It is ironic that in recent months, label chiefs have been stealing center stage from their more illustrious label acts but for all the wrong reasons. Where Britney had teased to reveal too much of her inner self, Doug Morris, for a man in his position as Universal Music’s CEO shocked the industry with revelations of the basic inadequacies of his anterior cortex when he claimed to have been clueless on not only technology but as a CEO, unable to even organize and hire the right talents. The recent pronouncements and actions of Doug and his cohorts give us cause to wonder if they really know what they are doing and if they have learnt anything since the onset of digital music activity almost a decade ago. Either he was putting on an act of stupidity to hide the greater offense of devious and greedy turf protection which the labels had been engaging in for the best part of the past decade or else he was just simply too inane.
Howie Klein, who previously worked under Doug Morris as President of Reprise Records takes him to task for his throwaway comments on not being being able to find a suitable technologist. As Howie states it, “in 2000, Steve Jobs snagged our VP of new media, Jimmy Dickson…to help with Apple’s music strategy… 6 months later: iTunes 1.0.” But Howie and Jimmy had already realized that the Internet was an opportunity and brought it forward to Doug and the corporate honchos as,
“not an opportunity to sue teenagers and/or their parents, but a new opportunity to let people purchase their music the same way they do at record stores… Our proposal, after lots of corporate headscratching, hummimg and hawing, was denied. So what happened?
They aggressively sued music fans. They didn’t give connected music consumers any alternative to piracy.”
For charity’s sake, let’s just grant the music label bosses a leave of their senses in 1999 BUT then over a sustained period of at least 8 years , they still haven’t got it - not one out of the sorry parade of major label CEOs. Instead of progressing with technology coupled with changing business models, they have instead variously been in denial, and then they subsequently regressed ethically with their main use of technology being for defensive, deceitful and destructive purposes - DRM, rootkit subterfuge, P2P spoofing, fake torrent sites and online scam ads. As Thomas Hesse, Sony-BMG’s digital head who was behind the rootkit fiasco stated with arrogant smugness, “Most people, I think, don’t even know what a Rootkit is, so why should they care about it?”
We can’t all as armchair CEOs figure out the best transition to the digital future and that is why it is a well-paid job. But if all the budget and energy is being spent protecting their turf to preserve the hubris that they have been accustomed to - instead of finding solutions to facilitate this shift to digital - then the obvious suggestion as the first step in this transition is for the Luddite label chiefs to be fired as they have totally lost the plot. Granted that few of us are shareholders of these labels in order to have a say in executive office appointments or terminations - but with major labels controlling up to 80% of commercial music combined with their failings which are obvious to all but themselves, they do have an effect on our lives too.
WE WAS WRONG
If they were simply passively ignorant, it wouldnÃ¢â‚¬â„¢t be half as bad, but their Sisyphean efforts to stymy the changes engendered by technology, are at best negligent, and at worst, criminal. And finally after all these years, Warner CEO, Edgar Bronfman admitted as much during the recent GSMA Mobile Asia Congress in Macau as to how they actually saw it as a war against the very people who were supposed to be financing their business:
“We used to fool ourselves. We used to think our content was perfect just exactly as it was. We expected our business would remain blissfully unaffected even as the world of interactivity, constant connection and file sharing was exploding. And of course we were wrong. How were we wrong? By standing still or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find and as a result of course, consumers won.”
But words are cheap, and besides paying lip service to customers’ needs, for now there are still no immediate benefits for them while Warner is still holding out on non-DRM music. Oh yeah, half of the major labels got rid of DRM but too little, too late and still too expensive as most music fans will probably still get their fix in DRM-free formats from their favourite free download services. And in a new development, Mad Doug is regressively introducing DRM again with his Total Music concept where music will be locked into Nokia phones. Nothing they do seem to be in favour of their customers and as Seth Mnookin of Wired stated it pointedly,
“Over the years, the label has for the most part used its market power to squeeze money out of others’ ideas. And its current moves - DRM-free songs and the Total Music subscription service - aren’t about serving consumers, at least not principally. They’re aimed at taking on Steve Jobs and, specifically, limiting the power of iTunes.”
