Fool contributor Anders Bylund recently called up Bertis Downs, longtime manager and legal counsel for Hall of Fame rockers R.E.M., to ask a few questions about the changing music industry. Bertis star-69'd, and here's the result.
Anders Bylund: Bertis, thank you for taking some time out of your busy schedule for the Fool. Let's start with the obvious question in this digital age. How do you feel about Digital Rights Management (DRM) technology?
Bertis Downs: I'm not an expert on technology issues, but DRM doesn't seem to work very well. We're certainly selling plenty of CDs without any protection at all, and you saw the trouble Sony (NYSE:SNE) got into when they tried to plug that hole in the dam.
AB: So, when EMI recently decided to sell unprotected song files through Apple (NASDAQ:AAPL) iTunes, that didn't bother you?
BD: Sure, go ahead. The people who want to copy music for free already have other sources anyway, so we might as well get paid for providing a similar service. If our record label (Warner Music (NYSE:WMG)) wanted to go that way too, it's not a problem for R.E.M. I'm not opposed to the idea of selling DRM-free downloads.
AB: Do you see digital formats replacing the physical CD entirely, anytime soon?
BD: To some degree yes, but there will always be a subset of the market that wants the physical artifact. They want the disc, the artwork, the liner notes, and so on. The 8-track may be long gone, but you still have audiophiles and collectors who buy vinyl LPs to this day.
But yeah, vinyl and 8-track and cassettes have all fallen by the wayside. It's an evolving business with new formats pushing out the old ones, and the market and consumers adapt.
AB: Some people are saying that the single-track nature of iTunes et cetera is hurting album sales, as the consumer doesn't have to buy eleven other tracks anymore just to get the one hit he wanted.
BD: Right, and that's just another side to that evolution. The artist will fill whatever format is available -- the vinyl single was once the dominant format, and people bought one song at a time then. The LP took over with about 45 minutes of recording capacity, and musicians filled that space. And the fans bought it. Now, the CD format holds a bit more, up to an hour or more per record, and we're filling that canvas too.
So if it's back to one sale, one song, then the industry will simply adjust again. It's what we do.
AB: Would you call the Internet a friend or an enemy of bands like R.E.M.? Or of musicians in general?
BD: In some ways, the net is certainly a friend. It helps us communicate with fans in whole new way, more effective ways, announcing events and the like. For instance, you may have heard that we're playing a couple of shows in Dublin this summer to prepare for the next album. We wanted to make sure that real fans could get tickets, and so there was a limit of two tickets per person, and we kept it all under wraps until the last minute. It's not easy to keep that kind of event a total secret, but it worked out just fine. So, we sent out the announcement via e-mail, to fan club members, an hour before the tickets went on sale. You couldn't do that before the Internet.
When you sell tickets that way, you put them in the hands of people who really want them. Of course a few ended up on eBay (NASDAQ:EBAY) anyway, but those were taken down. And a couple hundred tickets were lost in transit, so those ticket numbers had to be canceled. But on the whole, I think the whole process was a great success, and it's something that couldn't be done a few years ago.
On the other hand, is the Internet hurting sales? Oh, absolutely! For a band like R.E.M., lots of sales are lost to piracy and file sharing. How do you you compete with free? Then again, I remember a presentation by the people at Evian saying that they're competing with tap water. That's not exactly free, but it's close enough to make no difference. And yet, with branding and packaging and a reputation for quality, they're doing just fine. Selling plenty of expensive, bottled water to customers who could just as well open the tap and have a drink for free. So it can be done.
AB: How do you think R.E.M. would do if it was a new band today? Starting over on today's playing field?
BD: That's a daunting prospect. There would be a MySpace campaign for sure, grassroots promotion and spreading the buzz online any way we could. But it's getting so hard for a new, unproven artist to get big-time funding, to finance the kind of touring that built our success in the early days, for example. Music videos are expensive too, and another important part of promotion today.
AB: Do you think the copyright laws need to be updated? These days, after the Sonny Bono Act, you get copyright privileges up to 70 years after the songwriter's death ...
BD: No comment on the correct length of copyright terms, but these laws are becoming hard to enforce. The incentives for making new art and music, anything creative, get harder to protect all the time. But musicians have always found a way to make a living from their music before, and they will do so again. Adapting to new circumstances, that's how music survives.
AB: Lastly, we like to play a little game here at the Motley Fool, called Buy, Sell, or Hold. If the RIAA was a stock, would you buy, sell, or hold it today?
BD: Hold ... on!
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Fool contributor Anders Bylund holds no position in any of the companies discussed here, but he does own every R.E.M. album ever released -- and a few bootlegs. Sssshhh! You can check out Anders' holdings if you like, and you won't lose your religion with Foolish disclosure rules at your side.
