“There’s unlimited supply, And there is no reason why”*

The leaks emanating from the private equity firm Terra Firma about the excesses they claim to have found at record company EMI has no doubt ensured that large helpings of schadenfreude have been hungrily consumed within the rest of the musical economy in recent weeks. Terra Firma bought EMI in the summer of 2007 and has been poring over its books and accounts ever since as part of the standard private equity project to reorganise a company so that it be flipped back onto the market in three to five years time at a profit. Terra Firma has a track record of buying companies with ‘failed’ business models ; ironically, it has already given the private equity treatment to Thorn, previously part of the Thorn- EMI conglomerate before it was demerged in the 1990s. This in itself should have sent some kind of message to the outgoing executives of EMI that Terra Firma hardly had a positive view of their managerial abilities. The revelations of extravagance approaching the bacchanalian seem to have so shocked the sober-suited bean counters Terra Firma that they were simply unable to keep it to themselves. Admittedly, the disclosure reveals business practices that one might think a tad unusual and indulgent, such as the £20,000 spent on candles to decorate a Los Angeles apartment used to entertain clients, and a £200,000 annual budget for fruit and flowers.

Over the last couple of years, as part of research I’ve been conducting on the musical economy, I’ve talked to large numbers of people who work in recording studios and associated activities, and it is safe to say that they do not hold recording companies and their employees in high esteem. Indeed, one senior member of this community was so dismissive of their abilities that he insisted that should anyone care to undertake an comparative analysis of management ability across the British economy he was confident that it would record company executives would be found way to the left of the bell curve. So, while those working at the sharp end of the musical economy would certainly have found Terra Firma’s revelations of interest, they probably would not have been all that surprised. The recording studio sector in the UK and elsewhere is under going a crisis of significant proportions, which has meant that the institutional base of the sector has been receding at a rapid rate. Many studios have closed and those that remain open often struggle to get by. Redundancies have followed while those that remained in employment have found their conditions casualised or degraded.

But in addition to spinning against the old management, the head of Terra Firma, Guy Hands, has also discredited the established record company business model, and argued that executives in the company were slow to embrace the possibilities of transforming the demand for downloads into a viable business model. In this respect, Hands echoes findings from earlier research which has argued that one of the problems for record companies was an industry-wide corporate cultural crisis, and the inability to think beyond the business model that has sustained the recorded music industry for the past 100 years or so. The problem is finding a new business model that will enable to the industry to sustain itself – and allow Terra Firma to get their money back and more. Ironically, one band that left EMI to strike out on their own rather than work for Terra Firma was Radiohead, but which at least provided conclusive evidence of one model that they can safely discard: the pay what you think it’s worth model. Customers wishing to download the album were invited to set their own tariff, plus an obligatory 45 pence to cover administrative charges. As many as 60% of people chose to pay nothing at all. Radiohead are rich enough so that this level of freeloading doesn’t really matter, and can easily make this back in ticket sales from a stadium tour. But it is hardly a promising business model for new bands without Radiohead’s brand recognition. Terra Firma’s urgent need to find a coherent business model for the music industry will be worth watching.

* ‘EMI’, The Sex Pistols, Virgin Records, 1977.

The wisdom of crowds?

The announcement yesterday (13.11.07) that MyFootballClub(.com, obviously) have agreed to buy 51% of Ebbsfleet United of the Blue Square Premiership league represented an interesting development in the power of the Internet to mobilize passions and interests in ways that were not really possible before. For those not familiar with the project, MyFootballClub is an experiment in Internet-mediated mass participation. In return for £35, members will be able not only to participate in the governance of the club as a whole but also, extraordinarily, be able to help pick the team for the next fixture through expressing preferences through the website. As many as 20,000 people were sufficiently enthused by this project to stump up the cash which generated a war fund of £700,000 which enabled the MyFootball Club Trust to buy a controlling stake in a team that is in the fifth tier of professional football in England. I am particularly interested in this development for two reasons. First, I am in the process of rewriting a paper on the mobilization of affect and passion within the economy more generally, or what Henry Jenkins (Convergence Culture, 2006, NYUP) has described as ‘affective economics’. The Internet has a particular capacity to mobilize such affective energy, and the geography of the membership of MyFootballClub is testament to this, being drawn from as many as 73 different countries. The second reason that I am interested is that I have to confess that I am one of those 20,000 fee-paying members. I justified my decision to part with £35 on a project that, frankly, seemed like pie-in-sky back in the summer of 2007 when I joined by framing it as a form of research investment. I was working in this area and membership provided me access to the discussion forums and information from the organizers. But as a football fan, I must admit part of me was also keen to have the opportunity to participate in the running of a football club, however fractional that effort would be in light of the overall size of the membership.

How this experiment will work in practice will be interesting to observe; there is more than a suspicion that for many this offers an opportunity to replicate the gameplay of successful PC titles such as Championship Manager and Football Manager, but this time in real life. The fact that the average age of the membership is 27 adds weight to this suspicion (and a gender breakdown of membership would surely confirm that this is project in the main for 20-something men). It’s yet another example of the mobilizing and democratizing potential of digital technology, allowing the participation of actors within a field to which they would otherwise be denied access. The political implications of this will be fascinating too, and I suspect the initial enthusiasm expressed by the club official and Head Coach may well be tempered in time as they struggle to deal with the fact that their livelihoods are strongly influenced by an anonymous public vote. Decisions made in Football Manager have no real consequence; but decisions made in MyFootballClub will. Still, I’m hoping to convince the Head Coach to adopt my adventurous 3-3-1-3 formation, although I suspect that I may be outvoted 19,999 to 1.