Business Matters: Napster Co-Founder Sean Parker Now Believes In Record Industry
Business Matters: Napster Co-Founder Sean Parker Now Believes In Record Industry

New Paper On Napster Unveils Little 'New' Material
An academic article by a Rutgers School of Law professor, titled " Copyright and Innovation: The Untold Story," claims to have "uncovered" what was lost from lawsuits and stifled innovation in the years followed record labels' attack on Napster. The article is the result of interviews with 31 chief executives, founders and vice-presidents from the worlds of music, technology and venture capital.

Actually, it's a story that has been told in numerous and various places over the years. Music journalist and Rolling Stone contributing editor Steve Knopper put out a book, "Appetite for Self-Destruction," about the record industry's collapse at the hands of Napster. One can hardly attend a music industry conference without hearing a similar post-mortem. And newspapers and online sites have covered this topic incessantly for over a decade. Some of the people quoted anonymously in the article have excoriated record labels on the record.

Written by Michael A. Carrier and funded in part by Google (and with the assistance from Google senior copyright counsel Fred von Lohmann, among others), the article has the usual checklist of familiar and well-worn themes. The record business suffered from an innovator's dilemma: check. Record label executives were unprepared for the arrival of the Internet: check. Record labels could have avoided their file-sharing problems had they negotiated a deal with Napster: check. Record labels have mercilessly taken pounds of flesh from startups they believed would fail: check. Copyright owners charge exorbitant rates for their catalogs: check. Record labels wanted to protect the CD and their relationships with physical retailers: check. Music copyright is a confusing and tangled mess that prohibits any Tom, Dick or Harry from remixing and sampling without permission: check. Business development is greatly dictated by each labels' respective business affairs departments: check. Statutory damages for copyright infringement are kind of ridiculous: check.

If any of these topics and opinions is brand new to you, and you have fewer than two years experience in the music business, you should read up on the industry in which you work. But I'm going to guess that most everybody with an opinion has been around long enough to hear it all.

That's not to say Carrier is wrong. Quite the contrary, he has pulled together a narrative that explains how the record business devolved from the late '90s to today. Label executives and the executives of their parent companies were hardly ready for the digital era. Before a few glimmers of hope -- Spotify, Vevo and Muve Music come to mind -- there was precious little momentum in services that require direct licenses.

Carrier has built a storyline for an obvious and predictable series of events. The lesson in Clayton M. Christensen's "The Innovator's Dilemma" is that well-run companies filled with intelligent executives have difficulties integrating new technologies into their existing businesses. Why would anybody expect the music business to be any different? Why would record labels be less captive to their customers than, say, manufacturers of certain data-storage devices were to their mainframe customers? Record labels didn't have relationships with individual music fans, they had relationships with retailers that sold CDs.

Let's leave the post-Napster post mortem to the academics. Let other industries struggling with their own digital transitions learn from the mistakes of music companies. If looking backward won't provide anything new -- as is the case here -- then keep your eyes set to the future.

Lucian Grainge's 'Manifesto' Words Are Laudable -- If Actually Implemented
It was heartening to read that Universal Music Group chief executive Lucian Grainge told the Financial Times he is working on a "manifesto for the new music industry" that would provide "a new way of working with all these startup platforms ... in a fair, open-minded way." If true, that's good news -- even if it took shape only to convince EU regulators Universal is dedicated to digital innovation. Talk is one thing but implementation is another. The music business is a long way from winning over top digital entrepreneurs and the venture capital companies that will fund them. In any case, it was great to read those comments from the leader of the world's biggest record company.

Pandora Slips Into Australia, New Zealand
Pandora quietly launched in Australia and New Zealand, expanding the service beyond the U.S. border for the first time in five years. The service is in beta and is open to all users.

Why Australia and New Zealand? "We reached agreements with rights holders down there," CEO Joe Kennedy tells Billboard.biz. "As we've said before, that's really the gating issue in most of the world."

A web-only version of Pandora launched in late June and the company announced its arrival earlier this week by sending out an email to people who had signed up for the service five years ago. Kennedy says those users' accounts and stations are still intact from 2007.

In May 2007 Pandora started blocking listeners outside the U.S. due to licensing issues. It has operated as a DMCA webcaster in the U.S. but has lacked a similar license elsewhere. "As it stands now, there is still no affordable license for a webcaster to stream legally (ie. abiding by all standing copyright law and properly compensating performers and composers) anywhere outside the US, (actually, make that within the US too as we're trying to work through a whole other mess here as well!)," founder Tim Westergren wrote in an October 2007 blog post.

Expansion into foreign countries will be important for Pandora's long-term growth. The company just posted a very slight month-to-month drop in listening hours -- to 1.08 billion in June from 1.1 billion in May. CEO Joe Kennedy called it a predictable, seasonal decline. That's true, but the decline also suggests that Pandora has gathered the low-hanging fruit. Future areas for growth will be a bit more difficult. The automobile holds potential but will unfold over many years due to the long replacement cycle of automobiles. Foreign countries can provide millions of new listeners.

Australia, the world's sixth-largest recorded music market, appears ready for Pandora's return. Spotify, Mog and Rdio have all launched in the country, but the country still doesn't have a dominant Internet radio player and consumers aren't yet streaming radio in large numbers. According to an Australian Communications and Media Authority study, only 912,000 out of 17.8 million people over the age of 14 streamed radio in 2011.

Questions? Comments? Let us know: @billboardbiz

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