Jobs Talks: Macs and Music

  • Posted: 07 March 2002 09:52 PM

    In comments surrounding Apple’s receipt of a technical Grammy Award, CEO Steve Jobs has blasted the record business and its Byzantine and antiquated systems for controlling the flow of music to consumers. Recently, Disney CEO Michael Eisner publicly criticized Apple for it “Rip. Mix. Burn” ad campaign. Mr. Eisner claimed it promoted music piracy.

    Prior to entering the non-profit and education sectors, I spent several years as the CFO of a large and fast-growing independent record label. I also spent a few years as a finance/accounting consultant to small and micro-sized record labels.

    Please note: I do not endorse or in any way advocate music piracy. However, there are many myths that need to be dispelled. First, the vast majority of music artists never see a royalty check from a record company. Most successful artists make their bread and butter dollars from live performances. Even the CDs sold at concerts by artists under contract are billed back to the artist’s account by the label, often at no better than wholesale prices.

    It’s true that labels customarily take the financial risk of covering the cost of recording the CD and the net deficit from artist tours. Labels also pay for manufacturing, distribution and advertising expenses. Depending on the contract, in addition to recording and tour expenses, many labels also recoup varying portions of advertising and promotion expenses from the artists by posting the recoupable portion of those costs as an offset to accrued royalties.

    Most small record labels find it extraordinarily difficult to find decent distribution or other reasonable means to get their product to consumers. Even the prominent positioning of CDs in record stores and the opportunity to sample CDs at a listening post are paid advertisements.

    The entities most apt to make money in the recorded music business are the large music conglomerates that control manufacturing and distribution for their own labels and the distributed labels under contract. Often times the manufacturing and distribution divisions of major record conglomerates are more profitable than their record labels.

    Independent labels have two choices: Sign on for the heavy charges and fees of a major record distributor (if they can get a contract) or attempt to maintain a business by crafting national distribution through a complex web of regional and independent record distributors. Neither of the choices is an attractive one.

    Today’s music distribution system is not only costly and inefficient; it provides the major record conglomerates with oligopoly-like control of consumer access to recorded music. To hear Michael Eisner or others complain about consumers making a legitimate copy of a song from a CD (IMHO) represents little more than a smoke screen to divert attention away from a distribution system that penalizes artists and small record labels and denies consumers convenient and inexpensive access to recorded music.

    Again, music piracy is wrong. But so is the Byzantine and inefficient music distribution system that denies consumers convenient access to recorded music and punitively increases its cost.

    When Steve Jobs blasts today’s music distribution system, he’s speaking not only on behalf of Apple and its customers but also the artists, producers and other professionals who make a living on their Mac. There are more Macs in the hands of artists and others who make music than there are in the offices of the executives who control who hears the music and how much music fans have to pay for it.

    Robert

    edited to fix a sentence
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    <font size=-1>[ This Message was edited by: DawnTreader on 2002-03-04 23:26 ]</font>

         
  • Posted: 05 March 2002 03:15 AM #1

    One of the reasons I quit playing music was the music business. For me to get my music recorded, I would have had to sign over publishing to a record company. Now, I don’t mind the record companies making money, but I don’t think they need to make their whole year’s profit on me.

    All you need to know is that most of the entertainment industry is run by lawyers working for the mob. It’s almost as bad as the government. Almost, not quite.

     

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    Posted: 05 March 2002 03:20 AM #2

    Great post, DT.

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  • Posted: 05 March 2002 04:15 AM #3

    The major music labels make me sick. The music industry is terrified of technology, and what it can do to its media. I agree with the music industry that piracy is wrong, but I hope the recent trend of making music cds ‘copy-proof’ is stopped soon. I make mp3’s, but I make them from cds I own, not owns I download from online sources. I enjoy making my cds into a virtual jukebox. The labels need to think more about its customer.

    There are tons of ideas on how to square this problem away, but I believe the most plausible one includes reducing cd prices. Like the movie industry is starting to realize, music cds and movie dvds are fairly easy to ‘rip.’. By lowering the prices of these forms of media, there is a good chance that piracy may die off to an extent. The major labels and movie studios need to address the price issue very soon.

    Also, a lot of media companies, including Disney, are pushing for a government-based technology that would prevent piracy, and that is really scary!

