10 New Rules of the Music Industry

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On a Tribe Called Quest’s 1991 song ‘Check the Rhime,’ Q-Tip provides one rule: “Industry Rule #4080: Record company people are shady,” he says. Years later, Notorious B.I.G. would equate the rap game with the crack game on ‘Ten Crack Commandments,’ declaring, “I been in this game for years, it made me an animal / There’s rules to this s—, I wrote me a manual.” Bottom line: sometimes we need rules, and in the ever-changing landscape of the music industry, perhaps a little guidance would be helpful.

Forget everything you thought you knew about the music industry before 2012. It’s gone. Dead. Wiped out of memory like a PC’s hard drive after clicking an email that said “Check out my pics from vacation.exe.” The results is an environment where the higher ups are no longer as high as we think and our favorite artists are within reach — or tweet. It’s a new day, and with a new day comes a brand new set of rules.

If you’re looking to embark on a career in the proverbial “game,” this is a little blueprint to get you started. Artists, this speaks directly to your lives right now. For everyone else, this is just a simple guide about what’s really happening in the careers of those rappers and singers you fancy. You can print this out, and like Drake says “have a f—in’ read-along.” Here are 10 New Rules of the Music Industry.

Where were you on Fri., Dec. 13, 2013 at midnight? Don't say sleeping, because you're lying. You were posted up in front of your computer on iTunes purchasing Beyonce Giselle Knowles-Carter's self-titled opus and you know it. King Bey dropped 'Beyonce' and not a single member of the Bey Hive knew beforehand. It was perhaps the boldest, Beyonce-est move in music history, as the songstress delivered a sexually-charged independent release as a middle finger to her label for not supporting her new musical pursuits.

While some artists in a lesser tax bracket may randomly drop "free albums" (we call them mixtapes, right?) at random, no one has done what Beyonce did when she delivered a surprise album without a gigantic promotional vehicle. This new rule that albums will unexpectedly fall from the sky is reserved for the Kings who know they'll still profit, despite what Beyonce said on 'Ghost' with, "Soul not for sale / Probably won't make no money off this, oh well." You know what that means: Azealia Banks, don't try this at home.

Many years ago, the worst nightmare for an artist would be the release of a sex tape, a nude photo or some sort of past endeavor that they did for money and wished they hadn't. Nowadays, it's unearthing past tweets. Even present ones for that matter. If you put it out on Twitter, consider it etched in stone. Know why? Because someone out there is randomly taking screenshots of that tweet to use at a later time, regardless of whether or not you delete what you wrote.

Take Macklemore, who just swept the 2014 Grammy Awards and won the hearts of Americans through the song 'Same Love,' which came equipped with same sex marriages (officiated by Queen Latifah) when he performed the song live at the ceremony. However, a 2009 tweet from the indie powerhouse showed his overzealous usage of "no homo," which had the LGBT community in an uproar. Your thoughts and ideals can change. Sure. But be careful what you tweet when you tweet it, because five years later, you may be reminded of the skeletons in your cyber closet.

Hey websites, ever been sued over a photo? Not pretty right? Not cheap either. Photo copyright infringement is almost as "dangerous" as sampling a song without clearance. Major professional photo banks like Getty Images were (and still are) a viable means of obtaining press photos of celebrities, in addition to photos from the celeb's publicist or managament. Not anymore. With artists and actors taking photos of everything from their faces to their food on Instagram, a whole well of flicks are at our disposal. Some people use Instagram more than others. Singers like Rihanna and Beyonce always have a steady stream of photos to check out, along with Miley Cyrus (and her tongue). On the rap front, Rick Ross always has some lovely photos to offer, as does French Montana (he even shared an Instagram photo of himself getting arrested). If you need Kanye West photos, though, head over to Kim Kardashian's Instagram page.

There was a time when label delays led rappers to drop mixtapes to sate their fans in between album releases. It used to be a great idea. Used to be. That was until the mixtape completely replaced albums for a while, often being called "free albums" or "free EPs." You know what you don't make from free mixtapes? Money. And after a while, the effort put into mixtapes was on the decline after things like production and studio time came with no clear indication of a recoup. Projects like Lil Wayne's 'Dedication 5' and Meek Mill's 'Dreamchasers 3' are prime examples of mixtapes that would have garnered more praise in say, 2010, than they did in 2013. It's time for a change. Release albums, artists. Get studio time, grab beats from producers, record the album, sell it. You don't even have to promote it. Refer to Rule No. 1 for more information.

Beware of your lyrics, your public behavior, anything and everything you do once you land a coveted sponsorship deal. You will in fact be monitored, and you can lose that deal as fast as you received it. Back in 2009, when Chris Brown and Rihanna got into their fateful altercation en route to the Grammys, the photos that circulated of RiRi following the event led to Wrigley's pulling Brown from their campaign, even though 'Forever' was the new Doublemint anthem.

Reebok is another stickler. Last year, when Rick Ross uttered some sketchy bars on Rocko's 'U.O.E.N.O.' that suggested he was condoning rape, Reebok pulled his sponsorship right from under his large frame. Lil Wayne's Emmett Till line in Future's 'Karate Chop' remix left him without any more free Mountain Dew to drink. So you see, sponsors watch you like a potential employer does your Facebook page. Keep your brand squeaky clean, especially when you're paid to represent another one.

This one goes without saying, but it's a lesson we're all still learning. Hip-hop is a relatively younger art form compared to the extensive history of other genres. Since it's always been referred to as a "young man's game," the question of "What happens when the man is no longer young?" has been the elephant in the room for quite a while. Thank 44-year-old Jay Z for diminishing the boundaries of age set forth long ago in the rap game. It always feels like Jay is just getting started, so who knows? He may be rhyming at 60. And why not? Rock stars do it all the time. On the other side of the spectrum, we had a young Earl Sweatshirt of Odd Future who was geared to be the next Nas at the tender young age of 16. Teenagers being compared to legends (by the way, Nas is 40)? The age minimum and maximum are nonexistent. Age ain't nothing but a number.

Showing up on a reality TV show in place of an album (or in tandem with a release) isn't all that new. In 2005, Run-DMC's Reverend Run brought 'Run's House' to MTV, highlighting his family, career and love life. In 2008, conveniently around Valentine's Day, Public Enemy's own Flavor Flav debuted his romantically-challenged reality show 'Flavor of Love' on VH1. Love seems to be the common theme when it boils down rappers' careers hitting the reality TV circuit. 'T.I. and Tiny: The Family Hustle' and 'Marrying the Game' are both examples of shows centered around one rapper (continuing Run and Flav's legacy).

However, since the advent of 'Love & Hip Hop,' it's been a revolving door for rappers. Joe Budden, Jim Jones, Consequence, Saigon, Peter Gunz and the list goes on and on of rappers who have either made a cameo or starred in 'Love & Hip Hop' in their respective city. It seems to be the easiest way for artists to stay relevant without creating music these days.

