probably be easier to sell a catalogue of ten thousand musicians than an inventory of ten billion CD's, but the record companies don't see it that way. They prefer prerecorded songs because they're easier to control.

- tg