Congrats, RIAA: Chilling Effects Have Killed Interest In New Digital Music Startups

from the nice-work! dept

Fri, Jul 24th 2009 9:15am — Mike Masnick

We've noticed that pretty much every single new and innovative digital music startup that pops up eventually gets sued by the record labels. The labels seem to view this as a part of basic negotiations -- and, in fact, many of the lawsuits have ended in partnership/equity deals. But, those deals tend to be suffocating. Given that (likelihood of getting sued or getting a deal that makes a profitable business impossible), is it any wonder that entrepreneurs are shying away from any sort of digital music startup these days, in favor of opportunities with no obsolete gatekeepers demanding huge chunks of whatever revenue they might one day make?

At a time when the recording industry needs innovative startups more than anything else, the record labels and their oppressive lawsuits and deal terms have basically scared off exactly the people who create those businesses.

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Filed Under: chilling effects, digital music, entrepreneurship, lawsuits, startups

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Dark Helmet (profile), 24 Jul 2009 @ 9:25am

Well...
Those startups wouldn't have to worry about this shit if they'd simply work with non-RIAA affiliated groups and artists. In fact, I kind of see a good business opportunity in a large network of affiliated local free music websites:

You get registry on similar domains based on major cities similar to how Craigs List does it (i.e. www.freemusic.chicago.com, www.freemusic.newyorkcity.com, etc.). They're all ran by a local rep or reps, similar to a franchise. They all have a internet radio player playing random songs throughout the pages of the site (which can be turned off if the user would like). In the meantime, you can search by genre, band name, etc. In the results, you get streaming music, downloadable music, band/artist pages, and local show listings ONLY for groups within a certain radius of the major city.

This would be opt-in for interested bands/artists, they would be responsible for updating their pages and maintaining the uploads on the content, so overhead could probably be relatively low. In the meantime, you promote yourself as THE local resource for ONLY local music. It's the Craig's List of music.

Hell, maybe this has been done already, but if it has they've done a terrible job of marketing themselves because I don't know about it, and I'd sure as hell use it. I love my "Chicago" artists and bands. Yes because they're good, but also because they're Chicago.
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Man from Atlanta, 24 Jul 2009 @ 9:33am

Goodbye eMusic?
Got my email that eMusic was going to carry Sony artists and that all eMusic customers would get to pay the not insubstantial upcharge for it.

I think this is ultimately a misstep by eMusic, which for a number of reasons is a wonderful service. But hey, it's their business and I do hope they continue providing opportunities for emerging and indie artists to be heard.
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slacker525600 (profile), 24 Jul 2009 @ 9:38am

wasnt that their plan from the start
If they make the cost of entry high enough they kill competition. Then they don't need to worry about their business models. Which in turn gives credence to their claims that the music business would die if you do not support their ridiculous attempts at IP enforcement.
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richard, 24 Jul 2009 @ 9:38am

actually
I read an article on Tech Crunch a while ago where an industry rep said that they know they cant stem the tide forever, but at this time its more lucrative to sue sue sue.

Gotta keep those College interns busy, their paying them $12 an hour!!!
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Anonymous Coward, 24 Jul 2009 @ 9:42am

Re: wasnt that their plan from the start
Forget pleasing the customer, make the customer want what you're giving! That's the true business way.

After all, if it worked for GM, then it'll work for us!
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Anonymous Coward, 24 Jul 2009 @ 9:51am

Woohoo, finally the RIAA is doing something right!! Keep at it boys and maybe someday we, as a society can get back to the good ole' days of 8 track tapes. Cheap Trick is jumping on board people!!!! Abandon the scummy ways of the internet and embrace the power of 8-track tapes and Foghat!!!

Now I just need to start working on the auto industry so that my buggy whip futures will rebound. It's a crazy market out there right now!!! Long and strong!!!
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ChurchHatesTucker (profile), 24 Jul 2009 @ 9:57am

Re: Well...
"Those startups wouldn't have to worry about this shit if they'd simply work with non-RIAA affiliated groups and artists."

Nah, they've got that covered by making their partners the only ones able to collect rents. While making sure that anyone above the board needs to pay those rents. By law.

