Copyright Law in the Digital Age

Walter McDonough gives Jenny Toomey the legal lowdown on copyright law, sampling, and artist compensation

06.06.2000

J = Jenny Toomey
W = Walter McDonough

J: What's your history of association to the music world?

W: I started off in the hardcore music scene in Boston, although I pre-dated it a bit because I was a big Mission of Burma fan. I used to travel all over New England seeing Mission of Burma play. Then a friend and did the first hardcore shows. We did Dead Kennedys shows. We were a little bit older than the SSD guys so we got to promote a lot of those shows, you know, Gang Green and all that stuff. We were promoters and I managed a lot of bands up here --The Neats, The Turbines. I had a small record label.

J: What was it called?

W: 6L6. This was a long time ago. It was named after a kind of tube in a guitar amplifier. After that I moved around the country and did different things and then I moved back to Boston and went to law school.

J: What made you decide to go to law school?

W: I think I kinda liked the intellectual aspect of it. I think that was the main thing that attracted me to it.

J: Did you know that you wanted to do music law from the beginning?

W: I didn't do music law from the beginning. I actually ended up in music through a weird set of circumstances.

J: What happened?

W: Well I always hung around with bands and I have a lot of friends in bands that became big. When I first got out of law school I worked for the Attorney General in Massachusetts on the deregulation of the telephone industry, so I had a lot of exposure to telecommunications and the infancy of the big corporations trying to ramp up the Internet. I learned a lot doing that. For example, in one case we couldn't figure out why the phone company wanted to have so much surplus capacity. Well, we later realized it was because they were getting ready for the Internet and they knew even back then that at some point there would be some sort of broadband technology, although at that point I don't think they could put their finger on it. But we knew there was some reason why they wanted to have this surplus capacity.

J: And when was this?

W: That was in '95. Then I left that job and I got the opportunity to work for a famous federal judge here in Boston, which was an unbelievable experience. I got to see all sorts of copyright cases and patent law case, and he did part of the famous Boston case where the Tom Sholz sued his manager. So I got to work with everything from entertainment law to securities law.

While I was working at that job a couple of my friends, one guy in particular -- actually, believe it or not, it was Lewis Largent, do you remember him from MTV? Well he's an old friend of mine and we were out one night at a Jawbreaker show when I was clerking for the judge and Lewis said to me, "Have you decided what you want to do yet?" I said "No" and he said, "Why don't you work in the music business, you'd be great at it. You love music and you're a great lawyer. " So I said, "Maybe I will."

So one of my friends Mark Kates -- who is the head of Beastie Boys' label Grand Royalbut who was at Geffen at the time -- says, "You should meet Rosemary Carroll." Well, I had to be in New York for a wedding anyway and Rosemary invited me up to have lunch and all of a sudden she offered me a job and -- boom -- I'm working with Rosemary Carroll, Michael Guido and David Codikow, who are three of the biggest lawyers in the music business. It was a great experience. I learned a lot. I actually had the experience of putting in my two years working at a big deal entertainment law firm working with everybody from, you know, Jay-Z to Richie Sambora . I did everything: record contracts, publishing contracts and some of the first internet licensing deals that were ever done. I also did a lot of hip-hop, especially with Jay-Z. So I did, for example, "The Hard Knocks Life" samples clearance. At the time that was the single most complicated sample clearance ever done because it's from a Broadway play and you have to worry about separating all the rights. It's not just the music, but it's the story itself. Then J won the Grammy for it. So basically I had to go and negotiate deals with Puffy Combs' people and Dr. Dre's people and all that stuff and I lived in the hip-hop world for two years. I still have a lot of friends in hip-hop.

One of the reasons I came back to Boston was because I wanted to get more involved in technology. It's funny because when I started getting involved in clearing intellectual property matters in the net, it was very easy to make the transition because it was so similar to doing sample clearances for hip-hop artists. If you look at Napster, for example, the controversy that's going on with that is very similar to the sampling controversy.

So I'm back in Boston where I'm doing a lot of work with bands and obviously doing more internet stuff and intellectual property licensing on the net in general.

