Serious essay on the music biz

those are all great points for why the IP owner should be compensated for his loss by the thief. At the simplest, as punishment for touching that which was not his. I'm a big fan of punishment of crime, so I'm OK with that.

However.....that's not really what I'm talking about. I'm talking about actual impact to the artist by the theft.

Let's monetize this with fake but almost true facts. St. Anger was Metallica's WORST album. It costs $10. 100 people bought it, so Metallica made $250 off the sales of that album. Sales stopped at 100 because 99 of them were former fans, and the last was a music critic at Rolling Stone. They all flamed Metallica for the album, and nobody else bought an album.

Danny's surfing for music and sees that he can backfill the last of his Metallica collection when he stopped listening after the Black album. So he downloads Load, ReLoad, St. Anger and Death Magnetic for free. That's 4 albums at a value of $40 using iTunes math.

Lars finds out about the illegal download and gets so hopping mad he hops into the past to kill Al Gore who invented the internet and suddenly Online Music Piracy doesn't exist anymore.

Lars hops back to the future just in time to see Danny walk into a music store (which don't exist in Lars's original timeline). Danny, in a fit of nostalgia, plops down $30 for Load, ReLoad and Death Magnetic.

Lars is apoplectic. He lost a $40 sale in his original timeline, and now that he fixed everything, he still can't collect that last $10.

Why? Because not all pirated music is worth paying for, but it is worth stealing.

As such, when SOME musicians whine about piracy hurting their sales, they erroneously inflate the damage done to them by counting people who were NEVER going to give them the money for their crappy product.

it is obvious that russions SELLING fake copies of your music to people who would buy it otherwise is real and actual harm. Whether it be by CD or MP download.

It is not quite as true that some kid pirating St. Anger is stealing money from Metallica. Because that sale was NEVER going to happen because the product was crap.


I think my point is, some music is crap because there is so much of it, as such, some piracy is by people who wouldn't pay for it anyway, so you're not really losing as much as you think.

Dannyalcatraz said:

a shrinking of the variety within the market since the label system has been under siege. Yes, there are mor musical genres than 10 or 20 years ago, but it is much harder for any of those genres to get a break into mass market appeal.

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I'm not so sure that this could have possibly been avoided, regardless of the structure of music business.

It seems to me that previously musical genres started out as very regional, and then spread to the rest of the world. For example, grunge coming out of Seattle/West coast. This regional nature allowed the new genres to "incubate", to refine their appeal until they were ready to spread.

Now, there's no incubation period. Everything goes world-wide immediately. I think that has damaged the ability of new genres to become popular on a small scale, before hitting the larger audience. Technically, this is the fault of the Internet, but not in a way that business structure could do anything about.

However.....that's not really what I'm talking about. I'm talking about actual impact to the artist by the theft.

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I realize that. And I understand that people see theft of IP kind of like theft of fire- the owner still has the same stuff he had before the theft, so how is he harmed?

In the eyes of the law, the unauthorized exercise of control of the property is what defines the theft, not whether the property is actually removed- even for physical property. And the law does not care WHY you exercised the unauthorized control, merely that the control that was exercised was not authorized.

Ethically & legally, the harm is in the interference with the IP holder's property rights, which includes the right not to have the property used by others at all- also derived from physical property rights.

The right to exclude others is one of the cornerstone rights of property. It lets the owner build upon his creation, if he so chooses, or to enjoy it by himself to the exclusion of all others. It is one of the reasons property has value at all.

IP law simply chooses not to divorce that fundamental right from the bundle of rights merely because it is intangible. And I think, if nothing else, this lets the law apply the same rules without struggling to create new rules.

It is my position that unbundling the right of exclusion from IP would render it unprotectable in a court of law and thus, valueless.

Dannyalcatraz said:

It is my position that unbundling the right of exclusion from IP would render it unprotectable in a court of law and thus, valueless.