The real brilliance is that this just ensures that stealthy delivery systems (e.g., direct-from-artist downloads, torrents, etc.) are shored up. Thanks, *AA! I'm going to chill out with some Megaran and Optimus Rhyme right now.
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Hephaestus (profile), 24 Jul 2009 @ 10:35am

Re: Well...
Thats actually a great Idea mind if I steal it ???
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ScytheNoire, 24 Jul 2009 @ 10:37am

Legal?
I still don't understand how all these groups like the MPAA, RIAA, IFPI, etc are even legal. They seem like extortion groups, no different from the mafia or gangs, except they use lawyers instead of guns and baseball bats.

There really need to be a politician who cleans up this illegal, anti-competitive crap, because everything involving lawyers has gotten way out of hand.
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Dark Helmet (profile), 24 Jul 2009 @ 10:38am

Re: Re: Well...
"Thats actually a great Idea mind if I steal it ???"

Hey, if you can raise the VC money and impliment it, have at it friend. If you can get it going, I'd love the chance to work with you on it, particularly in the Chicago-land area.

And it's not steal, it's infringe :)
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PRMan, 24 Jul 2009 @ 11:00am

What? No credit for the story link?
Thanks, Mike, for plagiarizing my copyrighted link (that I sent you). J/K

I saw this and I immediately thought that this is right up Mike's alley.

It's funny how Mike's comments repeatedly just espouse the Golden Rule from the Bible.

Treat your customers the way you would want to be treated and everything works out. Treat them badly and you will eventually pay. It pretty much is that simple.
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Anonymous Coward, 24 Jul 2009 @ 11:08am

The funny part? Most of these "digital startups" were only potentially profitable when they didn't have to pay for the raw materials (music and movies). When they actually have to pay their fair share, suddenly none of them are even remotely close to being profitable and thus, they disappear.

Sort of relates to the "bring the public to copyright meetings". The problem is the public wants their music, they want it all, and they want it for nothing. Giving stuff away for "FREE!" is a great loss leader style business model, and potentially functional if you aren't paying anything for what you are giving away. But once that thing starts to have an actual cost, the weak business models are a non-starter.

Mike, isn't this more a case of companies with bad business models, rather than the fault of some "obsolete gatekeepers" who are in fact just asking for a fair payment for the use of someone else's materials?
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Dark Helmet (profile), 24 Jul 2009 @ 11:12am

Re:
You keep using the word "fair" as if that it has some clearly defined agreed upon value.

I'm curious, if you wrote out the functional definition of "fair" for this instance, what would that be?
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Ryan, 24 Jul 2009 @ 11:29am

Re:
I suppose if you want to redefine "fair" as "whatever the RIAA decideds to charge" then they're just asking for their fair share. However, that asking price is not market price, and reflects none of the cost used to produce the music; the marginal cost of digital music is zero, and it actually benefits artists to have their music distributed. This is not musicians asking to be recompensated for their costs, but record labels ostensibly representing musicians using the government to force anybody else to pay as much money as they can squeeze out for enjoying materials that not only cost them nothing, but actually helps the artists.

Yes, the public wants the best product as conveniently as they can get it and as cheaply as they can get it. This is true for ANY product and the businesses that can fulfill those desires the best will win out, which is the market's way of simultaneously ensuring consumers get a good product and rewarding producers for providing it. Music is no different, but because the market price of mp3 files is basically zero, people like you bitch that the government needs to come in to ensure the artists can get a 'fair' price--that price is zero! Many, many artists give their music out for free and still make a profit, so this market price in no way inhibits their reward for giving the best product to consumers.

So yes...this is the fault of some "obsolete gatekeepers" who are in fact completely unwilling to change business models to reflect the market's adaptation to technology, and instead spend resources lobbying governments to interfere in a way that helps neither consumers nor musicians as a whole.
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RD, 24 Jul 2009 @ 11:37am

Not theft
"Thats actually a great Idea mind if I steal it ???"

You cant steal an idea, you can only implement it better than someone else. Implement it TOO closely to the other guy, and it might be infringement, but its not stealing. Go ahead and take your best shot at it, if you can build it better than another guy, you win!
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Hephaestus (profile), 24 Jul 2009 @ 11:55am

Re: Re: Re: Well...
You would want use the following for the naming.....

