Savagery in Court

The Electronic Frontier Foundation ("EFF") is participating in the defense of the Council on American-Islamic Relations ("CAIR") in a lawsuit filed by Michael Savage, host of the syndicated radio show, Savage Nation. Savage alleges copyright infringement and civil RICO violations arising out of CAIR's posting of sounds clips from Savage Nation on CAIR's website.

I caught this press release from CAIR, which was distributed by EFF, and includes a link to CAIR's motion for judgment on the pleadings.

This is a great read. Savage's comments are shocking (see pages 3-4 of the motion). His profoundly misguided lawsuit is only slightly less obscene. While I admittedly have not read Savages complaint, CAIR's motion paints a pretty clear picture of the happenings. In short, Savage spent about 4 1/2 minutes slamming Muslims (including taking some shots at CAIR), and CAIR posted excerpts on its website together with an article aptly entitled, "National Radio Host Goes On Anti-Muslim Tirade."

Unless CAIR grossly mischaracterizes the facts or there are serious omissions, Savage has seriously crossed the line. It's one thing to espouse hatred and intolerance, which is indefensible but nonetheless a necessary product of free speech in a free country, but it's quite another when that person tries to prevent someone else from exercising those very same rights. The wrongness is even further amplified when the first speaker is advocating for principles so contrary to those on which a free country is founded, namely, tolerance and inclusiveness, and the responder is merely setting the record straight.

I can't wait to see what happens with this one. I certainly wouldn't advocate for silencing Savage, as he is free to think and say what he wants. However, I hope the court tells Savage to do with this lawsuit what he told Muslims to do with their religion: "Shove it up your behind. I'm sick of you. . . . What sane nation that worships the U.S. Constitution, which is the greatest document of freedom ever written, would [tolerate a lawsuit, or radio host, for that matter] that tells them the exact opposite?"

FCC Approves Clear Channel Buyout

According to Radio Ink and The Wall Street Journal, the FCC has approved a $19.5 billion private equity buyout of Clear Channel Communications, led by Bain Capital Partners and Thomas H. Lee Partners. As a part of the agreement with the commission, Clear Channel will sell radio outlets in 42 markets, and is encouraged to sell those to female- or minority-owned businesses.

The always outspoken commissioner Michael Copps was quoted by Radio Ink:

"This case is a close call and one that I approach with decidedly mixed feelings," said Copps. "On the one hand, this transaction could lead to a measure of de-consolidation in the radio industry. The largest radio chain in the country will be divesting 42 radio stations in the top 100 markets. Although at this point we do not know who the purchasers will be, by definition they will be companies with far fewer stations than Clear Channel. At the same time, Clear Channel is in the process of selling many of its stations in smaller markets. So while the new company will remain a media giant—now re-focused on the largest markets—there are some potential public interest benefits to this deal. "

However, Copps repeated his earlier concerns about the effect of allowing private equity investors into the broadcasting business. "I have repeatedly called for the commission to examine the potential impact of private equity on our ability to ensure that broadcast licensees protect, serve and sustain the public interest. Unfortunately, that has not happened, and nothing in today’s order indicates that the commission has had a change of heart. Instead, we once again close our eyes and pretend that nothing has changed—as if these new entities are no different than our traditional broadcast licensees."

The deal must still be approved by the Justice Department.

What the . . . ?! Fleeting Expletives May Be on the Radar Again

Radio Ink reports that Diane Keaton's dropping of the f-bomb on Good Morning America last week may stoke the FCC fires on so-called fleeting expletives. Members of the activist group the American Family Association have reportedly lodged thousands of complaints to Keaton's slip-of-tongue.

A previous FCC attempt at regulating the occasional heat-of-the-moment cursing was overturned by the Second Circuit Court of Appeals. However, according to Radio Ink, bills have been introduced in both the House and Senate that would "specifically allow the FCC to set a policy that single words or images can put a broadcaster in violation of the indecency rules."

Apparently the impetus for the expletive was lip envy: "Keaton said that if she had lips like GMA host Diane Sawyer's, Keaton wouldn't have had to work on her 'fucking personality.'"

One might hope that the profanity causing such a dust-up would be worthy of the reaction. Unfortunately, Keaton's utterance is no more exciting or taboo than the Super Bowl Boobygate. If ultra-conservatives want to express outrage over nudity, why not wait until an actual boob is exposed and remains visible for more than 1/20th of a second? And if they're britches are going to get bound up by a naughty word, why waste their energy on such a casual utterance? (Wouldn't it me more effective to go after full frontal in a sex scene where the female participant repeatedly instructs the male participant as to how hard he should do what he is doing? At least that would be a twofer.)

To seek to control fleeting expletives - or really any modest amount of "bad" words - is puritanical on a level way out of proportion with the rest of American culture.

Some Not-So-Good Ideas Circulating

I've subscribed to Seth Godin's blog for many months. However, just recently I've seen two of my music-related sources cite to Seth's Blog as an authority for commentary on our industry. I always read Seth's daily anecdotes as general guidance in business philosophy, not specific business policy. He is insightful and has many years' experience. Unfortunately, none of them are in music. While I have great respect for him, Seth Godin's comments are being taken out of context by those within the industry and, rather than being viewed broadly as food for thought, are being construed as a road map for the industry's future.

