The hardback edition of this book took the story of the record industry up to November 2003, a time when many top executives were moaning very loudly about the unfairness of their various predicaments. What has happened since then? Well, they’re still moaning, despite an apparent stabilisation in fortunes. In the first half of 2004, global sales of recorded music grew in volume by 1.7%, according to figures collected by the International Federation of the Phonographic Industry. The strongest growth was in the US, which managed to up volume by 5%, while the UK offered a more modest 0.6% increase in volume. The value of these sales fell from $14.1bn to $13.9bn, but the IFPI admits that the figures ‘reflect a slowing of the rate of decline…of the past four years’, declaring it ‘the best first-half year result achieved since 2000’[1].

The stabilisation could be the result of a number of factors. With audio sales continuing to drop, albeit by less than in previous years, the IFPI attributes a large part of the improvement to a 26.2% increase in DVD music video sales. In addition, the fact that volume sales have increased while their value has declined slightly may mean that the industry is starting to get to grips with the issue of pricing and the value for money that they’re offering. If so, this is long overdue. If not, why not? 

In Germany, Bertelsmann Music Group is trying out one new approach to value by launching cheaper ‘no-frills’ versions of CDs, without artwork, but with the title plainly printed on the disc. The idea was explained to Der Spiegel by Maarten Steinkamp, head of BMG Germany, in July 2004: 'The cheap version [which is expected to cost Euro 9.99] will look the same as one burned at home...That is our antipiracy CD'[2]. Unfortunately for Steinkamp, I suspect that many will rationalise that if a CD that costs 7 quid looks like a home-burned CD-R, they might as well get someone to burn them a CD-R for free. If record companies could guarantee a fully-specified product selling for £7 or £8, then they could probably win back a lot of trade. Nonetheless, Steinkamp’s move is an indication that someone in a position of power is actually trying to adapt to the new circumstances in which the industry finds itself, a significant advance on the record business complacency that informed consumers have come to know and hate. 

He seems also to have realised that the imperious attitude taken by some record executives in recent years has done nothing to endear them to their customers, actual or potential. Rather than putting stern, patronising, alienating anti-piracy stickers on all CDs sold, he has suggested that 'It would be better for us to write, "Thanks a lot for buying something from us".' What a nice man. He’s right, too, just as he is when he declares that ‘The music industry has sat motionless on its backside for far too long’. Here’s hoping that others in the business begin to exhibit similar levels of enlightenment and candour.

Steinkamp now works for a much larger company than he did in November 2003, the European Commission having finally approved the mind-boggling merger between Sony Music and BMG in July 2004. The Commission had decided that the concerns raised by competitors were minor, as was a threatened round of approximately 3000 redundancies, or about 25% of the combined workforce. Furthermore, the Commission came to the conclusion that allegations of price-fixing among the major record companies were groundless, although regular record buyers might choose to take issue with this particular decision. Is the merger a good idea? For Clive Davis, the answer is yes, because it means that he can do a lap of honour around the offices of the company that sacked him in 1973. Longer term, the benefits are less certain. There are questions as to how well the two differing corporate cultures will be integrated, but more fundamentally, there is the question of whether the major record companies should be getting bigger when the greater flexibility of a small organisation might be more useful.

Not that such considerations will put EMI or Warner Music Group off from shacking up if the conditions are right. If the rumours are to be believed, the longest, coyest courtship in the history of the industry since HMV tried to buy Victor and vice versa is back on, just as soon as Warner Music completes its projected public float in spring 2004. The merger puts Sony-BMG slightly behind the vast Universal Music Group in terms of market share, with EMI and Warner now trailing some way behind the two monsters. By merging, the combined group could make heavy cost savings, to add to those that EMI and Warner have been making individually. In April 2004, EMI announced a further 1500 redundancies as it sold off its factory in Holland, closed its US plant altogether, and instituted a 20% cut in the number of artists signed to the company, while Warner was undertaking a similar spring-clean. EMI’s decision to move out of physical manufacturing may prove to be a very shrewd move as downloads play more of a part in sales, but one wonders how much spare flesh is left on the company.

These four companies represent the bulk of the industry and the trade bodies that represent them collectively have continued with their various schemes and ruses to restore the industry to its former glory. In particular, the RIAA’s campaign to take every broadband-enabled American computer owner to court continues to wend its painfully slow way. The fact that it is the sort of idea that makes sense only after an all-day session in the pub (“Look, we should just go after everyone who’s downloaded anything ever…Oi, did you spill my pint? Outside, now. You’re my besht mate, you are…”) or some similarly mind-altering exercise has not deterred the British Phonographic Industry from trying a similar stunt in the UK.