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well, and I'm not considering the legal ramifications. Merely the factor that when an artist cries "boohoo, I'm not making any money, it must be piracy!", that technically, that may not be the case, despite finding oodles of copies of his music on pirate sites.

and also, as you know (but for everyone else who now thinks I hate musicians), I am not anti-music or anti-musicians making a fair living off their work. Quite the opposite.

I simply see that economically, it's not as straightforward as the law measures it.

Now on the other hand, I wonder if you could make a living off of having your music pirated and collect RIAA fines

Janx said:

well, and I'm not considering the legal ramifications. Merely the factor that when an artist cries "boohoo, I'm not making any money, it must be piracy!", that technically, that may not be the case, despite finding oodles of copies of his music on pirate sites.

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The legal ramifications are part and Patel of the problem. A right you cannot protect in the law of your society is valueless in that society.

Now, it is true that artists not making money is not the sole fault of piracy. Some music simply sucks.

However, it's pretty clear that there is a very real and measurable effect. More than a decad ago, multiple studies showed that, while the music industry's sales were increasing, the sales at stores around colleges were dropping precipitously, despite the high population density of the industry's target market there. That alone tells us only a little- those students could be buying elsewhere. However, the studies also pointed out that those same schools were experiencing a huge increase in downloading traffic on their systems that declined when things like Napster were banned. This gives us the obvious inference regarding music sales declining where there is a huge spike in the use of pirate sites which reverses when those sites are blocked.

One such survey was discussed here Survey Finds Link Between Downloading, Drop in Sales - Los Angeles Times


A more recent look can be tracked down here: http://www.youtube.com/user/iepgmu#p/u/13/eRMoB2QilDE

I simply see that economically, it's not as straightforward as the law measures it.

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The law measures it as economics informed the lawmakers to do. I got my degree in Econ some decades ago, and I didn't go into it full time. Some of my fellow majors, though, did do work on models of the costs of protecting vs pirating of IP. It looks a lot like what happens with tangible property- the right to control use is- essentially- the most valuable legal right you have regarding property.

If you own land, but have no right of exclusion, you cannot decide who has permission to walk across it, have a BBQ on it, take a dump on it, etc., and when, what do you really own? You still have the land, yes, but anyone and everyone else can use it too. Your ownership is without meaning; without value.

What is going on with piracy is the "destruction of the commons" in a sense. I'd be lying if I told you that I didn't know people who recorded stuff from the radio or CDs (or other media) and pass it along. With the technology available to the Average Joe of 1980, that wasn't so big a deal. The copies took a long time to make, and were low-grade- something that often drove those pirates to buy the legit, higher-quality recordings. (I know some who bought 7-10 copies of the same concert, for instance, before built the legit version- the various songs wer of various quality.)

However, the same technologies that made digital distribution of music and other IP possible- a definite boon to us all- also makes it possible to make fast, essentially perfect copies of the stolen IP. Any incentive to buy legit beyond one's own moral compass is gone.

And, as the article pointed out, it has resulted in an increasing shift of the burdens and risks of recording music to the artists. There is an evaporation of economies of scale that was present in the old system that let companies distribute risk and let a wide variety of artists get time in professional-grade studios and exposure to new audiences via concert tours and other tools of their marketing departments.

Now on the other hand, I wonder if you could make a living off of having your music pirated and collect RIAA fines.

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Highly unlikely!

Although I found it amusing that he talked about the "sweet spot" of having your album failing just badly enough to not recoup costs while you still got paid for certain things, like mechanical royalties. (And then pointing out that piracy cuts into those income streams as well...)

The major issue here isn't really piracy. It is one issue, but piracy existed before the internet, before CDs, and even before tapes. In fact, I'm not even sure there is a major issue in the digital age, just a congruence of issues:

1) People tend to forget this, but the record companies do (or did) have a specialized purpose - promotion. There's an assumption in the article (and often in general) that promotion is easy and cheap. It isn't. Promotion is a lot of work, and costs a lot of money and time. A lot of people are running into the hard reality that the internet hasn't changed that. You have a problem with YouTube/Facebook/Reddit/Twitter/etc? Don't use them, and don't be surprised when no one hears your music.

