Music piracy impacts bands, forcing them on the road and into merchandising

How do we define stealing, anyway?

Stealing means to take something unlawfully. But when the discussion turns to downloading or using intellectual property without permission, including music, there seems to be a gray area. When someone produces art or entertainment, goods or services, they expect to be – and under normal circumstances are -- paid. But the world has changed.

Many people believe that downloading music, and other intellectual property, like books, movies and video games, without paying for them is acceptable. If they can find it on the Internet, it seems to be fair game.

This attitude was shared by several college students in northeast Indiana during a recent discussion. It seems that it’s the norm to download music free and without permission, and it’s seen as OK. The justification varied from not having the money to make the purchase, to indifference; it’s just the way it is.

“I don’t have a lot of money and I’m in college,” was one reply. “They (musicians) make enough money.”

But do they? Today, CD sales are still important, but numbers aren’t what they once were.

“The biggest thing is sales – if you look at how many records it takes to get into the Billboard chart now compared to even a few years ago, it is a lot less,” said Jenny Reader, director of worldwide publicity for Fearless Records. “Bands are still judged by their first week’s sales, but if a record leaks too far in advance of release this is massively impacted.”

While, there have been cases when a record is leaked and is still received so well by so many people that it sells anyway, she said, that is not true for the majority of bands. They are hit negatively by low sales because so many copies have already been illegally downloaded, Reader explained.

And because stealing does affect the revenue a band receives from record sales, there are repercussions. Record sales are everything to a band’s progression, said Shawn Milke, singer for Alesana.

“Getting on bigger and better tours, more marketing money, more exposure, and larger retail purchases are all examples of achievements that rest solely on the state of a band’s record sales,” Milke explained, adding, “This is an issue I am very sensitive about. I believe that illegal downloading is the biggest epidemic in all of entertainment.

“What makes it worse is that the majority of people who do illegally download music, movies, books, and all other forms of intellectual property, feel as if they are doing nothing wrong.”

There are options for those who don’t want to purchase CDs without downloading music illegally. Many bands share their music with fans, but on their terms and not an entire album. Bands provide easy ways for people to access and learn their music through sites like MySpace music.

“There is no reason that a person cannot determine whether or not they like a band based on of the four, five, sometimes even six songs that are provided by the bands themselves on their networking sites,” Milke said.

So, why steal the music?

People and groups have been prosecuted for stealing music under copyright laws, including the law passed by former President George W. Bush in October 2008 that stiffened the penalties for music and movie piracy at the federal level. The Enforcement of Intellectual Property Rights Act increased statutory damage awards in civil counterfeiting cases, strengthened remedies available for prosecution of criminal cases and enhanced resources for the Department of Justice programs that fight against intellectual piracy theft.

Even with prosecutions and civil suits that have favored artists and recording companies, the piracy continues. The federal government estimates that counterfeiting costs hundreds of billions of dollars each year.

Asking Alexandria is one of those bands hit by illegal downloads. The band’s first CD debuted in September, but the world had already heard the music. The CD was leaked before its release date and people were already downloading its songs, said guitarist Ben Bruce.

“It’s hard, with people illegally downloading music and it’s a real shame,” he said. “The Internet is a great thing, but there are consequences.”

By illegally downloading the music, instead of purchasing CDs, fans miss the additional features that come with a CD, including the cover art, Bruce added.

And it’s not only new bands hurt by the stealing of music. U2 made the news in recent years, not only for the piracy that impacted the release of one of its albums, but also because Manager Paul McGuinness’ vocal outcry against music piracy.

And while some may say it’s not a big deal that a band loses a few dollars from a CD sale, the fall out sometimes results in the ultimate cost for a band. Milke said bands break up because of low record sales and are even dropped by management because their record sales were not at the level expected – all the direct result of illegal downloading.

“Possessing music created by someone else is not a right, it is a privilege,” Alesana’s Milke said. “Illegally downloading a record is exactly the same thing as walking into a Best Buy store and stealing the record from the shelf.”

Other Options

To make up for the lost revenue, bands are finding other ways to continue their artistic endeavors. Tours top that list and bands find themselves staying on the road more and more, even playing smaller or self-booked tours.

