What’s the Real Story Behind Home Land Security Shutting Down Hip Hop Websites?

Over the Thanksgiving Holiday something very disturbing took place… Homeland Security along with ICE (Immigration & Customs Enforcement) , the Department of Justice and the National Intellectual Property Rights Co-ordinating Center seized over 80 websites including popular Hip Hop websites RapGodfathers.com, dajaz1.com and Onsmash.com. These Hip Hop sites were accused of copyright violations, which is crazy, because their popularity rested in the fact that they mostly worked with artists to promote their work and help establish a buzz.

Was there anything on those sites in violation of copyright law?  The nature of any music site as robust as the ones mentioned, is you will inevitably find material. It might come in the form of someone posting a song on a message board or a video clip from a concert. It might be a link to a third-party site where folks can download a song, which was the case with the aforementioned sites. My experience over the years has been oftentimes its the artists themselves coming to sites asking for their material to be posted while the labels which also own part of the copyright objects.

In most cases if a site wasn’t blowing things up too much, most industry folks didn’t trip. in talking with label heads they note  that in most cases if a song or material was being highlighted prematurely or jeopardizing upcoming promotions a letter, email would be sent out or a phone call made asking for the files or links to be removed. Most sites comply without too much fanfare. It’s the way things have been done for years. It’s the symbiotic relationship that has long existed with record labels and media.

It’s important to note this practice of labels asking media outlets to stop playing or highlighting material has been around long before the internet. Working at a major radio station and several large music outlets, the name of the game  was for us to get material way ahead of its release date. Sometimes we managed to get a hold of a ‘press copy’ of a song given to magazines months in advance. Other times it was someone inside the label ‘leaking us a song’ which we would play for a couple of days only to get a letter from the record labels lawyers ordering us to cease and decease playing their material. Many of these stations including ours would post those letters up on the wall and even frame them. It was a source of pride and demonstrated your ability to have impact.

Granted the internet and us being in a digital world has allowed for unlimited copies of material to be distributed and there has definitely been rough patches with digital media and record labels, but at the end of the day all this boils down to relationships and the rule of thumb has been-know the people who run the sites and ask them to remove anything that was causing problems.

All these popular music sites were seized w/o warning

In the case of these Hip Hop sites, no warning was given. Not only that, but the entire websites were seized. In some cases we’re talking about hundreds of thousands of message board postings, articles etc. This wasn’t a shut down of a website. It was the shut down of a community and no matter how one feels about copyright law and how vigorously it should be enforced shut downs without due process should be disturbing to every last one of us.

What should be even more disturbing is how those shut downs took place. Who in Homeland Security was up on Onsmash.com enough to sit down and make a sound decision to shut down the site and seize its domain? How did they know the sites were in violation of any copyright? Was it the word of copyright owner? Did DHS check to get the other side of the story? Did the owners get arrested? Had they been fined or in trouble for any of this in the past?

Let me paint out a couple of scenarios that folks should consider before people start puffing out their chest and acting all righteous about websites breaking the law. First as mentioned earlier take down notices should be given thus allowing one the opportunity to straighten anything out. Thats first and foremost.

Second, oftentimes you have artists and even promotional folks at labels that will come along and give you material and a greenlight.  I could show you at least half a dozen emails that I’ve gotten in the past two weeks with folks asking how I can get material on my site. two have offered to pay. What many of us who do this work have discovered is that what the promo guys and the artists want may not always be in lockstep with what the lawyers or the trade organization for major labels (note I said labels not artists-remember that) the RIAA is pushing. The relationship with the artists and labels are fluid and informal while the relationship with the RIAA and lawyers for the label may be strictly by the book and to the letter of the law. One often has no idea what the other is doing. End game mass confusion.

The RIAA has railed against copyright infringement before there was an internet. They were mad about cassette tapes, then DATs, then CDS and now the web. This powerful lobbying group has always been a presence up on Capital Hill pushing for laws that would protect the interests and intellectual property rights of MAJOR record labels.  They definitely been up on the hill pushing and many say help right some of these new copyright laws, which leaves one wondering are they pointing out offending websites to Homeland Security?

That’s not a far-fetched notion and should have all concerned. Corporations sitting along side law enforcement to protect whose interest? All of our interests or just theirs?  Are the police and law enforcement following the dictates of corporations at everyone else’s expense. At the end of the day that’s called Fascism.

days after this photo was taken, editor Jason Chen got a vist from REACT

We saw blatant display of this earlier this year when a task force consisting of several police agencies called (REACT)  California’s Rapid Enforcement Allied Computer Team went banging on the door of Gizmodo editor Jason Chen entered his house and took his computers to see if he was behind the leaking of Apple’s next-gen i-phones. The task force claimed they were investigating to see if a law was violated.

Initially some clapped and felt the police were doing their job, until it was discovered that Apple sat on the board that oversaw the new task force that took Chen’s computers. Did the police do this because of Apple’s initial complaints or because they sat on the board?

Fast forward to a troubling news story a few weeks ago here in the Bay Area where a young man had a computer stolen from his office. He had a tracking chip inside that took a picture of the thief, however local police did not immediately follow-up with an investigation. The man resorted to taking his story to local news stations and even then there was no action. Talk about an imbalance of power and influence.

We did an interview earlier this week with Peter Eackersly of Electronic Frontier Foundation which has been in the forefront of protecting internet freedoms. He noted that what took place was far reaching and will continue to be so, because now the US is shutting down sites overseas. he also noted that what took place here without due process appeared to be the first step in the government with the assistance of corporate interests seeing how far they can go before they get push back.

While following these cases keep a close eye on the types of steps and reaches made around the Wikileak saga. Whatever the government is allowed to get away with is gonna set a precedent. Thus far we’ve seen shut down attacks  and seizures take place. Even more disturbing has been American companies like Amazon taking down the Wikileak cables. They officially say it was because of terms of service violations, but most experts are noting they got pressured.

Senator Joe Lieberman has been threatening websites without due process

To show you just how far the government is going, look what Senator Joe Lieberman just did. He threatened a Seattle-based company called Tableau to take down information that was legal and not classified, but reported on and issued charts about who and what countries were discussing Wikileaks.. His actions prompted a scorching response from commentator Glenn Greenwald.

“Those are the benign, purely legal documents that have now been removed from the Internet in response to Joe Lieberman’s demands and implied threats. He’s on some kind of warped mission where he’s literally running around single-handedly dictating what political content can and cannot be on the Internet, issuing broad-based threats to ‘all companies’ that is causing suppression of political information.”

You can read the story HERE

Today its Wikileaks being taken down which one might accept it because arguments can made about sensitive material being revealed and national security at stake could be argued. But what happens tomorrow when its you or me, because we represent competition or hold political beliefs that aren’t agreed upon? What happens when its you or me and the justification is that we’ve always allowed government to take down websites without a day and court, why complain now?

During our interview with Eackersly he noted that it was important for artists and others in the Hip Hop community to stand up, be aware of what transpired and come to the aid of those Hip Hop websites and communities that were shut down especially if they meant something to you.

After our interview Eackersly wanted to know the type of support the seized websites were getting. In his mind, he knew such large outlets would have throngs of artists ready to go to war for them. I think he was a bit surprised to see that more of us were talking about Lil Kim vs Nicki Minaj then the undue processed seizure of music websites. Even sadder is that many have callousesly moved onto other sites as if the shut downs of Onsmash and RapGodfathers was no big deal and was just another day in the life. Mark my words not understanding this and being dismissive will come back to haunt folks.

