The Web, the radio and the record companies
How things might work out so musicians can make a living (from a Canadian’s perspective)

originally written by Karl Hourigan November 8, 2005

I’m writing this little train wreck of an essay in the hope that I can, at best, spur some discussion and inspire our imaginations as to what may come to pass in the not so distant future. At worst it’ll just waste your time to read it.

Every day (literally) I come across articles about MP3 in one form or another. We all know the current challenges with this digital format, and many of the conversations sound very familiar to anyone who remembers the introduction of the cassette tape, or if you’re REALLY OLD, the invention of recorded sound. The RIAA’s credibility in this regard has been further weakened by two fairly recent events: 1. major record companies in the US have just lost a court case and been fined for essentially colluding to gouge retail customers 2. major artists and industry observers have spoken out in an articulate fashion about just what a sad deal most record companies give their artists.

It has been said that “digital information wants to be free” (numerous sources). It has also been said that “music wants to be free” (Travis). OK, but everyone wants to get paid. The trick now is to find a model that accepts digital delivery AND generates an exchange of dollars.

Anybody with a computer and an internet connection can be their own radio station on the internet. Unregulated, uncensored, unlicensed and unaccountable–in other words it’s a kind of like a vision of nirvana for anyone too young to really understand what mortgage payments look like. This vision is currently a songwriter’s nightmare.

I’d like to suggest a different dream that brings together a number of existing or plausible technologies. The players in this little drama are:
Streaming media
Wireless internet
Internet appliances
Central storage
and the usual suspects who control, administer, own or profit from copyrights.

The potential of internet radio is waiting to be realized. First, let’s try to describe a business model that would appeal to the end user, then explore the ramifications of that model on the vested interests (artists, publishers, record labels, radio, etc.). Finally, let’s take a look at some of the challenges that can prevent this from working out.

The End User Experience
Internet radio is readily available now on a typical home computer. As broadband quickly becomes more ubiquitous, and more and more homes have internet-capable computers, internet radio will flourish. The advantages of internet radio include an unprecedented wealth of potential programming, catering to every possible interest group. Like traditional broadcast radio, it’s free to the listener (except that we’re paying for an ISP).

What’s needed is an internet radio appliance that can use a simple familiar interface, but offers much more than conventional radio. Let’s imagine such a device in a hypothetical setting:

The internet radio is mounted under the upper cabinets in the kitchen. It plays music in stereo, or even 5.1 surround sound, at higher than CD quality. “Stations” can be chosen in a number of ways—styles of music or content (classical, rap, punk, news, talk, etc.), artists or groups of artists (e.g. Beatles or Beatles solo), place of origin (Detroit, Iraq, Russia, etc.), random, traditional broadcasters (e.g. CBC programming) and so on. Of course our radio can remember presets and preferences. It can automatically add new stations by category as they come online.

So far so good, but here’s where the interactivity of internet radio takes off from traditional radio. Let’s say you’re listening to a track by an artist you’ve never heard before. You can check the read out on your internet radio (let’s NOT refer to it as iRadio!) and instruct your radio to play more songs by that artist or from that album, or in that style (e.g. “choose more music featuring the sitar”). In the future, this could be voice-activated so you wouldn’t even have to stop chopping vegetables in the kitchen! You could return to the previous programming at any time.

But what if you listened to this new artist and decided you wanted to “bookmark” the song or artist for future listening? No problem. And here’s where we possibly return to the pop age of the “single”. Through the ISP connected to your internet radio, your subscription includes a certain number of “bookmarks” every month, say 50. If you want more than that, you are charged a very nominal fee. Your ISP account has a counter that tracks your “bookmarks”. Of course with internet radio, if you remember the name of the song or the artist, there may be a dedicated “station” where you can hear that artist anytime you want. But once you’ve bookmarked a song, you can go straight to it on demand. But wait, there’s more—through your internet radio’s FireWire connector, you can download your bookmarks and output them in any digital format you want, from mp3 to CD. Now you can take your bookmarked favourites with you. Later, when cars have internet radios, you can log on and access your bookmarked music in your car or wherever you have access to an internet radio device. The bookmarked material is not stored on the internet radio, it is stored by the provider (e.g. copyright holder, publisher) and served through your ISP. This also ties into wireless internet radios for accessing your “bookmarked” music.

