Also interesting (although I don't agree with it) is the Guardian's Comment section which seems to argue that there isn't a problem at all. Now whether it's a problem or not isn't yet clear, but it's certainly more than conceivable that online piracy could (and quite possibly will) strike a terrible blow to the music industry. I should point out that my problem is only with the statements that this is already happening at any dramatic level...

→ Posted by: Tom Coates at August 18, 2003 3:36 PM

i don't think it's that much of a blow - maybe record labels and record stores (like HMV, Virgin, etc) should decrease CD prices to something more affordable. these days (past two years) i've only bought used CDs...it's to expensive sometimes for completley new releases. this way i wait a while till those new releases show up at used CD stores.

→ Posted by: kavi at August 18, 2003 3:59 PM

I just read this report, which shows that the arguments we're used to hearing from record companies may well be false. If the studies cited are correct, the current boost in album sales can be partly attributed to online music distribution, as 87% of people who download music go on to buy the album.

A while back, I was predicting the online music revolution. I still stand by some of my economic arguments, but as this more sober analysis shows, intellectual property issues will remain the big obstacle for the record labels, despite evidence of the benign impact of online distribution. Piracy isn't destroying the music industry, but it's making it more competitive. Big companies with partial monopolies don't like that at all.

→ Posted by: Gareth at August 18, 2003 4:09 PM

Well some people argued that the decline in sales (that was very clear a few years ago, maybe not much in the UK) was due to the price-fixing effected by the recording-industry, so that if they charged a decent price, people wouldn't need to download so much. Those recent statistic you cite, Tom, seem to prove this!
If you don't believe companies have been fixing prices for eons, check this tacit admission:
http://www.musiccdsettlement.com

→ Posted by: Matthew at August 18, 2003 4:10 PM

I think the thing that terrifies the music industry most is not that album sales as a whole will decline--which, it seems, they aren't--it's that they no longer have any control over WHICH album sales are increasing. File-sharing (and information spread through other means online) is democratizing music sales, allowing the consumer to find stuff they really, truly want to listen to. New artists who would have languished in Local Band Hell for years in previous decades can now get heard and start selling internationally before their albums even appear.

In other words, the music biz's attempts to commodify its output (modern country, rap clones, boy bands, bad girls, Everybody Sounds Like Creed for a couple months, etc.) are threatened. The few predictable cash cows are being replaced by a broader market. More artists are selling less albums apiece, but more music moves overall.

If I had built MY industry on the concept of "making" hits and artists and the public buying what I made because that's all they got to hear about, I would be terrified, too. The big players in the music industry will have to abandon committees and develop better coolhunters if they want to avoid being washed away by smaller players that can finally find an audience.

→ Posted by: Max Leibman at August 19, 2003 1:50 PM

I think that the bottomless greed of RIAA and such would still cause them to argue that album sales would be higher IF file-trading stopped. I think this witch-hunt is not based on economics, but simply the ego of a behemoth that has been rattled. Rattled not by another company but by a mere group of people.

This might seem like hyperbole but i like to think of it as Darwinian. The alpha male has set a few examples to maintain dominance of the pack. It usually has nothing to do with need, only greed.

→ Posted by: asli at August 19, 2003 3:18 PM

I'm employed in the music business in NYC, and I can attest that piracy is one of reasons--not the only reason--the industry is in shambles. The economy is one reason. The lack of exciting new artists is another reason. But believe me, I wouldn't have nearly as many unemployed friends if people didn't think online piracy was benign.

The RIAA is not acting out of greed. It is acting to protect the assets of its members. Record labels invest a great deal of money in recordings. Why should they stand aside and let people acquire their property free of charge? People hate to hear this, but music is a business. If you want free music go down to the street corner and listen to the man busking for loose change.

I find online music piracy to be nothing more than shameless greed. One of the basic laws of economics says that if an item is given away for free, people will consume as much as possible, and often more than they rationally need to consume. This is greed, pure and simple.

And what about the price for a CD? In real terms, the price of a new CD has remained level since introduced in the mid '80s. In NYC, you can still buy a CD for less than a pizza. Yet I've never heard anybody bitch about the price of pizzas. One reason people think CDs cost too much is because DVDs are priced so low. This has affected the perceived value of the CD. In relative terms, the CD "seems" expensive.

