The Last Days of the Labels

The music industry is facing some troubled waters. To be precise, the business side of the music industry is in trouble; the big publishers and distributors, who, for the longest time, have controlled artists’ and musicians’ access to the highly lucrative popular music market. The technological changes that the internet has brought our society, coupled with diminishing costs artists face when recording their music, have put the industry into a deer-in-the-headlights scenario. A cuddly Bambi caught in the headlights on a deserted highway has essentially three choices: he can run away as fast as possible, he can stand frozen waiting for the bumper to hit, or, if he’s starring in a Queens of the Stone Age video, he can plunge at the car, capture the driver and make him his submissive slave in his Bambi colony.

This last choice was discussed and debated at the one day international conference, Who is in Control, held in Reykjavik the day before the latest Iceland Airwaves festival kicked off. The conference was organized by a new governmentsponsored office, Icelandic Music Export (IMX), whose role is to promote Icelandic music abroad, to increase the visibility of Icelandic music in the international sphere and provide an essential one-stop resource for all interested parties. Keynote speakers and panel discussion participants came from various corners of the industry, ranging from representatives from international music businesses – such as Sony BMG, Mute and Playlouder – Icelandic digital music online retailer tonlist.is, Síminn Telecom, Icelandic label Bad Taste and daily newspaper Morgunblaðið. In total, there were 22 speakers at the conference and a complete list can be found at IMX’s website, www. icelandicmusic.is. Artists and musicians were conspicuously absent from the list of speakers but at least some attended, although the hefty 20,000 ISK admission fee probably scared a few of the more frugal artists away.

Music like Water
The first and most interesting keynote speech of the conference was by Gerd Leonardh, a selfappointed Music and Media Futurist. A highly informative interview with Gerd was published in Grapevine issue 14 and I suggest that, if you have any interest in the matters discussed here, you check that out. Gerd’s speech was titled “Why the Flat Rate for Music is our Future – and why the End of Control is a good thing for Artists and Consumers” (it is available at his blog http://gerdleonhard. typepad.com/).

Gerd’s idea for the future of the music industry is basically this: Music will be everywhere, it will never be further away from you than three clicks on whatever device you have handy, your mobile phone, your computer, your ipod. Everyone will pay a flat rate fee for access – music will feel free, just like tap water feels free, but everyone will be paying. The business model could be something close to the consumer paying one Euro a week for unlimited access to music and the profit would be split between artists, networks and publishers.

But the cash flow from such a system is just the tip of the iceberg in Gerd’s view. The real money would come from by-products such as advertising, concerts and sales of various paraphernalia. Essentially selling a brand, not a physical product like a CD. The business of selling copies of music is over; from now on the music industry must sell access to its content. To put it simply, companies must monetize on what people are already doing with music. There is no way that the wheels of technology can be, or should be, reversed.

File Sharing
The internet has revolutionized the distribution of music. Easy digitalization of songs and albums is what is, in the words of the industry, killing it. Now this is nothing new, technology has attacked this industry before. The cassette played the role of the internet in the eighties. The mantra now repeated in every media is that file sharing is resulting in less music sales and the bottom lines of the big players in the industry seem to back up this statement.

The industry has responded to this by crippling the product they are selling, adding various forms of copy protections to the media they are selling and criminalizing their customers with law suits. None of this has worked, every copy-protection scheme has been broken and for every filesharing network shut down another has replaced it. Just last week the largest BitTorrent community evolving only around music, www.oink.cd, was shut down by a police action in Britain and the Netherlands. Oink’s webpage now points to a list of 55 other BitTorrent sites where music lovers can get their fix. In the United States the Recording Industry of America has been targeting file sharers with law suits with no apparent effect or result in sight, except a public relations disaster when 12-year-old children face thousands of dollars in fines for downloading a single Justin Timberlake single. Clearly this battle is lost if recording companies continue to try these methods on the new society.

Copyright
The argument for these kinds of actions has been that file sharing of music and other digital content is a copyright infringement, much less than a profit drain for record companies. It is probably true that music sharing is, if not illegal, at least a highly debatable activity in legal terms. But laws aren’t set in stone, laws can be amended. Copyright law has evolved enormously throughout history, often in response to technological changes, but most often because of pressure from copyright holders. For a further discussion of the future of copyright law, especially regarding the changes the internet has put into motion I refer to Free Culture, the excellent book by Stanford law professor Lawrence Lessig, available free from www.lessig.org.

At the IMX conference, the response to Gerd’s ideas, at least from representatives of the big players, was mixed. A few of them shook their heads vigorously throughout his speech, Alison Whenam from AIM UK commented that Gerd was looking at things from the outside and not from within, reinforcing the feeling that the industry will approach this problem in their own way and with their own solutions. Alison mentioned that a flat-rate fee would call for changes to copyright law which would take at least 10 years to implement and the industry simply could not wait that long. In her words the music industry is looking down a cliff, the first to be the victim of this new technology but certainly not the last. There is a simple solution to the copyright problem though: simply reduce the barriers the copyright license puts on the use of music and media. The Creative Commons license (www.creativecommons.org) put forward by Lawrence Lessig is a much more flexible license for digital media, allowing artists and publishers more ways of controlling the use of their work. Creative Commons licenses allow owners of media to license their work somewhere in between the general “All rights reserved”, where no use is allowed without permission, and the “Public Domain”, where all use is free. General copyright law puts heavy restrictions on all published works and leaves no room for an artist or publisher to allow use of the work without prior permission. Creative Commons makes that possible. In today’s world, it can be argued, general copyright laws are much too restrictive. With a Creative Commons license a rights owner can give up these rights if he/she chooses to do so, and society, in a way, demands that he/she does so.

