Tuesday, August 19, 2008

The Music Industry Continues to Cut Its Nose Despite Its Face

While the RIAA has made some baby steps in the right direction in recent months (linking up with Last.fm and finally acquiescing to consumer demand by ditching DRM at most major digital music stores, for starters), the fact remains that the traditional music industry is still way behind the curve when it comes to harnessing the marketing potential of the Internet. This is why nearly every single advancement in how people interact with and discover music has been developed by people outside of the corporate music ecosystem. In fact, many were created as a direct response to the many flaws of that system.

Take the example of Pandora. Terrestrial radio had grown increasing stale over the last 20 years, with fewer and fewer stations offering listeners consistent quality or variety, so it took the work of some musicians to create a service that would allow listeners to create custom radio stations that select music based on their listening habits. Imagine that, a radio station that plays music you like! What a wonderful concept! Of course, if you're SoundExchange (the organization that collects royalties for music performed for public consumption), "listening" to music is tantamount to theft, and therefore Pandora must "compensate artists" before it can be allowed to exist.

In the analog world royalties are collected on behalf of songwriters and publishers for all forms of radio (terrestrial, Internet, and satellite), yet only Internet radio and satellite are required to pay licensing fees to artists and copyright owners (eg. record labels) since terrestrial radio is believed to serve as a marketing tool to promote music sales (gee, what a novel concept).

In March of last year the US Copyright Royalty Board, based on the recommendation of SoundExchange and after ignoring the advice of The International Webcasting Association, proposed new higher rates for webcasters to abide by. Since then webcasters have been in negotiations with SoundExchange to reach a compromise, with very little progress being made. Because of the new fees (which charge a fee on a per song, per listener basis. Something that adds up very quick for people who create multiple Pandora stations and listen for hours each day) Pandora founder Tim Westergren admitted this week that the current model is unsustainable for his company and if something isn't done quick Pandora will cease operations.

A similar fate may await Muxtape. Readers of this blog know that I am a fan of this Internet mixtape service, which I (among many others) use to share music with other enthusiastic fans. Keep in mind that Muxtape merely hosts music files and doesn't make it possible for users to download tracks. Everything on Muxtape is a music stream, much like you would see on MySpace. Furthermore, Muxtape provides users with links under every song that give them the option to purchase tracks legally from major digital music stores (Pandora does the same thing, BTW). Nevertheless, as of today Muxtape is down due to "problem[s] with the RIAA."

While the message on their website claims the shutdown is only temporary, the fact remains that the RIAA is once again bullying another valuable service that only helps listeners become more enthusiastic about music. Do you honestly think I am able to constantly recommend songs, artists and albums on this blog because I spend money on everything I listen to? It would simply be far too expensive to do this, so I sample and evaluate music through Muxtape, Pandora, Last.fm, blogs, MySpace, imeem, iLike, torrent sites, etc. before I ultimately part with my hard earned cash (in the form of legal music downloads, vinyl records, or concert tickets) for the things I like.

If the RIAA and their cohorts insist on crippling Pandora, Muxtape and the rest, then people like me will increasingly turn to the torrent networks to find what we want. This method is far more subversive and virtually impossible to monetize, which would only hasten the record labels' demise. If they wise up and learn how to embrace the new digital world then their business models might not become extinct in the near future, but if they choose to continue down this path then that extinction is most definitely certain.

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