Tag Archives: business

The day the (free) music (almost) died

According to Wired, today marks the 10th anniversary of the music industry’s lawsuit against file-sharing site Napster.

You may remember that Napster’s defense in the suit, before laying down and playing dead, was that it did not give away copyrighted music — rather it provided a platform for users to share their own files with each other. The RIAA’s argument was that Napster was a bunch of fire demons with cloven feet who were sure to turn the nation’s children into gay communist ax murderers.

After suing Napster for everything it had, the RIAA turned its fire on Bertelsmann, the German media conglomerate that had loaned Napster money:

The lawsuits accused Bertelsmann of copyright infringement for propping up Napster financially with loans totaling $85 million. The lawsuits claimed the firm wanted “to preserve Napster’s user base for Bertelsmann’s own commercial advantage.”

At the time of the loans, Bertelsmann’s chairman, Thomas Middelhoff, explained that “Napster has pointed the way for a new direction for music distribution, and we believe it will form the basis of important and exciting new business models for the future of the music industry.”

Bertelsmann paid millions of dollars to settle the claims. The media concern agreed in 2006 to pay the world’s largest label, Universal Music Group, $60 million to settle the allegations. EMI got an undisclosed amount in 2007, and Warner Music Group settled that same year for $110 million.

The music industry has come a long way since the original Napster lawsuit. Not only has it recognized the promotional value of easily-copied digital music files, but it has engineered a successful shift in its core business model to compensate for the corresponding decline in CD sales.

Hahahaha, just kidding — they’ve been suing the shit out of college students and stay-at-home moms.

Oh, and stiffing the talent.

Witness the saga of Tim Quirk, bassist for Too Much Joy. Recently Warner Music sent Quirk a royalty statement that allegedly accounted for digital sales of the band’s music. The statement showed that Quirk’s band had earned a grand total of $62.47 over the prior five years (which was simply subtracted from the band’s “unrecouped” advances*). This is where Quirk’s day job helped him get to work:

Here’s the thing: I work at Rhapsody. I know what we pay Warner Bros. for every stream and download, and I can look up exactly how many plays and downloads we’ve paid them for each TMJ tune that Warner controls. Moreover, Warner Bros. knows this, as my gig at Rhapsody is the only reason I was able to get them to add my digital royalties to my statement in the first place. For years I’d been pestering the label, but I hadn’t gotten anywhere till I was on a panel with a reasonably big wig in Warner Music Group’s business affairs team about a year ago.

I knew that each online service was reporting every download, and every play, for every track, to thousands of labels (more labels, I’m guessing, than Warner has artists to report to). And I also knew that IODA was able to tell me exactly how much money my band earned the previous month from Amazon ($11.05), Verizon (74 cents), Nokia (11 cents), MySpace (4 sad cents) and many more. I didn’t understand why Warner wasn’t reporting similar information back to my band – and if they weren’t doing it for Too Much Joy, I assumed they weren’t doing it for other artists.

So a major player in the industry that spent years and millions attacking its own best customers has yet to build a reliable system for reporting to the artists how much they’re selling or not selling. Then when someone pesters them for real numbers, they sit on the request for a year and send him a half-assed statement that is clearly, indisputably wrong. And they know he’s a music industry insider, so they can’t possibly think they’ll get away with it.

In conclusion, the music industry is so hopelessly stupid it makes the newspaper industry look like Google. Oops. Bad choice of words?

Dec. 7, 1999: RIAA Sues Napster [Wired]

* Here is Quirk’s explanation of how advances and the concept of recouping works:

A word here about that unrecouped balance, for those uninitiated in the complex mechanics of major label accounting. While our royalty statement shows Too Much Joy in the red with Warner Bros. (now by only $395,214.71 after that $62.47 digital windfall), this doesn’t mean Warner “lost” nearly $400,000 on the band. That’s how much they spent on us, and we don’t see any royalty checks until it’s paid back, but it doesn’t get paid back out of the full price of every album sold. It gets paid back out of the band’s share of every album sold, which is roughly 10% of the retail price. So, using round numbers to make the math as easy as possible to understand, let’s say Warner Bros. spent something like $450,000 total on TMJ. If Warner sold 15,000 copies of each of the three TMJ records they released at a wholesale price of $10 each, they would have earned back the $450,000. But if those records were retailing for $15, TMJ would have only paid back $67,500, and our statement would show an unrecouped balance of $382,500.