J: We'll talk about Napster stuff later, but I wanted to establish something. You do work with a bunch of independent artists. Can you tell me who some of them are?

W: Jets to Brazil would be a big one. I also work with Hydrahead Records , which is the big up and coming avant garde heavy metal label. They have Cave In. It's like Jade Tree except it's harder music, but it's one of the fastest growing record labels in the world. They are very fair. We do have written contracts but we've been very influenced by what Tim has done at Jade Tree because we want to be fair to bands. It's all about giving the bands the opportunity to make money. I think within a year the bands on Jade Tree and Hydrahead will make more money than 85% of bands that are on major labels. There is no doubt in my mind about that. So it's really exciting to be working with these types of labels. Another guy I work with closely is Mr. Lif who is one of the big underground hip-hop guys. I represented Company Flow for a while but I felt like they needed somebody in New York so we're still trying to find the right guy to fill in for that slot. They have a lot to do because they're starting to be referred to as the hip-hop version of Dischord in New York now and they wanted to do this big collaborative with Lif. Are you familiar with Company Flow?

J: No.

W: Well they are one of the biggest underground hip-hop acts and they travel all around the world and Lif comes in as a collaborator. So we just felt that since Lif lives here in Boston and he's my friend and we work real closely that I would represent him and we would find someone else to represent them because we didn't want to have a conflict of interest. Besides, they need someone in New York that is going to do a lot of day to day work with the label. Lif just did a single for Grand Royal so he's doing really well and The URB just named him one of the best upcoming hip-hop artists for 2000. So really what I'm doing is trying to work with emerging artists. I've cut back a lot because I know what it's like to work literally every day of the week. Now I'm emphasizing quality over quantity. I want to be able to spend more time with my artists. Do fewer transactions and do them well. There are a few other people that I work with who are pretty well known but they don't want to be dragged into the Napster controversy.

J: Okay...

W: I've read the statistics and allegedly we have 65% of the Napster board run by people in Massachusetts.

J: The Napster board? What is that?

W: You know, the kids who actually have the message boards that tell you what's on Napster. Well, that coupled with just how controversial it is, some of the people I work with just want to be left out, which I can understand.

J: The predominant position at the three recent Internet technologies conferences I attended and in the discussion on the Musictech list suggest that the benefits of digital download technology for independent musicians outweigh the risks. What do you think of this theory? What do you think about that?

W: I think it's ridiculous.

J: Why?

W: Because as Terry Fisher from Harvard Law has pointed out, digital downloads only work if there is some sort of ancillary income where the musicians are getting paid. How can you get paid if you are giving everything away? Unless there is some sort of ancillary income coming in from merchandising or something else, it doesn't work. And, frankly, for most bands their sustenance is in publishing, whether they are independent bands or whether it's major label bands that aren't selling many records. I mean these major label bands may not be making money selling records, but they are making mechanicals from record one. How can bands make steady money if they give up their publishing income? I want someone to give me examples of bands that have done well by giving away music on the net, because I still haven't seen it.

J: Yeah, me too. Kristin and I just wrote a piece about that which goes through the different ancillary revenue streams and explains why they will not be able to replace royalties for independent artists as the major source of revenue. We then make a challenge to the people who work in the internet community who are supposedly music fans to actually build artist payment into their business models in some way because no one seems to be doing that. It's funny because what forced us to write about this was an email from Napster asking us to go on the record in support of them. And although they seem like nice folks we had to tell them "absolutely not," because it doesn't really seem like they've done a thing to guard the value of our labor as musicians.

W: The only people who are making money in this are the people who own these sites. How many have of these business models have you heard are based on these "communities of musicians" where kids can put up their music? Okay, the owners of those sites are getting paid because they are making ad revenues and in many instances they are planning to go public. How come the musicians aren't getting paid? Why should the site owners get "free content" when the musicians are not getting paid anything? They are making money and they are not sharing any of it with the musicians.

J: Clearly the great majority of those sites aren't making money at all yet. But what's particularly frustrating is that almost every one of these company owners is being quoted as saying that compensating artists is the most important thing for them, but clearly it's much more important for them to guarantee the future of their companies.

