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Pho, Cole Porter and Tarzan economics Jim Griffin, founder of Cherry Lane Digital and a leading figure in the music industry's transition to the digital age, says the biggest challenge facing the music industry is the misconception that file sharing is the core issue in the disruptive transition from analog to digital. "It's sad that this point is missed, but this struggle is not about how you get a Beatles song or a new track by Courtney Love. It appears to be about music and movie piracy, and it's not. Those are merely symptoms. It involves much deeper issues about how we communicate, how we share information and ideas."
The following is excerpted from chapter 11 (Personal broadcasting) of J.D. Lasica's book Darknet: Hollywood's War Against the Digital Generation.
"When she was a little girl, Ann went around the neighborhood and encouraged all the kids to draw, to create these terrific little works of art. She took them and decided to create a little neighborhood art gallery in her parents' garage. And then she decided to start charging a quarter admission. If the little boys and girls who created the pictures wanted to see their own drawings and their friends' drawings, they had to pay her a quarter. So, to recap: Ann created no art herself. She relied exclusively on the work of others. And she made more than the artists did." Sounds a lot like the music recording industry. Today, the gatekeepers and middlemen are in danger of being innovated into irrelevance. How will the record companies survive the transition from the analog to digital age? What will the new business models look like? It starts with Tarzan economics. "If you're Tarzan, swinging through the jungle, you've got to cling to the vine and stay off the jungle floor because that's death," Jim Griffin says over dinner at Versailles, a funky Cuban restaurant in Los Angeles. "But you've also got to let go of the vine at precisely the right moment to grab the next one. So there is this moment when you abandon the old thing and grab the new. You can't let go too early, because that would be death. And you can't hold on to the old for too long or it won't work." Griffin, a 46-year-old force of nature with broad shoulders, wire-rim glasses, and neatly combed salt-and-pepper hair, is a leading digital-rights visionary. "That's what this debate is all about: which vine to grab, and when to let go of the old," he says, booming voice rolling across dishes of garlic chicken, pork, and fried bananas. Moments later, a musician and a new media entrepreneur join our table, acting on an invitation I sent out earlier on the Pho digital entertainment discussion list. It's been like this since May 1998, when Griffin, his friend John Parris, and a handful of like-minded individuals began gathering each week at Pho 87, a Vietnamese soup kitchen in L.A.'s Chinatown, to thrash out the convergence of music, art, and the Internet. The get-togethers quickly blossomed into something larger: a mailing list with 1,000 members and a network of Pho hot spots — in New York, London, Detroit, Chicago, Seattle, Helsinki, Washington, Philadelphia, Austin — where dozens of musicians, technologists, hackers, attorneys, record label employees, new media chiefs, and others gather over brunch to discuss new business models, the latest antipiracy techniques, copyright reform, and how to midwife the music industry into the digital era. Most members appear to share the McLuhanesque notion that the medium is the message. In this view, the future is about ubiquitous digital music and services, not physical goods and artificial scarcity that mimic the analog world. All that remains is to hammer out the details. The Pho group has influence beyond its numbers. Griffin says the heads of all Big Five record labels — Universal, Warner, Sony, BMG, and EMI — either belong to the list or get summaries of important discussions. Napster founder Shawn Fanning, MP3.com founder Michael Robertson, former RIAA chief Hilary Rosen, and industry-bashing rocker Courtney Love were early members. Griffin was able to bring together such disparate parties for two reasons. First, he has street cred. Griffin was Geffen Records' director of technology from 1993 to 1998. In June 1994, he led the Geffen team that posted online the first legal full-length commercial song, Aerosmith's "Head First" — to the consternation of Geffen's parent company, Universal Music Group. Universal was later acquired by Vivendi, which put an end to Geffen's heretical ways. Griffin now heads up the consulting firm Cherry Lane Digital. The second thing Griffin brought to the table was an open-source approach. He took not only the name pho (pronounced fuh) from the soothing Vietnamese beef noodle soup, but also borrowed the spirit of conviviality, openness, and hospitality found at such gatherings — starting with Griffin picking up the tab for several years. Whether online or at one of its frequent gatherings, which can attract as many as 100 people at a time, the Pho community encourages an open, robust exchange of ideas. At Pho's inception, the music industry viewed MP3s with hostility, and woe be the turncoat who advocated accommodation with the new digital technologies. By contrast, anyone could come to a Pho brunch for free. Anyone could join the mailing list and espouse any view. "You had this very regimented music industry that was controlling the dialogue about the digitization of art and music," Griffin says, "and we decided, let's do the opposite of that." By flinging wide its doors to music fans instead of just industry professionals, Pho also encouraged the notion that a 14-year-old could teach the music industry a thing or two. "I thought it would help if the music labels and Hollywood found out what was really going on in dormitories and in kids' bedrooms," Griffin says. Young people still belong to the list, and he says they invariably display a keen instinct for indicating where the business is heading. Many music executives and company lawyers remain mired in the past, however. An hour earlier, Griffin — dressed in a gray suit, immaculate white