GnuMusiq/the problem

Document History 2004-11-11 Last save of original document (MS Word) 2009-02-09 Transcribed to wiki, without text formatting (to be done) 2009-02-10 Text formatting; added missing sidebar (gold/platinum/etc.) 2010-05-02 Cleaned up munged characters, added some links, inserted a couple of minor addenda 2013-09-08 moved from "/philosophy" to "/the problem"; removed "The GnuMusiq Manifesto" header

Intro

The music industry as it stands now is messed-up. New technologies have drastically altered the practicalities of how music is distributed and listened to, but the "system" which arose during the days of vinyl continues essentially unaltered. It took umbrage at the existence of cassettes, but was able to force them into a niche it could cope with. It has noticed the new digital technologies, but only to the extent of seeing them as another threat – and it has done its best to contain that threat by creating laws to squash digital media down into a role similar to that played by cassettes.

Digital media are capable of much more than that. To start with, the cost of distribution is minimal. Blank CD-Rs are less than a dollar; $300-$400 of computer equipment can imprint blanks with a full CD's-worth of audio in minutes. With a web site costing about $20/month, essentially the same audio (in MP3 or other compressed format) can be downloaded by hundreds or thousands of people every day. The rapid rise of music distribution sites such as Napster and MP3.com is testimony to the demand for digital distribution.

The effect on production costs at the high end has been largely unaffected. At the low end of the scale, however, that same $400 computer plus another $500 of computer parts and musical equipment plus the requisite skilled technicians and musicians (paid or unpaid) can now produce hit-quality music.

With the means of distribution and production being so inexpensive, it seems that we should be seeing a complete paradigm shift in the way the music business works. We're not.

Digital Media and the Working Musician

Let's start with unknown but immensely talented Jane Musician. She can record her songs in her living room, mix them down in her office, burn and print CDs for whoever she wants at about a dollar a copy, and upload them to her web site overnight. Cost: could be as little as $1000-$2000 for a decent-sounding recording (mostly equipment which can be used again for future recordings), plus sweat equity. Benefit: Jane didn't have to sign a three-album contract with Polymer Records, she still owns the copyrights on all her material, she doesn't owe Polymer $50,000 for the recording of her first album (which she would have to pay back from her share of sales which would never happen because Polymer decided, after listening to the album, not to put any money into advertising because she didn't project the image they were looking for), and she doesn't have to record two more albums for Polymer under the same exploitative contract. More to the point: for every CD (or download or t-shirt or coffee mug) she sells, the money goes back into her pocket.

Now, let's look at the other end of the scale. A friend has sent you a CD-R compilation of their favorite Britney Spears, Back Street Boys, N'Sync, Justin Timberlake, and Barry Manilow songs. You decide you really like all of them (hey, this is hypothetical, ok?), and you want to Do The Right Thing and make sure the artists get compensated for their talent and hard work. What are your options at this point?

The law says, in essence, that you are currently in possession of stolen music; you must purchase a copy of each song on the disc from a legitimate source. Unfortunately, since the demise of the $1 - $2 45-RPM single, there's no way to buy just the songs you want, even assuming the songs your friend picked were all "singles" being played on the radio. Even a 4-song "EP" is generally $8 - $12, if one is available for any of the songs you want, and "hit" CDs are generally $14 - 18 each. (2004 update: iTunes and its competition now make it possible to buy downloads of many popular tracks, although it looks like there are other problems with the way they do things; further investigation is called for.)

The best case: the record companies agree completely with your friend's taste, and have issued "EP"s containing the same 4 songs for each artist as those chosen by your friend; total cost to "legalize" your one compilation CD: $40 - $60. The worst case, where no "EP"s are available with any of those tracks, and each of the artists' CDs only has one of the tracks on your disc: 20 tracks at $14 - $18 each, total $280 - $360.

So that's a bit much.

But let's disassemble this a little further. You happen to know that part of the cost of those $14 CDs is in the printing of the full-color CD booklet, the burning of the CD and the screen-printed artwork on the CD, the CD jewel case insert, the jewel case itself, and (of course) the physical transportation of the CD to the store where you bought it – not to mention whatever premiums the record company may have paid to ensure that Justin Timberlake's latest release was prominently displayed near the entrance to the store.

These can be grouped into two categories.

Category One is the physical stuff; we can easily decide that we shouldn't have to pay for fancy graphics, CD printing, transportation, etc. if we don't need any of those things.

