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Lynne Kiesling

I'm outta here for a couple of weeks of bicycling! Sunday night we will arrive in Pierre, South Dakota, from whence we bike east along the Missouri River to St. Charles, Missouri. We are biking the first one-third of the Lewis & Clark Trail in reverse, accompanied by their journals and other history-relevant readings. Should be fun!

If you would like to keep up with our journey, I've created a blog, L&C Bike Tour, as our online journal. We will post as often as Internet access permits.

I am also using this trip as an opportunity to raise awareness and funding for the Melanoma International Foundation. The Melanoma International Foundation funds patient assistance programs, providing reassurance and understanding on the journey of having the disease as well as providing free screening and awareness events. They provide education through their professionally moderated forum and helpline. Melanoma can be fatal, especially if not caught early. But there's also a lot of low-hanging fruit in melanoma prevention -- broad-brimmed hats, protective clothing, staying indoors or in the shade during the most intense midday hours.

I am using this bike ride to request pledges and donations to support the excellent and important work of the Melanoma International Foundation. In particular, your pledges here will support the Leroy Coolbreeze Fund at the Melanoma International Foundation.

The Leroy Coolbreeze Fund honors the memory of Ian Copeland, a legendary music agent and bon vivant who brought great joy to many people throughout his too-short life. Along with his brothers Stewart (best known as the drummer in The Police) and Miles (who, among other things, managed The Police and founded IRS Records), Ian brought music into being that changed my life and thrilled me starting in the late 1970s. Their work continues to thrill and excite me to this day. Ian died from melanoma in 2006. My request for your support is a testimony to the value the Copeland family has brought to my life, and the joy I experience daily through listening to and playing the music that they have created.

As my friends and I ride along the Lewis & Clark Trail, please give to this worthy cause. If you can specify the "Leroy Coolbreeze Fund" and "Lynne" in your donation, then the great MIF folks will take it from there, and will know that our Lewis & Clark Trail bike tour is raising your awareness of the importance of melanoma outreach and research, and enabling them to do even more of this important work.

Lynne Kiesling

At Boing Boing, Cory Doctorow Nine Inch Nails made $750,000 in the first two days of its new album's online distribution. This is an interesting follow up to my earlier post on the release.

Gee, did RIAA get the memo that giving away an album's worth of songs for free still managed to bring in that much revenue? In two days?

Lynne Kiesling

I am listening to the WOXY Lounge Acts live right now with Jukebox the Ghost, and they are awesome! I have heard their song "Hold It In" a few times, and it's catchy and engaging.

They are about to release an album, and you can listen to their tunes on their webpage. Check them out!

Lynne Kiesling

2007 was the best music year I've had in a very, very long time. From a nostalgia perspective, you could argue that it's the best year I've had in 24 years, because that was the last time I saw The Police play live, and in 2007 I saw them live again, several times. And they rocked. I'm very glad I saw them indoors, because while seeing them at Wrigley was wonderful and emotionally meaningful for me for several reasons (with some of my favorite people, walking distance from my house, Wrigley!, Stewart in a Cubs jersey), but I really loved the energy and vibe of the indoor shows, for a lot of reasons.

But 2007 was also a good year for new music. Two radio stations that play music to my taste do end-of-year countdowns: WOXY and KEXP in Seattle. My favorite album of the year was Boxer, by The National. Loved it, loved it, loved it. Well-composed music, lovely bass-voiced lead singer, intelligent but not ponderous lyrics, really fun and high quality live show. Boxer was also #1 on WOXY's list and #3 on KEXP's list (as well as being the favorite of my favorite bartender at my favorite local watering hole, and I love being able to go in there and talk tunes with him!).

Both countdowns also listed Feist high up, but I honestly couldn't get as into her as I wanted to. Perhaps I need to revisit the CD. Same with Amy Winehouse, although I didn't buy her CD.

Other stuff I bought in 2007 that I really love:

• Stewart Copeland, The Stewart Copeland Anthology
  
• Interpol, Our Love to Admire
  
• LCD Soundsystem, Sound of Silver
  
• Editors, An End Has a Start
  
• Hot Hot Heat, Happiness LTD.
  
• Manu Chao, La Radiolina
  

And other stuff that escapes my memory at the moment.

The single song that I enjoy the most from 2007, the one that I sing at the top of my lungs irrepressibly whenever I hear it, is "Let Me In" from Hot Hot Heat. They were also a fun live show.

The two bands that I didn't explore in 2007 that I intend to in 2008 are Okkervil River and Gogol Bordello. Also St. Vincent; she opened for The National and was really impressive.

Time for more great music in 2008! What did you like in 2007?

Michael Giberson

Today, December 10, 2007, StubHub announced that the ten millionth ticket was recently exchanged through the site. The company said that the exchange involved a pair of tickets to next Sunday’s game between the Green Bay Packers-St. Louis Rams in St. Louis. In a pattern perhaps typical of many exchanges on StubHub, a fan of the visiting Green Bay Packers acquired the ticket from a St. Louis fan/season ticket holder who faced a conflict preventing his use of the tickets.

The ticket resale market has motivated a few theoretical economics papers, but usually very little data is thrown into the mix. Now that is changing. A couple of Stanford economists, Alan Sorensen and Phillip Leslie, have developed a great dataset on ticket resale based on data from Ticketmaster, StubHub, and eBay for a sample of more than 100 concerts during the summer of 2004. Overall they have records for over 1.7 million tickets sold or comped in the primary market – data from Ticketmaster – and almost 69 thousand tickets resold via eBay and StubHub (data provided by StubHub; eBay data scraped from the site – aren’t research assistants great? StubHub was acquired by eBay in February 2007). The economists speculate that about half of ticket resale occurs through one of those two sites, so perhaps a total of 140 thousand out of the 1.7 million tickets were resold in the secondary market.

The data is described in an unfinished paper, “The Welfare Effects of Ticket Resale.” While the analysis is incomplete, some interesting preliminary results emerge from their data:

• Total revenue received by resellers at eBay and StubHub is averaged 6% of the primary market revenue; the maximum for any single event in their dataset is 37%.

