Investors, "Beware" of Record Companies

NewYorkCountryLawyer writes "The Motley Fool investment Web site warns investors to beware of 'Sony, BMG, Warner Music Group, Vivendi Universal, and EMI.' In an article entitled 'We're All Thieves to the RIAA,' a Motley Fool columnist, referring to the RIAA's pronouncement in early December in Atlantic v. Howell, that the copies which Mr. Howell had ripped from his CDs to MP3s in a shared files folder on his computer were 'unauthorized,' writer Alyce Lomax said 'a good sign of a dying industry that investors might want to avoid is when it would rather litigate than innovate, signaling a potential destroyer of value.'"

The vicious last bites of a wounded animal

[elrous0 (869638)]

The traditional music industry is like a wounded animal at this point. They're hurt and desperately striking out at anything, in hopes of somehow surviving. They missed their opportunity to innovate a long time ago and now they're just the walking dead, stubbornly digging in their heals and refusing to just lay down and die.

They may get to the point where lawsuits are the only real income they have left. When that day comes, and all their Congressional bribe money has dried up, I think we'll see the courts and politicians finally start to hit back hard and finish them off. And they'll die still clutching their outmoded CD's, like pathetic John Henry's fighting innovation to the bitter end.

Re:The vicious last bites of a wounded animal

[altoz (653655)]

Oh, they'll be dead before that. Artists are leaving record companies in droves. They'll start producing their own music and hiring niche marketing agencies to create demand instead. Even now, the smart ones are already moving in the marketing/concert promoter direction.

Re:The vicious last bites of a wounded animal

[PhotoGuy (189467)]

Oh, they'll be dead before that. Artists are leaving record companies in droves. They'll start producing their own music and hiring niche marketing agencies to create demand instead. Even now, the smart ones are already moving in the marketing/concert promoter direction.

While I agree with the sentiment, are artists really leaving in "droves?" Other than indie artists maybe never pursuing a label to start with, how many already-signed artists are leaving the labels? Can you list more than 10? More than 20? Even if you listed 1000, I'm sure it would be something like a tiny single digit percentage (or less) of the total artists on labels, hardly qualifying as droves.

I think it *will* happen, and hopefully at an exponentially increasing rate. But for now, they still have the stranglehold on the artists.

Re:The vicious last bites of a wounded animal

[Shajenko42 (627901)]

While I agree with the sentiment, are artists really leaving in "droves?" Other than indie artists maybe never pursuing a label to start with, how many already-signed artists are leaving the labels?

How many have the legal right to do so? Aren't most artists working for the big labels locked into Draconian contracts that restrict them to either selling their work to the labels, or not selling their work at all?

Re:The vicious last bites of a wounded animal

[guruevi (827432)]

Sure, the artists you hear on the radio won't immediately leave the RIAA but after a while some groups and artists notice that they are not getting what they deserve and can get much better income elsewhere. Then they'll start switching. Another problem is that once you signed up with the RIAA, you can't really go back. Everything released from then on is their property and if you leave then you can't take your own work with you.

RIAA-safe albums as found on riaaradar.com (the top100) include some well known names though. Some artists that have actually dumped the RIAA include Madonna, Nine Inch Nails, Oasis, Jamiroquai, Radiohead, Courtney Love and Canadian labels Anthem, Acquarius, The Children's Group, Linus Entertainment, Nettwerk and True North Records and there has been some commotion between EMI and the RIAA too so they might pull out completely pretty soon too.

Re:The vicious last bites of a wounded animal

[gambolt (1146363)]

After dropping them from the label, virgin records put out a "greatest hits" album for Cracker without bothering to even consult with the band on song selection. The band responded by making new recordings of all their classics and releasing their own greatest hits album on the exact same day as the label. Theirs sold much better.

Also included is david lowry's retelling of how they got dropped, it ain't gonna suck itself [youtube.com].

Re:The vicious last bites of a wounded animal

[moderatorrater (1095745)]

In the past year, we've had McCartney jump to a new label, Radiohead release their own album, NIN doing their thing, and Prince bucking the trends, signing a deal that is unheard of from a record label, and distributing his cd in a way that pissed all the industry folks off. I agree that leaving in droves might be an overstatement, but it was the first year where labels started losing out in a high profile way because artists weren't playing along.

Re:The vicious last bites of a wounded animal

[RobBebop (947356)]

Also...

Madonna signed with LiveNation concert promotion group (I don't know if they are embedded or not).

Harvey Danger (90's one hit wonder) released a free CD

Barenaked Ladies have interesting views on releasing music (I can't remember the details, but they distribute through a non-traditional site)

Beastie Boys have put out at like one Creative Commons song and I think their latest album was somehow independent

But my favorite is any musician with decent music posted on Jamendo [jamendo.com], where provides BitTorrent downloadable Ogg-Vorbis albums under Copyleft licenses. The site is a virtual treasure trove of exciting artists waiting to be discovered.

