gilli moon attended NXNE, Toronto in June 2002 and discovered that questions are being answered about payola, copyright infringement and artist control in the music business.

On June 7, 2002, while attending the North By North East Music Festival in Toronto, Canada, I was able to sit in on a very interesting panel discussion. The discussion, titled “The Future of Music,” hosted some illustrious music movers and shakers, some old timers and others, the new pirates of the music frontier. Dick Gabriel, from the American Federation of Musicians (U.S. & Canada) moderated the discussion between Jenny Toomey (The Coalition of the Future of Music, Washington,) Dave Lory (Artemis Records, New York,) Ann Chaitovitz (AFTRA, Washington,) and Bernie Finkelstein (The Finkelstein Management Co, Toronto.)

While an advocate of change myself, I was hungrily anticipating a challenging and heated discussion on how the music business was going to wake up to today’s changes and hardships, regarding Internet, piracy and royalty issues. I found it, instead, quite promising and flowing with hardly any arguments. I guess because this discussion took place outside the courts of recent times.

I’ve used the term “mafia” not in a literal sense, but more in a conceptual, metaphorically speaking way. I’m not referencing any specific person or organization, rather, a state of affairs that concern control, monopolies and bribery that currently exist within the music industry, whether legal or illegal, between artists, radio, promoters and record labels. As we must be all “innocent” until proven guilty, this article merely expresses principles of the music business on how change needs to be made to improve it for artists.

Basically these panelists talked about what has been taking place inside the court rooms between the RIAA (Recording Industry Association of America,) who represent the Major Record Labels, and the independent Record Labels and artists. While the issues are quite grandiose, often difficult to explain, and convoluting, what has been going on, in lay terms, is a slow victorious ride towards ridding the following dirty words: payola (particularly in radio promotion), copyright infringements, illegal digital downloads and sharing, and the consolidation of companies causing monopolies.

In my eyes, as the panel discussion unfolded, I began to realize that who we had up on the panels were five keen music industry representatives representing the under-dogs in this tired world of the Music Mafia. Let the peasants revolt!

Here is a little of what was discussed in the NXNE panel discussion. I speak only for what they said, perhaps not word for word as I didn’t have a Dictaphone but certainly in the frame of their message. These comments are not of my own opinion unless I have indicated so. So here are their views about the problems we are facing in the music industry:

Payola

Payola was made illegal A LONG TIME AGO! But it still exists in a (so far) legal form today in the disguise of independent radio promoters. Instead of paying the radio stations directly with bribes, favors and trips to the Caribbean (or worse) the Major Record Labels have resorted to paying a middle person, known as the indie radio promoter, the “indie.”

Artists, whether through the Majors or through Indie Labels, pay so much to get on radio that they rarely see any royalties. (Gilli: I know for example, being an indie artist myself, that it costs a minimum of $400 a week for a minimum of six weeks just to start with some radio promotion but this doesn’t guarantee that the radio promoter can get you on radio, nor even in the listening hands. Record Labels spend hundreds of thousands of dollars on their artists. Where do indie artists have a chance?)

There has been huge consolidation of music companies (consider Clear Channel as an example.) Caps on how many one company could own were changed from two to eight in the U.S. recently. Four companies control more than 50 percent of music on the radio.

Jenny Toomey and the Coalition of the Future of Music (in her words, “a think-tank not a lobby group”) were given a grant to study the effects of this consolidation and the problem of payola in radio. They found that less music was being played, less music was being paid for, and prices were increasing in order to get on the radio dial. More about payola at www.salon.com by an article by Eric Boehlert “Payola City.” This article is also linked from www.futureofmusic.org or www.songsalive.org.

Jenny Toomey went on to say that Labels will be implicated in this payola practice. Radio will also be implicated. Therefore, it has become a kind of war between the Labels and Radio. A coalition of artist groups went to the FCC and lobbied to say that this practice was “illegal.”

Ann Chaitovitz from AFTRA (American Federation of Television and Radio Artists http://www.aftra.com), a lobby group, discussed how they, the AFIM, RIAA, Nashville Songwriters Association, NARIS and others (about 10 groups) signed a document to change the payola laws. The movement document was released to the press and 20/20 did a story on it. The issues that the document centered around was about Payola as well as the radio caps – creating more diversity in ownership. Artists need to be able to get onto a local station. Clear Channel as an example, who bought SFX, owns many venues, as Ann pointed out, as well as about 1200 radio stations and on top of that, they control the booking and touring of the artists to these venues and radio stations. In turn, there is a silent blackmail going on with the artists where, if they want to play in the clubs, they have to play for free, if they want to get radio airplay.

