It's Time to Face the Music

By Carl Weiss

It was 50 years ago in this February that the Beatles changed the music industry forever when they first made their way to the US. So I thought it appropriate to start this week’s blog with a couple of stanzas from their hit single, “Taxman”:

“Let me tell you how it will be. 

There’s one for you nineteen for me.

If five percent appears too small.
Be thankful I don’t take it all."

The lyrics lament the fact that British performers at the time were getting hit with incredibly high taxes on the royalties they earned. However, there was an even more insidious hand taking a huge cut of many recording artists’ pies at the same time, which had nothing to do with the tax man. And that was the cut that the record labels were taking from artists under contract.

While a number of stories about artists who were burned back in the early days of rock and roll are legendary, that doesn’t mean that the practice has stopped.  In fact, the past few years has seen a number of lawsuits against record labels by several notable songsmiths:

1.       In 2007, pop legend James Taylor initiated an audit and lawsuit against Warner Bros., which uncovered underpayment of royalties in the amount of $1,692,726 for the period spanning 2004-2007. (Warner subsequently paid only $97,857 of that balance.)

2.       In 2009 jazz great, Chet Baker, sued Warner Music Canada, Sony BMG Music Canada, EMI Music Canada and Universal Music Canada for releasing his music on Canadian CDs without compensating him.

3.       In 2011, Peter Frampton sued A&M Records for unpaid digital royalties. He hired music attorney, Richard Busch, who previously helped Eminem successfully sue Universal, the parent company of A&M.

What is even more noteworthy is the fact that many of these suits are seeking compensation for “digital distribution” of music. Translated, this boils down to “online distribution” of recordings.  And if the recent newsfeeds are any indication, not all of the ire being vented by recording artists is directed toward record labels.

“In 2012, a federal court reinstated a $222,000 damages award against a Minnesota woman accused of illegally downloading 24 songs, Reuters reported that the music industry victory in a case stretching past its sixth year. The U.S. 8th Circuit Court of Appeals in St. Paul, Minnesota, rejected Jammie Thomas-Rasset's argument that the fine – $9,250 per song – was excessive and violated her due process rights under the Constitution. She has said her ex-boyfriend or two young sons were probably responsible for downloading the songs.”

She was hardly alone, since some 18,000 people were sued between 2003 and 2008 by the Recording 
Industry Association of America (RIAA). It didn’t stop there, as talk show host Ellen DeGeneres found out a year later, when she was sued for copyright infringement when she broadcast more than 1,000 songs during the “Dance Over” portion of her popular show.

Read more: http://www.rollingstone.com/music/news/ellen-degeneres-show-sued-by-record-labels-over-copyrights-20090911#ixzz2wEuSKM9Q

This does not encompass the most litigious online music case of all time: Napster. Launched in June 1999 by Shawn and John Fanning, Napster was the first large-scale, peer-to-peer music sharing site. Wildly popular with the public, the site quickly ran afoul of a number of popular bands (such as Metallica) that took issue with having its music given away royalty free.  On top of that, the band accused Napster of leaking at least one of their songs (“I Disappear”) before it was even officially released.  Shortly afterwards, a number of other labels piled onto the suit, trying to force Naptster to monitor its service and block access to copyrighted material. A year later, the Court of Appeals decided in the record labels favor and issued an injunction. In June 2001, Napster was forced to shut down its business in order to comply with the ruling.

Nobody was Napping

A side note on Napster: After filing for bankruptcy in June 2002, Napster announced plans to sell the 

Timeline of file sharing (Photo credit: Wikipedia)

service, since it had hundreds of thousands of members at this point.  However, the judge blocked the sale and ordered Napster to liquidate. Less than a month later, Roxio, the digital music software purveyor, bought the Napster brand and logo for $5 million. Roxio then leveraged the popularity of the Napster name to revamp a failing music subscription service named Pressplay, later selling Napster once more (in August 2008), this time to Best Buy for $121 million. Best Buy then sold Napster’s customer base and other intellectual property in September, 2011 to Rhapsody for an undisclosed sum. (At the time of the sale, Napster reportedly had more than 700,000 customers.)

