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So Sick

The music industry’s latest payola scandal still occupies New York attorney general Eliot Spitzer. But this time around he is honing his sights on radio operators accepting bribes instead of labels doling them out, which is why he chose to sue Entercom, a Pennsylvania company that owns more than 100 stations. Spitzer not only accused the company of accepting money, but he also alleged that Entercom asked for cash from the labels, according to a March 8 press release from his office. And it seems that, since radio station executives left behind e-mail evidence, they won’t be able to blame their underlings. In one e-mail exchange, a program director complained about previewing certain CDs to generate payola. An executive replied: “These are not optional. They come from corporate and generate millions of dollars for Entercom.” In the end, Entercom will likely agree to pay fines and promise reforms, as Warner Music and Sony BMG did with earlier payola disputes.

Entercom isn’t the only radio corporation making headlines. Clear Channel recently sued XM Satellite Radio, demanding XM allow the radio behemoth to air commercials on the four XM stations it programs. XM wanted nothing of the sort—for the past two years it has touted itself as having 69 advertising-free music channels—but an arbiter ruled in Clear Channel’s favor. It would seem like a bigger deal if XM didn’t have 163 channels, meaning it can already advertise on 94 that mostly specialize in sports or news. Still, XM plans to add four new music-only stations to its roster, a representative told the Voice in an e-mail, keeping its total at 69.

Without a doubt, though, it’s still FM radio that holds the music-launching reins. Therefore, it came as a surprise when in early March Billboard‘s three top-selling albums were made for children of the age targeted by AM’s Radio Disney. The top slots went to High School Musical, Kidz Bop 9, and Sing-A-Longs and Lullabies for the Film Curious George. With tykes positioning themselves as consumers, record executives are taking notice. “I wouldn’t be surprised to see a dozen kids-spirited albums,” Universal Records president Monte Lippman told the Times.

And kids don’t just buy CDs; they also download—almost every track from High School Musical hit Billboard‘s Hot 100 on legal downloads alone.

But kids who download illegally are turning their parents into potential lawsuit targets. When Terry McBride, owner of Canada’s Nettwerk One, learned the RIAA pressed charges against a Texas man whose daughter downloaded a single by Nettwerk One artist Avril Lavigne, he leapt into the fray and took on the family’s legal fees. “I see this [lawsuit] as a knee-jerk reaction,” he told the Voice. McBride, who has no expectation of winning the case, believes suing customers damages the music industry’s future; person-to-person file sharing, he feels, is shaping up to be a major distribution route.

In an attempt to peg down purchasing patterns, marketing firm Ipsos, the Associated Press, and Rolling Stone polled 1,000 people on their music consumption. Unsurprisingly, buying CDs remains the most popular way to acquire music. Seventy-three percent do that, compared to 15 percent who shop at legal online music stores and 8 percent who share files illegally. But, no shock, nearly three-fourths of the fans polled still find CDs too expensive. And one-third believe that overall music sales are slumping because of people copying tunes illegally. Did they think the same about mixed tapes?

Some in the music biz are working with the digital trend. Island Def Jam refused to release Ne-Yo’s single “So Sick” to online music stores before his CD, In My Own Words, came out in late February. As the label hoped, consumers’ pent-up demand resulted in 301,000 first-week album sales, according to Nielsen SoundScan. And when “So Sick” finally did hit online shops, it sold 120,000 copies the first week.

Nettwerk One’s McBride has his own ideas of how the music business should work. He believes music should be valued like a utility—water, specifically—instead of as a product. At the same time, he says the market should regulate music prices. But in the U.S. at least, water isn’t totally regulated by the markets, and any company wanting to raise the water price needs permission from an advisory board. At least McBride has an idea. Dare to dream.

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E-thics

Grassroots or viral marketing campaigns are nothing new, but over the past 18 months record labels and PR firms have taken more interest in them. The campaigns even have a new, less disease-oriented name: “new media marketing.” As for why the industry’s interested, perhaps it’s because last year saw two enormous successes built almost entirely off bottom-up buzz: Label-less Brooklyn indie-poppers Clap Your Hands Say Yeah rode amateur MP3 blog excitement to sold-out Irving gigs, and topped Billboard’s independent charts. Across the Atlantic, demos by Sheffield’s Arctic Monkeys circulated for an entire year online before Domino signed the band. Spiting “file-sharing is destroying music” pundits, their Whatever People Say I Am, That’s What I’m Not LP is now the fastest selling debut in UK history.

“At this point MP3s are a necessary evil,” says one New York-based new media specialist. Legality prevents PR firms from leaking material themselves, he says, but when an MP3 blogger is contacted, the expectation is that s/he will leak at least a song or two. The strategy preys on the blog world’s unquenchable thirst for the new—both rarities and pre-releases. “I’m doing you a favor and you’re doing me a favor at the same time,” says another new media specialist. “We’ll scratch each other’s back.”

