Archive for March, 2007

Finally, the Real Reason CD Sales Are Falling

For years, the representatives of the recording companies have issued predictions of doom and gloom for their own industry.  Since suing Napster in 1999 they have fretted over copyright infringement and piracy.  According to the RIAA, file sharing costs the industry $4.2 billion per year. But now CD music sales are down 20% from 2006.  Has file sharing finally destroyed the music industry?  I doubt it.  Even if those lawsuits were having the chilling effect they are intended to spread, shutting down every P2P network on the planet, CD sales would be suffering. Why? It's tempting to say there's no good new music, and that the record companies have brought this on themselves by promoting the Brtiney Spears' of the world.  But I'm sure there's good music out there somewhere, and this sounds more like a subjective criticism than a real hypothesis. What if albums are not just competing for your dollar against other albums?  Most people only spend so much money on entertainment or media, and CDs now have to compete against DVDs and video games.  Most people only spend so many hours a day consuming media, and music has to compete with TV, the Internet, and cheap cell phone minutes. I'm not the first person to think of this, I've seen this brought up on blogs and in forums like Slashdot.  But it has always struck me how little coverage this idea gets in the mainstream press, even the business press.  Finally Aaron Pressman from Business Week has put some hard numbers to the notion that CDs are losing out to other media. His source?  A report from the MPAA, hardly a den of piracy-loving communists.  Time spent on entertainment rose 4% between 2001 and 2005, which doesn't even match S&P 500 growth rate.  People spent less time per week listening to music and more time with TV and the Internet. This tracks pretty closely with my experience (and I realize that this is just anecdotal).  In the early and mid 1990s, I spent a good percentage of my entertainment money on CDs.  As videos started to fall in price around 1995 or so, I bought a few here or there.  Then DVDs hit is big around 2000 or 2001.  Soon after that DVDs of television series started appearing and falling to  $20-$40 a season. My CD spending has slowed to a trickle.  I have never been much of a P2P MP3 pirate, and I never even bothered to install Napster.  I am, on the other hand, a big proponent of downloading all the great free MP3s that bands and labels make available.  I also still listen to some of the same music I bought in the 1990s, now ripped to my hard drive. I only have so many hours in a day and although I can listen to CDs while surfing the Internet, I'm not sure I want to put them in my computer anymore, for fear of rootkits. So where does this leave the music industry?  No doubt they will continue to sue 9-year-olds and disabled retirees, and litigating against technological change is not a good business model.  Maybe the open-source-loving interweb hippies are right and bands will promote themselves using MySpace and YouTube and keep a much bigger piece of the profits.  Maybe not. What they are doing right now, though, isn't working.  It's the limits of human consumption and the invisible hand of capitalism they should fear, not some kids with cable modems.

