MADE

AOL bought Bebo in 2008 for $850 million. After that happened, British musician Billy Bragg blasted Bebo in a New York Times article for refusing to pay out royalties to all the musicians who uploaded music to the site. According to him, they were just as much investors in Bebo as the people who put money into the site.

Billy Braggs is wrong about that. That strain of thought is faulty and dangerous to innovation, which ultimately benefits everyone. It presents one of the great ironies of the modern music industry. The very people (record labels, RIAA) who are desperate to find new revenue channels are stifling the very innovation that could produce new business models for the industry.

The Imeems and Lala.com’s of the world have been trying to invent new ways of experiencing music. So far, neither has been all that successful partly because of crushing music licensing fees. The labels have a mafia-like hold on these types of music portals because they own many of the most recognized musical acts and they know that the portals need them.

I don’t know how long it’s going to take for the labels to realize that charging for digital music is a losing game. When it comes to the issue of charging people money for music, most musicians are of the same mind as the labels.

It’s an entirely understandable position. You work your butt off to create music, so you expect payment for it. But just because it’s understandable doesn’t mean it isn’t faulty. It’s faulty on an economic level because the market doesn’t care how hard you work. Hard work having any intrinsic value is a fiction we tell kids to motivate them, but out in the real world, customers don’t give a damn how hard you work on something. They just care if your product is good. If it isn’t, you’re done, no matter how hard you worked. And philosophically, the idea of hard work having intrinsic value is also faulty. Just because you work hard at something doesn’t mean that you’re entitled to receive payment for it. There are many things that people work hard at that they don’t get paid for. Like raising kids. Or going to school.

Hard work in and of itself doesn’t assign value to something. Things have value when people think they do and are willing to exchange money for them.Value is purely psychological.

Music used to have value because it was relatively hard to get, not because it was hard to make. Good music is still hard to make, but it’s no longer hard to get. All anybody needs is a browser. When I say music has little value, I’m referring to music as a product, not as an emotional experience. That still has lots of value.

Music royalties were possible in the CD era because music acts and labels needed each other. In the abstract, the idea of royalties makes little sense. Why should you get paid every time a song that you wrote 10 years ago gets played? But before, the system was set up so you could get paid, so you did. You could because the labels needed you. So you could demand royalty payments and get them. And the label could pay them because they made money from the albums you sold, which most people had to buy to experience your music.

Royalties don’t work too well in the digital world though. Just because people are streaming a song doesn’t mean they’ve paid for it. In fact, most of the music that’s being heard online hasn’t been paid for. So who’s going to pay the royalty fee? Certainly not the site that’s hosting your song. They’re doing you a favor by making your song available to the public.

Don’t expect the labels to win this one. You can’t defy economics the same way you can’t defy gravity. The labels won the battle when they dismantled Napster, but they lost the war a long time ago.

By: Twitter Buttons