In October 2004, it announced that it was instituting legal proceedings against 28 (count ’em) people who had consistently made their music collections available online. Yes, they’re coming for you. Just not, in all probability, any time soon. Once again, the main beneficiaries will be the lawyers who pick up the fee income from this misguided pursuit. If the industry didn’t spend so much on pointless legal activity, it might be able to reduce prices to a compelling level.

Speaking at the 2004 In the City conference in Manchester, former PolyGram boss John Kennedy – who had just been announced as Jay Berman’s successor at the IFPI – declared that he is firmly behind the RIAA and BPI policy of pursuing individuals through the courts. ‘It will make the biggest impact when you know of someone that’s been sued,’ he declared. ‘When the parents of so-and-so down the street have had to put hands in their pockets for 2000 euros’[3]. Elsewhere at the same conference, US technology journalist Andrew Orlowski told delegates that they were ‘sitting on a gold mine…most people in technology wish they had the problems of the record industry’. He added that ‘It’s unrealistic to think that this tap can be turned off’. The question here is of who to believe or trust? An informed observer of the industry like Orlowski, or a proven lawyer like Kennedy who freely admits that ‘if there's money involved I'll do absolutely anything’[4].

The record industry has presented the downloading issue as one of the lawless trying to get something for nothing. While some downloaders undoubtedly are of that mindset, the evidence seems to suggest that many others are using their access to free music to supplement and inform their purchasing. The industry’s standpoint is at best a grotesque over-simplification of the real state of affairs and at worst a sickening piece of moral blackmail. Informed consumers are a dangerous variable to an industry largely based on bullshit, and so they obviously need to be stamped out. Meanwhile, taking the moral high ground and bleating about illegality seems rather hypocritical when at least one major label head has been threatened with prosecution for criminal damage, as a result of his company’s predilection for promoting its releases via the medium of naughty, illegal fly-posting.

The impossible dream of running every last downloader out of town is not the only big idea currently being propounded by the BPI and the IFPI. They are also at the forefront of a campaign to extend the 50-year copyright period that currently applies to sound recordings in the UK. BPI chairman Peter Jamieson likes to claim that this is all about protecting the artists and ensuring future revenue for investment in new talent. The British record business, he says, ‘has less time to earn from its work than other UK creative industries - recording copyright suffers from unfair discrimination at the hands of copyright law’. A simple retort to this would be to suggest that record companies try and maximise their earnings from a recording during the 50-year period, but this would obviously be too much like hard work.

For reasons of spin, the industry is presenting the 50-year term as though it is a new menace and they are shocked by it. In fact, the industry has lived and worked with the 50-year term quite happily since the passing of the 1911 Copyright Act. If record companies were so bothered about the length of the copyright period, they had an opportunity to do something about it in 1996, when copyright in written works (including musical compositions) was standardised throughout the European Union at 70 years after the creator’s death (compared to the previous UK term of death plus 50 years), but they didn’t. Back then, the hottest discs passing into the public domain were by Frankie Laine, Spike Jones and his City Slickers, Perry Como, Bing Crosby and Felix Weingartner, and no-one seemed particularly bothered about protecting their rights.

Anyone with an ounce of sense could have seen back then that recordings by ongoing cash cows like Elvis Presley, the Beatles and Herbert von Karajan would fall into the public domain in time. The fact that no-one did highlights the short-termism of the record industry. Meanwhile, the idea that the industry so desperately needs the money from sales of early rock and roll to guarantee its investment in new artists is deeply depressing and shows how complacent and hide-bound the business currently is. When RCA Victor signed Elvis, it wasn’t relying on recordings from 1905 to fund the deal.

If the desired extension of copyright is all about keeping the artists in bunce, what of the lesser-known talents whose deleted recordings languish in company archives with no prospect of a reissue? An extension of the copyright period would grant major record companies a licence to carry on doing nothing, at the same time putting smaller specialist labels out of business and reducing the amount of choice available to music lovers. Labels specialising in public domain recordings have been the saviour of more obscure items that would otherwise remain unavailable. Artists receive no royalties from the release of public domain material unless they also wrote or arranged the material, but then they receive no royalties at all if the recordings in question are in copyright but unavailable.