Dave Lory, of Artemis Records, pointed out that it takes a $100,000 marketing budget, minimum, to get a song heard on radio (and this is not even including charting). If artists get the chance to get airplay, they are encouraged to come to the radio station’s market (local area). “If they can’t make it (can’t afford to tour, etc.) then they just miss out.” The other problem is that the artists have to play the radio game. If they don’t play their selected venues and follow their rules, they don’t get a chance. It costs $10,000 for every ad on radio. This doesn’t even guarantee airplay. All this combined and if you can’t appear, they drop the record. Period.

“Record Labels created this ‘new payola’ in order to get the music to radio,” says Ann. “It’s like running their own game. But what should be played on the radio should be the best music, not what money can buy.”

Artists Need To Be In Control

It’s unfair that those artists getting the hits are in that ‘bad guy mob.’ “It’s not so black and white,” says Bernie Finkelstein. “We tend to put down the charting artists because they have signed deals with Labels that are forced to these measures due to the competition. We shouldn’t be so harsh on the charting artists nor the Major Labels. What we should be working towards is a time when everyone in the industry wants to clean up the system. We’ve been trying to do that for fifty years. Monopolies and consolidation happened even in the 70s with Motown. Nothing much has changed, just new people in power.”

“But to succeed in that system is to buy into it. Artists shouldn’t have to do that,” claims Ann. Jenny also agrees. “SFX which is now owned by Clear Channel, owns huge venues. Artists may not take a penny touring to get radio play which is fine on an interim scale but if you’ve got 14 tour dates, you want to see some tour revenue and radio royalties as well. Because there’s no choice for artists to say ‘no’ then there’s a problem.”

(Gilli: Too many clubs are asking artists to pay to play. In Los Angeles as a classic example, some of the hottest clubs on Sunset Strip require artists to buy tickets upfront, to sell to their fans, in order to play at the club. If they don’t sell their quota they end up owing the club money. Where is the sense in that? Where will the line be drawn that clubs, retail and radio realize that artists are offering a service, that should be respected and acknowledged monetarily?)

Dave Lory says that “most managers and artists don’t have the experience to negotiate with Major Labels on all these issues when marketing and promoting a record. It’s an endless, constant expense of money going out through a Record Label in promoting a record. It’s hard to keep up with it. Yes, you want a ‘hit’ but it will cost, say $500,000 to try. There’s no way to control that.”

The goal in the lobbying efforts, says Ann, is that artists will have more leverage and control over their deals, their airplay, their touring, their profession. “Artists need to be able to negotiate from a stronger position, not give away copyright ownership. Artists need to be more in control of their career and less beholden to the deep pocket.”

Playing the devil’s advocate (with a certain modicum of support as well) Dick Gabriel from the AFM says that, “to a degree, artists should be in control, but the label also needs to be able to get the music out there. For example there is usually a seven or so year clause in an artist’s contract. This clause allows Labels time to push the music. It’s a juggling act.”

“That’s right,” pipes in Dave Lory. “This is not a Label bashing. I’ve seen both sides. They have been caught up in it and have suffered also (for example, bidding wars, trying to recoup, etc.). The model of a Record Label as a whole has to change. Consider the consolidation of AOL and Time Warner. Their music division makes up five percent of their income, yet play stations make up 35 percent of their income. The model of how they run, with the record company arm having only a 10 to 20 percent hit ratio, makes no sense to the stakeholders. We are opening up Pandora’s Box. Label Executives have been in their jobs for fifty years and they don’t want to change the status quo. But they need to in order to move with the times.

Revenue Splits

Burning and Internet sharing had begun to erode artist and Label income, Bernie Finkelstein discusses. There was a campaign instigated in Canada called “Neighboring Rights” (still to happen in the United States). This is a system where artists who recorded the record and the master owners of the songs (not the songwriters, who get paid under performance and mechanical rights) get paid on radio airplay. As an example, artists currently who do not write the songs don’t get paid for the songs on radio, even though they performed them. Yet the producer often gets a royalty. This doesn’t make sense. This new Right allows artists to get the money direct. “Nobody expects television programs to be given away to the TV stations so why should artists give songs away to radio?”

In the United States a new law has been instigated for digital webcasts where digital performance rights are being paid 50 percent to the artists and 50 percent to the Labels. Even in the Wild West of the Internet, some new laws are being set in stone to create a better music industry.

With recording albums it is interesting to note, says Jenny Toomey, that “some artists who are able to get leverage, being successful, get songwriting credits on albums even if they didn’t write the song. This is the only way they can get paid upfront.” Ann adds as a side note that “Berry Gordy was listed as a songwriter on most of the Motown songs, and the real songwriter wasn’t even credited.”

“The question is,” as Bernie Finkelstein explains, “if you decide to give 50 percent of your songwriting/publishing to Celine Dion so it gets covered, then it’s your decision. It’s just a business transaction. You can always say no.” “Diane Warren I guess refused that option,” adds Ann again.