Asking Alexandria band members understand this; it’s the world in which they live. The UK band goes from one tour to the next, trying to make a living in the world of rock and roll, without the luxury of counting on the same type of record sales as bands in the past have done.

“We might get a week off between tours, and then we start a new tour,” Bruce said. “That makes it difficult to do anything, including writing new music.”

The band works on songs from its RV as the group travels, but writing on the road is difficult, Bruce said. The band is taking a month-long break in January to recuperate and to do some more writing before hitting the tour road again.

And bands aren’t the only ones impacted by music piracy. The record companies who sign the bands also are feeling the effects. Fearless Records, a 15-year-old company that came into the business when the Internet was beginning to become a daily part of people’s lives, has an edge because it doesn’t think under the old business model, according to Reader.

But while Fearless Records has been able to thrive in an industry on the decline, illegal downloading still has its impact. The company has evolved other revenue-producing options, including merchandising and touring. “It's (illegal downloading) basically changed the way the industry has to think, and goes hand in hand with the way people are now discovering and consuming music,” she said.

Another thing Fearless is doing is carefully choosing who gets pre-release copies of records, using only trusted sources on secure album streams. This has resulted in a drop in leaks, Reader said. However, the adverse effect of this practice is less press for the new music, since the media still need the music to write about it.

Fearless also has priced albums “reasonable” to give consumers an incentive to buy.

Trying to win the battle isn’t the answer, since there seems to be no fear of the laws. Instead, adapting has become the norm for companies and artists, Reader said.

“People will always want music. And, although the way bands make records is already changing to evolve with the new ways of listening and purchasing music – reliance on tracks and singles rather than full albums – the only way to thrive in this climate is to be highly tuned to what our audience wants and needs,” Reader said.

While some fans will always want something tangible, the physical product and packaging to hold and have in their collection, Fearless has found that by keeping its bands on the road, connecting with their fans, it is proving to be one of the labels actually thriving in these harder times. “By keeping close to the ground and adapting to change fast, with creative ideas and passion for our bands and the music, it is possible to not stop the tide, but ride with it to some level of success,” Reader said.

The Battle of Health Care

Health Care in the United States: Is it a right?

As citizens of the United States watch, listen and participate in the ongoing debate of health care reform, there is one question at the center of the debate – and one that seems to determine your stand on the health care issue: Is health insurance coverage a right?

The majority of people in the United States are covered by insurance. However, according to the most recent Census estimate, in 2008 15.4 percent of Americans under age 65 – 46.3 million people – were without health insurance.

There is much debate on whether the Census figures accurately reflect those without insurance, but the questions remain. What are the rights of citizens? Does everyone deserve and should they be given health insurance, even if their employer doesn’t offer any or they choose not to purchase health insurance themselves?

According to the Department of Labor Bureau of Labor Statistics, as of March 2009, medical care benefits were available to 71 percent of private industry workers, but only about half of those workers participated in a plan. And for those who did participate, employers paid 82 percent of the cost of premiums for single coverage and 71 percent of the cost for family coverage.

Dr. Stacey Bowen, DO, in Toledo, Ohio, says that people who aren’t insured choose not to be, so their costs should be their own. Since there is medical coverage for low income people available through Medicaid, Bowen said those who are middle income earners not covered by health insurance have chosen to purchase a third car or a larger home instead of medical coverage. And, she said, when those who do not have health insurance need medical treatment, they visit emergency rooms where they cannot be turned away.

However, Jim Morone, chair of Brown University’s Political Science Department and co-author of The Heart of Power: Health and Politics in the Oval Office, said that’s not a full picture of the uninsured or underinsured in the U.S. He said many of those who have no health care coverage cannot afford to purchase it. And because states operate Medicaid, it varies across the country when it comes to who is covered and not covered.

As an example, he pointed to Texas and New York to highlight the differences in Medicaid coverage from state to state. In Texas, Medicaid covers those persons eligible for Temporary Assistance for Needy Families (TANF), or who qualify for Supplemental Security Insurance (SSI) or have incomes below the TANF income cap. As of 2008, that was a parent with two children earning $188 a month or less, according to state information. In contrast, New York’s requirements are much higher. A family of three may earn up to $1,048 a month to qualify for Medicaid in New York, as of April 1, according to state information. And some people can qualify for Medicaid if their income is above those levels and they have medical bills.