Alberto E. Rodriguez, Getty Images

If Macklemore and Ryan Lewis taught you anything over the last few years, it's that major labels are the furthest thing from a necessity when it comes to fostering a successful career. It's not like they're completely irrelevant. It's just that the tables have turned, and an independent deal or DIY is the preferred means of moving units. They earned Grammy Awards and sold millions of singles and made an impact with their album 'The Heist' all on their own.

Financially it makes sense, and the internet has become an artist's greatest ally (and sometimes his worst enemy), but check the careers of acts like A$AP Rocky, Joey Bada$$ and Odd Future. While indie and imprint deals were struck for some in the middle of the buzz, artists are given more options to no longer be tethered to binding gigantic contracts that restrict any upward mobility. Sure some artists still prefer this means of management, but for many it's not necessary. Guess that dreaded 360 Deal is approaching obscurity as well.

Kevork Djansezian, Getty Images

For the 2014 publicist, Twitter, Facebook and Instagram as a social media vehicle is perfect for their artists. However, ever since they learned how to press "send" on a tweet or status, it's been game over. From ranting about their label woes (we see you Lupe Fiasco and Azealia Banks) to just complaining about everything and everyone around them (hi, Gucci Mane!) and making public apologies (Oh, Kanye.), rappers in particular love a good rant, especially on Twitter.

That's the bad side of it. The good side involves announcing album releases, tweeting at other artists and producers to reveal potential collaborations and announcing tour dates. Sure, it completely replaces a press release, but who references those anymore? Read any website and the "proof" of anything is usually a screen shot of a tweet, Instagram post or Facebook status. So there you go. A word of advice for artists: still use Twitter; just don't abuse it.

When Lauryn Hill delivered 'The Miseducation of Lauryn Hill 'back in 1998, and then swept the Grammys the following year -- including a win for the Best Rap Album, hip-hop purists were a bit concerned. Sure, Lauryn knew how to rap seamlessly, but she also knew how to sing just as well, and an album that was arguably primarily singing earned a rap-related honor. Was she the gateway drug to this ambiguity? Probably.

And while artists like Drake and more recently Childish Gambino have proven they too can both rap and sing, the grey area is where confusion (and dissension) lies. Since T-Pain retaught the masses how to use Auto-Tune, guys like Future have followed suit and the result is sing-songy rap. So is it singing? Is it rapping? Well, it's both, which is a tough pill to swallow, but that's what it is. Welcome to the new world. These are the new rules after all.

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PC Industry Fights to Adapt as Tablets Muscle In

Like the mainframe, which was said to be dead decades ago but has remained a meaningful business, the PC will almost certainly cheat death. True, mobile devices like the iPad will continue to gore PC sales. Those mobile devices, though, will most likely never satisfy spreadsheet masters, film editors and other workers who depend on multiple screens and the precision of a keyboard and mouse.

Still, there is a strong view among many longtime tech executives that the PC’s relevance will steadily diminish.

“In my humble opinion, the PC as we have known it is in a continuous decline and being relegated to a utility device for businesses,” said Hector Ruiz, the former chief executive of Advanced Micro Devices, a company that makes chips for PCs and other devices.

The mood around the PC industry has become increasingly glum. The business is effectively in a recession, and there is no upturn in sight. During the second quarter of the year, global PC shipments fell around 11 percent, for their fifth consecutive quarter of declines, the worst downturn since the advent of the PC more than 30 years ago.

Intel, supplier of the chips in most PCs, and Microsoft, which makes the Windows operating system on the vast majority of those machines, have delivered disappointing financial results. An overhaul of Microsoft’s software, Windows 8, did not lift sales and may have made them worse.

The once-mighty Dell, deeply weakened by the PC slump, is mired in a struggle with shareholders over a plan to go private, seeking relief from investor pressure. In their bid to take the company private, Michael S. Dell, the founder, and the investment firm Silver Lake have argued that they would turn the company into a corporate software services provider. A vote on Dell’s future is expected this week.

While sales of PCs to businesses remain steady, demand among consumers has plunged, largely because people are instead buying iPads, Kindle Fires and other tablets.

Still, a reality check: more than 300 million PCs are expected to be shipped this year globally. That is a lot of widgets for a business that has caught a cold.

Tablet sales are growing explosively. This year, there are expected to be more than 200 million shipments of the devices, which will for the first time exceed shipments of notebooks, the largest category of PCs, estimates Gartner, the research firm.

Steven P. Jobs, the Apple chief executive who died in 2011, predicted several years ago that PCs would become something like trucks, workhorses used by many people but outnumbered by tablets, the cars of the technology business. (The analogy is somewhat undercut by stats: the most popular vehicle in the United States for several years has been a truck, the Ford F-150.)

One theory is that tablets are leading PC shoppers to postpone purchases of new computers, perhaps by a year or two, but that eventually people will be ready for a fresh machine. “Replacement cycles are being pushed out,” said Toni Sacconaghi, an analyst at Bernstein Research.

A more pessimistic view is that a lot of the consumer demand for PCs will never return. Daniel Huttenlocher, the dean and vice provost of Cornell University’s new New York City technology campus, said consumers began buying PCs in big numbers beginning in the 1990s largely because no better device existed for getting on the Internet.

But the PC, he said, was always better suited as an office machine for the production of documents, presentations and other work. In his view, tablets are better for the consumption of content, whether that is watching Netflix or surfing the Web.

“There are way more consumers than producers, period, even in a world with lots of user-generated content,” Dr. Huttenlocher said.

In the first quarter, 53 percent of computer shipments were to the consumer market while 47 percent were to the commercial market, estimates the research firm IDC.

Disruptions: Ride-Sharing Upstarts Challenge Taxi Industry

Richard Perry/The New York Times Uber, like the other services, does not have its own fleet of cars. The company teams with existing luxury car services and acts as a digital dispatcher for people booking a car through its mobile app.

Last week, when I arrived at the Los Angeles airport on a flight from San Francisco, I made my way to the taxi stand and waited 10 minutes for a cab. Just as I was about to hop in, the driver and the dispatcher began fighting over whose job it was to put my suitcase in the trunk. After a few minutes, I dealt with the bag myself. We then drove off in a filthy taxi that smelled like cigarette smoke and had suspension so old that it felt as if it had square wheels.

This made me think once again: the taxi industry is ripe for disruption.

Several companies in Silicon Valley — like Uber, Lyft and Sidecar — are acting on that very thought.

Uber, like the other services, does not have its own fleet of cars. The company teams with existing luxury car services and acts as a digital dispatcher for people booking a car through its mobile app.

Although Uber determines price the same way taxis do, calculating fares by time and distance, the service can cost 50 percent more than a normal city cab. Another service offered by Uber, called UberX, offers passengers a lower-cost ride in hybrid cars and is comparably priced to traditional taxis.

But companies like Uber are continually confronting the obstacle of entrenched government bureaucracy, resistant unions of taxi drivers and dispatchers, and overlapping and sometimes conflicting systems of state and city regulation.

The latest roadblocks have come up in Los Angeles, where Uber began offering its service in March.

