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« Focus on a Few | Main | A Call For The (R)Evolution Of The Elephant »
Wednesday
Nov122008

Too Much Control and the Imaginary Bottom Line

Ever since the days of the infamous Napster takedown, the RIAA and MPAA have been trying to use virtually every form of control possible to limit the availability of copyrighted materials over the internet. This limitation is a good thing. It is at the very cornerstone of what is meant for something to be copyrighted. But the means in which this limitation is being implemented --- through the use of lobbying to change laws that give the government and RIAA almost "godlike" authority --- is very costly and destructive.

Think about it like this: In 2007 alone, the RIAA spent roughly 2.8 million dollars to lobby for laws that would

1) Give greater penalties for infringements (whose fines are not necessarily based on losses)

2) Give the federal government more control over the internet

3) Affect the international copyright laws

4) Require ISPs to install and run special filtering equipment.

What this all amounts to is more money out of our pockets so music business executives can reach their "bottom line." What doesn't go directly to the RIAA is charged to us in the form of taxes to facilitate the creation of new legislation. And if someone just happens to be doing something against one of these laws, they can be fined with astronomical fees, and/or put in prison. Incidentally, do you realize that the US has the largest prison population of any country in the world?! I really don't feel like paying taxes to house so-called "criminals" who make copies for their own use. We have enough murderers that I am glad to put up in the hoosegow as it is. Not to mention, we already pay more for CDs than is dictated by inflation, we will pay for any public defenders provided for these "criminals", we will pay the ISPs to facilitate for the extra equipment (while DECREASING bandwidth), and we'll pay for a "policed" internet. This doesn't sound like America's original idea of freedom to me.

Now, this is why I say call the new "bottom line" imaginary.... because IT IS. This is a concept perpetuated by formal financial accountability and the correct practices of accounting. This is a good thing in itself, but what most people fail to realize is that companies have started to change the meaning behind the phrase. Business has literally turned the bottom line into a "woulda-coulda" scenario: "If we didn't make as much as we did last quarter at the same expenditure, we are losing money." That's bull. If they made a profit and came out in the black, they MADE MONEY. In other words: they DIDN'T LOSE MONEY. It's all about comparative wealth. "Our company lost 4 million (in profit) this year." I am sorry, but a positive source of income is still a positive source. And if it is greater than the overall cost of running the business, nothing is "lost." Therefore, the bottom line is being referred to as a sort of "cushion" - an imaginary margin - that needs to be filled above what the literal bottom line is.

Here is where the two subjects - the imaginary bottom line and too much control - meet. Why is the RIAA doing so much to get laws passed to limit and control media? There are several reasons:

1) The large music industry no longer has complete control over it's own media. So they intimidate, change formats, use copy protection, sue people, and lobby gov't for change that facilitates their own copy protection.

2) The large music industry no longer has complete control over it's own bottom line. They use the idea that, if they normally made X amount by selling Y amount, then if THAT LINE (not the bottom line, per se) isn't met, they MUST be losing money.

3) The music industry does not have the artist's financial gain in mind. Just look at the amount of royalties an artist gets after recording with a large company. If they actually "break even" from all of the fees incurred from recording, promoting, distributing, etc..., they will make anywhere from 3 cents to 2 dollars per CD. Where does the rest of the 14 to 17 dollars go? You guessed it. The biz. And any artist who signs a contract actually signs to PAY for all of the record company's expenditures. The only way the artist makes ANY money from sales is if they brake even. You can look this stuff up, too.

Given all of these facts, we can see that the big music business doesn't want to change. It wants to exert more control so that their imaginary financial cushion that they like to call the "bottom line" is met. And in doing so, they sue everyone from 12 year olds to dead people. They force away our internet rights and they are unwilling to rethink distribution licensing. Not only do they want to do these things here in the US, but they want to do them internationally as well.

So why am I even blogging about this? Because I feel as though I have a viable solution. Here's what we know:

1) Artists by default retain COMPLETE CONTROL of all of their intellectual property. This is nothing new. Since the inception of the first US copyright laws, it's been that way.

2) Big music business contracts artists in a manner that has them sign certain rights and licensing over as to be in the music business's best interest (not the artist's).

So the solution lies in the licensing. It's as simple as that. Let's use this scenario as a hypothetical case-in-point: An artist gets signed to a big label. They tell the artist that he must sign a contract giving away earning and copying rights until the company breaks even on what they spend (and feel they are worth for the service). The record sells a million copies and the company breaks even. What did the artist make so far? Nothing. It happened with Toni Braxton and she wasn't an "unkown" or an indie artist.

Now, let's take MY solution. An artist finds a GOOD but small indie label that can record him for next to nothing. The artist spends a few hundred dollars recording the songs he plays best. The signed contract is for payment to the studio only. No rights are signed away. Then, he enters into talks with the label itself for distro privileges. They work out a deal where they can distribute his music in a smaller bulk arrangement that won't break his bank. Meanwhile, they sit on this deal until he can sign the contract and provide them with the necessary funds.

This is SO possible today and that is what the big companies are so afraid of. Anyone who is good enough with a DAW can produce pro-quality recordings. Artists have more freedom than ever because of the digital availability that the internet facilitates. Therefore, distribution is no longer a financial issue - only ADVERTISING.

==========================================================================

I developed a sort of "hybrid" type of license for all my personal music as a solution to what the RIAA has been pushing. Basically, my license states that:

1) Any physical or digital media that is being sold under a retail schema via artist's permission, must be paid for by the consumer. In other words, if I say you must buy it and it has a price, you have to pay that.

2) a) However, any media once paid for, is copyable for personal use, free distribution, or public performance provided b) the author's name is used and no money is made from doing so.

