THE BANK: FALL '08

yyyeeeeahhh!

We've got our hands full over here, working on some really exciting projects. Here's a glimpse of what we've been up to:

VIRUS: The Catalyst album is set to drop 12/23/08. It features Mr. Dope Shit Himself (Virus), with tracks by Battletek and appearances by Crooked I, John-Jon, J.U.I.C.E., Melanie Rutherford, and Punch & Words.

FUNSHO: After smashing in Shinjuku, the raw Chicago native is at it again, serving you his latest offering, Bad Skin. Full of street stories, futuristic soundscapes, tales of unrequited love and alcohol induced sexual mishaps, Bad Skin hit the streets this month. .


D. RICH: A man so hard the government wants to send him BACK to the Middle East, South Side rhyme-spitter D. Rich is working with us on his first full-length album, Boot Camp, which we'll be producing from top to bottom. Boot Camp features guest appearances by some great Chicago talent including John-Jon, Payne, Roze Red, and Virus.

PAUL THOMAS: Comedian Paul Thomas (check out the video for "Tighty Whiteys" in the "Shorts" section of his website- www.bigheadpaul.com) came to us to help give his musical stylings a contemporary feel. Good lawwd, so far the results have been nothing short of hilarious. The song, indefinitely titled "Smackin'," will accompany a music video of the same name. Check back here for updates!



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Game Theory

Here's an article I read on The Guardian.  Hmmm, seems extreme, is this the answer?  What do you think?

The Right To Peer Inside Your iPod
An agreement on intellectual property rights to be ratified by the G8 heads of government highlights conflicts between ownership and privacy
Charles Arthur
The Guardian, Thursday July 10, 2008


Photograph: Nick Veasey/Getty Images

The heads of the G8 governments, meeting this week, are about to ratify the Anti-Counterfeiting Trade Agreement (Acta), which - it's claimed - could let customs agents search your laptop or music player for illegally obtained content. The European Parliament is considering a law that would lead to people who illicitly download copyrighted music or video content being thrown off the internet. Virgin Media is writing to hundreds of its customers at the request of the UK record industry to warn them that their connections seem to have been used for illegal downloading. Viacom gets access to all of the usernames and IP addresses of anyone who has ever used YouTube as part of its billion-dollar lawsuit in which it claims the site has been party to "massive intentional copyright infringement".

It seems that 20th-century ideas of ownership and control - especially of intellectual property such as copyright and trademarks - are being reasserted, with added legal muscle, after a 10-year period when the internet sparked an explosion of business models and (if we're honest) casual disregard, especially of copyright, when it came to music and video.

But do those separate events mark a swing of the pendulum back against the inroads that the internet has made on intellectual property?

'A finger in the dyke'

Saul Klein, a venture capitalist with Index Ventures who has invested in the free database company MySQL, Zend (the basis of the free web-scripting language PHP) and OpenX, an open-source advertising system, is unconvinced. "In a world of abundance - which the internet is quintessentially - that drives the price of everything towards 'free'," he says. "People don't pay for any content online. Not for music, not for video. They get it, either legally or illegally."

Is that sustainable? "The model of suing your best customers and subpoenaing private information is doomed to failure," Klein observes. "It's putting a finger in the dyke. It won't change the macro trend, which is that there's an abundance of information. Copyright owners need to find new ways to generate income from their product. The fact is, the music industry is in rude health - more people than ever before are going to concerts, making it, listening to it. It's the labels that are screwed. The artists and managers are making money. The labels aren't.

"What is broken is the paid-for model for content, though it won't go away entirely. We look to invest in scarcity, where people will pay a premium for something not in abundance." He gives the example of Viagogo - a ticket-selling site that Index Ventures has invested in: "Selling tickets for Madonna or Prince capitalises on the public's interest in paying for scarcity."

But the BPI, which represents UK record labels, disagrees: "Music's true value is greater than its price ... people can see that creative people, and the companies who pay them, are not being fairly rewarded for the use of their work online, and almost everyone now agrees this needs to change."

