Music 2.0 - Exploring Chaos in Digital Music

I managed to catch Nine Inch Nails frontman Trent Reznor backstage for a chat on his views on copyright and digital music distribution just before they played at the Beijing Pop Festival on 9 Sep.

In May this year, Reznor famously launched a tirade against his label Universal Music in Australia when he found out that:

“Year Zero is selling for $34.99 Australian dollars ($29.10 US). No wonder people steal music. Avril Lavigne’s record in the same store was $21.99 ($18.21 US). By the way, when I asked a label rep about this, his response was: “It’s because we know you have a real core audience that will pay whatever it costs when you put something out - you know, true fans. It’s the pop stuff we have to discount to get people to buy.” So, I guess as a reward for being a “true fan” you get ripped off. “

And this week in Beijing, he again reiterated his disgust with the labels by stating

“We will put out one last album for Universal and after that we will sell albums directly to fans from our website at (say) $4 an album”.

In full empathy with their fans, he even prepared a Chinese language section on the NIN website in preparation for their first ever concert in China, with a heartfelt message to his Chinese fans which translates as follows:

“As for the special situation in China, it does not seem to be easy to obtain Western music via legal channels, so I have the following suggestion for our fans: If you can find and buy our legal CDs, I express my thanks for your support. If you cannot find it, I think that downloading from the Internet is a more acceptable option than buying pirated CDs. Our music is easy to find on the Internet, and you might not need to spend much effort to find most of our songs. If you like our songs after you’ve heard them, please feel free to share it with your friends. As I have put all my effort and heart into my music, I sincerely hope that more and more people can share the enjoyment with us.”

Reznor is adamant that fans should not have to jump through hoops of fire and pay unreasonable prices simply to get NIN’s music -  least of all in this day and age when every conceivable work of music could be made available a click away online.

As he pointed out, the world is getting smaller but labels are not taking advantage of this opportunity to put this music conveniently in front of fans. As proof of his intent and anger at artificial borders being upheld for profit, Reznor vetoed a label-planned European maxi-single for the song Capital G opting instead to release a Year Zero remix album at some point in the future. This way, fervent U.S. fans would not be forced to have to spend $30+ to import a two-song single that includes one new remix.

Reznor also stated that

“Since the CD came on the market, even with its relatively lower production costs compared to vinyl, labels saw it fit to increase prices exorbitantly while artists’ age-old contracts meant they got the same amount as before - and even granting that the labels invest in marketing and take risks, it is still a great rip-off”.

In his view, true fans are being made to pay to sustain the fat paychecks of label execs. These were the exact same sentiments that have been expressed by Chuck D of Public Enemy before - coincidentally Public Enemy was the other headlining act at the Beijing Pop Festival.

As a point of note, HMV is still selling music at global rate prices of US$18 in a lot of markets with imports going for the ridiculous price of US$25 and more. Makes one wonder if this also falls under the pirate CD category!

Reznor also thinks that DRM infested formats including the ones from iTunes do not serve fans well and he totally understands why they would instead resort to downloading ubiquitous DRM-free mp3s from BT and P2P networks.

Lest the misguided ‘music wants to be free’ movement conveniently hijack Reznor’s stance as an endorsement to free-load, he emphatically states that there has to be a way that musicians are compensated without imposing barriers to fans and abusing their trust by commanding unfair price premiums.. Hence NIN has built up an outstanding website not only to communicate directly with fans but with a view to making it easy to access their music at a fair price once NIN’s label dues are completed.

And what about the music?

Reznor reaffirmed his commitment to carrying on making the kind of music that’s brought them this far and which they still believe in. He also panned label executives who are panicking at the downturn in the music industry and subsequently try to force artists to adopt “flavor of the month Timbaland productions” as the panacea for their self-inflicted afflictions.

Reznor further added,

“We didn’t know what to expect in China as it is our first time here, so we brought all our equipment along. We didn’t want to compromise in any way and wanted to give fans the full Nine Inch Nails experience. I think we might probably have even lost some money on this show”

And what a fantastic show it was -  probably one of the more amazing shows seen in China. Credit to Beijing Pop Festival organizer Jason Magnus who moved mountains in China to put together a radical non-conformist line-up of NIN, Public Enemy, New York Dolls, Ramones (Marky) and rebel Chinese rocker Cui Jian amongst others.

However, in this digital age, the next radical act in the music industry will probably be played out online and Trent Reznor has already set the stage for it.

