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Big labels are f*cked, and DRM is dead - Peter Jenner

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But it's not just that. You've also got this incredibly complicated rights structure. They've got to sweep it away online - they don't need to fuck with it offline - but they need to say there will be payment for music, and it's for the [artists] to claim under some kind of regulation.

We can have an 'OfRoy' - an office of royalties, or whatever you want to call it. Someone just to keep an eye on things to see people aren't be shafted, and that there's arbitration in the long run.

Doing it through the courts is just too complicated - it just becomes nit-picking. What we are doing today with radio, PRS, is actually riddled with holes. Money gets lost, misattributed, deductions are taken for this or that - but we can all live with it. It's not some malicious plot. It's just compounded human error.

For readers who've never heard of the black boxes, what are they?

Any money that comes in through collective payment and you don't know who it belongs to for any reason - or you can't pay it to them because you don't know where they are - goes into what's called the black box.

Which everyone in the collection societies insists doesn't exist. You ask Fran [Richard, ASCAP] about the black box and he will give you the most fantastic bullshit. He'll say "We don't have a black box".

Of course he has a black box. With the best will in the world you cannot distribute all the money accurately.

In a blanket license system, there'll be huge black boxes, and we'll have to learn to hold the money for a long time. People will learn to register, then we can work out how to deal with the black box fairly - rather than giving it to people who know it's there. That's what's happened in the past, really.

We don't talk much about it - so no one know who's got it. And the people who get it don't say much about it - it's not top of their conversation at music conferences. They don't come in and say "we cleaned up on the black box". What they will say, is "our market share was fantastic." That's because it's divided up by market share. It's non-attributable income and it doesn't have go to the artist - it goes straight to the bottom line.

The industry dreams of black boxes! (laughs)

But now it's going to be in the collection agencies' hands - or some intermediary.

If it's the publishing side, you get 50/50 at least, or 70/30 if you have a modern or newish record deal. And that 50 per cent is not recuperable against any advance. It's the same with PPL - you get some substantial proportion of the income. [The PPL is a members' society that collects royalties from public performances and and divides them between the recording rights holder and musicians] It's not quite as much as they try and tell you get, but it's quite a lot. So it's another income.

But it's quarterly and they can't wait to get rid of the money. The agencies know the regulators are watching them closely and can come in and ask "what are these pools of money you have here?" The EU watches them very closely.

So in collection agencies, while money can get systematically stolen, it's like petty theft. It's like retail losses from shoplifting. The agencies are really just shoplifters, but the major labels are burglars, and the worst of them are like armed robbers!

You mention Clive Rich [Sony BMG] in your report who modernised the recording contract - but that cut the rate for songwriters, didn't it?

No, I don't think it cut the rate for songwriters. I think it kept the rates online very low - but it was much clearer, much simplified and absolutely a move in the right direction. But you see, because of the stock market, they're obsessed with "margin".

If you're talking about your margin you should be doing things completely differently. They should be talking about their bottom line. But they talk about "unit margin" because that's what analysts look at.

That's true. It's a house joke at The Register when we cover earnings calls that the analysts have this Pavlovian response. I've been on calls where a company's sales have fallen 50 per cent and all the analysts ask about is "margin" Er, guys, what about your sales drop!

What's important is what's your bottom line, for Christ's sake.

The blanket licensing thing is obviously going to slash your unit margin. The record companies have increased their margin on downloads, because the costs have been ripped out. So they've cut the artists royalties and raised their margin.

But because they've replaced an album with a single they've helped destroy the retail industry, they're now in a position where they're completely fucked.

No one's got any sympathy or love for them, because they've systematically been shoring up their figures in the short run - squeezing money into Universal to make up for their catastrophies; Warner Brothers have been coping with huge debt; EMI have been desperately trying to hold their stock price up so somebody would buy them; BMG has been wondering how the fuck they're going to pay somebody back money for whatever it was, so they don't go public - and Sony are in a terminal mess.

So all of them have been draining profit. It's "get the money in, boys, get the money in. "

So they've raped them. They've raped their whole business model, and no one's got the time or energy to think about their business.

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