The Music Industry Always Fumbles the Technology Bag
P2p, Napster, and Spotify are examples of the music industry’s crooked, nearsighted nature...and their knack for missing the big picture. Have they finally learned?
Before discussing Spotifiy’s endgame, let’s go back to before Napster, before p2p technology, before we ever heard of a thing called streaming; a time when music belched out from the radio and when records were bought from stores, brick and mortar ones, with sales reps, real people — most often hardcore music fans, who gave great recommendations — working as human algorithms whose only purpose was to spread the celebration of music. Back then, at this twilight before the crumbling of the old music industry, record company people may have been a bit more abreast of actual talent, but they were perfectly fine with longstanding industry standard shenanigans, like predatory artists contracts and fuzzy accounting practices. They also had a thing for being notoriously against any technology that (they believed) threatened their racket: the bureaucratic control of music sales and distribution.
Richard Nixon Is A Reminder of What Crooks Do Even When They Already Have All The Power
Nixon was a crook. Put a crook in the White House, crook shit is bound to follow. And one thing that ties most crooks together is their short-term thinking, their inability to see the bigger picture. The music industry is ran by crooks, people who have historically thought short term and looked for big and small ways to make more cents on the dollar for that behemoth bureaucracy that makes up what we commonly refer to as the music industry.
I’m not saying that everybody who works in the music industry is a crook; Nixon’s cabinet was filled with them, but there were also those who knew where to draw the line. Likewise, I know a handful of great people who work in the music industry, and I’m sure there are plenty of other solid people woking in the music industry that I don’t know. What I’m saying, however, is that the music industry’s ecosystem is bad, shit’s rotten and its been that way for more than 60 years! All propped up by crooks and others who go along with the program and look the other way because, hey, industry standard is industry standard — these people help the crooks. But then again, drawing the line in an industry where everybody plays the game isn’t quite like deciding between drowning with a corrupt President and keeping your name clean. People gotta eat…
And there’s one strange thing about most crooks: They’re always worried about somebody trying to rob them.
Napster? No Way Are We Doing Business With the Guys Who Tried to Rob Us
The crooks running the music industry didn’t see Napster as the way of the future, they didn’t see p2p technology as a way to expand their bureaucratic stranglehold over music distribution. They saw Napster — and the people who used their service — as crooks who were robbing them (the bureaucracy, not the artists); they saw p2p as the demon technology that was making the robbery possible. (Readers might want to note that the record industry was once terribly against cassette tape recording machines.)
Remember, most crooks never see the big picture; they see the short term, the score (big or small) right in front of them. Why give an artist 18 cents on the dollar when you can give him 16 cents on the dollar? Why loan an artist money to make a record, then give them the copyright to the record when you can own it yourself, even after the artist pays back the loan (which comes out of their share of record sales, not total sales)? Who thinks of this kind of diabolical shit?
Nothing even remotely close to this goes on in the movie or publishing industries. Not to say that there aren’t crooks in those industries too, there are, but the ecosystems of the movie and publishing industries are not the same sort of haven for crooks like the music industry is. Take publishing for instance, the industry I work in most prominently. When a publisher buys a book, what the publisher is really doing is buying the right to publish the author’s book. In other words, a publisher signs an author and commits to publishing their work, the author receives an advance, and usually the copyright to the book belongs to the author, full stop. The publisher pays for the production, printing, distribution, and marketing of the book, i.e. the publisher fronts all the money to make the book and bring it to market. None of this money is charged against the author!
The only money the author is on the hook for is the advance that they receive. After the advance is paid back to the publisher, the author gets 10% of the retail price of the book. This is typically way more than 16 cents on the dollar; for example, a $20 book yields an author $2. (Note: the publisher’s margin is not as high as it may appear from these numbers. Bear in mind that Amazon receives a 55% discount from publishers, and distributors take another 15%. Combined, that’s 80% which leaves the publisher with a 20% cut from the list price: $4 on a $20 book. But remember, factor in production costs and other publisher expenses, so the publisher’s net profit can be $2-$7)
The music industry doesn’t function like this, at all. And they keep artists in the dark…
But back to Napster and p2p.