• Resellers are obtained an average markup of 40% over the face value, and a quarter of resold tickets obtained markups above 66% - but 28% of tickets were resold below face value.

• Resold tickets were more likely to be tickets with higher face value, and more generally high quality seats were more likely to be resold than lower quality seats (even for tickets of the same face value).

• Indeed, the authors conclude that unpriced seat quality was a significant driver of ticket resale activity.

• Total profit (markup) obtained from ticket resale in our data is slightly over $1.5 million, or about 1.14% of total revenue in the primary market. Given that they observed an estimated half of resale activity, the actual values for their sample of concerts was probably closer to $3 million and 2.3% of the total.

A useful point for promoters and venues that want to discourage resale: price tickets better in the first place. Typically a particular concert will offer a variety of price points; the concerts ranged from 1 to 12 price levels in the Leslie and Sorensen dataset. With sometimes thousands of seats offered at a single price point, the authors observe that the variation in seat quality at a particular price can be dramatic. With variation in quality and a fixed price, an economist would expect relatively higher excess demand for the higher quality seat. Professional ticket resellers rely upon these high quality underpriced tickets to obtain their significant markups.

If primary ticket sellers were better at pricing tickets in the first place, they could squeeze most of the professional resellers out of business. (This is my conjecture, not that of Leslie and Sorensen.) No doubt an analysis of data from Ticketmaster and StubHub could help venues identify underpriced seats, and help them redraw their pricing regions.

I have no particular interest in driving professional ticket brokers out of business, but it seems to me that consumers don’t gain a lot in the long run from the economic surplus that flows into brokers' hands. As a consumer, I benefit more in the long run when profits are captured by suppliers, motivating supply-side competition among musical acts and concert venues to serve me, rather than when profits are captured by ticket brokers, which motivates an ‘arms race’ competition to obtain the best tickets first.

But lest this last argument be taken as an anti-scalping position, I hasten to add that I have a stronger short run interest in easy-to-access resale opportunities when a conflict arises and I can’t use a ticket. (Or, for example, when my team was leading the league at the end of the MLS season, so I bought MLS Cup tickets, then they didn’t make it through the post-season tournament, so I resold the tickets via StubHub rather than witness the Houston Dynamo repeat against the New England Revolution.)

My mantra remains: Online Secondary Ticket Markets can be Good for Teams and Fans (and musicians and venues).

NOTES: My most recent previous post on ticket resales is: NFL wants to support secondary market for tickets, New England Patriots want to punish ticket resellers.

(By the way, StubHub reports that Miley Cyrus was the highest grossing concert on the site this year based on StubHub volumes and exchange prices. Cyrus tix averaged a resale price of $258; only Celine Dion and Elton John tickets saw higher resale values, while resale prices for Eric Clapton, Bon Jovi, Bruce Springsteen, and The Police, among many others, fell below the Cyrus ticket average.)

See a related story on online ticket resale from The Economist: If you can't beat 'em, join 'em.

Lynne Kiesling

Today my head is full of music, not economics (OK, most days my head is full of music ...). Last night we saw Handel's Julius Caesar in Egypt (Giulio Cesare in Egitto) at the Lyric. It's the Lyric premiere of the David McVicar production from Glyndebourne in England.

Wow. I was transfixed for a full four and a half hours, which for me is certainly saying something. Everything was fantastic: singing, staging, choreography, costumes, and of course the music. I am a huge Baroque fan, and in particular I like the interplay of harpsichord and cello in Baroque music.

I won't repeat the earlier reviews of Dave Schuler at the Glittering Eye, or John von Rhein's review in the Tribune:

Think of Bollywood-style dance numbers, English colonial pith helmets, 1920s flapper wigs, a fey Egyptian king clad in belly dancer pants and a bath-to-bed routine to accompany Cleopatra's spectacular Act 2 showpiece, sung by soprano Danielle de Niese's super-sexy Cleopatra.

It's all there in McVicar's lavish, eye-filling staging, which honors the wit and seriousness of Handel's original while never forgetting why most people went to the opera back in his day, and why they have kept going to the opera ever since -- to be entertained.

Yes. It's a production that is serious and high quality without taking itself too seriously. I thought the Bollywood-meets-Madonna choreography gave the production a lovely tongue-in-cheek edge. David Daniels has a beautiful countertenor voice, and I'd never really heard any live countertenor, so it was a real treat to have three in one production (although with my tin ear I had trouble distinguishing them from some of the women!). Of course there were some creative liberties and time-period incongruities (for example, at the end Cleopatra and Caesar come out in full 18th-century French style garb), but by putting together all of these different snippets of power and success through history, I think McVicar turns them into a recognizably modern turn on Handel's conception of the quintessential "power couple". Loved it, loved it, loved it.

My favorite scene was at the end of the first Act, where Caesar and Ptolemy meet for some chilly diplomacy. They dance, a diplomacy dance, and the music is just gorgeous. The continuo (2 cellos, bass, 2 harpsichords, and a funky big lute with a 4-foot neck called a theorbo) played absolutely brilliant percussion through the whole dance suite. I was literally sitting on the edge of my seat and tapping my foot and hand along with them. It was beautiful. And the dance choreography captured the chilly diplomacy with great elegance and humor.

Another great feature was having a woman as conductor, French harpsichordist Emmanuelle Haim. From John von Rhein's second review:

Putting it all together in the pit is French conductor Emmanuelle Haim, a spirited, stylish Handelian who inspires the orchestra to play with the articulations and inflections of a period band. That she should be Lyric's first maestra is appropriate for a company that's had two women general managers for most of its history.

She both conducted and played second harpsichord. Brilliant, energetic, sprightly. She actually brought a tear to my eye during the bows at the end, because when she came up on stage she was absolutely beaming, and after encouraging the orchestra to take their bows, she turned to join the singers with a little leap of enthusiasm. Rarely do I see such an accomplished and successful woman have such an unabashed sense of life, and be so willing to share and display it so openly. I felt a moment of kindred spirit-ness there ...

