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Labels Strangle Startups More Than Music Pirates

(UPDATED) image from public-domain.zorger.comThe RIAA thinks that LimeWire should not be proud of their service, because they broke the law. They go on to say that services that flout the law do not deserve a place in today's music marketplace where "hundreds of existing, accessible, innovative legal sites offer users their favorite music at affordable prices — sometimes even free." Following this assertion, the RIAA notes that there are now "more than 11 million legal tracks online and more than 400 licensed music services today." This all sounds well and good, but like always, the RIAA still seems to be forgetting something.

The only reason any of these music services offer anything of any value to fans is that after more than a decade of fighting the web hand over fist, the record labels finally thought it was time to complete with piracy in a meaningful way. Had there been no music piracy than there would've been no digital culture for the RIAA to brag about, all fans would have online is a music experience that's vaguely better than going to a store and buying a CD. To this day, that's about all we have. Fans don't have a music service that's better than piracy because that would actually better than buying a CD; a move that the labels are still tiptoeing around. I agree with the RIAA in the respect that in order for a legal marketplace to thrive that there needs to be a level playing field, but firstly, that will never happen. Music sites will always have to compete with piracy and innovate in ways that create comparable experiences. Legal music services appear to be suffocated more at the hands of the record labels themselves than by the cut-throat, nasty pirates.

Why are there so few music sites for the RIAA to boast about? Is it because the "illegal services" like The Pirate Bay and LimeWire "conspired" against the legitimate music market or is it because the labels worked against the market themselves? If illegal sites didn't exist, the playing field would be level for the major labels and not the fans. Right now, Spotify wants to enter the US music market. They want to create an experience that's better than piracy and give fans a service that reflects the way they consume music. Why has that service not launched yet? I have not read a single report that says they are having trouble competing against the illegal music sites and that fans aren't willing to use it. Instead, all reports indicate that Spotify is locked into label negotiations and will have to pay large upfront sums before they are allowed to enter the US.

That is to say nothing about the sad, sad state of music startups themselves.

According to The NPD Group, consumer awareness of services like MOG (and likely Rdio too) is at a mere 2 percent. Sure, due to the social behaviors and norms that file sharing services promote, fans have become increasingly unwilling to pay for music and the proposition that legal sites make is monthly payments. This is a barrier. The greatest barrier, however, seems to be that fans don't know services like MOG exist. Also, because these sites have been neutered in their true potential, mostly to due label intervention, they fail to captivate any interest.

I have a different proposition. Fans will pay for legal services that compensate creators for their music the day that they actually align themselves with the state of music consumption now and are able to create services that revolutionize the digital music sector rather than attempting to preserve the brick-and-mortar and plastic disc based business model. The current music consumption system is still broken, quit pretending that it isn't. There's still much that needs updating.

"Services that flout the law do not deserve a place in today’s music marketplace where hundreds of existing, accessible, innovative legal sites offer users their favorite music at affordable prices – sometimes even free. 

There are now more than 11 million legal tracks online and more than 400 licensed music services today. A few of these legal sites can be found on our website or on the music community website Music United, not to mention audio or video streaming sites like Pandora, MOG, Vevo and Rdio.

In order for the legitimate marketplace to thrive, there needs to be a level playing field where illegal sites are held accountable and do not suffocate innovative, legal services whose business plans include compensating creators for their music.  That’s why the recent injunction represents a significant step in the bright future of digital music." (Read on.)

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13 Comments

  1. STUNNINGLY SHALLOW AND FLAWED ANALYSIS. AND TERRIBLY WRITTEN (“ONTO”? COME ON, THAT’S 6TH GRADE LEVEL SPELLING, JR.)

  2. is that content meaningful to you? You think the reason the labels are worse than file sharing for music because file sharing isn’t preventing spotify from coming to the States? The grammar is just the cherry on top of a fecal sundae.

  3. music is free. $10/month is a ridiculous price point for free. it doesn’t help that the music services out there have limitations. great thing about the internet.. its the wild west.

