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Lower-Power FM Reintroduced

It's been a messy week in music industry news. In a continuation of the music industry's crusade to alienate internet-using music lovers, EMI unleashed a slew of lawsuits against several internet start-ups, including their investors. The RIAA unveiled massive layoffs. MusicFIRST, a music industry lobbying group, pushed to tax radio stations. And LiveNation and TicketMaster are fighting for a merger in Congress.

There is some goods news. Congress has reintroduced the Community Radio Act in the House of Representatives. The Community Radio Act is a bi-partisan bill promoting low-power FM Radio and failed to pass in 2007. It's co-sponsored by Reps. Mike Doyle (D-Pa) and Lee Terry (R-Neb).

Low-power FM (LPFM) allows for more localized broadcasting. Churches, unions, high schools, and colleges could all occupy space on the radio dial to reach out to their individual audience. Because a LP signal is 100 watts or less, it only reaches a radius of about 5 miles. Five miles is powerful enough to reach a community but too weak to disrupt the signal of stronger commercial stations.

Since the Telecommunication Act of 1996, radio has experienced massive consolidation. Future of Music Coalition's report on deregulation revealed that Clear Channel and Viacom controlled 42% of listeners, and playlists suffered from lack of diversity across formats. Internet radio has stepped in to offer diversity where terrestrial radio has failed, and LPFM returns to terrestrial radio to add diversity. Internet radio cannot be consumed by mobile commuters without internet access or satellite radio. Thus, there is a demand for diversity in terrestrial radio, and LPFM can fill the void.

Opponents of LPFM cite "crosstalk" as a major objection. They argue that LPFM signals could interfere with nearby commercial stations allowing both broadcasts to be heard simultaneously. The National Association of Broadcasters (NAB) is one such opponent. NAB was a staunch supporter of the Telecommunications Act of 1996, which led to deregulation and rapid loss of localism in radio. NPR was also a surprise opponent of LPFM, claiming to support diversity but harping on the "crosstalk" issues that scientists debunked.

The verdict on LPFM is still on the table, but things look more promising in 2009 than in 2007. Look to Future of Music Coalition for future developments in LPFM.

FMC's DC Policy Day: Highlights

Future of Music Coalition held its third annual DC Policy Day at National Geographic's Grosvenor Auditorium two weeks ago on Feb. 11, 2009.

I arrived just in time for the Keynote Address from Michael J. Copps, Chairman of the FCC. The tides have truly changed at the FCC with the advent of the Obama administration. Copps follows two infamous predecessors, former chairmen Michael Powell (2001-2005) and Kevin Martin (2005-2009). Powell became famous for fining shock jock Howard Stern for profanity and Viacom for the memorable wardrobe malfunction of Super Bowl XXXVIII. Martin continued Powell's legacy by issuing $150 million in fines and setting the record for any chairman in history.

Michael J. Copps distanced himself from the behavior of both Powell and Martin. The FCC "is a consumer protection agency. It's time to start acting like one." He advocated rule of law over whim in issuing fines and condemned "mindless deregulation." Copps addressed net neutrality on the internet, an issue which Future of Music Coalition has championed for several years. He prioritized protecting the internet from heading down the destructive path of media consolidation. He vowed to preserve openness. In light of the recent bank failures, Copps pointed out that free markets are not the be all, end all. Where then does the FCC come in? Oversight, provided by the FCC he argued, is paramount to the preservation of the internet as we know it. Finally, Copps addressed the transition to digital television. He defended the decision to push the transition to June, although he didn't need to in this crowd. Attendees didn't react with much emotion to this issue.

Next up was the most heated panel of the day, Win-Win When? Copyright and Innovation in the Digital Age. Panelists included Zahavah Levine, Chief Council of YouTube, Gigi Sohn of Public Knowledge, Steve Marks of the RIAA, and Rick Carnes of Songwriters Guild of America. Despite a full roster of panelists, the discussion could be summed up as follows: Zahavah Levine of YouTube versus Rick Carnes of Songwriters Guild of America (SGA). Other panelists simply took sides. We got into the nitty gritty of copyright: of mechanical licenses, Section 115, and public performance and reproduction distinctions.

