Last week I published two opinion pieces based on my book – one in the Guardian and one in Wired UK. The reaction was fierce and generally unfavorable: At least a few dozen Guardian commenters thought I was wishing for a return to the age of the CD, excusing the music industry’s reluctance to change, or defending major-label greed.
Although I plead guilty to having a tough time summarizing a 300-page book in 1500 words, it was not my intent to do any of these – at least not exactly. I do think that major labels have tried to slow the inevitable extinction of the CD because it’s a business model that favors them, about which I’ll say more in a minute. And I know that they try very hard to make as much money as possible, which to many people signifies greed. But this hardly sets them apart other businesses: This is just what companies do.
I’m not saying “Greed is good.” (Neither did Gordon Gekko, apparently.) I’m saying that it is the force that drives companies, which call it “maximizing shareholder value.” They have a fiduciary duty to do this, and I think this is as it should be. (I also strongly believe government needs to do a better job of making sure that companies pursuing profits don’t wreck the rest of society in the process, but that’s another book entirely.) And record labels are hardly alone in their pursuit of profit: One of the ironic parts about controversy over copyright online is that venture capitalists call media executives greedy. Think Class Warfare 2.0 – billionaires vs. millionaires. Whomever wins, musicians lose.
We could certainly argue about whether outsize record company profits are bad for society, but I think that’s a tough case to make – we’re not talking about BP here. The legal term of copyright is indefensibly long, and we should fix it. But it’s more urgent to address the fact that the practical term of copyright is way too short – new albums and movies are available on file-sharing sites hours after they come out. And much of the public anger about record company greed concerns the price of CDs, not an issue that has a tremendous impact on society. Democracy will endure if some people can’t afford Watch the Throne.
Record labels certainly overpay executives, but I’m not sure what to do about that. Salaries in the media business are appalling, but so is the wealth of Mark Pincus, and I’d suggest that Watch the Throne is way better than “Farmville.” And the idea of having a central authority decide how much money people “should” make has a rather unfortunate history behind it (although I do favor higher marginal tax rates). Anyone who invests in media companies – I don’t, since it would be a conflict of interest – should look at how much money they devote to executive pay.
This inevitably raises another question: Do the executives who make all this money actually do a good job? That’s complicated. Certainly, the major labels were far too slow to sell music downloads, which is one reason Apple is eating their lunch. Five years ago, I believed the executives who ran these companies made all the wrong moves. But then I started to wonder who made the right ones. Newspapers are collapsing, Hollywood is in trouble, and the book business is having the same kinds of problems. It’s much harder to know it all then it used to be.
From that perspective, what’s the rush? Abandoning the CD before consumers do would be like putting down the cash cow because it started limping. Wherever you think the music business is going, it seems foolish to stop selling $15 CDs until it gets there.
Even former Napster chief executive Hank Barry – no fan of the major labels, he – sees the logic in this. “To this day it bugs me when people say, ‘They’re so backward,’” Barry told me as I did some reporting on the labels’ negotiations with Napster. “They’re not backward at all. They’ve got a physical model that’s a high-margin, high-revenue model. So it’s a perfectly rational business decision for them to stay in the physical world as long as they possibly can.”
That’s in the short term, of course. What if the best strategy is to give away music and try to make money in other ways, by selling concert tickets and merchandise? In order to do that, labels would need to completely rewrite their artist contracts – assuming that they can even get artists to agree to this new business model. This would take years. In the meantime, they’d have to keep revenue coming in – and the current model of selling music does just that. So even if you really believe that music must inevitably be free – and I don’t – it’s still impossible to give it away immediately without going out of business.
I’m not saying the labels made all the right moves – obviously they didn’t. What I am saying is that a preference for selling $15 CDs instead of 99-cent singles is completely logical. Major label executives aren’t especially sympathetic characters, but I’m not sure how much that should matter. And, as I’ll show later this week, the guys behind the Pirate Bay make them look like angels.