“It’s an incredible patchwork,” Morone said, adding that leads to many people not receiving health care. While he does agree that people do use emergency rooms and do find care there, they don’t receive medical attention for such care as cancer treatment or psychological issues, he said.

“There’s an estimated 18,000 Americans who die every year as a consequence of not having insurance,” he said. “Without insurance, it’s hard to access treatment and many people put off treatment (due to the cost or difficulty in accessing care).”

With a public option being considered as part of at least the major health reform bill now in the House of Representatives – H.R. 3200, there is concern about how that will be handled in comparison to Medicaid or even Medicare. Dr. Bowen said a government-run insurance program or social medicine would be detrimental to all people. She said with the reimbursement rates of Medicare already at such a low rate, she’s concerned over how another government-operated program would impact her ability to work as a general practitioner.

She said when looking at programs, such as Canada, she’s concerned because of the long waiting periods, which she said do exist and do result in deaths because of prolonging treatment. And, she added, insurance and hospital bureaucracy are the real issues here and those are the ones that should be the focus of reform.

Add that to negotiations with insurance companies, which she said are horrific, and the result for her as a physician has been no paycheck in three years. As a general practice physician, she said she is paid far less by insurance companies for doing the same treatment as a specialist. As an example, she said, she is paid less for drawing fluid off of a patient’s knee than an orthopedic surgeon is paid for doing the same procedure. She believes that will only get worse under a government plan and that general practitioners will disappear.

Morone agrees that the system is a mess, but he said it’s a complicated system and trying to fix it, therefore, is also complicated. An example is the billing system.

An Explanation of Benefits (EOB) from an insurance provider shows an initial billing from the physician, practice or hospital, minus the in-plan deduction to equal the final amount billed. So, if the original billing is the cost, why settle for less?

Bowen said the negotiation process for payment is so complex that medical providers bill at a rate they believe will help them to get costs covered. Morone said it’s even more complex than that. He said there are operating costs for medical practices and hospitals, and there’s a complicated formula to determine what procedures pays what.

He compared it to renting hotel rooms. Depending on what savings plan a person has, such as an AAA member or AARP member; people get rooms for different rates. So, what does a hotel room cost? It depends on discount programs, travel times or number of rooms, among other things. The costs of health care procedures are similar – it depends on the insurance and what the company has negotiated.

“There’s so much shifting of costs in the system that how much cost a patient bears depends on the insurance company and the incredible negotiating system,” Morone said. “There’s not a fixed cost for a procedure, there are costs for running the office or hospital.”

America’s Health Insurance Plans (AHIP) has released statements saying that reforms can solve the problems without creating a government-run plan and has proposed guaranteeing coverage to all Americans, eliminating pre-existing condition exclusions and no longer basing coverage premiums on a person’s gender or age. But, AHIP said these must be paired with a requirement to get everyone into the health care system. In addition, there must be cost containment included, according to AHIP.

Some are calling for the marketplace to fix the incredible disparities in the health care coverage system. But Morone said that’s not likely. While it’s not impossible for the market to fix the system, it’s not practical, he said. That’s because, he said, society won’t let a hospital fail or a person who couldn’t afford to pay for treatment to die after being hit by a bus. And, he said, we couldn’t give cheap medicine, so it’s hard for the market to do its job.

“It’s not like buying a computer,” he said.

Morone does like the plan President Barack Obama has endorsed because he said it does something to address the problems, but doesn’t do too much. And, he said, a public option gives a process for cost control. Similar to Medicare, a public option would set a reimbursement rate, setting cost controls.

Bowen hates the idea of the government taking over any part of the health care industry. She points to the pharmaceutical companies who research and develop medications that she said have saved lives. She’s concerned that will change with too many government restrictions on the system.