Understand this.. the seizure of websites without due process, corporate interests lobbying and then writing laws that allow them to be the police and t personally enforce, the battle over net neutrality is all about concentrating power in the hands of a few. This is about controlling the flow of information and being a gate keeper in the communications arena. Its the first step in moving a democracy toward a dictatorship. The next step is getting a population to endure fianacial upheavels and hardships.

The internet was the most democratizing tool we’ve had in a long time and now those who hate having to share and be accountable are trying to shut things down.It’s a power grab of the highest order. Don’t ever get used to being oppressed..It’ll be your undoing for years to come..Stay alert be ready, because they coming for you next.

You can peep the full interview we did on Hard Knock Radio with Peter Eackersly of EFF right HERE

http://www.swift.fm/mrdaveyd/song/81785/

Also be sure to peep this excellent article on alternet about this topic..Here Comes the Homeland Security Internet Police

Lastly after printing this I just got wind of a story Democracy Now just ran…

State Dept. Bars Staffers from WikiLeaks, Warns Students

The U.S. State Department has imposed an order barring employees from reading the leaked WikiLeaks cables. State Department staffers have been told not to read cables because they were classified and subject to security clearances. The State Department’s WikiLeaks censorship has even been extended to university students. An email to students at Columbia University’s School of International and Public Affairs says: “The documents released during the past few months through Wikileaks are still considered classified documents. [The State Department] recommends that you DO NOT post links to these documents nor make comments on social media sites such as Facebook or through Twitter. Engaging in these activities would call into question your ability to deal with confidential information, which is part of most positions with the federal government.”

Return to Davey D’s Hip Hop Corner

Corporations are People: This is How that Effects Hip Hop & Enslaves You

Major props to Young Guru one of Jay-Z‘s top producers. He drops some hard-hitting jewels that every single artist in the industry needs to listen to over and over and over again. What Young Guru is talking about goes beyond music. If you want to know how this country is working, then you need to pay close attention to what he is saying about corporations. His breakdown on this is accurate, insightful and more important irrefutable. Again what Young Guru is speaking on is HOW AMERICA WORKS.. Please understand this lesson.

Lastly what’s great about this clip is Guru provides us with a solution. He starts off his remarks by explaining simply how you need to approach corporations. Again this goes beyond the music industry. Please share this with friends and family. This is true Hip Hop where the 5th element-Knowledge is being displayed .

Shout out to Hakim Green of Channel Live for putting this together.

http://www.youtube.com/watch?v=TIejhzwpndE

Return to Davey D’s Hip Hop Corner

4 Bold Media Prediction by Inside Music Media

Jerry Del Colliano of Inside Music Media

Predictions are just teasing unless they turn out to come true.

The Clear Channel demise – predicted.

Consolidation destroying radio – predicted (during their glory days yet).

The rise of digital media and a new generation – yes, that’s one of the reasons you read me.

So, I’ve got four new ones that I’d like you to tuck away in the back of your mind. You may agree or disagree or be startled, but you’ll see why they will have such a great impact on the music and broadcasting industries.

1. ABC Television will be sold

News chief David Westin resigned recently. Some say he was tired of firing people. Others say he is leaving because new owners are coming.

I say, that, too!

Here’s some inside info:

Westin is suspected of leaking the news of his departure to The Washington Post. Then ABC rushes out the PR that says Westin was expected to leave all along. My sources say b.s. to that.

No replacement is waiting – unusual if ABC knew in advance. Westin is staying on to the end of the year, that long goodbye not necessary if ABC knew of Westin’s plans in advance. Disney owns ABC and doesn’t customarily handle things like this.

Disney is cutting the life out of ABC News. Huge newsroom reductions, searching for ways to make news gathering cheaper through cutbacks or alliances with others. ABC News is – to put it frankly – decimated. Bureaus here and abroad – none. No investigative of documentary units – too costly, not necessary in their view.

As an industry insider poignantly put it like this:

“Reality is that Disney has decided to invest in the Marvel comics characters instead of news. At least they skipped the part about anointing Spiderman as World News Tonight anchor.”

Who would want to be president of ABC News now as they are depleting their assets?

Prediction: ABC Television Network gets sold. Disney’s chief shareholder is Steve Jobs.

2. The New York Times will stop printing

Okay, I’m cheating.

Times Publisher Arthur Sulzberger Jr. told a London audience last week that “We will stop printing the New York Times sometime in the future, date TBD.” He was answering someone else’s prediction that the Times will go out of business by 2015.

When The Times publisher comes right out with it, why contradict him?

In fact I believe Sulzberger will be wishing he wasn’t printing the New York Times before then. It’s expensive. Costly unions. Gathering news isn’t cheap.

The best reason is that fewer people read newspapers every day.

I picked mine up off the front step at 2pm yesterday – having read it all before I went to bed the previous night. (Why am I still getting it? There’s a good question. I don’t have a dog).

The Times will introduce a pay model next year that will fail – metering readers use of content and charging for it when they read too much. To put that another way, making your greatest fans pay the most.

Prediction: The New York Times will stop printing and I’ll raise you – they will stop metering readers. This critical misread could cost them the franchise.

3. Advertisers will spend more in new media than traditional when the recession ends.

Is that going to surprise radio, television and print. Traditional media is expecting a big gain when the economy comes back.

Let’s go to the tape – even in this prolonged recession, digital media spending has increased.

Last week Pepsi announced its experimental online campaign that replaced Super Bowl sponsorships last January is back. The Pepsi Fresh Project was considered a social media experiment. Local community causes went to Pepsi online to seek money for their projects and the public voted who should get it.

Pepsi announced it will expand the project to Europe, Latin America and Asia as well as continue in the U.S. and Canada.

What recession?

Media buyers will weep when they see that Pepsi will spend $1.3 million a month for this year’s Refresh project. They have the money to also buy Super Bowl spots but this money is being taken away from traditional media nonetheless.

Pepsi certainly isn’t alone in beefing up its new and social media budgets even in advance of an economic recovery.

Prediction: Traditional media will languish until and unless they get back in the idea business instead of selling spots.

4. Twitter will replace radio and TV for Breaking News

During the Discovery Channel hostage situation, Twitter broke the story beating all traditional news platforms. Social media is a way to get the word out fast.

When USC has a campus emergency, students and faculty receive instant text message updates. Since everyone has a cell phone, there is no need to hope that radio or television will spread the word.

During the San Bruno fires in San Francisco last week, news stations like KGO and KCBS rose to the occasion – after all, free media such as radio can be very beneficial in public emergencies. But all stations should have been responding to this local community disaster.

Here’s what a radio insider from San Francisco wrote:

“I have been part of stations who fielded calls, gave information, suspended music and aired callers and got in our Vans and went to where we could help.

“What I heard, in summation, the 2 top news stations (KGO, KCBS) did a great job even with a smaller staff than they used to have.

“All the FM stations ran tracking as usual or if they had someone live they broke in with ‘Call the Red Cross to help donate money or blood and get the info from our website now here’s Rihanna’.

“I’m frustrated because I know what it could be and should be. There was more on Facebook last night. That has become the new “Town Hall” (CNN does a great job of using FB and connecting it with their site. We need to be all over that kind of outlet).

“Think of when there is an earthquake, where is the first place people used to go? radio ;I felt a rumble’, ‘I felt a roll’ now we are on Facebook in 2 seconds. BUT people still want to hear a human voice. If we link those things people will feel intimately connected”.