Category Two is the promotional aspect, and that's a bit more tricky to dismiss. The record company argument goes something like this: "we have to spend all that money on promoting The Back Street Boys, otherwise your friend would never have heard them, and never would have realized what excellent musicians they are, dude, and so never would have put them on the disc for you."

Ok, so if they hadn't promoted The Back Street Boys, we might never have heard them and realized that we liked their music. We might instead, I suppose, have heard some lesser, inferior artist – and the record company would just hate for that to happen. They want to make sure we have the very highest quality music at all times, and they consider it their duty and responsibility, their sacred charge, to keep us informed of what that music is. (Please pardon the sarcasm.) Unfortunately, this important service is rather expensive because it requires an incredible advertising onslaught these days to get through to the buying public, with all the competing demands on their attention...

No, I'm sorry; I don't think we should be paying the record company's advertising costs when we buy a CD.

What's left, then, is the cost of actually creating and distributing the music. "Creating" is also two parts: part one is services and materials necessary for recording; part two is paying the artist so she can make a living commensurate with her talent.¹

Note 1: It seems to be something of an unspoken tenet that Really Good musicians should become rich, while those of medium talent should be content doing studio gigs for an hourly rate (and those of little or no talent shouldn't quit their day jobs). Being as acquisitive (and secretly big-headed) as the next musician, this seems perfectly reasonable to me. But I did want to stop for a second and say that the really important part of this, it seems to me, is that any musician should be able to make enough money to buy the time they need to fill the demand for their work. If an artist's appeal is minimal, perhaps their income would just be supplemental. If their work is fabulous, though, and people are essentially lined up around the block to buy their every release, then it seems only fair that they should make enough money that they don't have to spend any of their working energy doing anything except making music. Where the present system falls short is on the lower end of things, and the "lower end" is gradually creeping higher and higher. Record companies are increasingly focusing on fewer and fewer megastars (often created solely to fit an image the company thinks will sell this year), and spending less and less on a broad stable of mere million-selling artists. This practice does not lead to a wide variety of good music at affordable prices.

Some Numbers

Just to get a better understanding of what level of sales figures are required to support an act, and what each CD would have to cost the consumer (if CDs were all we were selling), let's plug in some made-up numbers.

Polymer artist Phil And The Blanks spends $100k for their first release "This Is Our First Release", including mixdown, mastering, printing, etc. They spend about a year producing the album (maybe 9 months in daily sessions and 3 months to recover). There are 4 of them – so we need to earn a year's reasonable working salary – let's say $100k -- times 4, plus $100k for expenses, in order for it to be worth it to them. So the profits must total $500k to meet the budget we've set up.

Just looking at traditional media sales, let's say they sell 100,000 CDs. That means they have to make $5 a copy to recoup their expenses and make a living for themselves and their families. Each CD costs maybe $3 to press and print, with color inserts and case.

So, for sales of 100,000 units, a band can make a good living for themselves and pay for a pretty decent studio session (a traditional studio, at that) by charging $8 a disc.

Noteworthy Sales Figures For U.S. sales, the RIAA makes the following awards: "Gold" = 500,000 units sold (introduced 1958; currently over 7,000 titles) "Platinum" = 1 million units sold (introduced 1976) "Multi-Platinum" = 2+ million units sold (introduced mid-1980s) "Diamond" = 10 million units sold (introduced 1999; currently 78 titles)

If they sold a million ("Gold"), they'd only need to make 50 cents a copy. That would be $5.50 a disc.

Let's plug in values for other variables. Say an average band is able to sell 10,000 discs. Given the budget we've used, they would need to make $50/disc to recoup expenses. So $100k is obviously too much to spend if that's the extent of the demand. But let's say Phil and his band did most of their own recording, at a total cost of $5000. Let's also say Phil's band is willing to get by with $50k each ($200k total) for this release (i.e. for this year).

They would then need to make only $205,000 to cover expenses for First Release. 10,000 copies would have to make $20.50 per copy to cover that – but 20,000 copies would only have to make $10.25 each, and 30,000 copies would only have to make $6.83. Further, Phil & Co. don't have to take a whole year to make the album; they could make two albums a year, at which point 10,000 copies each would pay their salaries and production expenses at $10.50 profit per disc. (I made recorded and produced an album in about 4 weeks, once, with an investment of about $800 in addition to equipment I already had.)