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Oh. Oh no. Oh no no no no. Oh dear God no.

Last week I thought long and hard about writing a post on our former arch-nemesis Gregg Easterbrook — whom we have lambasted in this space for everything from self-righteous moralizing to being bad at science. I’ve continued to read Easterbrook’s Tuesday Morning Quarterback column throughout all of these episodes, because despite his flaws, he does offer a unique approach to sports and is quite often correct about things like the mendacity of Brett Favre and the fraidy-cat play calling of NFL coaches.

That was what I was going to say. Now I’m going to say something different.

gregg_easterbrookNow I’m going to say that Gregg Easterbrook has hatched, from deep inside the inky recesses of his brain pan, the single most stupidest idea for saving the newspaper industry in the history of the entire universe. If there were a contest in which everybody in America were asked to come up with the dumbest, most intellectually baffling, immediately recognizably moronic idea they could, and then those ideas were cast into a great heap so that they could be weighed as one unit, it is indisputable scientific fact that it would represent only a small fraction of Gregg Easterbrook’s proposition.

If you opened the door to a room with this idea inside of it, the smell alone would erase your entire brain.

Consider yourselves warned:

Can technology save newsprint? Here is the advance TMQ is hoping for: a print-cost breakthrough that allows you to print the newspaper yourself at home, eliminating delivery. Xerox recently rolled out a new generation of printers that use something called “solid ink” to cut the cost of color. Xerox’s product is intended for the office market, where most printing occurs, but perhaps is an indicator there will be a cost breakthrough in home printing.

“Huhhhh-GUH. Huuuhhhhhhhhhh-guh. HUUUUUHHHHHHHHHH-GUHHH.”

That’s the sound of my disbelief falling off its suspension.

There’s more:

Already home printers are themselves cheap, though the ink is expensive. If “solid ink” or some other improvement cuts the price, here’s what a future newspaper economy might look like: You subscribe, and each morning at whatever time you select, the newspaper transmits itself to your advanced printer, including, of course, the very latest news to that moment. Even with you paying for the ink and paper, that might cost less than $63 a month, since the newspaper subscription price — now basically a licensing fee — would go way down. You could set your printer to produce only the parts of the paper you actually read, reducing resource waste. A category of entry-level employment, newspaper delivery — once done by teens on bicycles, now often done by adults using cars — would be eliminated. But that’s a lot better than all newspaper-related jobs being eliminated!

If there were only some platform that would deliver me the news I need without forcing me to subscribe to a printed, delivered newspaper. Perhaps some way to make use of these computers and their blazing fast rates of information transfer. Oooooh, I’ve got it. Someone should establish a digital network of some sort in which news stories can be hosted and transmitted. Then we can feed that information directly into the brains of cockatoos — either through USB or ethernet ports. The cockatoos can then read us the news as we prepare to walk to work the wrong way around the entire Earth.

For all our grousing about what appears in the paper, right now American newspapers as a group are the very best they have ever been. Subscribe, or patronize the local newsbox. You will be sorry if the newspaper industry fades away. And don’t say, “I’ll just use the Internet for news.” The vast majority of the news presented on the Internet originates as a newspaper story.

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I’m sorry. My brain just flipped inside out for a second there. What were we talking about? The Internet?

Yep, Favre proved he can still play [TMQ]


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Social networking sites invade Maine

Father Scott

You may not be aware of this, but change is not Maine’s middle name (I think it’s actually the Indian word for moose crap, but that may be wrong too). So you might be surprised to find that this whole Facebook/Twitter/blogging generation is just now making its way into my fine homeland.

Former newspaper staffmate and Facebook friend of the Padre Mindy Favreau has an interesting piece about how HR professionals are beginning to use these technologies.