Travis Kalanick, the company’s co-founder and chief executive, said it received a cease-and-desist letter from the city of Los Angeles, “even though this is not under their jurisdiction.” He added, “The taxi industry feels it is getting disrupted and they are doing whatever they can with their lobbying relationships to try and stop us.”

The letter, issued by the Los Angeles Transportation Department, says that Uber is “operating an unlicensed commercial transportation service” in the city. Jonathan Hui, an agency spokesman, wrote in an e-mail that it was working with the mayor’s office “to determine ways to address ride-sharing companies,” but he declined to comment further.

William Rouse, general manager of Yellow Cab in Los Angeles, one of the largest taxi companies in the city, and president of the Taxicab, Limousine and Paratransit Association, a trade group, said that making sure taxis were officially licensed was a matter of public safety.

“Our roadways are a scarce resource,” he said. “When you have an oversupply of taxi cabs, you have more congestion, depressed driver incomes and poor service. It’s also an issue of public safety, where drivers aren’t insured and there are felons driving some of these ride-sharing apps’ cars.”

Uber and other ride-sharing apps say that all their cars are insured over the required taxi insurance limits and that drivers must undergo stringent background checks.

“This isn’t about safety,” said John Zimmer, co-founder of Lyft, which also received a cease-and-desist letter from Los Angeles regulators. Mr. Zimmer said he believed the real opposition from taxi companies was not about customer safety, but fear of competition.

Mr. Zimmer also pointed out that state regulators had approved his service.

The California Public Utilities Commission, he said, lets it operate “because we go above and beyond all of their guidelines.”

Uber has been dragged through regulatory hurdles in New York City since its introduction there in 2011. But last month Uber had a victory of sorts, winning a ruling allowing it to operate in Cambridge, Mass. This came after city officials, at the behest of local taxi companies, tried to ban Uber even though state regulators had already approved the operations of such ride-sharing services statewide.

The Federal Trade Commission has also recently issued a statement supporting the services; the agency said trying to snuff out ride-sharing apps would stifle competition and could hurt consumers.

The controversy in Los Angeles is par for the course for start-ups that have come up against regulators. They have been sued or received cease-and-desist letters from almost every city they operate in.

When it comes to protecting customers on pricing and overcharging, taxi regulation makes sense. But in some instances, regulatory bodies have done more harm than good. In 2009, for example, more than 30 people in Washington, including at least one city official, were indicted on bribery charges during talks of regulatory change.

Some lobbying groups, meanwhile, are using fear tactics. In March, Mr. Rouse’s taxi industry group issued a news release warning that companies like Uber and Lyft were “rogue transportation apps” and a “threat to public safety.” The release said that arguments involving payment “could turn violent,” but offered no examples.

Mr. Kalanick of Uber said cities should simply let the customer decide. “The taxi groups are so protected through these regulations that they do not have to offer a better service to customers.”

Mr. Rouse acknowledged that cab companies needed to do a better job, and said he was working with cabdrivers to increase quality of service. But he said taxi groups “will continue to advocate for law enforcement against these ride-sharing apps.”

Although the services do not share figures on how popular they are, the opposition suggests they are posing a real threat. As for me, I’m glad when I have a choice.

To get to the San Francisco airport, before my recent flight to Los Angeles, I called an Uber car. When the driver picked me up, he was nervous about taking me to the airport, he said, because its police were ticketing Uber drivers. The service is allowed in San Francisco, but the airport police follow different rules.

“I can take you,” the driver earnestly said. “But we will have to pretend to be related so I don’t get a ticket.”

When we pulled up to the airport, he got out of the car with great ceremony, handed me my bags and followed his script. “Have a safe flight!” he said, giving me a big hug while peering sideways for signs of the law. “I’ll see you soon.”

E-mail: bilton@nytimes.com

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Advertising: Apple’s Move Into TV Relies on Cooperation With Industry Leaders

Now, as Apple tries to reimagine television, it is taking the partnership route again, collaborating with distributors like Time Warner Cable and programmers like the Walt Disney Company on apps that might eliminate the unpleasant parts of TV watching, like bothersome set-top boxes or clunky remote controls.

Apple’s broader strategy — what its chief executive, Timothy D. Cook, recently called its “grand vision” for television — remains shrouded in secrecy, as everything Apple-related tends to be. Some analysts continue to predict, as they have for years, that the company will someday come out with a full-blown television set.

Whether or not an iTV ever materializes, the company’s more modest steps, like improving the $100 Apple TV box that 13 million households now have and adding access to cable channels through the box, suggest that its strategy stands in stark contrast to Google’s, which is contemplating an Internet cable service that would compete directly with distributors like Comcast and Time Warner Cable.

Reports emerged earlier this week that Google has held talks with several channel owners about licensing channels for such a service, but no content deals are within reach.

Apple weighed something similar years ago, but its executives concluded that it should work with the industry’s powerful incumbents, rather than against them.

“Apple’s probably going to have greater access to content by deciding to cooperate,” said Natalie Clayton, who oversees digital video research for Frank N. Magid Associates.

Case in point, Apple last month turned on HBO and ESPN apps for Apple TV owners, much to the delight of all involved. But those work only for people who have an existing cable or satellite subscription.

Coming next is an app from Time Warner Cable, allowing some of the company’s 12 million subscribers to watch live and on-demand shows without a separate set-top box. The app will effectively add an Apple layer on top of the TV screen, providing what its proponents say is a programming guide that is far superior to anything offered by Time Warner.

Apple has talked in-depth with other big distributors about similar apps, according to people involved in the talks. Its intent is to collect a fee from distributors in exchange for enhancing their television service and in that way, theoretically, make subscribers more likely to keep paying for cable.

“They’re trying to apply their software expertise, their user interface expertise,” one of the people said. (The people, both at distributors and programmers, insisted on anonymity because they said public comments would interfere with the private talks with Apple.)

Apple has sought support from programmers as well. It has proposed, for instance, an ad-skipping technology that would compensate networks for the skipped ads by charging users. While the idea is far-fetched, it intrigued some of the channel owners who were briefed about it and excited Apple followers when it was first reported by the technology writer Jessica Lessin earlier this week.

For Apple, further moves into television could neutralize some of the skepticism about the company’s future since the death of Steve Jobs in 2011. Investor concerns that the company might not have another iPhone- or iPad-level innovation on the way have dragged down its stock price, which topped $700 for the first time last September, but has recently hovered closer to $400.

For the time being, Apple TV is a small part of its business — something best suited to “hobbyists,” as Mr. Cook put it at the D: All Things Digital conference in May. At that time, he hinted at the opportunity Apple saw in the living room, calling traditional TV watching “not an experience that I think many people love” and “too much like 10 or 20 years ago.”

It is easy to see how Apple could help. Products like Apple TV and Roku, which connect TVs to the Internet’s wealth of streaming content, have proliferated because the set-top boxes that cable companies supply have not kept up with shifts in consumer behavior. But the streaming boxes remain a somewhat niche technology.

Apple could choose to market its box more heavily, especially as competition heats up from Amazon and other companies. Or it could eliminate the need for any box at all by building its own TV set. Reports this week that Apple may acquire PrimeSense, a maker of motion-sensing technology that could be used to control a TV without a physical remote, prompted a new round of guessing about that.

