What Free Lunch?
Not long after I wrote about the false image of legitimacy portrayed by some music download sites came word that the FTC may open an investigation into such sites.
The Associated Press ran a
story last week that said the
Center for Democracy and Technology plans to file a formal complaint with the FTC against “such Web sites with deceptive trade practices.” (Read a PDF of the complaint
here.) In the past, the group’s complaints to the FTC have been acted upon.
The article says one website’s lawyers wrote in a letter that the company “genuinely regrets that anything it has done or failed to do has been interpreted… as potentially confusing or misleading.” One person who formerly ran such a website said he believes it is deceptive and that “it’s a ripoff,” and added he’s glad he’s no longer involved with the site.
This is good news for consumers. There are some out there who use P2P applications knowing that they are downloading copyrighted sound recordings. But there are many, judging from the shock expressed by some when they are sued by the RIAA, who have no idea that the manner in which they used programs—some which cost up to $40—was illegal.
This isn’t an issue of whether or not P2P sites should or shouldn’t be attacked. It’s an issue not unlike the labeling of food products. Consumers have a right—especially if there’s a chance of being sued—to know about the product.
Indie Music Stores Having Mixed 2005
Are independent retail stores up or down for the year? If you go by what SoundScan is saying, the sector is down almost 25%—as reported by Hits and revisited by Don VanCleave, president of the
Coalition of Independent Music Stores. (Overall, album sales are down about 10% so far this year.)
In the latest CIMS email, VanCleave noted that “everyone I am talking with (just a few exceptions) are UP this year even without Norah Jones this quarter,” and he’s speaking only of music sales and not total store sales.
The numbers don’t lie, but they don’t represent everyone. VanCleave asked around a bit to find some insight. He said he talked to some wholesale distributors and found that some accounts are indeed “way down year to date.”
But the CIMS stores—which include such fantastic music stores as Sonic Boom in Seattle, Criminal Records in Atlanta, and Twist & Shout in Denver—are having a great first quarter. Why? There have been many albums put out this year by artists that found their first toe-hold with CIMS stores: Jack Johnson, Mars Volta, Death Cab for Cutie, Iron & Wine, and Kings of Leon.
“We are so happy with the current release schedule,” he wrote. “Hopefully it will keep up and provide us with our biggest year ever.”
Industry Leader Had a Good Year
It’s enough to make one think what kind of income statement Universal Music Group would have without piracy and general industry public image problems. Vivendi Universal, the parent company of UMG,
announced $4.6 billion in operating income for 2004, and UMG’s share was over $452 million.
More Grief For Warner Music Group
It’s no secret that Warner Music Group cut costs to tidy up its financial statements ahead of an IPO. An
article by the LA Times’ Josh Friedman and Chuck Philips went deeper to find out how cutting 1,600 jobs and pruning its artist roster will affect its future.
Analysts question the depth of the cost cuts, and Standard & Poors lowered its credit rating to “negative” from “stable” because investors were paid most of the proceeds from a debt offering, which “rewarded management at the expense of the company’s balance sheet.”
And what of its future artists, those who will help determine the future value of the company? Said the Times article:
“Sources also said Warner Music sharply reduced its artists-and-repertoire budget last year for new songwriters and unknown acts—the inexpensive contracts that nurture young talent and help keep hits flowing into the pipeline. Moreover, the company has virtually ended its talent scouting in foreign territories, knowledgeable sources said.”
And the company is still being criticized by some for giving out large executive bonuses when the company turned only a small operating profit. Hits ran a
piece on WMG’s many detractors. It quotes Ritch Esra, Co-Publisher of The Music Business Registry, in his “impassioned editorial to his industry mailing list.”
What is so truly disturbing here, is that it speaks volumes about the value system of an owner of a company that would pay its top-five record executives more than three times the amount of operating income for a 10-month period while dismissing 1,600 employees. … In addition to the employee layoffs, Warner Music Group also dropped 93 of the 193 artists signed to Warner labels in the U.S., approximately 47% of the artist roster, during this same period.”
Glenn works in the music industry in New York City. He writes about the industry and music in general at his blog,