Or if Phil's band only needed $30k each -- $120k yearly for the four of them, plus $5000 recording expenses. At 10,000 copies per disc, they need $12.50 profit per disc for one release a year, or $6.50 profit for two releases per year.

Or Phil and his band could keep their day jobs for the first release, and only need enough to pay for recording expenses. Looking at it that way, if they sold the disc for a mere $2 over cost (total around $5), they would recoup recording expenses after only 2500 discs. If they sold it for $5 over cost ($8 total), they would recoup expenses after 1000 copies. Based on sales of their first effort, they could then decide whether to record another disc and whether or not to quit their day jobs – all without going into debt to anyone.

My point with all this figuring is something like this. When you take out the requirement for huge up-front expenses in order to have any hope of making any money at all, the economies of producing and distributing a recording scale down pretty well.

As things stand now, aspiring start-up musicians generally don't expect to make any kind of money off their music, much less a reasonable living salary; they expect to lose money. The tradition is that you "pay your dues" during the first few years (which can grow into decades), keeping your day job(s) to pay for your equipment and recording expenses and living expenses until you can get "noticed" by a record company and (if you're lucky) signed to a record contract.

At which point (if you get lucky again) the record company could decide to promote you in some substantial way. And if you get lucky yet again, perhaps you will experience enough sales to pay them back for that promotion (and the expense of re-recording your demo in their studio) and maybe get to keep some for yourself.

Or you might win the lottery, which would take care of things too. Or you might get hit by a bus, which would solve the problem a different way; your family could live off the insurance money, and it would be a lot less work.

Small Bands and the Economies of Scale

The record companies (as mentioned earlier) greatly prefer to have a small number of hugely successful acts, rather than a large number of moderately successful acts. This practice is highly detrimental to the overall quality and diversity of the music available to the buying public, so why do they do it?

The explanation I have heard which makes the most sense is this: it costs money to keep track of and promote (however minimally) each act; the more acts you have, the greater your expenses. When an artist's sales fall below a certain number, accounting costs cut heavily into the record company's share of profit. 100 artists selling 100,000 copies each bring in the same net revenue as 1 artist selling 10,000,000 copies – and their bookkeeping expenses are about 100 times as much. (And other downscaling issues apply too: you don't get much benefit from 100 tiny ads squeezed into the same space usually reserved for one big ad, for example.)

But when a band handles its own sales – or when those sales are through a computer-managed venue such as MP3.com – the overhead essentially vanishes, or is at any rate kept more or less proportional to the band's gross sales.

The main disadvantage a low-budget band has over The Backstreet Boys is that the latter have a huge advertising budget. A huge advertising budget, we are told, is necessary in order to get anyone to buy anything. Obviously, huge advertising works – but is it really necessary?

Is High-Budget Advertising Necessary?

Once upon a time, Big Advertising probably was at least somewhat necessary to make an act financially successful. In order to sell any records at all, you had to have some kind of audience – people who had at least heard your music, and liked it enough to spend money on it. The only way to do that was to see your band play live or to hear your music on the radio. If you couldn't afford studio time to make a single, the radio option was totally out; and airplay has always been difficult to get even if you do have a recording out. If the only people who know your music are those who have seen you perform live, then you have to build your audience one roomful at a time. If you don't want to spend the rest of your working life doing this, you spend money advertising your shows so as to bring in larger roomfuls.

You can get somewhere that way, but it's slow and painful. Obviously, a band with talent might go further faster by somehow alerting masses of people that someone with money takes them seriously enough to spend money alerting masses of people to the fact that someone with money takes them seriously enough to spend that money.

It's kind of circular logic that all seems to rest on the musical tastes of someone with money, and people with money generally get that way by being attentive – in this case, paying attention to audiences and other people's musical judgement, which is bound to have some correlation with quality – and some of the time it works. For that matter, some people will buy anything they see advertised and sometimes that's all it takes to start the ball rolling.

Digital media and the Internet have changed the situation.

Anyone with a computer can place information about themselves (text, pictures, audio, even video) where it could be seen and heard by nearly anyone on the planet. Drawing attention to your corner of the 'net is still an issue, but the potential for an enormous amount of exposure is now there. In the age of print media, this was simply not possible.