Prediction: A human voice can be on mobile Internet devices and that’s the new breaking news.

wriiten by By Jerry Del Colliano of Inside Music Media

The Decline of Music Download Sites…

The Decline of Legal Music Download Sites

by Jerry Del Colliano

(When it’s 100 degrees plus all summer in the Arizona desert, a man’s thoughts turn to ice hockey).

Nielsen is reporting trouble for the music industry, which has been losing CD sales almost exponentially for a decade and now faces a significant decline in legal digital downloads.

Revenue is flat at the halfway point of this year (+0.3%).

Ringtones are down 24% since they peaked in 2007 according to Business Week.

There are arguments being tossed about that consumers have completed building their digital libraries for iPods and other mobile devices, but how does an active music buyer ever complete adding new music?

The uncertain economy is a factor.

But I’m not sure you can blame this on the economy.

All this and news that total music sales – estimated to be down to $7 billion in 2012 for all kinds of recorded music speaks to a much greater problem.

There are several considerations that come to mind:

1. Pandora and sites like Pandora allow consumers to have their music and eat it too for no fee or a voluntary fee (to exclude commercial interruptions). Keep an eye on this. Apple is. I think Steve Jobs will offer a streaming music service (among other things) using the Lala technology that it recently acquired to do what may constitute as Apple’s version of Pandora (minus the genome) tied into iTunes.

2. YouTube and other sites allow consumers to satisfy their passion for music at no cost – and remember, the recession is a factor not an excuse. Proof? Lady Gaga gives more music away for free than John Scherer’s Video Professor gives free learning CDs for computer programs. Yet, Gaga sells more music and more entire albums than any other artist.

3. Apps are competing for the time consumers used to spend on just iPod-delivered music. Even several years ago my college students told me they were bored with their iPods but didn’t want to give them up. I said, “what about radio?” They laughed. But today’s apps compete for time. Not the entire answer, but a nuance that is worth factoring in. Keep in mind the one thing that never declines – text messaging – and you have another.

4. Filesharing is alive and well and will go on. In spite of what record labels have tried to stop it, illegal filesharing proliferates. Listening to music you don’t own or that nobody ever paid for is still as easy and relatively safe from wrath of the RIAA than ever. I don’t think this explains the decline in legal downloads, but peer-to-peer filesharing certainly has not declined to create a demand for paid music.

5. Record industry solutions like Rhapsody, Vevo, Rdio and other emerging platforms in which the labels make more money are not popular with consumers. Translated that means: no growth factor there.

The labels have cooperated by supplying their music to initiatives with which they feel comfortable and that is a problem. What record execs are comfortable with is a wrongheaded solution. Their solution should pay greater attention to that which the consumer is comfortable. This disconnect has never been patched in the entire 10 plus years that the music industry has been in decline.

The Big Four record labels – or as I like to call them The Last Four Standing – are, believe it or not, still calling for negotiating a voluntary deal with ISPs so that they can charge their customers each month for any use of music.

A recent letter circulated by Universal’s Jim Urie seeking support expressed outrage that “Governments outside the U.S. are legislating, regulating and playing a prominent role in discussions with ISPs (Internet Service Providers)”.

It isn’t going to happen here and the labels seem to be betting the ranch on their call for action that is destined to fail.

The Bloomberg Business Week article said the bottom line is “As digital downloads slow, the music industry is scrambling for a strategy to keep revenues rolling in”.

And therein lies the problem.

The labels don’t know.

Haven’t known.

And have no clue what the consumer is telling them.

To young consumers, filesharing and free plays are their generations replacement for music radio.

Peers have more credibility to Gen Y than corporate radio which has virtually eliminated music experts and music loving live, local djs.

Apple devices and cool cell phones are not a radio – not a “CD” player but a gateway to on-demand entertainment.

A Ford Sync or an iPad should be the template from which to salvage the record industry from its doldrums and yet there is no major game plan in the music industry to understand how powerful these new portals are. And yet the labels are reportedly resisting Apple’s bid to use its Lala technology to offer a music stream available anywhere. They just don’t get it. The labels don’t get to decide. Times have changed.

And, I’ve saved the best for last.

Forgive me if you think it’s naïve but if the labels spent more time, money and effort to discover new artists and genres, they might be helping themselves a whole lot more than trying to cram a relative handful of existing artists into the devices of their choosing on their terms rather than the consumers.

Just sayin’.

written  By Jerry Del Colliano

Return to Davey D’s Hip Hop Corner

Limewire Loses Major Case to the RIAA-But Will that make a Difference in Record Sales?

A couple of articles to peep around the issue of  file sharing…The first talks about the recent court ruling against Limewire where the RIAA is happy as heck as it validates their long held complaints about how file sharing is ruinning the music biz..

  The second story is the exact opposite. It talks about how yet another study been published that shows there is no correlation between illegal downloading and record sales..  This is a hard pill to swallow for many in the industry. The thought of having to find another cause to explain low album sales is daunting for those who are still yearning for the old glory days of the industry where money and album sales was plentiful. Them days will not be returning anytime soon..

There are far too many cats in this biz who have totally forgotten about handling the basics which centers around relationships.  They refuse to go out and create a solid community. Instead of seeing fans as friends and allies, they see them as mindless consumers  who they accuse of morphing into despical theives when they don’t sucumb to the charms of a cheesy marketing plan. Too many executives and artists forget that a good relationship will be rewarding, not punitive.

There’s a very vocal segment of the music industry that reminds me of the proverbial loud mouth artist  who is barely known on his block but will be the first to complain that his lack of success is due to downloading… He’s the first to show  up and say “no’ to technology, but the last to show up and put in the hard work of shaking hands, kissing babies and leaving a lasting impression.

Everytime I hear this type of charcter whine, I feel like holding up a sign that says;

‘Son fallback..Nobody knows or cares  who you are..Ain’t nobody on Limewire looking for your joints..’

Sadly in an industry full of insecurities and egos, my line of thinking will rub some the wrong way.. no matter how true the assessment.

The reality is far too many artist refuse to really put in work and sincerely reflect the realities of the people they want to purchase their music. They wanna stand around and talk big like they’re entitled to the next fat check when they never really put in work. These types of folks need to go the way of the dinosaur.

Fortunately there’s a growing segement that has learned to embrace change. These are the types that consistently take every challenging situation and turn them into a fertile opportunity.

For example, I recall LA Hip Hop pioneer Egyptian Lover talking how his peers were moaning about getting bootlegged. He said he understood early on the bootleggers were there to stay and the best thing he could do was create a situation where it could work to his advantage.  Instead of woofing he said basically saw the bootleggers as a street team. They become promoters. He figured he was gonna need one earlier, might as well let the bootlegger do the work..  Egypt  put on his creative thinking cap and did what so many The record labels execs and artists have forgotten to do because they’ve become too comfortable. He  figure out how to ‘flip the script’.

Something to ponder

-Davey D-

LOS ANGELES — File-sharing software company LimeWire has lost a long-running court battle to the major recording companies.

A judge with the U.S. District Court in New York ruled this week that the company and its chairman, Mark Gorton, were liable for inducing copyright infringement.

The decision in the case, which began in 2006, doesn’t mean the site will shut down right away. The record labels and LimeWire are to meet with Judge Kimba Wood on June 1 to determine the next steps, such as a possible deal to work together going forward and a potential award for damages.

Recording Industry Association of America Chairman Mitch Bainwol said in a statement Wednesday that the ruling was “an extraordinary victory” against one of the largest remaining file-sharing services in the United States.

