The apple of U2’s eye

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1 April 2005 | 0

To those on the outside, some recent media reports might lead you to think that the music business is on the verge of collapse due to the proliferation of music file sharing networks over the Internet where terabytes of pirated content are uploaded and downloaded by million of users across the world. We wanted to find out the truth behind the hype so we spoke to one of the most influential figures within the industry – Paul McGuinness, manager of the biggest rock band in the world. You know who.

We gathered together his thoughts on the ways in which the Internet is impacting on how music is purchased, distributed and listened to. We also tried to get an understanding of how the music industry is facing up to the challenge of digital downloads. This interview with McGuinness is timely as U2 have become the first high profile band to tie a new album launch with a solid state digital music player – the market leading Apple iPod. After this groundbreaking move, it seems only a matter of time before others will follow suit. We wonder if this sounds the death knell for the CD sound carrier? Realistically, based on this interview the answer is no for the foreseeable future anyway.

CD sales good
According to McGuinness, CD sales are still quite buoyant. He says that legitimate digital music distribution has started slowly where digital sales represent just 3 per cent of the total music market. “Although the graphs for digital sales look as though they are going up, the percentage of music sold by digital means is still tiny.”
There is, of course, a very good reason why legal digital downloads are still in the slow lane. In the recent past, and we are talking about the period between 1999 and 2002, the record companies tried to resist this latest technological revolution by closing down peer to peer sites such as Napster and by suing illegal file sharers.
Indeed, McGuinness stresses that rather than encouraging music lovers to download and buy digital music that they could own themselves, the industry tried to push subscription services where the consumer could only stream and listen to the music for a set monthly fee. This, McGuinness argues, was never what the consumer wanted: “The industry was failing to produce a legitimate means for the consumer to acquire downloads. It was at that time it was pursuing the other model of subscription to streamed music but failed to realise that the consumer wants to own the music and not subscribe to something that can be switched off.”

Moral shift
Indeed in those early days of digital music distribution and sharing, when Napster captured the world’s imagination for creating a mechanism for mass music piracy and illegal use. Users didn’t even think they were stealing when they were downloading high quality tracks at zero, McGuinness notes. This was a dangerous behavioural and moral shift for the viability of the music business.
All of this begs the question as to why the record companies didn’t grab the bull by the horns, and adopt the technology to distribute music legally immediately. The industry mould-breaker Apple only got the support of the record labels for its iTunes online store in 2002, three years after P2P caused a storm and Napster only re-emerged as an above board digital music store in 2003 after its P2P infrastructure was shut down by the courts and its assets acquired by digital media company Roxio two years previously.

 

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Slow to change
McGuinness goes a long way to explaining the industry’s inertia towards the new technology. In part, he states that the industry has a long history of resisting rather than embracing new technologies. “They [the industry] were Luddites. Early sheet music publishers resisted the wax recording disc because they felt it would diminish music sales. There was similar resistance from within to the idea of playing music through the mediums of radio and TV.” Of course, it takes more than a dislike of progress to explain why the industry failed to adopt digital distribution technology in 1999. It was also a commercial issue for industry executives. “Remember, the most senior record company executives make huge sums of money from CD sales. They wanted to carry on in their own way with bricks and mortar stores, trucks and warehouses and pressing plants,” McGuinness says. Crucially, McGuinness argues that the “industry rainmakers” or the individuals who find the musical talent and know how to market it successfully tend to be impresarios rather than technologists. This is also part of the reason why the potential for p2p and digital downloads was not harnessed at that time.

Enter iPod and iTunes
The music industry needed direction from IT companies in establishing their digital distribution strategies. Apple led the way with the launch of its iconic iPod music player and its online record store iTunes. Available in almost every country in the western world apart from Ireland, the store now allows music lovers to download single tracks or full albums to the hard drives on their PCs and then onto their iPods. Paul McGuinness refers to the Apple hardware first. “I first came across the iPod in 2001, when a friend gave me one as a present with 1500 songs downloaded onto it. I thought it was a beautiful object.”

Apple initiative
A year later, McGuinness and U2 were to begin to form a relationship with its creator Apple. The initial approach to the band came from the Cupertino-based company. McGuinness recalls: “Jonny Dickson, head of music within Apple made the initial approach to us, when they came up with this idea of charging 99c per song and a reasonable revenue sharing model between Apple, the record company and the artist. We liked the look of that, listened carefully and bought into the idea. U2 were one of the first artists to support the iTunes music store and that’s how we got to know Steve Jobs.”

U2 pushed iTunes to industry
McGuinness says that U2 also encouraged other bands to sell their music through the iTunes store and that Bono even turned up at an Apple pep rally to promote the store: “They way Apple do their marketing, it’s a bit like a revivalist church and that’s maybe why Bono felt attracted to it,” jokes McGuinness. “There is something Moonie-like about the Apple culture but I rather like it, they have very smart people working there and they think a little differently about things.”

For McGuinness the big thing about the launch of Apple’s iTunes store was that a lot of the major artists were not prepared to allow their music to be sold song by song. “Many of them insisted that their music could only be sold album by album. They feared the effects of consumers cherry picking the individual tracks.” McGuinness and U2 thought this notion was silly and felt that their fans should be entitled the buy just the music they want, whether it’s an album or a single. McGuiness comments “If somebody wants to buy a single like ‘Beautiful Day’ they should be entitled to buy it for 99c. It’s just letting the public decide and people in the industry are a lot less nervous about this now.”