W: Well remember what the guy in Jerry Maguire said: "Show me the money." You know they are just taking advantage of kids who don't know any better. It's the age-old music business practice. Take advantage of people who don't know.

J: Something that complicates this conflict is the differing ideologies that exist between people from the independent music community and people from the Internet community. One thing that is very interesting about those two groups is that they are, in many ways, cultures unto themselves. Like for example, I could tell from what you say and how you say it that you had some history as a punk rocker because there are these signs and signals of having gone through that at a certain period of time and the residual effects of that are recognizable. These norms and histories influence your perception of these issues. There is a similar group of signs and signals for Internet culture.

The big problem is the fact that the Internet and indie music communities have different histories and outlooks that overlap in some places but diverge in others. For example, the history of giving stuff away and making art for love and playing for free exists within the independent music community and it follows the same idealistic logic that informs the beliefs of the open source programmers. I.E. it is both altruistic and logical to develop software through "open source".

W: How about the fact that the guy that invented the web gave it away.

J: Yes, that sets a certain precedent. So it's kind of a problem when the argument about "open source" and Napster becomes polarized and you are trying to decide which team you want to be on. Clearly it would be a lot more fun to be on the "open source" team because they seem like the good guys. Not necessarily the large corporations that own these Internet businesses, but the kids who are out in front with the altruistic concepts. The obvious problem then is that if music becomes essentially free it becomes difficult, if not impossible, to compensate artists for their work. What really worries me is that the idealism that informs that "open source" ethic is going to be a tough opponent to fight because it's not just a theory or an opinion, it's actually the roots of a whole tree of ideology. So I find it difficult to believe that those folks who were raised on the idealism of "open source" will ever see Napster and similar kinds of digital downloading a "piracy."

W: Well that's too bad because it's the law . Not accepting that is like not accepting that when the light turns red you have to stop the automobile. I don't understand how people can stand there and tell me it's not the law when it's the law.

J: Well, do you think that has anything to do with how incredibly difficult it is to police that law? I mean, I know dozens of people who will drive through a red light on a deserted highway in the middle of the night.

W: Is it really difficult to police?

J: Well it seems like it is.

W: I don't think that it is, but let me tell you this. This is the same thing that we went through in the '80s with the sampling controversy. When people thought they could sample with impunity and no one was clearing any of the samples it was going on and on and on.

J: Tell me about that because you've had a lot of experience with it and I think you are right, it's a really good parallel.

W: It started with the best of intentions, I mean, you know you're talking to somebody who's been a hip-hop fan forever. I was lucky as a little kid, I got to see some of the first hip-hop shows. I had a lot of friends in the black community who knew I was into music and just took me in initially to check it out and see what I thought. I saw Grand Master Flash and the Furious Five early on and it was just unbelievable to see. It's mind boggling to remember what it was like to see them for the first time. I mean who had any idea? But when those guys first started off --Cool Herk, Grand Master Flash, the original DJs -- they didn't know the law. They were just guys from the Bronx who liked to play records at parties. So as the business became more complicated, eventually Grand Master Flash toured with The Clash and they made this song called "White Lines, Don't Do It" which contained three samples. It was "Let's Dance" by David Bowie, "Happy Birthday Birthday Party " by Grand Master Flash, and "The Cavern" by a band called Liquid Liquid. What happened was David Bowie's lawyers sued Sugar Hill Records who had put out the record and then everybody else sued them, if I'm not mistaken. That's why Sugar Hill Records went out of business. They were sued out of existence. They went bankrupt.

So then people began to tighten up and do a better job of clearing samples, but again some people still didn't clear samples. Then we had the famous Gilbert O'Sullivan vs. Biz Markie case. Now I can tell you, I don't know Biz very well, but I've hung out with him and he's a good guy. He's a well-meaning guy.

J: Summarize that case because I'm not sure everyone knows about it.

W: What happened in the case was Biz Markie did a song that sampled "Alone Again Naturally" by Gilbert O'Sullivan. He did it because he liked the song. Well he actually contacted Gilbert O'Sullivan's people and said "we want to clear this" and Gilbert O'Sullivan got personally involved and said, "Look, I realize what you guys are doing and I respect it, but you have to understand something, this song is about my parents dying and it's very special to me and my family. We don't ever want it to have another use, so I'm not going to give you permission, but it's not personal."