In Apple’s partnership approach, some see the company placing a multitude of bets, recognizing that television could evolve in any number of ways.

Through Apple TV, it is simultaneously supporting established distributors and programmers as well as a parallel universe of streaming TV, as represented by Netflix, Hulu and Amazon.

Last month, in a little-noticed move, the company approved an app for Sky News, the British-based cable news channel. Sky could already be streamed live free on the Web, but by creating an app for Apple TV, the channel gained access to the television sets in 13 million homes without the need for complex negotiations with cable companies.

The Sky News app is free, but the software that powers it, from a company called 1 Mainstream, also allows for à la carte subscriptions.

Asked about the implications of the app, Rajeev Raman, the chief executive of 1 Mainstream, said: “It’s a learning year for Apple. And it’s a learning year for all of us, to say, O.K., what really does work?”

In effect the app is a more direct route to consumers for Sky News. Bloomberg TV, already available on cable, tried something similar earlier this year by cutting a carriage deal with Aereo, the streaming service backed by Barry Diller. But Aereo is antagonistic toward networks and existing distributors; Apple, at least for now, is positioning itself as a friend.

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The Cloud Factories: North Jersey Data Center Industry Blurs Utility-Real Estate Boundaries

Why pay $600 or more a square foot at unglamorous addresses like Weehawken, Secaucus and Mahwah? The answer is still location, location, location — but of a very different sort.

Companies are paying top dollar to lease space there in buildings called data centers, the anonymous warrens where more and more of the world’s commerce is transacted, all of which has added up to a tremendous boon for the business of data centers themselves.

The centers provide huge banks of remote computer storage, and the enormous amounts of electrical power and ultrafast fiber optic links that they demand.

Prices are particularly steep in northern New Jersey because it is also where data centers house the digital guts of the New York Stock Exchange and other markets. Bankers and high-frequency traders are vying to have their computers, or servers, as close as possible to those markets. Shorter distances make for quicker trades, and microseconds can mean millions of dollars made or lost.

When the centers opened in the 1990s as quaintly termed “Internet hotels,” the tenants paid for space to plug in their servers with a proviso that electricity would be available. As computing power has soared, so has the need for power, turning that relationship on its head: electrical capacity is often the central element of lease agreements, and space is secondary.

A result, an examination shows, is that the industry has evolved from a purveyor of space to an energy broker — making tremendous profits by reselling access to electrical power, and in some cases raising questions of whether the industry has become a kind of wildcat power utility.

Even though a single data center can deliver enough electricity to power a medium-size town, regulators have granted the industry some of the financial benefits accorded the real estate business and imposed none of the restrictions placed on the profits of power companies.

Some of the biggest data center companies have won or are seeking Internal Revenue Service approval to organize themselves as real estate investment trusts, allowing them to eliminate most corporate taxes. At the same time, the companies have not drawn the scrutiny of utility regulators, who normally set prices for delivery of the power to residences and businesses.

While companies have widely different lease structures, with prices ranging from under $200 to more than $1,000 a square foot, the industry’s performance on Wall Street has been remarkable. Digital Realty Trust, the first major data center company to organize as a real estate trust, has delivered a return of more than 700 percent since its initial public offering in 2004, according to an analysis by Green Street Advisors.

The stock price of another leading company, Equinix, which owns one of the prime northern New Jersey complexes and is seeking to become a real estate trust, more than doubled last year to over $200.

“Their business has grown incredibly rapidly,” said John Stewart, a senior analyst at Green Street. “They arrived at the scene right as demand for data storage and growth of the Internet were exploding.”

Push for Leasing

While many businesses own their own data centers — from stacks of servers jammed into a back office to major stand-alone facilities — the growing sophistication, cost and power needs of the systems are driving companies into leased spaces at a breakneck pace.

The New York metro market now has the most rentable square footage in the nation, at 3.2 million square feet, according to a recent report by 451 Research, an industry consulting firm. It is followed by the Washington and Northern Virginia area, and then by San Francisco and Silicon Valley.

A major orthopedics practice in Atlanta illustrates how crucial these data centers have become.

With 21 clinics scattered around Atlanta, Resurgens Orthopaedics has some 900 employees, including 170 surgeons, therapists and other caregivers who treat everything from fractured spines to plantar fasciitis. But its technological engine sits in a roughly 250-square-foot cage within a gigantic building that was once a Sears distribution warehouse and is now a data center operated by Quality Technology Services.

DealBook: Google's Earnings Incident Shines Light on a Stealth Industry

Google, via European Pressphoto AgencyMike Barham, a technician for Google, at the company’s data center in Dalles, Ore.

A little-known fact regarding corporate earnings was unexpectedly revealed last week when the third-quarter earnings for Google were filed with the Securities and Exchange Commission several hours ahead of schedule.

The filing hit the markets like a missile. Google’s stock quickly fell 9 percent before trading was halted 21 minutes. Google quickly pointed the finger at R.R. Donnelley & Sons, the S.E.C. filings agent that Google has used since the company’s first filing on April 29, 2004.

Considering the importance of earnings information, especially for widely held stocks like Google, the incident raises questions about whether the information could fall into the wrong hands. A growing number of companies are increasingly aware of this and are bringing the S.E.C. filings function in-house, at least when it comes to their earnings reports.

Doug Fitzgerald, a spokesman for R.R. Donnelley did not respond to several requests for comment. Donnelley, which dates back to 1864, has long dominated this market. Estimates vary, but it is believed that it has as much as 70 percent of the filings market.

Until Thursday, it wasn’t widely known that filings agents like Donnelley had access to a client’s earnings in advance – sometimes as much as 48 hours early.

During that time, the filings agent “Edgarizes” the filing – that is, making various changes to the underlying code. That involves converting the file from standard HTML to something called EDGAR HTML so that the content can be submitted to the S.E.C.’s Edgar system.

Typically, several test files are sent to the S.E.C. to make sure everything is correct before the real filing is transmitted, said Rob Mossefin, a vice president of production at FilePoint, a filing agent based in Raleigh, N.C.

“Once you push the live filing button, it’s like pushing the big red button. There’s no getting it back,” Mr. Mossefin said. That appears to be exactly what happened on Thursday: a draft of Google’s earnings – the filing said “Pending Larry quote” at the top to indicate that a quote was coming from the chief executive, Larry Page – was accidentally filed with the S.E.C. and went live instantly.

While Google’s premature filing was the most prominent example, other incidents over the last few years have involved similar inadvertent releases of information. Most of those, however, have involved a company posting a release on its own Web site prematurely, instead of submitting a filing via the S.E.C.

Two years ago, Microsoft, the Walt Disney Company and NetApp used Web addresses similar to previous releases to upload current earnings information before they were publicly available. That gave anyone looking for the earnings an instant edge.

