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THE STANDARD'S
B E A T S H E E T
The Latest Digital Music News - and It's Free
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Tuesday, February 27, 2001
TOP STORY:
* Show Me the Money
Indie record labels mull over Napster's $50 million offer.
NET NOISE:
* MusicIsland.com
BEATS:
* Napster News, Part MCXVII
* Prince Saddles Up the Subscription Pony
SOUND OFF:
* Is the primary purpose of any record label - major or independent -
to make money?
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TOP STORY
~~~~~~~~~
Show Me the Money
As indie record labels consider Napster's $50 million offer, some say
the numbers just don't add up.
By Julene Snyder (julene@well.com)
On the face of it, Napster's offer to pay $50 million a year to
independent record labels and artists in exchange for the right to
allow users to trade copyrighted songs sounds pretty good, from a
little guy's perspective. But putting aside the $150 million-per-year
offer that Napster and its partner, Bertelsmann, offered to the four
big labels last week - an offer they've since rebuffed rather
resoundingly - Napster's indie-music kitty may turn out to be too
small even to mean much to the small fries. After all, there are
hundreds, if not thousands, of small labels and artists who'd be in
line for the $50 million deal.
A new revenue stream can sound enticing when you're down in the
trenches working for what the big boys would consider chump change,
but some indie labels think that when you break it down, the economics
of Napster's offer - based on the number of times a song is downloaded
- don't add up. If we assume that 27.5 percent of songs traded on
Napster reportedly come from indies - a number that comes from data
collected by the Recording Industry Association of America - and that
the amount of music traded stays at the same rate that the RIAA has
estimated (14,000 downloads a minute), the $50 million offer comes out
to a royalty rate of a penny a track, well below what companies like
MP3.com reportedly pay (3.5 cents a pop).
For a lot of indie labels, money isn't the main part of the equation -
promotion and a relatively equal playing field is. Of course, that's
not to say there won't be a line out the door if Napster starts
handing out cash. "If someone's signing checks, sure, I'd love to get
a piece of it," says Cory Brown, who runs the one-man indie label
Absolutely Kosher Records from his San Francisco flat. Not that those
checks would necessarily amount to big bucks. Absolutely Kosher's
biggest band, the Mountain Goats, will be happy if it sells 3,000
records by the end of March, and Brown admits his bottom line won't be
affected much, regardless of the case's outcome. "Sure, the
bestselling artists have the most to lose," he says. "But for me,
every single track that's up there that was released by Absolutely
Kosher is a promotional opportunity."
Of course, Napster won't be able to come up with that billion dollars
unless the company actually generates some revenue, and that means it
must be successful as a subscription model. There's no reason to
believe that a good chunk of file-sharers wouldn't drift away when
that monthly bill of $2.95 to $9.95 comes due. Nonetheless, Lee Black,
director of research for the "digital entertainment intelligence" firm
Webnoize, says Napster's billion-dollar offer to major and independent
labels is at least a good starting point for negotiation. "Napster's
really put the money out there, saying, 'look, we're ready to play
ball, we're ready to legitimize our business,'" he says. "There's a
good opportunity for the independent labels in and around the Napster
system, because smaller labels have a greater chance of getting
distribution through Napster as they do through traditional channels
today."
But as the old song goes, when you ain't got nothin', you got nothin'
to lose. Bill Roberts, COO of Trauma Records, dismisses Napster's
offer to indies as "silly economics" - in other words, it's just not
enough money. Trauma, whose artists include Bush and No Doubt, has
sold more than 30 million records worldwide since it was founded in
the early '90s, far more than the average indie. "If you're bridging
the gap between independents and majors like we are, these numbers
don't make any sense."
Napster - which didn't respond to a request for comments by press time
- says in a media briefing on its Web site that the $50 million per
annum for the indie labels in exchange for licensing rights will
"provide an unparalleled opportunity for individual artists to be
rewarded according to merit of their music."
That's an argument that indie label TVT Records - home to Snoop Dogg,
XTC and Guided by Voices - can get behind. The label dropped its
copyright infringement suit against Napster last month and, for an
unspecified amount, agreed to make its master recordings available to
the company. "Once Napster agreed to compensate artists and see that
the files are secure, the question became, 'Where do I sign up and how
quickly can I avail myself and artists of this particular revenue
stream?'" TVT President Steven Gottlieb says.
Now that Napster's put $1 billion on the table and the major labels
have snubbed its efforts, Gottlieb believes their collective agenda is
crystal clear: to shut Napster out of the digital revolution entirely.
"It's a shame that the people who taught consumers what downloading
was all about are now going to be frozen out," he says. "We're now
going to be left to these big entities to try and figure out what the
future looks like, when I'm not sure they get it."
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NET NOISE
~~~~~~~~~
MusicIsland.com
So how many indie labels are there, anyway? Short answer: a whole
bunch. Long answer: go to MusicIsland.com for a partial list. (You're
welcome to count them all in your spare time.) This "home to
independent music on the Web" lists hundreds of labels, organized
alphabetically or by genre. Beyond useful contact info - including
address, phone, fax, e-mail and URL - many labels get some editorial
commentary, which can make for entertaining reading. Take, for
example, the review of the label Simple Machines: "Punk and la-la, all
in a timely fashion and friendly to boot." While there's a
cooler-than-thou vibe going on here ("Indie hipsters will recognize
the address as that of the Neals Yard Rough Trade shop," for example,
regarding Soul Static Sound), MusicIsland is clearly a labor of love
in the finest DIY tradition. In addition to all the indie-label data,
you'll find useful resources like sections on legal issues, promoters,
radio stations and studios. And the site's snark factor alone makes it
worth a visit: "Lacking both the homespun sincerity of K and the
major-indie credibility of Sub Pop, Box Dog remains your
factory-outlet mall for all that is extreme, overdone and
heavy-handed." Hee.