Innovative offerings
U2 and Apple are doing some very interesting things on the iTunes store. Fans in the US get a $50 coupon when they buy their special edition U2 iPod and this allows them to get a discount for that amount on the entire U2 back catalogue of over 400 songs, so it ends costing them just $100.  In other talks with Apple, The Edge suggested that the company should offer an iPod fully loaded with all U2’s albums. “For various reasons, Apple didn’t want to do this,” says McGuinness, “But they have done effectively the same thing with the back catalogue on iTunes.” McGuinness told me that U2 are also talking to Apple at the moment about the possibility of developing a system that would allow fans to download an audio recording of a concert they’d have seen the night before to listen to it again on their iPods. “That’s something we talked about for years.” McGuinness also says that the mobile operators are interested in similar approaches to delivering value-added content. “I know that the telephone companies are interested in this model and I have had conversations with the likes of Vodafone, T-Mobile and Nokia about doing this type of thing over streaming to the phone rather than downloading.” Of course, McGuinness also admits that this type of concert re-experience has huge implications for the way tours are organised and it may not sit well with showbiz concerns. “U2 do not want to be in a situation where they are performing a concert to 20,000 fans, most of whom have just seen it on TV or some other form of media the night before. We normally leave the television presentations until the end of the tour because you don’t want to give the plot away. You want your audience to be surprised by what they see.”

Vertigo and Apple cross-commercial
U2’s decision to enter a partnership with Apple was seen by some as a new departure for the band in that they had never before allowed their music to be used for advertising purposes. McGuinness argues that this was no exception when they did the commercial for the iPod and the band’s new single Vertigo with Apple. “The reason we did it this time is that we were advertising our own music,” says McGuinness, “And no money changed hands to make it happen.” U2 may admire the aesthetics and fashionable draw of the iPod, but ultimately its market-leading position attracted them to the table. The deal with Apple was good for U2, McGuinness says. “The great thing about the iPod deal is that Apple pays us a royalty on each piece of hardware they sell and they also sell our music. That is why there is no embarrassment about appearing in the iPod commercial.”

Format wars
When pushed on the plethora of digital music formats that compete on the digital music landscape, McGuinness naturally feels that Apple’s AAC format will win widespread acceptance because it is carried by the iPod. “The first MP3 player I heard of was the Rio, but it was erratic and hard to use. It was a sign of the future though. But every now and again, an object arises in the style culture and the iPod has been compared to the Mini, people want that object, it becomes invested with a whole generation’s attitude to style.” When we touched on Microsoft and its Windows Media Audio format, McGuinness told me of a brief tie-in the band had with Microsoft MSN portal during the PopMart tour in 1997. “We had a site that we launched on the MSN Network and it wasn’t an entirely satisfactory experience. I found the Microsoft culture tough – they do want to dominate the world and I found them quite hard to deal with, quite different to the Apple people.” In saying this, McGuinness has tremendous respect for Bill Gates who he describes as a phenomenal philanthropist.

More accessible music
McGuinness feels that the growth of the Internet isn’t the biggest problem when it comes to copyright violation. “We can combat illegal file sharing on the Internet by making legal digital music easy to access. If you live in Manhattan you can always find somebody who will hook you up to cable illegally for a couple of hundred dollars. When it breaks down, there is no one to ask for support. It’s the same with illegal downloads. If the music industry can get the quality and accessibility right, then fans will pay. “Almost everybody wants to behave honestly, but the ridiculous thing about the downloads business is that there wasn’t anyway to be honest for such a long time and the industry to trying to get back to a position before all of this happened.” McGuinness also talked about the fact that the industry now has ways to combat illegal p2p sites: “There are retaliatory moves taking place all of the time. The record industry quietly engages in a practice called spoofing, laying false trails around the networks and some users find that they have spent 30 minutes downloading something that turns out to be nothing of the sort.”

Piracy in the real world
A bigger issue than illegal P2P for McGuinness is piracy on the high street. He told me that you can walk into a record store in Italy and buy a bootleg U2 album which often consists of live recordings or compilations that pirates have taken from official albums. “I see dozens of U2 bootlegs which are pressed up and beautifully packaged as the Italians can do. They even have the nerve to print on the sleeves that they are paying royalties to the Italian music copyright protection society.” According to McGuinness, the piracy problem is also endemic in Russia, China and other parts of South East Asia where the authorities turn a blind eye to copyright infringement as a matter of course and where there are a large number of illegal pressing plants that turn out vast quantities of pirate product. McGuinness is adamant that not enough is being done at government level to combat this problem. “Every time I read that the Russians or the Chinese have signed up to a new international protocol I laugh. In those countries, there is no respect for copyright but it’s a far larger problem than I can tackle.”

*The U2 Special Edition iPod is available to buy in The 02 Experience, 3G and official Apple Store (www.applestore.ie) for €389.

U2’s latest album ‘How to dismantle an atomic bomb’ is in the shops right now.

Paul McGuinness on…

The music industry
CD sales are still buoyant but the industry was slow to adopt new Internet technology through a combination of a culture of resistance, industry executives who wanted to protect existing margins and through a reluctance by artists to make their music available as single downloads for fear it would adversely affect album sales.

Apple iPod
A beautiful object which has become a ‘must have’ fashion accessory for this generation.

Apple
Moonie-like in their devotion to the products but smart people internally who create iconic items and who have created a mechanism to allow U2 to distribute its music digitally to its fans. Apple also makes an excellent commercial partner for U2. The band receives revenue from every U2 iPod sold while Apple also sells their music at the iTunes online store.

Piracy
By making legitimate digital music easier to access, he believes peer to peer illegal file sharing on the Net can be combated. High street piracy is a much bigger issue for McGuinness that Internet file trading. He believes more pressure needs to be brought to bear on countries where governments have no respect for copyright. He cites China, Russia and Italy as the worst examples.

24/01/05

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