Cracking down on web radio, as your industry is doing—you seem perfectly happy to let AOL Radio and LAUNCHcast be shut down and Pandora and Live365 (with its 10,000 member-webcasters) be bankrupted—is going to be another case study in business schools.

This crackdown is actually even worse than the others, because in this case you guys probably really know that Internet radio is good for you. But you're lawyers—deal guys and litigators. Your natural instincts are to "win" as big as you can. Like the scorpion that bit the frog that was ferrying him across the river, it's your nature.

And the result that's only a month away? You'll kill off 80% of the industry, CD sales will go down an additional notch, and then you'll complain that CD sales are declining. Just as with the Napster lawsuit, you'll win but you'll lose.

Now let me quit my speechifying and address a couple of the specific points that you made today, Jay.

In your essay above, you described today's younger generation as "a bunch of morally bankrupt punks who think they are entitled to free music." I'm sure that's a perfect representation of the attitudes of the people running the music industry, but that's not the kind of attitude that's going to help sell anything to them! In our debate a couple of days ago, I pointed out that a teenager today has an iPod that holds 20,000 songs and that $1.00 to $1.30 per song seemed like too high a price point, since he can't really afford to spend $26,000 on the music to fill his $300 player. He's not morally bankrupt; it's just that your pricing is insane!

You write, "I know you see the Internet as some incredible invention that has opened the door to unlimited distribution of music... But all I see is a tidal wave of artist abuse." Ay yi yi! You are not seeing the forest for the trees. I have an upcoming analogy about a flood that will speak to this issue.

To go on, "Illegal file sharing is the direct cause of the greatest campaign of copyright infringement in history, and has resulted in the music industry being devastated." The first half of the sentence, maybe. The second half? There's no proof of that at all! The moderate declines in CD sales you've seen over the past six years are totally consistent with the probable effects of other phenomena—the lack of any hot new musical trends, DVDs becoming an increasingly better competitive value, a desire of consumers to buy tracks online (at a perceived-as-reasonable price, though), and so forth. You're drawing a causal relationship that you have no proof exists.

You wrote, "And now the question is why we don't allow webcasters to use the music without payment." That's a total mischaracterization! No one is asking that question! Webcasters aren't proposing to not pay a performance royalty at all—we're just pointing out that the rate you asked for, litigated, and won is so high that it would bankrupt the industry...and that shutting the industry down would probably be bad for all of us.

Finally, you conclude with the rallying cry, "This is no time to give into anarchy" and propose "an energetic lawsuit, and perhaps a smack in the head." Yes, exactly—that's a perfect summation of the record industry's modus operandi.

But think how much better off you would be if you actually tried savvy marketing and pricing and PR instead.

I'd like to end my piece of our conversation for the week with one final story:

Woman's caught in a flood, clinging to a tree. Two kids come by floating on a door, offer to help her; she says, "No thanks, God will take care of me." Big dog swims by, gets close to her in a helpful way; she says, "No thanks, God will take care of me." Woman drowns. She gets to heaven and asks God, "Why didn't you take care of me?" God says, "What? I sent you a two kids, a door, and a dog!"

Now the record industry is complaining that sales are in decline. But God has created MP3 players that hold 20,000 songs. Plus introduced a new form of distribution system—download sales—that removes all of the costs associated with the shipment of physical goods. Plus created thousands of new radio stations in hundreds of "long tail" formats (with vivid "now playing" information and "buy it now" links). Record industry says, "No thanks, I'm a lawyer; I'll litigate." Record industry dies. It gets to heaven (maybe) and asks God, "Why didn't you take care of me?" God says, "What?!? I sent you iPods, download sales, and Internet radio!"

Jay, it's been a fun week. Thanks.

Kurt Hanson is Publisher of RAIN: Radio And Internet Newsletter, the leading trade publication for the field of Internet radio, and CEO of, a popular multichannel Internet radio property that reaches almost half a million unique listeners per month. He previously worked at WLS/Chicago and WLUP/Chicago.

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