Content creators are taking a more assertive stance. Scott Adams, the cartoonist best-known for his Dilbert strips, stood up for his work in a blog post in April last year, where he reasserted his ownership of his products: "When you violate a copyright, you take something valuable from the copyright owner that he can't get back ... After I published The Dilbert Principle, within days it had been illegally scanned and was widely available on the internet for free. Technically speaking, it wasn't theft. But I still lost something. I (and my publisher) lost the ability to decide if, when, and how to publish as an e-book." (tinyurl.com/2zxgb5).

That drew many comments, such as: "There's nothing that you can do about us. You're impotent, we're everywhere, and soon, we'll be everyone. It's over. It's time to start seeing the world as it actually is, and not as you wish it to be."

Yet Acta spooks many. A draft version appeared at the Wikileaks site (tinyurl.com/5sh934), which said it reveals "a proposal for a multilateral trade agreement of strict enforcement of intellectual property rights related to internet activity and trade in information-based goods, hiding behind the issue of false trademarks".

One of the footnotes has sent a shudder across the net: "Members shall provide for the provisions related to criminal enforcement and border measures to be applied at least in cases of trademark counterfeiting and copyright piracy." That can certainly be interpreted as meaning that you could be stopped at Customs and quizzed about the music or films on your iPod or laptop.

Chasing the big boys

A more likely interpretation, however, is that Acta is really aimed at the big players, who copy CDs or DVDs on an industrial scale. The US trade representative Sean Spicer said in a statement on June 5 (tinyurl.com/5voyhk), after the last round of Acta negotiations, that "the main focus of the discussion was border measures, particularly how to deal with large-scale intellectual property infringements, which can frequently involve criminal elements".

Perhaps coincidentally, the UK Electronics Alliance, representing about 1,200 UK companies, will this month claim that counterfeit electronics cost the UK economy £1bn per year in supply-chain problems caused by fakes, yet only two customs officials have full-time jobs tracking them down. Certainly counterfeiting - especially of pharmaceuticals and electronics, but also of car parts - has become a serious problem in recent years, and the consequences can be serious: drugs that don't work, car parts that cause a crash.

Part of the aim of Acta therefore is to provide an international means of putting pressure on countries from which counterfeit products originate. But Acta's tentacles may spread wider than expected. It would include "safeguards for ISPs from liability, to encourage ISPs to cooperate with right holders in the removal of infringing material". But for those pirating material, that might also mean ISPs could finger them with the backing of the law.

Free, the internet?

And the implications for privacy? Acta is silent on the rights of the individual; unsurprising, since the signatories would include the US, UK and China - which have widely diverging ideas on the topic.

As one music industry insider - who asked to remain anonymous - notes, part of the problem with online culture is that people are used to getting stuff for free, while feeling that they will not be tracked down. "Imagine if someone somehow bought up Wikipedia, and demanded payment for access," he says. "People don't like the idea of paying for things they've not been used to paying for. The internet has given the opportunity for normal people to infringe intellectual property more easily than ever before. But I think there's a creeping understanding that what the record industry has been banging on about for all these years really is a problem."

Adams, meanwhile, thinks that challenging people is the perfect way to create "cognitive dissonance" - "putting a person in a position of doing something that is clearly opposed to his self-image. Then wait for his explanation. The explanation will seem absurd to anyone who doesn't share the dissonance" (tinyurl.com/2fndal). He adds: "I also enjoy the rationalisations from the people who say it is okay to violate copyrights whenever it's cheaper than paying. They argue that these violations will encourage greedy publishers to be more efficient, thus transferring wealth from recording companies to ... Steve Jobs."

Lefsetz Archive: February 20th

Here's an article from Lefsetz Letter, a great blog on the ever-changing face of our industry. We don't always agree with him, but he makes some great points. Check it out, share your thoughts, etc.

The Future

I’m going to make a prediction. The major labels are not going to control the future.

This is important not only because the majors controlled the past, but because they’re trying to control the future. And as the media chronicles each and every flailing, defensive effort, the sea change in consumption of music is being ignored.

Americans used to purchase their records based on radio and the resultant word of mouth. There were very few opportunities to get signed and promoted, and the few winners that resulted were extremely successful. It is this era and goal that the majors are trying to hold on to and return to. They want very few acts to be exposed and sold in an era where anybody can make music and distribute it and it’s extremely difficult to get notice.