The ethics are a bit sticky—since 2004, the Word of Mouth Marketing Association has been trying to define them. Published as a draft on February 9, WOMMA’s code is based on the “Honesty ROI”: “Honesty of Relationship (You say who you’re speaking for); Honesty of Opinion (You say what you believe); Honesty of Identity (You never obscure your identity).” The code is not government-enforced, but the goal is that “honest companies” will abide: “Marketers need be truthful and transparent. Consumers come first.”

Not yet. “I will do anything,” says one publicist in response to the WOMMA code. “Whatever gets people talking about my client’s product. There is no moral line.”

One example: Late December, word spread about an amateur website belonging to a small protest group, Mothers Against Noise (mothersagainstnoise.org). “If you are a concerned parent whose child is listening to NOISE and would like to do something about it, you have come to the right place,” read the site’s first lines. Founded by one M. Smith, the group wants to rid the world of “unpleasant or painful or extremely loud or discordant sound.” Top offenders include Wolf Eyes (they “encourage there [sic] fans to break laws”), Merzbow (“Merzbow is Anti-God”), John Cage (“his life turned out to be a Cage”), Radiohead (a noise “gateway band”), and To Live and Shave in L.A. (“a most vile anti-authoritarian noise band”). Noise, writes Smith, is “hell bent on destroying civilized culture.”

Was this a hoax? Turns out the creators of mothersagainstnoise.net had, in fact, hijacked the source code from mothersagainstnoise.us, the real site Smith had designed. The hijackers had taken her site more or less verbatim, but sauced up the text and top offender list. The kicker: Mothersagainstnoise.org creators reported that, if you performed a WHOIS search on mothersagainstnoise.us, you’d see that the domain’s owner was Universal Music. “As usual, the Big Record Companies take the public for idiots and keep trying to royally fuck them in the ass,” the .org pranksters wrote. They also pointed out that, on the actual M.A.N. site, the only noise offender to have out-links was To Live and Shave in L.A. Universal Music, they concluded, had invented the M.A.N. website to create buzz for the band’s upcoming spring release.

Except that, according to Tom Smith, leader of To Live and Shave in L.A. and a 30-year veteran who famously played with Pussy Galore, Universal is not putting out the next TLASILA album; small indie Menlo Park is. “It’s really not me, I gotta tell you,” says Smith over the phone. “But we deserve to be on a fucking major label. Fuck yeah. Give me the cash. If anybody needs to be on a major it’s us.”

So who’s responsible? And for what? Smith denied a role in the spoof (though he does share a last name with M.A.N.’s founder), so did Menlo Park. Perhaps the mothersagainstnoise.org founders themselves just created this pass-the-buck drama to drum up interest in their own product: a free noise compilation, currently entering its second volume. Either way, when the agency disappears into the background, the product still remains, and that’s the goal—even if Smith, currently an ethics grad student, insists, “I’m not at a point where I want to lie about this shit.”

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Taking Charge

With its five-year-old annual policy summit, the Future of Music Coalition has made great strides in identifying issues in business, technology, and policy affecting career musicians, “the vast majority” of whom, its organizers note, “live gig to gig, unable to afford the basic protections and securities of life that allow them to continue making their art.” As independent artists develop and discover shortcuts to get their music out in spite of an inequitable and often corrupt industry, conferences like the FMC’s go a long way toward providing them a map.

Many are asserting control over their creations by taking charge of their copyrights and licensing. Melissa Ferrick, in a panel on “New Label/No Label Models,” illustrates one approach: Incorporate yourself, start your own label, hire your own distributors, and you’ll actually see your own royalties. Hers is a touring-based model. But if you’re a New York five-piece indie-rock band with sales in the four-figure range, and touring is a break-even proposition at best, the licensing-centric indie Magnatune label might be a better fit: focusing your energies on exploiting your existing catalog.

Exploiting catalog has long been the near exclusive province of ASCAP, BMI, and SESAC—performance rights organizations (PROs) whose member publishers license content to soundtracks, film school projects, commercials, and elsewhere in exchange for a hefty chunk of copyright ownership and whose blowhard honchos spent the FMC summit boasting of their support of songwriters and musicians while disingenuously pretending that all those performers own their own copyrights. Which is one reason John Buckman created Magnatune, non-exclusive and demanding no transfer of copyright. “I’m not gonna make you rich,” he explains to one bandleader after a panel, “but I’ll be a nice supplementary income source.”

Interesting avenues are developing in emerging media for artists who control their own work. Podcasts utterly depend on such material, trapped as they are in a no-man’s-land where the law doesn’t know if they’re downloads or performances for royalty purposes. Candace Corrigan, who podcasts a local-talent show called Nashville Nobody Knows, explained during a panel called “I Am the DJ” that she pays out fees to ASCAP and BMI to be on the safe side. However, as Ali Partovi of GarageBand observed, the PROs offer no license to podcast, so it’s unknown whether they distribute those fees to the correct member artists. Safer to stick to content owned by the authors and artists themselves, most podcasters find.