Napster’s emergence meant only one thing to the music industry: Robbery! So the music industry’s gut reaction was to sue Napster, and people who downloaded music using p2p sites like Napster, into oblivion. The RIAA, the trade organization that represents the major record labels, was successful in their law suits, but… Here’s the thing, although the RIAA won their court battle against Napster, shutting down the once-mighty internet file-sharing company, they effectively lost the distribution and sales war in a big way. Thanks to their absolute ignorance of the actual flow of technology and the power of the world’s most unstoppable vanguard that is the internet, the major record labels not only shot themselves in the foot, they managed to hit both ankles, a knee, and a pinky toe, while they were at it.
Soon after their Napster victory (read here, the Napster loss), once again, in their nearsightedness, the RIAA announced plans to sue as many as 30,000 individuals for file sharing infractions, including teenagers! Apparently, the greedy blokes didn’t realize what this would all lead to: (1) The advent of new and better music file-sharing services (Hello, Spotfiy, we’ll get to you later at the end); (2) the creation of a culture that felt entitled to free music; (3) declining record sales; and (4) absolute litigation hell.
It’s been years since the beginning of the RIAA’s infamous crusade against file-swappers, and what’s the result? The music industry has been forced to deal with the reality of the culture and climate of free music that they themselves helped to create. The RIAA could have gone into business with Napster. Heck, they could have bought Napster, like any self-respecting, greedy monopolistic corporation would have done. But their crooks, remember, they don’t see the big picture. To them, Napster, an upstart company who robbed them, did not respect their right to rip off artists, centralize product, and curb the quality of popular music. How dare Napster!
Spotify’s End Game: Podcasts
Recently, Spotify is made its pivot to podcasts. They shelled out big money for high-profile names like Joe Rogen. Spotify’s aggressive moves in this space have been, as others have sighted, subsidized by the music industry:
The logical next question: As Spotify attempts to deny songwriters a pay rise because it supposedly can’t turn a profit, are those same musicians actually subsidizing Spotify’s huge podcast acquisitions, and therefore its rapid market expansion?
—TIM INGHAM, Music Business Worlwide
Put another way, Spotify used the music industry to build a massive subscription base, then took that money from subscriptions to invest in podcasts, a product that exploits their subscription base but a product that’s not music! In other words, Spotify does not pay a dime to the record labels and artists that that built Spotify’s massive subscription base. And Spotify did all of this relatively on the cheap, because crooks only see the short term, the big score right in front of them. They never see the bigger picture. So rather than tell Spotify to kick rocks when Spotify came looking for a license, they gave them a license.
What brought Nixon down was his administration's continuous attempts to cover up its involvement in the June 17, 1972 break-in of the Democratic National Committee headquarters at the Washington, D.C.Watergate Office Building. Nixon should’ve left the break-in alone. Why couldn’t he see the bigger picture? The music industry could have been in front of p2p technology, they could have bought Napster whole. Why license music to Napster when you can make your own p2p play? But the music industry fumbled the technology bag. They wanted to punish Napster and illegal downloaders; they couldn’t see that the break-in was small time and not worth their effort.
Then Spotify came along. Same shit, different package, improved technology, new sexy name — streaming — and a market full of consumers ready to pay subscription fees for an all-access music experience. When asked for a blanket license, the music industry could have said, “No, we’re building our own Spotify.” But crooks always want the quick buck, so they negotiated from a price floor that Spotify always knew the industry never fully understood. So the major record labels agreed to take a license fee and subsidize Spotify’s future in the process, a future that could have been theirs.
But has the music industry finally learned their lesson? Last month, Warner Music Group went public, WMG’s market cap valuation is $12.75bn right now. And Universal Music Group is planning to go public in three years with an estimated value of $33bn. But that valuation was made in February, 2020, before the world changed forever. Spotify is sitting comfortably with a $48 billion (and growing) market valuation. And they don’t fumble the technology bag.