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iTune Lunacy

The record companies are mad at Apple. Apple’s freakin’ because there’s a new hack-around for iTunes. Microsoft is mad at the record companies. Musicians are mad at Apple. Apple says Don’t blame us, it’s the record companies that are too greedy. The RIAA is suing 14,000 people. Nobody knows what to do about podcasts, which suddenly are everywhere. And there’s a new program that Tivos satellite radio! Governments all over the world are scratching their little governmental heads. And people are downloading music, either for free or for 99 cents a song, like there’s no tomorrow.

Is this a great world or what?

The record companies apparently don’t think they’re making enough money on music downloads, so they’re threatening to pull the plug on Apple’s iTunes, which has something like 80 percent of the download market. The companies want iTunes to dump its blanket 99 cents per song pricing. Edgar Bronfman, the booze peddler turned music mogul, says “some songs should be 99 cents and some songs should be more.” Duh, Edgar? Maybe some songs should be less? How ’bout that? Chivas over here, Four Feathers over there?

Actually, Edgar’s got part of a good point. There is no valid reason why, say, the new Mariah Carey single should cost the same as an old Bubble Puppy B-side. But who figures out the pricing? Edgar? Steve Jobs? Can you say “antitrust”? Sure you can!

Oh, and Edgar also thinks record companies should get a piece of iPod sales! How’s that for balls?

Meantime, Microsoft has stomped away from the bargaining table where it had been chatting with the record companies. Microsoft’s been trying to launch a music subscription service, but claims that the record companies want too much money for the service to be economical and competitive. So Microsoft has ditched the subscription idea.

The record companies had better be careful. All their shiny lawyers aren’t ever going to kill the “illegal” free services, and if they decide to jack the prices on the “legitimate” download sites, the free services are going to start growing exponentially—again. The only way the labels are going to compete with free is by staying convenient, dependable, and—most importantly—cheap. And if they push the price for a song over a dollar, I think they’ll be creating their own nightmare, again.

Over the pond, musicians in the U.K. are complaining that they get only something like five cents per song out of the download pie, and they blame Apple. They’re barking up the wrong virtual tree. The artists need to look at their record contracts. Most contracts more than five years old provide that all sales of music other than CDs carry a royalty of one-half the usual rate. These contracts didn’t envision digital downloads taking over the marketplace, and the clauses were meant to cover marginal, exotic sales on unknown media. (Until a few years ago, the major record companies were in a contrived state of denial that digital downloads were the future. That’s why the old Napster became so popular so fast—there was no legal alternative.) So, figuring that the usual lousy artist royalty rate for CDs is somewhere around 10 percent of the list price, applying the archaic contract clause to downloads gives the musician around five cents per song. D’oh!

Most newer record contracts provide that the artist and the label split the digital revenue 50-50, which makes sense. There’s no physical product, no packaging, no warehouses, no distribution. The label is now just a middleman—a financier, promoter, and briber of radio DJs. That’s it. So there’s no reason on earth that the labels should get a bigger chunk of the dough than the artist.

Although I didn’t think so in 1982, right now I’m glad that my band, Blotto, never got a record deal. We’ve got a couple of old songs that I sense some people still would like to own, but maybe not enough to go by our CDs (even though the CDs are sublime, revolutionary, postmodern masterpieces). A couple of months ago we put our stuff up on the major download services through CDBaby, a cool indie music distribution service that has agreements with the download companies, including iTunes. While we’re certainly not getting rich, we’re now making a lot more money from selling downloads than from selling CDs. After CDBaby takes its 9-percent cut, we get around 60 cents per download. All of a sudden our music is moving again, we’re getting paid well for it, and we couldn’t be happier. If we were with a label and getting five cents per download, we’d be bitching like crazy. And hey, if they want to charge a little less for some of our non-hits, we’d be cool with that, too.

—Paul Rapp

Paul Rapp is an intellectual-property lawyer with offices in Albany and Housatonic, Mass. He teaches art-and-entertainment and copyright law at Albany Law School. Contact info can be found at

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