The Great Train Robbery

“The Great Train Robbery,” released in 1903, was one of the most popular and commercially successful films of the pre-nickelodeon era, establishing the notion that film could be a commercially-viable medium. Inspired by a real-life robbery by the Butch Cassidy gang, the film was copied repeatedly in future westerns. Art imitating life. The film shows a train holdup with six-shooters, a daring robbery accompanied by violence and death, a hastily-assembled posse's chase on horseback after the fleeing bandits, and apprehension of the desperados after a showdown in the woods.

Fast forward 100 years. MySpace is the most popular and successful user experience ever -- this generation’s equivalent of a movie theatre. But will it establish the reality of commercially viable social networks? The jury is still out. There is no doubt that MySpace is being copied by dozens, if not hundreds, of social networks every day. They all hope to make it big like MySpace, which created tremendous wealth for its founders (Tom and Chris) and owners by translating massive number of eyeballs on a page into share value.

What is the connection between MySpace and the title of this blogor, rather, the key word (robbery)? If my awkward metaphor is unclear, stick with me while I give it another go…

What scares me most is not that MySpace continues to be heralded as one of the greatest wonders of the century, and is being emulated by countless others, but rather that it is supported by the financial community who (in the wake of Enron, etc.) should know better. MySpace has been engaged in what just might be the greatest robbery of the Century.

Tom and Chris have been joined by our modern-day Butch Cassidy, Rupert Murdoch, to form a kind of MySpace gang. The train being robbed is full of artists who have worked hard to create music for which they would like to earn money. But, instead, it is being given away free, in a form of theft, by MySpace. The money being stolen is that which artists, labels, and publishers (those who write and compose the music) would be paid if MySpace honored current copyright law and made payments due to record labels and publishers.

While MySpace offers many arguments as to why they shouldn’t pay, nothing changes the fact that MySpace is earning money (some estimate $200 million a year). How? From advertising sold on the back of tracks streamed illegally on millions of users’ pages every day.

Several major labels have gone to the bargaining table with MySpace to work out a retroactive deal (a kind a ransom). And many artists have been public about their enthusiasm for this new medium and how it helps to promote them (among them are some of the bigger independent labels, like Beggars). But the publishers (who are entitled to an amount equal to that of labels) have been strangely quiet, and only one of the major labels has actually begun a lawsuit to recoup its fair share of MySpace’s spoils. In large part the music industry has been passive, and yet they are the victims of this great train robbery.

Perhaps it’s worth mentioning that Tom and friends, pre-Rupert, may not have intended such massive copyright infringement. And maybe as the site’s popularity and share value grew beyond their wildest expectations they were blinded by fame and forgot how to do the right thing… But its hard to imagine that someone of their generation could forget the trouble that Napster got itself into (and doesn’t seem able to dig itself out of).

What we have here is akin to the Stockholm Syndrome. Musicians and record labels have been taken in by the hype and the presslargely controlled, funnily enough, by NewsCorp (or at least heavily influenced by it!). Ironically, the term “Stockholm Syndrome,” referring to the identification of hostages or prisoners with their captors, was inspired by another robbery (the 1973 Norrmalmstorg bank robbery in Stockholm, Sweden, in which hostages turned on the police for being unfair to the bank robbers).

Let’s do the math to see what is at stake. The top 100 major label bands on MySpace had an average total of 13 million plays as of November 2006 (that’s righteach band!). The calculation goes as follows: 13,000,000 track plays could earn 10 cents CPM (cost per thousand impressions) from advertising (quoted widely in the press as the average rate earned by MySpace), which equals $1,300 per band. This amounts to a total of $130,000 for the top 100 major label bands. The bands are due 8% for publishing rights (this usually goes to the publisher and the songwriter) and 8% for use of the recording" (this goes to the master owner i.e band or record label., or a total of $208 per band. Perhaps MySpace is earning more in advertising on these band pages, but lets say 10 cents CPM is all advertisers will pay for the eyeballs of students and people with too much time on their hands who don’t spend any money on the site. At $150,000 per copyright infringement (the penalty for stealing music), the contingent liability is enormous! My calculator doesn’t show this many digits. They risked all of this for potential income of $130,000, of which they would have owed a measly $20,800! Or maybe they should have paid 16% of the rumored $200 million they earned in advertising, which would be $32 million.

MySpace is owned by a publicly-traded company. In the US these companies supposedly cannot get away with outright theft. Maybe investors, too, are suffering from Stockholm Syndrome, caught up, as they seem to be, in too much share-value hype and not enough due diligence.

Perhaps some major labels are settling on the royalty payments with MySpace and other train robbers (YouTube, etc). But no one has offered a settlement on behalf of songwriter (or publisher) rights. No one from that side of the street has even begun to settle. In fact, when I spoke to a UK rights organization representative a couple of weeks ago, I was told that they don’t have the right to negotiate on behalf of ALL songwriters. Each one has to decide whether to settle.

We have the robbery.

The theft is not very big, but not unlike theft in the brick and mortar world, you do the crime, you do the time (and the time is usually a whole lot worse than the work required to pay for the stolen item).

And now a posse… comprised of one Universal Music (perhaps too weak for the task at hand, but at least showing tremendous bravery in the face of such opposition). The posse is clearly missing some key players: artists, independent labels, and those with an even greater vested interestsongwriters and composers who make their living thanks to copyright protections.

But I for one am waiting for the showdown.

Posted at 12:07PM Dec 31, 2006 by shelley in Music  |  Comments[0]