Is Starbucks the long awaited meteorite?

To anyone who has been paying the least bit of attention, it is clear that the situation of the music industry has become largely surrealistic. Lately, settlements to avoid lawsuits represent a profitable business for the RIAA (the trade group representing the American recording industry). In essence, they could stop producing music and live purely out of threatening people who download music illegally. This fear campaign has recently been extended to Europe, including France, Denmark and Switzerland.

However, there remains questions nobody cares to answer: what kind of business model involves threatening and potentially suing the vast majority of your customers? And after having paid thousands of dollars in settlements, do people really start buying CDs again?

The reality is that laws that make it illegal to do something widely accepted as legitimate (sharing music) don’t live long. They survived until now not because people weren’t copying records, but because the industry had not yet started calling their own customers thieves and suing 12-year-old girls.

As copyright reform activist Cory Doctorow would put it, “how many customers do you need to sue before they stop downloading music?”. The real answer is probably that this critical point won’t ever be reached, because people are starting to feel annoyed to be treated like criminals in spite of the fact that they still buy music.

Artists, too, are more and more outspoken about being exploited by the music industry. In an interview with the Herald Sun, Trent Reznor (Nine Inch Nails) exposed his discontent with his label Universal Music. When he asked a label representative why his latest album was almost 50% more expensive than most albums on the same shelf, the response was that “it’s because we know you have a real core audience that will pay whatever it costs when you put something out – you know, true fans. It’s the pop stuff we have to discount to get people to buy”. Of course, none of this extra money goes into his pocket, and artists never get a penny from lawsuit settlements either. Needless to say, artists are more than unnerved to see their fans ripped off and sued in their name.

The old copyright laws, by not adapting to the evolution of technology, carry much of the responsibility for this uneasy situation. People’s habits for accessing and consuming culture have changed dramatically. Aside from the traditional business-to-consumer model, new exchanges have emerged on an aptly named peer-to-peer model, for which the current laws are not adapted, if not plain absurd. In short, the ubiquity of free and trivial perfect copy of media has made copyright laws essentially obsolete.

Unfortunately, the government has proven unable to do its job, namely to reform the copyright laws to match their purpose: to protect artists and regulate the integration of the economy in our society in a sensible way. We have already seen the infamous case of the Copyright Term Extension Act, in which the lobbying effort of many, notably the Walt Disney Company, led to the extension of copyright terms in the United States by 20 years. The strong lobby exerted by the music industry maintains a similar pressure on copyright laws.

Except, of course, if they are no longer in control of the whole economy.

When I interviewed Cory Doctorow in November 2006, he told me that majors would eventually drop DRM once they admit it hurts them. To be honest, it felt like wishful thinking to me. In April this year, EMI announced they would start selling DRM-free songs on iTunes. More recently, they even confirmed that DRM-free tunes sold very well.

Another argument he mentioned was that if the revolution did not come from the current music industry, it would come from its successor. I believe that we’re seeing the first signs of this trend today. In March this year, Sir Paul McCartney announced that he was leaving EMI for a new label, after 43 years of collaboration. While this decision was not directly related to the DRM debacle, it certainly originated from the same fact: “They’re very confused, and they will admit it themselves: that this is a new world, and they’re a little bit at a loss as to what to do.” McCartney told the LA Times, before adding: “My record producer said the major record labels these days are like dinosaurs sitting around discussing the asteroid. They know it’s going to hit. They don’t know when, they don’t know where it’s coming from.”

There is no doubt that McCartney’s departure was a major blow, and it came in the form of a meteorite named Hear Music, a new record label owned by Starbucks. How could an unknown label from a coffeehouse company attract someone as famous and stubborn as the ex-Beatles?

If it were only a question of money, the other majors would probably have bought him years ago. Instead, McCartney explained his choice in very simple terms: “I was bored with the old record company’s jaded view. […] you go to the record company, and it gets very boring. You sit around in rooms with people, and you’re almost falling asleep, and they’re almost falling asleep.” Because no matter how many million albums they have sold, many artists are still excited by their work and want to share it with their audience in the best conditions.

Although Starbucks might initially come as a surprise, it makes perfect sense. The time of large, monolithic entertainment companies is long gone. Today, culture is produced and consumed as a social mash-up. Starbucks’ mere existence is only made possible by the predominance of cultural memes in our society; specifically, the simulacrum of a cozy, trendy American café. It’s not about selling coffee. It’s about creating a coherent ecosystem to which a wealthy portion of the population can identify, and replicating it throughout the world in all sufficiently consumerist cultures.

Starbucks might gain a direct benefit from it, through sales in their shops or in the standard distribution channels. However, this is missing the point entirely, because the music they are selling is not a product, but an additional service offered to their customers.

And because the music is not the focus, they do not need to strive blindly to make it a profitable business — their main activity is already sufficiently profitable. Even better: they own the product and they can choose all the rules, including dropping the antique legacy of earning a lot of money on the artists’ back, in order to attract new names.

Naturally, Starbucks is no less of a capitalist monster, but a (post-)modern one. They are ready to evolve and innovate to consolidate their market, and to focus on giving their customers what they want. And they do: within the next two years, 2500 Starbucks stores will offer on-demand CD-burning services. Wireless distribution is also planned. Services that had been promised for years by the music industry, but which was only possible by escaping the control of the majors.

There is no doubt that Starbucks is not the ultimate savior. For instance, their prices are still adjusted to iTunes’ — way too expensive to be considered a revolution — and they haven’t yet given much precision about the possible usage of DRM. Nevertheless, it represents a significant threat for the majors’ hegemony and a new, modern player on the field.

Whether the majors like it or not, the music industry is evolving, transformed by the new technologies. If they stubbornly keep their roles of slow, heavy dinosaurs from the prehistory of recorded music, they are likely to decay and go extinct, under the threat of the modern and fast meteorites to come.