Friday, October 05, 2007

Music Management Revenue Alcohol -- and Good News

October 6, 2007, 3:30 p.m.

From the Department of How Not to Run a Business: "This is what happens when you sell twenty dollar CDs with one good track and sue your customers for [file-sharing]."

The recording industry still bears a remarkable similarity to what it was in the days of hand-crank Victrolas and 78 rpm vinyl "records" -- the song writers and musicians make the music and the companies make the money from doing all the rest: provide the recording studios and mixing, the physical manufacturing process, shipping, promotion, and accounting. It is a financial arrangement that has given rise to the song lyric, "All the gold in California/Is in a bank in the middle of Beverly Hills in somebody else’s name." Larry Gatlin, "All the Gold in California."

It's also given rise to widespread "file sharing" of what is now but bits and bytes that can (and do) move at the speed of light through a global Internet. The current response of the industry is to sue its customers for this practice -- most notoriously, recently, resulting in a $222,000 judgment against a 30-year-old woman in Duluth, Minnesota. Jeff Leeds, "Labels Win Suit Against Song Sharer," New York Times, October 5, 2007.

This morning's Gazette reports the industry is also pressuring for ever-higher fees from those who are already paying the industry to play songs for listeners over the Internet (at little or no profit to themselves). George C. Ford, "Endangered Radio; Higher Royalties Could End C.R. Man's International Hobby," The Gazette, October 6, 2007, p. B14.

Many think this is not the most productive way to treat one's customer base, or most creative response to changing technology and potential business models. Jeff Leeds, "As for Music, Gates’s Taste May Not Be Adventurous but His Strategies Are," New York Times, October 4, 2007 ("In an interview here this week, Mr. [Bill] Gates hinted at his strategies for taking potential customers from Apple and expressed bewilderment that the recording industry had failed to turn digital music into a big moneymaker.")

One creative response comes from a group called Radioheads. Given that the musicians may only make a couple of bucks from a CD sale, the Radioheads have decided that, with a $1 processing fee, they can afford to "give away" their music, asking fans to contribute whatever they think is fair. It's similar to a model used 20 years ago in the software business, then called "shareware." Users were encouraged to copy and give the computer programs to friends with the understanding that, if they found it useful they would make a voluntary contribution to the creator. It's a model also used by start-up music groups today -- some of whom don't even ask for contributions in an effort just to get their music heard. But Radioheads are not a start-up.

Bob Lefsetz, the author of a well-read and curse-addled newsletter on the music industry, celebrated (in so many words) Radiohead’s scheme because it cuts out the middle man — the music labels that control distribution to music stores — and connects the band directly with the listener:

"This is the industry’s worst nightmare. Superstar band, THE superstar band, forging ahead by its own wits. Proving that others can too. And they will.

This is what happens when you sell twenty dollar CDs with one good track and sue your customers for [file-sharing]. This is what happens when you believe you’re ENTITLED to your business. This is what happens when music is a second-class citizen only interested in the bottom line.
Mike Nizza, "Radiohead Album Price Tag: 'It's Up to You,'" New York Times, October 1, 2007.

From the Department of Management by Disaster

Now it turns out we have some 180,000 private contractors ("mercenaries") fighting alongside our 160,000 military in Iraq -- while being paid some five times as much as our soldiers. Many of them are from an outfit called "Blackwater."

One would think you'd notice 180,000 Americans walking around in Iraq without military uniforms. But apparently not. They've just been discovered. Why? Because they've been slaughtering civilians and getting off free because they're covered by neither Iraq nor U.S. law.
Alissa J. Rubin, "Accounts Differ on U.S. Attack That Killed 25 Iraqis," New York Times, October 6, 2007

That's the disaster. So here's the management: Associated Press, "Rice Says Agents Will Accompany Security Guards," The Gazette, October 6, 2007, p. A3 ("The moves are aimed at 'putting in place more robust assets to make sure that the management, reporting and accountability function works as best as it possibly can,' State Department spokesman Sean McCormack said.") And no, there was no effort to explain why this wasn't done before the Blackwater boys were sent to Iraq. David M. Herszenhorn and John M. Broder, "U.S. Issues New Rules for Iraq Security Firm," New York Times, October 5, 2007.

The most basic questions, of course, involve conduct of war generally -- and the role of mercenaries in that context -- starting with, when and why (if ever) should we engage in "pre-emptive" wars, unprovoked invasions of other countries?

How should we pay for our wars? When the economy is relatively strong, why not "pay as you go" -- as we did in WWII, increasing taxes and selling "war bonds" to everybody from grade school children on up?

Where should we get our military personnel? Our "all volunteer" approach isn't working, for a variety of reasons. Tours are too long, time at home too short. The military we have is stretched too thin. Using mercenaries is not only extraordinarily expensive -- they're paid some five times what we pay our military personnel -- but bad for the morale of those paid so much less.