The Icelandic Model?
Although not mentioned directly in the IMX conference agenda, there was an underlying motif floating around. The first I heard of it was in the Grapevine interview with Gerd Leonardh referenced earlier. The idea is this: Iceland will become a kind of test market for a new business model for distributing music. Basically, Internet Service Providers (ISPs) will impose a flat-rate fee for access to content. This is in compliance with Gerd’s ideas and one suspects that he has been instrumental in putting the idea forward. Present at the conference were representatives of at least some of the biggest ISPs in Iceland. Judging from their comments they did not seem too keen on the idea. Hjálmar Gíslason, Director of Business Development for ISP Síminn Telecom, commented that it would be difficult for ISPs to increase the price for something users are now getting essentially for free. Something in that comment rings true, but it could also be argued that people want to pay a fair price for their media consumption. Whether Iceland could be a good test market for a flat-rate model remains to be seen. A few considerations come to mind. For example, would certain ISPs only provide some content, forcing the customer to pay for multiple subscription models? Would my desire to download Guns N’ Roses’ forthcoming album, Chinese Democracy, force me to subscribe to the service from Síminn; but if I should also want Britney Spears’ latest album, Blackout, would I have to subscribe to Vodafone’s service?

These matters and others are being discussed somewhere surely and, as stated before, were mentioned briefly at the conference. There was, however, no formal debate on an Icelandic test market and, to my knowledge, none has taken place in a public forum. But I wouldn’t be surprised if in the coming months we see some kind of subscription model based on a flat rate from a joint venture by ISPs and publishers.

The Middleman
In recent months we have seen big artists take a different route from the usual in getting their music to their fans. Typically an artist signs with a label, who then publishes the work, distributes it and keeps most of the money. It is a harsh truth that the recording industry must acknowledge that their PR image isn’t exactly shiny. It is generally considered true that labels and publishers screw their artists in every way imaginable. This was possible because artists and musicians had no way of entering the market without the help of a record company. Their expertise and their access to funds made them the gatekeepers of the market, carefully regulating the supply of music. The internet has now turned this on its head.

There is, in fact, no need for a band to sign with a label. A band can build a strong fan base simply by releasing their music online, forging a close relationship with their fans. Production costs of CDs and other media have dropped dramatically. The last big band to do this, of course, is Radiohead, who released its latest album entirely on the internet, allowing each fan to choose the amount to pay. The result: Radiohead pocketed far more money than they would have if they had signed with a big label and only sold their CD in stores or digitally in online stores. What Radiohead essentially did was to cut out the middleman: the business side of the music industry. Madonna took a similar route, not signing with a record label, but instead with a promotions company, arguing that concerts and promotional deals were far more lucrative than CD sales. Prince has given his CDs away, faithful in the knowledge that people will come to his concerts, but not necessarily buy his albums.

Obviously, these artists have already established themselves with the help of the music industry. Not many would have taken notice of Radiohead’s new business model, if not for the fact that Radiohead is already one of the biggest bands in the universe. But this is in fact good news for every band and artist, not just the big ones. The internet is an extremely efficient tool for musicians to market their music. The competition is fierce, of course, but it has always been that way. There are hundreds of thousands of bands on Myspace alone so it will be hard to stand out. As Einar Örn, former member of the Sugarcubes and co-owner of Bad Taste Records put it at the IMX conference: “If your songs are shit, then you are fucked”.

So, Who Then is in Control?
What we have is this: the music industry is losing its stranglehold on the market. There is much less incentive for artists to sign with a label. It is possible to build careers without signing a contract which will probably not be of much value. Mugison, one of Iceland’s most popular musicians, recently released his album himself, commenting that his debut album, Lonely Mountain, sold 13 thousand copies and his profit from that was 100,000 ISK. Someone somewhere has a fair stack of money from those sales, but it is not Mugison. The industry is finally acknowledging this, desperately trying to come up with ways of keeping their cash cow from starving. Consumers are delighted; access to music has never been easier.

Control has shifted from the record companies to artists, musicians and their fans. These are the groups that benefit most from the changes technology has made to our social fabric. Musicians have a closer relationship with their fans, more control over their careers, and music lovers have greater access to music at a lower cost. To simplify in the extreme: If you are in one of these groups, and not a shark in a suit sitting in an executive chair at a big record company, then you are in control. But, knowing the history of the music industry, that might not be for long. With power comes responsibility: use it wisely, guard your newfound position of power. Help build a fairer world for artists and music lovers. The record companies are expendable.