Internet Radio

Jenny Toomey, in her studies, has spent a lot of time on the topic of Internet radio. She claims that as a webcaster “you must sign the statutory license of you want to webcast.” This was decided by CARP, participants in the Copyright Arbitration Royalty Panel. (Side note: The Yahoo deal is different to the Indie webcast deal.)

Basically there is a problem with the CARP deal, she explains. “It’s a ‘one size fits all’ rate. If Indie webcasters had to pay the rate set, it would have put them out of business. So there were talks and there will be hearings about this to change the CARP process. I think you really can make your voice heard through webcasters, and this new process will assist this. We’ll see some less expensive non-commercial and hobbyist licenses. A chance to get in”

Normally agreeing to Jenny’s comments in this discussion, Ann Chaitovitz defends CARP. “The CARP Process was a huge process. Forty days, witnesses, etc. The final rates were graded and there was a non-comm rate based on the webcasters’ yearly income. The web provides more diversity and a new way to access an audience. Now, if you get played on the web , you will be paid. Sound Exchange, a collective of artists and record labels, does understand.  It is trying to work with community broadcasters who want to simulcast. It doesn’t want to put anybody out of business. It wants to pay artists. Make AOL pay. As a musician you shouldn’t have to subsidize AOL!”

(Gilli: You can read the outcomes of the recent changes to CARP on the AFTRA web site: http://www.aftra.org/resources/pr/0202/carp.html. From the site: “February 27 - The American Federation of Musicians (AFM) and the American Federation of Television and Radio Artists (AFTRA) hail the Copyright Arbitration Royalty Panel (CARP) decision setting the payment terms that will govern webcasters when they use music on radio-style Internet programs.

"We are extremely pleased that the Panel recognized the critical stake that performing artists have in the royalty fees and payment methods," said Tom Lee, International President of the AFM. "The statute requires recording musicians and vocalists to receive 50% of the royalty fees. We believe that the evidence presented by the unions during the proceeding helped the Arbitrators to understand the nature of the artists' creative contribution to sound recordings and the importance to them of this new income stream. We are disappointed that the rate set by the Arbitrators is substantially below the rate we requested, and we believe that the evidence presented in the CARP proceeding amply supported a higher royalty rate. But we are delighted that artists finally will be compensated when their work is exploited on the Internet." )

Talent Rises Above The Mafia 

Indie Radio Promoters work with some radio stations exclusively. They get, say $1000 each from 100 artists but only five may get on the station. “in a perfect world,” says Bernie Finkelstein,” “radio programmers would listen to CDs and decide on what the public wants to hear, rather than what was paid for.”

“There are too many artists out there,” responds Dave Lory. “The songs have to be great, not just good. The cream rises to the top. If you stick to it, it will work. If you pay an indie promoter and the song sucks, it still won’t get paid. It’s still got to be a great song. It takes time to break an artist. It took Bruce Springsteen and Bob Dylan until their fourth records.”

Jenny Toomey’s goal, with the Coalition for the Future of Music, is “for artists to connect in a more organic way with people who can connect with more people who like their genre of music.”

“Artists should be able to make more money with less people. We’re fighting radio to clean them up because most people listen to the radio for music so we are fighting the big guys. If the conglomerate controls the system then the artists end up paying them and this is wrong.

Copy Protected CDs

A question was asked about how the new copy protected CDs will help fight piracy and copyright infringement. Bernie Finkelstein was quick to respond. “It’s a useless endeavor. Any CD that can be locked can be unlocked. I understand the reasoning though. An example is the new Celine Dion record which was copy protected, encoded in a way that would corrupt various computers if copied. We just found out that a young German guy broke the encoding by running a marker over the CD!

Ann Chaitovitz concedes, “Most people aren’t thieves. When there’s a legitimate alternative, they won’t steal. I think that people still want their own CD copy in all it’s glory. But Record Labels have been slow in offering a real service to protecting copying.

Where does the future lie?

Bernie Finkelstein admits that in 10 to 15 years he sees an artist-driven industry, based from artist web sites direct to homes. “The focus is that artists need to get people to pay attention to their sites. Good music coupled with good marketing. The Major Record companies will still be around, but changed.”

Jenny Toomey believes that we will technically not erase the function of sharing. “Microsoft increased their business just by the 90 percent of piracy that took place with their programs. People got so used to using Microsoft they bought more!

“We just need to clean up the business so that artists get paid,” Jenny proclaims. “Consumers would want the money going to the artists.”

Ann believes that “the future brings more subscription services for say, $20 a month, with access to music everywhere, in homes, work, the car, the phone. Easy accessibility. On another note, accounting practices of Record Labels are going to be audited. Artists need to be accounted to in the proper fashion.”

In wrapping up this discussion on that fine Canadian afternoon, the panelists gave a warm address to the artists in the audience.

“Stick it out in this learning curve. You need to understand it all. Pay attention and don’t get ripped off. Stay active. Make great music. Watch, while the models begin to change.”

© 2002 gilli moon