The Pharmaceutical Research and Manufacturers of America (PHRMA) support health care reform by making a commitment to the White House and Senate Finance Committee to help most seniors who are affected with the Medicare Part D coverage gap by providing a 50 percent discount for brand-name prescription drugs, an $80 billion investment. But the organization stresses that reform should not be made through price controls.

Obama has promised to overhaul the health care system, saying he’s determined to be the last president to deal with it. While Morone said he supports Obama’s plan, he said the president won’t be the last president to confront the issue.

Obama’s office didn’t return phone calls or answer questions that were e-mailed upon White House staff request. In a response to the initial list of questions e-mailed to the White House, staff asked for (additional) specific questions following the President’s address on Sept. 9. However, the list of questions was never answered.

History of Health Insurance

Health insurance coverage in America has seen price increases since 1952, steadily increasing at a greater rate than the rest of the economy. World War II was the initial biggest boost to employer-paid health insurance coverage. During the war, the IRS put limits on employee pay, but health insurance was a new thing and was exempted from those pay limits. So, employers used that as a way to offer employees additional compensation.

In the 1950s, President Dwight D. Eisenhower made the exemption permanent. In 1952, about 10 percent of workers had employer-paid health insurance. By 1962, most workers had health insurance coverage.

As of March 2009, medical care benefits were available to 71 percent of private industry workers, compared with 88 percent among state and local government workers. About half of private industry workers participated in a plan, compared to the 73 percent of state and local government workers. Employers paid 82 percent of the cost of premiums for single coverage and 71 percent of the cost for family coverage, for workers participating in employer sponsored medical plans.

Sources: Jim Morone, Chair of Brown University’s Political Science Department and the United States Department of Labor

Crash of two of the Big Three Automakers based on gas prices and recession, not lack of knowledge of what customers wanted

The Auto Industry

It wasn’t a lack of knowledge about what vehicles people wanted that caused the crash of two of the Big Three automakers, according to experts. The collapse was based on two things: 1. Gas prices shot up to more than $4 a gallon; 2. An economic recession immediately followed.

People were buying larger cars and SUVs, but once gas prices skyrocketed that changed, said Scott Baier, a Clemson economist.

“GM was doing OK until 2007-2008 when there was a run up of gas prices that hurt the models that GM had been successful with, and then the economy collapsed,” Baier said, adding that those two incidents drove GM to the point of bankruptcy.

And Gerald Meyers, professor of management and organization at the Ross School of Business at the University of Michigan, agrees with that assessment. “GM built vehicles the public wanted and then gas prices rose and the public didn’t want as many of those big vehicles,” he said.

But one member of the Big Three – Ford Motor Co. – escaped bankruptcy during the collapse. The Detroit-based company had mortgaged many of its assets a few years earlier, and drained its assets from Wall Street before it collapsed, Meyers said.

Ford did not return calls for comments, but company information shows that Ford continues to hold its own today. In fact, its stock nearly tripled early this year, although the company took a $1.4 billion loss in the first quarter. However, Ford leadership said it had enough money to finish the year. Much of this is because of the steps it took earlier.

In late 2006, Ford raised $23.6 billion in loans by putting many of its North American assets up as collateral, including the Ford logo. The loans have kept it independent and on a course to survive the worst new-vehicle market in nearly 30 years, according to company statements.

Earlier this year, Ford completed a debt restructuring initiative to reduce its debt by $9.9 billion. The company also announced the sale of 300 million shares of its common stock in a public offering in May – at $4.75 per share for gross proceeds of about $1.4 billion.

Restructuring at GM and Chrysler LLC has been much different. It has included government loans, sales of companies and car lines, and bankruptcy filings – with government involved in each step. The future for these companies now depends on government staying out of the auto business, according to both Baier and Meyers.

Chrysler formed an alliance with Fiat and emerged from its Chapter 11 bankruptcy filing in late April and early May. The new company is majority owned by the Voluntary Employee Beneficiary Association (VEBA), which has 55 percent. The remaining ownership is 10 percent between the U.S. and Canadian governments and 20 percent ownership by Fiat with the right to increase its ownership another 15 percent.

