THE LEFSETZ LETTER: Lefsetz 101

Lefsetz 101

I constantly get e-mail asking:

1. Why do you steal music?
2. What’s your problem with CDs?
3. Why do you think music should be free?

The following is where I’m coming from:

P2P

It’s social protest.

If you believe change is gonna come by abiding by the rules of those in power then you just haven’t been paying attention.

For every teenager using Limewire, BitTorrent and IM’ing files there’s a baby boomer/exec who just can’t figure out why you’d need anything better than a CD. As if the CD were in the league of vinyl to begin with.


Bob Lefsetz, Santa Monica-based industry legend, is the author of the e-mail newsletter, "The Lefsetz Letter". Famous for being beholden to no one, and speaking the truth, Lefsetz addresses the issues that are at the core of the music business: downloading, copy protection, pricing and the music itself.

His intense brilliance captivates readers from Steven Tyler to Rick Nielsen to Bryan Adams to Quincy Jones to music business honchos like Michael Rapino, Randy Phillips, Don Ienner, Cliff Burnstein, Irving Azoff and Tom Freston.

Never boring, always entertaining, Mr. Lefsetz's insights are fueled by his stint as an entertainment business attorney, majordomo of Sanctuary Music's American division and consultancies to major labels.

Bob has been a weekly contributor to CelebrityAccess and Encore since 2001, and we plan many more years of partnership with him. While we here at CelebrityAccess and Encore do not necessarily agree with all of Bob's opinions, we are proud to help share them with you.

They call it convenience. Which is the same reason you like your TiVo. Your VCR recorded too, but you just couldn’t figure out how to use it.

If we don’t steal, then record companies will have us paying exorbitant prices for music and the public will be left without. The promise of online delivery is more music for more people at a lower per song price.

I ask you, do you have a problem with more people owning more of your music?

Would you rather ignore the stealing or try to monetize new delivery platforms?

In other words, which side are you on?

If you think the labels and the artists are on the same side, you’re a rube. A label wants to make the most money possible. An artist wants to have the most people possible exposed to his music, whilst getting paid for said delivery/acquisition. Their interests intersect, but they’re not identical. If more people acquired music, albeit at a lower per track price, more people would make more money. Would it be the SAME people? That’s the question. That’s why the labels are fighting so hard. Their monopoly is in distribution, the Net eviscerates that.

CDs

As referenced above, CDs sound shitty. The sampling rate is too low. True, if mastering engineers didn’t compress the signal they’d sound better, but they’re at the mercy of the labels who want tracks to pop out of the radio. In other words, we’ve got a circle jerk that leaves the public out. People DO like sweet sounding music of varieties not aired on Top Forty radio, which many aren’t listening to anyway.

The CD is not the end all and be all. It’s a MEDIUM, a CARRIER, that can be superseded as easily as one can switch to satellite radio from terrestrial radio, as easily as people switched from cassette to CD. To be married to the CD is to be married to every antiquated delivery system in history. From the horse and buggy milkman to the newspaper boy, OOPS, he’s not gone yet.

Kind of proves the point actually. You’ve got to leave the house to get the CD, when with files you can acquire them right in your house.

Files don’t sound as good as CDs unless you rip in lossless format which eats up a lot of disc space, but it’s not a factor of the people not having large enough hard drives, they just don’t CARE!

Prior to the iPod the sound standard for the average person was the boombox. Is an iPod really such a step down?

Furthermore, aren’t these defenders of the CD the same ones who killed the vinyl record, first for the vastly inferior sounding cassette?

It’s about convenience. Not only in acquisition, but usage. With files you can take your entire collection with you. And if you lose it, you’ve still got it on your home PC.

Trying to convince the public that this is a bad thing is equivalent to trying to convince you the aforementioned TiVo is superfluous, GET IT?

It doesn’t matter what the labels and old farts say or do. The disc is going to die as sure as film was replaced by the JPEG. Film might be better than the resolution most people shoot at digitally, but now they have INSTANT results and can shoot a ton of pictures for a pittance. Sales of CDs are off fifteen percent this year for a good reason. Because Steve Jobs delivered a better solution, and made you feel good about buying it. FURTHERMORE, there’s not a single soul who owns an iPod who doesn’t swear by it/testify about it. Imagine if they only felt the same way about the acts being rammed down their throats.

There’s a tipping point. We’re rapidly approaching it. That fifteen percent decline is far more dramatic than the loss of CD sales previously in this decade.

When the cookie crumbles, when most people want files, which side do you want to be on? Those purveying discs, telling customers to come back to the way things used to be, or those figuring out how to prosper in the new world of files?

Monetization

Music SHOULD NOT be free. Unless the rights holder wants to give it away. I AM not advocating that artists work without pay. I’m just saying that new methods of delivery beg for new methods of payment.

What do we know so far?

The iTunes Store accounts for a de minimis number of tracks on an iPod.

Despite the legal efforts of the RIAA, one can steal with impunity.

It’s going to be hard to eliminate disc and hard drive swapping. The only choice is to make it inconvenient/not worth one’s while. If everything is available at a cheap price to most people then asking your friend for an album will be equivalent to asking them to burn a DVD of last night’s "Sopranos" episode. Hell, HBO isn’t that expensive, get YOUR OWN damn subscription.

Standing in the way of new money arrangements are the old wave players worried about getting screwed again. Mostly publishers. Publishers need to go to a percentage rate. And record labels must give more of the revenue to artists. But neither of these two seem to be happening, so stealing continues unabated. And it’s this lack of movement that’s creating huge holes in the marketplace for entrepreneurs. Who might not need to profit off sales of tracks to make their nut. There’s a Microsoft looming to eclipse the IBM of the present world, those in power now just don’t know it yet.

There’s got to be some kind of ISP fee, a payment for acquisition, spread over many accounts, i.e. everybody, with a low fee attached. If you don’t think this is true, then you just don’t get it. We’re going to subscription, but said subscription is not rental, not in the foreseeable future. It’s time to charge in the interim, in the same way that Bronfman and Morris authorized YouTube, they must authorize a P2P site. Seven years have gone by without payment. Monies from acquisition of files on the Net this century via P2P methods is lost forever. Let’s START charging. Because just like the CD and the cassette before it, this era isn’t going to last FOREVER! Another one’s coming down the pike. The key is to make money NOW!

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