Hip-Hip Fridays: Chuck D. Before Congress
On Wednesday morning, May 24 the House Small Business Committee Chaired By Jim Talent (R-Mo.) held a hearing on Internet Music Issues inspired by the recent debate of Napster's offering of free music online. Chuck D. formerly of Public Enemy and the founder of Rapstation.com was one of four featured witnesses scheduled to testify before the committee. Simply put, Chuck stole the show.
The hearing began before a packed audience with a demonstration of how music could be downloaded with the MP3 technology that allows the transfer of music from the Internet to PCs with near-CD sound quality. After the presentation the hearing then went into testimony. The first witness was Ric Dube an analyst for Webnoize.com, which covers the entertainment industry's relationship with the Internet. Dube gave a rather academic presentation that attempted to provide balance to the debate over music downloaded and sold over the Net. He emphasized the fact that at present the Internet wasn't a real threat to the music industry in terms of lost sales. But he added that one day soon that may all change. His testimony included a look into the tremendous popularity of Napster among college students - a recent Webnoize survey revealed that 70% of students are using Napster monthly and 19% are using it daily. His survey also revealed that students would be willing to pay $15 per month for the Napster services that they currently obtain for free.
The next witness was Tom Silverman, founder of Tommy Boy Records , an independent record label that specializes in rap music. Silverman also is a board member of the Recording Industry Association of America which represents the major distributors in the music industry like Sony, Universal and BMG. Silverman's testimony highlighted the concerns of record labels that see the Internet as facilitating copyright infringement. Silverman expressed his frustration with the Internet, claiming that the Internet is encouraging potential consumers to not purchase CDs and tapes. He even cited an 11-yr old member of his family that he discovered was downloading music from the Internet and burning (copying) it to CD - without paying for it. He also challenged the view that the Internet would be a source of wealth for new artists. He cited several statistics that indicate that only a few artists in the Music industry account for the majority of the sales. Silverman's testimony depicted the Internet has little more than a means for people to trade music online that they did not pay for. He indicated that the proper role of the Internet was the marketing of new music and not its direct sale and distribution.
The third witness was Peter Harter, Vice-President of Global Public policy and Standards at Emusic.com. Inc. Emusic.com actually sells digitally formatted music over the Internet. They sell CD singles for 99 cents and full-length albums for $8.99. Harter says that his company pays royalties to the artists whose music they sell. According to Harter Internet sales of music will result in " Greater efficiencies in distribution, expanded consumer choice…lower prices, better products, and a larger overall market." Harter believes that in the long run the Internet " will benefit everyone - consumers, artists and the entertainment industry." Harter emphasized the role of the Internet in disintermediation. Disintermediation occurs when the "middle man" is removed from the sales process. Harter sees that as a good thing.
Then came Chuck D. Chuck's testimony provided the most comprehensive macro view of the debate and his articulation of the issues involved was impressive. Instead of simply taking an Us against Them approach, Chuck spoke of the matter in terms of business models. He said that the music business' problem is not simply the Internet but also the fact that the industry operates out of an out-dated business model that goes back more than twenty years. He made the point that the payment structure of the industry is inefficient and immoral. He pointed out that though it only costs 70 cents to have a CD produced, a CD will often retail for $17. Chuck sprinkled anecdotes of his earlier days as an artist throughout his testimony. At one point he recalled an incident where his accountant told him that though he had made millions of dollars for the record label and distributor but he himself had made little or nothing.
Chuck respectfully countered Silverman's arguments by stating that he believed that while the Internet may result in less sales for artists it will and already has resulted in more money for the artist's pocket. He also predicted the day where the Internet would facilitate the development of 10 million artists worldwide who would sell their creative works in the global marketplace. Instead of watering down profits and the art form, Chuck argued this plentiful supply of artistry would have a liberating effect on the individual creators as well as on those who are not able at present, to profit inside of the music industry's outdated structure. Chuck also disagreed with Silverman's point that the Internet would cost the music industry millions. Chuck brought up the fact that many record labels already give away anywhere from 5,000 to 10,000 copies of recordings as promotional items. Chuck says that is a far greater problem than the music that is currently being downloaded for free. Chuck punctuated his point by concluding that if HBO, Showtime and Blockbuster Video hadn't put theatres out of business the Internet wouldn't put record labels out of business.
Chuck depicted the current efforts of the RIAA to help artists gain royalties lost to free downloads as "B.S", saying that the record labels could care less about the artists and are using them to get the U.S. government to help them stop the emergence of a new business paradigm; a paradigm that the distributors do not control and which competes with them. He called the distributors "Dinosaurs" and said, the distributors and labels " want to control cyberspace without knowing what it is". His testimony, filled with sports analogies and colorful language held the audience on the edge of their seats.
Friday, May 26, 2000