But Who's Buying?

But Who’s Buying? A Column About The Music Business

A few weeks before Britain’s historic Brexit referendum — before John Oliver eviscerated the whole thing on Last Week Tonight; before Noel Gallagher broke his legendary silence on the matter; long before the results had been announced and countless Britons took to Google, asking, “What is the EU?” — I caught this interview with David Rennie, Washington bureau chief of London-based news magazine The Economist.

Rennie was addressing a US audience largely unfamiliar with Brexit, and he was detailing, point by point, the particulars of the situation. As Rennie told it, there was virtually no upside to such a decision. No positive or even net-neutral result. To vote “Leave” would be a shortsighted and frankly stupid act of pointless self-destruction. So Rennie explained all that, clearly and compellingly, to a couple of American interviewers, and then they asked him: Why had British journalists been unable to impress such dangers upon their own country’s citizens? How had the facts been lost amid all the noise?

“Facts don’t matter,” said Rennie. “[British politicians] make up their own statistics.”

He went on:

We have — one of the leading campaigners, the guy who could be prime minister next — Boris Johnson, former mayor of London, driving round the UK in a big red double-decker bus, and it has a gigantic slogan on the side that says: “We send Brussels £350 million a week, let’s spend that on the National Health Service.”

Um … we don’t send Brussels £350 million a week! Or anything like it! It’s a totally made-up number! And every time people say, “Mr. Johnson, that’s a totally made-up number,” he smiles, waves, gets back in the bus, and drives on. Because it’s a popular slogan.

Of course, we all know what happened next: Britain voted to leave the EU, and within a week, publications like The New York Times were running stories with headlines like “Brexit Proponents’ False Promises Crumble.” And as you’re well aware, many of the politicians who publicly backed Brexit have already resigned, described by European Parliament Member Guy Verhofstadt as being “like rats fleeing from a sinking ship.”

I doubt David Rennie would admit to having any such response as he watches his homeland crumble and dissipate like a mound of ash, but I wonder if, somewhere in his heart, he feels the teensiest, tiniest degree of vindication today. I know that I would. I know that when I was listening to that interview last month, I felt an enormous degree of empathy for David Rennie. As a writer covering the music industry, I’ve grown accustomed to popular slogans drowning out pragmatic analysis. I’ve seen firsthand the way facts don’t matter in the face of a widely aggregated story. I’m used to people making up their own statistics to suit their own needs, and other people treating those statistics as gospel, as evidence, as truth.

It’s frustrating. It’s depressing. It’s exhausting. It’s infuriating.

***

Let me give you an example of how this happens in the music industry.

In March, Cary Sherman, the chairman and CEO of the Recording Industry Association Of America (or the RIAA, as you probably know them), wrote a post on Medium titled “State Of The Music Business: What The Numbers Tell Us.” Sherman was ostensibly contextualizing a bunch of statistics compiled by his organization, and in doing so, attempting to win the support of musicians, labels, tech services, politicians, and the general public. Sherman closed his statement by saying, “[R]eforms are necessary to level the playing field and ensure that the entire music community derives the full and fair value of our work.”

But why are reforms necessary? How exactly are musicians getting screwed? Per Sherman:

[S]ome companies take advantage of outdated, market-distorting government rules and regulations to either pay below fair-market rates, or avoid paying for that music altogether. These unjustifiable inequities (really, special-interest favors) include: the exemption AM/FM broadcasters enjoy from having to pay artists and labels for the music they play, satellite radio’s unfair and inexplicable below-market rate standard, and the hopelessly outdated “notice and takedown” provisions of the Digital Millennium Copyright Act (DMCA), which many services have distorted to rake in billions of dollars of revenue on the backs of artists, songwriters and labels.

Sherman’s language here was charged and obviously biased. And that’s totally OK! He’s not expected to be objective. But his agenda was stuffed, Trojan Horse-style, into a big red double-decker bus, which included a slogan on the side that looked something like this:

RIAA

Here’s what Sherman had to say about that graph:

Need further proof that some fundamental market distortions are at play? Last year, 17 million vinyl albums, a legacy format enjoying a bit of a resurgence, generated more revenues than billions and billions of on-demand free streams: $416 million compared to $385 million for on-demand free streams.

Immediately, those statistics were picked up by media outlets across the country — by just about everyone, in fact, from tech-specific sites like Recode to old-guard warhorses like The New York Times. And those publications treated Sherman’s claims as facts.

You probably realize this already, but in case we’re not clear: They are bullshit.

Shall we dig in?

Let’s start with that bottom number: $385 million generated by on-demand free streams.

Assuming that’s an accurate figure (and I have no reason to believe it’s not), that represents the amount paid out by services like YouTube to music rights holders. That’s absolutely not the total revenue generated, because it doesn’t even include YouTube’s cut. Those are just royalties. That’s basically pure profit. Got it?

Let’s move on to the top number: $416 million generated by vinyl sales.