The ISP and other music-on-demand sites have logged every “bookmark” of every customer so that should be no problem to assign royalties to the correct parties. The customer never has to buy another CD if they don’t want to, but they can access their music library from any internet appliance (like say, your wireless internet watch). They’re paying for music, every recording is tracked, and everybody can get a little tiny piece of the action. ISP’s could offer to sell custom one-off enhanced CD compilations too, with videos, lyrics etc., just as an additional revenue stream.

The Vested Interests
If the internet radio delivers inexpensive music that you can try before you buy, a lot more music will be sold (how much music would you buy at pennies a song?). This may have a negative effect on the multi-million sellers that are sold on marketing hype, but could provide some viable income to a wider spectrum of artists.

Record labels move their business from pressing CD’s to an emphasis on marketing to get their artists heard and subsequently “bookmarked”. Publishers get a way to generate income from a greater selection of their portfolio (the long tail effect). During this phase, traditional radio and the income it generates is still ongoing.

With digital delivery through ISP’s, it should be realistic to mark and track every tune played. The ISP’s would pay performing rights societies (micro-payments) to deliver such content, just as radio stations do today.

Artists and their labels could still release CD’s, but internet radio would actually deliver higher audio quality (why settle for 44.1kHz 16-bit audio any more?). Of course, individuals could still be their own internet radio stations, but they would be challenged to support the interactivity of the dedicated internet radio appliance. Given the consolidation of publishing, production, artist and repertoire management, plus broadcasting and distribution AND manufacturing prevalent in today’s market (e.g. Sony), the major record labels are in a position to profit from such a change in the way music is delivered—manufacturing internet radios, reducing losses to piracy, activating income from more of their catalogue, etc..

“Bookmarks” could also be arranged by the subscriber into any categories they wanted (e.g. Summer Road Trip 1). Subscriptions could allow for multiple users, as in a family.

Hey, but what about…
CRTC and other broadcast regulatory bodies would be in a very difficult position to regulate internet radio. The attraction to the end user is all about choice, convenience and low cost. CanCon would suffer, for example, but there is nothing today to prevent me from listening to radio from around the world via my computer. I can hear a range of uncensored music and views. Pandora’s box has been opened, and in free democracies, we are reluctant to shut that lid. We prefer to choose not to listen if we don’t like what we hear. The difficulty for artists is that under the present situation, they are not being paid for current internet usage of their material. But if record companies insist on trying to collect pressed record type prices for internet delivery, the artists will ultimately lose out. ISP’s and record companies must realize the potential of micro-payments as a viable business model in an internet radio environment.

Another sticking point would be labels or artists not participating. The attraction would be to have any and every thing available. ISP’s could make licensing agreements with record labels. Given the current consolidation in that market, this is a good time to pursue agreements that would give ISPs access to most titles. New services would spring up (or old services would adapt) to help independent artists have their music featured on “independent” channels. More radically, a change in copyright laws could allow anyone to “broadcast” anything on the internet provided they were licensed to do so, meaning that they were following rules for tracking and paying royalties on distributed materials.

Scenario – the view from Sony
So you’re Sony. And you want to plug your artists and publishing. But you realize that internet radio restricted to only your catalogue, as big as it is, is not enough. So you license your entire catalogue to sub-stations, who offer up whatever playlists they want to, which can include Sony stuff. Plus Sony still gets paid back by the ISP’s who serve up their stuff regardless of the “station” that the end user has bookmarked the song from.

I think historically any time technology has introduced new ways to distribute music (read expand the potential audience), after the initial shockwaves and catastrophes, new business models emerge and new opportunities are created. Don’t get hung up on mp3’s. They’re not the last word. They’re just the first shot in this latest battle of the digital revolution. Record companies and radio stations need to get right in there with wireless internet technology, because they already understand many of the components that can make that business model work.