Also, thanks to Cory Doctorow for featuring this article on Boing Boing :

Next: Trent Reznor to Australia - Steal My Music

Even as we’re all blinded by the halo emanating from the Book of Jobs these couple of weeks, I was amazed at the revelations that were divulged to me while reading a pronouncement from Wall Street Journal’s Alan Murray entitled If Mr. Jobs Is Punished, Would Holders Suffer? - wherein he analysed the implications of the options backdating scandal to shareholders if Steve Jobs was indeed guilty, but at the same time examining the moral dilemma of it all.
Using a Steve Wozniak-like logical approach and applying some Steve Jobs reality distortion field techniques, the following astounding news was revealed to me, a conclusion that the Mac faithful have already known and believed in for years:
The Wall Street Journal revelation pronounces that that the options backdating law is there to protect shareholders, but if Jobs was indeed guilty and punished by being removed, then it harms the shareholders even more than the initial crime committed. So in this case, Jobs should be allowed to remain above the law - and thus by logical inference this means that Steve Jobs is god!
The following is a line-by-line logical examination of this revelation based on evidence from the article:
1) The Options Backdating law is to protect shareholders

“Securities laws exist to protect shareholders. If Apple is guilty of backdating stock options, the victims of the crime were, in theory, the shareholders who were misled. Apple shareholders, however, have benefited greatly from the tenfold increase in the company’s stock price in recent years. I doubt there is one of them who would begrudge Steve Jobs the extra $20 million he would have received if he had exercised the options. And I can’t imagine there is one who wants him removed as Apple’s CEO.”

2)…but if Jobs was indeed guilty and punished by being removed, then it harms the shareholders even more than the initial crime committed.

“If Mr. Jobs participated in backdating options, he should be punished. To let him off the hook would send a terrible signal that some people are exempt from the rules or above the law. But any punishment that hampers his ability to continue running the company would be a mistake. That is punishing the victim, and only compounds the crime.”

3) So in this case, Jobs should be allowed to remain above the law

“Walt Disney’s Michael Eisner, Hewlett-Packard’s Carly Fiorina, American International Group’s Hank Greenberg, Morgan Stanley’s Phil Purcell and Pfizer’s Hank McKinnell, to name a few, lost their powerful posts at least in part because of an inability to distinguish themselves from the companies they ran. Steve Jobs, however, is another matter. “Other CEOs caught up in the options backdating scandal have lost their jobs. If Mr. Jobs were to lose his, the principal source of Apple’s magic would be gone. While other companies take draconian actions to clear themselves of the backdating cloud, Apple is giving its leader a pass.”

4) Thus by logical inference this means that Steve Jobs is God

“Steve Jobs is Apple Inc. He created the company, and then came back to rescue it when it was headed for oblivion. It is difficult to imagine Apple continuing in anything like its current form without him at the head, dressed in mock turtleneck and blue jeans, conjuring up gratifying images in the minds of grateful consumers.The chief executive officer of Apple has good reason to think well of himself. As the founder of both Apple and Pixar Animation, he has produced remarkable products that have transformed three different industries: computers, music and movies. His trademark arrogance is more than just a personal characteristic. It is part of his brand.”

[no words of Alan Murray were harmed in the making of this mashup based on his original article]
Final Revelations:

“If Jobs is removed from office, clearly shareholders suffer. But if Jobs was involved in backdating and isn’t published (sic) punished, society suffers.”

So based on the premise that a company should maintain and increase shareholders wealth, how much of a responsibility does it have to society to do the right thing?
Update: For those into more serious reading on the rap sheet, Fortune’s Roger Parloff does a good job in his article entitled “Is Jobs really cleared?”

Epilogue: 20 Nov 2007
It certainly has been confirmed that Steve Jobs is above all this legal mumbo-jumbo as the suit on Apple options was dismissed “because it was based on statements made more than three years before the case was filed” as reported in New York Times.

Judge Fogel said in his order that he would allow shareholders to file the suit again if they could show Apple filed false statements about the option awards on or after July 30, 2003. The lawsuit was filed June 30, 2006.
Judge Fogel dismissed a similar suit last Wednesday, suggesting shareholders could pursue their case by joining the suit he dismissed yesterday, a derivative lawsuit by Apple investors on behalf of the company, accusing directors and officers of breaching corporate duties.

Amen.

Credits:
Steve Jobs Messiah image: Courtesy of Luke77

What a dramatic introduction of the iPhone we have had, coupled with the iPhone trademark battle sideshow between Cisco and Apple. While Steve Jobs has obviously calculated on winning in the court of public opinion, Mark Chandler, General Counsel of Cisco has cleverly used a weapon of the new economy by blogging Cisco’s point of view and approach.

