Official: Music biz still risk and revenue phobic

An answer to the music industry's woes slipped into the IFPI Annual Report last week, but its significance went unnoticed. Before I get to it, though, here's a poser.

“We screw the struggling artist, and pay the suit,” Nick Carr mused recently. Carr was examining a contradiction: information has never been less free, it’s never had as much as much value attached to it. Once you add up your Sky Sub, mobile broadband bill, and the many other information services, we pay a fortune for information, most of which is entertainment.

“It's a strange world we live in. We begrudge the folks who actually create the stuff we enjoy reading, listening to, and watching a few pennies for their labour, and yet at the very same time we casually throw hundreds of hard-earned bucks at the saps who run the stupid networks through which the stuff is delivered,” he wrote.

Scan the comments here and elsewhere and you’ll find people saying they make a point of principle not to pay for entertainment digitally, because entertainment companies are wicked. The principle is that two wrongs make a right, which makes withholding the payment justified. Maybe even morally superior to paying.

But as Nick points out, we all actually pay a fortune to suits – they’re just different suits. They’re suits at large telcos, advertising middlemen (eg, BT) and service companies. The answer seems simple.

If you’re a copyright business, then to appease the copyright militants, you must pretend that you’re not. You must say you’re in plumbing, or infrastructure. Or anything, actually. For the world’s biggest record company, Vivendi, this will be a case of returning to one’s roots. Universal’s parent Vivendi began life as Paris's first monopoly water supplier – it only changed its name from CGE and spun off the water and sewage businesses in 2000. And look, we can mention sewage and The X Factor in the same sentence without berating the obvious.

But I digress.

If the music business has suits, it must be the IFPI, and last week the international trade body for sound recordings published its annual global music survey. IFPI pointed to $4.2bn of new digital business since 2004, but of sales down 30 per cent overall. In some markets, sound recordings are truly in the tank. Spain started very late down the digital route, and digital sales there are negligible – overall sales have crashed to a third of what they were in 2001. In Brazil, which has been nurtured by the Berkman crowd as a laboratory for its post-copyright cybernetic utopia, full price sales of CDs by new artists are down by 80 per cent. I bet those artists are sending thank you emails to Messrs Lessig, Zittrain and Nesson as you read this. They’ve liberated them from the chore of being paid!

I have no doubt that most people lie in the middle ground between enforcement against fill-yer-boots infringement, and introducing new services which make enforcing casual infringement unnecessary. That’s a great big blurry middle ground, and it means fulfilling the anything anytime but-at-a-price pledge. But the IFPI emphasis is still heavily on enforcement. IFPI puts the blame for the 30 per cent fall in revenue firmly on wholesale casual infringement. IFPI notes that only 8 per cent of internet users frequently buy music. That’s a shocking indictment of the music business: it's lost a lot of regular customers.

Worse was to follow when examining some of the comments by Rob Wells, CGE's head of water transportation facilities management (as we might have to call him), but better known today as Universal's head of digital. Two of Rob's comments confirmed that doing business digitally is a bit of an oxymoron.

"We’re closer to ‘the utopia’ where a million people pay €1 rather than ten thousand paying €10,", he said. I’m not sure why that’s a utopia, it sounds more like a stealth tax: and when a million people suddenly realise they're losing a pound by stealth, then that's a million people with an added resentment against music. It's an example of customer-phobia - a prejudice against customers.

Even more worrying were Rob’s bullish comments about Spotify, which is doing so well it, er... can’t afford any more customers. Rob called it "sustainable", defining sustainable as money going to Universal. A sustainable business is one in which revenues exceed outgoings, and using this more conventional definition, it's evident to world+dog that Spotify is anything but sustainable. (UMG has an investment in Spotify.)

Alongside Spotify, the IFPI report features a sequence of losers: there's Nokia's Tero boasting about Comes With Music, some ropey scheme in Denmark which (like Spotify) gives people a reason not to buy music (to become ex-punters), and so on. It's really a sorry sight. But salted away on page 10 is a graph showing how various creative 'industries' cope with digital. The games business sees 32 per cent of its revenue from digital sales.

Now piracy is rampant in games, so it shouldn't be doing quite so well. What has the games business tried that the music business hasn't? Well, it's tried enforcement, and it's tried DRM. It's got (some) closed platforms, which must help a bit. Not so many people complained when the Xbox 360 door was closed recently: modders accepted it and got on with gaming. But none of these individual factors explains why it's a sector that's expanding, not contracting.

What games developers have done is create gaming "experiences" that are shared - that wouldn't be possible without the network connection. Participants are paying to share their gaming time with a particular service. There are music services where you can sort of share, but it's not much fun. With Spotify, Omnifone, it's more theoretical than practical - and you certainly can't keep the music you share. That's really lousy. By refusing to monetize sharing, the music business has failed to give people a positive reason to pay for music. ®