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Saturday, June 7, 2008

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How Musicians and Record Companies are Cheated on the Web

How Musicians and Record Companies are Cheated on the Web ---------It sounds like a great deal - most websites promise you: 50% of the income from the sale of your downloads a level playing field against the big stars (oops - they say "against the products of the big (bad) record companies") that you will be heard by record companies and/or big audiences worldwide Well, it sounds very good - actually it sounds so good that it most probably is not true. In reality this "win-win" business model is nothing new at all. It has been practiced by radio stations all over the world for most of the last century. Some radio broadcasters like WDR (a huge German radio broadcaster) or Jazz FM (a London-based smooth-jazz station) are almost exactly like this - they have their own record store/mail-order operations selling some albums of the music they play. In their case though, the record companies (or in the case of jazz FM, sometimes musicians selling directly to the radio station) usually get about 70% of the final sales price to the consumer and therefore a higher percentage. Actually, this is not the full story of the problem. These Internet music sites are really basically the same as radio stations, except that they are usually more convenient to the audience and give them even less of a reason to buy albums. The reality of the income structure of internet music sites is that they make between 80% and 90% of their income from advertising and hardly any money from sales of downloads. If you don#t believe this, have a look at some of the sites and check out the quarterly earning reports of mp3.com, which can be found among other places at the SEC website ( www.sec.gov). Of this income, the musicians get nothing. This is in contrast with radio, where they at least get something from advertising income, since radio stations have to pay between 2.5 and 6% of their advertising or mandatory (state radio) income for the use of music in most countries. The 50% of download income would be acceptable if a website does not sell advertising at all - or if it also pays a decent share of the advertising income (lets say about 30% to 90%) to all the musicians according to the percentage of their pageviews of the overall sites pageviews. Level playing field - ridiculous, since being somewhere even on a heavily trafficked website is about the same as sitting on a busy street corner and waiting until someone asks you to play a song. The real strengths of large record companies and big stars is partially quality, partially very good and often expensive marketing. The websites do not advertise for you - if anything, they advertise themselves, which they sometimes do with some illegal schemes, as mp3.com and Napster have shown recently. So what they really bring for a musician is that he does not have to have CDs manufactured. For this (and the very cheap webspace .. since you can usually get a free homepage almost everywhere) they charge 50% of the income from CD sales, should any occur. If you look at it from this side, it is an exorbitant amount of money to charge for saving a musician the trouble and about US-$ 1.500,- to have about 1.000 CDs manufactured (which he can sell at concerts - if he is able to perform live.) If you think record companies will check a musician out because he/she is on mp3.com or another such site - forget about it. Most record company people that I know would never go to such a site after their first visit, since there are usually thousands of tracks that just sound like bad copies of already successful bands. To find something like this, you do not have to go to a website - you go out to a hotel lobby , hotel bar or a neighborhood club to hear this. The normal audiences act very similar - the main search terms on the web are combinations of the words mp3, free and the name of a famous musician - no one just looks for mp3s by any musician.


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