Music, books and other media: meet the new boss, worse than the old boss

Most of the debate over digital music business models is about the record companies and their digital successors, but what about the musicians? David Lowery of Cracker argues that for them, things are much worse: at least some pre-digital musicians actually got paid.

The full thing is long but worth your time:

 Things are worse.  This was not really what I was expecting.  I’d be very happy to be proved wrong.  I mean it’s hard for me to sing the praises of the major labels. I’ve been in legal disputes with two of the three remaining major labels.   But sadly I think I’m right.   And the reason is quite unexpected.  It’s seems the Bad Old Major Record Labels “accidentally” shared  too much  revenue and capital through their system of advances.  Also the labels  ”accidentally” assumed most of the risk.   This is contrasted with the new digital distribution system where some of the biggest players assume almost no risk and share zero capital.

I don’t agree with everything he writes, but that bit there makes sense to me – and it’s being replicated in ebooks. What looks like empowerment can also be evisceration: the Apples and Amazons of the world aren’t getting rid of middlemen, but becoming them by getting writers to do all the work (editing, promotion, etc) that traditional publishers do. They still get a cut, but they don’t have to risk any of their money.

In the last few years it’s become apparent the music business, which was once dominated by six large and powerful music conglomerates, MTV, Clear Channel and a handful of other companies, is now dominated by a smaller set of larger even more powerful tech conglomerates.  And their hold on the business seems to be getting stronger.

There’s a wider angle to this too, which I’m sure I’ll come back to in a proper post: the way in which the new titans are organised in such a way that they can destroy their foreign rivals without paying foreign taxes. By routing ebook sales and music downloads through Luxembourg and putting UK earnings through Irish subsidiaries – something that, as public companies, they arguably have to do; their responsibility is to maximise their share prices, not to be good corporate citizens – the new bosses get yet another advantage: not only are they largely free from the need to invest in content creation, but they’re freed from some of the main costs of doing business too.

Lowery:

Taking no risk and paying nothing to the content creators is built into the collective psyche of the Tech industry.  They do not value content.  They only see THEIR services as valuable.  They are the Masters of the Universe.  They bring all that is good. Content magically appears on their blessed networks.

As I say, I don’t agree with everything he says, but it’s hard to argue against that one.

12 thoughts on “Music, books and other media: meet the new boss, worse than the old boss

  1. rutty says:

    This fits in with the monopsony/monopoly problem that Amazon is creating for eBooks:

    http://www.antipope.org/charlie/blog-static/2012/04/understanding-amazons-strategy.html

    Charlie doesn’t mention the risk side of it but Amazon really are living in a risk-free eBook world where they’re sponging off the talent of others without investing themselves.

    Have we thrown the baby out with the bathwater? I don’t think so. PledgeMusic seems like a good new way of artists raising cash to create albums (us consumers take the risk) but these enormous conglomerates are a real danger to variety in the markets.

    New world different worries?

  2. hunnymonster says:

    But Jeff Bezos doesn’t have a scruffy beard and a wardrobe full of “Christmas” jumpers…

    Small but visible differences ;)

  3. Gary says:

    Thinking about this some more, it’s like Virgin Megastores if Virgin simply let anybody in the world put a CD in the racks and took a cut of each sale.

  4. Stephen says:

    I think that some tech companies, such as Google, do think in the way he posits. But it’s unfair to say that Apple sees “content magically appearing on their blessed networks”. Steve worked incredibly hard to get the labels on board with iTunes, they didn’t just show up, magically or otherwise. He knew that shiny as it was, the iPod was not going to work without an easy way to get music onto it, and ripping CDs was not anyone’s idea of easy. David says that Apple does little to earn their 30%. That’s easy to say now that the hard work of creating the iTMS has been done. Building that wasn’t “taking no risk”. At the time everyone said it was a fool’s quest, and that Apple would fail. It was an enormous risk.

    I don’t like everything that Apple does. I think the aggregator requirement is wrong. But the answer to all these criticisms is this: if you think it’s so wrong, if you think you can do better, go right ahead! Apple had NO history in the music business. They made PCs. They weren’t even the first to come up with the MP3 player, hard or soft. In principle, anyone else could have done it. And that remains just as true today. So we have a music industry dominated by huge entrenched players today? It was exactly the same on the day Steve walked into Apple and said to his team “I want to build a music player”. So no excuses.

    I’m sure that David is right when he says that the labels spread the money more evenly. But guess what? Things change. The whole recording thing transformed music in the first place. Before that musicians were just workers for hire. (Many still are, of course. But for some, it was a game changer.) Now it’s changed again. But some kids will still want to be in rock bands, just as others will want to play in the Premiership. All but a few will have to give up on their dreams. I don’t think they will be particularly choked up to learn that those who make it will face the boss. Old or new, in the magical world of entertainment or the prosaic world of work, we all have our bosses.