In other cases, the use of outside firms could lead to deliberate leaks of confidential insider information. Two years ago, a low-level employee at Google’s outside investor relations firm, Market Street Partners, was connected to the convicted former hedge fund manager Raj Rajaratnam for providing details of earnings for Google and Akamai Technologies. Google quickly fired the firm.

Some of these issues could be resolved by bringing the filings processes in-house. On the same day that R.R. Donnelley filed earnings for Google, other companies including Boston Scientific, Halliburton, Sandisk and Southwest Airlines filed their earnings without using a filing agent.

Some, like Intel, which released its earnings last Tuesday, have been doing it this way for years. Most of these companies use third-party software platforms to handle the filings in-house.

“The more we can control the earnings release, the better off we are,” said an Intel spokesman, Chuck Mulloy, adding that Intel has been doing it this way for at least 18 years. “We own the liability and the risk, and this allows us to maintain the integrity of the reporting process. If there’s a problem, it’s our problem.”

An executive at Webfilings, a company based in Ames, Iowa, that sells an application that allows companies to self-file, used last week’s events as a marketing opportunity, reminding customers that “this unnecessary mistake reinforces the need for public companies to completely control the release of their financial data,” as Mike Sellberg wrote on the Webfilings blog.

A spokeswoman for Google declined to comment on why the company doesn’t handle its filings in-house. Kevin Callahan, a spokesman for the S.E.C., declined to comment on whether the agency was investigating Google’s early release. It is also unclear whether the S.E.C. thinks there is a larger worry about earnings winding up in the wrong hands before being made public.

But given Google’s technical prowess, it could easily move its earnings release in-house to prevent future problems.

“Our biggest challenge is the status quo,” said Matt Rizai, chief executive of Webfilings. “We represent technology that disrupts the industry.”

Michelle Leder is the editor of footnoted.com, a Web site that takes a closer look at companies’ regulatory filings.

Some Tech Industry Donors Warm Up to Mitt Romney

The two candidates, and their parties, have raised more money from technology executives and investors than the candidates and parties did in 2008. Altogether, Mr. Obama and Mr. Romney have campaigned here numerous times in the last year. And as the stakes for the industry have grown higher in Washington, both candidates have at least acknowledged some of its policy priorities, like immigration overhaul and lowering the corporate tax rate.

But although Mr. Obama is widely seen as a friend of the tech industry — and, with his party, has taken in far more contributions — the excitement associated with his campaign four years ago has diminished here, as it has elsewhere. Mr. Romney and the Republicans have made clear inroads.

By the end of August, Mr. Romney raised $2.04 million, compared with the $1.7 million that John McCain raised over his entire 2008 campaign. He has also tapped the pocketbooks of a few former Obama donors. One is Marc Andreessen, a prominent venture capitalist and Facebook investor who supported Mr. Romney’s failed primary bid in 2007, but went on to back Mr. Obama in 2008 with a $4,600 contribution. This year, he put in more than $100,000 for Mr. Romney.

Mr. Andreessen’s office declined to comment for this article, but he, like other tech industry executives, have said they find Mr. Romney’s business background appealing. Others say they are disappointed that the industry’s wish list in Washington remains unfulfilled, pointing, for example, to the unsuccessful effort to raise visa caps for immigrants with math and science degrees.

“This was a man who was elected in 2008 because he understood the power of the Internet,” said Mark Heesen, the president of the National Venture Capital Association, an industry group. “However, as much as the administration has loved the technology innovation agenda, they kind of walk away when you say you have to finance this innovation.”

Robert Nelsen, the managing director of Arch Ventures, based in Seattle, was on Mr. Obama’s national finance committee in 2008. He went to Grant Park in Chicago for the president’s victory party. This year, he contributed to the Romney campaign. He called it a protest vote.

“There needs to be some reaffirmation through words and deeds that engines of innovation are valued,” he said. “I feel like I need to send a message that everything is not O.K.”

The Republicans have been surprisingly adept at fund-raising from the technology industry. According to the Center for Responsive Politics, which tracks campaign finance, Mr. Romney, his party and associated “super PACs” have raised $8.9 million, compared with $13 million raised by Mr. Obama and his party. Those figures include donations from venture capitalists, though the center says it is impossible to separate who among them invests principally in technology. The overall amount is considerably more than in 2008, partly because of the emergence of the super PACs.

Within that larger pie, the Democrats are winning the battle for individual donors. Mr. Obama raised $5 million from people in the industry, compared with Mr. Romney’s $2 million.

But the Republicans have been particularly successful at tapping Silicon Valley billionaires for related super PACs. Among them are Meg Whitman, chief executive of Hewlett-Packard and a former Republican candidate for governor; Howard Cox, advisory partner at the venture capital firm Greylock Partners; and Peter Thiel, another early Facebook investor, who this year gave more than $4 million to conservative super PACs, including to those that backed the failed primary bid of Ron Paul.

Still, taken together, the Democratic National Committee and the Obama campaign are clearly in the lead when it comes to tech donors. And there are lifelong Republicans here who find Mr. Romney unpalatable either because, in their view, he is socially conservative or because he is too closely aligned with sectors that the industry distances itself from.

“Obama will push the Silicon Valley agenda on immigration, renewables, technology and fairness with China in trade,” said Vinod Khosla, a venture capitalist who invests in renewable energy and says he is a registered Republican. “Romney is pushing the oil and gas industry agenda.”

To mine that support, the Obama campaign has corralled entrepreneurs and executives under an umbrella organization called Tech4Obama, or T4O, bringing them together in small groups to meet with the president and open their wallets. Executives including Marc Benioff of Salesforce and Sheryl Sandberg of Facebook have held five-figure fund-raising dinners in their homes.

The Cloud Factories: Data Centers Waste Vast Amounts of Energy, Belying Industry Image

The company had been packing a 40-by-60-foot rental space here with racks of computer servers that were needed to store and process information from members’ accounts. The electricity pouring into the computers was overheating Ethernet sockets and other crucial components.

Thinking fast, Mr. Rothschild, the company’s engineering chief, took some employees on an expedition to buy every fan they could find — “We cleaned out all of the Walgreens in the area,” he said — to blast cool air at the equipment and prevent the Web site from going down.

That was in early 2006, when Facebook had a quaint 10 million or so users and the one main server site. Today, the information generated by nearly one billion people requires outsize versions of these facilities, called data centers, with rows and rows of servers spread over hundreds of thousands of square feet, and all with industrial cooling systems.

They are a mere fraction of the tens of thousands of data centers that now exist to support the overall explosion of digital information. Stupendous amounts of data are set in motion each day as, with an innocuous click or tap, people download movies on iTunes, check credit card balances through Visa’s Web site, send Yahoo e-mail with files attached, buy products on Amazon, post on Twitter or read newspapers online.

A yearlong examination by The New York Times has revealed that this foundation of the information industry is sharply at odds with its image of sleek efficiency and environmental friendliness.

Most data centers, by design, consume vast amounts of energy in an incongruously wasteful manner, interviews and documents show. Online companies typically run their facilities at maximum capacity around the clock, whatever the demand. As a result, data centers can waste 90 percent or more of the electricity they pull off the grid, The Times found.

