“Big Labels Are Declaring War on Free Music,” Radio Stations Warn

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The Free Radio Alliance is a consortium of nearly 1,500 US-based radio stations and broadcast organizations.  This morning, they issued this statement to Digital Music News.

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It’s increasingly clear that the big music labels have launched a war on free music.  Local radio stations are only one target.  For years, the labels have been pushing Congress to levy yet another fee on radio stations when they play music for listeners – free of charge.

Now, the record labels’ emerging plans with Apple to make less music available for free are becoming more obvious.

Peter Kafka’s article is on point: ‘Big Music Labels Want to Make Free Music Hard to Get and Apple Says They’re Right.’  The record labels, Apple and others are lining up behind Eddy Cue and Beats Music founder Jimmy Iovine, who so aptly said the music industry should ‘get behind a paywall.’

In a world where music will cost more and more, radio stands out as the place where consumers can still get the best of music without paying a penny. 

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The Free Radio Alliance is a coalition of people and organizations whose mission is to keep radio and other businesses that play recorded music strong for communities across the nation by opposing a performance tax. For more information, please visit www.freeradioalliance.org.

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39 Responses

  1. David

    What this guy calls the ‘performance tax’ is the royalty which is paid to recording artists by radio stations in every democratic country in the world, with the one notable exception.

    Quite why radio in the USA pays music royalties to composers/publishers, but not recording artists, is a bit of a mystery. I have seen it suggested that the original justification (around 1930) was that recording artists didn’t need a royalty because radio play promoted record sales, from which they would get a royalty. But so would composers, so that argument is feeble. In any case, if we are moving into a world when nobody buys records any more, what little merit the argument may once have had is rapidly disappearing.

    Reply
    • Name2

      What little is left of the public airwaves is just that: public and free. Not a toll road.

      Corporate behemoths aside, free radio and the music on it is a public good: A public good which outweights Jimmy Iovine’s business problems.

      And anyway, the Washington battle lines are largely drawn along these lines: Democrats love Hollywood and copyright holders, and the DRM and copyright mania which Hollywood loves. Republicans love terrestrial radio. It supplies their base. I don’t see radio broadcasters losing any battles in the near future.

      Reply
    • Joey G

      “paid to recording artists by radio stations in every democratic country in the world”

      Such payments may or may not be appropriate—however because-others-do-it is *not* a legitimate argument.

      Reply
      • Casey

        Artists and labels love make that statement but fail to ever compare the other aspects of radio in the US to the rest of the world. Radio in the US is a vastly different than radio in other countries. It is not apples to apples.

        Reply
  2. Anonymous

    yet they don’t pay for it themselves, company or persons, weird, and then if they like it theyll use it in theirs to make money and claim it takes a lot of free music to finally get somewhere so you dont get a slice of whats rightfully yours or else theyll then claim you as theirs to any other interested parties or businesses and circle and corner and then threaten bully intimidate and those kinds of things, so that doesnt help either…

    they figure free soda for the clubhouse and then try and dupe you through various methods into believing you are in some clubhouse so they can justify when they steal yours and dont pay for it, yet you never get any signed notice saying you are free to take their music without paying for being in the clubhouse, so they can set people up like that as well, and then trying some sympathy play for being broke or something as reasoning for not paying, tis a lickle silly…

    always some war with those kinds of people, always war war war war war fight fight fight fight…

    im not sure that business or those corporations deserve to be paid for their product to be quite honest, i really dont, but i still wont steal it, but if it does all come off youtube etc. and behind some paywall, then i certainly wont be listening anymore either…

    and then they will further target their core paying demographic and use more stats and data to make commercial product specifically for them, and all popular and mainstream music that is on the show will get lamer and worse and anything good will be further claimed as evil and devils work, never to get any traction anywhere…

    america has no edge and it cant get it back no matter how hard it tries, all it can do is sort of use illusory tactics like a mirage for their younger customers who are clueless to things…

    itll be like a big trainwreck how it all comes together, as the show will have no choice but to hype them up even more and more and more and more, oh fun to watch them entertain oh ye peasents and people…

    Reply
  3. Myles

    The revolution will not be televised…….they can’t afford to pay the licensing fees for the music

    Reply
  4. Sarah

    Professional music isn’t free to make. Why should it ever be free to consume by default?

    If professional music is free to play, it should be because the owner decided to make it free for some reason. Someone else shouldn’t get to step in and require that it be free because of their own preferences or beliefs – usually when that happens, we call it “theft.”