And their other aim has been to preserve the hubristic lifestyles that they have been accustomed to, with tales of excess in the music industry rife at the highest levels and then some, even permeating down the ranks. As highlighted by the Telegraph last week, Ste Williams, lead singer in a band called Cecil, who was signed to EMI’s Parlophone label for eight years said,
“There were a lot of people just employed to say yes and no, and you were never quite sure what their jobs were. I’m from Liverpool, I don’t need someone to get paid ridiculous amounts of money just to hold my bottle of water during a photoshoot. So much money was wasted.”
“A Mayfair hideaway reserved for record label EMI’s top brass has been deemed surplus to requirements by the company’s new owner, city financier Guy Hands and his Terra Firma private equity vehicle. The house has been sold for £5.6m, marking the end of an era of excess at Britain’s biggest music company. Gone too are the £200,000 a year spent on the euphemistic “fruit and flowers” for EMI’s west London offices, and the £20,000 bill for candles.
“The last thing they’re stripping down is their own expense accounts and shit. I mean, Jimmy Iovine of Interscope Records takes a private jet or rides first class to tell a band they don’t get tour support. I’m really sad for the days of the glorified groupie with the fucking hundred thousand dollar expense accounts. They’d drop bunches of bands before they would ever cut their expense accounts.”
In a prescient interview in 2003 with Rolling Stone, Steve Jobs himself observed,
“We think there’s a lot of structural changes that are probably gonna happen in the record industry, though. We’ve talked to a large number of artists that really don’t like their record company, and I was curious about that. And the general reason they don’t like the record company is because they think they’ve been really successful, but they’ve only earned a little bit of money. They feel (they’ve been ripped off).”
In the ensuing panic in the past week, all of this has resulted in blood letting and inevitably, a lot of talented but probably underpaid and passionate music executives are going to be released as reported in detail by Hypebot and Velvet Rope. At the same time, we should also spare a thought for the many label executives who have been forced to blindly comply with royal decrees about DRM and other luddite policies by their misguided label chiefs - which they might not be in agreement with. I know for a fact that, especially in countries outside of the US and Europe, major label executives have had no choice but to secretly undertake deals - legal, mind you - which would not have been approved by the company’s ignorant policy makers, just to meet their budgets and pay the rent. Not only have some labels chiefs lost the customers, but they’ve also lost their own people - and more famously in recent months, their artists.
NUMB AND DUMBER
“I’m also beyond pissed, as in not pissed, because I kinda figure they just don’t know better by now. It’s like when a dog shits in the house, you can hit ‘em with a paper but they really don’t know what the fuck happened. How can retarded kids know to not throw a Frisbee at the forehead of another retarded kid?”
I DIDN’T KNOW, I DON’T WANT TO KNOW
There is no shame in first realizing and admitting lack of experience in certain areas of the music industry and then keeping the hell out of there, or else learn quickly or hire experts in those fields. Steve Jobs, himself no less, clearly recognized his limitations,
“It would be very easy for us to sign up a musician. It would be very hard for us to sign up a young musician that was successful. Because that’s what the record companies do. Their value is in picking that 1 out of 5,000. We don’t do that.”
In 2003, FORTUNE talked to a few high level label executives and they also concurred with the view of sticking to their expertise in music production and A&R:
- Rolf Schmidt-Holtz, then CEO of BMG (before taking in Sony as well into his portfolio) thought that BMG should be in the business of producing music, not worrying about how it is distributed. He said, “What we need are good songs, good records. I don’t care if they are sold by bicycle, by plane, by CD, online. We’ll license them to anybody. But I’m not going to run an Internet platform. I have no clue how to do that.”
- Arista’s CEO, mega-producer L.A. Reid when asked about the fact that Avril Lavigne’s songs couldn’t be downloaded legally then, said, “I didn’t know. And I don’t want to know. Honestly, that’s just not what I focus on at all. I really feel that my role here and my passion is finding artists and helping them come up with material that we think will work.” His attitude is fine with his superiors. Schmidt-Holtz doesn’t want Reid to worry about downloading; he wants him to find the next Avril Lavigne.