----------------------------------------------------------------------
BEATS
~~~~~
Napster News, Part MCXVII
Napster's billion-dollar offer seemed like a bombshell when it hit the
wires last Tuesday, but that bubble burst quickly enough. None of the
big four labels is lining up to collect its first installment of the
proposed licensing fees, and they aren't likely to anytime soon. At
least that's what we'd gather from just about all the quotes we saw
from various music industry spokesfolk over the last week. Punches are
not being pulled here: National Music Publishers' Association lawyer
Carey Ramos told Inside.com that Napster's move to announce the
proposed deal through a press conference is proof that "they think
they can embarrass the labels into making a deal." CNET quoted a Sony
Music Entertainment statement that managed to all but sniff
derisively: "It's obvious to anyone that follows the music business
that the numbers Napster proposed on Tuesday do not make sense for a
$40 billion industry." And then we have calm, reasoned commentary,
like this from ZDNet's David Coursey: " Doing business with Napster
would be the same as negotiating with terrorists: You don't do it, not
even once, for fear of being held hostage again." In other Napster
news - now say it with me, "Is there any other kind?" - the company
asked for a full federal appeals court to review the three-judge
panel's ruling that could shut it down. At present, the bottom line
seems to be that Napster lives, at least until March 2, when U.S.
District Judge Marilyn Hall Patel holds a hearing to determine terms
of her modified injunction.
Read more at TheStandard.com:
http://www.thestandard.com/article/display/0,1151,22442,00.html?nl=bts
http://www.thestandard.com/article/display/0,1151,22453,00.html?nl=bts
Prince Saddles Up the Subscription Pony
Teetering on the fine line dividing the sincerely loveable from the
vaguely creepy, the artist formerly known as the Artist Formerly Known
as Prince (now just known as Prince) has given fans and sneering
journalist-types plenty of fodder over the years. Self-indulgent,
madly prolific and slyly subversive, Prince announced his latest salvo
this week: the launch of his new online subscription service, the NPG
Music Club (www.npgmusicclub.com), which "is now officially open 2
members and ready 4 downloading!" Take that, music industry! According
to Reuters, the basic service will set you back $7.77 per month, and
premium annual memberships go for $100. What will that chunk of change
get you? Wacky fun with letters and numbers, for one, but also: "U
will b given access 2 an xclusive array of xperiences from Prince &
The New Power Generation, including new unreleased trax, live events,
multimedia features, special merchandise items, concert deals and much
more." As if that weren't annoying enough, we're also told that "Ur
emales have been xtremely valuable in advancing 4ward." But once you
get past that sort of thing, props go out to the one-time glyph for
sticking to his paisley-patterned guns; his disagreements with the
major-label system are downright legendary. Now he joins the likes of
Todd Rundgren and David Bowie - who've launched their own online
subscription services - to "effectively eliminate the need 4 any
intermediates between the Artist and U. With no middleman, let the
freedom reign." Weigh two gough!
----------------------------------------------------------------------
SOUND OFF
~~~~~~~~~
This week's question: Is the primary purpose of any record label -
major or independent - to make money?
E-mail your opinions to julene@well.com with "sound off" in the
subject line, and we'll print a selection of the responses in next
week's newsletter. Letters may be edited for clarity and length, so
keep them short and include your name and affiliation, if any.
Last week's question: Have you found yourself downloading more music
than usual in case Napster is shut down? How will you get music online
if Napster goes away?
Napster is but one little breadcrumb on the floor of the very large
bakery that is the Internet. Even if decentralized versions of other
P2P clients aren't currently up to snuff, they soon will be. If RIAA &
Co. don't fully comprehend the nature of computer networks by the time
the Big P2P shows up, they're going to need a lawyer in every home.
Cue Gates.
- Simon Fraser
Partner
SmackDabMedia.com
The technology on how to share this stuff is widely known - close down
Napster and another clone will rise up - if not here, then another
country. AudioGalaxy, Gnutella, etc.
- "tompop"
I haven't been downloading more because I am so "scared" someone might
pursue me with a lawsuit - yeah, right! Come on over and get my Xerox
copies of magazines, my VHS tapes of "Seinfeld" and my cassette tapes
of Haircut 100 while you're at it! Two points which should be weighed
by any mediator, arbitrator, judge or jury in this case:
1. True artists shouldn't care about this outlet of sharing, as we all
know and have heard a hundred times from every puke in the media:
sharing grows the overall interest in music and, particularly, the
interest in new genres. But importantly, I thought an artist was in it
for the love of the art - its creation and sharing - or was that just
B.S. to make me feel good about crappy art?
2. True business people (Recording Industry Rubes) should also know
that in your Marketing 101 book (which you probably sold back at
college to pocket the money, you greedy bastards), you learned that
one of the primary rules of marketing is that before a consumer will
become a loyalist to your product/brand, they have to begin with
simple trial of that product/brand, and one of the best ways to
stimulate positive trial is through free sampling (just ask Procter &
Gamble ... they would pay for such viral sampling as Napster).
- Jim Sanders
Director of brand marketing
STAFF
~~~~~
Written by Julene Snyder (julene@well.com).
Editor: Michele Keller (mkeller@thestandard.com).
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