  5. Gary says:

    > David says that Apple does little to earn their 30%. That’s easy to say now that the hard work of creating the iTMS has been done. Building that wasn’t “taking no risk”.

    You’re misrepresenting what he says.

    “Now when you are building a brand new digital music store, a concept no one else has ever really done on a large scale there is considerable risk. So in 2003 (when iTunes store launched) a 30% margin is totally justified.”

    Now, though: “So if the mom and pop record stores could sell physical product profitably on a 40% margin with all that shipping, returns, breakage shrinkage, real estate and stoned employees AND big chains like best buy and walmart with their deep discounts could sell music on a 20% margin, then the only conclusion is that the iTunes store is incredibly wasteful and inefficient way to do business.I don’t think that is the case. I think that selling music as mp3 downloads from Apple/Amazon servers has to be more efficient than shipping thousands of breakable CDs all over the world. So I think what has happened is that over the years that 30% margin has become parasitic.”

    > if you think it’s so wrong, if you think you can do better, go right ahead!

    Isn’t that what Tesco says to farmers?

    His point isn’t that Apple et al are evil; it’s that the people who actually produce the content are just as fucked, if not more fucked, than they were in the bad old days of record labels and physical retail – and that tech firms such as Google are actively lobbying for changes in legislation that would fuck them even more. I don’t think he’s wrong there.

    > Old or new, in the magical world of entertainment or the prosaic world of work, we all have our bosses.

    Oh, of course, but tech firms appear to be held to different standards than others. How many people protesting SOPA did so with an understanding that went beyond “The Man wants it so it’s bad!”?

  6. Stephen says:

    So David says 30% was OK then, not now. He seems to think that it’s fair for Apple to have the 30% margin for some period (5 years? 10?) but after that, it’s no longer fair, so they should voluntarily reduce their own margins. Hello? What’s the weather like on your planet?

    That’s not how margins work. In the first place, the 30% margin is payback for that initial risk for as long as Apple can hold onto it. It doesn’t expire. It will go down when someone figures out how to effectively compete with them.

    And in the second place, margins don’t have to be justified by reference to whatever business practice is being replaced. There’s no Margin Police who make sure margin never changes. If Apple has found a way to reduce its costs over physical, why shouldn’t it keep the difference if it can? It’s great for the people who own Apple. If you have a pension, you probably own Apple yourself. And if you don’t you can easily buy shares and take part in the bounty.

    There’s another thing: there’s no way to be sure, but many analysts think that Apple breaks even on iTMS, because their real business is selling hardware, and the content just helps the hardware sales. The costs are probably a lot higher than David thinks. Running petabytes of online storage with five-nines availability is stupidly expensive, while building out the back end software must represent an untold number of coder hours.

    I agree that tech firms such as Google and Amazon are jumping on the corporate welfare bandwagon and trying to improve their margins through legislation, but I don’t think this is tech firms being held to a different standard, I think it’s business as usual. There are always firms who want to win by having laws passed so they don’t have to try to please pesky customers, or at least tilt the ground in their favour. It’s corporate socialism.

  7. Gary says:

    You’re accusing him of saying the opposite of what he’s actually written.

    > He seems to think that it’s fair for Apple to have the 30% margin for some period (5 years? 10?) but after that, it’s no longer fair, so they should voluntarily reduce their own margins.

    “If the market lets Apple take 30% they should take 30%. The part of me that is an Apple shareholder applauds this action. And Apple should continue to charge this margin until it is forced to lower it by it’s suppliers or competitors.”

    His argument isn’t against Apple; it’s against the people who tell him he should love what Apple et al are doing in music because it’s so much better than the pre-digital days. In many respects it clearly isn’t. What we’re seeing isn’t disintermediation; it’s just a changing of the guard.

    > there’s no way to be sure, but many analysts think that Apple breaks even on iTMS

    I don’t think they’re making big margin, but they’re making margin. I think there’s a bigger structural change, though, which is the move to individual tracks instead of albums. That’s wiped out a lot of the profit in music.

    > I don’t think this is tech firms being held to a different standard, I think it’s business as usual.

    I agree, it’s business as usual, and that’s what the author says too. His problem is with the fuckwits who think it isn’t, and there are lots of them – not just in music, but in all media. For example, some of the high-profile self-publishing successes couldn’t be any further up Amazon’s arse if they lived in its colon.

  8. Stephen says:

    Oh OK, didn’t see that bit! I think it’s probably not unfair to say that his argument is, if not exactly all over the place, then certainly far-ranging! But I agree with that bit, and also that he shouldn’t love Apple (outside of his role as Apple shareholder obv), and things are certainly not better for musicians.

    Agreed on the fuckwits. When Konrath came out on the side of Amazon in the ebook price fixing case, I– well, I wasn’t really surprised, to be honest. Just business as usual as well I suppose.

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