The RIAA said more than 200 million copies of LimeWire’s file-sharing software have been downloaded so far, including 340,000 in the last week alone.

The ruling could pave the way for a deal, similar to the way Napster was sued out of existence in 2000 but was reborn and is now under the ownership of Best Buy Inc. with licensing deals with all the major recording companies.

“This isn’t about getting something shut down, it’s about getting something licensed and legal,” said Steve Marks, general counsel for the RIAA.

LimeWire CEO George Searle said in a statement that while it “strongly opposes” the court’s decision, the company held out hope for a deal. The company sells an “Extended Pro” version of its free software for $34.95 a year, leaving open the possibility that a new business model could emerge in cooperation with the music industry.

“LimeWire remains committed to developing innovative products and services for the end-user and to working with the entire music industry, including the major labels, to achieve this mission,” Searle said.

original source: http://www.huffingtonpost.com/2010/05/12/limewire-loses-riaa-case-_n_574338.html

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Another Study Vindicates Filesharing

By Jerry Del Colliano

http://insidemusicmedia.blogspot.com/2010/05/another-study-vindicates-filesharing.html

Steve Meyer, who as I have often said is the smartest observer of the record industry, knocked my eyes out in a recent issue of his publication Disc & DAT (Digital Audio Technology).

Yet another study that exonerates filesharing as the culprit in today’s music industry.

It’s a lack of innovation — not filesharing – that’s the conclusion.

I’m sure that doesn’t come as a surprise to you, but it may be to the record labels who are acting like it is 1999.

Professor Nico van Eijk of the University of Amsterdam conducted the latest study and his conclusion speaks volumes:

“The entertainment industry will have to work actively towards innovation on all fronts. New models worth developing, for example, are those that seek to achieve commercial diversification or that match supply and end-user needs more closely. In such a context, criminalizing large parts of the population makes no sense. Enforcement should focus on large scale and/or commercial upload activities. . . Introducing new protective measures does not seem the right way to go…”

In other words, filesharers are consuming all media especially concerts, films and games – not just copyrighted music.

I’ve linked to the 55-page report here.

Let me comment on a few of the findings my friend Steve Meyer highlighted:

“The study concludes (among other things) there “isn’t a clear relationship” between the decline in sales and file sharing, while also finding that fear of evolution prevented the recording industry from adequately adapting their business models to the broadband age. While the recording industry is having problems, argues van Eijk, it has less to do with file sharing, and more to do with the fact they’ve been “abstaining from innovation” — as the study phrases it”.

Think about it.

The labels could have bought Napster, not annihilated it, thus avoiding creation of the Napster vacuum that was promptly filled by bit torrent sites, etc.

The labels could have innovated along with Steve Jobs when the Apple CEO caught them off guard with his offer to help stop piracy. That offer was the iPod and iTunes store. He played to their fears. They allowed him to become the de facto Big Kahuna of the Record Industry.

They could have laid off streamers and come up with an easy to swallow royalty payment schedule that would have grown music consumption instead of dampened it.

Could have launched its own cloud.

Could have done Pandora itself as an industry consortium – that is, if they could have gotten along together for a minute. Bet Steve Jobs would have loved to own Pandora. Bet he still does.

More from the report:

“Turnover in the recorded music industry is in decline, but only part of this decline can be attributed to file sharing. Conversely, only a small fraction of the content exchanged through file sharing networks comes at the expense of industry turnover. This renders the overall welfare effects of file sharing robustly positive.”

Innovation scares the record industry.

God forbid, they had a new idea other than CDs.

If record labels had to run the space program, they would find themselves doing a soft landing in Camden, New Jersey instead of the moon because they cannot figure out which way is up.

Now, record labels really need to know which way is out.

Because Steve Jobs is running their show.

Setting the rates, making the new age “record players” if you will. For all practical purposes, he’s eliminated the album (although you wouldn’t know that by Lady Gaga).

Apple is about ready to launch cloud-based instant access to iPods, iPads and iPhones – while record labels can brag about instant access to – well, suing people. And, by the way, the labels are opposing Apple’s iTunes “cloud”, too as witnessed by this recent article in The Wall Street Journal.

So expect the RIAA to raise a commotion and argue the latest study that looks at filesharing as the lesser of evils.

The worst being – a lack of music industry innovation.

As Meyer pointed out in his piece, Steve Jobs says “Sometimes when you innovate, you make mistakes. It is best to admit them quickly, and get on with improving your other innovations.”

That’s a great quote — not that Jobs ever admits a mistake (like in the current version of Apple TV).

Still wisdom of the quote is right on.

And Steve Meyer wrote this in 2003 when he launched his newsletter:

“Any software programmer will tell you the hard core (ugly) truth is this: anything that can be encoded digitally can be decoded and replicated with a little work. It’s time the labels recognize this fact, accept it, and now spend time brainstorming on how new revenue streams can be created within the framework of all the technology at hand.”

Okay, so don’t admit to past mistakes. We understand.

But, wake up and look around.

My USC students used to be split about whether filesharing was stealing. They had many excuses – some good (“I use it to preview what to buy”) and some bad (“the money never gets to the artists anyway”). I’ve often wondered about these rationalizations.

But there is no denying that one could also look at filesharing as today’s radio.

A source of music discovery.

And now we have yet another carefully considered report that explains the phenomenon if not the unfortunate response of the record industry.

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Return to Davey D’s Hip hop Corner

An Important Article About the Problem of Radio Consolidation

The Four Seasons of Media Consolidation

By Jerry Del Colliano

http://insidemusicmedia.blogspot.com/2010/04/dead-nationticketmaster-merger.html

Some of my readers have suggested workarounds to the Ticketmaster/Live Nation monopoly that I wrote about yesterday.

You know, the one that promises higher prices for concert ticket buyers.

The Grateful Dead concept of selling directly to fans.

The growth of entrepreneurial businesses that barter tickets in a fair marketplace like Brown Paper Tickets.

Others suggested Amazon or even iTunes as alternatives to Ticketmaster someday.

There is no shortage of good ideas when those ideas come from people who actually know what they are talking about, but the way our entertainment business model works right now — the CEOs and their bankers get to play with the monopoly money.

Take what happened yesterday when Emmis CEO Jeff Smulyan put together a $90 million buyout to take the company private. Alden Global Capital will buy all the outstanding Emmis shares for what amounts to $2.40 a share and Smulyan gets his company back.

You may remember that Jeff Smulyan was among the first to read the winds of change when he tried unsuccessfully several times to take Emmis private. The shareholders were always the problem. Emmis just never worked as a public venture.

But then again Emmis went public to get in on the Wall Street lending giveaway that enabled the other big consolidators to acquire stations once consolidation was approved. Unfortunately, Emmis never got big enough nor was it willing to be acquired and you saw how that turned out.

Radio is becoming a two-model business.

Consolidator vs. operator.

On one side the Clear Channels, Citadels and Cumulus-type consolidators who run on pure loan money and that must either grow or sell to have a reason for being. They are not interested in being broadcasters. By now everyone knows that what goes on-the-air is the least important component for these types of operators.

We know consolidators fire local personalities no matter how successful or profitable and keep only the “brands” that they can pipe to other stations in different cities to allow for more firings and lower costs.

They reward success by giving surviving managers even more responsibility guaranteeing that they cannot continue to produce excellence. Apple’s Steve Jobs would not take the executive in charge of his computer division and say, here take my iPod and iTunes initiatives, too. And then if somehow that person succeeded, could you imagine Jobs giving that same person a third responsibility — say, to oversee their retail stores.