Adventures in Home Buying

Apparently what needs two six-hour classes on the first two Saturdays of spring can be summed up within a couple paragraphs (at least in a couple installments) on a slightly successful somewhat humor associated blog. I am, of course, referring to the first time home buyer class my lender has required me to attend in order to obtain a state subsidized mortgage. I’m not knocking the program as it is meant for first time home buyers. But the elementary view and information this class provides these hopeful and somewhat naive homebuyers is almost worthless. At first I assumed the audience was somewhat knowledgeable in regards to personal finance. I mean, this is a class for people ready to make the biggest purchase of their lives. However, I was seriously surprised when more than a few hands raised to notify the teacher that they didn’t know what a “Credit Score� was. As I sat in the freezing room filled with plastic folding chairs listening to a real estate professional, a home inspector, and a real estate lawyer try to drum up business for themselves instead of educate home buyers, I decided to put down on paper the important lessons and intricacies that may be useful to a somewhat more educated, or simply alive, first time home buyer that I’ve discovered not only during the home buying process but also through my experience as a former loan officer and what I’ve learned while preparing to sit for the Real Estate Licensing exam in Ohio. Today’s topic – Preparing your financials for a Mortgage Preparing for a loan is, I think, the most important part of the process. Hopefully you’ve made some decisions as far as where you’re going to live and what type of house you’re looking for. A little bit of research around these assumptions will help you determine how much of a loan and down payment you’re going to need. Preparing yourself, or more importantly your finances for a loan, may take months or years depending on how far off plan you are. The two most important things that the bank will look at will be your debt-to-income ratio and your credit score (hopefully you know what that is). Your debt-to-income ratio simply is your month debt payments divided your gross income divided. Now for the most part you want to pay off debt in order of the highest interest rate, by the way, if you’re carrying credit card balances, you’re not even ready to begin thinking about buying a home. Work on a budget to get your credit cards closed and make yourself debit-dependent instead of credit-dependent. When evaluating your debt-to-income your bank will mainly look at monthly required payments and then debt balances, but the two measures that matter most are your debt-to-income ratio using only your new house payment, taxes, insurance, and possibly condo fee, and your total debt-to-income ratio including all monthly debt payments and your new house payment, taxes etc… These two ratios should be under or close to 28% and 36% respectively. Now this is where some creative financing takes place. The two determinates you can effect in these equations are your income, which is not as controllable as most of us like, and your current monthly debt payments. Like I said before, normally it’s prudent to pay off your highest interest loans and debts first, but when trying to improve your debt-to-income ratio by reducing your monthly debt payments this may not be true. Consider two student loans, one at 8% and one at 4%. Most people’s first instinct is to payoff the first loan with the 8% interest because the interest is higher. However let’s also assume that the 8% interest loan is amortized over 5 years with a balance of $5,000, and the 4% loan is amortized over two years with a balance of $5,000. The payment on the 8% loan is $101.38 and the 4% loan is 217.12. The lower interest rate loan has a higher payment due to the amortization time. After you’ve decided how much money you’ll need for down payment, closing costs, reserve funds, etc… any extra funds should be applied to your highest monthly payment to balance ratio. In other words, the 8% loans ratio is 101.38/5000, or 2% while the 4% loan is about 4.3%. This will lower your debt-to-income ratio. This theory should be applied to all your debt balances and monthly payments that have the same tax advantages. Notice how I compared two student loans instead of a student loan and a car loan. Normally the student loan will have tax advantages over the auto loan, because you can deduct the student loan interest you pay. This theory may also have negative effects in the future. Essentially in the scenario above you’re sacrificing a loan with a lower rate to afford a better home. If you had paid off the 8% loan instead, you’d pay less interest over time. These are all things that should be considered on an individual basis and they unfortunately don’t fit easily into a widely flexible calculation. Paying off any debt will also improve your credit score. The calculations that determine your FICO score are very complicated and outside of the scope of this writing. What I can tell you is that if your FICO score isn’t above 700 you can expect to pay a higher interest rate or points on your loan than what the market is advertising. Also, with all the problems with the sub-prime market if you’re FICO score is below 600 you may not have a prayer finding financing. Based only on my experience alone, the most diligent efforts to improve a bad credit score can only rise a score by 50 points a year at best. Based on that and your own knowledge of you credit history you should be better able to determine what your timeframe is before you apply for a mortgage. And like everyone says but almost no one ever does, you should check your credit score at least once a year and with all three major reporting agencies. Maybe the most helpful thing to do when you want to start preparing for a mortgage is to play with the numbers. Using something like Excel, list all of your debt balances, payments, terms, etc.. along with your income. Make some quick formulas to automatically calculate your debt-to-income ratio and then run through a few scenarios. Playing with the numbers will give you a better idea of what you need to do to improve your debt-to-income ratio and provide you with a better timeline of when it'll be proper to apply for a loan.