    Maybe free music does offer artists sufficient value in the form of exposure, that’s still the artist’s call to make. And if everyone who claims “but the exposure!” is right, then artists will choose to offer their music for free even if you stop forcing them to.

    A free marketplace is the solution. If a professional artist can’t earn a living from his music, it should be because the market doesn’t value it and doesn’t want to consume it – not because even though they value it and consume it, the system or third parties artificially handicap the artist’s ability to profit from his valued music.

    We have a free marketplace in some ways (Bandcamp is a good example). But we don’t have a free marketplace for the form of consumption that most consumers prefer: high quality streaming. We also don’t have a free marketplace where artists can offer everything they want, from tickets to streams to merchandise, on their own terms.

    So that’s what we’re building with RepX. An artist’s success should be up to him and his audience.

    Reply
    • Name2

      Professional music isn’t free to make. Why should it ever be free to consume by default?

      Since when is “non-skippable ads” ‘free’?

      A free marketplace is the solution. If a professional artist can’t earn a living from his music, it should be because the market doesn’t value it and doesn’t want to consume it – not because even though they value it and consume it, the system or third parties artificially handicap the artist’s ability to profit from his valued music.

      The trouble is that, when it comes to streaming, every instance of consumption results in a payment, and no one has any way of knowing how deeply the streamer values something. I might stream a song once because it sucks. I might stream a song once because it’s exhaustingly beautiful and there’s no need to gild the lily.

      With every song streamed – even involuntarily – filling somebody’s coffers, what is the likelihood that a Jimmy Iovine or Lucien Grange will not have a hand going forward in determining what non-demand “radio” is composed of? How is that anything resembling a free market? How does that do anything but reinforce and bring to digital what’s bad about most terrestrial radio?

      Reply
      • Sarah

        I didn’t say that no one will have a hand in determining the market equilibrium. In free markets, you always have some bigger players who naturally have more influence. But in a free market, those big players are constantly subject to meaningful competition – from each other, from little players trying to become big players, and even from the mass of little players who are happy to stay little.

        You’re right, “nonskippable ads” aren’t free. They cost the consumer time and attention, and they result in payments to someone.

        But why are they the default option? Is it because it’s the easiest way for a streaming service to grow (free is always easiest with consumers)? Or is it because the majority of consumers in fact prefer to deal with non-skippable ads than pay some amount? We don’t know because there’s never been a meaningful option.

        Right now it’s ads or $9.99 monthly subscription on Spotify, for instance – why don’t I have a reasonable PAYG option? I can pay but only if I pay a lot for a bundled package whether or not I want the whole bundle or just some of it? I can pay nothing but I can’t choose to pay something without buying a subscription that my use may not warrant?

        You might always want ads; personally, I’d like to skip the ads in many cases and just pay a few cents. I’m not buying a song to hear it once, but I’ll pay a penny or two to stream it – and if I don’t like it or (or loved it but never want to hear it again), big deal, so I paid a penny or two for a few minutes of entertainment (which, compared to other forms of entertainment, is a damn deal).

        How do you determine how deeply the market values something? You let it freely experiment with prices and pay attention to them. This happens successfully and efficiently in the vast majority of markets.

        As for the ads from the artist’s side: again, why force it on them? If you want your music to be available for paid streaming only (“my songs are 1 cent per stream”) but your audience only wants ad-supported … guess what? You’re going to have to switch to ad supported to get them to listen to your stuff, because that’s the limit of the value they place on it.

        Your preferences aren’t a problem – you’re entitled to them. It’s a problem for the market when one person (whether you or Lucien Grange) says “my preferences must define everyone else’s options.” If you’re right and ad-supported is the optimal solution for the majority of market participants (artists et al and consumers), then we’ll continue to have primarily ad-supported content no matter what else is offered.

        Reply
        • Anonymous

          Free and ad-supported is the default option because of decades of belief that public airwaves should be free and until recently it was all radio had been capable of offering. To this day it remains the only viable solution for terrestrial radio and therefore digital services have largely decided they too need to offer an ad-supported free version to lure listeners.

          “Right now it’s ads or $9.99 monthly subscription on Spotify, for instance – why don’t I have a reasonable PAYG option? I can pay but only if I pay a lot for a bundled package whether or not I want the whole bundle or just some of it? I can pay nothing but I can’t choose to pay something without buying a subscription that my use may not warrant?”