Its Glyndebourne production, with some different singers, is available on DVD. I think I know what's on my Christmas list!

Best.Opera.Ever.

Lynne Kiesling

Here's an interesting development: one of my favorite bands, Red Hot Chili Peppers, are suing Showtime for calling their new show starring David Duchovny "Californication":

"Californication is the signature CD, video and song of the band's career, and for some TV show to come along and steal our identity is not right," the band's lead singer, Anthony Kiedis, said in a statement. ...

The show features a character named "Dani California," which is also the title of a Red Hot Chili Peppers song released in 2006, the lawsuit noted.

Sounds like a pretty straightforward open-and-shut case, right? The album came out in 1999, now it's 2007, they used it first, right? Maybe:

In July 2007, Kapinos [the show's creator and executive producer] told reporters at a Television Critics Association press tour in Beverly Hills that he first heard the term in reference to Oregon.

"Apparently in the '70s there were bumper stickers that said 'Don't Californicate Oregon,' because Californians were coming up there, and I just thought it was a great, great title for this show," said Kapinos.

Hmmmm ... prior use?

So if you were a judge in this lawsuit, how would you decide? Is the name "Californication" now so irrevocably associated with Red Hot Chili Peppers that they should have a property right in the name? Or is it a generic enough term that it should not be associated solely with the band?

Lynne Kiesling

Today sees a couple more articles about Radiohead's decision to sell their album online, at prices determined by the buyer. This New York Times article highlights one thing that I find interesting: letting the radio listeners themselves determine which songs off the album should be considered the "hit singles":

The Radiohead camp has been reluctant to add to the hype surrounding the album, which has been stoked by breathless blog posts and e-mail exchanges for the past week. Bryce Edge, who manages the band with Chris Hufford of Courtyard Management, stressed that the band’s tip-jar-style tactic “is not a prescription for the industry.” ...

Mr. Edge summed up the pricing pandemonium simply: “Digital technology has reintroduced the age of the troubadour. You are worth what people are prepared to give you in the digital age because they can get it for nothing.”

In another departure from convention, the band declined to send out early copies of the music for reviewers and has not settled on a traditional single to push to radio stations. As a result, programmers are improvising. In San Francisco, for instance, the rock station KITS-FM, Live 105, has the entire album on its Web site (live105.com) and will let fans vote to determine which songs merit airplay.

“We just want to be involved in it,” said Dave Numme, the station’s program director. “We just want to reflect what’s going on out there and give our listeners a chance to tell us what they think of it.”

This Bloomberg article asks whether the music's any good:

Radiohead is open to charges that it has been forced down the Internet route because the band needs the publicity or can't sell its music any other way. Which raises the question, is "In Rainbows'' any good, at any price? ...

It is downbeat, depressing and a relatively rewarding rock experience, all at once. ...

As a single-sentence assessment, one could say this: Radiohead is near the peak of its powers and this is its best effort in a decade, since "OK Computer,'' which is regularly voted by critics as among the best rock albums of all time. ...

Not that this is necessarily saying much. For one thing (and this is a rock heresy rarely spoken), time has shown us that the 1997 album is less than the ground-breaking masterpiece it was originally acclaimed to be. For another, the albums in between saw the band veer off at an experimental tangent. "Kid A,'' "Amnesiac'' and "Hail to the Thief'' were Alternative Rock with a capital A, and varied from the strangely successful ("Pyramid Song'') to pretentious ("Sit Down. Stand Up.'')

I'm not a big Radiohead fan (I've got OK Computer and Amnesiac, but I never choose to listen to them, there's so much stuff out there that I like better), but I am intrigued by this experiment.

By the way, music sold by Magnatune are priced this way, to a point: you pick the price, with a price floor of $5, but you can pay more if you choose. They find that many people do.

Lynne Kiesling

Last Thursday we saw De Novo Dahl, Bedouin Soundclash, and Hot Hot Heat at the Vic in Chicago. Punch line: great show, very fun. More below the fold.

Lynne Kiesling

So I've really been enjoying The Police tour and rediscovering the joy I find in their music. Here's an article from the Guardian last week about the band, in 1978 and today, by a writer who has traveled with the band and written about them then and now. Of all the articles I've read, I think this is the best I've seen.

Have a relaxing holiday weekend.

Michael Giberson

I stumbled across the Home of the Groove blog some months back. It turned out to be a great place to delve deeper into New Orleans funk and R&B and related musicality. And recently, the Home of the Groove has sprouted its own internet radio station running a 10-hours and growing playlist of New Orleans lost hits, arcana, and other rarities.

Internet radio is not dead yet. Let's hope it survives the continuing loving embrace of SoundExchange.

Lynne Kiesling

Reason's Jeff Taylor has written an article that gives some insight into the history and motivation behind the current listener-based royalty rates that will go into effect on Sunday, unless a last-minute compromise occurs.

Turns out digital is not perfect. Digital can be crap. And a perfect digital copy of perfect crap is still crap.

But that was not widely understood in October 1992, when President George Bush signed the Audio Home Recording Act, which taxed digital audio equipment and media in order to "pay back" copyright holders for their added risk in this brave new digital era. Next, the World Intellectual Property Organization debates of the mid-90s advanced the idea that the United State had to "normalize" its copyright rules to the rest of world. A world that, interestingly enough, lacked either fair use or a First Amendment. The bit was flipping.

This in turn birthed the Digital Millennium Copyright Act of 1998, the proximate cause of Net radio's demise, albeit routed through an amazingly facile U.S. Copyright office. The Copyright Office has sided with current copyright holders in every meaningful decision on digital audio, dashing hopes that it would serve as a of bulwark against the immense lobbying power the copyright holders hold over Congress.

