WHOSBURNING WHO

l{etailers 1Sxploit

the Dioital

Revoluticm

BY MICHAEL GREENEPresident, The Recordin8 Academy

very disturbing pattern is developing in music'smarch toward the new millennium. Many ofour business leaders have so totally preoccu-pied themselves with the harvesting and ex-ploitation of the bountiful fruits of Ameri-

can music that they are now leaving the root system

which nourishes this success - our artists - to rot.

The symptoms of this disease are hard to ignore.• Despite the cries of the public and pleas of the artistsand labels, radio continues to totally ignore the issue of

artist identification (back announcing).

• Because of our industry's poor sense of the importanceof its own history, we remain virtually impotent tomobilize our community around the issues of musiceducation and the preservation of America's recorded

musical legacy.• And now the irony of ironies - retailers are sellingused CDs with absolutely no regard for the impact of such

short sighted behavior upon the future of our music

community.A CD is barely worth 10 cents. The only thing which

gives a CD value at all is the intrinsic artistic creation

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contained therein. This fact alone should make the record

retailers strive for the perfection of what should be asymbiotic relationship between their business and theartistic community. However, a dramatically differentscenario is unfolding.

The showdown over used CD sales has escalated

dramatically in recent months. It began with the May

announcement by WEA, Sony, UNI and CEMA that theywould no longer provide coop advertising to retailerswho sold used CDs. Then on July 19, the 339-storeWherehouse Entertainment chain, which had recently

forayed into the used CD trade, re-

sponded by filing suit against the dis-tributors in US District Court.

Meanwhile Garth Brooks, who

previously put conscience over profitswhen he risked alienating conserva-tive factions with his song, "We Shall

Be Free," has again gone out on alimb by threatening to withhold hisnew album from stores that carry

used CDs.This is clearly an issue where

no one can afford to stand on thesidelines.

The simple, inescapable fact isthat the sale of used and promotional

CDs cheats songwriters, recordingartists, producers and all the others up and down music'sfood chain out of the royalties they depend upon to earna living. It's been estimated that an unchecked used CDmarket could grow to as much as 20% of unit volume inthe next fiveyears, and that loss of income to the majorityof those in our artistic community, many of whom are

already living perilously close to the edge of financial ruin,will spell disaster.

The growth of the used CD market will not only

dramatically impact the sales of new recordings, it will alsodig deeply into catalog sales. Consumers who get turnedon to an already established artist can be expected to seek

out used copies of that artist's earlier recordings. No onefrom the artistic side gets a nickel from that transaction.

And it's not going to be the Garth Brooks of the world

who are hurt most by this practice. After all, used CDbins do not overflow with promo copies of U2 's Zooropa

or Janet Jackson's janet, and the few that reach thererepresent a statistically insignificant share of those artists'

total sales.No, the musicians who are being damaged are the

lesser known and cutting edge artists that the used CD

retailers like to cite as beneficiaries of their practice.

You've heard the argument before: New artists suppos-edly benefit from used and promo CD sales becauseconsumers are more likely to take a chance on theunfamiliar if it doesn't cost as much.

The problem is that even in the best case, where theconsumer buys a recording they otherwise would have

ignored, the artist still gets nothing. But the more likelyscenario, especially with retail outlets stocking used and

new CDs alongside each other, is that customers whowalk in planning to buy a specific new CD will insteadwalk out with its used equivalent.

In this case, as retailers repeatedly reap profits fromthe sale of used product, the artist gets less than zero, and

the loss in sales means fewer artists will manage to evenrecoup recording costs. That will cause labels to takefewer chances on unproven music forms, which willinevitably curtail the development of alternative musicforms and artist development, ultimately shrinking ourtalent pool. This loss in revenue will also be passed back

to the consumer through higher CD prices, which will

only serve to further exacerbate the problem.One also needs to consider what exactly constitutes a

"used" recording. Billboard recently cited a Wherehouse

spokesperson's explanation that the chain turns awayCDs that carry the word "promotional" on them. Yetmost promo CDs are instead indicated by a notch in the

jewel case or a hole in the inlay bar code, neither of whichare excluded by this policy. (The owner of a 104-storeTexas chain provided additional insight into the "used"CD puzzle when he told Forbes that 30 percent eithercome from record company employee theft or recordclub discount offers.)

Further aggravating this problem are advances in

home recording. In the coming years, we can expect tosee more and more customers buying used CDs, tapingthem, and then selling them back to stores a few days later.The result will be a kind oflending library effect, in which

a single CD generates cheap copies for consumers andongoing income for retailers, without generating a singlecent for the artist. In other words, the damage increasesexponentially. This is all reminiscent of the battle thattook place a few years ago in which the industry foughtsuccessfully to eliminate the record rental nemesis. Theregrettable difference is that we were fighting togetheron that issue - everyone had something to lose, and that

victory was only achieved by the imposition of federal

legislation.Not only are the retailers showing a great deal of

insensitivity about this issue, but bringing legal action

against the labels is just downright stupid! Everyoneknows that all the Big 6 label heads have had proposals ontheir desks for years outlining alternative delivery systemsfor recorded music. With the mergers of telephonecompanies and cable/media giants, the fiber optic mer-

chandising expressway is only as distant as the mediagiants choose for it to be.

Most would agree that the experience of walking in arecord store is one that is conducive to browsing, and thediscovery of product that might not ordinarily come to a

consumer's attention. But if much of the catalog productis used, the motivation for the labels to invest in newdelivery systems will most certainly be enhanced and theprocess accelerated.

The Recording Academy is committed to preserving

THE SIMPLE, INESCAPABLE FACT IS

THAT THE SALE OF USED AND PROMO-

TIONAL CDs CHEATS SONGWRITERS,

RECORDING ARTISTS, PRODUCERS AND

OTHERS OUT OF THE ROYALTIES THEY

DEPEND UPON TO EARN A LIVING

and promoting the rights of our constituents - theartists and technicians who together create this country'smusical legacy. It is incumbent upon us, and the record-

ing industry as a whole, to actively oppose the prolifera-tion of the used CD trade with every fiber in our being.The greed of retailers must not be allowed to ride the curl

of the digital revolution at the expense of our artists,

songwriters, musicians and recording community.It's been said that behavior in the face of hardship is

an important measure of character, but how one dealswith the responsibilities of success can be every bit astelling: A retail chain that has grown to hundreds of stores(with profits made from the work of artists like Garth)

must consider the dire ramifications of their actions andbe attentive to the concerns of those whose product theyexploit.

And, by the same token, more successful artists needto stand alongside Garth Brooks, who so far has been

repaid for his leadership by having his recordings publiclytorched. Those CDs in the bonfire may have Garth's

picture on them, but if the sale of used CDs is leftunchecked, it will be the entire recording community

which gets burned. Q

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