Rick Carnes didn't do musicians any favors by demonizing songwriters with his aggressive and irrational blind devotion to anti-piracy. If you entered the room sympathetic to the plight of musicians, you left apathetic. Carnes was blind to the slippery slope of regulation and advocated the end of piracy at all costs. His ideas were both illogical and regressive. Police the internet? Moderate downloads? Panelists and audience members burst out in mocking laughter several times. He found a friend in Steve Marks of RIAA, but Zahara Levine's contingent seemed much stronger.

Youtube's Levine and Gigi Sohn proved a force to be reckoned with. Levine argued for a more accessible database of publishing rights. They've got a big fat wallet to pay the songwriters with and no idea to who to open it to! In addition, Levine discussed irrational royalty requirements imposed on YouTube. Publishers force YouTube to pay for both a public performance (due to the stream) and a reproduction for the copy they must keep on their servers. Levine argued that YouTube should pay only for the public performance and that the server copy was simply a necessary means of providing the stream. The audience nodded in agreement, frowning upon the greed of publishers.

The transaction costs are simply too high to seek out the information for publishers of millions of songs. Unless the publishers and songwriters work to establish a more transparent database, the problem of unpaid rights will perpetuate. Rick Carnes showed an unwillingness to work with the digital age. He effectively demonized internet users for illegal downloads and scoffed at the potential for business models of free. Like I have written about before, free can and does work.

Rick Carnes and publishers will not find sympathy by being geezers of the music industry. They must look to new models and progressive answers to solve their copyright woes. They must work with major players like YouTube rather than against them.

Time for Change

Sony has reported this week that its profits are down 95% from last quarter. Included in the downward spiral is Sony's music division, which experienced a 41% decline in profit resulting from a 22% decrease in sales. (Source: Hypebot)

Even so, it's not time to lose our heads. In the same week, the music/tech blogosphere has been buzzing over the success story of indie artist Corey Smith. He reportedly made about $4 million in gross revenue with his DIY business model. A main component of the model? Giving his music away for free. Most of his revenue comes from concert tickets that he sells for approximately $5 per show. This, claims Mike Masniak of Techdirt, encourages fans to drag along their friends; to go to multiple shows; and to buy merchandise at shows.

The Corey Smith model contributes to a growing amount of evidence that models of "selling for free" can be profitable. Buying music today is simply too expensive, and those who give music away for free or sell cheaply tend to do better. Fans react negatively to a cd priced at $16.99. If you look at a full 120GB Ipod, how much would you value it at? If it's full of legally purchased music, it's worth $24,000 to $30,000. At that rate, it's not surprising that music fans tend to download music illegally. Even so, Corey Smith and others show that musicians can still come out on top. In order for the music industry to survive, they need to change their dramatically change their business models. At this point, experimentation is warranted.

Perhaps that's why songwriter Amanda Ghost was recently named president of Epic Records, a label owned by Sony (Source: Hypebot). Ghost is a successful pop songwriter and has penned such hits as James Blunt's "You're Beautiful." This unusual choice is a move in the right direction for Sony, which has little to lose following this quarter's losses. Perhaps the music industry should be run by musicians rather than business executives. The outdoor industry, for example, has thrived of the outdoor industry is run by skiers, climbers, and surfers. There's even a recent article at CNN Money about its unique model.

Amanda Ghost's appointment at Epic Records will hopefully bring a little bit of Corey Smith flavor to Epic. Companies are well-advised to continue appointing musicians to higher level positions within record labels. They bring a musician's sense as well as a point of view that cannot be acquired simply by earning an MBA.

Read the full story about Corey Smith over at Hypebot.

Satriani vs. Coldplay? See Journey.

Copyright claims have been on the rise since the the music industry became digitized, but is this the correct response to change? There is no question that property rights are paramount to the function of any industry, but the music industry's response to alleged infringement has been overly aggressive and ill-conceived.