To guard against a power failure, they further rely on banks of generators that emit diesel exhaust. The pollution from data centers has increasingly been cited by the authorities for violating clean air regulations, documents show. In Silicon Valley, many data centers appear on the state government’s Toxic Air Contaminant Inventory, a roster of the area’s top stationary diesel polluters.

Worldwide, the digital warehouses use about 30 billion watts of electricity, roughly equivalent to the output of 30 nuclear power plants, according to estimates industry experts compiled for The Times. Data centers in the United States account for one-quarter to one-third of that load, the estimates show.

“It’s staggering for most people, even people in the industry, to understand the numbers, the sheer size of these systems,” said Peter Gross, who helped design hundreds of data centers. “A single data center can take more power than a medium-size town.”

Energy efficiency varies widely from company to company. But at the request of The Times, the consulting firm McKinsey & Company analyzed energy use by data centers and found that, on average, they were using only 6 percent to 12 percent of the electricity powering their servers to perform computations. The rest was essentially used to keep servers idling and ready in case of a surge in activity that could slow or crash their operations.

A server is a sort of bulked-up desktop computer, minus a screen and keyboard, that contains chips to process data. The study sampled about 20,000 servers in about 70 large data centers spanning the commercial gamut: drug companies, military contractors, banks, media companies and government agencies.

“This is an industry dirty secret, and no one wants to be the first to say mea culpa,” said a senior industry executive who asked not to be identified to protect his company’s reputation. “If we were a manufacturing industry, we’d be out of business straightaway.”

These physical realities of data are far from the mythology of the Internet: where lives are lived in the “virtual” world and all manner of memory is stored in “the cloud.”

The inefficient use of power is largely driven by a symbiotic relationship between users who demand an instantaneous response to the click of a mouse and companies that put their business at risk if they fail to meet that expectation.

Even running electricity at full throttle has not been enough to satisfy the industry. In addition to generators, most large data centers contain banks of huge, spinning flywheels or thousands of lead-acid batteries — many of them similar to automobile batteries — to power the computers in case of a grid failure as brief as a few hundredths of a second, an interruption that could crash the servers.

“It’s a waste,” said Dennis P. Symanski, a senior researcher at the Electric Power Research Institute, a nonprofit industry group. “It’s too many insurance policies.”

The Cloud Factories: Data Centers Waste Vast Amounts of Energy, Belying Industry Image

The company had been packing a 40-by-60-foot rental space here with racks of computer servers that were needed to store and process information from members’ accounts. The electricity pouring into the computers was overheating Ethernet sockets and other crucial components.

Thinking fast, Mr. Rothschild, the company’s engineering chief, took some employees on an expedition to buy every fan they could find — “We cleaned out all of the Walgreens in the area,” he said — to blast cool air at the equipment and prevent the Web site from going down.

That was in early 2006, when Facebook had a quaint 10 million or so users and the one main server site. Today, the information generated by nearly one billion people requires outsize versions of these facilities, called data centers, with rows and rows of servers spread over hundreds of thousands of square feet, and all with industrial cooling systems.

They are a mere fraction of the tens of thousands of data centers that now exist to support the overall explosion of digital information. Stupendous amounts of data are set in motion each day as, with an innocuous click or tap, people download movies on iTunes, check credit card balances through Visa’s Web site, send Yahoo e-mail with files attached, buy products on Amazon, post on Twitter or read newspapers online.

A yearlong examination by The New York Times has revealed that this foundation of the information industry is sharply at odds with its image of sleek efficiency and environmental friendliness.

Most data centers, by design, consume vast amounts of energy in an incongruously wasteful manner, interviews and documents show. Online companies typically run their facilities at maximum capacity around the clock, whatever the demand. As a result, data centers can waste 90 percent or more of the electricity they pull off the grid, The Times found.

To guard against a power failure, they further rely on banks of generators that emit diesel exhaust. The pollution from data centers has increasingly been cited by the authorities for violating clean air regulations, documents show. In Silicon Valley, many data centers appear on the state government’s Toxic Air Contaminant Inventory, a roster of the area’s top stationary diesel polluters.

Worldwide, the digital warehouses use about 30 billion watts of electricity, roughly equivalent to the output of 30 nuclear power plants, according to estimates industry experts compiled for The Times. Data centers in the United States account for one-quarter to one-third of that load, the estimates show.

“It’s staggering for most people, even people in the industry, to understand the numbers, the sheer size of these systems,” said Peter Gross, who helped design hundreds of data centers. “A single data center can take more power than a medium-size town.”

Energy efficiency varies widely from company to company. But at the request of The Times, the consulting firm McKinsey & Company analyzed energy use by data centers and found that, on average, they were using only 6 percent to 12 percent of the electricity powering their servers to perform computations. The rest was essentially used to keep servers idling and ready in case of a surge in activity that could slow or crash their operations.

A server is a sort of bulked-up desktop computer, minus a screen and keyboard, that contains chips to process data. The study sampled about 20,000 servers in about 70 large data centers spanning the commercial gamut: drug companies, military contractors, banks, media companies and government agencies.

“This is an industry dirty secret, and no one wants to be the first to say mea culpa,” said a senior industry executive who asked not to be identified to protect his company’s reputation. “If we were a manufacturing industry, we’d be out of business straightaway.”

These physical realities of data are far from the mythology of the Internet: where lives are lived in the “virtual” world and all manner of memory is stored in “the cloud.”

The inefficient use of power is largely driven by a symbiotic relationship between users who demand an instantaneous response to the click of a mouse and companies that put their business at risk if they fail to meet that expectation.

Even running electricity at full throttle has not been enough to satisfy the industry. In addition to generators, most large data centers contain banks of huge, spinning flywheels or thousands of lead-acid batteries — many of them similar to automobile batteries — to power the computers in case of a grid failure as brief as a few hundredths of a second, an interruption that could crash the servers.

“It’s a waste,” said Dennis P. Symanski, a senior researcher at the Electric Power Research Institute, a nonprofit industry group. “It’s too many insurance policies.”

The iEconomy: The iEconomy: Nissan’s Move to U.S. Offers Lessons for Tech Industry

Josh Anderson for The New York TimesWorkers assemble cars on the trim line at the Nissan manufacturing plant in Smyrna, Tenn., in June. More Photos »

SMYRNA, Tenn. — The dairy farms that once draped the countryside here were paved over so the Japanese carmaker Nissan could build its first American assembly plant. Eighty miles to the south, another green pasture was replaced by a Nissan engine factory, and across Tennessee about 100 Nissan suppliers dot the landscape, making steel in Murfreesboro, air conditioning units in Lewisburg, transmission parts in Portland.

A RECENT RECHRISTENING Alongside this road in Jundiaí,Brazil, is a Foxconn factory thatmakes iPhones and iPads. More Photos »

Three decades ago, none of this existed. The conventional wisdom at the time was simple: Japanese automakers would not build many cars anywhere but Japan, where supply chains were in place, costs were tightly controlled and the reputation for quality was unparalleled.

