Re: More on Metallica vs. Napster

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From: Mike Masnick (
Date: Tue May 16 2000 - 00:09:52 PDT

At 05:12 PM 5/15/00 -0700, Daddy Mack wrote:
>Mike, also a FOIBer, wrote this kickass analysis of the Metallica vs. MP3
>battle, and the debate which aired last night between Chuck D (pro-Napster)
>and Lars Ulrich (Anti-Napster).

It was more summary than analysis... If you want analysis... buckle up. :)
 I've been arguing these points for some time with some friends of mine who
work in various positions at some of these online music companies.

>I believe that Lars does actually have a defensible position, although I
>also think he's ill-equipped to argue the point for any length of
>time. Napster is clearly reorganizing the entertainment business, and
>there is no clearly established mechanism by which artists get compensated
>within its system of distribution.

True. I'm not sure about a "defensible position". I will say that Lars is
trying to raise some points that certainly do need to be discussed. I
think he's doing a terrible job of it, and he's also chosen a very poor
forum to do so (the legal system - and most of the talk comes from his
lawyer who's looking to make big $$$ with this case).

>The argument that Napster can co-exist with the old world music machine is
>thin at best. But what Lars fails to realize is that the most threatened
>group is not bands but management, distribution, and promotion -- assuming
>that the New World Order accommodates the need for artists to eat.

I'm not yet convinced that Napster can't co-exist in some manner. It might
not be exactly the same, and I'd bet it will be somewhat different, but I
think there are ways to meet somewhere in the middle.

>What we really need to see is a real promise for the support of artists
>under a freely-distributable model. If the use of Napster was
>subscription-based, for example, artists could be paid based on the number
>of transactions per month using a mechanism similar to ASCAP/BMI radio
>station licensing. Just a suggestion.

Yeah, that assumes you could ever base it on a subscription basis, which
would be tough, except in some very specialized cases. I do think Chuck D
had a good point in his argument on the Charlie Rose show where he says,
basically, "face it, Napster is the new wave of radio". What if you
ditched the subscription idea and instead use an ad based model, like a
radio station. Incorporate ads into the Napster software. Hell, they
could be more "targeted" (something I'm not a big believer in, but...)
based on what people listen to. Or combine the two ideas, have
subscription services for certain kinds of special content (sorta a "cable
and network TV" model").

On a pure economic basis, however, remember that MP3s shouldn't cost
anything. It's a digital good, and your basic economics states that a good
should be priced at it's marginal cost, and the marginal cost of creating
another copy of an MP3 is essentially zero. I think this is partly why
folks don't mind getting free MP3s, whereas they might feel guilty about
stealing an actual CD. Intrinsically, they know they haven't removed one
item from the supply that can no longer be used by someone else. Instead,
they've increased the supply without having used up any of the means of
production either... The only way to stop these items from being priced at
zero is to set up artificial barriers (exactly what the music industry is
trying to do) which limit increasing the supply. History suggests that
artificial barriers are pretty damn tough to maintain. People find ways
around them (and they should) and the world becomes more efficient.

A subscription model could conceivably work if users were convinced that
they were getting some additional value that they couldn't get otherwise
(perhaps a filter or a really good "chooser" that gives them exactly what
they want). However, to just set up a blanket subscription model is most
likely to fail. It's an artificial barrier and people won't live with it.

>But the problem of ignorance among artists isn't exclusively limited to
>Lars Ulrich -- he's just one of a precious few who has the resources to act
>on his impulse. The music industry is extremely guilty of greed. Artists
>in the top 5% garner 90% of the wealth. The music industry itself is
>bloated, however since the emergence of CDs (and lower cost of production)
>they have actually catered to fringe music more effectively, using Boy Band
>profits to fund the nurturing of underdeveloped talent. This trend seems
>to be reversing, however.

I'm not sure I understand what you're saying here. My own personal
experience which is almost entirely focused on a very small, but somewhat
tight knit group of independent labels and musicians suggests that these
folks have been able to make an okay living doing what they do... if
they're good. My friends who are musicians, or who work at some of these
labels are not filthy rich, but no one ever said they were supposed to be.

