Is music undergoing democratization, or anarchization? I've argued before that P2P sites are a populist movement in the music industry, to the dismay of the major music labels. But I was taken to task recently by a friend who compares the use of P2P against recording labels to the use of technological weapons by the Bush administration. I like the analogy of the music industry to a government, but is BitTorrent really comparable to a Smart Bomb? Are P2P sites really akin to the Bush/Cheney White House?

A reader and friend responded to a previous post of mine about the “democratization” of the recording industry. In particular he objected to technology advocates who support P2P sites' attack on music labels. You can read his full comments, and my original article. Here are some excerpts that I find representative:

"Technology provided new consumer outlets, but never provided Label services like some would inappropriately claim. I knew the technology sites would one day have to pay to become "retail stores," just as Napster was advocating at the time. But they were never trying to become "Record Labels." Labels are banks who give artists money to record, tour, buy equipment, advertise, publicize, sell, distribute, hire attorneys, accountants, assistants and more, all of which are still needed, even with Internet "retail stores" like iTunes…"

"The notion of "democratization" as used by technologists toward music seems as absurd as when used by the Bush regime, and I find them similar. We live in a world, for better or worse, driven by "capitalization" which technologists seem hellbent to overthrow when practiced by the music industry. Yet, if the technologists do not 'capitalize" their own companies and VC funding dries up, there is no "democratizing" technologists employed there any longer.

"I personally find P2P users bombing the legal music industry to be no different than Bush bombing with technology in illegal wars and using illegal wiretaps that overthrow even more rights guaranteed by the American Constitution. Those same "democratizing" technologists provide the wiretaps, provide the smart bombs, and agree with right-wing politics most of the time, as suggested in an article about Facebook published by The Guardian in which the author refers to those technologists as "neo-conservative libertarians." Maybe you are one too? The last 8-years of all this bombing by Bush and his technology friends may have done more to overthrow Democratic Rights than to provide the "democratization" of anything."

–David Bean, Digital Music Professional

As anyone who ever befriended a struggling artist, I’m sympathetic to the plight of musicians. I’m sympathetic with those trying to get recording contracts; and I’m sympathetic to those who have recording contracts and find their careers going nowhere.

But I have less sympathy for major record labels. First, I believe generally they are in the business of generating “stars” rather than promoting artists. To this end, they spend a huge amount of capital on “artist development” and then maximize their investments by focusing on highly-profitable performers while allowing the bulk of their portfolio to go unsupported. The result is homogenization and a dead-end career for many very talented artists.

But mostly, I believe major labels have become so entrenched in their money-making system that they are unable to accept and take advantage of the changing technology landscape to benefit their clients. Make no mistake, even if albums disappeared and the price of a song fell to 25¢, there are still profitable business models for artists and labels – but rather than adopt to these models, major labels find it easier to abuse their customers and their clients in order to squeeze out every penny. In this, major labels are serving shareholders rather than artists or consumers.

This saga is why Big 5 Music Label executives are among the most hated businessmen in America.  Last June, Universal Music Group sued to have a video clip of a 13-month old toddler dancing to Prince’s “Let’s Go Crazy” removed from YouTube. Universal argued that the author – the child’s mother, Stephanie Lenz – violated the copyright of the song, which plays in the background of the video.

At first YouTube complied, but Lenz argued back, saying that the song was an obvious case of fair use. YouTube agreed and re-posted the song. This is when the story gets fun…

The digital rights group Electronic Frontier Foundation supported YouTube in court. The case pivoted on when a copyright holder may legitimately complain about possible infringement.

EFF claimed that the use of the song in Lenz’s video was obviously fair use – and that the label’s demand to remove the song was essentially harassment. The specific law they cited was the Digital Millennium Copyright Act, which recently has defined copyright on the Web.

Not understanding that discretion is the better part of valor, Universal turned and counter-sued the EFF. The big label argued that its initial complaint to YouTube was in itself a form a free speech – and the EFF suit represented a breach of Universal’s first-amendment rights. (Universal argued that use of the song wasn’t “obviously” a fair use – so a suit was warranted.)

The annual Brand-Z report of global brand valuations was released this week, and the results can tell us a lot about the road ahead for the emerging Mobile Web industry.

The survey is a listing of the world's 100 most valuable brands, compiled by WPP Group's Millward Brown unit. Brand rankings are determined by a combination of consumer perceptions, product performance, positioning and leadership. As it turns out, the most valued brands generally correspond to the most financially successful companies — and the best performance of publicly traded shares.

The relationship between brand value and business success is not as obvious as you might think. The Brand-Z study doesn’t take into account corporate performance when making the list. A brand is measured on less tangible qualities. What the study does show is that a well-positioned brand, innovative products, and successful public perception strongly impacts the success of a company’s stock price – especially during a recession.

The good news is for Google, whose estimated brand value rose 30% over the past year to $86.1 billion, making it the most valuable of the top 100 brands analyzed.

First it was Sergey Brin in Google’s January analyst call. Then AOL's Randy Falco in an internal memo. Now Facebook’s new COO Sheryl Sandberg has made it unanimous. No one has a clue how to make money on the enormous traffic spiraling through Social Networks. Sandberg told CNN.com “How we get [to advertising profitability], I don't think we know yet.”

To anyone moderately involved in the digital industry, these C-level comments are no surprise. As astonishing as the growth of Social Networks has been, their pitiful earnings have been equally stunning.

(originally posted at Brooding Savage)Â

In my last article, I explored the feasibility of a streaming music service by MySpace. The conclusion is that MySpace definitely has the traffic and ad inventory to make the business profitable. Unfortunately MySpace also has some financial problems that make the business not quite so cut-n-dry.

(This is part 2 of my 2-part series on MySpace and ad-supported music services. Read part 1 here.)

Let’s do some math:

MySpace’s overall advertising revenues in the United States reached approximately $525 million in 2007. But in the same period, MySpace served about 40 Billion monthly pageviews. Assuming that each page has space for 5 ads, that’s about 2.4 trillion ad impressions for the year. Assuming a conservative CPM of $2, MySpace should have made $4.8 billion in advertising.

Based on MySpace’s reported revenues, their actual CPM is $.24. But that’s not accurate either. Most of MySpace’s revenues comes indirectly, such as through their Google search relationship. In reality, MySpace rates have been reported to hover around $.01 CPM.

Why did MySpace fall short more than $4 billion in ad revenues last year, and why is their CPM 1/200th of what it should be?

(originally posted at Brooding Savage)Â

MySpace is now the latest company trying to distribute free ad-supported music. Good luck to them!

This article is part 1 in a 2-part series on MySpace and the feasibility of Ad-Supported Music Services.

Several companies, including LastFM and Imeem, are attempting to build ad-supported music services. I'm a fan of most of these, especially for the service they provide for independent artists. But lets be clear about one thing… these companies are not offering "free music." They’re offering free on-demand radio. There’s a big distinction.

SpiralFrog and Qtrax are building a reputation for delivering free, downloaded tracks, with the cost recouped through advertising revenues. I've had some previous thoughts on the subject. It would take more than traditional ad revenues to support the cost of music given the price points set by labels.

But the MySpace story is different, and raises two questions. Can MySpace actually provide even a streaming service supported by advertising when great services like Pandora and Live365 have stumbled. And even if MySpace can, who cares?