First, I acknowledge that a main thrust of (and allure to) Seth's P.O.V. is his position as an outsider. For whatever reason, it seems every otherwise intelligent businessperson throws logic out the window when it comes to our industry - no one would advise an insurance salesman to lead a car dealership, or a coal operator to open a flower shop. Yet for some reason everyone thinks that either (a) the music industry is so screwed up that anyone within the industry is necessarily tarnished, or (b) the music industry is so easy that anyone can do it.

I've seen countless otherwise successful business people pour millions into their music startups - mainly publishing and record companies. 99 out of 100 fail. It's worse than the restaurant business. Let's face it, you need to have a knowledge of the industry before you can set out to change it.

Seth's two industry-related blogs are here and here. Admittedly, the latter is on film distribution, though it was discussed by a music-related news source, Digital Music News, and concerns digital media and copyrights, which is why I mention it here. I thought it shocking that Digital Music News picked it up due to the sheer impracticality of the primary suggestion - that movies be delivered for 50 cents a piece initially. The credit card fees alone would devour such a low fee. While I can't recall exactly what my processing fees were in my digital distribution days, I think it was a % of the transaction with a minimum of 26 cents. Our business model was to offer music "virtually for free," with a target price of $1.00 per live concert performance. After considering storage and bandwidth fees, as well as credit card fees, the least we could sell a show for was $5.00. While charging 50 cents per video is a nice idea in theory, it disregards reality and is a figure pulled out of thin air.

Seth's other post concerns the devaluation of recorded music through the digitization process, and is the position echoed by Gerd Leonhard, "Media Futurist."

My point here is more a venting of frustration than a counter-point to the arguments raised; I'm miffed that so many industry commentators are fixated on one particular narrow-minded view and only perpetuate theories and ideas that mirror their own perspective. I've noticed that Paul Resnikoff, editor at Digital Music News, is particularly guilty of this - the vast majority of his articles begin with some variation of, "As record sales continue to plummet . . ."

The truth is, recorded music is not as dead as it's made out to be. Talk to indie music distributors and independently owned record shops. They'll tell you that sales are UP and in some instances, WAY UP. Vinyl sales are steadily increasing and the more artists who release on vinyl, the higher go the sales.

One fact the doom-and-gloomers fail to recognize is that big box retailers are a recent phenomenon. They stole business away from the independent record shops by offering convenience. They thrived when top hit-makers sold gazillions of copies - the boxes could offer a modest selection but still generate huge revenue from a relatively small footprint in their stores. File-sharing allowed the less initiated to get these records for free so those consumers stopped buying from the boxes. The avid fans, the ones who have always made up the core of the business, are still as rabid of consumers as they once were, if not more so. That the market has sloughed the big box retailers and trend-of-the-minute consumers who frequented them was as much an industry correction as a sign of Armageddon.

The doom-and-gloomers are fixated on statistics that do not take into account the indie distributors, the indie stores, or the indie artists. As a result, their information is faulty and their judgments poor. They are calling for radical change in a corporate structure when the radical change would be instituted by the young and nimble entrepreneurs - the reason why the commentators aren't seeing the change disagree with the conclusion that recorded music as a revenue source is a thing of the past. Majors have been seriously injured by file sharing but their problems run far deeper than downloads, and those problems won't be corrected with the addition of a 360 clause in their record deals.

The argument that once something becomes digital its almost valueless is short-sighted. I earned a business degree before law, and while it doesn't qualify me for much, I appreciate the rule of supply and demand just as well as anyone. However, the economy doesn't operate in a vacuum. True, when supply is virtually limitless, demand is theoretically nonexistent. However, this ignores two key real-world pressures: legality and loyalty.

I wholeheartedly disagree with the RIAA's litigious nature and think suing consumers is the dumbest idea ever. Fear mongering is no way to do business. However, I also think that anyone making money off of their illegal enterprise is more loathsome than the major labels who've ripped off artists for decades. That the Bit Torrent trackers and file sharing destinations have made millions upon millions from distributing music for free is no moral crusade against the man. They are leaches and deserve to be punished. Legitimate file sharing can and should be distinguished from illegal activity. I am a huge advocate of technology and no innovation should be limited; I support open source and believe Creative Commons and other open-rights licenses are invaluable to society. Our focus should be on getting rid of the jerks.

This should not be an insurmountable task - technology should catch up and we should put our energies there. File sharing even of copyrighted content should be allowed between individuals. Yes, in our interconnected world, 6 degrees of separation could come into play and theoretically allow digital media to be distributed infinitely. However, that's unlikely. Friends sharing their music with one another should be no more punishable than a friend playing a CD at a party (a "public performance" specifically exempted under U.S. copyright law).

