Saturday, May 29, 2010

Who's To Blame For The BP Disaster?

I've posted about oil before, and I've posted a few times about other energy sources. I feel compelled to write about the BP disaster.

It's been over a month since the Deepwater Horizon sank, and oil has been pouring into the Gulf of Mexico non-stop ever since. BP's latest effort ("Top Kill") has failed. It is gradually dawning on people that BP may not be able to stop the leak any time soon.

This will be the largest environmental catastrophe in American history. As much as I hate to prognosticate, I expect in a few weeks the phrase "America's Chernobyl" will make its way into the public dialog. And it should. But in the long term, this is worse than Chernobyl.

While Chernobyl was awful, affecting hundreds of thousands of people, it was dealt with quickly. Chernobyl resulted in a relatively small number of direct human deaths, and a minimal effect on the surrounding ecosystem. Now, 24 years later, nearly all of the area is habitable. Wildlife appears to be making a strong comeback, even with the radiation and inevitable genetic damage.

If BP were to stop the oil right now, the world is still facing the real possibility of the extinction of much of the sea life in the area, and the potential collapse of the ecosystem in the Gulf in both short and long term. Each day that passes increases those odds.

There is a very real possibility the well simply cannot be stopped with the technology we have today. With Chernobyl, relatively simple techniques (dropping tons of concrete) worked, and worked quickly.

There are about 3800 offshore drilling platforms in the Gulf of Mexico alone. The real surprise for the BP spill isn't that it happened - the real surprises are that it took this long to happen, and that the industry remains able to drill in places where there was not a robust plan for dealing with a "black swan" event or total failure scenario.

If you had been told "hey, there's a chance that offshore drilling will absolutely obliterate the Gulf of Mexico", would it still have been OK?

But that's not the real issue here. Right now, everyone is focused on one question: Who's to blame? So far, I've heard:
  • BP
  • Halliburton
  • Transocean
  • Big oil
  • The Bush Administration featuring Dick Cheney
  • The Obama Administration
But this is all distraction and misdirection. Here's who's really at fault:

Us. Me. You.

We ignored the wake-up call of the '70s oil shocks and spent the last 40 years pretending everything was OK
We continued to drive gas-guzzling cars after the oil shocks of the '70s, culminating in the plague of SUVs and The Hummer
We care more about how fast our car gets to 60 than how far it goes on a gallon of gas
We care more about cupholders and DVD players in our cars than emissions
We wanted a ridiculously big, heavy car because it made us feel safer, despite it actually being less safe for everyone else, and occasionally, us.
We knew we'd run out of oil, paper, and fresh water in our lifetimes and we decided somebody else would figure it out
We complain about windmills blocking our view
We fight nuclear power
We are OK with lopping the tops off of mountains and wrecking our landscape for coal, as long as it doesn't happen in our town
We complain every time the price of gas goes up a nickel, despite the fact that we only spend $2400 per year on gas, and the real cost of gas has fallen steadily over the last few years
We couldn't be bothered to bring bags to the grocery store and embraced the plastic grocery bag with open arms
We bought bottled water, buying industry panic and hype while both paying for tap water and infrastructure and not caring about groundwater quality
We leave the lights on
We expect everything to be wrapped and packed in plastic

Most damningly, we feel entitled to a particular way of life: A rich one, where we get to say what changes and what doesn't, when and how. That's delusional. Our way of life is always changing, like it or not.

We should all take a good look in the mirror. Make some changes right now. Find out what you can do. And prepare for a less pleasant way of life in the future.

Monday, May 17, 2010

Music and Business: What The Internet Really Means

5. What The Internet Really Means (for musicians)
Back to the original graphic that started this series of posts: It seems to show the best way for musicians to make a living is for them to sell CDs directly to fans.

Really? All this upheaval, all these changes in the music business, and the best thing people can come up with is a strategy from 1990 (but as would say..."on the WEB!")?

Does anyone really believe that artists should concentrate on selling CDs directly to fans?

First, the CD is dead. At the recent NARM conference, what's left of the irrelevant music retailing business was agitating for $10 CD prices. So the folks selling CDs want the price to go down, which means less money for music.

Guys, you're about 10 years too late. Tower is gone. Wal-Mart is very close to yanking all music from its stores. Best Buy is practically there already. The biggest music retailer now is iTunes, and in case you haven't heard, they don't sell CDs.

Second, there's the part about you selling direct to your fans. Once you've unwisely transmuted several grand into heavy plastic physical goods, you now have to distribute them. Hey, how many record stores (run by the aforementioned irrelevant music retailers) are in your town and immediate area?

Oh, but you're going to sell direct to your fans, right? OK. How many shows are you playing this month? For how many people? How many CDs are you going to move? How many did you move at your last gig? What about your friends' bands? How are they doing?

Mmm. You have a website? Well, you're on the right track. Now at least people can buy your CD whenever they want, instead of whenever you happen to be near them with a CD in hand. But you're either going to have to cut in CDBaby or you're going to handle fulfillment and credit card charges yourself. And your fans will have to wait several days for your CD to arrive. It sure would be better if you could just provide downloads.

And if you are providing downloads, why not have someone else host them, so they're always available? Why not make sure they're sold in the #1 store? That would be (right now) iTunes.

So you're back to selling downloads on the Internet. Because that's how you make your music available in the most convenient way to the most people. And from there, it becomes obvious that you should have your music available on Pandora, Rhapsody, MOG, and all the other services.

Why? Because if people can't hear your music where they want and in the way they want, they won't hear your music at all. And you'll get zero dollars for it.

