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The Pirates’ Good Deeds – Tomorrow’s markets: How the Internet is shifting powers between artists and companies. [by Kolja Reichert]

by Wolfgang Senges on August 8, 2009 in Business Models, Culture, Events, Strategies

“The Pirates’ Good Deeds” (© Kolja Reichert) has originally been published under the title “Die gute Tat der Piraten” in “Der Tagesspiegel” issued on 26.07.2009. Translated into German by Wolfgang Senges. Translation and publication on ContentSphere.de by courtesy of Kolja Reichert.

Please notice: Different to other articles on ContentSphere.de, this translation has been published under an “All rights reserved” licence by Kolja Reichert.

German version/original text: “Der Tagesspiegel” issued on 26.07.2009.

Pirate Flag

© Cristian Santinon | dreamstime.com

The New York Times’ online archive holds the oldest message in regards to the topic of piracy in music industry. It originates from 13 June 1897, the founding time of music industry. „Canadian Pirates“ mailed counterfeit records across the border and sold them for a tenth of its real price. Newspapers printed lists of songs available – a kind of early Pirate Bay. The industry bewailed a 50% loss in turnover demanding the postal sevice to filter items out. A rather mild measure compared to the three-strikes-out model the media industry longs to achieve for filesharers today.

The politics response to online piracy is not rigorous enough, claimed Dieter Gorny, CEO of Germany’s Body of Music Industry BVMI (Bundesverband der Musikindustrie) when justifying the cancellation of industry’s Popkomm conference. It’s been widely shared disconcertment his statement earned him. Mark Chung of the Body of Independent Labels VUT (Verband Unabhängiger Tonträgerunternehmen) says: „Strong generalisations are helping no one.“

Actually, Internet is not music’s enemy. It merely is the hard copy industry’s enemy. After the wax cylinder, vinyl, tape and CD, music now has been separated from a physical carrier and can be copied endlessly with little effort. Legal downloads in Germany do not yet reach US numbers that account for 39% of the market. However, first quarter revenues in 2009 are up again by 16%. Despite all arguments dealing with illegal downloading, it’s not about a conflict between artists and audience. This is the showcase the industry raucously propels for years. It is their interests that can be brought together in the most wonderful ways online.

DIY Woman

Right now, no one is showing off new ratios by more self-confidence than Amanda Palmer, singer with cabaret rock duo Dresden Dolls. If Amanda Palmer wants her audience to mobilise she doesn’t need any PR office and no promoter. It is via Twitter she invites to beach concerts including group picture, and to an impromptu party in a strip bar. A press conference held in an empty department store she turned into a free concert for 350 fans. On a Friday evening in May, a slogan for t-shirts was born during a mass chat. In realtime, Palmer did the print design right on her laptop while a friend of hers set up an online shop. By the end of the night, 200 t-shirts were sold. The next day, another 200. On her blog, the singer drew balance: „Total made on twitter in two hours = $11,000.?Total made from my [..] major-label solo album this year = $0.“ This is how rapture of an artist discovering her very own power looks like – more importantly, she demonstrates the days of artists being guided by managers eventually are long gone.

Fan Becomes Manager

After all, whether it is recording, design, booking, or controlling – today every single task of a label can be dealt with either by the artist himself or it may be outsourced to friends while fans provide for advertising through automatically generated recommendations based upon their profiles at social platforms like last.fm. Fans might even take the investor’s role and advance money needed in production by participating in fundraising platforms. Recently, funds for Patrick Wolf’s fourth studio production have been collected via Bandstocks.com. German band Angelika Express from Cologne funded their latest album via „Angelika Shares“ valued at 50 Euros each. 80% of revenues were supposed to be returned to fans.

Labels hardly advance studio rental and cost of production anyway. It is the finished masters they rather buy. The remaining four majors Sony, Universal, EMI and Warner see their future in licence business with fashion, advertising, movies and games. So called 360° licensing contracts allow for financial participation in every step of business the artist does – which in particular includes revenues from touring. After having parted with Sony in 2008, Bertelsmann now is involved again in today’s vibrant marketing rights business with BMG Rights Management. The lordly seniors’ business: administration of estates.

Therefore, upcoming artists in most cases are left to their own device. Smallest labels are springing up like mushrooms – only to release hardly any more than their founders own music. Berlin manufacturing service Handle With Care is literally flooded with orders – they have specialised in smallest editions of 1.000 copies and below.