In Maine, HR professionals are just starting to warm up to this new technology. David Pease, senior vice president of human resources at Androscoggin Bank in Lewiston, was recently elected director of the SHRM Maine State council, and has been pushing social media to the state’s HR professionals as a way to keep people connected. He created a discussion group on LinkedIn called Maine HR Council, and he has noticed an uptick in the number of people he sees linking up with him online; so far the group has attracted 68 people in less than two months. He also started a blog called MaineHR, and made his first and only post on Dec. 6. So far, no one has made any comments on it. “[Using social media is] beginning to become more prevalent,” he says. “But it’s slow going.”

As Mindy’s subjects note, it’s about finding value in these sites — being on them in and of itself does not make you useful in anyway. And perhaps this slow-going way has some merit. For instance, maybe if I spent less than six hours a day looking at my Reader and clicking on links in Facebook to see what my friends were writing, I’d get some work done. It’s a good thing 68,000 people didn’t get laid off today, or maybe I’d have something to worry about.

You wouldn’t Twitter either if you had this view


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Friday Random 10: Volt Edition

Pax Arcana

Despite my endorsement of extra-terrestrial Vice Presidential candidates, Pax Arcana is a proud American who wants nothing but the best for cornerstone American businesses such as auto manufacturers, software companies, and the Wayans brothers.

That’s why I’m openly rooting for the Chevy Volt.

The Volt. Can you feel the electricity?

Like other American car companies, Chevy is on the brink of irrelevance thanks to our increasing distaste for the gas-guzzling trucks that propped up the domestic market throughout the 1990s and early 2000s. In a hugely risky gamble to get back on track, Chevy is pouring around half a billion dollars into research and development of the Volt, a mostly-electric car aimed at bringing reduced-emissions vehicles to mainstream America.

If successful, the groundbreaking technology tucked inside the car could drastically reduce the environmental impact of each owner:

The Volt, which General Motors finally unveiled Tuesday, is a series hybrid, also called a range-extended electric vehicle. Like the Prius, it’s got an electric motor and a gasoline engine, but the engine merely charges the battery as it approaches depletion. Electricity alone turns the 17-inch wheels. The Volt is designed to travel 40 miles on a single charge of its lithium-ion battery, meaning most drivers will never burn a drop of gasoline.

It won’t be mass produced until 2010, but here’s hoping Chevy’s on to something. I’m sure our environmentally savvy and not-at-all-shrunken-brained vegetarian friend Eoin over at the Bright Green Blog will keep us up to date.

The songs:

Candylion — Gruff Rhys
What’s Good — Lou Reed
Blind — Talking Heads
Videotape — Radiohead
Masochism World — Hüsker Dü
Bye & Bye — Bob Dylan
NYC-Gone, Gone — Conor Oberst
Mississippi — Bob Dylan
Bought for a Song — Fountains of Wayne
Missing — Beck

Bonus Video:

I’m OK You’re OK — Let’s Wrestle (Live at Stolen)

The Rules: The Friday Random 10 is exactly that — random. We open up our iTunes, set the thing on shuffle, and listen to 10 songs. We are not permitted to skip any out of embarrassment or fear of redundancy. Commenters are encouraged to post their own.

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This is the way the industry ends, not with a bong but with a plink

Pax Arcana

Jay Leno is America’s foremost unfunny late night talk show host, but did you also know that he knows stuff about cars? It’s true! He owns lots of them!

As such, Leno is uniquely suited to be doling out advice to the U.S. automotive industry — which is undergoing a seismic shift thanks to plummeting sales of gas-hording SUVs and light trucks:

The problem with what’s happened over the past few decades is that you have a whole generation of kids who have no brand loyalty. They’ve grown up on Honda, Hyundai, Kia and Toyota. To lure them to the American brand, you’ve got to give them something exciting, something bold, something different. America does technology well, and I think this is how the companies will bring those buyers back. I think cars like the Chevy Volt, which is entirely battery-powered, or hydrogen cars from Chrysler, Ford, and G.M. will take off.