Chicago.IL.US.freemusic.com
NYC.NY.US.freemusic.com
etc

And if you are interested in where I am going with this read through my past posts, specifically the

"xxx note/entry)"

ones
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Hephaestus (profile), 24 Jul 2009 @ 11:57am

"if you can build it better than another guy"

exactly where I am going with this actually .... big old grin
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Anonymous Coward, 24 Jul 2009 @ 12:17pm

Re:
Please define "fair" in this situation with numbers, algorithms, or empirical evidence.

"Fair" is relative. To me, "fair" would be $0 up-front, and a percentage of future revenue depending on contributions of particular pieces of music to the overall equitable value. So, Song X proved to provide 2% of overall equitable value to the project, so thus the song's creator gets 2% of dividends paid to artists, which could be of a pie about 5% of revenue.

So, since that's MY definition of "fair share", you obviously agree with this price structure if I were to open up an on-line database of musical notes that searches from humming, yes?
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JPD (profile), 24 Jul 2009 @ 12:17pm

Done chilled me
I have an idea for an interesting music sharing site. I think it's fully legal and would allow people to share all of their music with anyone without violate copyright. However, even if I got a lawyer to analyze if this was a viable and protected model, I wouldn't have the money to fight RIAA to prove it in court.
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Dark Helmet (profile), 24 Jul 2009 @ 12:21pm

Re:
Except I don't care if you use the idea. In fact, I'd like to use it with you. When do we start?
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Hephaestus (profile), 24 Jul 2009 @ 12:37pm

Re: Re:
How do I email someone here?
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Dark Helmet (profile), 24 Jul 2009 @ 12:46pm

Re: Re: Re:
I guess you couldn't. I'd pass along my work address, but I can see that being a disaster.
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Mike Masnick (profile), 24 Jul 2009 @ 12:54pm

Re: Re: Re:
How do I email someone here?

If both of you contact us via the feedback form agreeing to share email addresses, we can connect you.

http://www.techdirt.com/contact.php

Just link back to this comment.
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Dark Helmet (profile), 24 Jul 2009 @ 1:24pm

Re: Re: Re: Re:
Thanks, I'll do that shortly. However, this only counts as 1/2CwDH...
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Anonymous Coward, 24 Jul 2009 @ 2:21pm

Re: Re:
Heck, I will use that version of fair when I open my next retail store - no rent, I won't pay for inventory, I will only pay them a small percentage of my profits, or no more than 5% of revenue.

Yeah, that will go over really well.

A music site without music is just an empty website. The value of the music in the equation isn't 5% of the deal, it's most of it. Since most of these sites aren't barely generating enough income to cover their bandwidth, why would the music industry be interested in a percentage of a really small number?

In all business, there are fixed costs. Music for this is a fixed cost. Work your business model to meet your fixed costs, or you are out of business. The rules apply everywhere.
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aguywhoneedstenbucks (profile), 24 Jul 2009 @ 2:45pm

Re: Re: Re: Re: Re:
If you guys are doing this and need any help, let me know. I'll send my addy along to Mike too in case you guys want it.
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aguywhoneedstenbucks (profile), 24 Jul 2009 @ 3:37pm

Re: Re: Re:
Or deal with musicians directly and get a better price than what the big media companies can offer you. In most cases (Think Wal-Mart) companies selling bulk can give you more for less. In the creative world many indie musicians are willing to give more for less. I know I was more than willing when I was playing full time and I made a fair living. My brother (a current independent musician) sells his music pretty cheap and makes a better living than I do, and I've gone into IT consulting instead of music.
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Dark Helmet (profile), 24 Jul 2009 @ 9:14pm

Re: Re: Re: Re: Re: Re:
Mike, get this guy involved, if you don't mind. Or do I really have to send another precious techdirt email or whatever.

Dammit, Mike, that guy needs 10 bucks, and I've got a goddam business plan. Why do you hate the homeless mike?
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aguywhoneedstenbucks (profile), 24 Jul 2009 @ 11:34pm

Re: Re: Re: Re: Re: Re: Re:
aguywhoneedstenbucksthrowaway at gmail dot com

I have it forwarding to my normal email address.
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Peter, 25 Jul 2009 @ 4:34pm

Re: Goodbye eMusic?
I gave up on eMusic this month because the change to the fee structure meant I was spending 12 credits on an album with 5 tracks, and also because a lot of the stuff they promote isn't available for download here in Australia, so I would get my hopes up about downloading an album, click on it, and get the dreaded "content unavailable in your territory" message.
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