That policy of using what’s free and clear guides technological visionary Lucas Gonze. A programmer with roots in the peer-to-peer movement, Gonze appeared at the FMC summit to discuss Webjay, his project that helps people create playlists of audio (and some video) files that are freely available on the Web. It’s as much a social-behavior experiment as a methodology for artist promotion: Gonze deals in an idealized scenario wherein the should, the unspoken moral imperative, guides interaction and music sharing. “Today I asked one of the guys from Kill Rock Stars what their should was,” Gonze explains. “He said, ‘Well, for every album, there’s one song that we don’t care what people do.'”

The material Gonze recommends for his playlisters’ community is generally either public domain or Creative Commons licensed. Under Creative Commons, a growing “some rights reserved” copyright, creators set tiers at which they permit different levels of reuse, remixing, and redistribution of their work. The CC licenses make it easier to share songs (as in Webjay), sample and remix others’ works (as in ccMixter), and become part of a “pod-safe” community (as in GarageBand, which has gained a new lease on life through people perusing and podcasting content).

Artists who make their music freely available in this fashion take a risk in not going for the immediate sales. But as participants in a closing panel on “The Unheard Music” note, CDs aren’t exactly profit makers either. Rather, best to treat them as calling cards, use them and MySpace connections and collaboration partners to self-market. As celebrated avant-garde jazz pianist Matthew Shipp explains, if you’re good at what you do, there is an audience for it. And these emerging technologies and policies are making it easier to find that audience without the major labels, bringing artists steps closer to a more desirable middle-class existence.

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The Other Foot

A few weeks ago, New York’s attorney general, Eliot Spitzer, triumphantly announced Sony BMG’s agreement to quit exchanging money and goodies for radio airplay and to throw in $10 million to nonprofits by way of apology. The reaction from the music industry was a collective shrug and a hint of wounded entitlement. Payola, the music business likes to claim, is deplorable; it’s just that everyone does it. And expensive gifts to radio programmers? That’s about maintaining good relationships. Who doesn’t like a good relationship?

It was simple in the old days: You slipped a C-note into your new 45’s sleeve when you handed it to a disc jockey. In 1960, when King Records’ boss, Syd Nathan, was called to testify in front of the congressional payola hearings, he explained that he told DJs “if they wanted payola they’d have to take a check” so King could treat it as a business deduction. In fact, it’s still legal to pay a radio station outright to play your song, as long as they announce your sponsorship—that’s what helped to break Limp Bizkit, Gavin DeGraw, and John Mayer, for instance.

After payola-as-such was quashed, the “independent promotion” shell game became standard operating procedure, continuing until recently. Independent promoters pay a radio station a flat rate (often in the six figures annually) to be a conduit between the station and record labels, and “suggest” records for their consideration; if a promoter doesn’t suggest a record, forget it. Labels then hire the promoters to hype their records, and pay them based on how often
their records get played. Consequently, all the money in the world can’t make a song a radio hit—listeners still have to like it—but there’s no chance that a song can get significant commercial airplay without major-label-level money behind it.

But that scam has been dying off, as massive radio conglomerates cut out the middleman. Clear Channel, Cox Radio, and Infinity have all made a show of severing their ties with independent promoters. (A 2003 Clear Channel press release declared that the company would “begin working directly with the recording industry on specific group-wide contesting, promotions and marketing opportunities,” and quoted radio division CEO John Hogan: “Strong relationships with artists and record labels are a priority for our business.”)

So labels have been reverting to old-fashioned kinds of persuasion that, even if they aren’t quite cash, can be written off on taxes. Spitzer’s investigation is still going on, and other labels and radio companies have been subpoenaed, but the Sony BMG documents already made public by the attorney general’s office reveal a weirdly pathetic level of bribery. The most ridiculous is a marketing plan that involved sending mix-show DJs one sneaker, with the promise of sending the other one after they’d played Killer Mike’s “A.D.I.D.A.S.” 10 times. Troy’s WFLY seems to have gotten “3 cheap DVD players, and one 32 inch tv” for adding an Evan and Jaron song and bumping up an “FFF” (Five for Fighting?) song a little. Suggesting that a “contest prize” could just go to a radio employee’s home address, a Sony e-mail notes, laconically: “A lot of stuff get lost when you send to station . . . Wink wink.”

One name in particular keeps coming up in Spitzer’s Sony BMG files: Dave Universal. The former program director of Buffalo’s WKSE, he was fired in January for payola-related offenses. A Sony memo indicates that Universal got flown to New York “for Jennifer Lopez ‘I’m Real’ ADD but maybe we want to put we flew him down to hear Micheal [sic] Jackson.” Universal told The New York Times that he “was allowed to do whatever I had to do to foster relationships.” Love is all around!

And what’s the Federal Communications Commission doing about all this? Dithering, mostly. The last time they actually levied a payola fine, it was $4,000 apiece from stations in Denton, Texas (KHKS), and Detroit (WKQI) for playing a Bryan Adams song in 1998. Following last month’s Sony BMG settlement, FCC commissioner Jonathan Adelstein made enough of a ruckus that chairman Kevin Martin agreed to investigate Spitzer’s findings for payola law violations.