  4. Thanks for the kind words. I fixed a few of the errors. This piece was written rather quickly and I would be more than willing to back up the points expressed in it.
    Also, I would be glad to have an in-depth discussion and let you challenge my analysis.
    I am more than aware that this piece is not perfect but it is not that far off either.

  5. Stunningly loud and flawed approach to online typing. Come on, SHOUTING is something you’d do in 1st grade.

  6. As I’ve pointed out a few times in the past, I was working with some legit online music services circa 2003 who were convinced that subscription was the way of the future. It still hasn’t happened and I seriously doubt it ever will. It has nothing to do with the labels, who have licensed subscription services for nearly as long as piracy has existed. It’s quite simply a matter of consumer demand.
    I don’t disagree that labels deserve a lot of the blame but it seems we’re still rehashing old, outdated arguments against them. They’ve been licensing plenty of services and there are likely more than 400 legit services out there – and there have also been countless more that were licensed then failed. How many different services do you think should exist before it’s a sufficiently diversified landscape? Back in the day, how many brick-and-mortar stores could survive in a single market? Some will fail for lack of demand. You wouldn’t say the search engine business is a failing business model because only one truly dominates the market and only a few participate meaningfully.
    Labels have also been willing to be creative. The overwhelming success of Pandora is proof of that. It occupies an undefinable netherworld in copyright law – semi-on demand, semi-interactive streaming. However, it’s a hugely popular (and profitable) business.
    The same can’t be said for Spiralfrog. It was the ideal “feels like free” environment, yet failed miserably. It wasn’t for lack of support from the labels or lack of funding. It was because consumers just didn’t like it.

  7. You paint kind of a nice picture here, but the reality is that Kyle is right. The labels and RIAA make it extremely difficult for any music startup to not only get going, but to actually stay in business.
    The licensing costs are huge – in the millions to just start up, then quarterly minimums that are the reasons most of the start up fail. They can’t afford to market because all of that money is going to licensing – a great majority I might add does NOT go to the artist.
    Pandora may be successful, but they are hardly profitable. Last numbers I heard was that they made something around a $500M (don’t quote me on that- going from memory) and barely eeked out a profit. Somethings very wrong when a company can have revenue that high, and is barely making a profit.

  8. Irregardless of how badly the RIAA and the Record Labels have botched things (and they certainly have)……At the end of the day, if you took something that was for sale and didn’t pay for it, you have done something morally wrong.

  9. >>>>KYLE says>>>>>>>>>>
    Also, I would be glad to have an in-depth discussion and let you challenge my analysis.
    I am more than aware that this piece is not perfect but it is not that far off either.
    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>
    Attacking someones spelling is a cheap shot.
    I will NOT argue that the labels and the RIAA, do not have anything to be ashamed of. Because I agree that they do.
    I realize that the point of your article is: Without online piracy of music we wouldn’t have all the online legitimate online services that we do now.
    And there may be some validity to that argument, but what I would argue is that articles like yours seem to (whether you intend it or not) justify the actions of sites like Lime Wire, that made available for free, music that was never meant to be free. That it enabled people to take without paying. And that it continues to allow people to rationalize justify the act of taking without paying (Stealing) to themselves.
    IE:
    “The labels and RIAA where (or are) a**h****, so it’s ok for me to take this and not pay for it”.
    I have always said that the labels and RIAA where a**h****, that they did a lot of damage to the music industry, and that they did a lot of stupid things, but that that fact, doesn’t make stealing right. A simple fact that somehow seems to get lost in all these online arguments.

  10. TD said>>>>>>>
    The same can’t be said for Spiralfrog. It was the ideal “feels like free” environment, yet failed miserably. It wasn’t for lack of support from the labels or lack of funding. It was because consumers just didn’t like it.
    >>>>>>>>>>>>>>>>>>>
    And could it be that the reason why consumers don’t support it, is because they can just get it for free somewhere else?

  11. There might be a lot of truth to this. Many start-up folks say that record labels are the ones who get in the way and shoot them in the foot.

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