Like most people, Leno seems oblivious to the difficulties of altering product lines on such a massive scale. Think about how hard it is for you to rent a U-Haul truck for an afternoon — calling the rental place, confirming your rental, arguing with the guy at the shop about your reservation, paying, etc… Now imagine trying to renegotiate contracts with thousands of independent parts suppliers, outfitting hundreds of manufacturing centers with new equipment for producing more light cars, realigning the global shipping routes of hundreds of thousands of 2,000 pound packages, calculating product distribution charts among dealerships in hundreds of countries, and rolling out brand-new multimillion dollar sales, accounting, human resources, and supply chain software to support it all. And that’s before you consider how to market your new cars or, you know, figure out what they should look like. [Yes, I write about shit like this for a living. Bored? Deal with it.]

But Leno does raise a good point here:

When you get into a high-priced, well-made American car today and the key is in the ignition, you hear a melodic bong, bong. But when you get in a cheap American car, like a rental, and the key is left in, it goes plink, plink, plink. It’s just horrible. Every time you use the turn signal, it’s like breaking a chicken leg. In order to make the more expensive car more appealing, U.S. companies feel as though they have to dumb down the cheaper car.

In other words, automakers have to recognize that buying wisely is a virtue and not a sin — and they have to design cars accordingly. Also, would it kill them to make the cup holders bigger? I can hardly fit my magnums of Cristal in most of them.

Jay Leno’s Serious Advice to the U.S. Auto Industry [Wired]

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UPS drivers go all Zoolander to save gas

Pax Arcana

Rising gas prices are more than just an inconvenience for companies that rely on the stuff. That’s why UPS instructs its drivers to conserve gas as much as possible by never, ever turning left.

I’m not kidding. Look:

Instead of wasting gas sitting in traffic, avoiding left turns keeps trucks moving and drivers have found they make deliveries faster by going right. It’s also good news for UPS’ bottom line. By turning right, the company says it saved over 3.3 million gallons of gasoline in 2007 alone.

“It’s a huge amount, and we also shaved off a total of over 30 million travel miles for our drivers,” according to Laura James, UPS’ industrial engineering manager.

When asked if he would require drivers to reverse direction to conserve more fuel (they currently race around the track counter-clockwise), NASCAR president Booger-Bob “Bubba” McCracker said “Helllllls no, sugartitties! They’s only one way to drive a race car — and that’s to the left! Besides, we already got all these left-facing tracks. Just what do you s’pose we goin’ do with dem once we build the right-facing ones, Mr. Norman Einstein?”

Also, did you guys know that the tops of UPS trucks are white? It’s true — which makes them exactly the opposite color scheme of Father Scott’s underpants (yes I will keep making fun of you until you start posting again you lazy asshole).

Right turns only! [Tampa Bay 10]


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Star athletes go for broke

Pax Arcana

During last night’s broadcast of Game 2 of the NBA finals, ABC ran a cursory-but-effective profile of Leon Powe — the shining star of Game 2 and a remarkable profile in courage for his struggle from childhood homelessness to the NBA.

Today we celebrate Powe’s 21-point performance by offering a humble prayer that his broke days are permanently behind him. According to the Toronto Star, that would put him in the minority of NBA players, a staggering 60% of whom are bankrupt within five years of retirement.

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Today in dumbass ideas

Pax Arcana

As has already been established and repeated ad nauseum by every hand-wringing sympathy whore in the wood-paneled halls of the fourth estate, the contours of the professional journalism business are changing rapidly.

Young people don’t read print newspapers. Classified ads are no longer the exclusive domain of local rags. Increased digital revenue is not enough to subsidize the losses. Advertisers are pulling out. Companies are buying out “experienced” reporters and editors to save a few duckets.

Yadda. Yadda. Yadda. We get it.

Among many elders of the journalism tribe, this confluence of events means only one thing:

The death spiral of the American republic and the end of the entire universe.

And instead of focusing on the obvious, though tricky, solution to the business problem (hint: information won’t cost as much to produce when you don’t have to buy paper, ink, trucks, gasoline, printing presses, and the services of dozens or hundreds of people to cart a piece of paper to the front door of a 30-something who wonders why he keeps re-subscribing to a print edition he never reads), these champions of the status quo go searching for ways to keep the old ways alive.

