Recording Industry Update

Warner's new e-label: In an announcement datelined "Aspen, CO," many news services reported, Warner Music Group chairman and CEO Edgar Bronfman, Jr. introduced a new Internet music distribution system called an "e-label," which would eschew CDs by allowing artists to issue their music in clusters of three songs every few months.

Bronfman explained that Warner's e-label scheme would create a "supportive, lower-risk environment," presumably as compared to the current system that demands complete albums and blockbuster commercial hits. "Rather than releasing an album every couple of years, every few months the label will release 'clusters'—three or more songs—by an artist.

"And, finally, and perhaps most revolutionary, artists retain ownership of their masters and copyrights while signed to this label."

We found this last point an interesting admission. Don't artists already retain ownership of their copyrights, if not their masters? That's when we noticed the Aspen dateline and thought to wonder why Bronfman made the announcement there. He was speaking at a Progress & Freedom Foundation conference, an organization described by most news reports as a think tank dedicated to studying "the digital revolution and its implications for public policy."

Well, yes, it does. We went to the PFF's website and discovered that it's more accurately described as an advocacy group, dedicated to de-regulating the communications industry; "urging private solutions to help reduce digital piracy and increase the availability of rich digital content, without government mandates"; "advocating antitrust over regulation in the software market"; and "explaining the imperative to protect rich digital content and encourage innovation through the traditional legal notions of copyright and patent." The timing and the content of the announcement make more sense in this context—although you'd never know it from the way the mainstream media reported the issue.

Most business pages spun the announcement as a Big Four record label responding to the "spectacular" uptick in popularity for music downloading services and the collapse in sales of the CD, portraying the two as forces balanced at either end of the sales seesaw. That may be true, although the e-label concept seems to have borrowed heavily from the downloading services' biggest draw, the flexibility of being able to purchase less than a complete CD's worth of songs.

This raises some interesting issues besides that pesky one about who controls the content if the artist retains copyright and the masters. Does the per song download paradigm signal a return to the hegemony of the hit single, as in the 1940s, '50s, and early '60s? Where would that leave more ambitious artists who think in larger-scale concepts? And is Bronfman suggesting that recording labels abandon the retailers who have traditionally been their partners?

Just as interesting was a question Bronfman did answer. After praising the MGM v. Grokster decision by the Supreme Court, on the grounds that it "will inspire the growth of legitimate digital music services," Bronfman went on to say, "We like government levies when they benefit us."

That's the only part of the speech that we accept at face value.

Is the iTunes price right? When Apple first announced its iTunes download service, many record labels cheered Stephen Jobs' decision to price individual songs at a flat 99¢ each. For one thing, it meant that there was rough pricing parity between a physical CD and the iTunes downloaded equivalent. This reassured the record industry that its pricing structure would remain intact.

According to a front-page article in the August 27 New York Times, Sony BMG and the Warner Music Group have had second thoughts. Here's the part you'd never have guessed, though: Rather than determining that DRM-encumbered, lossily-compressed files are worth less than their physical alternatives, the two major labels are upset that they are not allowed to charge more for downloads. Well, some of them, anyway.

The labels reason that they should be able to charge more for new, popular recordings—and, to be fair, less for older back-catalog items, although they haven't actually explained the "less" part in any detail yet. The other two members of the Big Four seem split down the middle on the subject of variable pricing: Universal Music Group seems to support the one-price model, while EMI passively supports variable pricing, but doesn't seem willing to push for it.

Record labels receive about 70¢ of the 99¢ per song fee collected by Apple.

The real issue may be that iTunes has become the 500 lb gorilla on the digital music block, controlling 75% of all legal downloads and 80% of the portable digital player market. That level of market dominance may be the real sticking point for the recording industry, which has long been used to actually driving the market rather than being in the passenger seat.

In other words, it may be an old-fashioned turf war.

More mom news: Patricia Santangelo, the White Plains mother who has chosen to fight the RIAA's accusation that she participated in illegal file-sharing activities, now has a blog. Called The Recording Industry vs the People, it is maintained by lawyers from Beldock Levine & Hoffman, LLP, with the assistance of the Electronic Frontier Foundation (EFF). Ray Beckerman of Beldock Levine & Hoffman explains, "My firm has undertaken to represent people in our area who have been sued by the Recording Industry Association of American (RIAA) for having computers whose Internet accounts were used to open up peer-to-peer file-sharing accounts. We find these cases to be oppressive and unfair, as large law firms financed by the recording industry sue ordinary working people for thousands of dollars."

The site links to articles concerning Ms. Santangelo's case, pertinent legal filings, and other background information.

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