Jul 05, 2009
Posted by: Hitsville

Rock ‘n’ roll’s greatest criminal is dead

allan_klein.jpgAllen B. Klein died of Alzheimers in New York, the Times says. The description of him in the headline—”managed music legends”—is a joke. He ripped off music legends. He was the biggest crook pop music has ever seen.

Among other things he pulled off the crime of the century—stealing the Rolling Stones’ music from the band.

You don’t hear about this much; it’s just one of the ways the music press sucks.

Basically, Klein went to the Stones in 1966. The band was frustrated; it was selling millions of records, but not getting any money. The band members were essentially broke. Klein told them he could pry money out of Decca, and, after an impressively profane and confrontational meeting with the company’s lawyers, succeeding in vastly improving the band’s deals with the label.

Sounds great, right? That was just the setup. The band’s company was called Nanker Phelge Music. Klein created a new company, Nanker Phelge Music USA. In the band’s new contracts, the band’s money and control of its creative output was vested in Klein’s company.

Now, it must be said, one assumes this set-up was all there in black and white in the contracts the band signed. On one level it’s their fault. But from the record that remains (I’m basing all of this on the accounts in the numerous histories of the band and what coverage Rolling Stone provided, back in the day, of the group’s subsequent lawsuits with Klein), it seems as if the band would have had to have the presence of mind and suspicions to initiate a pretty sophisticated financial and legal review of the documents that their own manager was putting before them. (For example, even if they noticed the slight change in the name of the operative company, they would have had to figure out that Klein had incorporated it.)

It’s unlikely that Klein was in any way operating at the band’s direction (“Hey Allen, we want to give you control of all our master recordings. We won’t take no for an answer. We want you to have control of our masters and make all the money off of them. Not just temporarily. Forever”) or with its financial interests in mind.

According to my namesake‘s meticulous history of these years, Stone Alone, once the band tried to untangle itself from Klein it found their options extremely limited. Wyman says the band’s lawyers thought they were owed $17 million; in the event, they settled for $2 million, half of which went to Jagger and Richards for their songwriting. To this day Klein owns the band’s pre-1970 masters outright, and administers the Jagger-Richards publishing as well.

(That’s why you see Klein’s company name, ABKco, on the classic 1960s-era Stones CDs. There’s even some evidence he has his fingers in some post-1970 work by the band as well. A sense of his control over the band’s output is that his company released the Rock ‘n’ Roll Circus CD and DVD in recent years. I can’t confirm it right now and I’m open to being corrected, but my understanding is that for some reason he also controls the rights to the band’s unnervingly powerful 1972 concert film, Ladies and Gentlemen the Rolling Stones, which has never been released on VHS or DVD.)

That’s just part of his grimy history*, of course, and again, he did operate as a singular force in rectifying some of the unfair label-band contracts of the era. All that said, he stole one of the most valuable artistic treasure troves of the second half of the 20th century. He was a crook and should have died in jail.

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* His interactions with the Beatles were similarly rococo. One amusing footnote to rock history I found in a 1969 Rolling Stone: Klein’s extended explanation of why Lennon and McCartney didn’t need to buy back control of their publishing operation, Northern Songs, from the larger company that controlled it. The name of that bigger company? ATV Music. Had that happened at least one extravagant musical career would have been much different.

Jun 08, 2009
Posted by: Hitsville

Creative accounting never goes away

As the labels continue to see their public business models implode, you gotta figure they’re going to spend even more time making sure that their private ones don’t.

The private ones, of course, involve screwing artists by not paying them royalties. I was just catching up on the latest suit involving such shenanigans.

Cher is suing Universal, saying it owes her and the heirs of Sonny Bono royalties from two compilation albums. There’s a fairly substantive Hollywood Reporter story on it here.

The article doesn’t make it 100 percent clear, but the issue seems to be the difference between royalties and licensing fees. Universal farmed out both Cher’s and Sonny & Cher’s music to another label for compilation purposes; in general terms, that would fall under the rubrick of licensing, fees from which might typically be split between label and artist fifty-fifty.

This is how the fees break down if an artist’s song is used in a movie, or is picked up for a Now That’s What I Call Music collection, on the grounds that it’s essentially free money.

A normal record sale, by contrast, would generate a normal royalty payment, which might typically be 20 percent of the wholesale price of the CD.

Cher’s suit says that Universal let a Warner repackaging arm put out the compilations, but tried to route the money back to make it look as if it had come in through normal Universal sales channels, and subject to the lesser percentage.

As the labels continue to sue file-sharers—and generate press clippings that cite unchallenged the labels’ crazily high estimates of their alleged losses—it’s important to remember that the real criminals are the labels themselves. They routinely underpay royalties, and then make it punitively difficult to audit.

Apr 13, 2009
Posted by: Hitsville

Thoughts on the “three strikes” law

The RIAA and MPAA have not been coy about suggesting that what the U.S. needs is a “three strikes” law like the one under consideration in France, under which serial illegal downloaders, say, would lose their internet access after a series of warnings.