In practice, so far, that investigation seems to have consisted of issuing a “fact sheet on payola,” which announces that if you hear an example of unidentified pay-for-play, you can tell the FCC. There is, however, a crucial problem with this: The reason payola of any kind is wrong is that you can’t tell when you’re hearing it—when what’s supposed to be programming, on airwaves that belong to the public, is actually advertising. What are you supposed to do, declare that you hate a song so much you’re sure the DJ is wearing new sneakers? A lot of stuff gets lost when you send it to the FCC. Wink wink.

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Never Ending Math Equation

Justice David Souter’s opinion in MGM Grokster a few weeks ago was the first U.S. Supreme Court decision to mention Modest Mouse by name, but it was otherwise less juicy than it looked. It’s had no immediate effect on the file-sharing scene—Grokster is better known for spyware than for its user base, anyway—and the gist of the ruling is that it’s a bad idea to advertise that infringing copyrights with your product is fun and easy. The Court didn’t even declare that Grokster was liable in this case, only that it could be; the case is now back in the hands of a lower court.

That didn’t seem to bother former Grokster CEO Wayne Rosso, who declared in a June 27 cnn.com article that “the bottom line is that consumers are going to have to get used to paying for their music. Period.” Two days later, Rosso’s new peer-to-peer service Mashboxx announced a licensing deal with Sony BMG; Mashboxx’s consumers will pay 99 cents a song for Sony’s music, including Souter’s favorite emo band. (Two years ago, Rosso told The Washington Post that the major-label-revived version of Napster would fail “because it will be just like every other pay service. What’s the big deal?”) Meanwhile, the kids who want to disseminate music in a hurry these days are doing it with anonymous Blogspot blogs, BitTorrent, and files hosted by Rapidshare and YouSendIt. If there’s one thing music fans are learning in a hurry, it’s how not to get sued.

Music-related lawsuits are threatening to take out innocent bystanders, though. According to Jeff Waye, who manages the North American branch of Ninja Tune, the Montreal-based electronica label’s insurer recently canceled its policy, simply because Ninja Tune does a lot of business with the U.S.—America has such a litigious climate that somebody might, say, cut a finger on a CD case and decide to sue. Waye and his associates eventually found another insurer who was willing to cover them, as long as less than 80 percent of their sales were to the U.S. But if, say, the Herbaliser’s new Take London became a runaway hit in the States, Ninja Tune could be in trouble.

And sometimes the law is on the side of whoever can afford it. Now that some time has passed since the June 8 police/Recording Industry Association of America raid on Mondo Kim’s, it’s worth considering exactly what got raided from the store, and to whose benefit. In the words of the RIAA spokesperson quoted by mtv.com, all of the discs seized were “urban in nature”—that is, mixtape CDs. They weren’t pirated copies of commercially available albums; as Tricia Romano noted in the Voice a few weeks ago, the confiscated titles were compilations that are basically sanctioned by both artists and labels (who supply exclusive materials to them), with the understanding that the mixtapes will yield more cachet than cash.

One possibility here is that the left hand of the music industry doesn’t know what the right hand is doing. (Don’t rule that out.) The other is that the right hand is telling the left hand what to do. The point of mixtapes is to generate buzz—and it’s a lot easier to make something exciting if it seems a little bit illicit. So there’s the occasional bust of a high-profile retailer like Kim’s that doesn’t do a lot of business for RIAA-associated labels, but does sell lots of mixtapes; the word goes around that the Man’s trying to bust mixtapes, and artists who contribute to them get more street cred and sell more of their $18.98 major-label CDs. Follow the money.

Unless, of course, there’s no money to follow. The newest version of Apple’s iTunes allows its users to subscribe to podcasts—regularly updated, downloadable, often homemade audio programs—or promote their own podcasts through Apple’s index. You can buy the Herbaliser’s “Gadget Funk” in iTunes for 99 cents, but if you use iTunes to download a podcast that contains both “Gadget Funk” and “Float On,” it’s free.

Free for you, anyway. It’s not clear yet how the law’s going to work, but podcasters are probably obligated to pay the copyright owners of both the compositions they play and the recordings of those songs. (Compositions often go through rights management organizations like ASCAP and BMI; there’s no equivalent rights clearinghouse, or rate, for recordings because the closest thing there’s ever been before is radio airplay, which has always been considered to be promotion for record labels.) So some podcasters, fearing a retroactive bill or worse, are sticking to material covered by a Creative Commons license that permits rebroadcasting. But nobody’s been coming around to rough up podcasters for their lunch money—yet. Sometimes life’s OK.

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How Much Is Music Worth?

Let’s say you wanted to buy a copy of Linkin Park’s Hybrid Theory, in honor of their current protest against Warner Music Group for not cutting the band in on WMG’s (not-as-successful-as-planned) IPO. For $18.98 (list price), you’d get a CD from which you could rip MP3s to play on whatever portable device you like; you could also sell the disc back to a record store for a few dollars, or give it to a friend, perfectly legally. Alternately, you could buy Hybrid Theory at amazon.com for $13.49 plus postage—it’d take a few days to get to you, though.