          Because the labels killed it. There may not be any solid evidence of it but it is pretty clear why the $5 per month Spotify Unlimited plan has been nearly killed off. Nearly every other service has killed off their $5 per month plans. And the major labels are reportedly rejecting Apple’s attempt to price for $8 per month. The major labels no longer seem interested in anything less than their share of $10 per month.

          Reply
          • Anonymous

            $10 a month is cheap. Think how much CD rentals were. $10 a month is already raping the industry. That’s a good deal for unlimited music streaming for a month.

          • Name2

            Like advertising, the “gym membership” model is well known and familiar to MBAs.

          • Sarah

            Oh, well, as long the MBAs are comfortable with it … 🙂

          • Name2

            You joke, but does this not explain (among other things) why we were saddled with DRM for so long?

          • Sarah

            People make mistakes? People are shortsighted? Hindsight is 20/20? I think the consumer market made its feelings about DRM pretty clear. You can’t avoid all problems, you can just set up a system where they’re more likely to be corrected in a timely and efficient manner.

        • Sarah

          Anonymous:
          To this day it remains the only viable solution for terrestrial radio and therefore digital services have largely decided they too need to offer an ad-supported free version to lure listeners.

          Good point, and I agree that plays a part. But there’s another major factor that would have likely produced this same outcome of free/ad dominated digital services: it’s the easiest model. It’s easy to implement and, more importantly, it’s easy to get fast, high consumer growth.

          The business model you choose depends on what your business goals are, and for the majority of investors since FB (and therefore for the majority of new tech companies), the goal is simply “consumer growth.” Nothing grows faster or easier than free.

          Because the labels killed it … The major labels no longer seem interested in anything less than their share of $10 per month.

          They did not kill off a PAYG option – they killed off a lower set subscription tier. Those are very different.

          Killing off the lower fixed subscription tier could be an economically reasonable move if you think that you’d lose more money (in people switching from $10 to $5) than you’d gain (in people switching from $0 to $5).

          You make the most money by trying to match prices to the amounts people will actually pay. A single (or even two) fixed subscription price leaves a lot of money on the table.

          Imagine 15 people.
          1 is willing to pay $12.
          2 are willing to pay $10.
          3 are willing to pay $7.
          4 are willing to pay $4.
          5 are willing to pay $0.

          If you have a $10 subscription, you will get 3 people and revenue of $30 (2 who are at their price, 1 getting a bargain). All 15 people listen, for an average of $2/person.

          If you have a $5 subscription, you will get 6 people paying, with revenue of $30/month. All 15 people listen, for an average of $2/person.

          If you have a PAYG model, where everyone can effectively pay what matches their value and budget, 10 people pay (or, all 15 pay but 5 of them “pay” $0), for a total of $69 in revenue. Average of $4.60

          The thing is, we don’t actually know those numbers – we don’t know how many people are willing to pay what amount, for what amount/mix of content. There is absolutely no way to know those numbers without actually letting the market figure them out.

          So when Spotify or the labels pick a number and says “everyone has to pay $X or $0,” they’re just guessing at an amount that they hope will maximize total revenue. Any number they pick, they’re almost certainly going to leave money on the table, it’s just a question of how much. We know this is true because, no matter what price is picked (above maybe a penny), there will always be people willing to pay SOMETHING who are not willing to pay the price arbitrarily assigned.

          We don’t know how much they’re leaving on the table by insisting on the $10 price point. In this example (simplified though it is), insisting on the $10 price point decreases your revenue by $39 ($2 from the guy who would pay $12 but only pays $10, and $37 from the people who would pay $7/$4 but instead pay $0).
          Not letting people pay what they’re willing to pay costs the music industry a lot of money.

          But, you know, saying “it’s $X or $0” is just a super easy model. 🙂

          Reply
          • Name2

            One practical problem with a variety of tiers and pay-go plans:

            emusic worked this way for a while before finally going under. i.e., offering users both a bewildering array of price tiers/offers, each with its own number of “download credits”; and subscription term-lengths to taste (quarterly/monthly/annual). And then the infamous “bonus packs” – 10, 20, or 50 credits which one could buy on top of the chosen package, and which had its own set of rules.

            I won’t say that this was their downfall (“getting” Universal catalog, and whistling Universal’s tune as a result, was probably the Trojan Horse), but it made managing one’s account a major chore.

