Music 2.0 - Exploring Chaos in Digital Music

December 7, 2007

Time for Luddite & Wanton Label Chiefs to go

Filed under: Music Industry — maths @ 8:43 pm

Coke on Tap v2Doug Morris cartoon

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 wouldn’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.”

HUBRIS

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.”

The Independent & The Telegraph also reported more skeletons in the closet being revealed on the excessive lifestyles that the top executives had been indulging in at EMI,

“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.

Despite these kind of changes, Josh Homme of Queens of the Stone Age, in an engaging interview with the blog Antiquiet is still sceptical of the labels and pointed out,

“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

We’ve all heard the recent misgivings of Trent Reznor, Prince and Thom Yorke in their rants against their erstwhile labels but Josh Homme is remarkably even beyond that,

“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.”

PIRACY  INSURANCE

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.

Credits:
Doug Morris Cartoon: Courtesy of Joel Watson

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22 Comments »

  1. nice one. let’s not forget ian c. rogers post “Convenience Wins, Hubris Loses and Content vs. Context, a Presentation for Some Music Industry Friends” at http://www.fistfulayen.com/blog/?p=127

    i am seeing deja vu’s. i feel that the tipping point is near.

    Comment by minoruuuu — December 7, 2007 @ 10:03 pm

  2. Excellent post. Unfortunately, as public companies, 360 is the only available option for the majors. It will inevitably prove to be a disaster for everyone it touches, just like all of their other initiatives of late, but there are very few bands who will turn down a major deal, even if it is screwing themselves in the process. It’s all about the advance, baby.

    Comment by Ed Peto — December 8, 2007 @ 1:50 pm

  3. i pretty much agree with ed also.
    yeah, those advances and expenses have been pretty yummy………..
    for the bands that want to to “make it”, a lot of them dream of that excess……. those that don’t, are often treated as weirdoes. strange, since it seems that the former is destined for a shorter span.

    Comment by minoruuuu — December 9, 2007 @ 1:55 am

  4. […] by Om Malik, Saturday, December 8, 2007 at 7:28 PM PT Comments (0) Says Music 2.0 Blog: if all the budget and energy is being spent protecting their turf to preserve the hubris that they […]

    Pingback by Fire Music Lab Bosses Now - GigaOM — December 9, 2007 @ 11:40 am

  5. […] pero muy recomendable artículo en Music 2.0, “Time for Luddite & Wanton Label Chiefs to go“ (vía GigaOm) en el que se refleja cómo la industria de la música, gracias a la ignorancia […]

    Pingback by Música: el estado de la cuestión » El Blog de Enrique Dans — December 9, 2007 @ 8:24 pm

  6. […] Says Music 2.0 Blog: 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. This one is a must read. […]

    Pingback by Fire Music Label Bosses Now teasered @ Feed UP !! — December 9, 2007 @ 11:32 pm

  7. […] on the evolution of music and the struggle to change the industry, check out Music 2.0, where Maths has posted a longish — but definitely worthwhile — […]

    Pingback by Fiddy Cent on P2P: Artists need to deal - - mathewingram.com/work — December 10, 2007 @ 12:52 am

  8. […] on the evolution of music and the struggle to change the industry, check out Music 2.0, where Maths has posted a longish — but definitely worthwhile — […]

    Pingback by Fiddy Cent on P2P: Artists need to deal - - mathewingram.com/work — December 10, 2007 @ 12:52 am

  9. Great article! I also wonder if, perhaps one day, digital song files will used as promotional vehicles, instead of being seen as sold as revenue generating products. Of course, this would mean record labels would need to generate their revenue from 360-degree models. As Ed Peto wrote in his comment, that’s easier said than done. Interesting times we’re living in.

    Comment by Mike Lee — December 10, 2007 @ 2:53 am

  10. *instead of being sold as…

    (Rats, I hate typos)

    Comment by Mike Lee — December 10, 2007 @ 2:57 am

  11. […] the more I read about the music industry the more I laugh. Check out this article from music2dot0 that starts with the title, “Time for Luddite & Wanton Label Chiefs to go” which is […]

    Pingback by Bill Watt’s Blog » Blog Archive » More fodder for the music distribution debate — December 10, 2007 @ 3:11 am

  12. […] no wonder that the studios are having a very bad time, while there is a large backlash against the music side of the house, the video side of the houses are just as troubled, and facing the same kind of consumer […]

    Pingback by Viewers ready to revolt over delays with BSG season 3 | TechWag — December 10, 2007 @ 4:56 am

  13. While I’m mostly sympathetic towards this article, if you actually think that Internet company executives are going to do less raping and pillaging than the music industry executives, I think that’s a pipe dream.