Make no mistake, the death of Net radio is merely a means to an end—the end being the rollback of any notion of fair use of copyrighted digital content. The goal is nothing less than a licensing regime for all digital music that recognizes no ownership rights, fair or otherwise. In its place will be a digital licensing fee tacked on to every broadband customer's bill, right alongside the other mysterious fees and taxes that serve the political status quo.

This would be a pathetic outcome. WAIT, WAIT ... I literally just clicked over to WOXY to check on updates, and they post a link to this this Wired article saying that the parties have negotiated a temporary reprieve:

For now, the parties involved in what's described as ongoing negotiations have agreed to waive at least temporarily the minimum charge of $6,000 per channel required under a scheme created by the Copyright Royalty Board, or CRB.

HOWEVER,

The deal affects only webcasters participating in CRB hearings convened in Congress this week aimed at winning a reprieve for the industry, according to a source familiar with the negotiations who requested anonymity. Although the deal is for now provisional, one participant expressed relief.

Wired will be providing live updates throughout the day at their Listening Post blog.

Lynne Kiesling

Seeing the Police at Wrigley Field last week has reinvigorated my too-long dormant fascination with Stewart Copeland. And I'm not alone; Sun-Times music critic Jim DeRogatis turns out to be the same age as I am, and to have had similar behavior when attending Police concerts the first time around:

I first saw bassist-vocalist Sting, guitarist Andy Summers and drummer Stewart Copeland perform at New York's Madison Square Garden in 1980. I was 15, an aspiring drummer and such a geek that I intentionally bought tickets behind the stage so I could try to figure out what Copeland was doing; his uniquely syncopated, reggae-inflected hi-hat patterns, complicated fills and polyrhythmic beats remain some of the most innovative in rock history, as any of my fellow drum geeks will tell you.

Well ... living in Columbus, Ohio (a town lacking even a decent radio station), I had to wait until 1983 to see them live, and I had to drive all over the Midwest to do so. In Indianapolis we had seats behind the stage so I could watch Stewart.

John at Ascent Stage got the picture I wanted at Thursday's show.

We now return you to your regularly scheduled economics commentary ... but perhaps with a little better rhythm.

Lynne Kiesling

Thursday was a gorgeous day in Chicago; a bit humid, but it was still an amazing evening for The Police concert. Overall I thought it was a fantastic show, and unlike Greg Kot at the Tribune, I was perfectly happy with the start of the show ("Message In A Bottle") and the fact that it built to a higher energy in the second half. I've been lurking on the forums at Stewart Copeland's site for a while, so I knew that the guys had worked out new arrangements to many of the songs.

I thought starting with "Message In A Bottle" and "Synchronicity II" was good, because they are pretty high energy songs that are known by even casual Police fans. Then they did a set of more mellow songs, including new slower-paced arrangements of some songs (I am forgetting the actual songs and the order). At that point a lot of the audience sat down, because the mood was more mellow (and, after all, this is an audience of 35-55 year old folks!). In this set was what I thought was the least successful of the new arrangements, "Don't Stand So Close To Me". This song depends crucially on a sort of agonized tension as the teacher struggles against his desire for his student. The decision to sing in a lower key sapped the chorus of the energetic tension required to pull off that emotion. Sting sang on key, but the overall effect was flat.

The guys really hit their stride with "Truth Hits", which is an excellent song, and the new arrangement really works. Of course, I loved "Every Little Thing She Does Is Magic", which they didn't mess with too much, and the video of which firmly cemented my Monster Crush On Stewart Copeland. Everyone sang along with "Roxanne", of course. There were two instances in which they mashed-up songs, using one song as a bridge in another; the first was "Voices Inside My Head" with "When The World Is Running Down", and the second was "Can't Stand Losing You" with something I'm completely blanking on. "Regatta de Blanc" was very effective for stadium audience participation, with Sting egging us on to sing "eee-ay-yo" over and over at the top of our lungs (Greg Kot found this to be one of Sting's verbal tropes, but if you really know the Police well, you know that this is a strong thread of the reggae themes in their music). "Walking In Your Footsteps" had very cool dinosaur video effects and was well-arranged, as was "Invisible Sun". I also liked how they played some older, less well-known songs in the latter half; they ended with "So Lonely" and "Next To You", and they were an energetic frenzy.

One of the coolest things was in "Next To You", their last song, they left the stage, and Stewart came back wearing a Cubs jersey that said "Copeland 07" on the back. A very classy touch. They also showed a montage of old photos while they built up the frenetic energy in the song. It was a great way to end the show.

We had seats at the bend between the third base line and home plate, which meant that the stage was pretty far away. But once they started playing, they displayed images on three large screens behind the stage and one screen to each side. The stage itself was very spare (befitting the spare structure underlying the music), but the most amazing thing about the stage setup was the camera work and the lighting. The sides of the stage were set up for very cool, tall light effects, simple but extremely effective. I loved the camera work, because all three of the guys got lots of camera attention, Stewart's drum kit was well-lit, and the camera shots did a good job of showing their musicianship by focusing on their hands while playing. The camera work helped make this a concert for the connoisseur as well as the casual pop fan. Even after 23 years I remain firmly convinced that these three guys are amazing musicians, and that Stewart Copeland in particular is one of the most creative and gifted drummers I've ever heard in my life. He also has a brilliant and incisive wit that I love.

Sting also did a good job of dealing with the fact that this was a stadium show and not an arena show or a club show; he didn't talk too much, and he involved the audience in call-and-response on several of the songs. In our section most everyone was singing and dancing the whole time. Here it is, 14 hours later, and my adrenalin is still high, and we're still sitting around watching Police videos on YouTube.

Lynne Kiesling

Want to listen to your favorite Internet radio today, like Soma FM or WOXY? You can't; they are silent. This is what we can expect permanently if the proposed Internet royalty rates, which discriminate against non-broadcast, online-only stations, take effect in mid-July.