Re:The vicious last bites of a wounded animal

[Billosaur (927319)]

The parallels with SCO are amazing, especially given the sizes of the companies we are talking about. That they could fail to see the future coming at them and more importantly read the trends (i.e. Napster) and react to them in a positive, money-making fashion, is an indictment of the corporate system, where over-priced CEOs sit in their glass-lined offices looking like suit-wearing fish and providing just about as much value to their company. When you start treating your customers as criminals, you have slipped over the edge and down the slippery slope toward oblivion.

Not like John Henry

[by Anonymous Coward]

Bad comparison! John Henry was a champion for the dignity of human work. He illustrated the very real danger of big business treating individuals as disposable ever since the industrial revolution. John Henry as the RIAA? Ridiculous.

Re:Not like John Henry

[elrous0 (869638)]

No, he was a damned fool. Stubbornly digging your heals in, refusing to change, and fighting innovation to the bitter death isn't dignified and heroic. It's pathetic and stupid. It's like the old man who's afraid of computers, and who, instead of conquering his fears and adapting to the changing world, simply refuses to use them and becomes a goddamned living relic.

If America were full of John Henry's, we'd have become a third-world backwater a long time ago.

Sounds familiar

[Mick Ohrberg (744441)]

[...] rather litigate than innovate [...]

Now where have I heard that before... Oh, that's right. SCO. And look where they're at...

Re:Sounds familiar

[garcia (6573)]

Now where have I heard that before... Oh, that's right. SCO. And look where they're at...

Yeah, but they didn't have much to market and a very small group that they could actually market their products (invented or real) to. SCO had to invent the "Pay us for Linux or we'll sue later" shit in order to have something that some companies would actually be willing to pay them for.

Those involved with the RIAA still have a product that is mass marketable and that plenty of people will continue to purchase. Just because the Slashbotters (me included on this one) refuse to support RIAA music doesn't mean that anyone else really gives a shit. Yes, artists are starting to come around and going around the RIAA by distributing their music online, and it's working, but it's still not to the point where it's a 100% viable method to get your music out.

It will be at least 5 years and more like 15 to 20 before we really see the fuckers die off -- as unfortunate as that is.

Trade Associations Gone Wild!

[Presto Vivace (882157)]

I guess the sue your customer business model isn't working out for them. Who knew?

Re:Trade Associations Gone Wild!

[mea37 (1201159)]

Or rather the columnist believes that's the business model they're now in and predicts it won't work well for them.

The inference people here seem to be drawing (that the labels are in trouble because of the lawsuits) resonates well -- we want to believe that kind of justice works in the market -- but really it has the cause and effect reversed. Sales dropped first, then the law suits started.

Now, the thesis is correct in so far as "sue the customer" is not a productive response to an adverse market. They continue to spiral not because they file the lawsuits, but because meanwhile they do nothing to address the orignal failure of their position in the market.

The "ripping mp3s is unauthorized" angle is FUD all around, though. FUD on the RIAA for using that wording in the first place (yes it's unauthorized, in the same sense that I'm not authorizing you to disagree with my post), and FUD on everyone who cites this as the moment where the RIAA calls all users thieves.

Now, sure, the bad press from the lawsuits doesn't help the RIAA... among the small part of the market that sees what's going on and cares. Don't get me wrong, I'm among that small part of the market (not anti-copyright, not convinced that everything the RIAA says is wrong, but on the whole opposed to their actions over the past few years); but don't be fooled into thinking that slashdot is the world.

As to the investment point of view... yeah, to a point, I wouldn't want to be putting money behind the major labels right now. But Sony? What would be the total impact on Sony if their record label arm spun off or died out completely?

Shared Folder?

[by Anonymous Coward]

I wonder how they define a shared folder? I'd imagine an shared folder to them is any folder on a computer that is connected to the internet, WAN or LAN, has a CD or DVD burner in it, has any kind of magnetic removable drive, or any computer in which the hard drive can be removed.

This is probably the best thing to happen to them

[cashman73 (855518)]

Seriously, I'm no fan of the **AA. But if more investment companies warn folks not to buy their stock, and since these guys seem to be motivated primarily by the almighty dollar, maybe if they see their stock shrivel up into nothingness and their retirement blasted into oblivion,. . . maybe they'll finally, "get the memo," that their 19th century strategy isn't exactly working out in the 21st century. All we need is for one of the big fish to declare bankrupcy, the and rest will see that and stop their litigous ways and actual get back to giving consumers what they want,... And if they don't, then f*ck 'em!

Talking out both sides

[emeb2 (536129)]

A lot of discussion centers around the apparent change in the RIAA's position on ripping for personal use. With the recent change in their website removing language that suggests they're OK with it and the statements from the Washington Post article about 'steals one copy' it sounds like they're taking a harder stance on it. Meanwhile there is this article http://www.azcentral.com/arizonarepublic/local/articles/0103music0103.html [azcentral.com] which quotes a representative who says that it's not an issue.

I suppose they want it both ways - keep people on the edge and they're easier to control or something.