Again, let’s take it as a given that we can trust that figure (it’s probably too high by at least a few million dollars, but I won’t get into that right now). That represents the total retail value of all vinyl sales. That’s not profit; that’s not even gross income. That’s the end-user cost. So when you walk into Urban Outfitters and fork over $25 for a copy of Lana Del Rey’s Honeymoon, the RIAA is counting that as $25 in revenue generated. That’s not even the wholesale price; it’s the retail price. That includes every penny, short of sales tax, including Urban Outfitters’ markup.

The royalties on that sale, though, are probably more like … two bucks? Three? If that? (And that doesn’t begin to account for the vastly disparate ways in which those respective sums are finally paid out to artists and songwriters.)

But don’t take my word for it. Here’s what Godmode Music’s Nick Sylvester had to say about the vinyl market in 2014:

The margins aren’t great at all. We make about $2 for every YVETTE record we sell [retailing for $20], and we only made 233! Vinyl is our primary source of income, but it’s also our biggest expense.

If we extrapolate using Sylvester’s math, vinyl sales actually generated about $41.6 million in 2015, which is approximately 11 percent of the $385 million generated by on-demand free streams — which seems, y’know, not wildly out of line for “a legacy format enjoying a bit of a resurgence,” right?

People seem to like charts, so I made one of my own, correcting the “errors” in the RIAA’s formula. Welcome to reality!

graphh

“Need further proof that some fundamental market distortions are at play?” Well, you’re in luck, because the RIAA — the self-described “trade organization that supports and promotes the creative and financial vitality of the major music companies” — is here to distort that shit beyond recognition. Then they’ll smile, wave, get back in the bus, and drive on.

***

None of this would matter all that much if these statistics and “facts” weren’t being used to influence opinions and forcibly reform “outdated, market-distorting government rules and regulations” in ways that will almost definitely negatively affect listeners and artists and everyone else. BUT that’s precisely how they’re being used. Last month, A2IM (American Association Of Independent Music) Keynote Speaker Jim McDermott included the “vinyl revenue is bigger than YouTube revenue” line as a knockout punch in his address at the organization’s “Indie Week” in New York City. He too was advocating for serious reform. Here’s an excerpt:

YouTube [i.e., Google] uses the DMCA as a shield and an excuse to behave like internet companies did in the Napster and Limewire days, when iffy behavior about copyright was still getting hashed out … As big a threat as Napster once was to the survival of our industry, Google [i.e., the open internet] is a much greater existential threat, now and in the years to come. Napster didn’t have the ambition or the deep pockets required to influence governments. It’s going to be an incredibly difficult battle, and our industry is outgunned. We’re going to need consumers on our side, which means the artists are going to have to get a lot more vocal. And the messaging needs to be crafted carefully, because the tech industry and the media so often reframe any artist who speaks up about their rights as greedy.

In his speech, McDermott talked about “speaking truth to power,” but made no mention of blatantly lying to those who lack power when directing those people to “get a lot more vocal” and telling them their “messaging needs to be crafted carefully.” Whether artists are greedy is irrelevant — surely some are greedy monsters, some are selfless angels, and the other 99 percent are just regular people trying to make a living.

The thing is, artists are largely uninformed and/or misinformed, and the music industry needs them to stay largely uninformed and/or misinformed. But it also needs them to be vocal and on-message. Mission accomplished. As of now, 180 MASSIVE artists have signed a petition directed at Congress demanding digital copyright reform. There are also 19 organizations and companies that have affixed their names to that petition — including the RIAA and A2IM.

Let’s assume those organizations and companies are fully aware that the whole “vinyl revenue is bigger than YouTube revenue” thing is outright bullshit. Which … I mean, they do, because they’re not actual idiots. They know how these things work. Well, then, they’re lying. They’re lying to the public and the media and Congress. They’re lying to artists.

I won’t try to explain the vastly ill-advised and willfully destructive nature of these proposed reforms, partly because doing so would require another two columns even longer than this one, and partly because I’d do a bad job of it. Fortunately, TechDirt has compiled the highlights and Rebecca Tushnet has been cataloging the whole damn debacle. You should check out both those things, because they’re terrifying, and this will affect you.

I also won’t speculate on the music industry’s motives for pushing such reforms, because there are numerous possibilities, and as Hank Green illustrated in his recent Recode essay, “The Music Industry Seems To Love YouTube. Why Do They Keep Saying They Hate It?,” the motives are almost irrelevant, because they may not even be clear to the instigators. You should also read that story in full, because it’s fantastic, but in the meantime, here’s one important point made by Green:

YouTube isn’t “hiding behind” DMCA safe harbor. It isn’t a loophole, it’s a law. It was designed to protect companies from overzealous litigation, and it’s doing exactly that.

So without attempting to divine the industry’s reason for lying to everyone, the fact remains, they’re lying.