Soma FM and WOXY are participating in Save Internet Radio's Day of Silence today. Here's Soma's estimate of the economic effects of these new royalties, which impose disproportionate costs on online-only stations with small listener bases (for example, 2,500 concurrent listeners at Soma):

The future of Internet radio is in immediate danger. Royalty rates for webcasters have been drastically increased by a recent ruling and are due to go into effect on July 15 (retroactive to Jan 1, 2006!). SomaFM will be liable for $600,000 in additional royalties for 2006, and over $500,000 for the first half of 2007. As of July 15th, we will owe $1.1 million dollars in additional royalties.

If you like this silence, it'll be permanent starting in mid-July. If you don't like this silence, it's up to you to do something about it. What can you do? Call your Congressional representatives and tell them that you would like them to support H.R.2060 and S.1353, the Internet Radio Equality Act.

Previous KP posts on this issue here.

Don't be part of the collective action problem.

Lynne Kiesling

I am off to my old stomping grounds for a few days of KP Spouse family reunion, and seeing some of my old colleagues and friends. To plant a seed for discussion upon my return, here's an event that I've been thinking about a lot in the past few days: Lala, which started life as an online used CD trading site, will now be selling online music, and in ways different from iTunes and the other online music sites. Here are some background articles as a placeholder:

Business Week: Lala to send music directly to iPods

WSJ: Listen for free, but pay to carry (subscription required)

NYT: Warner to offer free music through Lala

Lala reshaping the online music industry

Note: compare/contrast Lala's new business model with Magnatune's.

See ya next week!

Michael Giberson

At the suggestion of prediction market scholars Justin Wolfers and Eric Zitzewitz, InTrade is running a market on the XM-Sirius satellite radio merger. The apparent verdict? Market says, "maybe next year."

For the moment, the "The XM and Sirius satellite merger to close before the end of Dec 2007" contract most recently traded at 10.5, while the "end of Mar 2008" contract recently traded at 40 and the "end of Jun 2008" contract traded at 55. (Though I'd warn that trading in the contracts are a little thin for jumping to conclusions.)

Googling the XM-Sirius merger turned up this item from SatNews ("a leading provider of satellite news, publications, research and other satellite industry information") presenting commentary from the Competitive Enterprise Institute with themes similar to those we've exhibited here (and here):

CEI said that while some critics have charged that a merged XM/Sirius would “dominate” the market for satellite radio, they ignore the fact that both companies are actually relatively small players in a much larger market of news and entertainment that includes broadcast networks, commercial radio, cable television, the Internet and more. The approximately $13 billion in market capitalization of both companies pales in comparison to $57 billion value of one major cable company alone.

SatNews is drawing from a recent essay by CEI vp Wayne Crews, which draws a quote from here at KP:

Sometimes, competitive industries overshoot and need to retreat and consolidate. ... Antitrust delays such needed realignments; but this Roach Motel, you-can-get-in-but-you-can’t–get-out mindset could waste precious months, all to forestall “monopoly” in…audio news and entertainment? As economist and “Knowledge Problem” blogger Mike Giberson noted, “Doesn’t the FCC know that by raising barriers to exit, they create barriers to entry for some future satellite radio rival?”

Not me at my quotable best, but it is always nice to be noticed. Crews goes on to write:

Regulators also should refrain from using the merger review process to extract a parade of concessions from these struggling companies. But meanwhile, antitrust policy should allow aggressive competitive responses to the combination. Wall Street, investors, programmers, consumers, already-poised rivals, and new entrants collectively will discipline more thoroughly than could the FCC. That’s as it should be.

Lynne Kiesling

I misunderstood the per-play royalty in my previous post on Internet radio royalties. It's not 8 cents per play per listener, it's 8/100 of a cent per play per listener. So I was off by 2 decimal places; my apologies, and thanks to commenters for pointing it out.

So the annual royalty would be $40,353.33 for Groove Salad alone. Which is still too much when you consider the share of the total listener market that Groove Salad serves.

[Corrected as per comments, thanks!]

Lynne Kiesling

While we're discussing music, we are on the verge of another nail in the coffin of Internet radio, in the form of royalty payments. In mid-April the U.S. Copyright Royalty Board decided to affirm a prior ruling it had made to raise royalty rates that Internet-only radio stations pay:

Released March 1, the new rules (PDF) prescribe rate hikes of .08 cents per song per listener retroactive to 2006. The rates would climb to .19 cents per song by 2010, which amounts to a 30 percent increase per year. Each station would also have to hand over a minimum $500 royalty payment under the ruling.

The judges in their decision issued two clarifications--one about the way royalties would be calculated for 2006 and 2007 and another stating that the royalty rules would also apply to music streamed over mobile devices. But they left a number of other questions about the ruling unanswered.

Internet radio operators argue that, when compared with broadcast and satellite radio, they already pay the highest royalty rates in proportion to their revenue, and any further changes could imperil their offerings. A group of artists, labels, Webcasters and listeners has formed the SaveNetRadio Coalition to pressure Congress to get involved.

"As a former touring musician myself, I'm no stranger to the challenges facing working musicians," Tim Westergren, founder of the Internet radio service Pandora, wrote in a Monday e-mail. "The issue we have with the recent ruling is that it puts the cost of streaming far out of the range of ANY Webcaster's business potential."

Take, for example, soma fm's Groove Salad, which right now has 5774 listeners. In the past hour Groove Salad has played 10 songs. That means that in just the past hour alone, soma fm would have to pay 5774x10x0.08=$4619.20 in royalties. With 168 hours in a week and 52 weeks in a year, if this hour is representative, soma fm would have to pay annual royalties of $40,353,331 just for Groove Salad alone!!!!

This per-performance royalty structure for Internet radio differs substantially from the traditional royalty structure that traditional broadcasters pay, and it makes the royalty responsibilities on the Internet radio stations disproportionately higher relative to their listener base. For example, these recent statistics from BetaNews show how disproportionate these results are:

For our research, we wanted to compare what streaming radio providers would be charged by SoundExchange against the fees that broadcast radio stations today pay to the three major performance royalty organizations (PRO) - ASCAP, BMI, and SESAC. While indeed, some radio stations do pay as little as $972 per year in total royalty fees to PROs, as BetaNews reported Tuesday, in practice, we've since learned this isn't an average that applies to all stations, and major metropolitan radio stations do pay significantly more.