Magnatune.com

[ProteusQ (665382)]

Might be a good time to listen to a [magnatune.com] few [magnatune.com] tunes [magnatune.com] from a label that's not evil.

[Caveat: I don't work for them, own any part of the company, or know anyone personally who's released a CD through them. I just buy their stuff and dig Shannon Coulter's sultry voice.]

Stock shares?

[SharpFang (651121)]

Actually, I wonder how their stock shares fare.

Many companies have been proclaimed dead or dying while their shares kept going up, and they keep going up still. Some portals were proclaimed to be dead because their percentage market share vaned comparing to Google, but they actually gain users as the net grows, and they actually grow and note profits each year.

So how's it for the record industry?

The **AA can't afford any more attention like this

[zappepcs (820751)]

If anyone here thinks that the Fool will harm the **AA's business, think again. The Fool is only telling us what is happening. In a family gathering of more than 25 people for present opening ceremonies this year, I watched quite gleefully to find that only ONE CD or DVD had been purchased. ONLY ONE! There were cameras, books, clothes, presents galore... but only ONE lonely little DVD.

My in-laws really don't care about the **AA and their ways, CDs and DVDs are JUST TOO EXPENSIVE. Never mind the lawsuits, their crap products are priced way out of order.

Time to start ePhoenix records I think....

Re:so, what would Fool say about our Friend

[sm62704 (957197)]

These guys (disclaimer: I'm not one of them and in fact haven't owned any stock for over 20 years) always say that you should pick a stock with a dividends to price ratio if ten to one or better.

Microsoft, the last I heard, pays no dividends.

So I think MS is probably a "stock for fools". If you buy a stock with the expectation of its price rising, you're gambling, not investing. That's not to say that gambling that Mars won't explode in the next two weeks isn't a good bet; some gambles are worthwhile.

As to the record companies, DUH! You don't need an expert to tell you that a company whose sales have been falling for over five years is a turkey.

Re:so, what would Fool say about our Friend

[fotbr (855184)]

I doubt he'd say much.

RIAA: track record of suing their own customers, based on "evidence" gathered via pretty shady means
MS: doesn't regularly sue their own customers (their competitors, sure, but not random joe off the street)

Failure of vista: Not the only money maker that MS has. Also not their only market.
Failure of music sales: only thing the riaa has.

The former are desperate, the later aren't

[DrYak (748999)]

Microsoft is digging whatever they could find in their "Imaginary Property" port folio of patents to find something with which they could scare client who would potentially consider fleeing to open-source. They're basically trying to invent new ways to kill their adversary.

**AA are suing who ever they can going through complicated legal justification trying to explain why "Fair Use" never applies, trying to persuade that "Format shifting" represents "Unlawful evil piracy", etc. They're basically trying to find ways to stop everything that normally should be allowed by the law (and somewhat managed to partly achieve this goal with DMCA).

On the other hand the situation with GPL is much simplier.
The copyright law is simple : Thou shall not copy. (outside the list of exception, like personnal backups, etc. against which the **AA are fighting).
The GPL is a license : it gives additional rights, more specifically it gives you the right to freely distribute copies of GPL software, as long as you pass along the accompanying freedom to the next in the chain.
If you don't follow the license, you lose those additional rights and everything reverts to the official copyright law. Which says No-No to distributing software which you don't own personally.
They're basically making sure that the users retains their freedom by using pre-existing legal infrastructure.

You'll notice that :
- GPL isn't threatening to sue users at all. The whole "FreeSoftware" concept is about giving freedoms to users. They threaten to sue companies that would be taking away those freedoms. And in fact they don't threaten as often, as they help misguided companies who don't really understand the GPL. There are only a couple of suit-threats that we've heard here on /. whereas most of the time is companies who don't really understand how they should behave to follow the GPL. Most of the time it's more a polite exchange of explanation (you should publish that piece of code...) than threats.

The end users benefits of the GPL, whereas with the former the end user is the target.

- There are no auto-settlement-bot spilling standart cease-and-desist suit-threat

- GPL isn't trying to twist the interpretation of the law to try to remove rights that where granted in the first place (They're not arguing what is "Fair Use" and trying to limit it). The GPL is based on pre-existing laws.

Look to wedding photography

[Solandri (704621)]

Before cheap scanners and color inkjet printers, most wedding photographers would shoot the wedding for free or at-cost. They would charge up the wazoo for the prints and reprints. When scanners and color printers became cheap, people just started scanning the prints (or sometimes the proofs) and running off all the copies they wanted. In response, wedding photographers have mostly moved to a model where they charge all the money for shooting the wedding, then give the prints away for free or at-cost.

I suspect musicians will go the same route. Songs will be given away as free advertising, and they'll make their money by booking performances and concerts (and selling memorabilia at such). For all practical purposes that's the way most of the RIAA-contracted musicians work anyway right now, since the studios keep 95% to over 100% (the band owes them money) of all the proceeds from song sales.