    Mitch Featherston

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  • Posted: 05 March 2002 05:29 AM #4

    Free enterprise has two components. We are free to have an enterprise. The words coexist, not in a vacuum, but rather as a guideline for our economy folks.

    I have a question for Mr. Jobs. Is he going to eliminate the license I agree to when installing my OS so that I can install it on any machine I want ever and not ever pay him again? Is he going to allow me to make a copy of an iPod and give it away to anyone? NO! It’s simple economics. You hit him in his $1.1 billion wallet and he’ll pay attention.

    I don’t defend the practices of the record labels either. Their lawyers have negotiated some of the most heavy handed, one-sided deals in history since the Louisiana Purchase. That’s what they do. They negotiate for an industry that, let’s face it, has good artists, but a lot more that aren’t. There is a lot of risk in the music industry.

    But lets face facts here, the music industry is just that, an industry designed to make money. If artists want to give away their music for free, there is absolutely nothing in the world stopping them from offering their work online free to anyone with an agreement that the consumer can freely copy and distribute it as many times as they want.

    Of course, the artist will starve unless he or she has a full-time job to pay for their lives. Let’s get real folks. If you have signed a contract, you have to live up to it. If you haven’t, give your music away. But don’t expect the people to pay you for it either.

    And all this hoopla shouldn’t be about the technology that allows consumers to make a copy of a song for personal use. That is covered under current laws. But what isn’t covered is the new technologies that allow consumers to share these counterfeit copies with anyone in the world. Do you think the US Goverment is going to let you copy their money? No.

    So, do we throw the baby out with the bathwater? Well, if you could curb the human temptation to steal, maybe not, but facts don’t lie. A 10% drop in a multi-billion dollar industry in one year and the sheer statistics of people using peer-to-peer filesharing in 2001 point to a bigger problem.

    Stealing.

         
  • Posted: 05 March 2002 06:26 AM #5

    or the fact that a lot of the music being put is crap and people don’t want to pay $17 a pop for a load of crap.  put out better music, maybe sales will pick up again.

    oh, and that we are sort of in a recession.

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  • Posted: 05 March 2002 07:50 AM #6

    On 2002-03-05 08:15, Sigmascape wrote:

    Also, a lot of media companies, including Disney, are pushing for a government-based technology that would prevent piracy, and that is really scary!

    Actually, that is very laughable. The government couldn’t even deliver our mail without bringing in people from the outside.

     

     

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  • Posted: 05 March 2002 07:53 AM #7

    I have to wonder what the artists think of all this.  Obviously Metallica has made their opinion very well known.  I’m talking about the bands that make their money out of touring, and can’t produce their own cds, due to lack of funds.  I know Chumbawumba thought that any way someone could get their music was fine with them.
    So there’s both sides of the extreme.

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  • Posted: 05 March 2002 08:13 AM #8

    On 2002-03-05 11:53, Lavode wrote:
    I have to wonder what the artists think of all this.  Obviously Metallica has made their opinion very well known.  I’m talking about the bands that make their money out of touring, and can’t produce their own cds, due to lack of funds.

    California Guitar Trio has taken to recording all their gigs on ADAT, and if they have a particularly good show and crowd, they release an ‘Official bootleg’ through their website store.  The profits from this inexpensively produced CD go towards studio time for their major releases.  And they’ve captured some really good performances that way.  Just another business model for those not afraid of the technology.

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  • Posted: 05 March 2002 09:53 AM #9

    >>A 10% drop in a multi-billion dollar industry in one year and the
    >>sheer statistics of people using peer-to-peer filesharing in 2001
    >>point to a bigger problem.

    Where did you get this figure?  According to all of the information I’ve seen, the record industry is growing not shrinking.  And if the industry did shrink in the last 6 months or so, are you really surprised?  I believe we’ve been in a recession, haven’t we?

    Back this with some hard facts and I might listen.

    Matthew

         
  • Posted: 05 March 2002 11:13 AM #10

    >>A 10% drop in a multi-billion dollar industry in one year and the
    >>sheer statistics of people using peer-to-peer filesharing in 2001
    >>point to a bigger problem.

