Friday, April 10, 2009
BOB GARFIELD: Okay, that’s settled. Ad support is a failed model. Pay as you go may be the only path forward, except when it isn't, for instance, when it comes to music downloads in China. Whereas in the United States people still occasionally pay for music tracks - more than one billion digital songs were sold last year, and iTunes is now the nation’s biggest music retailer - in China, the piracy rate is 99 percent. So accustomed are the Chinese to free music that Google announced a deal last week, in cooperation with the remaining four music companies and more than a dozen independent labels, to offer a million-plus songs in China, downloadable, for free. The gimmick is that the site will be ad supported, generating some revenue for the labels and, presumably, the artists. Greg Kot writes about music for The Chicago Tribune and he’s co-host of the public radio show Sound Opinions, and joins us now. Greg, welcome to OTM.
GREG KOT: Thank you, Bob.
BOB GARFIELD: So, this new scheme is, as I understand it, that the songs are free but Google gets ad revenue on its website, and that it shares with the music labels. Is that how it works?
GREG KOT: Yeah, that’s exactly how it works. Google is basically attracting music from the major labels. It’s paying the labels to license the music for them in order to attract advertisers, get eyeballs. And then as a result they are going to take this revenue from the advertising and split it with the record companies, keep half itself, and figure out, actually, the first viable means, hopefully, of monetizing music in China on the Internet.
BOB GARFIELD: You know [LAUGHS] it’s just kind of phenomenal, though. I mean, I'm thinking – I get burglarized, right? They take my TV and my stereo and my jewelry, so I put on a deadbolt, and they strike again, and this time they take my furniture.
GREG KOT: [LAUGHS]
BOB GARFIELD: And I install a burglar alarm and they come back again, and gone are the rugs and the paintings. So I decide to unlock all the doors and windows and just put up billboards for the burglars to see while they're stealing from me. Isn't that what they're up to?
GREG KOT: You sound like the head of Warner Music or something. [BOB LAUGHS] It’s - you know, they must be thinking, what do we have to do here. The people in China who have been stealing for years, basically, by the record company’s definition, are rewarding for stealing by getting more free music, whereas [LAUGHS] in the United States the people who are actually paying for music on the Internet, they're being rewarded by being sued if they download or share a music file without paying for it.
BOB GARFIELD: Very literally, a double standard.
GREG KOT: It is a double standard, and it’s - it makes me wonder why hasn't this model been applied in the United States. It makes perfect sense. I mean, you mentioned the figure that, you know, more than a billion downloads had occurred in the last year. It’s a record number of downloads, a record amount of revenues. But, at the same time, for every legitimate download in the United States there are 40 illegal ones. So [LAUGHS] there is no way they're going to catch up with the so-called pirates. The best thing that they can do is to apply this Google model – it seems like a worthy attempt, anyway – to make it continue to feel like free but figure out a way to make someone else pay for it, in this case, advertisers.
BOB GARFIELD: With online ad rates what they are though, and they're low, it’s hard for me to understand how the revenue generated by advertising to the music pirates could begin to approximate the kind of money that record labels would generate by selling the songs. Is this just that they're willing to accept a penny on the dollar just to get something out of their investment in this music?
GREG KOT: Well, first of all, I think you have to understand is that the people making all the money off the sales of music in the last half century have been the record labels. The artists have not made a lot of money off the sale of music. That’s a myth. There’s a litany of artists who never got royalties. So you’re essentially taking a zero-sum game anyway for these artists and saying something is better than nothing. The real losers in this whole new model that is coming into the music world are the record companies, the middlemen. They're the ones who have got to figure out how to insert themselves inside this scheme where they can make some money off it. The best they can hope for is to serve as a marketing arm for the artists.
BOB GARFIELD: Now, you spend a lot of your time talking to musicians who for years were stiffed by their labels, and now they're being stiffed by the market at large, and yet they continue to produce music and seek to get it recorded. Why do they keep smashing their heads against the walls? Why don't they just surrender and, you know, I don't know, go into dentistry?
GREG KOT: I say these [LAUGHS] people are, with all due affection - these people are crazy, just like writers are crazy. You know, you don't do it because it’s a way to make money. You do it because you have to do it. There’s no other thing you can possibly imagine yourself doing. That will never go away. Similarly, the desire for people to gather in groups to see music, to witness music, to hear it performed will never go away. That’s why all these demise of the record industry/music industry stories are so, at the end of the day, meaningless to me, because artists can get more music out to more people, in quicker fashion than ever before. And if I'm an artist, I'm somebody making music, I'm thinking, I'm stepping into a world full of possibility. It’s really more an issue of the 20th century music industry that is gnashing its teeth and wringing its hands and wondering woe is me. The artists and the fans are going to be just fine.
BOB GARFIELD: Greg, thank you so much.
GREG KOT: My pleasure.
BOB GARFIELD: Greg Kot is the host of the public radio show Sound Opinions and author of the upcoming Ripped: How the Wired Generation Revolutionized Music.