Nonetheless, there's still a considerable gap between PRO fees and SoundExchange's proposed "per-performance" fees, as our updated statistics demonstrates.

Radio stations collectively bargain for the royalty fees they pay to PROs; and as Keith Meehan, the executive director of the Radio Music License Committee, kindly explained to us today, the compromises these bargaining parties make effectively set a cap on how much PROs can collect from all stations combined.

As Meehan explained, in 2002 for ASCAP and 2003 for BMI, the two organizations calculated the amount of maximum royalty collections they could each live with, based on a percentage of radio stations' estimated revenue retroactive to 2001. Then they agreed to stop using stations' revenue as a benchmark for determining royalty rates from that time forward, switching instead to a formula that takes the maximum collectable amount for each year, and works it backwards to determine a fair rate that each station can contribute to it.

As a result, we absolutely know the amount of royalties that these two firms are expected to receive for 2006. For ASCAP, the agreed upon amount is $208,650,000. That's as much as it can collect from radio broadcasters in the US, no more. For BMI, the figure is $208,000,000 even.

OK ... so the entire broadcast radio industry pays royalties of $416 million annually, and these new royalties would impose fees of $40 million, 10 percent of that amount, on an online station with 5774 listeners? How fair is that?

Of course artists should be paid for their creations (but I think one would be naive to expect that record labels will pass most or all of this royalty on to the artists!), but is this royalty a good way to meet that objective? One consequence of the demise of stations like soma fm and WOXY would be that fewer consumers would be exposed to artists whose CDs they would then go out and buy. That would decrease artist incomes. How fair is that?

If you want some more background on this issue, soma fm has a nice overview page. If you care about this issue, visit SaveNetRadio.org, call your Congressional representatives, and urge them to support the Internet Radio Equality Act, HR 2060.

The new, unfair royalty structure is due to go into effect on May 15 unless this legislation passes.

UPDATE: my corrected understanding of the actual royalty rate is in this post; I was off by two decimal points, but it's still an unreasonable royalty relative to those paid by radio broadcasters.

Lynne Kiesling

Such is the assertion in an article in today's Wall Street Journal (subscription required) on how big box retailing is changing music retailing.

In past decades, deejays and music critics helped shape musical trends. Today, many music industry executives agree, the big boxes have become the new tastemakers. Even as compact disc sales fall, their choices dictate which CDs are widely available on store shelves across the U.S. Big boxes are the industry's biggest distribution channel -- and the rock, hip-hop, jazz and classical music titles they choose not to carry face drastically reduced chances of reaching mass audiences.

Thanks largely to aggressive pricing and advertising, big-box chains are now responsible in the U.S. for at least 65% of music sales (including online and physical recordings), according to estimates by distribution executives, up from 20% a decade ago. Where a store that depends on CDs for the bulk of its sales needs a profit margin of around 30%, big chains get by making just 14% on music, say label executives who handle distribution. One of these executives describes the shift as "a tidal wave." Despite the growth in online digital music sales, physical CDs still are the core of the recording industry, accounting for about 85% of music sales.

Is that really true? Are big box stores really the new tastemakers? I'm not persuaded, and actually the lede of the story hints at why I'm not convinced:

When Wal-Mart Stores Inc. informed record labels it was looking for CDs to include in a promotion of Jewish music last year, executives at Naxos of America Inc. leapt at the chance to get some of their ethnic recordings onto the shelves of the big-box retailer.

But within months of shipping thousands of CDs to Wal-Mart, the classical music distributor's loading docks were swamped with unsold copies of "Klezmer Concertos & Encores" and "Great Songs of the Yiddish Stage." Since they hadn't sold quickly enough to meet the retailing giant's standards, 80% of the CDs Naxos shipped to Wal-Mart were returned. Record stores typically return only 20%.

"In hindsight, if we'd thought about this a little more, we wouldn't have done it," says Naxos Chief Operating Officer Jim Selby. "Jewish classical music, going into a Wal-Mart store, it's pretty farfetched that we'd have 60% or 70% sell through." He adds, "It's niche-y music."

If the big box stores truly are music tastemakers, then why such large return shipments? It sounds to me like WalMart forecast a higher ability to create demand for Jewish music than they were able to realize. That's not a tastemaker. What this sounds like to me is WalMart doing its usual thing of shifting risk to its suppliers, not WalMart leveraging any ability to shape the music purchases of their customers. Of course the inventory of CDs that big box stores choose to carry shapes the music purchases of their customers at that store, but even though 65% of all CDs are sold at big box stores, if customers want something particular and WalMart doesn't have it, they'll get it at Amazon or Best Buy or Target or Borders or some other online or physical place.

Furthermore, the WSJ article begs the question of whether there are really tastemakers in music any more. So many commentators decry the fracturing of the music market, the decline in the shared pop culture experience, because of the ability that technology creates for long tail marketing. So here's a simultaneous proclamation of new big box tastemakers and the demise of the tastemaker. Who's right?

And another thing: mass audiences? I personally find the music that's pitched at mass audiences to be utterly anodyne, devoid of any redeeming feature; granted, I'm not the target demographic, but I think there are enough people of diverse enough ages, tastes, and incomes to make the concept of the mass audience fast on the tail of the dodo bird: nearly obsolete. That's another way of saying that on both the supply side and the demand side, technology has made the music market a lot deeper and broader than in the halcyon good-old tastemakers-create-mass-pop-stars days. And thank goodness for that.

In fact, just this week Chris Anderson wrote a Long Tail post about the decline in top album sales, referring to a recent Music Week survey:

The so-called “long-tail” impact on the singles market, since the introduction of legal downloads, is starting to reach the albums business, according to new Music Week research.

MW’s detailed study of quarter one trading patterns indicates that, while sales of the Top 200 sellers plummeted year-on-year by more than 20%, the rest of the market dropped by little more than 3%. It indicates that, as the top titles suffer the biggest falls in a clearly tough market, sales are being spread out more widely across a greater number of titles.