Radio does this all the time.

Piling on work because the end result doesn’t matter.

Program directors are a thing of the past with consolidators. Content manager is the new name that at least admits to the change in job description — to channel national programs to various local destinations.

Bain Capital, one of the major investors (along with Thomas H. Lee Partners) that overpaid $20 billion for Clear Channel shows us how they are hell bent to operate as recently as this past weekend.

News Blues, a paid subscriber site, reports:

“The Weather Channel was in full balls-to-the-wall storm coverage mode Saturday as the nation’s Southeast lit up with severe weather. But Friday night, when nearly a half-dozen tornado watches were in effect, and parts of Mississippi were being ravaged by storms, TWC aired a movie: “The Avengers.”

Sound a bit like consolidated radio? You know, the kind owned by Lee and Bain and other “vulture” capitalists.

As was pointed out in News Blues, “The Weather Channel partners Bain Capital and Blackstone Group will never justify the enormous $3.5 billion price tag they paid for TWC in July 2008 at the height of acquisition market”.

They are all about profits.

Mobile apps, inter-connectivity and Internet distribution models.

Profit first.

Forget the tornadoes.

The model is right there — Clear Channel’s co-owner is doing the same thing at The Weather Channel.

Fresh off of $1.3 billion in refinanced debt.

This is getting too easy for us to understand, isn’t it?

The only climate The Weather Channel cares about is the business climate.

I mention all of this because the radio and music businesses have always operated in their own worlds. If you’ve worked in either (or both), you know that reality never meant anything in these businesses.

Radio set its own rules.

Always dictated what the audience would hear, how advertisers would support them. They don’t like being shoved around by the Internet, Apple, Facebook or a bunch of kids right out of Pirates of the Caribbean.

And, the music industry still doesn’t acknowledge the real world.

Napster was an asterisk in their history.

They can sue fans for stealing.

Lose money.

Watch consumers prefer digital downloads to plastic CDs.

And it remains business as usual.

They, too, are doomed.

That’s right — the CEOs who take their orders from equity owners — are doomed because they are operating in the make believe financial world that they live in and are not capable of acknowledging the real world where it takes innovation to grow revenue.

So, if you’re an innovator or have just a little innovation in you, fired from a media job you did well — the real financial turnaround is going to happen for your career.

Legal monopolies are not a business model in a world that has changed.

Financing and refinancing while content excellence suffers is a short-term and foolish strategic move — not an adequate five-year plan.

There are no viable five-year plans in the entertainment business because these industries are already ten to 15 years behind the consumer and their preferred technologies.

So here’s my take on the economic recovery that is coming.

Keep in mind Citadel, a company in bankruptcy, is bragging about a 4% increase in revenue over the first quarter of 2009. Also keep in mind — that is a pretty low standard to meet. Q1 of 2009 was the absolute bottom of the media economy and these geniuses think a 4% hike a year later is a recovery. Hey, it’s better than losing money, I grant you.

A growth business — never.

So here we go:

1. Equity holders must continue to consolidate or liquidate — collecting fees all along the way — to remain viable.

2. The longer they hold their assets, the more they run into their loan covenants that will require the purchase of more expensive debt. So watch things shake out in the year ahead.

3. For those of you who want to buy radio properties when the prices come down, remember that even Larry Wilson isn’t buying now. And that the properties may still be sound but consolidators kind of ran down the neighborhood if you know what I mean. In other words, they’ve devalued the very radio stations they overpaid for making it hard on competent owners who want to try their hand at good terrestrial radio.

4. Good operators like Bonneville, Cox, Lincoln Financial and others (usually smaller groups) will turn in excellent results because they have not devalued their properties even though they sell in a climate that has. However, these companies are like building Beverly Hills in downtown DC — location, location, location.

5. There can be no growth business for the entertainment industry without an interactive digital strategy separate and apart from traditional broadcasting content. And it must be fully funded. No digital. No growth. No kidding.

6. The brain drain will start showing its effect on media companies that have neglected great over-the-air content and have failed to innovate new media platforms. Sorry, but they just can’t keep firing assets and then declare they are hiring again for new needed media initiatives. The best people are going to stay away from operators like that.

So the reality is that media is just another microcosm of the new American business model.

Buy big.

Overpay.

Over-commit to debt.

Cut assets and costs.

Refinance again and again and hope the economy makes this model look good enough to — resell.

At a profit.

Or at least for more fees.

I’m going to put it in writing — years ahead of general knowledge — that once everything has been bought, sold, and resold, there will be a need for new ventures.

That’s why they call these vultures — venture capitalists.

Sadly, they need more businesses to buy and ruin for fun and profit.

The necessary growth businesses will never rise up from the companies they bought or funded because that’s not what equity owners are about.

For the growth businesses of the future, they will have to turn to the talent that has been shown the door or to the young people who cannot even get in the door.

The four seasons of consolidation are:

Spring — rebirth and growth by entrepreneurs.

Summer — the cornucopia of innovation with its abundant supply of revenues and rewards.

Fall — The final harvest of new business growth.

Winter — The coldest season of all — not friendly to the seeds of new ideas and an atmosphere not conducive to growth.

In radio, television, print and music, we’ve just suffered through the worst media winter ever.

Spring has sprung.

Get planting seeds of innovation. Equity speculators have to eat.

original article: http://insidemusicmedia.blogspot.com/2010/04/four-seasons-of-media-consolidation.html

Return to Davey D’s Hip Hop Corner

Ice Cube..Tells New Jacks He’s Not Here to Make Them Famous

Ice Cube drops offers up words of wisdom to new jacks

I got alot of questions since my last blog. I’ll answer a few.

What’s up with these local MC’s in L.A. who keep disrespecting me? They’re just mad cause I don’t fuck with they wack-ass. They ain’t on my level, why should I waste my time. I don’t even remember ever meeting these clowns or even being in the same room with any of ‘em. They can’t make a name for themselves so they need help from the O/G’s. I refuse the throw’em a life line. Fuck’em. It ain’t my job to make nobody famous. And for the record, I ain’t scared of no nigga. Especially, no rappers….seriously people.

Age-ism in rap? Age-ism is everywhere folks. In the work place, in sports and of course in hip-hop. We are a out with the OLD in with the NEW world. But as we go through life we realize NEWER ain’t always better. We find ourselves saying, “Back in the day, bah, bah, bah….” All young MC’s should route for old MC’s to have long careers. If you play us out, what kind of future do you have in hip-hop when you get 40?

Advice for young rappers: You gotta be hot on your block first, then your city, then your state, then your country, then the world. If you can’t make your block notice you. The world is a tall task.

Ice Cube continues… http://icecube.com/users/icecube/blogs/227401

Bragging and boasting: When I was coming up. Every rapper had a attitude like Kanye. Now when you say you the best and act like you the best. Niggas get their feeling hurt.

Battling: If you scared to test your skills up against any MC in the game. Quit right now. Become a fuckin’ ghost writer and go hide in the corner of the studio. Now they’re 2 ways to battle. Freestyle live: To me this is like a slam dunk contest. Or battle on wax: I call this the Finals. That’s Hip-Hop.

Question: Why don’t I produce up and coming rappers like I use to? I got burnt out. Niggas couldn’t take the baton and run wit it. I was sick of babysitting grown ass men and walking them through the industry. I felt like Dr. Frankinstein building uncontrollable monsters. How? If you DON’T make’em a star, they blame you.
If you DO make’em a star, they leave you. I got sick of that ungrateful shit.