But, as Seth Godin argues and others have parroted, we should NOT throw up our hands and say that digital media has no value. We should not concede that selling music is a thing of the past. However, we should do so not for purely financial reasons. I say "not purely" because in order for high quality music to be made, artists must be able to earn a living and dedicate their lives to it; if they only do it part-time, you end up with part-time product.

Knowing that money must still be made in the music industry, commentators like Seth Godin, Gerd Leonard and Paul Resnikoff argue for alternative means of generating revenue. Ad-supported sites are an avenue, as are selling more merchandise.

The very grave problem with these models and others like them is that music quite literally ceases to be the product. When recorded music is ancillary to something else, that something else will take priority. Decisions will be made based on maintaining the health and viability of that something else and all other things, including the music, will necessarily be compromised as a result.

Artists should make music for music's sake, without influence and without agenda. If we are truly concerned about saving the music industry, we shouldn't lose sight of why it is worth saving in the first place. Any theory, any proposal that requires an artist to forfeit earning a living on his or her music alone is bound take this industry down a path that is doomed.

Update on Investigation on FCC Chairman Martin

As the House Energy and Commerce Committee prepares for its investigation of FCC chairman Kevin Martin and his stewardship of the agency, it has ordered that he retain all e-mail and other communications, and that he not interfere with its investigation by retaliating against any FCC employees who might given information in the matter.

The story can be found in this story by Multichannel News.

The Ultimate Consolidation Has Begun: Live Nation Ticketing

When Clear Channel began gobbling up radio stations in 1997, accumulating a total of over 1,200 at one time, it was a concern. This consolidation was a direct result of the Telecommunications Act of 1996 and led to what many argue was a major blow to the music business.

In 2000, Clear Channel acquired SFX Entertainment, which was at the time the world's largest events promoter and producer. SFX was also a significant owner of concert venues and had gone on a significant buying spree prior to the acquisition.

Clear Channel got a lot of flack because it dominated the concert promotion business, owned so many venues and an overwhelming number of radio stations. It was widely believed that Clear Channel was leveraging its control in order to compete unfairly in the concert business. The message to artists was, Let Clear Channel promote your show or else you won't get your show advertised on our radio stations and we won't spin your record. Even if an artist was willing to take a chance with another promoter, they would be relegated to performing in second-tier venues in most markets since Clear Channel owned the most valuable venues.

Ticket prices went way up following the Clear Channel buying spree. I remember reading articles expressing complete shock that Clear Channel would be willing to drive prices so high so quickly. The result was many shows going undersold. The price for a ticket would later come down but apparently just low enough to generate some more sold out shows - they are, of course, still through the roof.

The cost of putting on a show in a Clear Channel venue also skyrocketed after consolidation. There were several rooms in which I used to promote where the cost literally doubled.

Pressure on Clear Channel became greater as its anti-competitive practices became more apparent. It was the connection between radio and concerts that chaffed the most - the major labels didn't like the "do or die" attitude they got when considering promoting their tours with someone else. This is perhaps the primary reason why Clear Channel spun off its concert business to form Live Nation in 2005.

To say "spin off" is a bit of a misnomer. With the diminishing importance of radio, Live Nation is the entity that came away with the real power. Since 2005, Live Nation has gotten largely into merchandising and, through its acquisition of Musictoday, is a significant website developer, fan club operator, shopping cart/order processor, and VIP ticket provider.

Ticketmaster, equally loathsome amongst music fans, has single-handedly dominated the ticketing industry for as long as many can remember. People have grown to dislike Ticketmaster even more in recent years as its service fees continue to skyrocket despite the huge cost savings to providing ticketing services online.

Both Live Nation and Ticketmaster have been equally dedicated to squeezing as much money as possible out of the concert-going public while keeping their costs at a minimum (i.e., contributing very little to the process). Now things are going to get even more interesting.

In its July 28, 2007 issue, Billboard reported that Live Nation may not re-up its contract with Ticketmaster and will instead opt to handle its own ticketing. Digital Music News reported this morning that Live Nation will announce its new ticketing plans on January 11. It is perhaps a sound business strategy for Live Nation but a travesty for artists and concert-goers.

Ticketmaster was by no means a check and balance to Live Nation and vice versa. However, by allowing Live Nation to control virtually every facet of the live concert event, together with merchandising, fan clubs, and artists' entire web presence, they can ensure that they control every aspect of an artists' career outside of the recorded album . . . and they are vying for that as well.

If we thought Ticketmaster was a threat with its exorbitant fees, and Clear Channel for its control of the airwaves, and the major labels for recorded music, what is to become of the future of music when Live Nation controls it all? They have proven that they will increase ticket prices to the highest extent possible, they will charge independent promoters ridiculous fees to put on shows in their venues. There is no reason to think that they will handle their ticketing business any better than Ticketmaster and will certainly not treat their artists any fairer than the majors. In fact, they will no doubt ensure that they will maximize their own profits at the expense of artists in the few arenas in which the artists used to make money.

This is a slippery slope, indeed. Clear Channel's mentality in the radio business showed that advertising was always a priority over music. Now, with Clear Channel-groomed business heads leading the Live Nation surge, what is to happen to the music industry when they, a single corporation, control it all?