- And the larger-than-life Clive Davis seemed surprised when asked if he is thinking about digital sales and stated “The strategy is one of creativity,” Davis says. “Really, the technology I leave to others.”
Even Rick Rubin, producer extraordinaire and now co-head of Columbia Records in that interview with NY Times three months ago revealed a degree of naivety in assuming that subscription is the only way forward but still, he is to be lauded for embracing an innovative mindset that has been hitherto lacking in the collective mindset of label chiefs.
360? YOU MUST BE HAVING A LAUGH!
But now as we approach the end of 2007, the 360-degree model is all the rage, and one can only conclude that they must be intoxicated on their expense accounts.
Specifically Edgar Bronfman told analysts on 29 November that they had “made a decision about our business … and the way we are going to build our business … and we’re not going to continue to sign artists for recorded music revenue only.” Instead of simply focusing on their areas of expertise and strengths, they are now moving into other areas of the music industry to impose their well-documented inefficiencies, being drawn shamelessly like sharks to blood in search of revenue to sustain their erstwhile hubristic lifestyles. Leopard, spots, come to mind - but like fish out of water, if the labels pursue this direction, 8 years from now, there is a high chance that Bronfman’s future successor will likely issue another admission of failure but will still not be wiser to the cause. Or do we collectively say enough is enough as Ian Rogers, head of music at Yahoo defiantly did so recently in a speech entitled “Convenience Wins, Hubris Loses“,
“8 years. How much opportunity have we lost in those 8 years? How much naivety and hubris did we have when we said, “if we build it they will come”? What did we spend? And what did we gain? We certainly didn’t gain mass user adoption or trust, two prerequisites to success on the Internet. If the licensing labels offer their content to Yahoo! put more barriers in front of the users, I’m not interested. Do what you feel you need to do for your business, I’ll be polite, say thank you, and decline to sign. I won’t let Yahoo! invest any more money in consumer inconvenience. I want to delight consumers, not bum them out.”
So far into a long article on the music industry and still no explicit use of the word “piracy” is quite a feat indeed! Piracy exists as the executive insurance for inefficiencies and bad business decisions of label chiefs. “Budgets not met? Can’t keep up with the changing economy and technology?Blame piracy. Not to absolve the negative role that piracy has played in the digital music environment, but we also have to realize that its role as the bogeyman serves other parties’ interests well. Piracy, in a bizarre way is the lifeblood of the RIAA and IFPI - without it, they cease to exist and the labels (and their artists) would be at least $132 mil richer annually. To the outsider, it is shocking that years of continued high levels of payment to these trade bodies has still have not yielded what the labels have set out to achieve - and this exercise in futility and wastage of funds has finally been identified by at least one label chief, EMI’s Guy Hands as a target for cost-cutting
LOOK BACK TO LOOK FORWARD
Cory Doctorow succintly sums up the evolution of technology and copyright in media development and this is how the label chiefs should view it:
“The record industry (which only exists because the phonogram producers of a hundred years ago “stole” compositions from sheet music publishers before the law was passed that legitimized their piracy) deserve no sympathy if their best excuse for their inability to keep up with change is “We couldn’t figure out how to recruit people who understood technology.”
Technological shifts have always resulted in copyright shifts. In the past century, US copyright law has been changed to legalize widespread ‘piracy’ in the form of sound recordings, radio broadcasts, cable, jukeboxes, and VCRs. Each one of these changes has had winners (the public, and the companies that capitalized on change), and losers (the companies that didn’t capitalize on changes, the artists who bet on them). The record industry exists due to the legalization of a form of technological copyright infringment a century ago, and the fact that they responded to the current change by suing 20,000 American music fans speaks poorly of their sense of history and their business acumen.”
Some say the music’s stopped for the labels but that would mean a closure is at hand - instead we still hear music…but that of Nero fiddling.
Doug Morris Cartoon: Courtesy of Joel Watson