Labels & Artists DO NOT need iTunes....
VegasMusicMan
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#1
27th November 2007
Old 27th November 2007
  #1
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Labels & Artists DO NOT need iTunes....

I thought of a perfect example of why the labels DON'T need iTunes, and could be far better off if they followed the following example:

Now, some of you may be aware of this, but I am guessing that many are not.

In Canada, you can not buy beer in a 7-11 or a supermarket. The Canadian government has mandated that you can only buy beer at a chain of stores that are actually called "The Beer Store." Now, I have no idea why they have this law, but it works flawlessly for the three largest breweries in Canada, which are Molson, Labatt, and I can't remember the third, sorry...Here is why...THE BREWERIES OWN IT! Now, they are of course in competition with each other for customers, but the main thing that all three realize is that they all need to control distribution to their retail customers.

So, from what I have been told by a high-ranking person at one of the breweries, what they did is came up with a way to agree on the principals of how it would be run, and each invested 1/3 of the costs to do it, and they all appointed a "management" board to work together and run it.

So you ask, "How does this apply to the record industry?" Well, it can work the same way. Now, obviously, this wouldn't be mandated by the U.S. Government, but why can't all 4 of the major music label groups in this country sit down and agree that they need to regain control of the music industry, agree to equally invest in a retail website that can serve their need the way THEY want to operate, and pull their catalogs from every other site like iTunes that didn't agree to do it the way the labels wanted? Now, let's not be silly...There would be a lot more to it like front page promotion space, independent accounting audits, etc...But no matter what, if the will by all 4 is there, they will find a way.

Now, that being said, if all 4 major label groups agreed and announced this, how fast do you think Steve Jobs at iTunes would come running to them with his tail between his legs and want to resolve these issues immediately. THAT would certainly threaten his iPod sales and everything else...Sadly, this is what it would take, though..

Now, the question of the independent artist comes up...Here is the answer. The labels would end up making a profit on each one of your downloads, so of course they would want to keep your music up there...And the more you charge for it, the more that they can make on you...!

I'm sure there is more to it, but I think that this could be a great direction to go...The label groups have hundreds of millions of dollars to work with and executed properly, this could come back to them dressed up like a nickel.

John
#2
27th November 2007
Old 27th November 2007
  #2
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Quote:
Originally Posted by VegasMusicMan View Post
but why can't all 4 of the major music label groups in this country sit down and agree that they need to regain control of the music industry, agree to equally invest in a retail website that can serve their need the way THEY want to operate, and pull their catalogs from every other site like iTunes that didn't agree to do it the way the labels wanted?
Hillary Rosen who was the RIAA's representative in Washington told a SXSW conference that the big labels were basically too paranoid and too greedy to ever agree on anything.

For example if BMG / Universal agreed to adopt the technology put forward by Sony - then, WAIT! OH MY GOD!! Perhaps all the Sony acts would have a slight advantage!!!?? THE HORROR!!!!! CANT DO THAT! How about using OUR system?? No?... er....

It was presented by Ms Rosen that real childish and paranoid stuff like that delays EVERYTHING that needs agreement between the big labels and she cited this as a continuous problem area for labels trying to agree anti piracy initiatives etc.. Anything that might give a competitor the slight edge / advantage is rejected.

Thats how she put it anyway...
#3
27th November 2007
Old 27th November 2007
  #3
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RULES FOR THIS FORUM - This is a guest Q & A forum. That means, questions from Gearslutz.com members are put to the special guests to answer only.

AHH! Yes, I need to go back and change that, with agreement, we have opened this forum up a little to be more of a discussion - still moderated though! Thanks for pointing this out... Jules - GS Admin
#4
27th November 2007
Old 27th November 2007
  #4
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I think its a a poor idea. Free market competition is good for everyone. Why not have itunes who has proven a great force for selling tunes, then open their own site if they want to. I think the more availability the better the product has a chance to be heard and purchased. Competition drives the price to a buyers market. Why should a company control distribution, especially when they are really there to serve the artist, and vice versa? Wasn't that one of the main complaints about the old way, its seemed unless you were on the top 5% you didn't survive. 2 cents.
#5
27th November 2007
Old 27th November 2007
  #5
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Vegasmusicman,
Are you from Canada ???

Because as a Canadian, I've never heard of this thing about "the Beer store" and not being able to buy beer at a supermarket or 7-11...

