Bob Lefsetz opinion....follow him at twitter.com/lefsetz


Rights, distribution and radio. Those are the three cards the major labels and their controlled publishing companies held. And until Napster, those cards always triumphed.

You needed exhibition to sell. And that's where the labels' relationship with radio was so important. Independent labels could not get their songs played. Still cannot get their songs played, despite the Spitzer agreements.

It was not easy to get records in retail establishments. But even if you managed to accomplish this, it was almost impossible to get paid if you didn't have a steady flow of desirable product. That's how retail worked. Stores paid you when they needed new product. If you had no new product to deliver, you didn't get paid. And it's hard to run a business with no cash flow.

And then we get to the rights. This is what tripped up Napster. He who owns the product gets to say how it's sold. You just can't take someone else's wares and give them away for free. You can't take them and sell them either, the rights holders have veto power.

So, innovation has been locked out.

I just read a fascinating story in the "New Yorker". Entitled "The Instigator", subtitled "A crusader's plan to remake failing schools."

Speaking of failing schools. I'm stunned how many times I make an argument and my readers can't comprehend it. They've never been taught the power of analysis. You've got right and wrong, black and white. Subtlety? Wrestling with the facts to your own conclusion? Frequently their teachers couldn't even exercise this. And now, everybody gets a college education, but they take business courses, they've got no understanding of the arts and reason, and our society is poorer for it. But the poor are another matter entirely. They often go to schools where the teachers literally don't teach. And the students end up dropping out, and that ends up as all of our country's problem. Because even if you pull yourself up by the bootstraps and buy a BMW, where are you going to park it? Where can you leave it where some poor citizen doesn't break in and steal the airbag, to sell for cents on the dollar so he can buy drugs, feeding his habit that he employs to cope with the futility of life.

We don't live in India. Not even China. We're not a country rampant with strivers, willing to work long hours to get ahead. Rather, you don't need an education because you're going to be an athlete, or a rapper. Sure, some kids go on to get computer science degrees and change the world...

But they haven't changed the music business. Because of the triumvirate of rights, distribution and radio.

This guy Steve Barr. He's been taking over schools in Los Angeles, one by one with his charter organization Green Dot. High schools. When it's supposedly too late to have an effect. But his Green Dot schools now send eighty percent of their students to college, whereas in L.A. we've got a forty-seven percent dropout rate. Standardized test scores are twenty percent higher than L.A. Unified's. How did this happen?

The power of one.

Steve Barr is fifty, met his wife at Burning Man, married her three weeks later... He's not conciliatory, he threatens to create rival schools if the district doesn't play ball. He's got a deal with the teachers union, but it's not the standardized contract, and he makes all of the teachers in Green Dot schools reapply in the transition. Where is the Steve Barr in the music world? Where is the single individual who's going to change the landscape, for the benefit of listeners?

It's not Irving Azoff. Sure, he wants to deliver rights to the artists via the Ticketmaster/Live Nation merger, but now, in light of the Obama administration's recent antitrust pronouncements, I doubt that merger goes through. And even if it does, Irving's so tied up with Doug and Jimmy and the rest of the usual suspects that he can't lead a revolution.

But he did start one. With the Eagles and Wal-Mart. Suddenly, the big acts are no longer signing with the major labels. It's not financially prudent. Which brings us to distribution.

Physical sales are dying. Getting paid online is no problem. The biggest problem is attention! How is anyone going to know you're releasing music, never mind hear it?

Music radio means less than ever before. Not only because of the endless commercials, but the alternatives. Net radio, streaming on demand, iPods...why be subjected to unappealing tight playlists if you have options?

Rights. This goes back to Mr. Azoff. If suddenly the artists control the rights, it's a whole new ball game.

But Irving deals with the old acts, the superstars. How about the wannabes?

The lawyers make those 360 deals because they want to get paid. As do those acts who put down their John Hancocks. Handlers convince them it's the way to go, or they're so desperate for cash, they see no alternative.

But there is an alternative. Especially when 360 deals forfeit so much for so little. Check SoundScan, no one's going diamond, almost no one is going platinum. How much can the label advance?