War on the cheap, with no sacrifices for those at home, also interferes with the political process. What did the President advise his fellow Americans to do after 9/11? "Go shopping." That, plus tax cuts for the wealthy, putting the projected $2 trillion cost of this war on a credit card for our grandchildren, radically reduces the focus of citizens and their elected representatives on the wisdom of a war policy.

A draft, increased taxes, pay-as-you-go, rationing, and other sacrifices at home might be a wiser way to proceed with decisions about war -- especially unnecessary wars.

The least of the problems is that mercenaries are bound to create the kinds of problems that ours have.

And that's why the Blackwater scandal is today's example of "Management by Disaster."

Today's Department of "Revenue is Needed"

"Revenue is needed" is a reference to decisions by institutions' administrators that violate some standard of law or ethics, a decision of which they can't really be proud and for which they have to come up with some defensive explanation, that often as not ends up as some variation of "revenue is needed."

We get a clue of what the Regents and their universities' presidents may do as a result of the Regents' revelation from their investigation that as much as a $1 or $2 million a year may turn on the universities' and their alumni associations ability to sell the private, personal information about alums, students and their parents to credit card companies -- while permitting exorbitant interest rates to be charged students. Diane Heldt, "Millions at Stake; Credit Card Deals Bring Alumni Groups Big Money," The Gazette, October 6, 2007, p. B1.

Meanwhile, with another example from the academy, we look to Randolph College. It seems the administrators there have decided to sell off some very valuable paintings that students and alums view as central to the school's history and symbolism. Knowing how unpopular this decision would be they apparently pulled it off by cutting the phone and computer lines of the art museum's director, having the police announce that they were investigating a bomb threat, cover the paintings, and carry them off in an unmarked van. The museum director has since resigned in protest. Law suits may follow.

And what was the explanation? You guessed it: "revenue is needed."Neely Tucker, "Randolph College to Sell Paintings; Controversial Multimillion-Dollar Auction Tied to Finances," Washington Post, October 3, 2007, p. C5

Alcohol and "A Tale of Two Cities"

Bar owners in Iowa City are appalled, devastated, that the citizens might actually vote to restrict their illegal sales to underage college students.

And what is this horrible restriction, called "21-only"? It would limit bar owners' illegal sales after 10 p.m.!! After 10 p.m. the law would be enforced. What a sacrifice. Imagine.

Besides, what's the harm? Here's one example of the "boys will be boys" harm from this morning's paper:

A 19-yearold man was hospitalized after being knocked unconscious during an early morning fight Friday, Iowa City police said.

At 2:07 a.m., police received a report of a person on the ground and not moving after a fight at Clinton and Jefferson streets, according to a press release. Responding officers found the man on the ground and unconscious.
"Man Knocked Out in I.C. Fight," The Gazette, October 6, 2007, p. B3.

And, of course, there are the seemingly never ending assaults on women on their way home after the bars close. This latest one occurred within one block of the police station -- but was still beyond the ability of the local police.
Gregg Hennigan, "Latest Assault 'Differs;' I.C. Police Say Details of Friday Incident Unlike Recent Series," The Gazette, October 6, 2007, p. B6.

As evidence that it doesn't have to be this way, that other cities take a different approach, consider what Marion, Iowa, has just done. It doesn't wink at illegal sales of alcohol to underage patrons of bars. It doesn't try to represent that kicking them out of the bars at 10 p.m. is a meaningful restriction on binge drinking. Its idea of a real loosening of restrictions on a meaningful "21-only" restriction is to permit underage patrons to enter bars (a) that do "a majority of their business in food sales," not prior to 10 p.m., but (b) between the hours of 11:00 a.m. and 3:00 p.m. for those who want to buy lunch! "Underage Patrons OK in Bars During Midday," The Gazette, October 6, 2007, p. B1.

And for the good economic news . . .

A new marketing firm looks like a useful addition to the resources needed by entrepreneurs new and established. Let's hope it's willing to give a little pro bono time and advice to some of our local non-profits as well. George C. Ford, "Corridor Execs Form Marketing Firm," The Gazette, October 6, 2007, p. B14.

A very impressive editorial in The Gazette illustrates what can be done when a paper combines data, analysis, and solid suggestions for economic growth -- albeit in this instance with regard to a farmers' market. Editorial, "Downtown Market Earns Blue Ribbon," The Gazette, October 6, 2007, p. A6.

Editorial, "Writing Program Needs Financial Anchor," The Gazette, October 6, 2007, p. A4, is a nice editorial about the UI International Writers Program and its need for an endowment to insure the continuation of this very important program throughout good times and bad.

And, finally, the Iowa City Community School District folks have some good news as a result of their taking a tough stand with regard to which schools students will attend. Given that this is a free to parents, public school system it's not an unreasonable way of trying to better balance the enrollments of the two conventional high schools in the District. Gregg Hennigan, "Enrollment Policy Showing Results," The Gazette, October 6, 2007, p. B3

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