In this week’s Chronicle of Higher Education, retired Fortune journalist Lee Smith says the way to save newspapers is to convince each of the seven richest universities in America — Harvard University, Yale University, Stanford University, Princeton University, the Massachusetts Institute of Technology, Columbia University, and the University of Pennsylvania — to pony up 3% of their endowments to buy the New York Times.

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Other Music has the right idea

Pax Arcana

Now that legal sources for online music downloads are both plentiful and appropriately priced, the hard thing for music lovers is keeping up with the glut of choices.

Pax Arcana — and at least two fellows of the Pax Arcana Brotherhood of Flying Shark Vikings — have subscriptions to eMusic, which offers plentiful monthly downloads for a fraction of what you’d pay at iTunes or other online outfits. Almost all of the music on eMusic, though, is of the obscure indie variety. This makes it hard for non-obsessives like me to keep pace with what the hep kids call “the scene.”

While eMusic and other sites offer song samples, there’s still nothing like a good recommendation. For example, like when the good doctor (and alleged future interest rate tinkerer) tipped us off to A.A. Bondy and Deer Tick — both excellent listens.

The Pax Arcana pick of the week: Little Death by Pete and the Pirates.

BusinessWeek profiles NYC indie music shop Other Music, a brick and mortar stalwart that is capitalizing on its in-house expertise to boost business:

Last year, Other Music launched a digital download store that now accounts for nearly a quarter of the company’s sales. Labels and artists that aren’t featured on iTunes and other digital stores turn up on Other Music Digital first. The company also sells vinyl rarities on eBay and mail-order albums through its Web site.

The company’s first online venture began nearly a decade ago with an e-mail newsletter reviewing new releases. The update now reaches 25,000 subscribers, and Madell calls the blurbs his staff writes crucial to the store’s role as a tastemaker in the music world. “The people who work at the independent record shops tend to be the specialists and really know what they’re talking about, and that’s a real advantage when it comes to being online,” says Andrew Dubber, a music industry consultant in Britain and author of the blog New Music Strategies. Dubber says stores should try to capitalize on that expertise by helping consumers find what they like amid the near-boundless choice of the Internet (iTunes boasts 6 million songs).

Unlike, say, Pitchfork — which reviews every album released ever in rambling, pseudo-intellectual stream-of-consciousness deconstruction — the Other Music staffers just pick their favorites and share the love. Definitely something to check out.

From Bricks and Mortar to Digital Music Master [BusinessWeek]
Other Music Digital [home]

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Your coffee is wearing a throwback uniform

Pax Arcana

If you’ve ordered a coffee from Starbucks in the past few days, you may have noticed that the chain is now using the more old-fashioned brown logo with a twin-tailed mermaid on its cups rather than the more familiar modernized green mermaid. The older logo is similar to the one first used by the coffee retailer in 1971.

On the left, the new old logo. On the right, the new new logo.

Business Week says the company is dressing its overpriced products in the throwback uniform to harken back to simpler times — when people weren’t vandalizing the shit out of the company’s stores and complaining about its unfair buying practices:

This is the second time in three years Starbucks has trotted out the brown mermaid, inspired by a Norse woodcut. Back in 2006, she was resurrected to mark the chain’s 35th anniversary. This time, she is a messenger for Chairman Howard Schultz, who is trying to restore some of the goodwill and warm feelings for the brand that have gone by the wayside because of increasing coffee prices, machine-made lattes, and bad press.

But enough about that. Let’s talk about boobies.

Specifically, let’s talk about how the last time Starbucks trotted out the old logo, the American Civil Defense League for Refraining from Acknowledging the Existence of Mammaries (ACDLRAEM) came out against the bare-breasted siren:

In 2006, when the logo was originally revived, the chain received complaints about the “decency” of the logo and, despite the chairman’s well-known liberal politics, the lady grew long hair to cover her indecency. That’s the version we have today.

And we’re better off for it. Nothing gets Pax Arcana hotter than a cardboard print of a woodcut of a chubby half-fish woman with two scaly appendages for legs. Every time I see her, it’s like I’ve drowned and gone to sex coffee heaven.

Starbucks’ Retro Logo [Business Week]


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