Continued here: http://icecube.com/users/icecube/blogs/272061

Return to Davey D’s Hip Hop Corner

Is this the Beginning of the End for Consolidation? Radio Employee Uprising

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Is this the Beginning of the End for Consolidation? Radio Employee Uprising

By Jerry Del Colliano

There is a new spirit I am feeling lately that a movement is underway to take radio back – back from the consolidators who have pillaged it.

But when I say take radio back, I don’t necessarily mean by putting groups of investors together to attempt to buy failed stations from failed consolidators.

It’s more significant than even that.

Friday I shared a story with you about fired San Francisco Cumulus sales rep Brian Mass who was not only shown the door but had it slammed on his attempt to seek unemployment.

Mass eventually sought the services of a New York employment attorney named Robert Ottinger who recently filed a class action suit against Cumulus for employment law violations.

That is, Cumulus did not pay Mass (and apparently others in California) overtime when their sales jobs were allegedly categorized as outside sales when he is alleging that the job by state law definition is an inside sales position. There are also issues that expose Cumulus on expense reimbursements that are tied to the status of an inside or outside sales person.

If Mass prevails in court or through a likely settlement, every Cumulus worker in California affected by their company’s violation of employment law will receive some form of compensation automatically.

And, Ottinger is looking for employees from Cumulus and other consolidators for lawsuits and class action initiatives from additional states.

In the first 24 hours after my story ran, 15 other Cumulus employees contacted Ottinger about either joining the class action suit or seeking to start a separate action of their own. And that’s just the first day’s response. Judging from the email I am receiving, others are preparing to contact Ottinger because he appears to be willing to help them without upfront money or undue risk.

That’s what convinces me that radio people are beginning to take their industry back.

There are plenty of lawsuits-in-waiting for Citadel and Clear Channel as well because mean management is not limited to Cumulus – although they are the industry leader. This Brian Mass may have awakened the people who actually know how to run the consolidators’ radio stations and presented them with the most effective tool to fight back.

The courts.

But now, it’s different.

Clear Channel, Citadel and Cumulus have run roughshod over their people and because the recession and downsizing made it hard for good folks to seek other work in the industry they loved, the “lucky” ones had to put up with it.

Everyone else was laid off – a term that still rankles me because the dictionary defines it as “to dismiss (an employee), esp. temporarily because of slack business” when radio consolidators don’t take this action temporarily.

In fact, some companies, like Cumulus actually have been rehiring on a massive basis – they even brag about it. To them, it is their version of ethnic cleansing except there is no discrimination – Cumulus is an equal opportunity firer.

But now, I believe we are seeing the beginning of the end for radio consolidators especially Clear Channel, Citadel and Cumulus but I’m not leaving out NextMedia or other pretenders who operated from the 3C Playbook.

Think about it.

Cumulus will be tied up for the entire year and maybe longer if more people come forward and sue them. Initially, they don’t have it in their DNA to settle.

This is the start of consolidators on their heels in an area they never saw coming – employment abuses. They got away with it because people needed work.

Now, these same radio people have had it. They are stepping up. I am privy to legal actions being considered by some wronged individuals that are potential major problems for consolidators if they file actions.

So, consolidators may have stolen their licenses from the public interest, convenience and necessity and they may have turned radio into a commodity at the exact worst time possible, but now they will be hamstrung in court by the average Janes and Joes they abused.

In fact, the only way out is to settle class action suits out of court and for those brave souls who will start individual lawsuits, settlement money. If I am seeing this right, in another year or two, the 3Cs will be looking to settle everything in site – lost will be the bravado that comes when the Complaint arrives in the mail.

But there are more changes ahead.

While radio advertising revenues should increase in 2010 and comparables between this year and the abysmal 2009 fiscal year will look favorable, new media will eat up more advertising budget than radio consolidators anticipated. After all, they are the ones who decided to sit out the Internet revolution.

Flat growth – if there is such a term. Well, there is irrational exuberance, isn’t there?

Stations will come on the market again and sell at 1-3 times cash flow – that’s my prediction and you’ve got it in writing.

And why would stations sell so cheaply?

Because consolidators have run radio into the ground, driven listeners and advertisers into the hands of digital media.

And, after all, the equity holders that have taken ownership control in lieu of debt payments cannot make their money unless they generate more fees and you generate fees from selling assets.

One more thing.

Radio people are beginning to move on.

I saw that at my Media Solutions Lab where impressive radio execs and talent were hot on the trail of new media. Paths to new media will become more apparent as the next year or two unfolds.

So you see radio people are beginning to believe that they can have a management, sales or programming career in digital media at the same time failed consolidators get bogged down with a flat-ad market and an increasing docket of employee lawsuits.

My mother used to always remind me that “every dog has its day” and for talented and loyal radio managers, programmers, sales people and talent, I am here to tell you I see signs that your day is coming.

For those of you who would prefer to get Jerry’s daily posts by email for FREE, please click here. Service does not begin until you go to your email or spam filter to activate.

Thanks for forwarding my pieces to your friends and linking to your websites and boards.

Warning: Hip Hop Artist Need to Know About Today’s 360 Record Deals

360 Deals Are Today’s “Record Deals”

By, Wendy Day from Rap Coalition (www.WendyDay.com)
I gotta state right upfront that I am biased against 360 Deals. I understand WHY they exist, I just find them unfairly oppressive in the label’s favor in an industry with a draconic history of jerking artists out of money. I stopped negotiating deals for artists in 2005 because I refuse to do a 360 Deal for any artist! How strongly do you have to hate something to stop your own income over it?

In the early 2000s, the music industry went through a severe change. Music sales plummeted, the importance of the internet reigned supreme, and there was an influx of artists into the industry causing an over saturation never seen before. It’s gotten worse, not better, for the major record labels.

Once used to a healthy profit margin that afforded grand lifestyles for those at the top of the food chain, the major labels became disgruntled as sales dropped while they missed the boat on less profitable digital sales. Taking on the role of dinosaurs fighting for survival, they tried everything from stopping the new digital revolution, to fighting it, to suing it, to band wagon jumping too late. Nothing worked for them. And they still haven’t learned from their mistakes—they still continue to fight the ways the consumers want to receive their music.

So to justify their continuing existence, they decided to take an even larger share of the pie from the ONLY aspect of the equation that they controlled—the artist (or the “content” provided for digital download). Back in the day, labels took roughly 87% of the pie while giving the artists 12% of the money AFTER the artist paid back everything spent on them from that 12% share. This means that if the artist sold $500,000 worth of CDs, and it cost $50,000 to market and promote that CD (a very low example), the artist share of $60,000 (12% of $500k) would be divided between paying the label back that $50,000 and a check for the remaining $10,000. The label would receive $490,000 for its investment and belief in that artist while the artist made $10,000. In exchange for giving up the lion’s share of the sales, the labels always told the artists that they’d make 100% of the touring. Any show money, was the artist’s to keep!

When the shit hit the fan financially for the labels, they decided to tap into the show money, and all other streams of income for the artists, as well. After all, if your profit margin is made smaller, you need to eat more of everyone’s income to keep the fat cats at the top, and the stock holders, happy. Most 360 Deals share in endorsement income (15% to 30% depending on the artist), performance income (10% to 30% depending on the artist), merchandising income (20% to 50%) and Film/TV money (15% to 40%). Before I go any further, I have to thank Bob Celestin (Law Offices of Robert A Celestin www.raclawfirm.com) for supplying me a 360 Deal contract for an indie label and the good folks at Warner Bros Records for leaking me a major label contract for an artist’s 360 Deal. This enabled me to write about REAL contracts instead of just what I’d heard from lawyers, artists, and label folks.