In this respect, the internet is great for musicians, because it allows you to cheaply distribute your music worldwide, 24/7. Yeah, you make less money per transaction. Big deal. The other folks in the chain are providing value. Personally, I'd rather have 100 people pay me $1 for my album than 1 person pay me $200 for it. But then, I'm not a "professional" these days.

In terms of live music, I'd note that when I fronted a cover band, I made thousands of dollars and could have easily made a living earning close to $100k per year...if I had wanted to sing "Hungry Like The Wolf" in shiny silver pants night after night. It was fun and it paid the bills, but it was not deeply satisfying. It was also a hard life full time - lots of alcohol, travel, bad food, and other work hazards.

The internet made it easy for the cover band to get booked - people could check out videos, MP3s, and photos. We didn't have to doll up expensive physical promo packs. And people from all over the world could check out the band, resulting in a wider range of bookings.

Making my own music, while extremely satisfying, has barely made me enough money to buy a dinner or break even on the CDs. Factor in the gear, time, etc. and I'm way in the red. But I get to make exactly the music I want, on the terms I want, when I want. And with the internet, everyone can hear it.

Ultimately demand for music is lower than musicians would like. Despite the supposedly bleak financial picture for the business, there are more people making music and releasing albums than ever before.

That freedom, that creativity, that power - it's a good thing, right?

If you're interested in making music, the internet is great for you...and great for everyone else. You'll have to try hard to be heard over everyone else's music. But all in all, the internet giveth more than it taketh away.

If you're interested in selling music, the internet is essential for you...but you're in a terrible, highly competitive business. My advice to you: lower your expectations and/or get into a new line of work.

Regardless of whether you're making or selling music, as a vocation it is a tough one. Despite the difficultly, people have been and will continue to be professional musicians. The internet is now a key part of any job requiring networking and communication.

The original graphic and article show just one axis or dimension: what you have to do to get a certain amount of money. It positions all of these actions as equivalents, which is a substantial elision. Selling CDs directly to fans is extremely difficult. That's why you get to keep more money: it's hard to make the market and convince someone to buy your CD. It's much easier to convince them to play your song a few times on a music service like MOG or Rhapsody.

The internet and music technologies have provided a new universe of tools for creators and listening experiences for users. It's the world we live in now. Rather than continuing to decry how little money musicians get (something that is probably as old as music itself), I think we should focus on how to get more people listening to all of us.

All 5 Parts Now Available:
1. The Problem Nobody's Talking About
2. Too Much Music?
3. Now It's Everywhere
4. The Audience Isn't Listening
5. What The Internet Really Means

Monday, May 03, 2010

Music and Business: The Audience Isn't Listening

4. The Audience Isn't Listening
Many record business executives point to the original, illegal Napster as the beginning of the end. And they blame Napster for mortally wounding the music business. But Napster didn't host files. It just allowed people to share them. It was the listeners and fans who did all the "illegal downloading".

Since the glory days of the music business (let's call it the late 1980s) the world has changed. The business stopped selling singles (or charged much more than they ever had) and focused on albums. The major labels changed how they develop artists (they stopped). They changed their definition of a "hit" or successful record. They focused on selling 2 million albums in a single year over selling many millions over a career.

Music fans grew up. The entertainment dollars they and their kids have can go to music...but they can also go to Internet subscriptions, World of Warcraft, XBox, mobile phones and data plans, iPhone apps, computers, Netflix, DVDs, and fancy coffee. The music business has responded...largely by offering the same product, but "remastered", with a "bonus disc" at a higher price. In other words, "please just go buy it again".

Digital music services came along. The traditional industry responded with piracy concerns and has only reluctantly allowed legitimate services to operate, dragging their feet the entire time.

Simultaneously, the record industry has sent mixed signals about piracy. Some users who upload are sued, some aren't. Some services which offer content illegally are shut down, others are allowed to "convert" to legitimate services...provided the labels get cash, an ownership stake, and a seat on the board. Some blogs which host mp3s get taken down, some don't. It's no wonder listeners are confused.

Music is a niche product. And there's a glut of it.

Listeners are overwhelmed. There's so much music out there, the value for listeners is practically zero, and their ability to wade through it all to find things they're interested in is minimal. In the aggregate, "music" has value to them. But any one piece of it? Probably not so much.

The average annual per capita expenditure on music in the USA is about $35 and it is declining. Most people don't care about music. They just don't. They won't pay. They'll steal or listen for free, and they don't much care to what. There's a ton of free music easily accessible.

Music has a strange, asymmetrical value proposition. One listener might be willing to pay $5 to hear the new Radiohead song. Another user might have to BE paid $5 to listen to it. Perception of value of individual music changes over time.

The labels have been somewhat unfairly charged with assuming that all music fans were pirates. But perhaps on one level, the labels were right: Maybe the problem is the audience. It's not listening and it's not buying.

It's not hard to see why - "so much music, so little time"...and so little worth paying for. That's not to say there isn't great music out there. There is. But it's extremely difficult for any individual user to find. CDs and physical media are dying out, but the digital services have largely been handicapped with Draconian restrictions and aren't able to produce an experience so much more compelling that everyone has to get on board.

To put it in context, the business community gets extremely excited about things like Facebook and Twitter. Regardless of what one may think of these services, they've been allowed to create something compelling enough to attract millions of users within a few years of launching...while the latest and greatest music services struggle.

Sure, it's possible that everyone (except Apple) really has gotten it all wrong. But there are millions of people downloading illegally and listening to music without paying for it. That's not Apple's fault. Or Rhapsody's.

Maybe it's the record business' fault. But it is also the fault of the people doing the illegal downloading.

Up Next: Part 5 - What The Internet Really Means/Conclusion
1. The Problem Nobody's Talking About
2. Too Much Music?
3. Now It's Everywhere
4. The Audience Isn't Listening
5. What The Internet Really Means