Nine days left

In publishing their decision in the Federal Register, the Copyright Royalty Board (a trio of judges working for the U.S. Copyright Office, which is itself an agency within the Library of Congress) established that their decision would become effective on July 15, 2006. That's the date when [blah blah blah, 17 months of retroactive payments, blah blah blah...]

Meanwhile, record sales are in free-fall. CD sales fell from 256 million units in the first six months of 2006 to only 205.7 million in the same period of this year, a 19.3% drop.

Download sales could be a savior of the industry -- costs of the physical handling of product have been stripped out of the equation! -- but they aren't quite, at least not yet. Sales of digital albums were up 60% -- from 14.3 [check] to 23 million units. In a sense, excellent!

But that's down 50 million CDs and up only 9 million digital albums, so it's a net-downward trend.

SoundExchange's John Simson has argued that this is due to increased Internet radio listening. This argument is not credible, nor supported by any evidence. It is actually due to a combination of declining interest in music in general, increasing consumer interest in DVDs (e.g., when I buy a season of a TV series, I can get several hours of audio+video for the same price that the record industry is trying to charge me for 40 minutes of audio on a CD) and video grames, disappearing record stores, and consumer antipathy caused by the RIAA indiscriminately suing children and grandmothers (it is the only industry in America whose primary image is that of screwing its artists and suing its customers).

Killing Internet radio will not fix the problem, it will exacerbate it.

The outlook is decidedly blue

Congress doesn't like to set royalty rates; they prefer to set procedures by which royalty rates are determined.

Musicians don't know what to think.

Meanwhilek there's a Dr. Evil-esque scheme hanging around in the background: SoundExchange uses "The artists deserve fair payment" verbiage to argue for Congress leaving the CRB's bankruptcy-level royalty rates alone. [SEE ESSAY ABOVE.]

Ai yi yi!

Download sales

Nielsen SoundScan left off three points: (1) There's increased interest in buying song by the track from iTunes, et al., and they didn't mention that. That's millions more dollars narrowing the gap. (2) There's other record label income coming in this year that's ahead of last year -- ring tones, satellite radio royalties (at ~7.5% of revenues). (3) The issue holding back download sales is, again, pricing! Teenagers own MP3 players that hold 20,000 songs. The record industry wants them to buy tracks legally to fill those devices. But at current prices ($1 to $1.30 per track), they want to charge each teenager $20,000 to $26,000 to fill up their $250 device!

Record labels have never been marketers. Historically, they have been (1) lawyers cutting deals with artists (and largely screwing them thereafter, or at least so the story goes), (2) manufacturers and distributors of the physical product. The actual marketing, as it turns out, has been done by artists and managers. (Did EMI break Norah Jones, or did Norah Jones and her management company break Norah Jones?) That crazy $1 to $1.30 price was set by lawyers (A) trying to get as much money per track out of Steve Jobs as they could (ignoring the effect of pricing on volume) and (B) wanting to match the price per track they get from the manufacturing-and-distributing-physical-product side of their business (ignoring the disappearance in the digital world of all of the costs of associated with those processes).

What in the WORLD is the record industry doing?

Okay, offering to renew the noncommercial stations, reasonable. Offering to renew the Small Commercial Webcasters deal, fine -- except it's unclear why they want to keep small guys below $X million in revenues, except that they think they can get more than 12% of revenues out of them if they're at $X+.1.

But the big guys: Claiming that they'd NEVER meant that the $500/station minimum should necessarily apply to massively-multichannel stations like Rhapsody's and Live365's and Pandora's... but then agreeing to a cap on that only through 2008, and only if DiMA would quit trying to lobby for any long-term legislative change. That's chutzpa!

What next?

Starting one week from Monday, the risk-averse will begin to go out of business...