Rock in Cleveland, Stay for Free

So, in my last post, I mentioned that we housed a band, Street to Nowhere, for a night. I do enjoy playing hostess, so I was thinking that it would rock if I could figure out how to set up something here that bands who are coming to Cleveland could stay at my house for free if they'd like. But, how do you advertise that kind of thing? I mean, I guess that I am doing it here, but that's not quite what I mean. I would really like to do this, 1. because I love taking care of people, 2. because it must suck not knowing where you are gonna stay from night to night and 3. because I would probably meet some really cool people. Did i mention that I was really excited to have the band stay at my house? Like a stupid little girl on her first day of school (sue me, I was a nerd and loved to go back to school), I was giddy with the excitement of "Holy shit, they are coming, i need to clean up so it's presentable for them when they get here!!!". It's all good. I even offered to make them breakfast, even if it is just toast and eggs, maybe oatmeal. So, if you have any suggestions for me on how I can become a band hostel, let me know. If you are a band member and you are reading this and thinking that you might be coming to Cleveland and need a place to stay, you can always leave a comment below with a way I can contact you or hit up my myspace. (like anyone reads my posts who doesn't already write for unsought, ha!)

Two Reasons Why the Viacom-YouTube Debate is Important

Just last year I wrote a little bit about why YouTube works. Since then, two major things have happened: YouTube was bought by Google, and large copyright-holding corporations finally noticed it. The almost inevitable result? Billion-dollar lawsuits. I'll let The Daily Show explain the situation better than I can: [youtube]w9CRD1COCAY[/youtube] But really, who cares?  Two multi-billion dollar companies duking it out in court surely doesn't effect you or I.  But there are at least two reasons why it does matter. 1.  It's not about stealing TV shows, and it's not really about YouTube in particular.  It's about control and availability of information. Let me explain:  Viacom doesn't offer all of it's material online, but Comedy Central at least has it's "motherload" interface.  The clip I posted above - and apologies if it has already been deleted - is available there.  They even have a little "embed" link, to help you post the clip in your blog. Notice I didn't use that embed link, and instead have the same clip from YouTube.  No, I'm not trying to be ironic.  I tried using the Comedy Central clip but noticed something sort of odd.  It says "This video expires 04/22/2007." One of the main reasons the Web is so powerful, and so important, is that it makes publishing, storing, and retrieving information cheap, fast, and easy.  Not a little cheaper, a little faster, a little easier - we are talking orders of magnitude. In the past, there were reasons why information might disappear, or be difficult to find.  Books went out of print because someone had to actually print books.  But now, there is no longer any real excuse.  Videos don't naturally expire on a certain date, like bologna.  Keeping the video around for a while doesn't really cost Viacom that much, and bandwidth and storage prices are always going down. I'm sure lots of people use YouTube just to watch TV shows without paying for them, but that's not why YouTube is important - it is important because it makes video available for comment, by anyone, basically forever.  So when a senate candidate uses an delightfully unfamiliar racial slur, but no major news networks are around, the video still gets out. So why should we care that clips from a network that has puppets making crank phone calls are available too?  There's no way to cordon off the important video from the unimportant, because it's too subjective.  In fact, Comedy Central is the perfect example - it has actually been the source for some very, very important video over the past few years. Steven Colbert's explanation of the concept of truthiness was the most insightful commentary on the current administration and it's backers to be seen on any channel.  But I can't find it on Comedy Central's web site.  And any video site hosting it, even in the fair use context of commentary and scholarship, is likely to get a DMCA letter to take it down. If the Viacoms of the world get their way, we will lose something new and amazing - the democratization of commentary and reference in the world of video. 2.  If Viacom wins, in the long term Viacom loses.  Again, video clips are not bologna.  This Daily Show video expires because Viacom doesn't understand the Internet.  The Colbert truthiness video is not immediately available for commentary because Viacom doesn't understand the Internet.  Some stuffy old guy in a well-appointed office made this decision, and the thinking went something like this: "Hmm, this video clip thing is hot according to CEO Fad Magazine, but I don't fully understand how to monetize it."  I suppose he understands enough to put a billion-dollar price tag on the copyright infringement, but not enough to actually make a billion dollars by putting video clips online.  Will this cannibalize DVD sales?  Will people stop subscribing to cable altogether?  So many scary questions! Meanwhile, people like YouTube founders Chad Hurley and Steve Chen, sitting where ever they used to sit, were thinking more like this:  "Wow, we've done the math and the Internet has made an amazing thing possible that has never been possible before.  Let's do it." Now think back to all of the biographies you've read about inventors, founders of major companies, scientists and engineers.  Which mentality, do you think, has driven the American economy to create such amazing amounts of wealth?  How many companies stay successful by avoiding change, becoming confused and disoriented by new possibilities, and trying to fight new technologies with lawsuits? Viacom needs to get a clue and embrace the fact that video distribution and storage has suddenly become easier, faster and cheaper.  They don't have to do so by letting YouTube host videos, but ignoring the lessons that YouTube is teaching the rest of the world is not a good long-term strategy. This is important because there is a lot of money, and there are a lot of entrenched interests, on the clueless side.  These companies are sitting on top of a gold mine but more worried about putting up fences than actually digging up the gold. I don't really care if YouTube or Google Video or iFilm or whoever has clips of this show or that.  I'm not interested in whether they paid for them, if so how much, whatever.  If this was all just fighting over whether or not college kids can watch blurry little South Park clips for free in their dorms, we could all safely ignore it. But this is important, and hopefully you are paying attention.

