Disruptive Distribution – a Shareable.net Interview with Michel Bauwens and Neal Gorenflo

I met Michel Bauwens over at Marvin Brown‘s place when Michel was in town giving a talk on The Future of Peer Production. Talking with Michel (and reading some of his work) was part of the inspiration for my recent post “Watching Open Source Destroy Capitalism.” I forwarded the post to Marvin, who sent it on to Michel, which eventually resulted in the following interview with Michel and shareable.net co-founder Neal Gorenflo. The original can be found here.

Civilized comments from any point of view are welcome as always.

Michel Bauwens: You are a music entrepreneur, and reportedly doing quite well. Can you explain the basis of your success and whether you use music that can be shared, for example based on Creative Commons Licensing?

JD Moyer: I co-founded Loöq Records with DJ Spesh in 1998. We don’t release our music under Creative Commons, but we often take advantage of deals where end-users can use our music for free. We joined YouTube’s AudioSwap program early on (when it was still in beta). AudioSwap allows users who upload videos to select background music from AudioSwap’s library, at no cost. Some of our artists have done very well from being part of that program, as have we. The source of revenue is a small royalty percentage from ad views, but it adds up.

We also offer at least one free download from every new release, and encourage sharing. It would probably make sense for us to officially switch to a Creative Commons non-commercial license for all releases, but it would mean re-doing over 100 artist contracts if we wanted to convert our entire catalog. Let’s say it’s “on the to-do list.”

JD Moyer and Stephen Kay, known in the DJ world as Jondi and Spesh. Photo used courtesy of Loöq Records.

Neal Gorenflo: The music industry is being thoroughly disrupted and dematerialized. Now it appears that what happened in the content space is happening in other industries, even ones where the end product can’t be digitized, like cars. What industries do think are ripe for disruption today and what can we learn from what happened in music?

JDM: The U.S. major labels (which don’t represent the entire global music industry) reacted to file-sharing in an exceptionally horrible way. They attacked their customers (in both the press and the courts). After years of easy profits (in the era of CD sales), the majors got complacent and were totally blindsided by changes in the industry.

I think every industry is ripe for disruption because the means of production are becoming more distributed and decentralized. Book publishers have fared better than the music industry because they’ve embraced digital publishing and they haven’t attacked their customers. Hollywood seems to be going down the same path as the major labels. The RIAA and Hollywood see piracy as the only problem, but the real threat to their interests is the vast competition from high-quality, free, peer-to-peer production and distribution.

Mass production industries are vulnerable to the maker movement, local fabrication centers, and all kinds of community-owned/managed production resources. The more discontent there is with what mass production has to offer, the more vulnerable the industry. I think clothing is an interesting space to watch, because mass-produced clothes fit basically nobody. Every single person who has ever tried to buy mass-produced clothes that fit well has been frustrated by the experience.

NG: Who do you look to for inspiration in the music business, and what are they doing that impresses you?

JDM: I’m impressed by BandCamp, which gives artists a way to go directly to customers, and customers a centralized interface to browse and buy – or download for free – music from many different artists. Most people feel fine about paying money for music as long as they’re confident the artist is going to get a good chunk – or all – of that money, and BandCamp offers a good model for that.

MB: What are the key factors influencing the evolution of music production, consumption, and sharing? How do you see the shape of the music business in, say, 10 years?

JDM: The key factors … 1) The sound quality you can get from a laptop-centric studio has skyrocketed (if you have the knowledge and skill); 2) digital replication, producing, and distributing a physical product (record or CD) is now a totally optional aspect of a recording career; and 3) the barrier to commercially releasing music is so low that the sheer number of new releases – and small labels – has vastly increased.

There will still be music revenue in the next 10 years, but it will be from advertising and licensing royalties, not sales. Streaming will replace downloading for the most part, and music will be on-demand, and free. If there are any remaining music sales, they’ll be based on obtaining high quality lossless recordings for personal collections. I hope that market takes off … for the last decade or so, people haven’t seemed to notice that they’re mostly listening to crappy compressed files. Low bit rates make music less pleasurable due to ear/brain fatigue.

The labels that focus on quality releases, treat artists fairly, and keep expenses in check will survive. Most artists prefer being on labels because it’s higher status and less work. It’s a hard grind doing it all yourself (going direct to the public without any label support). Still, BandCamp and other direct options will appeal to some artists who want to keep more revenue and don’t mind doing more work.

I won’t predict the end of vinyl. The sound quality is too good, and so is the tactile and visual experience. The vinyl market will stay small, but it’s not going away entirely.

NG: I am amazed by the amount and variety of music that’s available to young artists today because of technology. I wonder how this will influence the development of artists. I think back to the British Invasion of the ’60s and how important American blues were to them. But that was just one genre. Now a young person can sample dozens of genres in a matter of minutes. What kind of music might emerge from this new situation? And how might this impact culture?

JDM: I’m not sure about the future, but one interesting current effect of the Internet is that young people can learn about music much more quickly and directly. When I was in high school in the late ’80s, you actually had to meet people who would teach you about music, take you to the right record stores, tell you about bands, etc. It was a much slower, more labor intensive, more face-to-face discovery process. Now you can just follow links, watch videos on YouTube, read the band’s Wikipedia page, and get a pretty thorough introduction to a new band or new music genre in about half an hour. You can even drill down and learn the production techniques used to make the music. One effect of that is less “genre loyalty” and more cross-genre experimentation.

NG: What advice would you give to a band just starting out about how to make a living with their music?

JDM: Prioritize the relationships between the band/group members above everything else, because it takes a long time to see real financial success even if the talent and the market are perfectly lined up. Have a written partnership agreement that everyone understands and feels good about.