shirt, and silk tie — appeared on a panel discussing Internet piracy held by the Beverly Hills Bar Association. "An intellectual property attorney on the panel was nearly ranting about Nokia selling a phone with an embedded MP3 player," he says. Such players were ruled to be legal in 1999, but the record companies still haven't accepted MP3. "That's how bizarre things are," Griffin says. "You and I would laugh at the notion that MP3s are piracy, but in some countries, they are. In England, unlike the U.S., it's a copyright infringement to change the form of a song. Laws aside, the message from today's customer is clear: We'll choose the medium. It's very much a change from push to pull. When I came into the entertainment business, it was all push. It was unheard of to think that a customer would get to choose the delivery medium for her music." When you speak to entertainment executives privately, he says, nearly all concede that the digital transformation of their industry is inevitable. "But they also take the view, 'Not on my watch. Just don't let it happen during my contract.'" That, naturally, creates friction. Griffin says the biggest challenge facing the music industry is the misconception that file sharing is the core issue in the disruptive transition from analog to digital. "It's sad that this point is missed, but this struggle is not about how you get a Beatles song or a new track by Courtney Love. It appears to be about music and movie piracy, and it's not. Those are merely symptoms. It involves much deeper issues about how we communicate, how we share information and ideas." Griffin says the music companies should accept the inevitability that file trading has become a permanent staple of youth culture. But more importantly, they need to move beyond that reality and figure out how to "monetize the anarchy." The new digital rules we arrive at will affect not just the way we acquire the latest pop hit. They will also determine how all kinds of knowledge will be shared. "This issue is our generation's nuclear power, and we have to get it right," he says. "We want to keep art, knowledge, and expression flowing freely." He digs into a plate of chicken, rice, and beans. "Teenagers instinctively know this. When they put a song on a P2P network, they believe they're increasing a song's popularity and its ultimate value. So the record labels' model of distribution — where they adjust price to meet demand and control every aspect of the supply chain — is a very different world than the one in which a teenager grows up today." The other two Phosters nod in agreement with this bit of wisdom from their sage-in-chief. Over the years, Pho members have read or written thousands of e-mails about the recording industry's outmoded business model. Many would doubtless agree with Lyor Cohen, head of Universal's Island Def Jam, who told the New Yorker in 2003 that the record industry would have been better off had the CD not come along in 1983. Without the CD, the old record industry would have died in the early '80s, and a new industry would have risen up in its place. Instead of a decaying industry intent on recycling old staples and maintaining the status quo, we would now be awash in new musical forms and exposed to a new generation of artists who today find it difficult to get onto the airwaves or onto the dwindling shelf space for new artists at the three largest music retailers: BestBuy, Wal-Mart, and Target. Today, the prospects for the music industry's rebirth are less certain. How things turn out is anyone's guess. "We're in the steepest, most turbulent part of the S curve of change right now," says Josh Warner, the ecommerce guy on my right. "I can see this far in front of my nose right now." Three main schools of thoughts seem to have formed about the industry's prospects. The optimists believe that because digital delivery is destiny, customers will eventually flock in great numbers to legitimate online music stores or subscription services that tap into a celestial jukebox. The pessimists believe file sharing permanently undercuts the possibility of a legitimate music marketplace, and the music business will return to an 1800s model when live performances and songwriting were the main sources of revenue. David Bowie, for instance, has told interviewers he believes copyright "will no longer exist in 10 years," that "music itself is gong to become like running water or electricity," and that "the corporate [music] companies will come to an end." A third school — I'll call it the Ubiquity School — advocates universal access to music. The theory goes that accessing media shouldn't be free but it should "feel free." The Ubiquity School's tenets boil down to this: Open wide the music vaults, digitize the unreleased catalogs, legalize the file-sharing networks, and exponentially increase music consumption — and revenues — by imposing a blanket license. All three groups believe, to some degree, that we are in the midst of a historic upheaval in how people use and consume music. They agree, to varying degrees, that the record companies, wedded to mega-stars and mass tastes, will undergo major disruptions in their business models, and that the late 20th century phenomenon of pop superstars bringing in tens of millions of dollars was an aberration. But if there is one overriding consensus among all three camps on Pho, it is that we need to ensure artists are paid for their works. Lyricist Sammy Cahn, the Songwriters Hall of Fame member who wrote such hits as "All the Way" and "Call Me Irresponsible," was often asked, "Which comes first, the music or the lyrics?" He liked to say, "Neither. It's the phone call." When Cole Porter was asked where he gets his inspiration, he replied, "My sole inspiration is a telephone call from a producer." The dollar still drives a lot of inspiration. If music and art are to flow like fountains, where will the money come from? Who will dial up today's Sammy Cahns and Cole Porters? Griffin, a leading figure in the Ubiquity School, says that for a roadmap of where we're heading, we first need to look back. When electricity became widespread early in the last