3) Any media obtained through a non-retain downloadable digital medium will be considered free as long as rule 2b applies.

4) You are NOT allowed to put ANY digital copy protection of ANY kind on the copyrighted work as it is a breech of this license.

There is no "imaginary bottom line", no "losses" from downloads, no one gets sued, and I still get paid for units sold. The only ones who lose out are the RIAA - because they CAN'T sue people over this license, and the big music biz - because they cannot force you to sign over your rights.

I realize that small business cannot promote at the same level as big business can. And that is my solution's "Achilles heel". But everything else is in place. It's very obvious. And if enough people get over the idea that fame comes from being under a large company's "umbrella", the indie music industry will explode. Not only that, but with licensing resembling what I laid out, the RIAA will almost run out of cases to try. We can retain our freedoms, and the artists will inevitably make more money.

Please, tell me what you think.

Peace and axle grease, Jon Wilson

(NOTE: The website where the RIAA references are made has many more links on it to other RIAA related material. This is the reason for the limited references)

Jon is a freethinking musician who has been playing bass for 16 years and recording for 5. He believes that people have the power to influence and decide their own destinies. He also believes that adaptation to change facilitates better understanding and harmony. Jon holds an IT degree in computer programming and has received many awards for academic excellence.

References (3)

References allow you to track sources for this article, as well as articles that were written in response to this article.

Reader Comments (4)

Disappointed in this post. There is nothing revolutionary here.

"They work out a deal where they can distribute his music in a smaller bulk arrangement that won't break his bank."

Not even sure what that means. What is a small bulk arrangement? If you know of a way to do physical distribution effectively, for cheap, please enlighten us.

I'm also not sure about the whole basis of the new bottom line argument. I don't believe anyone is mistaking less profit for loss. I do believe seeing a big percentage change in profit with the "same expenditure" DOES signal that there is a serious problem, probably in expenses.

November 13 | Unregistered CommenterAndrew Goodrich

this is brilliant. your post kind of nudged me into deeper thinking on some similar ideas of my own. as i was reading, this thought crossed my mind:

many people (including myself) regard an artist/band as a company. what is best for a startup company is slow and steady growth to insure that they don't take on too much debt, and diversify too fast. when an artist signs a standard contract with a major music company it's like a startup business taking on too many partners too fast, getting a loan from the bank too early or going after vc money before they are ready.

what a new artist needs to focus on is a) making music worth remarking on b) not growing beyond their means (don't sign with anyone, or sign only very small and limited contracts at first) c) making sure their business fits the marketing, not the other way around.

November 13 | Unregistered Commenterstinson

To Andrew Goodrich:
Sorry to disappoint you. Firstly, I will address your issues.

1) "They work out a deal where they can distribute his music in a smaller bulk arrangement that won't break his bank." Not even sure what that means. What is a small bulk arrangement? If you know of a way to do physical distribution effectively, for cheap, please enlighten us.

A small bulk arrangement is exactly what I said it is. There's no hidden meaning here. Instead of paying a company (let's say) $500,000 out of your sales and touring revenue for x amount of CDs and promo provided you DO manage to strike a "big time" deal, you pay a couple grand to a small company for the CD distro and some limited promo. Remember, I already stated that I understand that: "... small business cannot promote at the same level as big business can."

2) I don't believe anyone is mistaking less profit for loss. I do believe seeing a big percentage change in profit with the "same expenditure" DOES signal that there is a serious problem, probably in expenses.

Granted, but I believe businesses are looking in the wrong place to judge their bottom line. Firstly, if you are copying a physical medium and find 100,000 extra digital copies (like mp3s) lying around that weren't copied by you (the company), there's no way that hurt your actual expenses. You still used x amount of money to produce y amount of physical goods (CDs in this case). Only now, instead of producing y amount of copies for x amount of money, you get y + 100,000 for the SAME amount of money. The only thing that could hurt your bottom line in this case is if the unauthorized distribution of digital media actually caused the sale of physical media to be less. Instead, most of the music business considers any unsold, unauthorized copy as a POTENTIAL sold copy. So to them every unauthorized copy equals a negative amount. Within all of this, we can observe two things fairly clearly - not all copies that are obtained or made will EVER be sold. This holds true in all media and even before the days of readily available digital media..... and it costs very very little to copy and distribute digital media. The cost is quite literally time + bandwidth which is substantially less than physical reproduction and anyone with a limited computer can do it. So where do these companies get off using this argument when it is so hard to prove that digital copying hurts sales anyway?

3) "There is nothing revolutionary here."

Of course there's not ; )
The ability to license one's own works has been around since the observance of the ideal of intellectual property. But what I believe to be truly revolutionary is the idea that society is poised to bring about this change (as in: unique licensing) in a very REAL and popular way so much so that it could cause the majority of the music industry to either follow or go out of business. And I don't mean by cutting into the bottom line. I mean by the idea that people would rather buy an $8 CD instead of a $12 or $17 one. Or because people are being sued for no REAL reason except a legality. Or because fans who love an artist aren't allowed to share his music with others. This is preposterous.

I believe the RIAA sees this and is fighting like mad to preserve the old way by reducing freedoms and imposing legalities. Meanwhile, there will always be digital media, computers, networks, and people who will get what they desire.

November 23 | Unregistered CommenterJon Wilson

To Stinson
Thank you! And to be honest, I never thought of it in the way you put it. I believe your comment is probably more brilliant than my own :)

You make some good, key points to consider about the business part of it. Whereas I just really loathe the idea of taking away freedoms and imposing legalities ESPECIALLY when they are driven by the "almighty" dollar.

November 23 | Unregistered CommenterJon Wilson

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