Even more conveniently, you could buy a digital download. Hybrid Theory will run you $9.90 from MSN Music, since Apple’s iTunes store has established that people will pay 10 bucks for a digitized album. But MSN’s protected Windows Media files don’t sound as good as a CD, you can’t give them to a friend, you can’t resell them when you’re done with them, and you can’t play them on an iPod. Also, “you,” in this particular case, are very likely to be male: The British newspaper The Guardian cites a study claiming that men make up 96 percent of the market for paid music downloads. (Just over 50 percent of Americans who buy music are female, according to the Recording Industry Association of America.)

If $9.90 for protected files sounds like a rip-off, yourmusic.com will mail you a perfectly good CD of Hybrid Theory for $5.99. Yourmusic is a division of BMG Music Service, the company that was once the RCA Record Club; The Wall Street Journal reported a few weeks ago that BMG’s parent company Bertelsmann AG is also buying Columbia House for $400 million. Every disc in Yourmusic’s catalog is $5.99, postage included. That makes music retailers very unhappy, because it’s significantly less than what they pay wholesale. John Timmons, who owns the record store Ear X-Tacy in Louisville, Kentucky, has complained about Yourmusic forbidding stores to buy retail stock from them, and announced in March that he’d “opened new [Yourmusic] accounts, in case they totally shut me out of my current account, which I expect they’ll do.” That’s not all they did; in mid April, BMG Direct filed a lawsuit against him.

Meanwhile, the price of Hybrid Theory keeps dropping. The dubiously legal Russian site allofmp3.com will sell you the whole album as MP3s, with no digital rights management attached, for $1.08. Not that Linkin Park or WMG is likely to see any of that money, but it’s safe to assume that allofmp3 is making some profit after overhead, bandwidth costs, and credit card fees. Compare that to Apple’s cut of sales from the iTunes store, usually said to be between 30 and 35 percent, and suddenly 99-cent songs and $9.99 albums look like cash cows.

You can pay even less than a dollar, legitimately, to hear an album—although maybe not Linkin Park’s albums, which aren’t on every digital service. Subscription programs like Napster to Go and Rhapsody to Go let users download as many tracks as they want for a flat rate of around $15 a month. Those files can’t be burned to CDs; they only play on Windows-compatible pseudo-Pods, and when you stop paying the monthly fee, they self-destruct. So may their providers, thanks to the new Yahoo Music Unlimited, which offers the same services for as little as $5 a month (burnable files are 79 cents apiece). It might be that Yahoo is willing to lose some money on Music Unlimited at first to establish a subscriber base and freeze out its competitors, since it has a lot more cash to burn than they do.

If a YMU subscriber is hoovering up a few hundred songs a month, how much money trickles down to the copyright holders? Labels who rent subscription-style, rights-restricted downloads through Yahoo earn a prorated share of net revenue, which reportedly works out to something like a penny a song. Not everybody gets the same rates, though. “It’s definitely a two-tiered system,” says Tim Mitchell of the Independent Online Distribution Alliance, which represents a few hundred indie labels. “The indies get treated differently from the majors.”

And what about the Linkin Parks of the world? Artist royalties for legal downloads are a fraction of the retail price. When that fraction means a thin slice of a penny for a “legitimate” download, and major labels are selling CDs for less than digital files, it becomes mighty tough to make the case that unauthorized file sharing is a real financial threat to anyone—or that music you can’t hold in your hand is worth the inflated prices we’ve been asked to pay for it until now.

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The Big Chill

Users of easytree.org who visited it on April 6 got a nasty surprise: a note saying it had been shut down due to legal threats. EZT, as it was known, was the file-sharing equivalent of Grateful Dead-era tape trees: a clearing-house for “torrents,” which allow multiple users to exchange fragments of the same big file with each other until they’ve all got the whole thing. The site’s focus was complete concerts in CD-quality sound by the likes of the Drive-By Truckers, moe., and Miles Davis; its administrators were fastidious about removing listings for anything that had been commercially released, and it didn’t host any actual media files itself.

Didn’t matter. The word that went around the EZT community was that a European division of Universal Music had complained to Easytree’s Internet service provider that the site was hosting an illicit Nirvana video (which it wasn’t) and threatened to sue. Whereupon the ISP got cold feet; that’s why they call it a chilling effect.

File traders bounced right back. Within days, they’d migrated to the very similar dimeadozen.org, whose anonymous administrator had no comment for the Voice on the resemblance between the two sites, and were happily torrenting last year’s kickass Truckers gig from the Netherlands, a Meters interview from NPR, and thousands of other shows.

As usual, the music business’s legal threats are eight steps behind technology. The wheels of the law creep slowly enough that Grokster—the file-sharing service about which the Supreme Court recently heard arguments, with a decision expected in June—is now basically irrelevant. And i2hub, the high-speed peer-to-peer application that runs on universities’ Internet2 networks, has finally been noticed by the Recording Industry Association of America, which just sued 405 college students who’ve used it.