>The MP3 movement has done a piss-poor job of expressing exactly what kind
>of distribution system they propose to compensate artists for the "use" of
>their works, one way or the other. The reality is that they are guilty
>parties, too -- exploiting legal loopholes for short-term profit. There is
>systemic freedom implicit in the world of the internet and that doesn't
>lend well to control, monitoring, or measurement.

Here I go back to my statements from before. I actually don't think it's
the MP3 movement's obligation to create the distribution system that
compensates artists. Their job was to find a business model that supports
themselves. It would be nice, and probably in their long term interest to
work more closely with the recording industry to deal with the changes, but
to suggest it's their responsibility seems wrong.

I also don't think they're "exploiting legal loopholes for short-term
profit". First, the obvious point is "what profits?", but the other point
is that they're not just "exploiting a legal loophole" but rather realizing
a really new distribution system for music and pushing that forward. The
fact that this distribution system doesn't happen to currently have a
mechanism for paying the artists, isn't necessarily their problem.

As for the "systemic freedom implicit in the world of the internet" I'd
suggest that it's much more intrinsic to nature in general and not just
"the world of the internet" as it's been created. I can bang away at the
tired notion of "information wants to be free" but it makes total sense
from the economic argument I laid out above. Maybe I'm brainwashed, but I
really truely believe in the importance of efficient markets, and an
efficient market for MP3s should have them be free...

>The argument, streaming from the mouths of the very hypocrites who are
>behind Napster et al, that lesser-known artists get exposed via free
>distribution assumes that they will ultimately benefit because this raising
>of their profile will allow them smoother entry into the old-world
>distribution system. This is a ridiculously circular argument if the same
>system that brings these artists above the froth is also working to
>undermine the traditional music distribution system by which they are
>ultimately supposed to get compensated.

Perhaps this is the case, but I'm still not completely convinced that
Napster/MP3/whatever completely undermine and destroy the traditional music
distribution system. I'm not sure what the answer is, but I still see a
place for it, somehow. Besides friends of mine (on the artist side) who
support Napster and MP3s aren't necessarily so interested in getting in to
the traditional music distribution system as they are getting their music
heard. Most of them make their money from performances, anyway...

>Even a Marxist-Leninist analysis (such as mine) of this music industry
>quandary identifies the need to have artists be compensated for,
>essentially, selling their labour.

Certainly true, but creating artificial barriers is an inefficient and
ultimately doomed idea. Figuring out other ways to compensate the artists
probably makes more sense, and are much more likely to come about
naturally, rather than by Metallica forcing a payment scheme down
everyone's throats...

>So, believe it or not, I think that both sides are acting foolishly. And I
>am, despite my obvious love of MP3, not ready to say that free distribution
>is an acceptable means by which we can support James Hetfield's heroin habit.

I once again ask why it's our/Napster's responsibility to support his
heroin habit? If artists want to make music simply to get rich, then let
*them* figure out how to make money off of it. It should not be our
responsibility. If the economics of the situation state that the songs
should be free, then, dammit, they should be free. Figure out some other
way to make money, or get out of the business.

>Cat's out of the bag, though.. and I'm glad for it. My heavy use of MP3
>has not appreciably impacted my CD buying habit, though I suspect it soon

I have a ton of MP3s also, though every one is ripped from my own CDs.
I've yet to find Napster particularly useful for finding new stuff. I've
tried a few times and failed miserably. I still buy CDs and don't see any
reason for me to stop any time soon (most recent CD purchase: The Slackers,
"Live at Ernesto's" which just came out last week). I actually do like to
have the actual CD/liner notes/etc in my hands. I also support bands I
like by going to see them play live when I can (though SF is *dreadful* for
the music I like). Who knows if that continues.

So, I see Ian's point. Musicians have to make money. My point is that
it's not acceptable if "making money" means making the market less
efficient. I also think the responsibility is on the artists to figure out
ways to make money (if that's what they're in the business for). To put
the impetus on us, the end users, or Napster/Gnutella/ (the
enablers) makes no sense to me. If I were to start a business I'd better
have a business plan on how to make money, and not demand that my end users
tell me how to make money (though, I guess there have been a number of
business plans that come along like that). And, if I have a business plan
and market conditions change, I'd better figure out a way to change along
with them, or I'm out of business. That's the way the world works, and
mostly for a good reason.

Ugh. Too long. If you actually read this far, you have way too much free
time on your hands.


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