century, music underwent a transition from the acoustic to the electric. "Generally speaking, before the 1920s, artists controlled their art with their feet. If you weren't in the same room, you couldn't see or hear the performer. When electricity comes on the scene, suddenly you have public address systems, which means the audience is bigger than the artist can count, and control starts to slip away. Radio comes along, and people can hear you perform from across the ocean. When television appears, they can see you from anywhere, and artistic control is really gone. Then cable and satellite arrive. So artists enter the 20th century with complete control and leave with no control." Seen in the rear-view mirror of history, the transition from acoustic to electric was far more disruptive and savage than the transition from electric to digital. Griffin says history again teaches us what to do. "We create a pool of money, we find a fair way to split it up, and we give people flat-fee buffets of unbridled choice. A civilized society does not long tolerate creativity or knowledge or art losing its financial footing." The idea of a blanket license is fairly straightforward, though the devil is in the details. Under such a plan, music fans would pay a tax or fee on their Internet access, on MP3 players, or on blank CDs — regardless of whether the person downloads anything. Music file swapping would become not only legal but actively encouraged, with free downloads for everyone. The more frequently a song is downloaded, the more an artist would be paid. "Let's give up the control but take in the money," says Griffin, who figures it would tack on another 10 percent to the average cable bill. He compares the plan to the pay-one-price admission at an amusement park. Proposals for a blanket license take many forms. Some apply just to music, while others encompass all digital media, including movies, TV, and porn. Griffin favors a voluntary system devised through private industry negotiations rather than by government mandate. If a voluntary approach doesn't work, he favors the government stepping in to impose a solution. The EFF and some prominent academics are among those who favor that approach, called a compulsory or statutory license. Proponents point out the government has intervened in this way on several occasions. In 1909, Congress set up a licensing system so that anyone can record a cover of a song, without having to ask permission from the songwriter, as long as they pay the composer a standard fee based on each copy they sell. That's why you're perfectly free to be the billionth artist to record a cover of "Louie, Louie." "L.A. and Hollywood were built on licensing, and they die without licensing," Griffin says. Later, the government imposed similar compulsory licenses for radio and cable television. "Can you imagine the alternative, where every radio station has to call every rights holder for permission to play any song?" he asks. It's an intriguing proposal, one that's worthy of serious consideration. It would solve the P2P file-sharing problem overnight by making the activity legal. It would get money into the hands of artists. It would eliminate the labels' penchant for pernicious forms of copy protection that prevent people from playing legally purchased music on the devices they want. A small fee assessed on blank CDs, as Canada does to compensate artists, certainly seems reasonable. But I'm not yet ready to sign on to the compulsory license bandwagon, and not just because of the insuperable difficulties involved, such as divvying up the proceeds, forcing fees on third parties, making it work internationally, or persuading people that their tax dollars should subsidize JLo or Britney. We're still early in the age of digital media. Our cultural attitudes about sharing music and other media remain half formed. Are we ready to abandon the notion that customers want to buy music and pay for art? Not likely. Americans bought about $12 million worth of CDs in 2003. Business is booming at the Apple iTunes Store, with major retailers rolling out rival stores. If the success of the Apple store and the budding prospects for music services like Musicmatch and Rhapsody tell us anything, it's that customers want their music in multiple formats. Movies already do this: We have a choice of movie theater, DVD, pay-per-view, cable, satellite, TV. Now music needs to come up with a buffet of options. As Griffin observes, the era of push has given way to pull. History shows that new technologies bring not just disruptions to old business models but new market opportunities. Innovate or die — the mantra of the technology world — is a frightening concept for any industry. But it is also a cold truth. Let a thousand business models bloom. Griffin relates an adage he heard about the three tiers of life. "If something arrives in the world when you are born or very young, it will be a natural part of the world to you — so natural that it's hardly worth discussing. If it arrives when you are 13 to 35, give or take five years, it will be your career. It will be so new and amazing that you'll feel you've discovered it and you ought to make a business out of it. Generally, if it comes into the world after you're 35, it should be outlawed. It's a threat and must be stopped immediately." Griffin and I both have a young son. "I think we each see our kids and imagine the kind of media world they'll grow up in. It will be so different from our own, but to them, it will just be the natural order of things. Our children will grow up in a world where entertainment and most art and intellectual property will be friction-free. The idea that a song could be recorded and moved effortlessly over a network or even wirelessly to a cell phone will seem normal. And the idea that this can be stopped — through legislation or a piece of software code or a shrink-wrap contract or a misleading educational campaign — will be preposterous to them."
(From chapter 11 of Darknet: Hollywood's War Against the Digital Generation. You may copy excerpts from this entry to comment on or critique the work or to otherwise engage in fair use.) |