They went back and forth about this for awhile and finally Biz just released it anyway without clearances, and Gilbert O'Sullivan's people sued. The case went to the Southern District Court of New York and in the decision the judge said that it was theft, and then he said it was a criminal matter, so that it could be referred to the US Attorney.

The fact of the matter is it's never been the same since then because once the judge said "theft" and "crime" that completely changed it. Now everybody clears his or her samples because you've got to. Even in the drum n' bass movement in England which is completely based on uncleared samples, once a record reaches a certain number of sales they clear it because they don't want the hassle. Again, it's different because the law is different over there. So kids still release records with uncleared samples but for the most part once you reach a minimum sale level, you pretty much have to go back and clear it. Here's a case in point. "Uptown Baby" by Lord Tarik had a sample of "Black Cow" by Steely Dan. It was a great record that they literally sold out of the backs of trunks of cars. As the record became more powerful Steely Dan came in and said, "Okay guys, we want a check." They were very upset about it, but Lord Tarik didn't know any better.

Again, the same thing is happening now with digital downloads. There are a lot of kids out there and no one has ever told them that what they are doing is wrong. I don't know if it's going to be a Kevin Minnick situation or whether it's going to be a Biz Markie situation, but sooner or later there is going to be a court case and someone is going to get hauled in there. Hopefully it won't be for criminal indictment but sooner or later it's bound to happen. It's either going to be a civil case or a criminal case.

J: Well, how about this? I can see how those types of lawsuits are going to shut down or paralyze easy targets like Napster or MP3.com, but what about the argument that "if you can hear music you can tape it." Kids will be sending these types of downloaded files to one another using other means the second these two major channels get shut down. It seems to me that the only way to prevent that would be to police everyone's home computers.

W: Oh, I don't know if that's true.

J: Well then explain to me how ?

W: Well, the thing that makes Napster dangerous is that it facilitates the illegal practice. Any system that facilitates copyright infringement is dangerous because it could crater the music industry. I'm not sure I fully understand the question. Can you restate it?

J: I'm talking about the idea that these files are really easy to download. For example, at a conference at Harvard one panelist was explaining how to go about downloading a file and then he said, "Make sure you cancel it before it downloads because if you don't you'll be committing piracy." Well the only way to trace those kinds of singular transactions would be to have to watch what is happening with everyone's home computers.

W: Yeah, but nobody really cares about copyright infringement on the margin because, you're right, it's too difficult to police. But when someone creates a huge system like Napster or any other of these that facilitates copyright infringement, that's dangerous. It's one thing to have a handful of kids who have outstanding computer skills who can crack files but it's quite another matter when the dumbest kid in the class can use Napster and that's the problem. No one cares about piracy on the fringe. What they care about is a mass technology that facilitates this. Some people say that there are as many people who use Napster as there are at AOL. That's pretty scary, particularly so considering the fact that AOL put up a Napster type system up (Gnutella) and then realized within 24 hours they had to bring it down because it was copyright infringement. Ironically they were committing copyright infringement on stuff they owned, namely the catalog of Warner Brothers records.

J: Let's move on. Tell me about the Digital Millennium Copyright Act of 1998. Do you think this legislation helped or hurt independent musicians?

W: It helped them.

J: Why?

W: Well it's like this, as I said today in a speech to the Boston Bar Association, the RIAA should have spent their time worrying about stuff like Napster instead of trying to stick it to musicians by adding the "work for hire" language. While they were worrying about this ridiculous, selfish thing they let the Napster phenomenon grow out of control to the point where Metallica and Dr. Dre are now doing their work for them.

J: The "work for hire" clause makes it very difficult for independent musicians like me to be aligned with the RIAA's positions at all.

W: I know one of the managers of Metallica, Peter Mensch, and I love Metallica to death. In my opinion, no matter how it looks, they are fighting the fight for everyone else. As far as Dr. Dre goes, I've never had the opportunity to meet him personally, but I have talked to a number of his people over the years. I have tremendous respect for him because, in my experience, with the small dealings that I've had with them his organization is straight up. They always pay everybody. They don't stiff people. They are really straight up guys so of all the bands in the world if Dr. Dre and Metallica are suing you then you know it's serious because they are not into hassling people.

