4:25 PM

On September 29th, Derrick Ashong gave a presentation at Harvard in which he presented a new model for the music industry. He was speaking on behalf of ASAFO Productions and their Freedom Access Music (FAM) licenses. The FAM license is similar to Creative Commons licenses. It allows the music to be redistributed, provided that credit is given to the artist.

One of the major focal points of the talk is that musicians don't make money by selling recordings of their music. Musicians make money by selling things related to their music such as concert tickets and merchandise. Therefore, not only should musicians not try to control the sale of their music, but they should encourage the distribution of the music as widely as possible.

Ashong gave examples of parts of the music market that already work in this way. For example, many rap artists and reggae artists get their start by making a name for themselves in the gray market of music sales without copyright protection. They then turn the fame they have gotten into a major career. He asserts that the music industry as it currently exists is dying and it will be replaced by this sort of system generally.

My notes from the talk are below. As usual, they are not formatted particularly well.

music industry - simple principles
label is bank, distributor, own heart, life, soul
company has sole right to profit from what I do
master recordings belong to label
under FAM, no exclusive license, license for commercial or noncommercial reproduction. for the most part, you are free to do as use please
look at four artists
A is independent, selling unsigned
B is signed, but new
C is known
D is superstar

A makes money performing. Music makes selling music is directly sold. Doesn't have resources to do promotional blitz.

B makes money from live performances. Doesn't make money off sales unless goes platinum

C makes money from records, performing, merchandising

D is a marketing machine. Not in business of music. In business of brand. Sells anything you put his name on. Makes more money off merchandising than record sales.

If money not in sale of recorded music, why keep selling? 90% of bands don't make any money from records. less than 10% make profit for parent company. The 10% who do sell so much they make up for everyone else.

music industry is not in business of music. It's in the business of image. Notoriety makes everything else work. In business of fame.

FAM licensing: If I want to be successful, need to understand nature of business.
cost of production very high.
talk of home studios and Internet distribution

If in 10%, label will milk product for rest of life.

only reason to sign: promotion. label will manufacture notoreity.

reduce cost of promoting new talent by distributing among a variety of promoters
incentive to sell music and support artist if successful.

lists rappers who started on underground (illicit tracks)

questions

busting monopoly. Then again, not. System as it stands is broken. If I want to be a company, I don't want to be a record label, because no longer have monopoly on production or distribution. make my business as manager. build business around notoreity. take percentage of everything.

record label will want monopoly on brand? managers regulated. More choice of promoters

record labels decide to go after top 10%? more artists become viable with smaller sales

question about 24 Hour Party People, but also mentions value of high end studios. Sound quality not as high, but people still make money.

question about replacement for mix tape? distilling functions of record label. management company controls efforts

not trying to sell to record companies. trying to sell to artists.

will consumer buy into more fragmented market? downloading issue. good music and smart marketing always functional.

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1:56 PM

Jason Goodman wrote an email disagreeing with my assertion that radio spectrum is nonrivalrous. I trust that he won't object to my posting his letter here. Here is his letter, followed by some additional comments.

I disagree that radio is inherently nonrivalrous. The FCC's band licensing rules exist because there's not enough room in the low-frequency radio spectrum for everyone to have their own TV/radio station. These rules are in place precisely to prevent a tragedy of the commons. Thus, the excludability of low-frequency radio is not an arbitrary legal impediment, but is designed to maximize the utility of a rivalrous medium.

Wireless networking is not rivalrous in practice today for two reasons. First, it is not a mature technology, and the hard limits on its use have not yet been reached. Today's high-frequency radio spectrum is a bit like the open range of the 19th-century American West: if you tried to explain the tragedy of the commons to an early Texas rancher, he'd spit on your shoes.

Second, anyone can create a wireless network because the range and power of those networks is limited by FCC regulations to reduce interference. The FCC's power limits reduce rivalry, but do not remove it: once every bar, coffeehouse, and restaurant on the block has wireless internet, interference will become a major problem. (Only 3 802.11 networks can coexist in one area!) The power limit also excludes certain types of use: there's no practical reason a company couldn't build a massive wi-fi transmitter and provide service to an entire small town or city center (ala cellular telephone service), but this use is forbidden by the FCC's power limits. Part of the reason for this limit is to allow small transmitters (home networks, for example) to exist.

Thus, FCC regulations impose legal exclusion in order to maximize the utility of a rivalrous but not physically exclusive resource. Legal action to make spectrum excludable increases the utility of the spectrum by eliminating hogging, in contradiction to your thesis in the second-to-last paragraph.

Jason

I recognize that there are theoretical limits to the density of wireless networks, but in my experience there are no practical limits. Two quick examples are that at my old apartment, my computer could detect four different networks simultaneously and I was never aware of any interference, and I was at BloggerCon yesterday and I don't know how many people were wirelessly networked simultaneously, but the answer was lots. See Dan Bricklin for photos. It may be that wireless networks today are like the 19th-century American West and they will eventually fill up, but wireless network protocols are designed to prevent that from happening. I may be naively optimistic, but I'm not convinced that the wireless spectrum will be filled.

My second point is that in no way am I claiming that wireless spectrum should be unregulated. FCC regulation controls FM radio and it controls wireless networking. The difference is in the type of control. FM broadcasts are tightly controlled. The FCC regulates who can broadcast, where they can broadcast, the broadcast power, and what they can broadcast. In comparison, the only control on wireless networks is the power level, and the same frequency range is used for a variety of devices, including portable phones and interference from microwaves. It may be that in order to maintain the wireless network frequency range as a nonrivalrous commons, the FCC may need to establish further regulations, but I hope it will never turn into FM radio style regulation.

The fact that radio spectrum depends on regulation to be nonrivalrous does distinguish it from information, which is inherently nonrivalrous. The licensed spectrum of FM radio is clearly not the only or the best way to regulate spectrum. I don't want to be too quick to assume that all ways of utilizing spectrum will necessarily result in all spectrum being filled. Analogously, current copyright laws are not the only way to regulate information and other forms of regulation may have different advantages.

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