The apparent trend is being warmly received by labels and retailers alike, coming after a challenging opening three months of 2007 when artist albums were 8.94% down on Q1 2006, despite having had the added benefit of download album sales. These were not added to OCC sales figures until quarter two last year.

The drop was led by disastrous sales of the Top 200 artist albums, whose total of 11.29m physical units in the 13-week period was 21.13% lower than the first quarter of 2006.

Further down the chart, however, it was a different story, with sales of wider catalogue remaining relatively healthy. Excluding the top 200 best sellers, 13.10m physical artist albums were sold in the first quarter of 2007, down just 3.33% on a similar total for Q1 2006.

This all leads me to conclude that the WSJ article is off base, and that even though more than half of music sales in the US occur through big box retailers, that fact does not mean that such retailers are tastemakers.

Michael Giberson

By inclination I'm not favorably inclined toward the thesis of Barry Schwartz's book, The Paradox of Choice: Why Less Is More. More choices a bad thing? Nah, my attitude is more "Don't worry, be happy." (Daniel Gilbert, in Stumbling on Happiness, helped me out a little here. Apparently people who want to 'optimize' become overwhelmed by more choices, while 'satisficers' just are happy to have a selection to choose from and don't get all knotted up over which precise combination of things will be just right.)

New Orleans is certainly more of a laid back, satisficer's kind of place, and a quick trip there should be and is just the sort of thing I like. But Jazzfest -- more formally the New Orleans Jazz and Heritage Festival -- gives me a taste of what the 'paradox of choice' must feel like for you optimizers out there.

It is just too much, too good, and practically all happening at once. Just to pick the first day of this six-days-over-two-weekends event as an example: Surely I must go see Dr. John on Friday afternoon, but that means missing T-Bone Burnett appearing at almost the same time on the stage at the far end of the Fairgrounds. Then there is Bonerama, Trombone Shorty, and the James Carter Organ Trio. All worth seeing, and all pretty much at the same time, and all spread out over different stages. I was going to trek up to see Bonerama in Baltimore a week or two ago, but thought, "Oh, I'll see them in a few weeks at Jazzfest." But if it means missing Dr. John (and T-Bone Burnett and...). It's just too much.

Later Friday is Van Morrison. Not a New Orleans act, but they like to bring in a little fresh blood, and how can I miss him if he's there on stage after Dr. John? Course, at the same time on another stage is Mr. "When a man loves a woman" himself, Percy Sledge. And Kermit Ruffins & the Barbeque Swingers - you can't get much more New Orleans than Kermit Ruffins -- or Geno Delafose & French Rockin' Boogie over on the Fais do do stage. My head spins just thinking about all of these choices.

Then there is Saturday and Sunday.

Maybe that Barry Schwartz was on to something. (To keep this post at a reasonable length, I'm only hitting the highpoints. They run about 10 stages all day, all of the time, and even if you've never heard of the band on whatever stage you happen to be passing by, they're good and you can sit down and enjoy it.)

But even with all the paradox-of-choice-head-spinning I suffer through when the stage-by-stage schedule comes out, I still volunteer for the trip. In fact, I'm looking forward to the day that I'll be able to suffer through both weekends.

Lynne Kiesling

While we're on the subject, I was fishing around about soccer and found the EPL Talk blog, where there's a neat post about musicians who are mad about soccer. A disproportionate share of those listed are Manchester City fans (as am I), including:

Johnny Marr (Manchester City). The former guitarist of The Smiths had trials at Manchester City and was approached by Nottingham Forest to play football.

One of my favorite bands, one of my favorite teams, one of my favorite places. Yes, I like Manchester very much.

I think the disproportionate Man City representation reflects the hotbed of musical creativity that Manchester is.

Michael Giberson

XM and Sirius, two satellite radio networks, announced plans to merge yesterday. Amusingly, in the New York Times the story begins with "The nation’s two satellite radio services, Sirius and XM, announced ...", while in the Washington Post leads with ''XM and Sirius, the two satellite radio companies ...." In each case the hometown company goes first.

Both stories highlight the apparently high antitrust standard the two companies must overcome to gain approval for the merger. The Post:

The FCC bars a single company from controlling the satellite radio market, but FCC Chairman Kevin J. Martin recently noted that such rules can be changed. Martin said yesterday that the hurdle "would be high. . . . The companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices."

As the Times explains:

An army of merger and antitrust lawyers for both sides worked several marathon weeks of conference calls and trips to Washington to gauge the political climate for the transaction before opining that the deal should pass regulatory muster. Simpson Thacher & Bartlett and Wiley Rein are representing Sirius; XM is being advised by Skadden, Arps, Slate, Meagher & Flom; Jones Day; and Latham & Watkins.

Doesn't it seem a little silly that federal regulators are suggesting somehow the world would be worse off with one satellite radio company (for the time being) where as of a few years ago there were none? Do consumers have a right to two money-losing national music, talk and news services? Doesn't the FCC know that by raising barriers to exit, they create barriers to entry for some future satellite radio rival?

I'm not a subscriber to either service -- in fact I just barely had a CD player put in to my car a few months back when I started commuting to an office. The CD player also plays mp3 files and has an audio imput so I can plug in an iPod. I don't really need more options for in car entertainment, but I've been tempted to go satellite after conversations with a few passionate fans.

You know, just maybe if they called up Texas Fred, the Zydeco Cowboy and put him on coast-to-coast, I might have to do it.

Lynne Kiesling

Let me count the ways ...

Seeing and hearing Stewart Copeland back behind a drum kit just makes me all jelly-like inside.

Sometime today they will announce the details of their upcoming reunion tour. Takes me back to 1983, when I drove all over the midwest to see them as many times as I could.