Be cautious about giving up exclusive rights to anything, but be reckless in terms of increasing exposure, offering free downloads, non-exclusive deals, any kind of press exposure, and local gigs.

If you get any kind of momentum, ride it. Most bands will have a “window” where working extra hard leverages into improved results. It’s much easier to build momentum than it is to regain it.

Have early, frequent conversations about what kind of lifestyle the band members want. If “success” for your band is going to result in lots of touring, and one (or more) member hates touring, that’s a problem. I faced this issue personally in terms of DJing, which I wrote about in The Reward Is The Job, Do You Want the Reward?

A DIRTYHERTZ remix album released by Loöq. Photo used courtesy of Loöq Records.

NG: What’s next for your label, what vision are you working to make real?

JDM: We don’t have any kind of broad social vision or agenda; we just like to sign, release, and promote great music that we love. We’ve had to think seriously about what the functions of a record label even are anymore. Music labels no longer decide what music gets released (It all does, because the artist can go directly to the consumer now.), or how much it costs (The consumer can get it for free if they want.). So the remaining value of labels is in what value we can add. We can add value via artwork, wider distribution, promotion, and filtering/improving music (signing and A&R, respectively).

MB: In a much-debated article titled Open Source Abundance Destroys the Scarcity Basis of Capitalism, you describe the growing contradiction between nonrival goods that fall increasingly outside of the market because they are no longer scarce, and the need for capitalist markets to be based on scarcity. Hence a ‘crisis of value’ or, more precisely, a crisis of monetisation that affects for-profit companies, the user-workers, and society in general. Is this a fair summary of your thesis and could you expand on this?

JDM: That sums it up well. Capitalism is an economic system that depends of scarcity and strict control of resources, and when there’s a shortage of scarcity, corporate interests will go so far as to manufacture it (planned obsolescence, market manipulation, psychological programming, restrictions on distribution, etc.). Products that last 30 years or more, people that are happy with what they have, DIY/maker culture, frictionless distribution – these are all good things, right? But they’re all threats to scarcity and, therefore, to capitalism itself.

So, I think we’re seeing an enormous amplification of threats to scarcity. Digital replication is the most obvious, but other forms of cheap, decentralized replication are also emerging. Diamonds are being created in labs. Blueprints that allow expensive machines to be made from cheap parts are being released on the Internet, for free! (Witness Open Source Ecology.)

Some rights organizations would have you believe that it’s an intellectual property issue, a piracy issue. Obviously, that can’t be the case when the producer/creator/rights holder is saying “please replicate my stuff,” or when the source material is clearly in the commons (the molecular structure of diamonds, for example). The issue is that your product just became cheap or free to replicate.

In the post, I speculate about what might happen if we ever see Star Trek replicator technology come online. I think we’re already halfway there with 3D printing. What happens when we can print everything at home, including food, electronic devices, and personal hygiene products? Will our economy become entirely based on services we provide to each other? Will we even be needed to provide services to each other if AI’s can do intellectual work as well as (or better than) we can? AI’s are software, and they can be replicated, as well.

MB: What is the solution to the conundrum? You end your article by arguing for the creation of civic wealth. What is it, and how would we fund it? What do you see as solutions to have a thrivable society of the future, that could co-exist with increasingly non-monetized wealth?

JDM: Some commenters expressed that I wasn’t, in fact, predicting the end of capitalism, but rather the end of corporatism, or some sort of minor adjustment to capitalism. I disagree; I think the changes we’re seeing are vast, scary, and potentially liberating.

As a label owner, I was punched in the face by the economic effects of digital replication, so I may have a unique perspective. Everything is different now. I can’t help but think about what reduced scarcity and increased access to personalized production systems is going to mean for every industry in the world.

The short-term risk is that any technological/economic disruption tends to concentrate wealth and increase income inequality. We saw that with mass production and the industrial revolution. The same thing is happening now with the digital revolution. Everything has become more efficient, so fewer workers are needed. Business owners, like myself, can often adjust to technological change, even take advantage of it; but for workers and employees, it generally sucks.

Citizens will have to claw back some of the wealth created by efficiencies and innovation (and “innovation” sometimes includes clever types of crime and exploitation). That’s part of what the Occupy Movement is about.

It’s not a flashy or glamorous solution, but I think investing in civic/public wealth – everything from education to public health campaigns to national healthcare to public parks – that’s how we spread out some of these huge efficiency/innovation gains we’re getting.

How do we fund it? Some of it is self-funding. Investing in public health pays off in reduced Medicare costs. A healthier populace is more productive. A more educated populace competes more effectively globally.

Do we need to raise taxes in the U.S.? I think a 50% maximum tax rate for the very richest makes more sense than the current 35% cap. The maximum tax rate was 70% or above from 1936 to 1980, so there’s plenty of precedent for taxing the filthy rich a bit more. And why not give some tax breaks to the poor? It wouldn’t cost much, and we need to do something to increase class mobility and reduce income disparity. Economic “evenness” has huge social benefits. Richard Wilkinson has presented some good evidence for this idea.

So what about the long term? If the replication trend continues to accelerate, we may have to shift the basis of our economy to providing for each other, instead of prioritizing corporate profits. Marvin Brown has proposed the idea of an “economy of provision” in his book Civilizing the Economy. If we end up with very little scarcity, but also very few jobs, we’ll have to totally rethink our economic system. We don’t have to get rid of private property, or money, to evolve into an economy of provision, but we do have to prioritize the quality of human experience over the abstract bottom line.

You could say that communism already tried this, and it didn’t work. In China, communism resulted in plunging productivity and millions starved to death. But when you take scarcity out of the equation, maybe there’s a bit more room to consider some collectivist ideals. We’ve taken capitalism about as far as it can go, and we’re dealing with some ugly consequences.