The Only Republican in San Francisco

But why now?

My previous post on declining music sales elicited some interesting alternative theories on the decline. Some are plausible, and others less so.

If the fortunes of the recording industry are declining, we have to ask what has changed to cause it. Why is 2007 different from 2006 or 1997? In other words, why now?

Theory 1: Individual songs

The most plausible one that I see is that consumers are now able to buy individual songs through iTunes and others, while previously they were forced to buy the whole album. So an artist now sells $2 worth of hits instead of a $12 CD.

However, the idea of singles is not new. CD singles have been available, and before that, vinyl 45s. I don't know the numbers, but it seems to me that consumers largely rejected the CD single. Back in the day, vinyl 45s did well, but I generally chose albums. (Don't ask about that Andy Gibb 45 in the basement.)

So, to my mind, individual songs have always been available, even during times when the recording business was doing well.

Theory 2: Record companies are releasing lower-quality music

I don't think the facts bear this out. Remember the 80's? The 90's? And now? Come on, clear out those cobwebs.

Generic mainstream music has always been with us. At any given time, 90% of what you hear is junk and a small percentage is worth your attention.

For me, this made it fun to find those Camper van Beethoven and Replacements records, way back when.

The Economist sums it up pretty well:

[T]his argument is almost always offered by people over the age of 25.  It has been known for years that turning 25 puts certain physiological processes in motion, as a result of which an ever-increasing percentage of new music sounds like an electric cat being vivisected inside a commercial laundry.  And second of all, the overwhelming majority of music being downloaded is the same crap that critics claim nobody wants to buy. 

Understand, grampa? Hey, I am old like you. But that ain't the music's fault.

Hell, I would even venture to say that Justin Timberlake is vastly more listenable than Michael Bolton ever was. So maybe our commercial music is actually improving. Admit it: mainstream pabulum is as old as music itself.

Theory 3: Artists don't need record labels

This could well become true, up to a point. A record label offers an artist three things: marketing, distribution and a paycheck. The distribution thing is becoming nearly free, so artists have more options.

But bands still need to be promoted, regardless of distribution channel. You need someone to figure out your "brand", to get your song played on The OC, to negotiate with Steve Jobs, and to make sure the royalty check actually comes in.

So I do think that we will continue to have some sort of royalty-based music promotion. We may not call it a record label, but it's something close.

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Back to the question -- what has changed that would explain the drop in music sales? Music itself is as popular as it's ever been. The quality is the same, and the variety is greater. Record labels were greedy in 1965 and they are greedy now.

What's different?

Sticking it to whom, exactly?

Today, the Wall Street Journal points out that CD and overall music sales have dropped precipitously from the year previous. Michael Arrington sees this as a good thing. Others, like James DeLong, believe that the loss of intellectual property portends a comeback for the reed flute.

We need to recognize record contracts for what they are: venture capital for new talent. A record company fronts a new band money to allow them to record an album, go on tour and otherwise promote themselves.

If making a bet on a new band becomes a greater longshot -- which is to say, the record company has a diminished likelihood of recouping its investment -- then they become less likely to take a chance in the first place.

Can we assume that this decline in fortunes for the record business is due to piracy? We can't say for sure, empirically, but I think most of us would recognize that piracy is quite easy and quite rampant. Even an otherwise honest person, who has no particular interest in the creative industry, will often choose free over not free.

So if piracy takes, say, 20% of music sales, what happens? It looks something like this.

Madonna will sell only 4 million copies instead of the usual 5 million. She does not make the usual extravagant profits, but comes out way ahead regardless.

But a typical "indie" band will sell maybe 50,000 copies if they do especially well. One million lost record sales is the difference between success and failure for 20 such bands. Where established artists are only slightly less successful due to piracy,  smaller artists simply fall off the cliff.

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Arrington speculates that the result will be a move from making money on album sales, to making it in other forms such as tours:

As the marginal price of recorded music continues to fall towards zero, its natural price, bands will need to make money elsewhere. Live concerts will become more and more popular, and will be the largest source of revenue for many artists. Recorded music will be used to promote those live events.

He's right that the cost of reproduction is falling to zero. And certainly, artists have a lot of new possibilities due to the Internet. But it's a big leap to say that less recorded music will result in more people going to shows.

Think of it this way: of the shows an average person goes to, how many are bands whose recordings they've heard? If record companies are less likely to sign and promote a band, resulting in less recorded music and less audience awareness, how can this improve an artist's chances?

Let's remind ourselves that the Beatles stopped touring in 1966. Subsequently, they released Sgt. Pepper's, The White Album, Abbey Road and Let It Be. Could they have made these albums if their only recoupment was touring?

Another of my faves, XTC, stopped touring in 1982, after which they made many of their best, most lavishly produced masterpieces. Today, would they even get signed?

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A decline in business for legal recordings will hurt the smaller bands first. And we won't even know it, because we will never hear them in the first place. It's very hard to cherish the record that never gets made.

Record companies will only take sure bets, which means bland commercial artists, and runners-up from American Idol. The revolutionaries will more likely be found asking if you want fries with that.

It's easy to think that piracy is some sort of comeuppance to those greedy record companies. But such moralizing aside, who exactly are we sticking it to?

PS: The author used to work at a pretty good independent record company and also played in a pretty good band which put out a pretty good record and also turned down a pretty bad record contract.

