Record Sales & Digital Steaming Cake: and Eat it Too

Wired Magazine recently wrote about a research project by NDP Group that suggested interactive music streaming sites such as Spotify decrease music purchases by consumers. According to NDP Group, users of interactive sites purchase 13% less music, while users of non-interactive tailored sites such as Pandora, actually increase music purchases by 40%. These numbers don't sound realistic, but the principle remains. As stated by Wired, Pandora provides internet radio, Spotify provides a record collection. The respective effect on sales of music is expected by the business model being deployed.
Both formats greatly increase music consumption, a benefit that increases consumer identity with the artists they listen to. Record companies, as the frequent owners of sound recording copyrights, receive a royalty each time a song they own is played on the internet. The rate is higher for interactive services than it is for non-interactive services. The Copyright office has provided this benefit with the understanding that interactive services have the potential of offsetting music sales. Point being, record companies are getting paid for the use of the music which is far more beneficial than pushing consumers back to acquisition by piracy. Piracy is a unilateral street, interactive services extend benefits to all interested parties.
Eliot Van Buzkirk of Wired writes: "But it’s not a bad thing for the industry that on-demand services like Spotify and Rhapsody replace sales — that’s what they’re designed to do. It’s no accident, and neither is the much-higher premium — a penny per stream — that labels and publishers extract from them, which is ten times more what streaming radio sites pay."
Internet streaming services are left to figure how to make the burden of paying a high royalty for sound recording broadcasts. Some like Grooveshark have chosen the advertising revenue model, others like Rhapsody use a subscription model, while services like Spotify use a hybrid. Rhapsody has only 700,000 subscribers compared to the 2.7 million users that signed up for Spotify in its first 6 months.
Ultimately, the threat of dwindling sales continues to rear its head and pose trouble for recording companies. The digital royalty serves to offset this problem. I predict a push by record companies to legislate non subscription interactive services out of business through license fee hikes and other restrictions. The true danger of interactive services replacing purchases will not occur until many more people have access to mobile plans that can access streaming services on the go. At that point the celestial jukebox will be a full reality and anyone with a connection won't need to purchase their tunes.

Wearing a Different Hat, Guantanamo Bay

We are all in the habit of living 24 hour days. For nearly three years my hours have been spent vigorously pursuing a legal education. This education has not been limited to class room experience, nor has it been limited to the traditional law school curriculum. In addition to the standard fair, two interests have consumed my focus. The first is exploring issues in law related to music and the internet. This interest is the broad subject matter expressed through this blog. The second interest is investigating the Guantanamo Bay Detention Facility.
As a research fellow with Seton Hall Law's Center for Policy & Research (CP&R)I have spent thousands of hours researching government documents and records relating to the military base. This work has been poured into several of CP&R's 17 published reports, many of which have been cited by the U.S. Supreme Court, Congress, European Parliament, New York Times, Washington Post, and many more sources. Most recently, CP&R published a report titled "Death in Camp Delta," exploring the events surrounding three alleged suicide deaths that occurred on base during the summer of 2006. The following article is a brief explanation of our lengthy report. On February 16, 2010, a 40 minute interview discussing CP&R's investigation into these events aired on NPR's "The Story." The interview which featured myself, student Kelli Stout, and Professor Mark Denbeaux can be heard here. Furthermore, I encourage you to read the March issue of Harper's Magazine, in which author Scott Horton significantly expands upon CP&R's research.


In Search of Truth at Guantanamo Bay
By Adam Deutsch (written for "The Cross Examiner," Seton Hall Law's internal student news paper)