Because of the interactive possibilities offered by the web, conversations can happen between individuals who might live in totally different parts of the world. Web sites can encourage such meetings and bring together people who might be interested in hearing new music, or even a particular band's music. A band with only a very narrow appeal can still generate intense interest, worldwide, if that appeal is intense.

And because the interaction is mediated by computers, additional mechanisms can be put into place to help the cream rise to the top.

I must digress for a moment. The whole point of promotion, it seems to me, is to allow the best music (in each niche) to become the most widely known – regardless of the artist's ability in any other area besides music. An artist shouldn't have to be attractive or charismatic, or good with money, or a good salesman. (It will probably remain important to be good with money as long as one needs to have money to live well, but the point is that one should not have to be any better with money than anyone else earning a living wage.) Artistic talent should rise to the top, and the quality of the art should be the only criterion.

So, getting back to the point I was leading towards: We can do this now.

A web site can collect the music of many independent artists, subject them to review by its audience, and publish ratings based on those reviews. By distributing the work of review across a large audience, no single reviewer's bias will doom good music to failure – or promote bad music which that particular reviewer wishes to promote, for whatever reason. Each genre (where each "genre" can emerge naturally as a collection of music with a large correlation in popularity – people who like one piece in the group tend to also like other music in the group, once exposed to it) can be covered fairly by those who are fans of that genre, rather than being unfairly panned by those who don't understand it.

Interest in a given work will be based on a combination of the purchaser's preferences and those of the reviewers he/she chooses to trust – not on advertising or on strategic decisions to "push" a certain thing this month.

A band (or record label, or promoter) might choose to advertise, and more people might listen to the music that was advertised than to music which wasn't. But those auditions will still be subject to review. If the band is mediocre, some inexperienced reviewers might rate the band highly simply because they haven't heard anything better or they buy into the band's "image" as presented in the advertising, but such reviewers will inevitably be downrated by the audience at large and their reviews will have minimal effect on the band's ultimate success (and a gradually lessening impact in general). At any rate, a good design will minimize the effect of money spent on promotion, and maximize the effect of quality.

But this is all hand-waving so far; it's time to get into details.

How Will This Work?

Possible Objections

To some degree, the whole thing is up for discussion; I have my biases and my ideas about how things should work, but what matters more is the opinion of those artists who might be interested in participating in such a system. If it doesn't do what they need it to do, then nobody will participate and the system will be a failure.

However, I do sense a certain amount of conservatism among musicians in general. In particular, I have run into a lot of worry about music being "stolen" by music fans or even by other artists if it is not adequately protected by copyright or copy protection. This is understandable, on the face of it; your music is your lifeblood, your stock in trade, your heart. For most artists, it is often an outpouring of deepest feeling, with many many hours of frustration and sweat put into it (especially the recording sessions).

Just to be clear, there are three main ways music can be "stolen":

• (a) unauthorized recording and distribution of an authorized performance (by the artist or by someone who is performing the song legally)
• (b) unauthorized performance, and distributing recordings of same
• (c) copying an authorized recording without permission.

2010 addendum: I've also run into "unknown" artists worrying that a "big" artist will record a song written by the former -- and get rich off it, of course -- because they can get away with it. To the best of my knowledge, this never actually happens.

(c) is the one currently under discussion, and the one which is by far the most affected by recent changes in technology. An artist (or other stakeholder in the artist's work) may well wonder: "if everyone can download or copy my music for free, why would they ever buy my CD?"

Let's look at this more closely.

First, let's change "why would they ever buy my CD?" to "how will I make money making good music?" There are two reasons to rephrase it this way:

• An artist should receive income from their work (commensurate with the quality thereof), not necessarily or only through selling lots of CDs. Physical copies of your art are not the only way to make money in the digital age, and perhaps not even the best way to convey the art.
• An artist should receive income commensurate with the quality of their work, not just sell lots of CDs regardless of how good the CDs are.

Second, let's remember that giving away free samples has always been a part of music promotion. Yes, free-for-all downloading is different, but I would argue that it serves the same purpose – if implemented properly. The devil is in the details of implementation, and that's where I see the most potential for input from experienced musicians.

Goals

Let me propose some fundamental goals; these are certainly up for debate, but they seem pretty reasonable to me: An artist should receive income commensurate with the quality of work. (I've stated this earlier as a fact, but it should be included for completeness and in case anyone wants to debate it.)