One major function of property rights is to balance incentives to invent with incentives to innovate. In the case of music, copyright claims have stifled the innovation that arose from the digital revolution. See Girl Talk's Gregg Gillis who has built his career on mash-ups and remixes. Armed with his laptop, Gillis uses hundreds of samples per album without obtaining rights by claiming fair use. This has made him a target for copyright cops and slowed his ability to release albums. Now that he's released both Night Ripper and 2008's acclaimed Feed the Animals, he argues that his use of samples increases exposure for all parties involved. Proponents of traditional copyright point to established precedents set in the 80s when rappers began paying for their use of samples. However, up until recently, artists never before used samples in such large quantities.

It's not only DJs who have been targeted in the copyright wars. Guitarist Joe Satriani has recently filed an infringement suit against Coldplay for alleged theft of a riff. Satriani claims Coldplay stole the melody of "Viva La Vida" from his song "If I Could Fly" (see below for evidence). True, the Satriani's chorus sounds alarmingly similar to the Coldplay's verse, but is this lawsuit material? The blogosphere has echoed a resonant "no," while some Coldplay haters are supporting Satriani's suit. The chord progressions are similar but not not identical (click here for the music theory analysis). In addition, it's virtually impossible to write a completely original song without unintentionally borrowing material.

Check out this video from College Humor which it illustrates how 30+ songs are based on the chord progression from "Don't Stop Believin'." It's also a fun stroll down memory lane via song. Rigorously pursuing copyright infringement is not the way to support an already struggling industry. Copyright of some kind is necessary to create incentives for creating songs, but we must reevaluate what constitutes fair use versus infringement.

Here's a comparison of Satriani's "If I Could Fly" with Coldplay's "Viva La Vida." Decide for yourself.

DRM: Not Dead Yet

During its final appearance at the annual Macworld expo, Apple announced that it was phasing out DRM (digital rights management) on all songs purchased from its Itunes Music Store. If you're unfamiliar with DRM, perhaps you're familiar with a message like this: "This computer is not authorized to play [insert song title here]."

The problem with DRM is that it limits a customer's use of legally purchased mp3s, often malfunctioning and allowing less than the 5 authorized users. I almost never purchase music on Itunes, but there's a price for convenience and I paid it. I purchased "Late Nite Radio" by John Denver to play on my college radio show this past semester. When I sent it to my co-host to play through her computer, it wouldn't play. I received the above error message even though I had only authorized one account!

Even though I vowed never to buy another song from Itunes again, I understood why so many others do. The Itunes Music store provides maximum convenience in a world where Itunes is the music software of choice. The consumer's quest for minimizing opportunity cost blinds them to the two major flaws of the Itunes Music Store: 1. songs are DRM-protected (until now); and 2. they come in a file extension(.m4p or .m4a) that's incompatible with other music players. Apple previously made some unenthusiastic attempts to offer DRM-free tracks, but they were only available from the Itunes Plus Store, which was (a.) more expensive than the regular Itunes Store; (b.) limited in selection; and (c.) poorly publicized by Apple.

Following Macworld, it seems like the age of DRM may be at an end. Alas, that would be incorrect. DRM is alive and well at Apple, as Electronic Frontier Foundation (EFF) has highlighted below:

• Apple uses DRM to lock iPhones to AT&T and Apple's iTunes App Store;
• Apple uses DRM to prevent recent iPods from syncing with software other than iTunes (Apple claims it violates the DMCA to reverse engineer the hashing mechanism);
• Apple claims that it uses DRM to prevent OS X from loading on generic Intel machines;
• Apple's new Macbooks feature DRM-laden video ports that only output certain content to "approved" displays;.
• Apple requires iPod accessory vendors to use a licensed "authentication chip" in order to make accessories to access certain features on newer iPods and iPhones;
• The iTunes Store will still lock down movies and TV programs with FairPlay DRM;
• Audiobook files purchased through the iTunes Store will still be crippled by Audible's DRM restrictions.

DRM is now virtually obsolete in music, so there's still reason to celebrate. Still, hopefully Apple learns quickly that the DRM model is not the correct way to protect against piracy. Apple, along with other companies in piracy-afflicted industries, must find more sustainable solutions to profit from the new way the industry works. Ditching DRM is the first step.

Source: Apples Shows Us DRM's True Colors - Richard Esguerra, Electronic Frontier Foundation