Artist Becomes Entrepreneur

A true example of successful online self-marketing is Berlin DJ Alexander Ridha aka Boys Noize who founded Boys Noize Records in 2005. Regularly his remixes pop up at Hype Machine, a website featuring recommendations from several popular music blogs. While other labels keep sending turn down notices Alexander Ridha simply doesn’t have time to do so. Viral marketing and creative work converge into an endless stream of club gigs, studio sessions and MySpace updates. Most prominently, Ridha sells his music on beatport.com, the leading download platform in electronic dancefloor beats. beatport.com proves that online even high prices are paid as long as the quality of sound fits the price.

If you want to address an audience willing to pay you have to be visible in large online stores: iTunes, musicload, and Amazon mp3, the latter urgently pushing onto the German market since April 2009. Getting there, you are facing middlemen like labels and content aggregators. However, you might take the short way with virtual labels like „Artists Without a Label“. A basic standard contract allows for a sales account on iTunes and provides high shares of revenues – exit anytime. It has been the starting point for the Arctic Monkeys, as well as for The Editors and Tina Dico. Germany’s regioactive.de offers an additional service quite similar. Yet, a 65 Euros starting fee did pay off for almost no one – to be heard, just being online is not enough.

Rather Give Away?

DJ Martin Juhls on the other hand received orders from all over the world after releasing his music for free under a Creative Commons licence, similar to those licences commonly used for free software. It allows for any number of copies as long as it is intended for private use only. At Amazon, the best selling MP3 album in 2008 has been „Ghosts“ by Nine Inch Nails – despite being released under CC licence before. In Germany, more artists might choose this way if local collection society GEMA would pave the way for royalties from CC licences – merely one example of overdue political decisions interfering new opportunities.

Claiming the Internet provides for its own regulation has been found to be superstition, same with hoping it could be thoroughly controlled. The fine success stories mostly show how things might work – but unfortunately work most rarely. It is easy for stars to do well in online marketing channels. Question is, how do new acts find their audience? Representing the independent labels, Mark Chung draws a pessimistic picture: „The new ones within those five million artists on MySpace are soon realising there is no one around inclined to invest.“

The good news: Artists can claim a much larger slice of the pie in future. Bad news: It is hard to bake the pie on your own. Andreas Gebhard, CEO „newthinking communications“, sees an increasing demand for consulting and software services. Also, the government is in demand to expand its initiative in music. Pop model country Sweden, demonstrates what infrastructural encouragement can achieve.

Music industry is quick in accusing online piracy for lost sales. A juicy simplification. If a file is copied nothing is lost. Quite the opposite is true: Afterwards you got two. Yet that is not what the old structures in distribution were made for. New ones still are developing. It is nothing less than the quest for a solution how society might compensate its artists in the future what it is all about – and how cultural renewal can be ensured. Christian Höppner, secretary general of German Music Council bewails: „The triad of creatives, performers and listeners is separating. Each is following his own interests instead of searching for a mutual way to go together.“

On the one hand, there is the music industry who would like it best to save old revenues in new media one-on-one – on the other hand, there is a strong community of listeners who doesn’t get why to pay 10 Euro for a data bundle that can be copied endlessly. In between, there are the artists being on their own and lacking any representation without licensees being involved at the same time. A public compensation system like a cultural flatrate might turn out to be an opportunity to initiate a consortium of creators. For the first time, an accurate method of accounting between artist and consumer could be introduced to turn P2P-users into paying customers. Music industry and Conservatives rather would ban pirates from the Internet. Legalisation vs. imposition of sanctions – a next election period’s task.

The DIY Conference

Music corporations are loosing touch with what’s up. Actually, Berlin’s fair now is taking place without their participation: as an open conference organised by participants similar to an online forum. The formation of „all2gethernow“ immediately brings to mind Amanda Palmer’s t-shirt sale: Gorny cancels Popkomm, Internet expert Andreas Gebhard calls music entrepreneur Tim Renner who calls the venue Radialsystem. Together a website is set up, an association is founded, and within a few days only the entire Berlin music scene becomes part of it. There is a serious demand for talks which is clearly confirmed by the programs of Cologne conference c/o Pop and Hamburg’s Reeperbahnfesival.

Ten years ago, first P2P download platform Napster heralded the CD’s end. Meanwhile, the first online pirate is present in European Parliament. Culture Pirates are not the enemy, music journalist Matt Mason argues in his free of charge published ebook „The Pirate’s Dilemma“ They invent new styles, technologies, and business models. Without their innovations today’s culture industry would not be conceivable.

Vice versa you might say: With their ideas, tomorrow’s culture industry becomes conceivable.

This post is also available in: German

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