We can castigate NARAS for a lame Grammy show, the third lowest rated in history, but do these poor numbers have anything to do with what was up on screen or could it be that nothing could garner the numbers of the past? The Grammys actually won the evening. It’s just that fewer people are watching network television. They’re spread over many cable channels and untold Websites. And they’re not coming back. But the major labels believe they will.

Give the television networks credit. Once they realized cable was siphoning off their viewers, they purchased the cable outlets. However that was in a limited universe, getting on a cable system is very difficult. Majors try to make deals with independent labels, but they seem unaware that independents have options, and that the label might not be the key player controlling the act, that the label might only have a small piece of the overall pie, that the manager is the one collecting all the revenue.

The concept of rolling up indies or distributing them is a sound one. But the majors don’t seem to notice it’s a changed marketplace. The majors just offer their muscle. But you don’t need the majors’ muscle to get paid at iTunes. And very few acts are Top Forty radio friendly, or can get on television, the two areas where the majors can exert power independents usually can’t. Furthermore, print publicity sells fewer records than ever before, independents actually do a better job of publicity, focusing on what works online, where the people are paying attention, whereas the majors employ more of a scattershot, press the button philosophy. Independents grow slowly. This is anathema to the majors, who are also dishonest, both in promises and payments. So, the concept of rolling up indies is flawed. Transparent deals and accountings would have to be married with larger pieces of the pie. But the majors will never deliver this.

Majors are run by kingmakers in a world increasingly run by serfs. In order to succeed in the future, majors would have to establish trusted relationships with not only their acts, but their consumers, and be willing to sell ten thousand of this and twenty thousand of that, knowing that almost nothing will go platinum.

There will be rich people in the music business in the future. Acts and managers, of course. But the businessmen who are successful will see their roles differently, as aggregators. Selling wide swaths of product to everybody who wants it at a cheap price.

It’s akin to IBM and Microsoft. IBM ruled computers when most people didn’t have them. Big Blue believed the money was in corporations. Microsoft in concert with PC manufacturers ultimately sold an inexpensive product that everybody could buy. IBM? They sold their PC manufacturing business, even their vaunted ThinkPad line, they’re now a profitable company operating in a much smaller sphere, in the world of services. Major record labels have huge assets, their catalogs, this will give them a seat at the table in the future, they will do business, but they won’t dominate. They’re not constructed to dominate in the future.

In the future it’s about volume. Something the majors still don’t understand. The paradigm isn’t one track for a buck, but getting everybody to be a music consumer at a low price. Under the guise of protecting music’s "value", the majors are killing their business. And making recorded music sales challenging for everyone. Which is why all new players look to maximize touring revenue, sometimes giving their music away for free on the Internet.

The biggest story of the year is how the mainstream press and the pollsters were completely out of touch with the electorate. No one foresaw Obama, no one predicted his success. And his success so far has proven that people want change, they’re sick of the past, they want to believe in something new. The public has embraced digital music. People own thousands of tracks. The majors are against this. They want the average citizen to pay $40,000 to fill his iPod. But, more importantly, the majors and the infrastructure surrounding them fail to realize what the public truly wants, music to believe in, not the evanescent, oversold crap which dominates today. I’m not saying all sponsorships/endorsements/advertisements are bad, but I am saying that sometimes they come with a cost. They erode the consumer’s belief in the underlying act and its music. Majors talk about whoring out the music, they don’t ever speak of the bond between fan and act. But it’s exactly this bond that is at the heart of the future. And the new players know this.

Don’t become infatuated with the exact date the CD dies. Or ridiculous predictions by consistently inaccurate research companies when digital sales will eclipse those of physical product. There’s no evolution here, just revolution. And a research outfit can’t predict the details when confronted with a shake-up of this magnitude.

Music will be vital in the future. Its potential to reach people exceeds all other entertainment media. But it takes individuals who understand technology, in touch with the customer base, willing to take risks, in order to be successful. Those running the major labels fit none of these criteria. Therefore, these companies are doomed for marginalization.