While the music industry desperately searches for ways to stem the tide of piracy that threatens to engulf it, new data from the BI Norwegian School of Management suggests that music pirates actually buy more music than others. A lot more.
When it comes to P2P, it seems that those who wave the pirate flag are the most click-happy on services like the iTunes Store and Amazon MP3. BI said that those who said they download illegal music for "free" bought 10 times as much legal music as those who never download music illegally.
How can this be explained?
I've written before that piracy is a great way to help the music industry gauge the tastes of its prospective customers and that there are a host of new adoption-based business models lurking in this rampant piracy.
But these perhaps explain solutions to the piracy problem. They don't explain why music thieves may purchase more music than others do.
One way to explain it is simply to acknowledge that piracy may precede purchase. People may be downloading songs in anticipation of buying those worth their 99 cents. In this way, most of the downloaded songs will never be followed by a click-to-purchase.
For me, the frequency of downloading songs off peer-to-peer service LimeWire has trickled to a halt over the years as Apple's iTunes library has expanded. At 99 cents, I can afford to squander money on songs that I may delete a few days later. But I'd prefer to listen to a full song before I buy it, if that were an option.
Yes, I know I can use services like Pandora and Last.fm (operated by CNET News publisher CBS Interactive), and, yes, I know that iTunes and Amazon.com offer brief preview clips, but this latter option is almost never a great way to evaluate music. It's too brief.
I doubt that many people deliberately want to steal music. They simply don't want to buy in inconvenient formats (who wants a physical CD?), or they don't want to pay for casual listening to music that they really don't like enough to buy. So the download becomes the equivalent of listening to music over the radio.
There are ways to monetize this casual interest, as I link to above. But the music industry is going to have to experiment to discover them. Ultimately, it's going to have to grapple with piracy as an opportunity, not a threat.
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Digitization has a disruptive effect on a wide range of industries, from music to software to publishing to...you name it. If it can be digitized, it can be disrupted.
It's therefore encouraging to see the music seemingly converging on a cool new-old model: an ASCAP (American Society of Composers, Authors, & Publishers)-like tax from one's Internet service provider that allows unlimited downloading of music.
Gerd Leonhard's recent presentation on the subject is the best I've seen yet, one that I'd recommend you review, even if you never stray from the software world to think about music:
Leonhard argues that digitization has made a control-based music economy impossible, forcing the industry to seek other ways to monetize music--ways that conform to digitization's abundance, rather than to the old idea of scarcity.
In a sign of things to come, the Isle of Man just approved "a single blanket fee (that) will cover unlimited download activity for all 80,000 or so...residents," as Ars Technica reports.
This follows a new trend toward "free" services, in which the music industry hides the cost of the music in the price of a separate service or device. It's oddly similar to trends I'm seeing in software.
This isn't the only model. As the Future of Music blog points out, some musicians, like Corey Smith, are finding that giving away music to drive more concert ticket sales can be a winning recipe. But while $4.2 million last year for Smith is a great return for an individual artist or band, it's not a great way to build an industry. I'd liken it to "lifestyle" software businesses that generate great revenue for their founders but provide little in the way of equity for other participants in the company's success.
So I think the "adoption tax" model is promising. The future is flat-rate: you subscribe, you forget about paying for individual transactions, you enjoy more music than you ever have before.
As reported in Friday's Wall Street Journal, the music industry has apparently given up on suing 13-year olds and dead people in its quest to stem music piracy. Instead, it plans to work with ISPs to identify and notify copyright infringers of the need to come clean:
[T]he Recording Industry Association of America said it plans to try an approach that relies on the cooperation of Internet-service providers. The trade group said it has hashed out preliminary agreements with major ISPs under which it will send an email to the provider when it finds a provider's customers making music available online for others to take.
Depending on the agreement, the ISP will either forward the note to customers, or alert customers that they appear to be uploading music illegally, and ask them to stop. If the customers continue the file-sharing, they will get one or two more emails, perhaps accompanied by slower service from the provider. Finally, the ISP may cut off their access altogether.