Just wanted to clear up some facts..
#6
27th November 2007
Old 27th November 2007
  #6
Founder CD Baby
 
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Smile think the public would just shrug and go back to illegal P2P methods

I believe this is what happened in 2001 or so, when the majors authorized and part-owned MusicNet and PressPlay.

Problem is, nobody went there.

Even if ALL the majors yanked ALL their music from iTunes and said you could ONLY get it at their owned/authorized store, I think the public would just shrug and go back to illegal P2P methods.

Steve Jobs' big motto with the iTunes Music Store is "we can compete with free". So far they've been one of the only outlets that made it so easy and compelling that millions seemed glad to go there and spend money instead of finding the same music free on P2P.
VegasMusicMan
Thread Starter
#7
27th November 2007
Old 27th November 2007
  #7
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Thread Starter
Quote:
Originally Posted by dantheman360 View Post
Vegasmusicman,
Are you from Canada ???

Because as a Canadian, I've never heard of this thing about "the Beer store" and not being able to buy beer at a supermarket or 7-11...

Just wanted to clear up some facts..
No...I used to live 5 minutes from the border...If it isn't in all of Canada maybe it is just Ontario, then....unless of course, something has changed since 2006...

Chhers...
VegasMusicMan
Thread Starter
#8
27th November 2007
Old 27th November 2007
  #8
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Thread Starter
Quote:
Originally Posted by Derek Sivers View Post
I believe this is what happened in 2001 or so, when the majors authorized and part-owned MusicNet and PressPlay.

Problem is, nobody went there.

Even if ALL the majors yanked ALL their music from iTunes and said you could ONLY get it at their owned/authorized store, I think the public would just shrug and go back to illegal P2P methods.

Steve Jobs' big motto with the iTunes Music Store is "we can compete with free". So far they've been one of the only outlets that made it so easy and compelling that millions seemed glad to go there and spend money instead of finding the same music free on P2P.
But don't you feel that this has screwed up the industry pretty bad?
#9
27th November 2007
Old 27th November 2007
  #9
Peter Wells, SVP Operations, Customer Advocate - Tunecore
 
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I'm going to go deeper for just a moment.

This entire debate reminds us that those who have the content have the power. Not those with the money, note: the content. When iTunes has major label content and tons more, they have power. When illegal filesharers have content, they have power. When you speculate, Vegas, about what the majors could do if they ever truly went into caucus, it's the threat of "regaining control" of their content that gives them power.

The lesson? KEEP CONTROL OF YOUR MUSIC. That's the founding principle of TuneCore--you control your rights, your masters, your choice of distribution channels, everything.

--Peter
peter@tunecore.com
#10
27th November 2007
Old 27th November 2007
  #10
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I gotta look into tunecore again...
#11
27th November 2007
Old 27th November 2007
  #11
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A couple of quick thoughts:

1. I've never heard of this Canadian beer cartel, but even if it existed in Canada, it would be illegal in the US. Antitrust laws exist specifically to prevent the largest players in an industry from colluding to control pricing, distribution, and other competitive factors
(because
2. The big 4 labels do not constitute the music biz. They actually only account for a fraction of it. The majority of music produced is not affiliated with them.

3. The major labels would most likely fail miserably at running an online store because they're not in the business of running websites. They're in the business of distributing plastic discs, and of promoting rock stars. The sooner they phase out the former and learn to concentrate on the latter, the better off they'll be.

4. The argument that the labels would be better off without Apple could more effectively be applied to the artists directly. The problem at the moment is there are too many interested parties sharing a rather small $0.99 pie. With the label and the online store both getting a sizeable cut, it doesn't leave much for the artist. Unless the labels can come up with a way to produce music without artists (arguably, they already have) then I think we're more likely to see the artists (especially well-established ones) eliminate the obsolete middle man and deal instead directly with iTunes. If you can afford to pay for your own production and marketing costs, there's not a lot a label can do for you besides truck plastic discs to shopping malls.