The industry’s also seemingly poking around Soulseek: Search for not yet released albums, and you’ll see dozens of suspicious fake “sources” with user IDs that are biblical names with three digits appended (Jacob837, Elijah098, Luke356, and so on). The kids will probably move past Soulseek soon anyway; these days they’re flocking to YouSendIt, which can easily disseminate big files, isn’t a peer-to-peer deal, and allows uploaders to remain basically anonymous.

Meanwhile, the RIAA has been massaging its 2004 figures to convince regulatory agencies that they’ve got a big problem—and potential investors that everything’s copacetic. Its March 21 press release leads with word that CD shipments to American retailers rose 5.3 percent last year, the first increase in five years. Citing the number of discs going to stores, not the number being bought from them, is the RIAA’s favorite trick. As they don’t mention, though, CD sales also rose in 2004, to 666.7 million discs, about 10 million more than 2003. And that’s despite the fact that major labels—of which there are now four, one fewer than a year ago—are slashing the number of new albums they’re releasing.

The RIAA’s press release goes on to natter solemnly about “the ongoing impact of . . . illegal downloading on peer-to-peer networks,” but its overall tone is sunny: “[T]he public’s enthusiasm for music is stronger than ever,” it says, and chairman Mitch Bainwol is quoted as saying that “the legitimate digital business has not even begun to reach its potential.”

Why so perky, Mitch? It could be that Warner Music Group, one of those four majors, desperately needs to convince investors that it’s got a future. WMG has just announced details of its forthcoming $782 million IPO, which will value the company at $3.43 billion. That’s a hefty increase from the $2.6 billion that an equity group led by former Universal Music head Edgar Bronfman Jr. paid last year to buy Time Warner’s music division. According to a Financial Times report, its top five executives scored $23.3 million in salary and bonuses last year, or more than triple the $7 million from the IPO proceeds that will actually go to WMG’s general operations; Forbes notes that Bronfman and associates are also filling their pockets with a pre-IPO $141.5 million dividend. Not bad for a company that keeps getting subpoenaed by New York attorney general Eliot Spitzer over its promotional practices.

So where’s the extra billion bucks in WMG’s value coming from? Apparently from “streamlining”: getting rid of well over 1,000 employees and dropping just under half of the artists signed to Warner’s labels. And maybe from expectations of future alliances: The New York Times suggests that Warner may still want to merge with another major, EMI. All they have to do is convince regulators that kids trading Drive-By Truckers live tapes on the Internet are so dangerous that further consolidation is the music industry’s only hope. It worked last time.

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Bluenosed

One Republican Federal Communications Commission chairman (Michael Powell) leaves, another one (Kevin J. Martin) takes his place; will it really make a difference in what you hear on the radio? Yeah, probably.

The good news about Martin is that he’s not the flag-waver for media consolidation that Powell was—he’s for it and all, but he doesn’t want to eliminate broadcast ownership caps altogether. The bad news is that Martin is even more gung ho about indecency. He’s often argued that FCC judgments fining radio and TV stations weren’t nearly harsh enough.

The FCC reports that it received 1,405,419 complaints about broadcast indecency in 2004, roughly evenly split between radio and television. That’s up from 202,032 in 2003, and only 111 complaints in 2000. It’s not that the airwaves have gotten a thousand times raunchier in the last five years—it’s that L. Brent Bozell III has hit the scene. Bozell is the chief bluenose at the Parents Television Council, which MediaWeek reported was responsible for around 99.9 percent of last year’s complaints. (The PTC claims that figure should only be about 21 percent.) He also runs the Media Research Center (dedicated to “neutralizing liberal media bias”), and belongs to the secretive, hyper-conservative Council for National Policy. Martin wrote to Bozell in 2003 that he believes broadcasters’ First Amendment rights “should be limited by good taste.” Which would sort of negate the point of the First Amendment, wouldn’t it?

Even small complaint campaigns are spreading a chill through radio and TV. Jeff Jarvis of buzzmachine.com noted in November that exactly three people wrote letters complaining about a Fox broadcast of Married by America in April. One of those letters was sent out, verbatim, by 21 people, to multiple recipients at the FCC. Result: an official tally of 159 complaints, and the highest-ever proposed FCC fine: $1,183,000. Of course, there’s no official mechanism for people to tell the FCC that a broadcast didn’t bother them a bit—although a woman named Amanda Toering has set up speakspeak.org to launch “noncomplaint” campaigns. The current maximum penalty per station, per incident, is $32,500, but the House of Representatives just passed the Broadcast Decency Enforcement Act, which would require broadcasters to put half a million dollars in the swear jar for each offense.

And what’s an offense, exactly? The FCC isn’t saying. In a recent announcement that showing Saving Private Ryan uncut on broadcast TV is A-OK, they declared that “contextual considerations are critical.” That’s exactly what the bluenoses want. If the border between permissible and impermissible is clearly defined, there are always ways to get around it; if it’s not, every broadcaster that can’t shrug off $500,000—meaning every one that’s not part of a Clear Channel/Infinity- sized conglomerate, from college radio on up—has to err on the side of total blandness.