Put it this way: How many artists would have signed that petition if they were fully aware that, in 2015, vinyl revenue was in fact DWARFED by YouTube revenue, and that the digital copyright reform they’re currently backing would fuck over the whole internet, piss off the whole world, and, oh right, also severely and inalterably cut into their own earning potential, effective immediately?

What’s the American word for “Bregret”?

peace-sells-2

***

So yeah, it’s infuriating, and I’m sick of it, which is where this column starts and why I started it. My intention here is to cover the business of music as honestly and accurately as I’m able — not always easy given the steady line of total bullshit we’re constantly being fed. It’s something I’ve tried to do a whole bunch in assorted features on Stereogum over the last year or so, and now, we have a dedicated space for this stuff. The goal here is finding the actual facts, even if they don’t matter to anyone else. If I make a mistake or a miscalculation, I’ll own it, but I’m not trying to “reframe” anything for the sake of seeing how it looks in a new frame; I don’t have an agenda beyond the truth.

The column’s title — “But Who’s Buying?” — is a Megadeth reference, and I think it speaks for itself, but if you don’t mind, I’d like to share with you how I came up with that name (after considering and rejecting a bunch of others including “Double-Decker Bus,” a richly ironic Smiths reference).

Earlier this week, I was reading a piece called “Why Is It So Hard For TV Shows About Music To Get It Right?” The story was written by the excellent music critic Steven Hyden, who called out Vinyl, Roadies, and Sex&Drugs&Rock&Roll as three shows that got it wrong. An example of one that got it right? Empire: “the most successful pop-related show on television,” in Hyden’s opinion. “Empire might not closely resemble the real-life pop industry, but watching it often feels like listening to pop music.”

I’ll defer to Hyden here because I’ve never made it through a single episode of any of those shows, but for my money, the show that really gets it right — the one that does “closely resemble the real-life pop industry” — is also the best program on TV, period (sorry, Tom). It just concluded its third season on HBO, and it’s full of exactly the sort of executive-level sociopathy, corporate ineptitude, tech-world arrogance, creative-type hubris/naïveté, dream-squashing profiteering, solipsistic self-regard, and media manipulation that defines the music business today.

It’s called Silicon Valley, and if you don’t watch it, you should.

If you do watch it, you’re maybe sitting here thinking, “Hey, wait a sec, unless I missed something, nobody on Silicon Valley cares about music at all!”

You didn’t miss anything, my friend. That’s the music industry today.

I mean, that’s not the only way Silicon Valley gets it right. See, the other thing is … the biz has, like, evolved, man. In the ’90s, when five nerdy, dysfunctional DIY dudes hung out all day and night in a dumpy house in the California suburbs, smoking pot, drinking beer, and jamming on some ideas, they called themselves Pavement, and they looked like this:

pavement

But in 2016, when five nerdy, dysfunctional DIY dudes hang out all day and night in a dumpy house in the California suburbs, smoking pot, drinking beer, and jamming on some ideas, they call themselves Pied Piper, and they look like this:

siliconvalley

If you don’t watch Silicon Valley, you won’t know what Pied Piper is, so I’ll tell you: It’s the name of the startup that the five guys in pic #2 have been trying to launch, to varying degrees of success, for three seasons now. It’s also the name of that company’s flagship product: a platform, and/or a piece of hardware, and/or a video-streaming service, and/or whatever other shape Pied Piper might take. The business model changes depending on who’s calling the shots and how they envision Pied Piper scaling; what their plan is for mining billions of dollars from the hard work, accidental ingenuity, and doofy camaraderie of those five guys (and, of course, the global economy).

If you do watch the show, you might remember this fun fact from its very earliest episodes: In Pied Piper’s first incarnation — before the people with money realized there was infinitely more money to be made elsewhere and told its creators to pivot in another direction — it was … a music app.

Haha. I know. You think that was an accident? That wasn’t an accident.

So ANYWAY, Hyden’s piece made me think of Silicon Valley, and that made me think of Pied Piper, and that (as always) made me think of Megadeth’s 1992 single “Symphony Of Destruction,” a fucking awesome song with an especially fucking awesome chorus that goes:

“Just like the Pied Piper/ Led rats through the streets…”

And there was something in that messy confluence that spoke to me; it seemed somehow to exactly match my intentions for this column. But it didn’t provide a title: “Symphony Of Destruction”? A little too melodramatic. “Rats Through The Streets”? Sure it fit, but, honestly, fuck the rats. I didn’t want this thing to celebrate the vermin who will be jumping off this boat just in time to grab the last life preserver. So I went with a different Megadeth song, a stone classic. It has a lot in common with “Symphony Of Destruction,” sonically and thematically, and it too features a fucking awesome chorus:

“If there’s a new way/ I’ll be the first in line/ But it better work this time.”

See, right now, nothing seems to be working. But some of the new ways? Man, believe it or not, things can get worse, and they will. That double-decker bus is going to crash. And that shit written on the side? It’s totally made-up. It’s wrong. Don’t fall for it. Don’t buy it.