    Other potential explanations are:

    1.  The huge increase in CD prices over the past3 years.
    2.  The general downturn in the economy during the past 2 years.

         
  • Posted: 05 March 2002 11:28 AM #11

    On 2002-03-05 11:50, tbone1 wrote:

    On 2002-03-05 08:15, Sigmascape wrote:

    Also, a lot of media companies, including Disney, are pushing for a government-based technology that would prevent piracy, and that is really scary!

    Actually, that is very laughable. The government couldn’t even deliver our mail without bringing in people from the outside.

     

     

    I agree. Let me clarify my statement. Disney and others are asking that all electronic media be distributed with built-in copy protection. They also want manufacturers to include copy protection in hardware devices.

    Mitch Featherston

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    Posted: 05 March 2002 01:31 PM #12

    Well, I’m a strong supported of Copyright law as it currently exists, even if I think it may need a few tweaks. However, I think the RIAA is doing itself a grave disservice if they intend to make it harder for individuals to manage their music.

    It’s a simple fact that the more value that people can get out of a product, the more likely they are to buy and support that product. I’m actually more likely to buy a CD these days, for several reasons:

    1: MP3 players are much more durable, compact, battery efficient and skip-resistsnt than CD-players.

    2: By creating MP3 playlists, I can more easily manage the music to fit the mood I’m in, instead of dealing with arcane settings on CD jukeboxes.

    3: Because I can choose which song I want to listen to at any given time, I am less concerned about the number of irritating songs on a CD, than I would be if I was forced to listen to a single CD all the way through.

    4: By sharing MP3s, I can more easily sample contents of an artist or CD before purchasing, instead of relying on hearing a friend’s copy first. I never buy a CD without knowing what I get, unless it’s by a band I love. Even then, I’ve been burned a couple times. As a result, I’ve actually bought MORE CDs since Napster than before. 

    5: If I had the oppotunity to purchase individual tracks from artists I would otherwise not enjoy (I.e. Ex-Spice Geri Haliwell’s “Look at me” comes to mind), I’d probably spend more money on music than I do now.

    The tighter the music industry asserts it’s grip on the way we can listen to music, the more it will foster these methods of piracy. By switching to an encrypted standard that offers less benefits than CD/MP3 formats, people will be more inclined to commit piracy, boycott the new formats, and look for alternatives. This sort of short sighted thinking has the potential for doing far more harm than good.

    The problem right now is not merely seen in the Music industry, but it is universal in modern day Corporate America. The executive and managerial levels of industry today have slowly gained complete control over the flow of money in these industries, becoming self-important, and a heavy burden on thier own companies. The corporations which they control, desperate for a safe, easy income, are rarely competing, innovating, or otherwise improving the industries to which they belong. Why are we still using gasoline in the majority of US automobiles? Why is Microsoft forcing users to buy on a subscription-based system? Why do entertainment production companies milk a trend for all it’s worth? Why are Nike shoes produced overseas for cheap wages, yet STILL cost upwards of $100/pair?

    There are exceptions to this rule, of course, but right now, corporate law encourages this sort of behaviour, creating self-contained systems that are quickly running counter to the ideals of Capitalism and Democracy in the US and abroad.

    Whoo, that got off topic. Sorry. To conclude, I agree with Steve: Corporate interests in the entertainment industry at large are currently persuing very short-sighted, and ultimately counter-productive methods of preserving traditional sources of income. As more and more customers and artists become disenfranchised by the current system, we can expect to see these actions by the music industry have an opposite effect than intended.

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    <font size=-1>[ This Message was edited by: KitsuneStudios on 2002-03-05 17:36 ]</font>

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  • Posted: 05 March 2002 02:01 PM #13

    On 2002-03-05 17:31, KitsuneStudios wrote:
    I’m actually more likely to buy a CD these days, for several reasons:

    1: MP3 players are much more durable, compact, battery efficient and skip-resistsnt than CD-players.

    2: By creating MP3 playlists, I can more easily manage the music to fit the mood I’m in, instead of dealing with arcane settings on CD jukeboxes.

    3: Because I can choose which song I want to listen to at any given time, I am less concerned about the number of irritating songs on a CD, than I would be if I was forced to listen to a single CD all the way through.