Still, innovators in the music sphere have been hamstrung by those rights the labels and the publishers still hold. How many stillborn online music services have we had? Playing by the established industry's rules is a license to go out of business. Just ask iMeem (which supposedly has found new financing, but they're losing money streaming music.)

For the past few years, the innovators have thrown up their hands. If you want to be in charge of your own destiny, you create an iPhone app, you don't try to solve the problem of music distribution.

But this is going to change.

New acts see value in giving away their music. And if you control it, you've got the right. How long until there's enough unfettered new music, tunes the creators control as opposed to the fat cats, that someone from the outside can roll up these rights and create a viable alternative to the established game?

It's just a matter of when. The old guard just wants to keep the old system in place. Kind of like the French three strikes law. What kind of garbage is that? Rearguard and unenforceable. Do they really think it's going to increase revenues significantly? No, legal alternatives are necessary. But they're impossible to establish when the old guard has so much power.

But we've established that the old guard is losing its power!

We're not talking artists here, we're talking businessmen. Great artists are almost always shitty businessmen. But great artists recognize great businessmen, which is why when David Geffen started his eponymous label, John Lennon, Donna Summer and Elton John immediately signed to the company, even though Geffen had been out of the business for years. It's why and how Irving controls all those acts today.

But Geffen's essentially retired. And Irving is not about the new wave, but the old.

And what people want most is exhilarating new music. We love our oldies, we want to remember our summer camp girlfriend, but we don't want to be married to her.

So he who controls new music controls the world! What if new music does not align with the usual suspects? What if new music goes with the entrepreneur? Who is more about protecting the artist and his career than making a quick buck?

The old players don't like this, they don't want this. But they're losing their stranglehold. We've got a ripening landscape wherein a revolutionary like Steve Barr can build a position and then cause the old guard to blink. Break a bunch of new acts by delivering the tunes in an innovative way and how long is it until the old guard has to sign up on your terms?

You've got no leverage if you control no rights, if you can't break your act without terrestrial radio and physical distribution. But if you can get the word out online, and control all revenue streams via a storefront you own, the old guard will come to you.

And even if the old guard does not capitulate, it ends up being neutered. Because of its diminishing control of hit music.

I'm doubtful anybody in the established music business can lead the charge. There's too much history, too many alliances with the past. As Malcolm Gladwell says in the same issue of the "New Yorker", David only beats Goliath if he puts in incredible effort and is willing to do what is "socially horrifying". "Socially horrifying" means you challenge the rules, and break them. Or as Gladwell states, "He couldn't fight the establishment, because he WAS the establishment." "The price that the outsider pays for being so heedless of custom is, of course, the disapproval of the insider." Even Irving Azoff, with his reputation for questionable veracity, can't fuck Jimmy Iovine. He's in business with him! You're not going to break the rules if your wives are friends and you vacation together, play golf every weekend at the private club.

So, it has to be an outsider who leads the charge. Who has to be desirous of putting in the effort. But after Napster and Grokster and KaZaA and the Pirate Bay, no one's been willing to make the effort. But what if you weren't stealing? What if you were setting up a better shop across the street? More in tune with what the public desires? Then, you're on the road to success. But not overnight.

It takes time. You can't play by the old guard's rules if you're trying to break them. You can't be desirous of driving a Lamborghini based on the venture's profits in the first year. Which is why the charge won't be led by people like Tim Westergren, or Michael Robertson, who aren't about music, but money. The lead will be taken by someone who's been to a million shows, who's got multiple hard drives of music, who first and foremost is a music lover! That's how Ahmet made it, that's how all the legends made it. But too many of those in power today have always worked for the man, they've never done it themselves, which is why they are vulnerable.

Never underestimate the power of one. The David who challenges convention with a ton of effort and succeeds. There is no innovation in the mainstream music sphere. It's not wanted. Risk is anathema. But we've just about reached a tipping point. Where someone unknown is going to amass rights and power and change the entire game. Just you watch.

http://www.newyorker.com/reporting/2009/05/11/090511fa_fact_mcgray