    Comment by Owen Byrne — December 10, 2007 @ 9:21 am

  14. #13 Owen, the alternative does not necessarily need to be Internet company executives, but if the record label executives don’t get a grip soon and do the right thing, the business will be laid to waste by everyone simply feeling that it is their right to download everything for free. And at the same time your description of raping and pillaging is apt, as like hyenas waiting in the wings for the final kill of a wounded animal, search engines (and other internet services) will indeed move into an inefficient market and then pillage whatever they can via advertising and other means. And so you do have a good point
    But interestingly, let’s look at Amazon introducing the Kindle - I see it as a defensive strategy by Jeff Bezos while MOVING forward to keep the digital product within the family with a prescribed revenue model (time will be the judge of the revenue model) before Steve Jobs or some other disruptive service (Google Books anyone?)moves into their territory. Contrast this with the record labels circa 1999 till now who have just “stuck its head in the sand” (Guy Hands, EMI boss).

    Comment by maths — December 10, 2007 @ 2:15 pm

  15. Nice article. Feels a bit like deja vu - no matter how many of these things I’ve read / written over the years, nothing much seems to change.

    #14 - I’m not sure about comparisons with the Kindle at all - it’s a whole different ball game. Only about 10% of books are sold online, a tiny proportion of which are ‘e-books’. The market isn’t there, and there’s no advantage being a first-mover (semantics aside, I know they’re not the first).

    Comparisons with eg the iPod aren’t valid, partly because I can only read *a few books* in a good month while I listened to more than 1,000 songs last month. It’s about access, and I only ever need access to a couple of books at one time. So I just don’t see the benefits, either now or in future. It isn’t attractive on price. And I don’t need any more internet-enabled devices thankyou, I have plenty already. It’s a vanity project for the mighty Bezos that might pay for itself one day, but that’s about it…

    Comment by magicbullets — December 10, 2007 @ 11:21 pm

  16. #15 - Thanks
    Kindle might well be seen as a vanity project, and time will tell. But what if we all evolve such that the majority of reading/ writing in the future is done on a device?
    And that is where I’m trying to give credit to Bezos for trying to claim his stake in the digital domain from the onset (albeit based on a ‘what if’ scenario) as compared to the labels’ who have always been trying to suppress the digital instead of exploring new options. And we know that Jobs and Google are waiting in the wings to pounce, not with their current devices (eg. your mention of your iPod reading experience is duly noted) but they have the potential to develop products and services that will cause disruption to the existing infrastructure.

    Comment by maths — December 12, 2007 @ 12:17 pm

  17. Hey Maths - Awesome blog, as usual. It brings to mind the book I’m reading - Beinhocker, the origin of wealth. Basically, the argument goes that economic systems are evolutionary systems. Social Technologies, Physical Technologies and business models evolve. If they don’t evolve or arent’t fit for purpose, they die out. This seems like a classic case - the current model has to either evolve or die. Of course, they will kick and scream along the way… but, ultimately if better services, better business models and better technologies are available they will prevail.

    Comment by Lucy — December 12, 2007 @ 8:13 pm

  18. […] music indutry over many years, as well as the corporate excess, so the long and entertaining post here makes great reading (£20k/year candle bill […]

    Pingback by Music industry digital foolishness « Gregs blog — December 14, 2007 @ 5:09 am

  19. […] Music business: Time for Luddite & Wanton Label Chiefs to go […]

    Pingback by nothing happens — December 30, 2007 @ 2:22 pm

  20. […] wrong for the record labels Music 2.0, a blog focussed on digital music has a long analysis here that pulls no punches it where it thinks the labels have gone wrong. Worth a […]

    Pingback by Where did it go wrong for the record labels « The thing about useful stuff is — March 11, 2008 @ 2:37 pm

  21. […] Major labels’ luddite tendencies are legendary but their slowness at the head office level in sanctioning the tapping of the booming mobile music market in Asia allowed faster moving Service Providers and carriers to land grab juicy revenue shares, and as a result major labels in Asia are still paying the price as they are left with the short end of the stick in deals with carriers. But this very lack of technological understanding as admitted by Universal Music’s CEO, Doug Morris in his now infamous interview with Wired, had a more profound effect in the faster developing mobile and internet markets of Asia, as more advanced and unforgiving Service Providers and websites that sprung up on the back of this new technology invariably engaged in stealthy methods of music piracy, resulting in easy-t0-use applications and products that consumers welcomed with open arms. […]

    Pingback by Music 2.0 - Exploring Chaos in Digital Music » EMI Closing Asian Offices - Major Labels’ Global Foibles Exposed — September 1, 2008 @ 12:28 am

  22. it’s a de javu.

    Comment by Allan Piccolo Freder — February 4, 2009 @ 5:33 pm

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