Shortly after midnight on June 10, 2006, prison guards found three detainees hanging in their cells at the Guantanamo Bay detention facility. The detainees had been dead for at least two hours. Guards said they were stiff with rigor mortis, cold to the touch, with blue extremities and no pulse.
Later that morning, the Department of Defense (DOD) forced all of the detainees’ attorneys and press members to leave the military base while an investigation began. Contemporaneous to the forced evacuation of non-military personnel, the DOD announced that the detainees had engaged in “acts of asymmetric warfare” against the United States by committing suicide. The government issued this conclusive statement on the cause of death before autopsies were performed, and before persons on duty were interviewed. By holding the early press conference before performing its due diligence, the DOD skewed the objectivity of the subsequent investigation and forever altered the public’s perception of these deaths. It is now clear that the DOD’s final investigation was either grossly incompetent or a concocted cover-up of the truth.
How could three people commit suicide by hanging in one of the most secured prison facilities in the world? In 2008, more than two years after the purported suicides, the DOD released a three-page summary of the Naval Criminal Investigative Task Force (NCIS) investigative findings and a massive, heavily redacted file of investigative interviews and documents. Research fellows at the Seton Hall Law Center for Policy and Research (CP&R), headed by Professor Mark Denbeaux, began analyzing more than 1,000 pages in redacted documents to better understand how the three detainees died.
What the research fellows at CP&R found is remarkable. According to the DOD’s interviews of Guantanamo personnel, each deceased detainee braided a noose by tearing bed sheets and clothing, made a mannequin of himself so it would appear that he was asleep, hung sheets to block guard views of the cell, tied his feet together, tied his hands together, placed cloth in his mouth or throat, hung the noose from the metal mesh of the cell wall, climbed upon the sink basin, put the noose around his neck and released his weight to result in death by strangulation.
According to the base’s Standard Operating Procedures (SOPs), the detainees should not have had possession of enough fabric materials to complete the suicidal act described above. Furthermore, it was an SOP violation to hang a sheet that would obstruct a guard’s view of the detainee cell for more than a few minutes while one used the in-cell toilet. These sheets, like the detainees, hung for more than two hours. The SOPs dictate that guards are to walk the cell block every 10 minutes and take visual count of each detainee. The guards on duty failed to complete this task a minimum of 12 times while the detainees hung dead in their cells.
These details are only the tip of the iceberg. While making sworn statements, several guards were accused of making false statements or failing to obey direct orders. However, not one Guantanamo employee was disciplined for failure to obey the SOPs. Even though the detainees were reportedly found dead beyond the point of resuscitation, they were given invasive medical treatment, which in some cases included use of defibrillating machines, tracheal tubes, catheters and intravenous injections. None of these procedures could have saved the detainees, and yet there has been no explanation as to why post-mortem mutilation of the bodies occurred.
In early December 2009, Seton Hall Law’s CP&R released “Death In Camp Delta,” a report uncovering discrepancies and issues with the DOD’s investigation. Since then, members of Congress have called on Attorney General Eric Holder to conduct a new investigation into the DOD investigation, and Harper’s Magazine published an article taking CP&R’s research further. Harper’s author Scott Horton spoke with several people on duty the night of June 9, 2006, who confirmed that the three detainees did not die in the way that has been alleged. Horton found that those guards who were stationed in observation towers, which provided a clear view of the entire camp, did not see any bodies carried out of their cells to the medical facility. Harper’s identified what it believes to be a non-DOD facility at Guantanamo that might be a CIA “dark cite.” It suggests that the detainees died elsewhere on the base, confirming the investigation as a probable cover-up. Horton has thus extended the investigation that Seton Hall’s CP&R began.
“Death In Camp Delta” is the sixteenth report published by CP&R that examines the Guantanamo Bay detention facility operations. These reports are researched and authored by Seton Hall Law students under the guidance of Professor Denbeaux. The reports have been cited in U.S. Supreme Court opinions, Congressional records, the European Parliament, the New York Times, Washington Post and numerous other academic and periodical sources. While the full truth of what occurred on June 10, 2006 has yet to be uncovered, public dialogue toward ascertaining the truth, with the help of Seton Hall Law’s CP&R, is as vigorous as ever.

Warner's Dillema

In early February, Warner Music CEO Edgar Bronfman Jr. announced that his company would not be issuing licenses to free (non subscription based) interactive music streaming services. Bronfman has arguably been the most outspoken of the major label CEO’s when discussing the life of music as it collides with new technologies and the internet. While Bronfman’s sound-bites are entertaining, one must ask whether they make good business judgment.
BBC News quoted Bronfman as saying ”free streaming services are clearly not net positive for the industry and as far as Warner Music is concerned will not be licensed. The get all your music you want for free, and then maybe with a few bells and whistles we can move you to the premium price strategy is not the kind of approach to business that we will be supporting in the future.” Warner is singling out those services such as Lala, Grooveshark or Europe’s Spotify, which allow users to select specific songs and entire albums to stream on demand without paying a fee. It is the position of Bronfman, and many other recording industry executives that such legal services have the potential to permanently displace the sale of music.
Fear that record sales will continue to decline as the use of free on demand streaming services rise is rational. This fear was directly addressed by Congress more than ten years ago when they provide sound recording copyright owners with an exclusive right to digital public performance of music. Through this right, Warner collects a royalty each time music they own is played by a licensed webcaster or streaming service over the internet. In contrast, Warner does not collect money when their music is played over traditional radio airwaves. The royalty compensation provides a steady stream of income to copyright owners, while providing consumers a way to remain connected to music and to try music in advance of purchasing it. Furthermore, it is unlikely that streaming will completely replace music purchases because consumers do not have constant access to internet streaming.
According to NDP Group, a researcher of trends in the music industry conducted a study analyzing the use of internet music among the key teenage demographic of 13-17 year olds. Teenagers purchased 19% less music in 2008 when compared to 2007. At the same time, the demographic also acquired less music through illegal means during this period. Use of Peer to Peer networks declined by 6% and the “ripping” of music from friends dropped by 28%. One area of music consumption that dramatically increased was the use of internet radio and streaming services. 52% of teenagers listened to online radio in 2008, compared to only 34% a year earlier.
Trends clearly show that the legal consumption of music over the internet is increasing, while illegal means of music acquisition is declining. The rational consumer will always seek to acquire product at the lowest economic cost. Although the theft of music via peer to peer networks has been stigmatized enough to decrease the practice among consumers, the practice of acquiring music for free remains in high demand. The copyright code has been adjusted to provide royalty payments and therefore incentivize record companies to participate with and encourage new technologies such as streaming. If it chooses not to allow consumers to acquire music through the most economically efficient legal means, Warner runs a significant risk of alienating consumers. Alienation may result in a return to illegal acquisition of music, or simply moving consumers away from the consumption of musical recordings owned by Warner. The remaining big three record labels are unlikely to follow Warner’s example, and this increases the potential self-inflicted wound Warner is chasing.