Artists who argue in favour of the extension seem to do so largely because they believe what their record companies tell them. Obviously the record bosses aren’t going to tell the talent that when their recordings enter the public domain, it actually means that they can reclaim their back catalogue for free and release it themselves. If the artist in question is popular, other labels will be competing, but if added value means extra sales, who can add value to a package better than the artist who made the original recording? Artists arguing for the copyright extension are arguing for further enslavement to a corporate monolith that has already given them a bum deal. Happily, outgoing arts minister Estelle Morris is not, at the time of writing, rolling over and doing the record industry’s bidding. She told Music Week that if the extension was to be granted, ‘all relevant government interests, as well as our EU partners and the European Commission, would need to be convinced that this is justified’[5].

The presence of public domain material in the market does not stop the record companies that originated the recordings from competing or benefiting. Sony/Columbia has done very well with its remastered and extensively-annotated box set of the Louis Armstrong Hot Five and Hot Seven recordings, despite the presence of a number of good independent releases carrying the same material. Perhaps the record companies might have a case for the extension if they committed themselves to making their archives of deleted recordings available in some form or another. If not, the industry should consider taking the lead of the book publishing business, where contracts routinely provide for the reversion of rights in material to its writer/creator if the publisher lets a book go out of print.

What else has been going on? Congressman and friend of the RIAA Howard Berman’s original bill, which would have allowed copyright holders to hack into the computers of file-sharers, did not make it onto the US statute book. However, his subsequent brainwave - the Piracy Deterrence and Education Act of 2003, introduced by Berman and his colleagues Lamar Smith and John Conyers – did, being passed by the House of Representatives in September 2004. This sets a potential tariff of 3 years in jail for file-swappers caught for the first time, with 6-year sentences for repeat offenders. The overwhelming impression is of using a sledgehammer to crack a nut, underlined by Berman and co’s stated intention to distract the FBI from its important involvement in the wars on terror and drugs to locate the nuts who download. Even Michael Jackson, not noted in recent years for his sanity, thinks that this legislation is going a bit too far. Looked at purely in terms of logistics, imprisoning downloaders and uploaders is liable to place an unacceptable strain on an already creaking prison service. Also, hasn’t the FBI got far more important things to be getting on with?

There has also been a subtle reclamation of the word ‘download’ by the record industry. In November 2003, all downloading was wrong, or so the record companies would have us believe. However, now that iTunes, the legalised Napster and other paid-for services have finally got their feet under the table, we are asked to distinguish between legal downloads and illegal downloads. All very well, but if the record companies had embraced downloading in 1998 or 1999, it is quite likely that illegal downloading might not have taken off in quite the same way. The advent of an official download chart, as happened in the UK in August 2004, is indicative of the industry’s belated change of heart, but perhaps the executives should be keeping an equally close eye on what is being downloaded illegally, so that they know what deleted gems are worthy of reissue.

The industry persists in its belief that one ‘illegal’ download equals one lost sale, which is a fallacy: people will download things on which they would never dream of spending hard-earned cash. Felix Oberholzer-Gee of the Harvard Business School and Koleman Strumpf of the University of North Carolina examined the logs of downloads kept by file-sharing networks, tracking songs from the 680 best-selling albums of the period. They found that there was no correlation between the number of times a song was downloaded and the sales of the CD containing the song. Oberholzer-Gee estimated that at best, it took 5000 downloads to equal one lost CD sale.

On the human resources front, Arista head Antonio ‘LA’ Reid was given his cards by Bertelsmann in February 2004, to no-one’s great surprise, after several years of mounting losses. Within a month, he had pitched up at Universal, to run the Island Def Jam operation. He is reported to be on a much more modest salary than he had become used to, with extensive bonuses if success is achieved. Meanwhile, Sony’s decision to close its London recording studios in September 2003 has been proven to be the lunacy that it seemed to be at the time, following the facility’s re-opening in spring 2004 as the independent Whitfield Street Studios. Sade’s former producer Robin Millar now runs the show, Mike Ross-Trevor continues to lay an educated hand or two on the giant Neve mixing desk in studio 1, and the venture seems to be thriving.

The record industry may not quite be thriving in the same way, but there is a prospect of real recovery if the record companies really want it. Over the last year, some within the industry have shown a laudable willingness to adapt, to think radical thoughts and to get on with competing effectively in a market place where the old certainties have disappeared, rather than wasting valuable man-hours crying over their disappearance. Admittedly, other parts have proved themselves to be just as complacent and idiotic as ever, but it’s a start. However, if the record industry wants to guarantee its future existence it will have to rethink its attitudes and its business models far more than it has, and go on rethinking them almost on a daily basis. Unless it does so, the return of the good times is unlikely.

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