For-profit music distribution industry fundamentally redundant

In an article (via Furdlog) on the fabulously-titled field of “Rockonomics”, Slate magazine summarises the findings of Princeton researchers Alan Krueger and Marie Connolly (PDF), who have analysed the various revenue streams of pop and rock artists over the last three decades.

One interesting finding, which is highly relevant to the current upheaval on the ‘net surrounding music sharing, is that most artists make far more money from concerts than they do from recordings – even those with multi-platinum albums to their name. Furdlog found this relevant quote:

Gayer and Shy (2004) present a model of an artist and her publisher, and show that the artist’s revenues are greater under file sharing since the more revenue comes from live concerts, which get better publicity from the distribution of songs on P2P networks.

This is exactly how I feel about current trends in the music industry. The best way to contribute to a healthy music industry, and the wealth and well-being of artists, is to share their recordings and attend their gigs. Now that the cost of music reproduction is virtually nil, there is little point trying to make money out of it. As this paper clearly states musicians are much better off using music sharing as a tool to raise awareness of their art than monetizing their wares through a profit-sapping gatekeeper.

The only artists that won’t be better off are the dozen or so Britney Spears-types of the world, and their generic mass-marketed pap won’t be missed. Assuming that people still spend just as much on music, but put that money towards seeing gigs instead of overpriced trinkets, we should see a surge of creativity and viability in the music industry.

In a few years time, physical copies of electronic recordings will be more like a souvenir than a content delivery mechanism – people will already have most of the tracks, but buy the disc because it represents the music that they love, much like they would buy a band t-shirt. And the current crop of corporate labels who have profited so mightily from delivering music on a near-free medium at a grotesque markup while making artists liable for the costs of the recording and promotion will fade into irrelevance.

Update: In a Slashdot article about the BSA’s response to trackerless Bittorrent (yay!), Shani summarises my position perfectly in the following words:

Most people either download music, and/or see nothing wrong with it. The “extreme” that you mention is the norm.

It is not possible for every activity to result in somebody getting paid. Neither is this a reasonable goal.

There were no “content producers” for most of human history, yet people made music, works of art, and so on. It will be different, neither better nor worse, if the world returns to a state where people are not paid for making digital recordings.

Why people pirate music and don’t care

Following on from my earlier rant post about why it’s hard to make money as an artist, I was inspired by yet another insightful mini-article at ArsTechnica. The premise of the article (based on an LA Times article that requires registration to view) is that the US FBI is reluctant to prosecute P2P copyright violators. Specifically, author Charles Jade finishes with the following paragraph:

One wonders if the tide is turning at last, though it’s not the end to copyright infringement or smoking cannabis that is the likely outcome of law enforcement efforts. Orin Kerr, a law professor at George Washington University, states a simple truth. “The gap here is [that] it’s socially acceptable to download files, but it can also be a crime,” Kerr said. However, as the number of people who commit a socially acceptable crime grows the impetus to enforce the law decreases, then efforts to decriminalize, or at least pragmatically address the issue, increase. The only question is how extreme the laws punishing an act can be made by a powerful minority before the majority decides the issue for good.

This led me to wonder why people are so easy on copyright violators? Ignoring the cost issue, which varies from country to country, I have arrogantly decided to break the answer down to the following three major factors:

  1. Internet copyright violations are seen as “victimless crime”, because you can make a perfect copy of something an infinite number of times without having any effect on the original copy
  2. The majority of popular artists are such distant, abstract marketing creations that we barely relate to them as other humans (they are outside our Monkeysphere), therefore the guilt we might feel ripping off a friend or acquaintance whom we respect just isn’t there
  3. The celebrity system encourages consumers to believe that artists are rolling in money. Sometimes this is true, sometimes it is a marketing myth. The impression, however, is that they won’t miss the income from a handful of CDs.