How do labels justify taking an even BIGGER share of the pie from artists? They complain that they are doing all of the developing, investing, marketing, and promoting. Their argument is that they believe in the artist when the artist has nothing, and they feel that assuming the lion’s share of the risk should result in sharing in a lion’s share of the profit. If the label is developing and building the artist to a level of super stardom, they feel they have the right to share in a percentage of everything that super stardom affords the artist. So if they drive the artist platinum, they feel they should get a piece of the tour that came from the fame the label helped the artist build, and a piece of the endorsement deal or film income that came from the fame that the label helped build. I guess I could see this argument better, if I actually agreed that the labels did their jobs well of building artists.

I have a different vantage point of record labels. I see major labels based in tall glass buildings in NY and L.A. that have little interaction with the streets, fans, or the artists. I see them sign artists that have already started to build a buzz or sell music themselves, and then I see them sit back and let the artists’ teams continue to do much of the work themselves. I don’t see major labels taking much risk with their artists, but do continue to put them through a system that is almost an outdated cookie cutter version of how to sell CDs. The labels rarely interact with the fans and are quite out of touch about what the fans want or are willing to buy. They seem to create this assembly line of artists who all sound similar and fit a certain format at radio. They seem to throw a lot of music into the marketplace and work whatever catches on quickly and easily. Most labels do what’s best and easiest for the label, not what’s in the best interest of the artist. Now, in a way, it’s very unfair of me to make this sweeping generalization, because there are some amazing people who work inside of major labels and really go all out for the artists. But I find these people to be the exception, not the norm, and I also find them to be frustrated most of the time because they constantly have to fight with their bosses and the status quo to succeed on a project.

I also find that competitor labels usually hire the best people away from the labels who are experiencing some success, thereby breaking up the synergy within a team once they all learn to work well together. This is why a label like Def Jam or Universal could be so strong in the late 90s and yet be struggling to succeed today. I find that artists rarely look at the teams working at labels and just fiend for a record deal no matter the success of the label or who’s at the label (staff or other artists).

So labels got further away from the fans, the staffs got lazier or more frustrated (perhaps more work for less pay?), the artists took less risk because there were more of them and they were just happy to have a record deal, and the fans started expecting music for free because they could just download it if they didn’t feel like paying for it. Major labels continued reducing spending, slashing budgets, cutting pay, and signing “sure things” (whatever that means). And to justify the spending they were still doing, they decided to offer deals that cut into more of the artists’ income. The argument was that out of 50 artists signed to their label, only one was successful and funding the 49 losses. No other business on earth has such a backwards business model. Imagine if Ford built cars and accepted the fact that every model but the Taurus was meant to be a loss leader, and that the Taurus sales had to make up the loss of every other brand under their umbrella. Huh?

Or imagine if banks lent money for mortgages expecting 99% of the mortgages to default, and 1% of the mortgages were expected to make up the bank’s profits that year. Further imagine if each homeowner paying back their mortgage didn’t actually get to keep ownership of the house after their mortgage was paid back! The bank’s argument would be that they took all the risk on the house, so they should get to retain ownership. The people that lived in the house would still have to pay for all the repairs and upkeep, but the bank would own the house. That’s how the music industry is built. And the folks at the top with the most to lose are the ones fighting to keep this backwards system alive.

People ask me all the time what I think is wrong with the music business. I would like to blame our troubles on the greed of major labels, the proliferation of bad music that the fans don’t seem to want, or the free downloading of (stolen) music. But the truth is that if the artists didn’t agree to these incredibly bad deals, there would not be incredibly bad deals. If a bank existed that kept ownership of your house after you paid back your mortgage, you would never do business with that bank. Yet all day, every day, there is a long line of artists willing to sign their lives away to record labels because they don’t understand, or possibly don’t know about, the consequences. Or maybe they just don’t care. Maybe the need for fame overpowers the need for money…until they realize they aren’t making money but someone else is. I find that it takes artists 3 to 5 years to realize they are getting jerked. In that time, a lot of money is lost and one or two things happens: either the artist is replaced with a new artist willing to make less money, or the artist has enough value to renegotiate their deal and share a larger piece of the pie. Sometimes, they even start their own labels and repeat this onerous process with their own new, unknowing artist! They got jerked, so they turn around and jerk someone else.

But back to 360 Deals. This new model will exist until artists are willing to say “no!” and I don’t see any signs of that happening. What I do see happening are artists becoming more entrepreneurial, and instead of signing to major labels, I see them finding their own investors and building their own teams who can help them succeed. There are enough laid off employees of record labels who’ve experienced some success out here to hire to run and work at indie labels. There’s a huge void in the marketplace to deliver the kinds of music fans want…and that’s not just one kind of music.

What I learned from both the buzzes of Drake (lyrical mainstream artist who’ll succeed at radio) and Gucci Mane (not-so-lyrical street artist with gutter stories and experiences to share) is that fans still want music. Major labels are still slow to respond to the needs of the streets and the internet is only speeding up and splintering demand further. There’s still a market for good music that the fans want. Our job is to give it to them. And if we do so with a fair and equitable split of the profits, the artists can build lifetime careers and we can all make money!

I hear the artists who sign 360 Deals say that they feel they have to sign these deals because the label won’t work their projects if they don’t give up a bigger split. I hear the artists say they want the labels to help them land endorsement deals, major tours, and TV Shows and film roles—but I’ve yet to see a major label do this. Let’s be realistic, these major opportunities go to the biggest stars and the ones who apply themselves directly in those alternate areas. If you hire a film agent, and take acting lessons, you may get increased roles in film and TV. If you increase your fame through music sales, your endorsement opportunities increase. Beyonce landed a Revlon contract because she was a star, Revlon did not make her a star. How many new artists are the major labels building to be stars? In 2009, it was Taylor Swift and Susan Boyle out of all of the releases that came and went. And neither of them were developed by the major label system—one was a product of an indie label and the other a product of a TV show. The majors had access because they did deals with middlemen and then applied their systems behind those movements that were already happening. Maybe that really is the job of a major label in today’s environment.

In my opinion, a 360 Deal is an excuse for a major label to take a bigger piece of the pie without doing any additional work. It’s insurance on their part. If the artist does blow up by chance, it gives them more opportunity to make a bigger cut. And that’s just smart business. I guess if they called it what it really is, I’d be less annoyed by it: the price of doing business with a major label. If they played a bigger role in building overall success, I’d be happy to see them share in a bigger piece of the pie at the end of the day.

Example of a “360 Deal” Artist (this is not an actual artist example):

Male rapper based in Atlanta with a strong following. He has his own team of inexperienced friends and family around him and a very strong street following. The DJs, fans, other artists and industry are supporting him and propelling him forward. With no real single or CD in the marketplace, demand is high—he’s getting $30,000 a show and performing three or four times a week for the past few months. This will last about 6 months, approximately. He’s put out a series of mixed CDs, for free, over the past year. The label signed him a year ago to a 360 Deal but hadn’t begun to promote him yet because their roster was full. The artist got tired of waiting and began putting out a new mixed CD every month to build his buzz.