But again, the RIAA spent all their time on the kookoo "work for hire" language when they should have been worried about Napster. The thing that's really important about the Digital Millennium Copyright Act is that it raises the penalty for copyright infringement. In the MP3.com case, for example, when you see the damages get multiplied out according to the new standards -- I don't remember what the last count was, but they're up around $3.2 billion. If somebody wanted to bring a suit against Napster they could theoretically have damages in the quadrillions because it would be a civil RICO suit under which damages get tripled and they have to pay the attorneys' fees on top of the damages.

What the musicians lost in the DMCA, and this mostly effects the major label musicians, is their right to try to terminate the deal and get back their masters 35 years after a record has been released. Don Henley and Sheryl Crow and a whole group of musicians are going down to Congress to try to get this legislation repealed.

From what I've heard, there is actually a good shot that it will be repealed. In terms of the damages for copyright infringement in a digital format this act has definitely helped musicians because the damages have gone way up. So between what they've done with the domain names and what they've done with the DCMA, trademark owners and copyright owners have more rights than they ever had before. Except for the work for hire thing which will hopefully get knocked out.

J: Here's something that I'd like to ask you about with regards to the Biz Markie case: what do you think about the idea of substituting "right to first use" for sampling, as opposed to the way it is now where the artist has complete control of the recorded performance?

W: You mean the "first use" doctrine? Well the first use doctrine only goes to the first time a song is used. In other words, you can't cover a song unless it's been released.

J: Exactly, but with regards to the sampling...

W: Oh that doesn't have anything to do with it. I mean because...are you talking about compulsory licenses? I mean you can get a compulsory license for something.

J: Explain what that is.

W: Well, there are exceptions to copyright code where people can use work without permission as long as they abide by certain rules. One of them is the compulsory license. Right now I'm in a situation with a band that is the subject of a tribute record and they are not too happy about it. We're trying to work something out because it's a big band and everyone that is participating in the tribute is a fan. Nobody wants to hurt anyone's feelings, so they want to come together and make a deal. Essentially if the band doesn't want the album to come out the bands that are doing the covers could get compulsory licenses -- if we were willing to abide by how it works -- which means you have to make monthly payments. But you can not do that with a master recording. You can only do that with the song.

J: Oh, I see.

W: I mean, how can you have a second use of a master recording?

J: Well, I suppose you could argue that sampling was a second use.

W: Well, what constantly happens is this: a record will come out and someone will sample someone's song. So the person who has been sampled will say, "Hey wait a minute, you sampled me, you can't do that, that's copyright infringement." And the first musician will say, "No it's not because I applied for a compulsory license and that's not your master recording. That's just a bunch of guys that I hired to play the song."

J: I'd guess that happens a lot when you can't get a sample cleared.

W: Yeah, if you can't get it cleared you could go back and do what is called a "replay" of the master recording and then apply for a compulsory license but compulsory licenses are pains in the neck because you have to pay every month. I don't want to go into the history of compulsory licenses but basically there are a lot of cases where the person who samples hasn't kept up with the payments and has eventually lost the license.

J: Now we get to talk about something that I think was particularly interesting that you said on Musictech. A lot of people who champion digital downloads talk about the fact that the music industry is selling more records than they have in the past. So their argument is that as sales continue to increase, digital download technology is not acting as piracy but as some sort of new fangled form of radio. It suggests that by hearing the tracks you get a chance to like them and to buy them.

My problem with that, of course, is that the majority of these business models are based on a future in which digital download delivery of music begins to replace CDs. So their argument that Napster is fueling sales only works as long as there are CDs to be sold. It doesn't work at all if digital downloads become the predominant format for music. You had an interesting point with regards to this theory and Soundscan.