          • Sarah

            Eeek. That does sound scary. It takes lot of effort to set up a system where consumers can pay but don’t feel overwhelmed or annoyed by it, or have it turn “enjoying your favorite music” into “price shopping.” But it can be done.
            Part of the solution is easing consumers into it – you don’t start with a complex system, you give them a nice simple process to start and let them get comfy. That technique has been proven by many consumer services (though if they did it by design, who knows?). Happy to show you how RepX works, I’m sure you’ll have some insightful criticism and comments.

          • Sarah

            I just took another look at emusic. Their system is still very confusing, plus it’s downloads only, which is unappealing for many consumers. Also, they don’t make this readily apparent but they seem to offer only MP3 downloads, which is silly (Bandcamp has that right). Finally, it’s not a very pleasant site to spend time on – it’s dark and feels like a very impersonal store. So …. yeah, we’re not like that.

          • Name2

            Right. emusic was always all about (DRM-free) MP3 acquisitions, not streaming.

            But they had no preview abilities beyond the standard 30-second taste. They eventually started a regular hour-long show called “17 dots”, made available for free on East Village Radio, which curated and highlighted new releases of interest available on emusic. But EVR was shut down by the usual suspects, so I don’t know what emusic is doing now to accomplish allowing listeners to hear something before they buy it.

            When I left it behind, they had moved from “credits” to real cash values as their currency, and the customer’s balance was not allowed to roll over. It was “use it or lose it”. In the old days, if you had only one credit at the end of the month, you could snag a song – any song. If you had 67 cents, and no song tickled your fancy at your available fund level, you had to make peace with losing 67 cents.

            There’s a right way and a wrong way to do flexibility.

          • Sarah

            They went with the wrong way, I think.

            Seems like they just have 30 second previews now – if there’s anything else, it is not at apparent on the site.

            The customer’s balance was not allowed to roll over? That’s crazy.

            RepX is very different: add money when you want, in the amounts you want, use it when you want, it never expires, if you have money on the site but decide you don’t want to use it anymore, you can transfer to a friend or donate to an artist. I’m not sure how we can make the process and policies any more friendly, but happy to hear any ideas.

        • Anonymous

          you must not like music that much if you think that $9.99 a month for unlimited streaming is expensive.

          Reply
          • Sarah

            LOL. Come on, Anonymous. That’s not even close to what I said. In fact, you might be the one undervaluing music. 🙂

            In a market, arbitrarily setting a single price for a single bundle of content (that is bundled on the basis of what’s easiest for the service, rather than packaged according to what consumers want) is always going to result in you making less money than you could.

            Personally, I think the $9.99 for unlimited music streaming is a steal. But that’s just my opinion, and opinions aren’t worth much.

            Here are facts:

            1. There are people who would pay something ($8.25 or $2.50) but not $9.99, and right now Spotify (all services that work this way) are rejecting their money: “if you don’t want to pay $X, you must pay $0, I will not take any money from you if it is not in the amount of $X.”

            2. There are people who would pay more than $X (because they’re high-using music lovers) and Spotify doesn’t let them: “you may not pay $15 even though you consume more and value it more and are willing to pay $15, you must only pay $9.99.”

            3. There are people who would pay/subscribe for a package they want, but not for a package that consists of 90% of things they don’t want, because then they perceive that they are overpaying and therefore the deal isn’t a good value: “I only listen to these 15 artists, and would subscribe to their music, but the $9.99 subscription includes a billion artists I don’t want so it must be a bad deal for me – I’d be paying for mostly for stuff I don’t use”

            How many people are in these categories? We don’t know — there’s no way to know without actually putting together a market and finding out. But reason suggests it’s a lot.

            If you think a $9.99 subscription should be the only amount people are allowed to pay, then I think you are the one who doesn’t value music very much, because you’re leaving money on the table and (unless something miraculous happens) it’s shrinking the industry.

            The only one this model works for is the service itself, because it’s easy for them. It doesn’t maximize revenue for the industry or value for consumers.

          • Anonymous

            if you want to buy a cable package, that at minimum costs $20(just an example), can you really tell them u only want to pay $15?

          • Sarah

            Unbundling of content, my friend. This is in fact slowly happening with TV: options for buying individual shows instead of full channels, or for buying individual channels instead of a block of channels. It’s happening largely because it’s more popular with consumers and it is a superior economic model.

            Right now, the bundle is “X for everything.” And perhaps there should always be an “X for everything” bundle for music streaming.

            But offering “X for everything” does not exclude the possibility of also offering “Y for less than everything” or “Z for specific packages selected out of everything” or “individual prices for individual pieces of content.” I’m not opposing a particular package (“X for everything”), I’m saying that offering only one arbitrarily determined package that doesn’t reflect the range of consumer preferences that exist in reality necessarily results in lower total revenue than you could actually get.