The means by which artists receive income should not be subject to the whims of any single entity (government, nonprofit, corporate, or individual).

• Music should be a guilt-free experience.
• Being a musician should be a rewarding experience.
• Artificially-imposed rules should be kept to a minimum; the flow of income should arise naturally out of the enabling structures of the system.

This last point needs more elaboration.

An artist should not earn income just because "you can't copy that, you have to buy it"; they should earn income because the purchaser will naturally benefit in some way from contributing to that income. Stated yet another way, that which is technologically possible should be permitted unless it directly conflicts with other goals; the system should be designed so that that which is technologically possible aids the artist or the audience or both, rather than being a threat or against the rules.

Mechanisms

Which gets back to the key issue: how can "music-copying" (or "file-sharing") be profitable for the artist? This question contains within it an assumption: the relative number of download requests for a given song is an indicator of its quality. We want the artist to benefit from copying because the more people copy a song, the better that song must be (else why do all those people want to copy it?).

The traditional music industry system has used a certain kind of copying – retail purchase of mass-preproduced CDs – as a means of determining the compensation the artist receives. The system has its flaws, but the basic idea is reasonable: make the audience pay for what they like, and the artist gets paid from what the audience buys.

The problems with the basic idea are

• Each listener must pay for each copy they receive
• Each listener must pay a pre-set price for each piece of music they receive
• Each listener must pay that pre-set price regardless of how much they actually listen to the music, or enjoy it

This last point is key. Music fandom comes in many varieties. Some are fairly narrow; let's call them "groupies". They enjoy a small range of music, usually what they heard on the radio or what their friends like. At the other end of the spectrum, we have "aficionados" – people who sample from a wide variety of music, forming their own opinions and often building up enormous personal music libraries.

In the vinyl era, aficionados could be found at used record stores, buying at $2 - $4 LPs which were sold retail at $6-$10. CDs, unfortunately, resell much closer to list price in most areas, and aficionados have had to restrict their diet or continue buying (and perhaps digitizing on their computers) old music on vinyl.

But now, with the emergence of digital distribution, a new breed of aficionados has emerged: the Download Hog. Regarded by the industry as criminals, they crawl all over the internet looking for music they like, often downloading "illegal" copies of popular music from sites such as KaZaa.

They spend hours and hours doing this, and then what do they do with their ill-gotten gains? Do they burn pirate copies of commercial CDs and sell them at budget prices on the street? No. If they were going to do that, it would be more efficient to buy a legal copy and pirate it. Better sound quality and less effort.

What they do is two things: 1. They listen to the music themselves. Shamelessly. Sometimes repeatedly. 2. They give it away to their friends.

In defense of #1, please refer to what happened to Aficionados when CDs replaced LPs; if you are the sort of person who buys maybe 10 - 20 discs a year, you might not be able to see the justification for this internet "piracy". But aficionados are the sort of people who will download dozens and dozens of CDs worth of music over the course of a year – and go out and buy legal copies of discs by their 10 - 20 favorite artists. They'd probably buy more if they could afford it; collecting music is kind of a turn-on for them. (Ask me how I know.)

So they're spending hours and hours searching the broader musical spectrum, identifying what they believe is the best, and then alerting their friends to their choices. Having performed this service, they then go and spend money on the artists they have chosen to favor.

In other words, there is a certain type of listener who acts as a volunteer music reviewer, drawing attention to what they believe is the best. They listen to far more music than they could possibly afford to purchase under the current system, and they perform a valuable service.

My proposal is that our new system needs to encourage this sort of listener. If they want to take the time to "review" unknown music, they should be able to – legally and within their budget. So let's add one more tenet:

• The system should not suck the listener's budget dry. The system should encourage each listener to contribute financially as much as they reasonably can, while permitting them to listen to and review as much as they can stand.

And remember: "listening" can be both an act of consumption and of contribution. Listeners can pay for their music, evaluate music, and encourage the spread of music they like. The contributive aspect should be encouraged, so long as it does not conflict with our other goals.

and this now seems kind of unfinished, but that's all I had written. --Woozle 12:17, 10 February 2009 (UTC)

I could link to the design document for further details, but unfortunately I never got around to actually writing the technical bits; it mainly pins down the philosophy a little more. I do have some pretty specific ideas about how to make this work, but it is probably going to require something like the voting system component of InstaGov to be developed first. --Woozle 08:20, 2 May 2010 (EDT)