5. Apple is succeeding because they're good at what they do. The discontent among the major labels is due to:
a. Low prices leading to dwindling profits (which is arguably due to the dwindling contribution they're making to the process)
b. Their stubborn refusal to accept that music distribution is inherently vulnerable to piracy, and no copy protection scheme will ever be effective unless it prohibits customers from listening to the music.
#12
27th November 2007
Old 27th November 2007
  #12
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It seems like the notion of the big boys entering into an agreement that would create equal ownership of the sole distributor of their content would have a good chance of running afoul of U.S. Anti-Trust law. Have a read about the end of the Golden Age of the film industry. United States v. Paramount Pictures, Inc. - Wikipedia, the free encyclopedia

I personally would prefer that the big boys have less power in this industry. I'm not holding my breath though.

The success of iTunes, IMHO, has less to do with the content available than it does with a well designed product. Which also happened to come along at just the right time.
#13
27th November 2007
Old 27th November 2007
  #13
MonsterIsland.com
 
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Quote:
Originally Posted by VegasMusicMan View Post
I thought of a perfect example of why the labels DON'T need iTunes, and could be far better off if they followed the following example:

Now, some of you may be aware of this, but I am guessing that many are not.

In Canada, you can not buy beer in a 7-11 or a supermarket. The Canadian government has mandated that you can only buy beer at a chain of stores that are actually called "The Beer Store." Now, I have no idea why they have this law, but it works flawlessly for the three largest breweries in Canada, which are Molson, Labatt, and I can't remember the third, sorry...Here is why...THE BREWERIES OWN IT! Now, they are of course in competition with each other for customers, but the main thing that all three realize is that they all need to control distribution to their retail customers.

So, from what I have been told by a high-ranking person at one of the breweries, what they did is came up with a way to agree on the principals of how it would be run, and each invested 1/3 of the costs to do it, and they all appointed a "management" board to work together and run it.

So you ask, "How does this apply to the record industry?" Well, it can work the same way. Now, obviously, this wouldn't be mandated by the U.S. Government, but why can't all 4 of the major music label groups in this country sit down and agree that they need to regain control of the music industry, agree to equally invest in a retail website that can serve their need the way THEY want to operate, and pull their catalogs from every other site like iTunes that didn't agree to do it the way the labels wanted? Now, let's not be silly...There would be a lot more to it like front page promotion space, independent accounting audits, etc...But no matter what, if the will by all 4 is there, they will find a way.

Now, that being said, if all 4 major label groups agreed and announced this, how fast do you think Steve Jobs at iTunes would come running to them with his tail between his legs and want to resolve these issues immediately. THAT would certainly threaten his iPod sales and everything else...Sadly, this is what it would take, though..

Now, the question of the independent artist comes up...Here is the answer. The labels would end up making a profit on each one of your downloads, so of course they would want to keep your music up there...And the more you charge for it, the more that they can make on you...!

I'm sure there is more to it, but I think that this could be a great direction to go...The label groups have hundreds of millions of dollars to work with and executed properly, this could come back to them dressed up like a nickel.

John
That's called collusion.

That can bring on huge problems. Even though it's jointly owned, it's still a monopoly.
#14
28th November 2007
Old 28th November 2007
  #14
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Quote:
Originally Posted by VegasMusicMan View Post
Now, that being said, if all 4 major label groups agreed and announced this, how fast do you think Steve Jobs at iTunes would come running to them with his tail between his legs and want to resolve these issues immediately. THAT would certainly threaten his iPod sales and everything else...
That wouldn't have any effect at all on ipod sales. iPod sales were doing just fine long before the itunes music store even existed. If ITMS disappeared tomorrow people would get their mp3s from the new major label service or from p2p and they would still put them on an ipod. And people would continue to buy music from all of the smaller labels that would be smart enough to leave their stuff up on ITMS.

I have to somewhat disagree with Peter's idea that the people with the content are the people with the power. It seems to me that Apple is the party with most of the power in this situation which means that distribution is the true source of power as it always was. Look at companies like Youtube which started with nothing but a distribution model and the content came to them. Or look at businesses like Tunecore and CDbaby. I wouldn't be surprised if they make more money than any indie label in the US. Content producers have always been and might always be dependent on the people who have the ability to deliver and more importantly filter the content.
#15
28th November 2007
Old 28th November 2007
  #15
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Quote:
Originally Posted by Mike Caffrey View Post
That's called collusion.

That can bring on huge problems. Even though it's jointly owned, it's still a monopoly.
The music distribution system proposed is not a monopoly any more than, say, Apple only allowing iPhone service through AT&T.