    4: By sharing MP3s, I can more easily sample contents of an artist or CD before purchasing, instead of relying on hearing a friend’s copy first. I never buy a CD without knowing what I get, unless it’s by a band I love. Even then, I’ve been burned a couple times. As a result, I’ve actually bought MORE CDs since Napster than before. 

    5: If I had the oppotunity to purchase individual tracks from artists I would otherwise not enjoy (I.e. Ex-Spice Geri Haliwell’s “Look at me” comes to mind), I’d probably spend more money on music than I do now.

    i also accept and support copyright laws, but the fact is, i have bought a few cd’s by bands that i thought i liked their music, and when i would listen to the other tracks, besides the ones that had been released on the radio, i would find that i didn’t like most of the songs.  so, for the most part, i have stopped buying cd’s.  if i could go through and listen, and pick and choose songs, i would be willing to pay on a song by song basis so that i don’t have to listen all the way through a tape or cd for one song.

    this weekend, my sweetie and i had his ipod hooked up to speakers in a group of people, and people were not only interested in the ipod, they were interested in some of the music we had on there because they hadn’t heard some of it before.  getting the music out there to be heard will sell more cd’s.  when it is good music.

     

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  • Posted: 05 March 2002 03:35 PM #14

    The only way in my mind to solve the problem is to crack down HARD on the individuals that commit copyright theft, the general public.
    Over time it would be seen as socially unacceptable and morally wrong to copy MP3’s thus solving the problem, or at least reducing the problem to handlable levels.

    Similar to drink driving in the UK, a number of years back it was not seen as wrong by joe bloggs to meander home in in a car on a saturday night after a few beers. A huge campain was started by the government, and people were made examples of. Now in the UK the subject is very taboo, if I were to admit to drink driving to friends, I may as well have said I was a rapist or something!

    The problem is, MP3 stealing is so popular, that a government attempting to clamp down now would find themselves being as popular as back in prohibition.

    Or is it the governments job to do anything? Right now copyright theft IS THEFT and against the law. So what’s to stop companies like EMI, SONY MUSIC (bla bla) to bring charges against the public? Has there EVER been an individual ordinary Joe Blogg’s taken to court? Well maybe that’s what the corporations should do. But then they run the risk of being as popular as pig droppings too!

    I can’t talk, I do make the occasional MP3 theft myself. But I would rather it was individuals like me that were clamped down on, and not the companies that make the toys I love to play with (ie Apple). I used to have my own Record Label and I remember the ‘pain in the arse’ attempt Sony etc made to stop duplication (SCMS I think) with DAT. Nothing but annoyance.

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    Posted: 05 March 2002 03:53 PM #15

    Actually, let’s throw this in historical perspective:  Through the DCMA, the various recording industries are trying to gain a monopoly on the distribution of copyrighted digital material. This has been attempted twice before.

    When Thomas Edison literally created the recording industry, he attempted to gain complete control over it by extending his patents and copyrights of his inventions to ensure that his company was the sole recorder, producer and distributor of audio and motion picure content. There have been some interesting reports of the abuse that happened during this period, mostly because Edison himself made the determination as to who would be recorded and by this time, he was stone deaf!

    Using patent disputes to hinder competition, and eventually creating the Motion Picture Patents Company on December 18, 1908, also known as “The Trust”, which was essentially a monopoly that essentially controlled the american film market. By trying to exert this level of dictatorial control over the industry, he ended up pushing many new filmmakers out to Hollywood to escape this monopoly. The end result eventually killed the New York film industry, and gave birth to a completely new one, in which Edison’s own company would have no part in.

    http://memory.loc.gov/ammem/edhtml/edhome.html

    A similar use (And one I don’t have a homepage reference for), involved the case between Juan Trippe’s Pan American Airlines, and Howard Hughes upstart TWA. Trippe attempted to use government contacts to change the law in the US to allow only one national airline, and squeeze TWA out of the market. However, the fix was too obvious, and resulted in a public scandal that destroyed the career of the politician involved, and threw favour overwhelmingly behind Howard Hughes and TWA, again, resulting in the opposite effect than intended.

    http://store.aetv.com/html/catalog/vp01.jhtml?id=43222&browseCategoryId;=&_loopback=1

    History… it’s fun! =,

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