Cory Doctorow, among others, has sharply criticized such an ISP partnership in the past, but I see it as a big step up from the industry's current tactics, and one that could lead to other possible solutions like a music tax at the ISP level. TechDirt doesn't like this option, but it's unclear what other (good) options the industry has.
Throttling downloads at their source - i.e., the ISP that provides the bandwidth - is at least the right area in which to target the activity. Whether a tax or some other solution ends up working matters less than that the industry is now focused on the right piece of the piracy puzzle.
For those struggling musicians worried by rampant piracy and the subsequent difficulties in earning a living, Tim Blanning has news for you: it was ever thus.
Writing in The New Statesman, Blanning traces the history of the music industry, finding "Modern musicians' lot compares very well to that of their predecessors." Indeed, Blanning points out the very bane of modern musicians' existence - the ability to record (and, hence, copy and distribute) music - is also the very reason that musicians have an opportunity to generate outsized returns on their musical investments.
Until music could be recorded, the only revenue available to the musician was from performances of that music. "Not even as great a virtuoso as Paganini or Liszt had a back catalogue."
The result? Today, good-but-not great bands like Coldplay can make tens of millions while the great composer Richard Wagner died a comparative pauper. With all the flaws of the modern system from pirates and ensuing economic uncertainties, we should be cheering the modern system and its digitization of musical content, even when some profit is lost to piracy.
For composers...copyright protection is very much a creation of modern times. Until deep into the 19th century, piracy of the most flagrant kind was the norm....In the course of the 19th century, ever-growing markets, bigger spaces for music and better communications allowed many more performers to make much more money....
...[Even so] for every Bono and his countless millions, there is a host of modestly paid session players, 90 per cent of whom earn less than [$22,500] a year....It will come as no consolation to them to know, if they do not know it already, that it was ever so.
Ever since musicians emerged from the servile but cosy world of aristocratic patronage into the harsh daylight of the public sphere, the musical profession has been a pyramid with a broad base and a sharp top. The new opportunities brought by every major technological shift have also left many casualties among musicians unable or unwilling to adapt.
There are no easy answers for the music industry, but in its quest to capture all possible digital revenue, let's not forget that digitization has introduced dramatically more available revenue than ever before. A little "leakage" hurts, but not nearly as much as it would to go back in time and earn one's keep by performance alone.
Warner Music Group has a proposition for U.S. universities, according to Techdirt: buy a blanket license to music downloads through file-sharing services, or be sued.
Techdirt thinks that this is a bad idea, and I disagree.
Techdirt's criticisms are clear:
It's basically a music tax--allowing the record industry to be lazy. Someone else gets to go out and collect all this money, and hand it over to the industry to distribute (or, actually, not distribute). It effectively sets the business model of the recording industry in stone, and harms better, more innovative business models by inserting the recording industry (and not the musicians) into a role where they don't belong.
But the benefits to such a blanket tax are also clear, as I wrote back in 2003. Consumers want a convenient way to pay for content. A tax levied by the ISP is a highly efficient way to ensure that the music industry gets paid, and that consumers don't get slowed down in their enjoyment of music.
Techdirt has some valid points, but it fails to identify the "better, more innovative business models" that would take the music industry forward, either in this article or in the others to which it refers.
Personally, I pay for my music, movies, and other media. But not everyone does, perhaps because they don't want to use iTunes or a similar service, for whatever reason. A minimal tax added to students' university fees would easily cover this, with little cost to these consumers and great benefit.
No, not every student would end up using the service, but that's the nature of a tax: sometimes you pay for others' benefits, not yours. In fact, that's usually the way it works.
So many good stories, so little time....Here are a few of the best posts today:
- You might not be able to get Google-like profits, but at least you can treat your employees more like how Google treats its own employees. There's a good lesson in there....
- Most of the music on the iPods of UK youth has been pilfered. Surprising? No. There are two interesting factoids in the data, however:
- "80% of those who admit to illegally file-sharing are prepared to engage with a legal file-sharing service, and place a considerable monetary value on it"; and
- The older people get, the more they pay for music. 55 percent of youth aged 14 to 17 illegally download music, jumping to 60 percent when they're aged 18 to 24, but dropping down to 39 percent when aged 25 and above.
... Read more
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