Free! What does it mean for EMI talent?

The folks at Sagwatch.net (whoever they are!) recently brought to my attention a new book/idea/article coming out of the ideologues at Wired magazine who often drive the debate about the direction of high technology companies.

The core idea in the latest manifesto is that so much of what is provided by Web 2.0 is free – no one pays Google, for example, every time they do a search. Of course, Google draws in millions of users every day by offering this “free” service and earns a ton of dough by charging advertisers to harass us in various ways so that we DO in fact “pay” for googling. The other dimension of the “free” era is that digitalization implies that many physical products are in essence free to reproduce and distribute once designed – the marginal cost of delivering a movie to 100,000 computers is not much higher than delivering it to 100 computers.

The important question is what does this mean for talent in the EMI sector? In some ways, this question has already been seen and answered – the DVD revolution was an early version of the problem. The infamous 80/20 split in revenues from home video was set up in an era of relatively high cost videotapes and turned into a windfall for studios when the much cheaper and easier to distribute DVD came along.

But the new digital era is even more threatening to current business models. And the studios are well aware of this. Their high fixed cost structure is threatened just as the recording industry went into panic mode in the face of Napster. Thus they have been willing to fight tooth and nail in this year’s round of labor negotiations in order to defend their embattled corporate fortresses.

The danger for the guilds and unions in the EMI sector is that they have fallen into the trap of fighting the last (or, at best, the “penultimate”) war. Thus, the WGA targeted the studios over new media when in fact the terrain of the new world is being designed by talent agencies, advertisers, venture capital firms and high technology companies. Is it a surprise when the studios turn their pockets inside out and say they have so little to share? And sure enough a valiantly organized politically popular strike yielded relatively modest gains.

And now, sadly, the dominant group within S.A.G. seems to think they can squeeze more out of this environment by tough talk. The problem with this approach is that it radically underestimates the potential gains to be won by talent in the new environment. The power shift is, in fact, away from the corporate structures to the creative individuals, to the content providers.

That is where the money is.

As Chris Anderson, author of Free!, says, everything you need to know about the American labor market today is written on the back of the Apple iPhone: “Manufactured in China, Designed in America.” And guess which workers earn more – the Chinese assembly line workers in Shenzhen or the engineers in Cupertino?

But the approach of S.A.G.’s Membership First appears to be to lead actors as if they are workers in a Chinese sweatshop not highly trained and well educated individuals with real market power like engineers in Silicon Valley. In taking this approach they are just borrowing a page from the WGA – hire a tough sounding NED (one an ex-Teamster, the other an ex-football player); print up lots of red signs; call a “strike” (what is a strike anyway in an industry where only a small percentage of the membership are working on any given day?)….and the result when the dust clears? A package that caused nary a ripple in the valuations of the conglomerates that own today’s studios.

Free! Why $0.00 Is the Future of Business