Advance: $75,000
Album Budget once popularity increased: $350,000
Recoupable Marketing and Promotions: $750,000
Monthly Show Income: $420,000
Endorsement Deal: $50,000

Album comes out and sells a total of 350,000 copies (it was a very commercial album but the artist had been very street, almost gutter, up to the point of his album release so fans didn’t really embrace the album as expected).

Album income for label: $3.5 million
Artists’ Share after Recouping: negative balance of $405,000
$750,000 + $75,000 = $825,000
12% of $3.5 mill = $420,000
$825,000 – $420,000 = $405,000
Artist’s endorsement Deal Share: $37,500
75% of $50,000
Artists Share of Touring Income: $1,764,000
70% of $420,000 x 6 months
Artists Share of Publishing Income (50%): $100,000 (estimate of mechanicals and ASCAP/BMI royalties)

Income for Label: $4,773,500 gross income on an investment of $825,000
$3,500,000 sales
$405,000 recoupment
$12,500 endorsement income
$756,000 tour/show income
+ $100,000 publishing income
$4,773,500 gross income
Less Staff costs
Less Day to Day operating expenses
Less Taxes

Income For Artist: $1,122,375 income
$37,500 endorsement income
$1,764,000 tour income
+$100,000 publishing income
$1,901,500 sub total
-$405,000 recoupment
$1,496,500 gross income
Less 20% management fee
Less 5% Business Manager fee (Accountant)
Less Tour costs/legal costs/tour manager/DJ/Operating expenses/taxes

Let’s compare gross incomes…
Artist made 1.5 million while label made 4.7 million
Artist share: 24%
Label share: 76%

Let’s compare Net incomes before taxes…
Artist made approximately $1 million while the label made approximately $4.5 million
Artist share: 18%
Label share: 82%

If the label is taking all of the risk (they are not), putting up all of the money in all of the right places (they are not), devoting all of their attention to this one artist (they are not), and doing most of the work (they are not), then this business model makes sense for everyone involved. But if the artist is doing the bulk of the work, risking their career in the hands of the label, and coming out of their own pocket for many expenses, then this business model is hugely skewed in favor of the major label.

Copyright Time Bomb Set to Disrupt Music, Publishing Industries

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This is one of the reasons the music industry has become more ruthless in its approach toward things.. I can only imagine what they are doing to the artists.. From my take one of the reasons they rushed to change contracts and put what we now know as 360% Deals is to ensure that they will forever have access to artist’s income streams.. So as these copyrights expire, the record labels will be angeling to get a piece of future revenues, because 360 Deals mean the labels gets a part of ALL income no matter if its music related or not..One of the things people need top pay close attention to is increased enforcement of ‘copyright infringement, this will set up the justification for a new more strident copy right bill.. It’s at that point you will see something buried in the details that will flip these laws around who gets to own copyrights and for how long.. Pay close attention to how they are rewording and approaching the digital game cause thats where the hoodwinking is on full tilt..  -Davey D- 

Copyright Time Bomb Set to Disrupt Music, Publishing Industries

By Eliot Van Buskirk

Wired – November 13, 2009

http://www.wired.com/epicenter/2009/11/copyright-time-bomb-set-to-disrupt-music-publishing-industries/

The late ’70s, when punk exploded and disco imploded,
were tumultuous years for the music industry. A time
bomb embedded in legislation from that era, the U.S.
Copyright Act of 1976, could bring another round of
tumult to the business, due to provisions that allow
authors or their heirs to terminate copyright grants –
or at the very least renegotiate much sweeter deals by
threatening to do so.

At a time when record labels and, to a lesser extent,
music publishers, find themselves in the midst of an
unprecedented contraction, the last thing they need is
to start losing valuable copyrights to ’50s, ’60s, ’70s
and ’80s music, much of which still sells as well or
better than more recently released fare. Nonetheless,
the wheels are already in motion.

“The termination that’s going to be coming up is going
to be a big problem for the record companies and
publishers,” said attorney Greg Eveline of Eveline
Davis & Phillips Entertainment Law.

“It’s written into the statute,” said entertainment
lawyer Robert Bernstein. “It’s just a matter of time.”

The Copyright Act includes two sets of rules for how
this works. If an artist or author sold a copyright
before 1978 (Section 304), they or their heirs can take
it back 56 years later. If the artist or author sold
the copyright during or after 1978 (Section 203), they
can terminate that grant after 35 years. Assuming all
the proper paperwork gets done in time, record labels
could lose sound recording copyrights they bought in
1978 starting in 2013, 1979 in 2014, and so on. For
1953-and-earlier music, grants can already be
terminated.

The Eagles plan to file grant termination notices by
the end of the year, according to Law.com. “It’s going
to happen,” said Eveline. “Just think of what the
Eagles are doing when they get back their whole
catalog. They don’t need a record company now.. You’ll
be able to go to Eaglesband.com (updated) and get all
their songs. They’re going to do it; it’s coming up.”

Other artists are also filing notices (there’s a five-
year window), according to Bernstein. But in some
cases, they’re choosing to leave the copyright grant
where it is – albeit with much more favorable terms.

“There are all different kinds of ways people approach
it,” said Bernstein. “If they have a publishing company
that’s making money for them, and collecting it and
paying them well, they may just want a higher royalty.
Or if they’re unhappy, they get it back.”

This isn’t just about music. “It’s every type of
copyright,” said Bernstein. “It doesn’t distinguish
between the types of copyright.”

The only exceptions, he said, are derivative works such
as movies based on novels that include certain music in
their soundtracks, because Congress decided it was
unfair to ask publishers to give those licenses back to
artists and authors.

The record labels tried to defuse this bomb in 1999 by
sneaking an amendment to the Copyright Act through the
House of Representatives that would add sound
recordings to the Act’s list of copyrights that were
considered “works for hire,” which would make them
exceptions to the grant termination clause. According
to one source close to the situation, the labels told
Congress that the Copyright Act already covered sound
recordings as exceptions because albums of music are
“compilations” – but that “just to be absolutely clear,
[the labels] wanted to put it in so nobody can debate
it.”

After musicians, including Carly Simon, reacted
negatively, the amendment was withdrawn amid public
outcry leaving record labels with precisely two options
for fending off notices of termination, neither of
which looks promising. The first is to continue to
claim that albums are compilations, which doesn’t pass
the common-sense test (compilations include songs from
different artists), and probably won’t pass legal
muster either.

“Everybody kind of snickers at that [strategy],” said
Eveline.

The second option is to re-record sound recordings in
order to create new sound recording copyrights, which
would reset the countdown clock at 35 years for
copyright grant termination. Eveline characterized the
labels’ conversations with creators going something
like, “Okay, you have the old mono masters if you want
– but these digital remasters are ours.”

Labels already file new copyrights for remasters. For
example, Sony Music filed a new copyright for the
remastered version of Ben Folds Five’s Whatever and
Ever Amen album, and when Omega Record Group remastered
a 1991 Christmas recording, the basis of its new
copyright claim was “New Matter: sound recording
remixed and remastered to fully utilize the sonic
potential of the compact disc medium.”

This might sound familiar, because BlueBeat.com
employed similar logic in creating new copyrights to
Beatles songs – right before it was sued by EMI and a
judge barred them from continuing to sell the songs.

If the labels’ best strategy to avoid losing copyright
grants or renegotiating them at an extreme disadvantage
is the same one they’re suing other companies for
using, they’re in for quite a bumpy – or, rather, an
even bumpier – ride.

[Eliot Van Buskirk has covered digital music since
1998, after seeing the world’s first MP3 player sitting
on a colleague’s desk. He plays the bass and rides a
bicycle.]

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