1a) This also applies to distribution, for the most part.

2) Few artists got some magical start by virtue of their music being good. Most of them had a long, hard road to success coupled with a few lucky breaks. Most of them played gigs for little to no money hoping to attract a crowd or be noticed by someone in the industry. Even those musicians that do find success can find it fleeting - the term "one-hit wonder" didn't come from nowhere. It's great that technology and the internet has made production costs fall to levels where anyone can do it. That doesn't excuse anyone from the work that it takes to become successful.

3) The downside to the costs of production and distribution dropping (in theory anyway) is the expectation that price drops as well. If technology made it easy for a musician to put their music online, then those savings should be reflected in the price. No one ethically expects to pay nothing, but they do expect a fair market price that takes advantage of the technological means available. Why shouldn't someone be allowed to buy a single song from a CD, if it's not going to be on physical media where it makes sense to put as much on it as possible?

4) A lot of income comes from non-album sales - merchandise tables at tours, for example.

5) If piracy has done anything to change the face of the music industry, it's to magnify the importance of these points. Whether anyone likes it or not, it's no longer possible to expect (or even force) people to pay for your music because it's the right thing to do. You want people to pay for your stuff? That means doing the hard work of promotion, distribution, suffering, and innovating - all the things that bands, successful and not, have been doing for decades in one form or another.

The short story is that the Digital Age has certainly made some aspects of being a musician easier. There are valid ethical questions and conversations that it has posed. However, I feel a lot of these rants seem to come from people who, ostensibly, feel entitled to being profitable musicians without actually having to put in the effort.

LightPhoenix said:

The major issue here isn't really piracy. It is one issue, but piracy existed before the internet, before CDs, and even before tapes. In fact, I'm not even sure there is a major issue in the digital age, just a congruence of issues:

1) People tend to forget this, but the record companies do (or did) have a specialized purpose - promotion. There's an assumption in the article (and often in general) that promotion is easy and cheap. It isn't. Promotion is a lot of work, and costs a lot of money and time. A lot of people are running into the hard reality that the internet hasn't changed that. You have a problem with YouTube/Facebook/Reddit/Twitter/etc? Don't use them, and don't be surprised when no one hears your music.

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The assumption in the article I posted was not that it was easy and cheap, but rather that the record companies spread that cost around and got the benefit of economies of scale.

With the new business model being forced on the industry, that risk and cost have been shifted to the artists. It's less efficient and more costly, leading to decreased profits. Worse, since the job once done by trained pros is now being done by amateurs who have better things to do (like, say, practicing their instruments and composing music), the time devoted to this can have a direct negative impact on music's quality.

About 9 years ago, a guitarist of note was giving a keynote address at the Dallas Guitar Show, and asked the audience how many people in attendance had taken up the instrument to play like him. Many hands went up.

"Forget it!" he said, shocking the audience to silence. He then detailed his daily practice routine- both solo and with other musicians- which at this point just maintained his skills. Now, taking away sleep, eating and a couple other things, and that man would not have had time for promotion of the kind that helped him sell albums.

It's great that technology and the internet has made production costs fall to levels where anyone can do it. That doesn't excuse anyone from the work that it takes to become successful.

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Nobody's saying they expect to get rich without working for it.

The downside to the costs of production and distribution dropping (in theory anyway) is the expectation that price drops as well.

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The theory hasn't exactly held up- technology made it easy for a musician to put their music online, yes, but the equipment that lets them make professional level recordings hasn't gotten any cheaper, and they have to spend more of their own money now than ever in acquiring it since the labels arent doing that as much anymore. Economies of scale have been lost.

And the costs of creating merch haven't fallen either...and again, that is a cost that is increasingly being shifted to artists.

A lot of income comes from non-album sales - merchandise tables at tours, for example.

