Nettime mailing list archives

<nettime> Enron Music Bizness stylee... corporate corruption in theindus
Paul D. Miller on Fri, 4 Oct 2002 17:37:01 +0200 (CEST)

[Date Prev] [Date Next] [Thread Prev] [Thread Next] [Date Index] [Thread Index]

<nettime> Enron Music Bizness stylee... corporate corruption in theindustry...

Well... all I can say is, yeah - it's basically like the bubble is a
burstin' - Cd's cost about 1 penny to make... the rest is corporate
markup... who's the Martha Stewart of the industry (she was, after all, a
major contributor to the Democratic party... I wonder who the contributors
to the Republicans are, and ummm... if they're being hounded... I doubt

you figure...


Music industry takes heavy fire

October 2, 2002


The music industry is broken, and the major labels don't have a clue about
how to repair it. This is the only conclusion one can reach in the wake of
a $143 million settlement announced Monday in a nationwide price-fixing
case that involved five major record companies and three giant retail

And it isn't only fans and consumers who feel aggrieved.

Arriving in stores Tuesday, "The Last DJ," the new album from Tom Petty
and the Heartbreakers, is a withering attack on the music business. In one
song, Petty, who has famously crusaded for lower CD prices, bemoans the
fact that "money has become king." In another, he sings, "Well, you may
take my money/You may turn off my microphone/But you can't steal/What you
can't feel/Can't stop the sun from shining."

Filed in August 2000 by the attorneys general of 41 states, the lawsuit
let the sun shine in on how the five major record
distributors--Bertelsmann Music Group, EMI Music Distribution,
Warner-Elektra-Atlantic Corp., Sony Music Entertainment and Universal
Music Group--strive to keep the price of new CDs artificially high.

The suit charged that between 1995 and 2000, these companies violated
federal and state antitrust laws by conspiring with three national
record-store chains--Trans World Entertainment (which operates Camelot
Music, Coconuts Music & Movies and Strawberries Music), Tower Records and
the Musicland/Best Buy stores--to block discounting, reduce price
competition and set a standard minimum price for CDs.

The big chains share the blame with distributors. Stores such as Best Buy
often sell new CDs at a loss to lure customers who may then buy more
costly electronic goods. This practice, along with competition from
Internet retailers, has driven hundreds of mom-and-pop music stores out of
business, endangering the sort of businesses where the clerks know your
name, can cheerfully make recommendations or answer questions, and will
actually let you listen to any disc before buying it.

The settlement, which must be approved by the federal judge in Portland,
Maine, who was overseeing the case, calls for $67.3 million to be
distributed to states, which will then compensate consumers who overpaid
for CDs. (Anyone with receipts for discs purchased between '95 and 2000 is
eligible to file a refund claim, though the exact machinery for the
process, which is sure to be complicated, has not yet been set.)

The major record companies also will have to give 5.5 million CDs valued
at $75.7 million to schools, libraries and charity organizations in order
to promote music programs. (Finally--a use for all those unsold Mariah
Carey and Michael Jackson discs!)

Not surprisingly, the major labels all deny any wrongdoing. They say they
simply opted to settle to avoid the costs of lengthy litigation.  But this
is actually the second time that the industry has settled rather than
fight these charges--in 2000, the record companies reached a similar
agreement to end a complaint by the Federal Trade Commission.

Setting aside the exact charges of these two cases, what the industry is
clearly guilty of is a pervasive contempt for the Americans who support it
to the tune of some $14 billion a year.

This disrespect is seen in three key areas, all of which have deceptively
easy solutions that the labels must consider if they don't want to become

1. Set a reasonable price for CDs for all retailers (large and small), and
eliminate wasteful promotional expenditures.

When CDs were introduced in the early '80s, the prices were higher than
vinyl albums because the technology was new. The labels promised that the
cost would drop once the new format became the norm, but that never

It costs only pennies to manufacture the actual compact disc and its
packaging. Retailers keep $2 or $3 from the price that consumers pay,
while the artists are lucky if they get $1, after the label recoups a long
list of expenses from the cost of videos to publicity photos to review
copies. The record labels keep all the rest.

True, a substantial portion of that income goes to legitimate overhead
costs. But an absurd amount of money is wasted on promotional scams.
According to their own lobbying group, the Recording Industry Association
of America, for every big hit, the major labels spend $6.3 million
promoting at least 14 albums that don't succeed.

This figure includes questionable practices such as "pay for play,"  the
system of paying independent record promoters to get songs on the
radio--something that costs the industry an estimated $150 million a year.

Prodded by Sen. Russ Feingold (D-Wis.), Congress is considering
legislation to curb the practice, and this is already having repercussions
in the industry. (Jeff McCluskey & Associates, the Chicago-based
independent promotion firm that is one of the most powerful in the
country, recently laid off 10 veteran employees.)

Eliminating pay for play would be a good start for the industry and fans
alike. A recent poll conducted by the Future of Music Coalition indicated
that 68 percent of radio listeners want the government to consider laws
ensuring that all musical artists have a "more reasonable chance" of
getting radio play.

2. Respect the artists as well as the consumers.

Artists are also pushing for legislative reform, seeking to retool the
standard recording contract. In another major settlement announced Monday,
the Universal Music Group has freed Courtney Love, a leading crusader for
artists' rights, from the record contract for her band Hole. The agreement
came at the same time that Love settled her suit with the surviving
members of her late husband's band, Nirvana.

Love's trial, which was set to begin this week in Los Angeles Superior
Court, would have marked the first major legal challenge to the standard
industry record contract. Love says these contracts are similar to the
now-outlawed deals that major movie studios used to tie up actors and
actresses for decades at a time. In joining the cause, she told the L.A.
Times: "I could end up being the music industry's worst nightmare: a smart
gal with a fat bank account who is unafraid to go down in flames fighting
for a principle.''

She has vowed to fight on, pushing for national legislation and reform in
the state of California.

3. Back off on issue of Internet music-trading.

While the labels have consistently failed to offer any exciting or viable
model for online music, they continue to attack any Web site that
encourages the swapping of music files.

The point has been made many times that online file-sharing only
encourages people to sample new music; that many fans wind up buying the
CDs that win their hearts, and that digital technology is no more of a
threat to artists or the industry than cassette tapes were in the early
'80s (though the labels tried to stop them, too).

Yet the industry has succeeded in crushing Napster. Now it has its sights
set on other services such as Kazaa, Morpheus and LimeWire.

What would happen if the music industry embraced the Net, lowered CD
prices, and began treating musicians and consumers with a modicum of
respect? We'd all be singing a happier song--and maybe it would even be
good for business.

"None are more hopelessly enslaved than those who falsely believe 
they are free...."
Johann Wolfgang von Goethe

wildstyle access: www.djspooky.com

Paul D. Miller a.k.a. Dj Spooky that Subliminal Kid

Office Mailing Address:

Subliminal Kid Inc.
101 W. 23rd St. #2463
New York, NY 10011

#  distributed via <nettime>: no commercial use without permission
#  <nettime> is a moderated mailing list for net criticism,
#  collaborative text filtering and cultural politics of the nets
#  more info: majordomo {AT} bbs.thing.net and "info nettime-l" in the msg body
#  archive: http://www.nettime.org contact: nettime {AT} bbs.thing.net