Commentary: Are Record Labels Having A Sunni Awakening?

The Brits released the results of a new study yesterday claiming that 7 million people in the UK are illegally file sharing, costing the economy billions of pounds. Consequently the Strategic Advisory Board for Intellectual Property (SABIP) says it may be hard to change attitudes. Duh. You think? This is news? Give me a break. Just ask Eric Garland of Big Champagne. When I was president of Grokster, we knew the numbers. Our biggest single market of users was London! So I would go over to the UK, say a lot of wacky shit in the media, and our downloads would climb. And that was 6 years ago. Could it be that everyone is starting to get their fucking heads out of the sand ten years after the launch of Napster? Maybe.

There was also an interesting story in the NY Times yesterday about how record companies are becomming more “flexible” in their licensing terms. It’s about time. But my guess it that it is still not enough. Record companies have been stuck in their alternate universe for so long that they still don’t understand that the value of their content isn’t what it used to be. And they have to face the reality that now music is basically free. Anyone can get anything anytime. And suing the masses just doesn’t work. In fact, suing anyone just doesn’t work. So they sue a start up and put them out of business. So what?

When I was with Grokster, one of my mandates was to try to talk sense to the record companies and work with them to convert file sharers into music buyers. I would get one of two answers from every record label: 1) we don’t reward pirates; 2) shut down and then we’ll talk. Naturally both answers were utterly ridiculous. Addressing the later first, the labels were so stupid that they all thought that there was some master switch behind a curtain somewhere that we could flip to completely shut down the network. And they refused to believe it when we swore that was not the case. And even if we were able to shut down the network completely, what good would do to cut off millions of potential customers? They just didn’t understand that once you lose them you’ll never get them back. Just ask Napster.

In the first case, let’s dig into the history of the record industry. To say that they don’t reward pirates is utter fallacy. How do you think that they would combat rogue cd plants in Asia that they could not shut down? They made them authorized distributors! They just couldn’t understand that they could and should employ the same strategy with file sharing companies. Now I will admit, when the file sharing companies were winning in the courts before the Grokster case got to the Supreme Court, some of the p2p guys were getting a bit uppity. But that’s no excuse. The goal was to form an alliance that would work for everyone. The guy who tried to break the logjam was Andy Lack when he became CEO of Sony Music. But that’s another story for another time.

A lot of music people, most visibly Paul McGinnis (U2′s manager) want the ISP’s to protect their content. That’s ridiculous. As is the Warner Music proposal to get ISP’s (or colleges and universities) to pass on a “music surcharge” to its customers, just like a tax on your mobile phone. Also ridiculous. It’s just not the ISP’s job, nor in their best interests to do so. Content owners are responsible for their content, no one else. That’s always been the case. ISP’s are not government agencies and thus are not assigned that responsibility. And the bellicose arrogance that the recording industry has historically displayed have not exactly endeared them to anyone, including their own customers.

Jim Killock, executive director of the The Open Rights Group – a UK based group that works on digital rights and freedoms, told the BBC “We need a compelling ‘all you can eat’ music service to reduce illicit file sharing. But [we need] to remember that extreme enforcement measures would probably be very unfair and make people angry.”

So now we’re here in 2009 and something akin to the Sunni Awakening is being suggested by the NY Times article. But just like the Sunnis, record companies have to avoid overreaching. They have already made the investment climate nearly impossible for start-ups to get viable venture capital, as VC’s have learned not to trust them. The major label deals thus far have made it impossible for a start-up to succeed. What they now have to do is much more than is even suggested in the Times article. They have to truly want new companies to succeed and help them do so instead of looking at them as cash cows for big advance payments and high royalty rates in order to bolster their bottom lines. That was and is harmful short term thinking. What they have to learn is that they are all in it together. A-salaamu ‘alaikum.

© 2009, Wayne Rosso. All rights reserved.

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Tags: digital music, EMI, file sharing, Grokster, ISP, napster, p2p, Universal Music, Warner Music