Sunday, June 11, 2006

Are Record Labels Becoming Obsolete?

Kevin Delaney, Ethan Smith and Nick Wingfield wrote an excellent Wall Street Journal (WSJ) article that discusses issues associated with the distribution of copyrighted material over sites like YouTube. It’s a rephrasing of the problem of paying royalties and protecting intellectual property to artists.

Some of the most popular videos on sites such as YouTube and Google Video show amateurs lip synching to music by the Backstreet Boys, *Nsync and other pop artists. Many home-videos posted on such sites include songs as soundtracks, as well as snippets of concerts captured by music fans with their cellphone cameras. Virtually all this material is put online without securing permission from the owner of the rights.

The concerns have taken root as the popularity of video sites -- which allow users to post their own and view others' videos -- has exploded, thanks in part to the spread of high-speed Internet connections and the rapidly expanding amount of amateur and commercial content online.

One of the most popular video sites, YouTube Inc. of San Mateo, Calif., was founded only in February 2005, but has seen its traffic increase dramatically. Each day, YouTube says, consumers upload more than 50,000 videos to its site, and watch its online videos more than 50 million times. Companies including Google Inc., Yahoo Inc. and CNET Networks Inc., have gotten into the act too.

But with the videos attracting millions of users -- and a rising amount of advertising revenue -- some in the music industry are debating whether to attempt a crackdown. At a May meeting of the Recording Industry Association of America, the industry's main trade group, the world's largest music company, Universal Music Group, pushed for an aggressive stance against amateur videos using commercial songs.
That’s today’s problem. Tomorrow’s problem is very different. What happens when the content created by amateurs is as good as or better than that created by professionals?

As if taken directly from the lyrics of The Monkees’ Pleasant Valley Sunday, in our neighborhood “the local rock group down the street is trying hard to learn their song”. They can record on their PC. They can mix on their PC. They can distribute for free on the net. They can generate buzz on any number of blogs or discussion boards such as MySpace.

The tipping point will be when YouTube artists start using amateur songs as their soundtracks. Just as TV newscasts are becoming obsolete as informational blogs rise, the rock music industry is becoming obsolete. Content quality is taking a huge jump in quality while labels are taking a beating.

Ask yourself this: what added value does Universal Music Group provide? I’ve got my music collection on mega-shuffle right now as I blog. I like the music. As much as I love the cover art for, say, Iron Maiden, the value of the packaging has long since depreciated to zero. Universal Music Group doesn’t make Bruce Dickinson’s vocals any better or worse and it doesn’t play guitar for Adrian Smith.

Iron Maiden has a great website with all kinds of cool features and art. Their label may have provided all of that to the band for their fee. Their tours are probably scheduled and contracted, the roadies hired and the reservations made by their label. That’s value added for the band, not the listeners. Once the tour has gone by, all you have left is the music.

When the local rock group down the street learns it’s song, we may not need the labels any more. Ask the network news what happens then.

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