W: Yes, well first of all we are in an interesting time period because if you look at the Billboard 200 and the records that are selling a lot -- the two examples that I always use are N'Sync and Santana. Those records are clearly being bought by people over 24 years old. In the case of N'Sync, my friend has three daughters and each one of them had to have her own copy so he bought three of them. So I asked someone about this and I was told, "Yes, it's common for parents buy an N'Sync record for each one of their kids." It's like Pokemon cards -- each kid has to have their own CD.

So on that level I think sales are distorted. The boy bands and a lot of the other bands that are doing well -- for example, Santana -- have a dynamic that masks the fact that the demographic group that we are losing the most sales to are 16-21. I mean, 16 to 21 year old kids are being brought up and being trained by the Internet culture to believe that they don't have to pay for music, and that's dangerous.

The other thing is that Soundscan is not a 100% quantitatively accurate sample. Those numbers are based on a projection. I forget the exact number, one person told me 65%, but it's hard to get a precise number because the statistical model is proprietary and Soundscan won't share the information. Soundscan samples throughout the country and then they take those figures and they extrapolate to make the 100% totals. I can tell you that a lot of bands are not represented in those numbers because there are a lot of records that are sold in places that do not track Soundscan.

J: This was always the case for the bands on Simple Machines because we sold the great majority of our records through mom pop stores and mail order.

W: Hip-hop too. Hip-hop 12" sales, someone could sell 30,000 copies of a hip-hop single and you'd never know because they generally don't have bar codes so you can't scan them. Mr. Lif sells tens of thousands of singles and they don't scan. The only reason we know how many he is selling is because the record stores throughout the country like the guy and they tell him.

Newbury Comics , for example, they are one of the biggest independent record store chains in the country with a lot of stores in the Boston area. They break bands. That's where you're going to buy Tortoise records, that's where you're going to buy Dischord records, that's where you're going to buy all this stuff. Kids go directly there to buy it. Well, Newbury doesn't report to Soundscan so we don't know what's happening. Mike Dreese (an owner of Newbury Comics) will at some point come out and talk about how this is affecting his sales. What if we take hip-hop and country out of the equation and we just look at independent rock in the US? Most of those records are sold in record stores near college campuses. Nine times out of ten these stores are almost on the grounds of the campus. Those places don't report. So the stores that are taking it on the chin are the ones that don't report to Soundscan. So we don't know what's really going on and the RIAA are asleep at the switch and they should be trying to find out what's going on. But you know what? They don't care about the indies, they only care about the majors. They don't seem to grasp the fact that but for the indies the majors would have no new source of talent. There wouldn't have been a Nirvana if there hadn't been a Sub Pop and we could name a million other examples. No one is looking into this but someone should be surveying these stores and figuring out just how much the sales are dipping because kids aren't buying records anymore.

J: I'd be curious about that. I'm not arguing with you but DC has two new indie record stores and they both seem to be doing really well. But then again, we are living through this incredible boom time and there's a lot of disposable income floating around.

W: It's like this, the phenomenon hasn't completely kicked in. We have not had a great release schedule yet because of the mergers of all the major labels. You can make the argument that there are fewer records out there than there should have been. There should have been more records out so we're still at a stage right now where at any moment there could be a huge drop off because when you add this many people to Napster all the time and you are training more and more people it has a snowball effect. I know for a fact that there are kids at the Boston College computer room who are making hundreds and hundreds of Guster records. Guster is losing those sales somewhere and my guess it's at the record store that's closest to BC. Someone's sales are down if these records aren't being purchased. Now I recognize this is like free beer. I mean you're going to do a much greater volume in free beer than if you were charging a buck a beer, obviously. Several independent labels have told me that their sales are down, they just don't want to go public because they don't want to get into a fight with anybody. I think it's going to come to a head and I think it's going to be Mike Dreese who is one of the two owners of Newbury Comics. I think at some point he's going to make a detailed speech about Napster and CD burning and how it's affecting his business. I've seen him do about 60% of the speech already where he says that basically CD burning is going to wipe out record stores throughout the United States. It's not going to hurt Best Buy; they are selling the CD burners. It's going to kill the boutique stores.

J: Let's talk about the idea that Brian Zisk brings up that there is no impenetrable format. If we are moving towards a digital download music economy and that is the major format for music, how will we ensure that artists get paid?