There's still PLENTY of competition. I mean, the Eagles distributed their most recent release through Wal-Mart ONLY, from what I hear (this may only be stateside...fact check needed)...regardless, it's not on iTunes.

I was proposing something conceptually different but in effect the same -- have new music available ONLY through streaming subscription, but have the streaming subscription be cheap and widely accessible. I don't think people are trying to save a buck or two -- I think people just don't wanna spend ANYTHING on a product that has been devalued in the eyes of the public.

Have you ever pulled out your copy of the hot new CD, only to have someone in the room say, "oh, man, why'd you spend 15 bucks on that? I've got it in the car -- I'd have lent it to you."

My thoughts -- IT'S NOT THE FIFTEEN BUCKS! Kids in high school will find the fifteen bucks to order a pizza and soda with their friends. THEY HAVE THE MONEY and will find it for something they WANT. Lowering the price to ten bucks or five bucks "per pop" won't change the equation here.

But offering a ten-buck-a-month "all-you-can-eat" subscription with instant on-demand access to a vast library of the classics and all the new music you ABSOLUTELY CAN'T GET ANYWHERE ELSE would completely change the game.

You just have to make it UNDENIABLY CONVENIENT and make it EASY FOR PEOPLE TO PAY THE BILL.

http://www.ncta.com/ContentView.aspx?contentId=54

U.S. cable TV: 65 million subscribers, avg., $74.7 billion revenue last year, $26.9 billion advertising revenue

U.S. mobile phone industry: right around 200 million subscribers (possibly more by now)

Nobody has a problem with paying THESE bills...

...because people view TV and mobile as UTILITIES not LUXURIES!

http://www1.medialiteracy.com/stats_advertising.jsp

and radio ad revenue is TWICE the revenue from CD sales?!? (nearly $20 BILLION in the U.S.)

ARE WE IN THE WRONG BUSINESS, OR IS IT JUST ME?

Now start putting these numbers together to match the music industry's recent $10-15 billion/yr. RIAA sales figures without selling a SINGLE CD EVER AGAIN and without kowtowing to iTunes/Starbucks/Wal-Mart or Silicon Valley -- just cutting deals with cable & mobile companies from a position of leverage.

Tack on $3/month to each subscription for unlimited anytime music? One third of subscribers pay ten bucks a month?

Or how about a three-tiered system: free (targeted ads play between songs), $1.50/ month basic (limited library, some new music), or $10/month premium service (all new music, exclusive live shows, video downloads, etc.).

Consumers have adapted to using iPods and iPhones for music storage and delivery in cars, homes, offices, etc.

If streaming isn't viable, it is certainly very close -- maybe one generation of mobile technology away. Cheap and (relatively) fast mobile internet is already here.

U.S. analog TV goes off soon, and that juicy bandwidth will be for sale -- bidders are already lining up. THAT'S actually the future of digital in the U.S., period. If it is not monopolized and run into the ground to keep existing models profitable, wireless digital will be "broad" band well beyond what we can imagine under the current system.

Of course, when the rail companies had come up with a cheap, accesible way to get people around, the car companies bought them up purposely put them out of business, replacing them with buses and cars (U.S. in the 40's?) and leading to a VERY profitable expansion for the auto and oil industries. Free enterprise, meet laissez faire capitalism and corporate-funded lobbying...let's hope the lobbyists don't have a field day with this one...this makes the fight for Net Neutrality look like a minor skirmish...

Quote:
On February 8, 2006, President Bush signed into law the "Digital Television Transition and Public Safety Act of 2005", a section of the "Deficit Reduction Act of 2005". This law mandated a hard shut-off date of February 17, 2009 for the end of all analog (NTSC) TV transmissions in the U.S.
Hmmm...one month after the inauguration of the next President...

http://en.wikipedia.org/wiki/High-de..._United_States

Streaming-on-demand (or with TiVo-meets-iPod time-shifted playlisting) as the ONLY legal distribution method of new music will severely handicap all existing forms of piracy and gray-area intellectual property dilution (P2P, iTunes library sharing, etc.). And, with the active participation of Silicon Valley and mobile tech, EVERYONE could make more money, even Apple (the iPod gravy train will eventually run out as the market gets saturated with iPhones and competing products).

Dave Kusek's book "The Future of Music" put this all into perspective years ago -- the overriding thesis was "music like water" -- sell it as a utility, not a la carte.

http://www.futureofmusicbook.com/
js1
#16
28th November 2007
Old 28th November 2007
  #16
js1
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Sorry to continue derailing this thread, but...