No catchy name for a post about a show I went to last night and the band that stayed over

So, I went to yet another mcchris show last night, although this time he was opening for Piebald. It was kinda sad for me since mc wasn't headlining his set was pretty short, but I do digress. I didn't stay for Piebald, just so you know, but I did arrive early enough to see the opening band, of whom before this point I had never heard of, Street to Nowhere. Usually I am very indifferent when I don't know of the opening band for a show that has such a diverse line up of entertainers, mc being a nerdcore rapper and Piebald being emo-core. But, if you knew me better than you do, you would know that I hate to be late for anything, so there I was dutifully waiting for the doors of the Grog Shop to open here in beautiful Cleveland, OH.

Anyway, none of this so far is telling you why i currently have the band members from Street to Nowhere sleeping in my living room.

So, back to the point. We get to said show. We get in, buy our mc merch early and take it to the car, since we are so early (we got there when the doors opened, you know). We go say hi to mc, who always dutifully hangs out at his table with his merch guy until the show starts. And then the first band starts. It was kinda weird, there was no intro or anything, just kinda, all of a sudden there was live music instead of the jukebox music. So, I am skeptical, because I always am skeptical. But they start out, and I look over to Ry and say "hmm....maybe I am glad that we got here early enough to hear the opening band, they kinda rock".

And they did. I was suprised. Boy, I guess that that is kinda mean, but you know how hit or miss the first opening band can be, right? Maybe I am just a little pessimistic. Sorry about that. They did rock, I totally enjoyed their set. I was kinda disappointed that some of the crowd for Piebald just stood their like statues in the front reserving their stations for a band that wouldn't play for two more sets. They just get in the way of good rocking.

So, during their set, they tell people they are looking for a place to stay and do their laundry. I kinda thought they were kidding, but that goes to show you how naive I am about the music scene. So, after their set, Ry and I go over and wait for them to finish putting their stuff away and offer them accommodation. But before we can actually offer, a girl who I dubbed 'anti-mohawk' comes over and offers her service to them as well. They start a list, and we go to rock out with mc. I didn't really think that they would call on us, I mean, there had to be better offers, right? But I think that free laundry (as opposed to paying with quarters, you know) is a nice bonus for anyone.

Well, long story short (since this blog is getting out of hand), they do call us, and we are housing a band for the night. It's gotta be a tough life for a band on the road. No days off for good behavior, running all the time, staying in complete strangers houses, but, think of how much fun that can be for a while, too. Just no too long, you know? Bands do make nice house guests, though.
If you see that Piebald is coming to your town, go see the show, and get there early enough for Street to Nowhere and mcchris. You won't regret it. It's up to you if you stay for Piebald, though.
Please excuse me while I go make my house guests some breakfast.