One tenet of Western economics is protection for patent holders, copyright owners and the like. Without these protections, there is less incentive to develope and create new products. Entire industries--certainly many in computers and hi-tech--have been created because these protections allow business to flourish.

Take away the protections and you take away business. Record labels have less of an incentive to record and release music. At the end of the day, everybody is worse off...the labels, the artists and music consumers as well.

→ Posted by: Glenn at August 20, 2003 4:51 PM

In reading Glenn's comments, I realized I left a door open in interpreting my views that I hadn't intended to. I didn't point to the trend as inherently good or bad. I'm a believer in copyright and patents. I have nothing against the profit motive and I'm not supporting free music as a political or economic cause. I'm just presenting the situation as it appears to me--certain labels and blocs may be losing sales, but if sales are up, they're up. The question, to my mind, becomes, "What is selling, and why?" and my comments are aimed at answering that.

To me, if the major trend is breaking up power blocks and putting people in touch with art they enjoy more, and the economic value generated by that is greater than the loss to piracy, then it's a good trend. If that effect is minor or non-existent (as Glenn stated in an e-mail to me--thanks for the insight, Glenn), and the economic loss to piracy is greater than the overall gains brought by the democratized market, it's a bad trend.

I think my initial message had more of a "Damn the Man, burn the system!" tone than I intended. As anyone who reads my blog can attest, I AM the Man, Whitey, etc. I can't claim I've never downloaded a song that wasn't legally put online. I CAN claim I've never held onto an unauthorized download that didn't result in me buying an album. I'm a capitalist and believe in the rule of law, but I also believe in the power of markets, and whatever bad online piracy may be (and whether I've interpretted the results correctly in my first post or not), it is also part of a larger message from the market about how it values the current product and its distribution.

→ Posted by: Max Leibman at August 20, 2003 6:06 PM

Glenn - first things first - I think it's obvious to everyone concerned that piracy has the capacity to damage music sales. But - in the UK at least - there doesn't really appear to be that much evidence that it's doing so! That's not to say that it won't begin to more over time, but I repeat the highest album sales in history were over the last few months - so perhaps the level of scaremongering that the industry is undertaking is counter-productive.

Now at a secondary level, there's other things to think about - the first one may be simply whether or not it's possible to control information at the level that would be required to stop this kind of activity and if it is not possible to do so, then the music industry clearly will change quite radically. I was talking to Joi Ito a while back and he said something really interesting - that people no longer build pyramids, because there's no longer a legitimate business model to support it. It could very well be that we're at that brink-point between music sales through physical media being something that you can make money out of and something you cannot. Think about it this way - if someone said ten years ago that you would be able to get most of the world's newspapers online for free now, and that people - for the most part - did not seem prepared to pay would you have believed it? Does it seem like unfathomable greed that people can access those newspapers now? Whether that's sustainable, of course, is another matter...

The only thing in your piece that I really disagree with is the characterisation of people who download music as greedy. They might very well be stealing, but that's something very different. There are lots of free things in the world that are free because they are not scarce - air for example. People don't hoard it, they don't sell it and they don't gorge themselves on it - because there's no need. Now new music isn't like that - someone needs to make it, and they need to be able to live while they do so. So it's not the same at all. But having said that, something that can be infinitely and effortlessly copied without any loss in quality and can be distributed with little or no cost is essentially non-scarce and it's very very difficult to legitimately ask people for money for things that are not scarce...

→ Posted by: Tom Coates at August 20, 2003 7:37 PM

Max said, "I can't claim I've never downloaded a song that wasn't legally put online. I CAN claim I've never held onto an unauthorized download that didn't result in me buying an album.". I would have to wholeheartedly agree with him on this one. I've bought more CDs this year than I ever have done because I've had the opportunity to listen to the merchandise first via a download. I really don't see the difference between my doing this or going down to my (not-so-local) record store and putting on some headphones in a listening booth. The biggest difference is that I've had the opportunity to listen to every track several times and get hooked rather than have to make a snap decision on a few seconds of each track because I don't want to be standing in a shop for an hour. The other factor in my increased purchasing also has a little to do with the high quality of material coming out of both established and new bands. I'm hoping that this isn't just some minor blip and that it continues for a while...

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→ Posted by: Document Security at May 30, 2006 12:53 PM