Quote:
Originally Posted by VegasMusicMan View Post
In Canada, you can not buy beer in a 7-11 or a supermarket. The Canadian government has mandated that you can only buy beer at a chain of stores that are actually called "The Beer Store." Now, I have no idea why they have this law
It's an Ontario thing, and a holdover from our past. "The Beer Store was created in 1927 by a group of brewers working with the Government of Ontario to create a responsible system for beer distribution in the province.

Following the repeal of prohibition, the Ontario government struggled with how best to manage the sale of alcohol and wasn't prepared for the Liquor Control Board of Ontario (LCBO) to invest in a separate system to handle beer. After turning the issue back to the brewers of Ontario to resolve, the companies joined forces to create Brewers Warehousing Company Limited to provide an effective distribution system for beer in Ontario"

Doesn't make sense any more, but any time there's talk of change, the government gets cold feet because of access by minors and loss of revenue (especially from LCBO).

Trust me - it would be a crappy system for music distribution. No competition, limited choices, and the product is taxed to death. What keeps it in check is that prices are controlled by the government. I'm sure that the record companies would be happy to let the state governments tell them what to do...

And, what's the problem that you're trying to fix? ITunes is a solution, not a problem. It gives national and international distribution for Indie artists. It showed that there was a viable business model for music downloads. All the record industry came up with on their own is CDs with rootkit like DRM and lawsuits.
#17
30th November 2007
Old 30th November 2007
  #17
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Quote:
Originally Posted by Gregg Sartiano View Post
(the iPod gravy train will eventually run out as the market gets saturated with iPhones and competing products).
Wanted to clarify this before the thread gets "locked" for posterity -- I am referring to the iPod as it relates to the music biz. Its function in the consumer marketplace has already begun to change from mp3 player (with other capabilities) to PDA/sub-labtop computer (with mp3 and video capabilities).

So the "gravy train" aspect is the iPod (+free iTunes software) being sold (in practice, anyway) as an alternative to a traditional hard-format music collection for a given consumer.

Quote:
And, what's the problem that you're trying to fix? ITunes is a solution, not a problem. It gives national and international distribution for Indie artists. It showed that there was a viable business model for music downloads. All the record industry came up with on their own is CDs with rootkit like DRM and lawsuits.
Problem? Solution? iTunes is like the proverbial yin/yang -- a little (a LOT) of both. Frankly, I think Apple knew what they were doing:

Quote:
As Steven Levy writes in The Perfect Thing, his 2006 book about the iPod, when Apple was trying to start iTunes as an online music store it had trouble convincing the major labels to offer up their music...a big factor in his success was Jobs' assurance that, since it was limited to Macs, iTunes could affect, at most, 5 percent of the market. (iTunes for Windows came out in 2003.)Whatever the promises, once the mighty Universal signed on, everyone else followed.
With the record companies on board, Jobs did something remarkable: He turned the labels' demand for bulletproof DRM into a way of locking up the retail end of the online market. Jobs argued that in order to make Apple's DRM software, called FairPlay, effective, it had to be proprietary — and since Jobs won't license FairPlay, tracks sold on iTunes can be played only on iPods. (Similarly, the iPod won't play DRM-encoded files purchased through other retailers.) This lack of interoperability, combined with the iPod's overwhelming dominance, gave Apple a stranglehold on the digital music marketplace. And Jobs got to be the good guy with consumers, blaming the mess on the music industry's pigheaded insistence on DRM.
When I suggest to Morris that the labels gave Jobs license to create what was in effect an Apple Walkman that played only Apple cassettes
http://www.wired.com/entertainment/m...urrentPage=all

--

They saw that all consumers needed was an excuse to "free the music." Why is it that people on this board will debate about "freeing the music," but talk of "freeing the software" is taboo? Intellectual property issues need to be dealt with on a level playing field.

--

Downloads are five percent of hard format sales right now -- even after a revolution in consumer habits, HUGE market penetration for the devices and unbelievable market penetration for the software (it's FREE!) -- even with the hard format market in freefall, even with major chains closing one after the other...

FIVE percent.

Device of the decade. "Killerapp" software of the decade.

In most industries, that wouldn't be considered "viable business model" -- that would be considered "salvaging what's left."
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