Even Commissioner Martin has acknowledged that the FCC probably can’t police satellite radio, though (since subscribers pay for it), much as he and Senate Commerce Committee chair Ted Stevens would like to hold it to the same vague standards. Just to make sure, Representative Bernard Sanders, Independent from Vermont, has introduced a bill to keep the FCC’s indecency regulations out of orbit. But if terrestrial radio has become an oligopoly, satellite radio is a duopoly: two companies, XM and Sirius. (Every so often, word goes around that they’re discussing a merger, and both companies promptly issue indignant nondenial denials.) They collectively had fewer than 5 million subscribers at the end of last year.

The satellites have yet to break any bands or create any stars, so Sirius and XM are paying through the nose to attract existing big names; Sirius is reportedly spending $500 million, or the top potential fine for a thousand offenses on terra firma, for a five-year contract with Howard Stern, beginning next year. And Sirius is crossing its fingers that it won’t have mechanical problems: According to its SEC filings, its three satellites are uninsured, and if two of them fail, it’s off the air for at least two years.

Conventional radio is starting to treat the satellite companies as serious competition anyway. There’s a rapidly growing radio format, called “Jack” or “Bob,” that’s modeled on satellite stations’ extensive playlists. It hasn’t come to New York yet, but it’s caught on in Indianapolis and Dallas, and recently popped up in L.A. “Jack” features a thousand or more old favorites of 35-to-44-year-olds, rather than the roughly 200 songs that a station normally plays over and over, and eliminates DJs from the mix. Presumably, that makes it easier to be limited by good taste.

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Priced Out

Why would people agree to pay astronomical rents to live in the new apartment buildings and high-rises that are popping up all over the East Village and the Lower East Side? One big selling point is the neighborhood’s world-class live music clubs—except those same new buildings and high rents are driving the clubs into extinction. Luna Lounge and Fez have both announced that they’re shutting down, at least for the moment, and the future of Tonic and CBGB is in doubt.

Robb Sacher and Dianne Galliano co-own Luna Lounge, which is closing its location on Ludlow Street at the end of this month. Their building has been purchased by a developer who’s reportedly planning to demolish several one-story buildings to build a large apartment complex. Luna’s owners would eventually like to reopen the club nearby, and Sacher says their hopes are pinned on a one-story building on Essex Street that’s currently tied up in a bankruptcy proceeding. “We really want to stay on the Lower East Side,” he says, “but there’s absolutely no other building that’s available to us, and I’ve been looking for three years. Landlords don’t want to rent [non-residential buildings] to us; they want a ‘triple A’ tenant, like a bank.”

Luna is currently paying $5,700 a month for 2,000 square feet—an impossibly low rate for Manhattan. So Sacher’s also thinking about relocating to Williamsburg: “We would really prefer to sell beer for $5 rather than $7, which wouldn’t be possible if we opened in Chelsea or the West Village.”

Meanwhile, the owners of Lafayette Street’s Time Café, in whose basement the velvety, cabaret-style room Fez is located, have signed a new lease, and decided to renovate the restaurant; they don’t currently plan to reopen Fez. The club’s final show will be March 17: the Mingus Big Band, the first group that ever performed there. “There aren’t going to be that many spaces left to do this kind of thing,” says Ellen Cavolina Porter, Fez’s booking agent since it opened in 1992. “The economics of these rents and the size of these spaces make it very challenging to try to make money.”

It used to be a lot simpler. When Hilly Krystal started CBGB almost 32 years ago, its monthly rent was $600. But CB’s gradually made the Bowery chic, and new ground-floor space on the legendary punk club’s street now rents for around $55 per square foot. Krystal’s third lease ends this August; a new lease would cost him somewhere between $38,000 and $40,000 a month, in addition to the almost $80,000 a year he pays for liability insurance.

“I pay approximately $20,000 a month now—I can’t pay $40,000,” Krystal says. “I can’t run the club at a deficit. We’d have to charge a lot more for drinks, we’d have to charge a lot more for admission, and I don’t know if it’s worth it to people. If it’s gone, I don’t see that anybody’s going to replace it. We’re not a big moneymaking machine.” He’s thinking about trying to continue, but also thinking about going elsewhere: “I know some people want me to put CBGB in New Jersey, and some people in L.A. want me to move out there.”

Down on Norfolk Street, Tonic is struggling to stay where it is right now—like Luna Lounge, it’s in an old, one-story building in a neighborhood that’s rapidly growing taller. As the Voice reported last week, the club is trying to raise $100,000 to survive in the face of flooding, a sewer-line collapse, and a robbery, and it’s scheduled a series of benefit performances by artists including Yoko Ono, Vincent Gallo, and Devendra Banhart.