While the kind of services offered by Napster went against the grain of the music industry, the popularity of being able to download music online did not.  What it did was spur the imagination of a number of entrepreneurs to take action in order to capitalize on this efficient means of bringing music to the masses.

“With all the buzz around Spotify and the absolute dominance of iTunes since 2003, it's easy to forget that Napster was the first big name in digital music, and introduced computer users to the idea that they could listen to nearly any song in the universe, any time, on demand. The only problem: the people who made that music wanted to be paid for it, and it took about a dozen years to figure out how that would work to all parties' satisfaction.” Read more: http://www.businessinsider.com/napster-is-finally-dead-heres-a-look-back-at-what-happened-2011-10#ixzz2wFNZ8XOa

Steve Jobs Gets Ready to Jam

No sooner had the fur begun to fly in the courts over Napster when Steve Jobs at Apple Computer realized that if he could find a way to deliver music to the masses in a legal and profitable venue, then he would be sitting on the next killer app.  The only problem was the fact that he didn’t want to waste a year or more developing an app from scratch.  After looking at and rejecting another potential solution, Jobs approached Robin Casady and Michael Greene to discuss their SoundJam app.  Their powerful digital encoding program had a couple of things going for it, chief among it being the fact that the interface looked remarkably similar to Apple’s QuickTime player. After negotiating a price, Casady and Greene sold the rights for SoundJam to Apple and Jobs immediately got ready to jam by creating iTunes.

Excerpt from MacWorld: “About 10 months later, at Macworld San Francisco in 2001, Apple debuted iTunes alongside iDVD and the CD-RW-enabled Power Macs. While it wasn’t exactly a show-stopper (though 275,000 copies were downloaded in the first week), the "world’s best and easiest to use ‘jukebox’ software’ definitely raised the bar for music players on the Mac, which were relatively sparse and rather pricey (SoundJam cost $40). By offering iTunes as a free download and installing it on every new Mac, Apple essentially cut down the competition at the pass — or at least put a good scare into them. “Apple has done what Apple does best — make complex applications easy, and make them even more powerful in the process,’ said Steve Jobs at the time. ‘iTunes is miles ahead of every other jukebox application, and we hope its dramatically simpler user interface will bring even more people into the digital music revolution.’”

http://www.maclife.com/article/feature/complete_itunes_history_soundjam_mp_itunes_9

After racking up more than a million downloads in the first month alone, Apple knew they had a hit on their hands.  It also spurred Apple into creating hardware that could give their customers the opportunity to take their tunes with them. Thus iPod was born. More importantly for singers, songwriters and aspiring musicians, this gave them a whole new lease on life. No longer bound by record labels to record, produce and, more importantly distribute, their music, iTunes (and other services that soon sprang up alongside it), enabled musicians to deal direct and cut out the middleman.

Leave it to Bieber

Since then, a number of previously unknown artists have not only sprung onto the scene, a number of 

them have done quite well for themselves. Take Corey Smith, a country folk musician, who went from high school teacher to high-paid recording artist, grossing more than $4 million in 2010.  More importantly, he did it DIY style, without signing up with a record label.  Mashable had a feature a couple of years back entitled, “15 Wannabes Who Found Fame on YouTube.” This included Julia Nunez, Chantelle Redman and Justin Bieber. http://mashable.com/2011/01/23/found-fame-youtube/

Some other industrious souls have found online fame by posting musical parodies. One such success story is the Gregory Brothers who turn press conferences into ersatz operas with the help of some clever voice altering computer software.

  

The Brothers insert themselves into news footage to sing along with political leaders. Early videos saw Hilary Clinton singing about Somalian pirates, while the US Congress debating climate change turned into gospel song. While the Gregory Brothers and other parody producers like them aren’t likely to win any Grammy® Awards, their large fan base on YouTube makes sure they earn a comfortable living by monetizing their channel via AdSense ads. And unlike a lot of starving artists, these talented performances have found a way to face the music and thrive online. That’s more than many musicians can say.

Carl Weiss is president of Working the Web to Win, a digital marketing agency in Jacksonville, Florida.  He is also co-host of the Blog Talk Radio show that airs live every Tuesday at 4 pm Eastern.