Lynne Kiesling

Speaking of music, the leader of my current favorite band, Franz Ferdinand, has written a book called Sound Bites, which is largely a compilation of his food columns for the Guardian. Alex was a chef before he was a rock star, and he writes with a lot of humor about his culinary experiences while touring and from his past. Hear him talk about the book and the band on this recording of his Fresh Air appearance from early January; read more about the book in this Washington Post article (hat tip to my friend Diane for this one!).

Lynne Kiesling

Grant McCracken has a good post on the music industry's recent behavior toward its customers. Lately there has been some softening toward digital music and fair use. But, as Grant asks, how to capture value?

Here's a thought. What if the music industry came up with a new pricing scheme? What if the music industry started charging fewer people more?

...

The notion here is that every artist has a deeply passionate core constituency. For this constituency, the artist creates value like crazy. The fan is not only willing to pay the full sticker price but to pay more for the full sticker price. And this passionate engagement makes up all those unpaid MP3 in circulation, which may now be regarded as loss leaders. Some of them will end up in the hands of a would-be fan who will, it is hoped, convert to core constituency status. Think of it as a "user pay" model. Lots of people benefit, but only the real users pay.

This is price discrimination; serve high-value customers with high-quality products at high prices, making up for the large volume of cheap customers you lose to digital. Perhaps. I think there will always be music fans who strongly prefer having the media, and catering to them could be profitable.

I have to ask the same question as one of his commenters: isn't this an industry in which transaction cost reductions (through technological change) have reduced the need for an intermediary between consumer and musician?

Lynne Kiesling

How cool is this? All of Mozart's sheet music is now available online, in celebration of the 250th anniversary of his birth, at Digital Mozart Edition.

Michael Giberson

As the fine folks at the Energy Legal Blog report: Illinois Considers Continuation of Retail Rate Freeze. Back in 1997, Illinois politicians cooked up the Illinois Electric Service Customer Choice and Rate Relief Law, no doubt with ample input from industry and consumers in the state. The law mandated retail rate reductions of up to 20 percent and a multi-year freeze on rates that has already been extended once. Now legislators, continuing to lament the lack of competition, would like to vote themselves and other retail consumers another three years of frozen rates.

Legislators still love the customer choice thing, they just aren’t ready to commit. Or, as LL Cool J put it:

i know i said i would roll with you,
put my lifestyle on hold for you,
all them sweet things that i told you...
this conversation is overdue...
freeze!

getting too wild to respect the vow,
i just ain't ready to settle down,
my name too big in the ghetto now...
freeze!

feels like i'm ready when i'm holding you,
but it's so many honey's what i'm sposed to do?
keep sending them apology notes to you?
freeze!

Amazing what you can find with Google, a moment or two of time, and a willingness to quote LL Cool J in a serious discussion about boneheaded legislative action.

i kno it's rough but i need your support,
you said it all last time that we faught,
so don't talk baby hold that thought and...
freeze!

don't change...
don't go...
don't leave...
just freeze!

Of course Illinois state legislators still want customer choice -- didn't they make it clear back in 1997? -- it's just, you know, now is not the right time to settle down, is all they're saying.

Additional background from the Energy Legal Blog here and here. Some of Lynne's comments about Illinois retail rate policies are here, here, and here. Lyrics to LL Cool J's song, "Freeze," available widely on the internet. Just Google it.

Michael Giberson

From the musical section of the "who'da thunk it" department comes this little footnote (from a law journal article [PDF] on the uses of popular music in legal writing), attached to a remark that Justice Samuel Alito "once attended a ska music festival":

[15] Becker & Russakoff, supra note 13, available at 2006 WLNR 475058. According to the American Heritage Dictionary, ska is “Popular music originating in Jamaica in the 1960s, having elements of rhythm and blues, jazz, and calypso and marked by a fast tempo and a strongly accented offbeat.�? Ska enjoyed a renaissance in the U.K. during the late 1970s and early 1980s. For a representative sample, see THE SPECIALS, A Message To You Rudy, on SPECIALS (Two-Tone Records 1979); THE ENGLISH BEAT, Mirror In The Bathroom, on I JUST CAN’T STOP IT (Go Feet/London 1980); MADNESS, One Step Beyond, on ONE STEP BEYOND (Stiff 1979).

The "Becker and Russakoff" citation is to a Washington Post profile of Alito "In His Wife's Words."

Just last Friday night I caught the original ska band, the Skatalites, at the State Theater. (Well, only about 2/7ths of the original band, but what do you expect for a group that first organized 40 years ago.) I didn't notice any Supreme Court Justices in the house, but maybe quietly in the back...?

Michael Giberson

Music has also been on our minds here in the other KP household, approximately 600 miles to the east south east of Chicago, where I have been contemplating the iPod music selections of the other KP spouse.

The arrival of the iPod was itself a source of interest and amusement on my part. While my KP spouse is assuredly geek-like (undergrad and grad degrees in economics, teaches middle school math but talks about moving to high school because she’d really like to teach statistics, etc.), she has been a non-tech geek. When I picked up a low-budget mp3 player last year, she wondered whether it was worth the small amount of money and large amount of trouble just to carry around a little bit of music. So I was surprised that, a few months ago, she treated herself to an iPod. Now she is a non-tech geek who has gone through three or four sets of headphones trying to find the right pair and worries that an iPod carrying just over 490 songs just isn’t going to be big enough.

More interesting than the acquisition of the iPod itself has been the accumulation of the 490+ songs – many from CDs we owned but many more from the iTunes store. Not just Bowling for Soup’s “1985,�? but a lot of the songs from way before Nirvana, when music was still on MTV. All in all it has been an instructive process, especially since, after all, I misspent my youth on a somewhat different set of songs.

But, and this is the true mystery, the psychological puzzler, the source of wonder and concern: why would anyone spend 99 cents and a few moments of time to put Bonnie Tyler’s “Total Eclipse of the Heart�? on one’s iPod? Had I world enough and time, I would never ever get around to it. Never ever ever.

Unfathomable, and my only consolation is in deeper contemplation of the mysteries of life. (With thanks to Glen Whitman at Agoraphilia.)