            Also, technically, this is a form of “he jumped off the cliff so I should too” argument. Who cares how cable offers subscriptions? The right question is “why does cable offer subscriptions in this specific manner and does this manner maximize the total revenue they earn from selling content access to consumers”? And then, of course, “if so, is applying this model to music streaming the best way to maximize our total revenue?”

          • Anonymous

            You seem to have it figured out, start your own streaming company, and see how offering your business model affects your revenue. It’s obviously there for a reason, you want an individual track, go on iTunes.

          • Sarah

            That’s exactly what we’re doing, good suggestion! It’s called RepX and we’re giving demos to artists right now, before we launch to the public. 🙂

          • Sarah

            “It’s obviously there for a reason.”

            I assume you’re referring to the unlimited subscription model. Yes, the reason it’s there is because it’s easy to implement and maintain. The free tier is there because nothing grows faster than free, and fast growth means the investors will get a huge pay day REGARDLESS of whether the company itself is doing well.

            You have to consider the incentives of people who build and invest these things.

  5. Chris H

    What scare tactics. The amount of money we are talking about to represent the master side isn’t that much money in the grand scheme of billion dollar radio companies or for smaller radio stations, that are largely talk radio at this point anyway. Not to mention, they don’t play much , if any foreign music (occasional David Guetta song notwithstanding), so this is all grandstanding to fight the end of a half century of a free lunch on your “programming”. Shocked and outraged as they are , in the TV world and everywhere else it’s entirely normal to pay for programming. They have gotten away with paying for half, forever.

    Reply
    • Casey

      Billions in revenue does not mean billions in profit. Many stations are operating at slim profit margins or even in the red despite countless cost cutting moves. Even a small royalty would put a lot of stations under. Primarily in small markets which are areas that need their stations the most.

      There is a reason why Gordon Borrell predicts we could see as many as half out radio stations in the US disappear in the next 10 years. That’s without the added burden of royalty payments.

      Reply
      • Anonymous

        Oh well, reduce the licensing fees for the airwaves, I’m sure they’ll go cheaper when there is less demand due to these stations going bust. Or maybe, they’ll get used for something more useful who knows. Either way, the artists need to get paid, royalties is more than fair. The music industry coped with piracy, now the radio industry needs to cope with royalties

        Reply
  6. Anonymous

    Why is this even an argument? They are using the music, they should pay for it. I’m surprised they haven’t been already. Artists deserve to be paid for their music, same way the radio station gets paid by advertising revenue. To use someone else’s work and get paid for it, and then not pay a fee to the artist that recorded it, under the guise of free exposure is ludicrous especially when radio is playing catchup nowadays, and youtube/social media is a bigger promotional platform. Artists either build up their fanbase from the ground up or using major label promotion. So either way the artist and the label needs to get paid for their work/investment into their music. Especially in this day and age of piracy where music sales are extremely low due to downloads. I support Jimmy Iovine and Apple in this move. Radio stations should have been doing this from a long time ago.

    Reply
  7. Matt Goldstein

    How can they possibly expect this bullshit to work? Everyone knows that piracy isn’t going away anytime soon – at least streaming it for free is a more effective way of garnering support and at least a little bit of cash. If anything, this move will only prompt more people to start pirating music…

    Reply
  8. Remi Swierczek

    Radio and streaming (which is a form of Radio) is an OBVIOUS TO AN IDIOT savior of music industry!

    Just convert both to conventional MUSIC STORE!

    Philanthropic PIMPS of music like Shazam or Google Voice Search can abandon music prostitution and start as well paid or even overpaid cashiers of $100B music industry.

    Reply
  9. Wurd

    Radio stations make a lot of money. But they don’t pay for music when they broadcast it unlike every other type of content they DO pay for. From sports team broadcasts to Rush Limbaugh, everybody is getting paid except artists and the people who help fund their recordings.

    Just because US radio has managed to avoid paying performers for decades while the remainder of the globe does doesn’t make it ok not does it mean that other countries are wrong.

    Some of you free music supporters really have your heads up your asses when it comes to understanding how revenues flow. Radio has been screwing artists on this royalty for a long time and has fed most of you the propaganda you are regurgitating because you think everything should be free

    Broadcast listeners don’t have to pay this royalty. Only the radio stations you listen to for free do. They can’t take your money and it is not a tax.

    Reply

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