Did musicians lose the battle? Part 2: Who really makes the money...

Let’s look at how the internet companies are making money. Everybody downloads music – mostly for free, and share it with friends. It seems to be free, but in reality, it’s not: everybody pays for the internet connection, lately the high speed internet. The internet providers get the money and how much do they pay the labels and artists? You guess it right: peanuts! 

From the point of view of labels and artists, distribution is almost free, and everybody can sell, like CDBaby takes 9% of the receipts, and if you sell yourself through paypal, it is just cents. However, the ISP – internet providers are making a lot, as people pay for the convenience to download or watch videos. The providers/streaming services/search engines, etc are the main beneficiaries of all the internet content; they are using it to generate massive revenues.

The streaming services, knowing everybody is glued to the computer, are looking to offer the convenience of listening whatever they want, however, they can’t just do it without the prior consent of the labels/artists, so they pay, but what they pay is close to nothing. Of course, it is like the radio in the old days, a great marketing tool, where you can choose what station to listen at, however, there is something missing, which is the final sale that provides compensation for artist/labels; it used to be the vinyl, the cassette or the CD, not anymore, it is the free download now. The streaming companies were clever enough to understand that they can impose a fixed rate for the listener- like 8-10 bucks, that this payment is on top of the payment for the internet connection and many people will buy into it. Even more, they generate huge money from advertisers even in these pages where people can find music. Not bad!

Music and videos are most likely the best incentives for the average guy (along email, info) to be on the internet and pay for this service. What really happened, due to the new delivery system, somehow the model pushed offered the final product free. RIAA went overboard when Napster drove down to such a large extent the sales and changed the perception of downloading; but failed miserably to point the finger at the real beneficiaries of this: the ISP’s and other google’s of the world. Now it is too late: look at the financial power, it is very hard to take them on. Just the fact that the ISP’s have no responsibility when it comes to infringements of the copyright should tell you how succesfull these companies were on lobbying governments.

I once sat with a few friends that are working either in IT or in music business, and started to ask them questions, and brainstorm a few things. Let’s imagine for a moment that now, as internet speed is high, somebody comes with a new format, where he can include a subroutine that generates a kind of code making it readable, but also traceable completely, storing the info like when and who bought the files, etc. Maybe even having a specialized piece of hardware (wich may not be really a good idea, cause it costs again money). There are different scenarios here, but one thing is clear: ISP need to be part of it! As it stands now, they’re left out, the law doesn’t impose any responsibility to them. If I know that if my friends are breaking a bank stealing, I am automatically tried as a complice to theft: not so the ISP’s! And the same goes for the other internet companies. You may have tried sometimes to watch a video on youtube, but is says that the video is not available, as it was removed due to copyright infringements. 

It is also a joke when you think that the Canadian government imposed the pay for streaming to be 10 times lower than what is imposed in States. Rings a bell?

There is also another interesting source of revenue. Today, the cost of producing music is extremely low – for a few thousand dollars you can buy some speakers, a computer and you can have a decent production. So, everybody jumped in the bandwagon. The competition is fierce, and everybody uses internet to market their music. Most of the music is pathetic, but it is incredible how much music is out there. If you listen 12 hours a day, you can hear less than 4% of what’s been posted everyday on internet.

Once you post your music, then you are told you need to do marketing, which is basically correct, as you want to grab everybody’s attention. However, the more creative the marketing, the more googles and apples and isps and the likes are making. Why? Very simple: they basically employ thousands for free to do marketing, who are coming with new ideas, and they do not cost a cent, but they capture the attention of people, and then, the internet companies are placing their paid ads, use sophisticated methods to redirect consumer, etc. It is incredible how far these things are taken, and I just have the feeling that I am scratching the surface. The new digital age has and will have so many victims, just because the business logic and approach changed completely, the ethic side of it doesn’t exist anymore, and, until the majority of the people will start to grasp and understand the consequences of some actions, it is like the Wild West.

Now, that we know a bit what are we up against, we need to take a look at what can we do about it. Is there such a thing to use “them” instead of being used by “them”? 

Stay tuned,

Flo Fandango

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