W: Well, there is going to have to be some sort of watermark embedded in the digital information. I can accept the argument that the technology does not exist now, but at some point the technology must exist because there will be overwhelming demand for it.

J: You don't think that there will be a way to get around it? I mean it's a pretty compelling argument that Microsoft's encoded music form got cracked in a day.

W: Well, it's like this, technology can change. I have tremendous faith in human progress. Just think about the polio vaccine, the Wright Brothers. I mean, sooner or later there's going to be some encryption software or some other method that will be a better mousetrap. In the mean time anyone who is intelligent enough to hack a DVD or Microsoft's code is one thing, but as I said before, when the dumbest kid in the class can do it it's another thing entirely.

That's why Napster is so dangerous because they facilitate it on such a huge level. I mean you can't police everybody, nor do we want to. We don't live in that kind of society, nor do we want to live in a totalitarian state. It's one thing when you have very intelligent people on the margins doing it but when you create a system that's available to anybody and you facilitate it that's very different. I'm not concerned about the one person who can do it or the 15 people who can do it. What I am concerned about is the 15 people banding together and building a system where anybody can do it.

J: It's funny to see these companies with these very young idealistic people running them but who are all being funded by big money and being given very long leashes right now . It reminds me a lot of the A phenomenon...

W: Exactly.

J: ...where you have an A guy who is young and friends with the band and makes them feel comfortable. Most A men of that stripe I think really can only be successful salesmen for the majors if they actually believe that they have some control of the system, and the majors let them believe that.

W: Have you read Steve Albini's article?

J: Of course, "Some of Your Friends are Already this Fucked". The point that I'm making is similar. It's so interesting talking to these idealistic kids at these internet companies because it really is a very different world in the sense that while they work very hard, they are also completely funded, often for work that is not bringing in much (if any) income.

W: Yeah you could take all the music stuff from Steve Albini's article and substitute it with venture capital. Somebody said something to me recently, and I think it's an interesting point. He said, "You know how venture capitalists are like record labels? They want you to spend as much money as possible so you have to get more money from them." It's absolutely true. Have you ever heard the story about the venture capitalist that gave some company $2 million? It's a true story. It was a really good Internet company up here in Boston and they raised 2 million bucks. It's all they wanted to raise. They only wanted to sell a small piece of equity but they had a short term financing need. They wanted to run an advertising campaign, so they priced it out and the venture capitalist said, "Are you going to spend a million dollars on advertising?" The Internet company said, "No." The venture capitalist said "Why not?" The company said, "This other company from Tacoma, Washington will do the job better for $200,000." The venture capitalist said, "No, no, no use the company from Boston that's going to cost a million". Well, the guy from the Internet company said, "What, are you crazy? Why should we spend 5 times as much for something that's not as good?" until they realized that the venture capitalist actually wanted them to burn up the money as fast as possible so they would have to sell more of their company's equity so the venture capitalists could own a larger piece of a great idea.

Let me tell you, these people aren't idealistic, they are greedy. I mean, idealism is the Civil Rights Movement, idealism is the Women's Rights movement, it's Free South Africa, and it's Free Tibet. That's idealism. I know people who went to Harvard Law School and teach in ghetto schools for $15,000 a year. That's idealism. Idealism is not people waiting around for the big kill and that's what everybody is doing. This is all based on what one of my friends calls "phony IPO money". I mean, this not idealistic. This is greedy.

J: Now, come on, some of this is idealistic.

W: Open source people, yes, I would agree with you there.

J: And some of these kids, too. Some of these indie kids who are trying to create these companies are absolutely committed to indie ideals. They have a different perception of it because they never lived in a world that didn't have an indie community. So they always see themselves in relation to these structures they've lived with their entire lives as opposed to the earlier generation that built their own structures.

W: But one, they are talking to Wall Street people and two, they are using a business model that doesn't pay musicians, and when they do that they are not idealists.

J: Absolutely, I agree with you there, and the only reason that I was bringing that up because it seems really interesting to me. I mean there's this very shiny face on a lot of this stuff but I see the shake down coming. I think it's interesting because these big companies will sit back and let the idealistic kids take the punch.

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