“They were very unfamiliar doing anything outside Japan,” said Senator Lamar Alexander, a Republican who was governor of Tennessee when Nissan opened its factory here in 1983. “They were tentative and awkward even discussing it.”

Today, echoes of that conventional wisdom can be heard within the American technology industry. For years, high-tech executives have argued that the United States cannot compete in making the most popular electronic devices. Companies like Apple, Dell and Hewlett-Packard, which rely on huge Asian factories, assert that many types of manufacturing would be too costly and inefficient in America. Only overseas, they have said, can they find an abundance of educated midlevel engineers, low-wage workers and at-the-ready suppliers.

But the migration of Japanese auto manufacturing to the United States over the last 30 years offers a case study in how the unlikeliest of transformations can unfold. Despite the decline of American car companies, the United States today remains one of the top auto manufacturers and employers in the world. Japanese and other foreign companies account for more than 40 percent of cars built in the United States, employing about 95,000 people directly and hundreds of thousands more among parts suppliers.

The United States gained these jobs through a combination of public and Congressional pressure on Japan, “voluntary” quotas on car exports from Japan and incentives like tax breaks that encouraged Japanese automakers to build factories in America. Pressuring technology companies to move manufacturing here would pose different challenges. For one thing, Apple and many other technology giants are American, not foreign, and so are viewed differently by politicians and the public. But it is possible and the benefits might be worth it, some economists say.

“The U.S. has a long history of demanding that companies build here if they want to sell here, because it jump-starts industries,” said Clyde V. Prestowitz Jr., a senior trade official in the Reagan administration who helped negotiate with Japan in the 1980s. The government could also encourage domestic production of technologies, including display manufacturing and advanced semiconductor fabrication, that would nurture new industries. “Instead, we let those jobs go to Asia, and then the supply chains follow, and then R&D follows, and soon it makes sense to build everything overseas,” he said. “If Apple or Congress wanted to make the valuable parts of the iPhone in America, it wouldn’t be hard.”

One country has recently succeeded at forcing technology jobs to relocate. Last year, Brazilian politicians used subsidies and the threat of continued high tariffs on imports to persuade Foxconn — which makes smartphones and computers in Asia for dozens of technology companies — to start producing iPhones, iPads and other devices in a factory north of São Paulo. Today, the new plant has 1,000 workers, and could employ many more. Apple and Foxconn declined to comment about the specifics of their Brazilian manufacturing.

However, a developing country like Brazil can adopt trade policies that would be difficult for the United States to do. Taking a hard line to reduce imports of technology goods and encourage domestic manufacturing could violate international trade agreements and set off a trade confrontation. “We’re a long way from even talking about limits on imported iPhones or iPads,” said a former high-ranking Obama administration official who did not want to be named because he was not authorized to speak.

Protectionism is bad policy in today’s globalized world, many economists argue. Countries benefit most when they concentrate on what they do best, and trade barriers harm consumers by driving up prices and undermine a nation’s competitiveness by shielding industries from market forces that spur innovation. The United States needs to create new jobs, economists say, but it should not chase low-paid electronics assembly work that at some point may be replaced by robots. Instead, it should focus on higher-paying jobs.

“Closing our border is a 20th-century thought, and it will only weaken the economy over the long term,” said Andrew N. Liveris, president of Dow Chemical and co-chairman of the Advanced Manufacturing Partnership, a group of executives and academics convened by the White House who have studied ways to encourage domestic manufacturing.

The debate is not just economic, however. Increasingly, it is political. With high unemployment, the question of how to create jobs has taken a role in the presidential race between President Obama and Mitt Romney, and both have traded barbs on outsourcing by American companies.

Bill Vlasic reported from Smyrna, Tenn., Hiroko Tabuchi from Tokyo and Charles Duhigg from New York. Lis Horta Moriconi contributed from Rio de Janeiro.

The iEconomy: The iEconomy: Nissan’s Move to U.S. Offers Lessons for Tech Industry

Josh Anderson for The New York TimesWorkers assemble cars on the trim line at the Nissan manufacturing plant in Smyrna, Tenn., in June. More Photos »

SMYRNA, Tenn. — The dairy farms that once draped the countryside here were paved over so the Japanese carmaker Nissan could build its first American assembly plant. Eighty miles to the south, another green pasture was replaced by a Nissan engine factory, and across Tennessee about 100 Nissan suppliers dot the landscape, making steel in Murfreesboro, air conditioning units in Lewisburg, transmission parts in Portland.

A RECENT RECHRISTENING Alongside this road in Jundiaí,Brazil, is a Foxconn factory thatmakes iPhones and iPads. More Photos »

Three decades ago, none of this existed. The conventional wisdom at the time was simple: Japanese automakers would not build many cars anywhere but Japan, where supply chains were in place, costs were tightly controlled and the reputation for quality was unparalleled.

“They were very unfamiliar doing anything outside Japan,” said Senator Lamar Alexander, a Republican who was governor of Tennessee when Nissan opened its factory here in 1983. “They were tentative and awkward even discussing it.”

Today, echoes of that conventional wisdom can be heard within the American technology industry. For years, high-tech executives have argued that the United States cannot compete in making the most popular electronic devices. Companies like Apple, Dell and Hewlett-Packard, which rely on huge Asian factories, assert that many types of manufacturing would be too costly and inefficient in America. Only overseas, they have said, can they find an abundance of educated midlevel engineers, low-wage workers and at-the-ready suppliers.

But the migration of Japanese auto manufacturing to the United States over the last 30 years offers a case study in how the unlikeliest of transformations can unfold. Despite the decline of American car companies, the United States today remains one of the top auto manufacturers and employers in the world. Japanese and other foreign companies account for more than 40 percent of cars built in the United States, employing about 95,000 people directly and hundreds of thousands more among parts suppliers.

The United States gained these jobs through a combination of public and Congressional pressure on Japan, “voluntary” quotas on car exports from Japan and incentives like tax breaks that encouraged Japanese automakers to build factories in America. Pressuring technology companies to move manufacturing here would pose different challenges. For one thing, Apple and many other technology giants are American, not foreign, and so are viewed differently by politicians and the public. But it is possible and the benefits might be worth it, some economists say.

“The U.S. has a long history of demanding that companies build here if they want to sell here, because it jump-starts industries,” said Clyde V. Prestowitz Jr., a senior trade official in the Reagan administration who helped negotiate with Japan in the 1980s. The government could also encourage domestic production of technologies, including display manufacturing and advanced semiconductor fabrication, that would nurture new industries. “Instead, we let those jobs go to Asia, and then the supply chains follow, and then R&D follows, and soon it makes sense to build everything overseas,” he said. “If Apple or Congress wanted to make the valuable parts of the iPhone in America, it wouldn’t be hard.”

One country has recently succeeded at forcing technology jobs to relocate. Last year, Brazilian politicians used subsidies and the threat of continued high tariffs on imports to persuade Foxconn — which makes smartphones and computers in Asia for dozens of technology companies — to start producing iPhones, iPads and other devices in a factory north of São Paulo. Today, the new plant has 1,000 workers, and could employ many more. Apple and Foxconn declined to comment about the specifics of their Brazilian manufacturing.