“Tonic’s rent has doubled since we opened [in 1998], and our insurance has tripled since 9-11,” says co-owner Melissa Caruso Scott. “There’s activity on our block at night now, and I think our customers feel safer—we used to have rats like crazy on Norfolk Street, and I haven’t seen a rat in two years. But with that comes the challenge: Can we stay in this neighborhood? Where artists used to be able to put on performances in their loft spaces, now high-end restaurants want to move in. It certainly makes it harder to present less-mainstream music. I’m hoping that we’ll be able to work something out and get back on track, but the worst-case scenario is that we get evicted, and at some point we’ll look for another space.”

This isn’t the first time a New York neighborhood has begun to price out the clubs that helped shape its identity, Fez’s Porter points out. “MacDougal Street, where all those great folkies started, used to have a club every 30 yards. All the reasons that people used to have to want to live in the Village don’t really exist here any more. It’s strange and sad to see it all go, but it’s going fast.”

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Fair Useless

In the late ’80s, Karlheinz Brandenburg of the Fraunhofer Institute in Germany listened to Suzanne Vega’s “Tom’s Diner” more than a thousand times. He was perfecting a technique for audio compression that could reduce a CD track’s file size by about 90 percent while distorting Vega’s voice as little as possible. The result was the Moving Picture Experts Group Audio-Layer III format, or MP3, which has earned the highest form of infringement: Its name has become generic shorthand for audio files. Similarly, pocket-sized digital audio players are colloquially iPods, no matter who makes them, just like any pocket-sized cassette player was a Walkman. (A recent Merrill Lynch report noted that iPods are catching on even faster than Walkmans did in the early ’80s, and Apple’s rumored to be introducing a smaller, cheaper model with flash memory instead of a hard drive.)

But every big music and tech player is pushing MP3 alternatives now. Open-source culture tends to favor Ogg Vorbis, a “free, open, and unpatented” audio format. And the four major labels, Microsoft, and Apple would prefer that people load something a lot less free than MP3s onto their iPod equivalents. The iTunes Store, for instance, sells songs in Apple’s own proprietary format, AAC, with a digital-rights-management (DRM) scheme called FairPlay. (Download a 99-cent copy of “Tom’s Diner,” and you can only play it on your own computers; if you send it to your friends, it won’t play on their machines.) It didn’t take long for an enterprising, anonymous programmer to devise PlayFair, which removes the DRM from iTunes purchases; it was promptly cease-and-desisted. By then, though, it was far too late, and other anti-FairPlay programs are now easy to find.

In the second-time-as-farce department, both the neutered Napster and its creator, Shawn Fanning, have reappeared touting DRM systems. Fanning’s currently shilling for a technology called Snocap, meant to be used by peer-to-peer services. (Mashboxx, a not-yet-running system started by Grokster’s former head, will probably incorporate it.) Snocap is supposed to check sound files that users offer for “trade” against a central database, and indicate what other users have to pay to get them, and in what form. So, if you tried to download something called “T0mZd1n3r.wmv” from HotNYFolkies4U’s music directory, a Snocap-enabled system would know to charge you a dollar.

In other words, all the expense of iTunes with the extra unreliability of Kazaa, and a way for labels to avoid having to pay for bandwidth themselves. Former RIAA chief Hilary Rosen is advising Snocap, and Universal Music Group is already cutting a deal; Fanning, talking about “trying to create this platform to allow the market to really explode,” sounds like a pod person (lowercase p). Meanwhile, an online marketing company with the appropriately dreadful name Wurld Media is launching a division called Peer Impact, which will also let users “share” files for a dollar a song; so far, they’ve gotten the thumbs-up from Universal, Sony BMG, and Warner Music Group.

Napster’s name and headphone-devil-kitty logo are now owned by the former CD-burning-software company Roxio, which has pasted them onto a trial run of a new business model: music by subscription. For $10 a month, you can listen to unlimited (major-label) tracks on your computer. If you ever stop shelling out for service, though, your complete Suzanne Vega collection becomes unplay-able. You can also buy individual tracks for keeps for a buck apiece, and transfer them to a portable player—but they’re in Windows Media format, which requires one of the very few digital audio players that aren’t iPods. And if you don’t buy a particular track, you can’t play it on your not-quite-a-Pod anyway.

That’s expected to change when Microsoft finally introduces the “Janus” technology it’s been promising for a few years; the idea is that your quasiPod will have a “secure clock” inside, so you can’t hack it to keep playing “Tom’s Diner” forever after your subscription runs out. (Janus will probably be linked to Microsoft’s MSN Music Store, which is currently in beta.) Month-to-month leases may appeal to labels as a way to save money on royalties. If they sell a digital download, they have to pay the artist and song publisher; if they’re just renting it, it’s not clear they owe anything.

The big question, though, is who the labels expect to buy into these schemes. Every one of them has a fatal and unavoidable flaw, which is that no form of DRM actually works. If you can hear a song on your stereo (or pod), you can make a copy of it with identical sound quality. All you need is a $2 cable with a headphone plug at each end and some free audio software like Audacity, and you’re back in the days when you could take fair use for granted: once upon a time, before the rain began.