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True.

And while it is also true that you can make money on local tours and selling your CDs & merch out of your band van, that money usually amounts to an annual income below the poverty level. The big money is on the big tours...but you need sales- sales outside of your region- to land on those big tours.

And those sales? Even with an album (not singles) going Gold, a newish 5 piece band with a typical royalty structure will (again) have a net income per player below the poverty level. You get better royalty rates with iTunes and similar services, but since most transactions are per song and not per album, you still have to move a lot of songs to ach that kind of income.

In a music forum, my sig quotes Sturgeon's 2nd Law: "90% of everything is crap.". Well, in the music biz, even stuff that isn't objectively crap fails to make a profit in pure sales (some woul argue that only crap sells), but those sales open the door to the merch income stream.

You want people to pay for your stuff? That means doing the hard work of promotion, distribution, suffering, and innovating - all the things that bands, successful and not, have been doing for decades in one form or another.

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Actually, as was pointed out before, a lot of the really expensive risky stuff- including the big promotions/distribution stuff- was what the labels offered as their contribution to the industry. It spread the risk, and everyone shared the wealth...including artists who were just getting started. That was because the labels used profits from their few big sellers to subsidize the rise of new artists.

Extreme example- Vanilla Ice's debut album sold so many copies that Suge Knight essentially robbed him of some of his money to finance the rise of SK's label, launching dozens of careers, including Tupac Shakur, Dr. Dre & Snoop Dogg.

Now, with the digital age eating away at that, the artists have to assume the costs that the labels once did. Economies of scale evaporate as multiple artists make duplicate investments in recording gear, establishing home studios, forming their own distribution networks (mainly for merch, these days), and so forth.

However, I feel a lot of these rants seem to come from people who, ostensibly, feel entitled to being profitable musicians without actually having to put in the effort.

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I can't really agree with this- there are LOTS of complaints from established artists who have seen their profits dwindle as piracy of their IP rises...and their costs of capital investments go up as well. Ani Di Franco is the example I cite most often, since she is essentially a one woman company, but she's not alone.

Here's a recent interview:
[ame=http://www.youtube.com/watch?v=1ZtgtVfESck&feature=youtube_gdata_player]Ani DiFranco on Illegal File-Sharing - YouTube[/ame]

Even though she talks about shows being her main income throughout her career, she also talks about how hard her label is struggling to put out the music of others on her label- piracy keeps eating away at her label's profits. IOW, here is an artist with a label who is trying to reinvest her money into bringing out the music of others...and the sales of even her own stuff has eroded enough that she's fonding this difficult to do. (This is something she's been saying for nearly a decade.)

See also here:
How do you make your money, honey?! - MusicPlayer Forums

On a slight tangent, wonder if there is a similar erosion of revenue happening in the movie/tv world.

For example, are the movie/media companies making much money on all those $5 (or less) dvds at places like WalMart, which frequently just sit there collecting dust for months at a time? (Even blurays are showing up in the $5 bins these days).

There has been, but not quite the same- there simply isn't the same kind of ability to shift costs to the content providers. And even if there were, the content providers are often corporations & partnerships that are big companies as well. Movies cost a lot more money to make than albums do. On the flip side, mainstream movies have many more revenue stamps than most albums do.

But yeah, there has been some hurt. As I recall, there is actually some discussion of movie piracy in the econimist's lecture I linked to in Post #15.

so, how do we fix it?

Do we bomb the russians and chinese back to the stone age?

Do we strong arm YouTube and others into properly paying their ASCAP fees for playing songs?

Do we send ChillingEffects.org a DMCA request to take down the names of people who sent requests because they were unlicensed use of their names (I'm sure the right lawyer could find a way to twist that so they're the bad guy).

Do we lobby congress for equal enforcement of IP laws be it music or google patents?

Do we leave it alone and let it all sort itself out? Maybe live music will die? Maybe all new music will be amateur based or KickStarter sponsored?