Dvorak and the myth of "free"

John Dvorak has a long tirade about municipal Wi-fi and phone companies' supposed conspiracy to kill it. I like Dvorak's curmudgeonly ways. But the risk of such muckraking is that he gets a lot of things wrong. Let's start with this:

If you take a city the size of San Francisco and give the entire population free high-speed Wi-Fi, think of the applications that will fall into place. That includes VoIP calls galore. Move over, cell phone; hello, Wi-Fi phone.

Mr. Dvorak is committing the common sin of getting people's hopes up while not doing his homework. Let's put aside the fact that the network doesn't yet exist. Here are the incorrect assertions:

1) Free wi-fi will be faster than the phone companies' wireless plans. Dvorak says:

Wi-Fi is currently at 54 Mbps and has been for years. Reaching 100 Mbps is easily achievable thanks to pre-n and other tricks. The cell connections run from 384 Kbps with EDGE up to maybe 2 Mbps on EV-DO, if you're lucky.

All true. Except that in San Francisco, the free Wi-fi offering promises only 300kbps, which is six times slower than the mobile offering above.

And keep in mind that these are theoretical numbers. Add an apartment building -- or a neighbor's microwave oven -- and Wi-fi bandwidth drops a lot. The mobile phone companies have been working around physical barriers for a lot longer than the Wi-fi folks.

In both cases, you'll be sharing that bandwidth with a few hundred thousand of your closest friends. Wi-fi only works within the city limits, while the phoneco's coverage is much broader.

Advantage: phoneco's.

2) The SF wi-fi network will support VoIP. The basic, free, ad-supported service promises around 300kbps. This is theoretically enough for a voice call -- but only if that bandwidth is consistent and glitch-free (see above).

I use Skype over my hard-wired 5-megabit connection here at Casa Republicano. It works fine in most circumstances, but breaks up with some regularity.

Now imagine a wireless network with 1/15th of that bandwidth, and shared by your neighbors. You might be able to achieve an intelligible conversation here and there, but I can't imagine anyone will depend on it.

More importantly, I suspect that free service will not even allow VoIP traffic. Did I mention that it's ad-supported? Google inserts ads into web pages. How do you insert ads into a third-party VoIP call? You don't. So it's a fair bet that Google and Earthlink will only allow traditional web surfing on the free network.

Advantage: phoneco's.

3) The public is interested in switching between mobile and wi-fi. According to this report:

The research firm Ovum predicted in a report released Tuesday that by the end of 2010 only a little more than 2 percent of all mobile subscribers, or fewer than 5.5 million people, will have purchased dual-mode services.

I dig the idea of a phone with Wi-fi capabilities, but it would have to work with a minimum of fuss. I am not gonna tweak network settings all day long. And I'm a geek! Most people's tolerance for the cutting edge is much lower than mine. Of course, these things might improve drastically. But until they do, don't expect a change in that 2% figure.

Advantage: phoneco's.

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Now, let's get to the meat of this. Is municipal Wi-fi desirable? Dvorak puts it this way:

Is the public so stupid that if given the choice between that service and free municipal Wi-Fi, they'd want the slower expensive service over the free faster service?

Probably not when the extremes are that broad, but you can be sure that the local politicians will cave on this, and we can forget free municipal Wi-Fi and Skype phones. Free is, by definition, communist! And it hurts free enterprise!

Who needs progress when you have profits?

I appreciate his snark here, but I am afraid that a) it's not faster [see above] b) it's not free and c) it's closer to communist than John thinks.

Municipal wi-fi projects have all been enormously wasteful boondoggles paid for by taxpayers, and largely unused by the public. Here are a few samples from this new report [pdf]:

• Dalton, Georgia: $171.0 million
• Tacoma, Washington: $110.9 million
• Grant County, Washington: $ 76.4 million
• Jackson, Tennessee: $ 63.7 million
• Alameda, California: $ 59.3 million
• Provo, Utah: $ 45.7 million [...]

...and these are just preliminary numbers. The funds have gone to creating new bureaucracies, which will certainly continue to grow. How many teachers you figure those numbers would pay for?

These networks do not need to perform to continue to receive funds. This allows them to work poorly while undercutting commercial offerings on price. So yes, it does hurt free enterprise, which many of us call progress.

And here in San Francisco, socialism is alive and well:

IN SAN FRANCISCO, says Ross Mirkarimi, one of 11 members of the city's elected Board of Supervisors and a co-founder of California's Green Party, “suspicion of corporate interests flows as thick as the fog.” So it has come naturally for the Board, the city's legislature, to force a delay on a plan, signed in January by the mayor, Gavin Newsom, and two technology companies, Earthlink and Google, to let the firms blanket the city with free or cheap wireless internet access by putting little “Wi-Fi” antennae on lamp-posts.

[The] reason appears to be that fog-like suspicion. If “big business”—ie, Earthlink and Google—is so keen on that wireless network, “we should consider doing it ourselves,” says Jake McGoldrick, another supervisor. He wants to study other options, including a network financed, owned and run by the city.

This is quite the opposite of Dvorak's concern. He seems to think that free-market types like me are the barrier to municipal Wi-fi. In San Francisco, the primary barrier is that the current proposal is not socialist enough.

h/t Glenn, who has more.