May 9, 2002

Vivendi Universal Retreats From Shark Infested Internet Waters

Webcaster Ruling Could Be Final Nail In Coffin

Here is an excellent CNET story explaining rather thoroughly why Vivendi Universal is running scared from cyberspace. The company is now paying the price for a myriad of questionable online decisions which has drained the company of cash.

Universal's initial and most obvious mistake was filing litigation against Napster. The case, which is still dragging on, only served to expose the labels' weak spots in regards to copyright ownership. One could formulate the opinion the labels have abused copyright ownership priveleges by failing to properly promote many of the artists.

Most legal experts are of the opinion that if the labels' contracts with the artists do not specify digital transmissions, therefore, the labels may not have legal rights to the online music. To simplify, if it is not specified in the contract, the labels do not own it.

 

Is Vivendi Swimming In

Dangerous Waters?

Another unwise decision by Vivendi, which most analysts could see coming from a mile away, was their ill advised decision to launch music subscription service Pressplay with Sony. The much maligned service, which offers "restricted music" only a dictator would be proud of, underestimated the popularity and the power of the legitimate peer to peer file sharing programs (in case you are wondering, they are all legitimate).

Pressplay was also launched with absolutely no promotional strategy. Like with any web site, it must be tirelessly promoted to have even a chance at being effective.

One of Pressplay's partners is Yahoo, one of the most frequently visited portals on the internet. A visit to Yahoo's home page fails to promote Pressplay. A link to it may be on the page, however, the senseless clutter prevents any quick surfer from searchng for too long.

Remember, Yahoo has a history with internet music purchasing Broadcast.com for $6 billion. No need to even comment on that one. Yahoo has had its own customer service problems lately which you can read about here. How would you like your spam today?

Getting back to Vivendi, adding insult to injury, they purchased MP3.com (don't go there if you like music), Emusic (see MP3.com) and RollingStone.com (forget about the cheesy stories, it's a web designer's nightmare). The good news is they didn't pay $6 billion for the three combined.

The CNET story states, "Having acquired Universal in June 2000 for $34 billion in stock, Vivendi has been hit with a wave of setbacks." We'll take it one step further - Universal Music Group is the main force driving Vivendi down. The biggest music group in the world should take the biggest blame for the horrific state of the music industry.

Since music, unlike other media, is worldwide and possesses a "Universal" language, it has the power to transcend financial value. One could argue that if Universal Music Group was doing well, the company and its stock would be in much better shape. For that matter, a lot of other sectors in the economy would be much better off.

The final death nail in UMG's coffin may come on May 21st when the Librarian of Congress rules on the recommendations of the Copyright Arbitration Royalty Panel ("CARP") concerning Internet radio royalty rates and webcaster record keeping requirements. Ironically, Universal is supporting its own death by squashing vital internet music promotion.

The conventional radio system has worked from day one because of payola. If you want the station to play your music, you have to pay them to play it. After all, there is so much music to play and so little time to play it. Therefore, as with anything else, the squeaky wheel gets the grease.

By charging the webcasters and not paying them for promotion, the labels are cutting off their noses to spite their faces. The labels argue, why should the webcasters be permitted to build a business off their content? in reply to that, the webcasters argument is if you do not pay us to play and promote, you do not sell and, sooner or later, you are finished. Are you still wondering why Vivendi has been nothing short of a miserable failure on the internet?

Here is a good Wired story about the webcasters dilemma. According to one portion "In an open letter, John Simson (of Sound Exchange) said the music industry "has waited patiently for more than three years to be compensated while webcasters have been building their businesses. Webcasters are not entitled to a subsidy. The time has come for webcasters to stop protesting and work cooperatively with artists and record labels to ensure success for all."

In response to Simson, building what businesses? The music industry has done its best to keep down the webcasters by supporting that self-interest piece of garbage legislation known as Digital Millennium Copyright Act. If webcasters are not entitled to subsidy, then the record labels can go out and promote the music on their own (what a joke that would be). The webcasters will work cooperatively when the labels and artists get off their high horses and permit the webcasters to play whatever they want to play - for free plus payola.

So as May 21st approaches, one can not help but feel sorry for these media companies who have lost sight of the fundamentals of music promotion. The consumer has to hear the music if he has any chance of buying it.

A ruling in favor of the labels will probably force angry online music consumers to flock to the file sharing companies for music. And since the consumers will be well aware that the labels and artists shut down webcasters with their greed, they will be more than happy to screw them back and continue to download music for free.

Sphinx
"There's Only 1 Station"

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