The way I see it, as long as people are able to play music, it is going to be ripped from the delivery medium and posted in the clear on the Internet via some form of P2P file sharing. The only practical way to discourage this is to create a relationship between the artist and the consumer. This could be via blogs, gigs, personal messages or whatever. Anything that brings truth and reality to the artist’s persona, so that if you hear about someone ripping off that artist’s songs for free without giving anything back, you actually care.

And here is why the RIAA will never achieve this without a complete rethink of their strategy.

Currently, the greatest profits are generated in the music industry by pushing a handful of huge artists to the greatest number of people possible. These are your Whitney Houstons, Britneys, Madonnas, U2s. This is because the cost of recording, which is still pretty high, is amortised across millions of CDs each of which has a 90% profit margin verses manufacturing cost. The studios have an unthinkably large investment in very finely tuned marketing machinery based around this concept. It’s all about big names – big producers, big artists and big stadiums. Getting those dozen or so megastars in front of the maximum number of people at once and then handing them a big paycheck.

You may have heard of the Long Tail concept. It talks about how most of Amazon’s revenue (and revenue from anything on-demand manufactured or electronically delivered commodity) is made on items that fall below the traditional unit threshold for profitability. The RIAA’s members know all about the Long Tail concept, and they are currently applying it to great effect with their vast and immensely valuable back-catalogue, which they can distribute almost for free online via iTunes et al without any promotion, recording, manufacturing or touring costs.

I’m sure this is how Apple originally pitched iTunes to the studios – 100% profit on their whole, slow-moving back catalogue.

Where major studios are in real trouble is with new artists. People don’t give a crap about Britney and her cohorts and will pirate them til the cows come home without feeling a scrap of guilt. The fact that the studios push these small numbers of new artists so far and wide doesn’t help them much, because the most popular a file is in the P2P network the easier and quicker it is to download.

So the challenge for big labels is to leverage the Long Tail concept with new artists. Find a cost-effective way to promote new artists all over the world to audiences that are actually going to care about them and want to provide them with a living wage. If they don’t manage to do that, and continue with their strategy of attempting to sue their own customers into bankrupcy, then they may find themselves obsolete and irrelevant even sooner.

It… wasn’t a debacle?

Tonight, The Debacles played Impro Sundae as a house band. It went far more smoothly than I’d dared to hope, and I’m really impressed by Brent (guitar/bass) and Matt (drums) for their sterling effort in completely unfamiliar circumstances. Brent, in particular, because he’s currently sleeping about 3 hours a night while raising a 2-month-old child.

It started shakily when the host (Dave Williams) introduced us and asked us to play a little riff; we stumbled through 30 seconds of dissonant garbage as we tried in vain to come up with a funky progression. However we soon found our feet, conveniently located at the ends of our legs, and that made all the difference.

Probably the most challenging game for me personally was Balladeer, in which a player sings a few verses, then the players advance the story, then he sings another few verses, and another advance by the players, and so on. We played a completely different tune in a different style for each verse and some of them worked really well, like the Nick Cave one where Andy managed to put in a Red Right Hand reference right at the end. We’d played none of the tunes before, we just agreed on them while the players were acting out the scene, and then jumped in.

Another fun game was Greatest Hits, which tonight was Greatest Hits of the Gatekeeper (?). Cam named himself something like Oleg the Dirty Fuck (or similar) and announced hits along the lines of Youse Cunts Stay Out. My mother was really impressed. At the end, Cam started groping co-host Janelle’s breasts in a scene that can only be described as highly unlikely to appear on broadcast television any time soon. Perhaps it’s his frustration at the relatively gentile constraints of his own Cable show(s)? It was, however, absolutely hilarious.

As was Nick throwing the word Zimbabwe at random into a word-at-a-time story about an anorexic swimmer.

Anyhoo, we played pretty well and improvised as well as could be expected, and none of the players seemed to have any complaints.

Three word assessment: Hard But Fun!

We’ll be back.