Smalltalk Tidbits, Industry Rants

On the face of it, services like Pandora look like a great thing for music companies - lots of exposure, links to buy music legitimately, large customer base - what's not to like?

Pandora is one of the nation's most popular Web radio services, with about 1 million listeners daily. Its Music Genome Project allows customers to create stations tailored to their own tastes. It is one of the 10 most popular applications for Apple's iPhone and attracts 40,000 new customers a day.

Well, if you're SoundExchange, marketing is apparently spelled S-T-U-P-I-D:

Last year, an obscure federal panel ordered a doubling of the per-song performance royalty that Web radio stations pay to performers and record companies. Traditional radio, by contrast, pays no such fee. Satellite radio pays a fee but at a less onerous rate, at least by some measures.

So the channel that your prime demographic - young buyers - pays the most attention to is getting charged in ways traditional radio isn't. The music industry exists due to terrestrial radio, and internet radio might allow it to continue to exist in something that resembles its current form. Assuming that anyone at the SoundExchange had a clue, that is.

They would rather pursue the profit margins of 20 years ago (which aren't coming back), and end up with nothing. Here's what passes for thinking at SoundExchange:

"Our artists and copyright owners deserve to be fairly compensated for the blood and sweat that forms the core product of these businesses," said Mike Huppe, general counsel for SoundExchange.

Maybe someone could make things simple for Mr. Huppe - he's suffering from the same delusion that a lot of sales and sales management types do:

The sales person goes to a prospect, and offers the product for $N. The prospect says (repeatedly) that they can't, or won't, pay more than $M, where $M < $N. The sales guy is so intoxicated by the commissions he'd see from the higher number that he doesn't understand that it's not a possibility; it's either going to be $M, or $0 - he thinks there's blood left in the stone. What he ends up with is $0, and, all too often, is confused as to how that happened. For instance:

SoundExchange officials argue that because different media have different profit margins, it is appropriate to set different royalty rates. Moreover, they complain, Internet radio stations have done too little to make money from playing their songs.

Yeah, getting people to hear new music they didn't know existed - and then buying it - is such a bad plan. I think this Huppe guy needs to ponder how much money the non-existant web music industry will be sending his way - and then ponder what lesson upcoming artists will draw from that. Most likely, they'll decide that working for idiots like Huppe is a very bad plan...

Update: Mike Arrington thinks that the labels and artists will have to be pounded with the death of Pandora before they see reality clearly.

Technorati Tags: RIAA, copyright, stupidity