However, a developing country like Brazil can adopt trade policies that would be difficult for the United States to do. Taking a hard line to reduce imports of technology goods and encourage domestic manufacturing could violate international trade agreements and set off a trade confrontation. “We’re a long way from even talking about limits on imported iPhones or iPads,” said a former high-ranking Obama administration official who did not want to be named because he was not authorized to speak.

Protectionism is bad policy in today’s globalized world, many economists argue. Countries benefit most when they concentrate on what they do best, and trade barriers harm consumers by driving up prices and undermine a nation’s competitiveness by shielding industries from market forces that spur innovation. The United States needs to create new jobs, economists say, but it should not chase low-paid electronics assembly work that at some point may be replaced by robots. Instead, it should focus on higher-paying jobs.

Bill Vlasic reported from Smyrna, Tenn., Hiroko Tabuchi from Tokyo and Charles Duhigg from New York. Lis Horta Moriconi contributed from Rio de Janeiro.

Europe Moves to Aid Digital Music Industry

PARIS — The European Commission plans to introduce legislation on Wednesday to bolster the digital music market in Europe by streamlining the methods of agencies that collect royalties on behalf of copyright holders.

Michel Barnier, the internal market commissioner, is expected to propose a bill aimed at resolving problems at the 250 collecting societies that operate in the European Union, some of which are holding back growth in digital music. The move follows the disclosure that some of these groups have lost money on risky investments or, in some cases, failed to pay royalties owed to rights holders.

“Collecting societies need to modernize their operations to meet the challenges of a fast-evolving digital economy,” the commission says in a memo explaining the proposals. “An underlying problem is the insufficient transparency and control of the way collecting societies are managed.”

It is not the first time that the commission has taken aim at the collecting societies, which gather about €6 billion, or $7.5 billion, annually from radio stations, restaurants, bars and other music users, and distribute the proceeds to authors, composers and other rights holders. In 2008, lawmakers enacted legislation aimed at breaking down national barriers in the digital music business, making it possible for rights holders to issue pan-European licenses.

Yet cross-border licensing of music and other media content has not developed as quickly as Mr. Barnier would like, limiting consumer choice, hurting rights holders and promoting piracy as listeners seek alternate ways to obtain the music they want, the commission says. Only one legitimate digital music service, Apple’s iTunes store, is available in all 27 E.U. member states and digital sales accounted for only 19 percent of recording industry revenue in the European Union in 2010, compared with 49 percent in the United States, according to the International Federation of the Phonographic Industry.

The commission acknowledged that there were several reasons for this, but singled out collecting societies.

“The ability of collecting societies to efficiently deliver their services is increasingly being questioned, leading to a loss of trust and confidence in their services,” the commission says in a written assessment.

Less than half the amount collected in royalties is distributed within the first year, and as much as 10 percent not until three years after collection, the commission says. Under the proposal, societies would have to disburse the money within one year.

In the interim between collection and distribution, rights holders complain, some societies have been making risky investments with the money. The commission says an Italian collecting society in 2008 lost €35 million in a “debt instrument” with the failed investment bank Lehman Brothers.

Véronique Desbrosses, general director of Gesac, a Brussels-based group that represents European collecting societies, said the organization “welcomes the E.U. directive.” But she disputed the notion that collecting societies were to blame for the problems of the digital music business.

She said European collecting societies gather more than 60 percent of the revenue collected worldwide by such groups, undermining the argument that the European societies are inefficient.

“We believe that we are already active in working to achieve the highest standards possible in transparency and efficiency,” she said. “In some cases, these standards are already higher than what the commission is proposing.”

Kelvin Smits, a spokesman for Younison, a group that represents artists, said the proposal would improve the workings of the digital market, but would not do enough to overhaul the offline segment, which still represents 95 percent of royalty collections in Europe.

Among other things, the bill would let collecting societies keep funds held on behalf of rights holders who cannot be located — after five years.

“If that would change, the good life would be over for the collecting societies,” Mr. Smits said.

Europe Moves to Aid Digital Music Industry

PARIS — The European Commission plans to introduce legislation on Wednesday to bolster the digital music market in Europe by streamlining the methods of agencies that collect royalties on behalf of copyright holders.

Michel Barnier, the internal market commissioner, is expected to propose a bill aimed at resolving problems at the 250 collecting societies that operate in the European Union, some of which are holding back growth in digital music. The move follows the disclosure that some of these groups have lost money on risky investments or, in some cases, failed to pay royalties owed to rights holders.

“Collecting societies need to modernize their operations to meet the challenges of a fast-evolving digital economy,” the commission says in a memo explaining the proposals. “An underlying problem is the insufficient transparency and control of the way collecting societies are managed.”

It is not the first time that the commission has taken aim at the collecting societies, which gather about €6 billion, or $7.5 billion, annually from radio stations, restaurants, bars and other music users, and distribute the proceeds to authors, composers and other rights holders. In 2008, lawmakers enacted legislation aimed at breaking down national barriers in the digital music business, making it possible for rights holders to issue pan-European licenses.

Yet cross-border licensing of music and other media content has not developed as quickly as Mr. Barnier would like, limiting consumer choice, hurting rights holders and promoting piracy as listeners seek alternate ways to obtain the music they want, the commission says. Only one legitimate digital music service, Apple’s iTunes store, is available in all 27 E.U. member states and digital sales accounted for only 19 percent of recording industry revenue in the European Union in 2010, compared with 49 percent in the United States, according to the International Federation of the Phonographic Industry.

The commission acknowledged that there were several reasons for this, but singled out collecting societies.

“The ability of collecting societies to efficiently deliver their services is increasingly being questioned, leading to a loss of trust and confidence in their services,” the commission says in a written assessment.

Less than half the amount collected in royalties is distributed within the first year, and as much as 10 percent not until three years after collection, the commission says. Under the proposal, societies would have to disburse the money within one year.

In the interim between collection and distribution, rights holders complain, some societies have been making risky investments with the money. The commission says an Italian collecting society in 2008 lost €35 million in a “debt instrument” with the failed investment bank Lehman Brothers.

Véronique Desbrosses, general director of Gesac, a Brussels-based group that represents European collecting societies, said the organization “welcomes the E.U. directive.” But she disputed the notion that collecting societies were to blame for the problems of the digital music business.

She said European collecting societies gather more than 60 percent of the revenue collected worldwide by such groups, undermining the argument that the European societies are inefficient.

“We believe that we are already active in working to achieve the highest standards possible in transparency and efficiency,” she said. “In some cases, these standards are already higher than what the commission is proposing.”

Kelvin Smits, a spokesman for Younison, a group that represents artists, said the proposal would improve the workings of the digital market, but would not do enough to overhaul the offline segment, which still represents 95 percent of royalty collections in Europe.

Among other things, the bill would let collecting societies keep funds held on behalf of rights holders who cannot be located — after five years.

“If that would change, the good life would be over for the collecting societies,” Mr. Smits said.