The crux of the dispute is in the use of the “iPhone” trademark… if two companies release products in a similar category with the same name, it creates confusion among consumers and so the trademark law exists to distinguish the products. The Cisco approach for a resolution according to Mark Chandler is interesting…he has used terms like “sharing the iPhone trademark”, “open approach”, “interoperability” and yet stating that they wanted to “differentiate the brands in a way that could work for both companies and not confuse people, since our products combine both web access and voice telephony”….phew, some of that even sounds contradictory! A comment by a reader called Mandla on Cisco’s blog, catches them out on this with a salient point in that Cisco is actually trying

“to leverage the trademark to blur the distinction between the two products. That’s not what trademark law is there for now is it? A trademark is not supposed to be a crowbar for gaining access to other people’s products and IP. It’s there to protect your own products, not to prise open other people’s products.”

Many people have also turned on Cisco on these grounds but to be fair to Cisco, it is OUR assumption that a trademark should be settled in pure monetary terms and that has clouded many observers’ view of the Cisco case. Cisco is already rolling in the money as it currently has the highest market cap in Silicon Valley and it seems probable that mere financial gain is not its main motivation so instead, it is going about this in an unconventional manner. But to be fair to them, their approach is still in the realm of business negotiation. In simple terms, Cisco has something Apple wants and Cisco is asking for payment, albeit not in obvious monetary terms but in kind…so despite how others have analysed Cisco’s terms of engagement and accused them of trying to profiteer, this is a straight forward business negotiation – take it or leave it!

Even though it is mere speculation for all of us to debate the legal aspects of who is right or wrong ultimately in this case, it is important for us to separate the legal aspects from the moral areas, with Apple trying to dominate the latter. It is amazing to read the huge number of pro-Apple comments (and on the “enemy’s” blog too!) accusing Cisco of a multitude of transgressions when in fact, it is public knowledge that “Apple approached Cisco many times over the past five years to acquire rights to use the iPhone trademark, acknowledging Cisco’s rights to the trademark” – this is a clear example of Steve Jobs’ famous Pied Piper reality distortion field at work where even his evangelists are instead trying to claim the moral high ground.

It is a foregone conclusion that Apple has already won in the court of public opinion but some of the comments denigrating Cisco’s brick of an iPhone compared to the elegant, beautiful Apple iPhone crosses the line into reality distorting moral ownership claims along the lines of “How dare the nerdy geek have the homecoming queen as his girlfriend when the fairy tale dictates that she belongs to the football hero jock?”

It is one thing to praise the Emperor’s New Clothes even though the threads seem to be misappropriated in parts, but since we are on the subject of intellectual property, let’s also focus on the other major announcement of the day at MacWorld with the name change from “Apple Computer” to “Apple Inc”. So Jobs’ Apple has now moved beyond the confines of a strictly computer industry domain and is formally signaling its intent to devour other industries including consumer electronics and music. It was not too long ago that the Beatles’ “Apple Corps” was battling “Apple Computers” when the latter started moving into the music industry and in doing so flouted a previous agreement – Cisco has obviously noted that succinctly

“Today’s iPhone is not tomorrow’s iPhone. The potential for convergence of the home phone, cell phone, work phone and PC is limitless, which is why it is so important for us to protect our brand”

For a company that “is a very aggressive enforcer of their trademark rights” and even claims 200+ patents for its iPhone, it is damning that Apple’s very own company naming exercise itself was a result of arrogantly taking a forbidden bite out of another company’s name. As such, though Apple can count on winning in the court of public opinion and while we await a resolution either in the courts or on the negotiation table, Apple seems to have lost moral ownership of the iPhone name.

[maths does not own shares in Apple or Cisco and has no affiliation to either company but is the proud owner of a Linksys router and a video iPod and will probably want a piece of both iPhones, whatever they are called]

Update: 21 Feb 2007
So Cisco’s wheeling and dealing has paid off and they are likely to have gotten their interoperability pound of flesh from Apple…and Apple will now be free to use the iPhone name, and probably dominate and own it. The brief statement from Cisco follows:
SAN JOSE & CUPERTINO, Calif. – Cisco® and Apple today announced that they have resolved their dispute involving the “iPhone” trademark. Under the agreement, both companies are free to use the “iPhone” trademark on their products throughout the world. Both companies acknowledge the trademark ownership rights that have been granted, and each side will dismiss any pending actions regarding the trademark. In addition, Cisco and Apple will explore opportunities for interoperability in the areas of security, and consumer and enterprise communications. Other terms of the agreement are confidential.