The new General Motors Co. launched on July 10, made up of Chevrolet, Cadillac, Buick and GMC. The U.S. Department of the Treasury owns the majority of the new company –60.8 percent. The rest is divided as follows: 17.5 percent UAW Retiree Medical Benefits Trust; 11.7 percent Canada and Ontario governments; and 10 percent the old GM.

“I worry about the government influence,” Baier said. “Government has different agendas that it wants satisfied, things not necessarily involved in the building of cars that people want. This introduces inefficiencies and cost, and cars people don’t buy.”

The White House says it has no intention of running the auto industry and will not make decisions on design, according to a White House spokeswoman. However, government influence can’t be ignored with new fuel efficiency standards announced earlier this year.

President Barack Obama set new fuel economy standards in May to increase fleet fuel efficiency by 5 percent per year beginning in 2012 and ultimately requiring the average fuel economy standard of 35.5 mpg in 2016. The 2009 requirement is 25 mpg.

But the real concern, some say, is what else politicians will require of the new GM and Chrysler since the federal government has ownership and/or influence in the companies following bailouts and loans. And, Meyers added, the Treasury Task Force has a deep bias against large vehicles, which could have an impact.

“Americans love their big cars, big anything, and you can’t take that away from the American public,” Meyers said. He gave the example of the early 1980s when higher emission standards were placed on the family station wagon, which had been popular.

When that happened, American buyers looked to Jeeps and similar vehicles. “That was the birth of the SUV,” he said.

Meyers said that while GM and Chrysler may feel the pressure to bring out more efficient and smaller vehicles, he sees Ford working in similar directions. “They’re all gambling on gas prices and it’s a gamble they’ll lose,” he said about the auto manufacturers. “Now, it seems we have oil coming out our ears and once the speculators are out of the picture, prices will probably get even lower.”

In fact, with gas prices lower this summer than last, SUVS are selling. Midsize SUVs, including GM’s Buick Enclave, saw sales up in June.

So, looking to the future, how do the revamped Chrysler and GM, as well as the other auto manufacturers, figure out what Americans want? Like all other businesses, it’s a guess based on the current facts.

“The plain truth is the public doesn’t know what it wants, it has to be sold on what’s there,” Meyer said. “The public, however, does know what it doesn’t want. The game is figuring out what that is three years from now.”

So, who seems to have it right? Meyers said it’s the niche companies – those that don’t try to build a car for everyone, but concentrate on one customer base. Pointing to BMW, he said that’s a company that puts out a high-end product and does it well.

Looking at the numbers from GM:

· In 2008, GM sold 2.98 million vehicles, compared to Toyota with 2.2 million.

· 12 of the top 20 best-selling vehicles last year came from U.S. automakers. Two of those were trucks – Ford F-Series and Chevrolet Silverado.

The Beginning of this blog

Journalists get a bad rap these days. Some deserved, others not so much. There are few jobs in the world where criticism is as harsh as it is for journalists, because there are few jobs that are so public and where the product is preserved for as long.

However, most journalists choose this noble career because they love the idea of doing the right thing, uncovering the truth and informing the public. I remember telling my sister, a teacher, that she teaches kids, but I teach the world. While I was kidding, I do believe that is part of the role of a journalist.

But there are those in the profession who give the rest of us a bad name. Unfortunately, like other professions, the bad ones seem to get all the headlines – pun intended.

In addition, today there are the so-called “citizen journalists” who are allowed as much space, or more, than trained journalists. So, there’s a lot of misinformation and information without substance or research to support it. And unfortunately, since many people use the Internet, social media and other online sources for their information, they may not be getting the true, complete story.

And before you say she doesn’t know what she’s talking about, anyone can be a journalist. Just let me ask you if you’d hire an architect to set a bone in your arm? Would you hire a teacher to do electrical work? Everyone has a skill and something they were trained to do, and journalists are the same.

Now that I’ve possibly made enemies, which isn’t hard if you’re a reporter, let me explain why I’m launching this news blog. I want to give you more information based on research, facts and experts. And yes, I am a journalist – with credentials and experience.

I will pick a subject monthly and try to make sense of it with only the truth – using data, experts and public statements to deliver the news to you, just as it has traditionally been done.

So, please read my first posting on the automotive industry and let me know what you think. I’ll be back next month.