Hitsville favors this approach if the principle is extended to other aspects of the debate.

If Mitch Bainwol, the head of the RIAA, lies three times to reporters via email, he loses his internet access. If he lies three times on the phone, the RIAA has its phone lines cut off.

If the RIAA files three frivolous lawsuits, it loses access to the courts.

If Warner Bros. is found to have not paid three artists their royalties, it is prohibited from selling CDs. If Sony records is found to have paid off three radio stations to play songs by its artists, in violation of federal payola laws, it loses all access to terrestrial radio.

Am I on to something?

Apr 09, 2009
Posted by: Hitsville

iTunes gets “flexible”

The iTunes Store went live with its new increased prices this week. Most coverage, NYT and LAT included, led with the fair and balanced news that the store was raising the price of many hit singles to $1.29 and lowering more obscure tracks to 79 cents.

In reality, since the $1.29 price will be for the most popular songs, the ratio in terms of sheer number of sales will be highly skewed to the new high price, and should in the short term significantly increase the income at the store.

That’s what all the talk about more “flexibility” in the prices was all about: Selling things for more money.

In classic record industry fashion, this does indeed look good in the short term, but not in the long term.

Why?

The downside for the labels is that the price hike came only after they agreed to remove the DRM from the iTunes.

Did Jobs get the best of the labels yet again?

Imagine two teens buying music. They are used to buying songs for 99 cents. They notice the price is higher … but the restrictions on just emailing a downloaded song to a friend has been removed.

Aren’t the labels giving them a rationale to buy the track once and send it around to their friends? And as the learning curve for that rises, won’t the rate of sales for the higher-priced songs start dropping?

“Oh, Madison, we shouldn’t—file-sharing is illegal! It’s stealing!”

“Oh Barlow, don’t be silly. They just jacked up the prices! And besides, they specifically changed it so we can just email songs. They want us to!”

There will be a learning curve, of course, but how long is it going to take 14-year-olds to get into the habit to emailing any song they buy to a half-dozen friends?

Jan 06, 2009
Posted by: Hitsville

Itunes goes DRM free—at a price

Greg Sandoval at Cnet was first to report that Apple has finally cut a deal with Warner, Sony and Universal to sell DRM-free tracks on iTunes.

The catch—Steve Jobs is apparently retreating from his long-time insistence on a 99-cent consistent price:

Apple has cut deals that will finally enable iTunes to offer songs free of copy protection software from the three largest music labels, according to two sources close to the negotiations. In exchange, Apple has agreed to become more flexible on pricing, the sources said.

Note how even Cnet is using the phrase “become more flexible on pricing” in its record-industry preferred way, as a euphemism for “raise prices.” (See my previous discussions of this tendency here.) The piece is a little too-industry friendly overall:

The good news is that the price of catalog music is falling to 79 cents per song. The labels will get an opportunity to price some hit songs for more than 99 cents but eventually those songs will drop to 79 cents, according to one source.

Before iTunes users get too worked up, they should remember that song prices at iTunes haven’t increased in five years. According to the Consumer Price Index, a 99-cent song in 2002 would be worth $1.17 today.

Since the bad news was “flexibility,” the good news makes things seem all better. The real bad news, which the piece doesn’t say flatly, is that the hit songs of the day Apple is going to allow the companies to charge more for will of course make up a huge percentage of a day’s typical sales.

As for the CPI, the peer-to-peer networks offered music for the competitive price of zero in 2000. Today, adjusting for inflation, the price there is still … free.

Last graf of the Cnet piece:

Not only will new music downloads be free of copy-protection software, but Apple and the labels will begin removing DRM from music already available in the iTunes Store, the source said. However, it’s unclear what will happen to songs that have already been purchased.

Removing the DRM from already purchased music would be an important and somewhat ameliorative gesture by the labels how wrong their insistence on DRM was.

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The question of selling non-handcuffed music raises the question of how much the companies are going to be sacrificing in sales. Without the copy protection, purchasers will be able to do what comes naturally: Email a friend a song, right after purchasing it at the iTunes store.

It’s possible to pass along legitimately purchased music to friends right now in any number of ways, ranging from simply letting them rip a store-bought CD to the more laborious one of burning a physical CD from one you bought on iTunes (i.e., thereby removing the DRM) and letting them import that.

The new way, obviously, is going to be easier, and ironically enough it’s going to hit the hits, most minor and major, most heavily, because someone who eagerly buys a new Beyoncé track will presumably have a friend or ten who are interested in it as well and can now immediately and easily pass it on. If you’re digging up an old song from Nirvana’s first album, by contrast, it’s unlikely you have ten friends who are going to want it that same minute.

You’d think, in fact, that the industry would charge less for hits (to encourage people to buy it online rather than get it from a friend) and price catalog higher—if you want that old Nirvana song, you’ll pay the extra quarter, and the chances are lower a friend of yours would have it.

I think Jobs, for all his severity, was appealing to the better nature of people with consistent pricing. In a world where you don’t have to buy, the image of an industry playing fair, for once, on pricing couldn’t have hurt.