The Entertainment Industry isn’t suffering – part 2

TechDirt has published its second “The Sky is Rising” report revealing some pretty good industry growth metrics despite the doom and gloom mantras chanted by industry representatives:

For years now, the legacy entertainment industry has been predicting its own demise, claiming that the rise of technology, by enabling easy duplication and sharing — and thus copyright infringement — is destroying their bottom line. If left unchecked, they say, it is not only they that will suffer, but also the content creators, who will be deprived of a means to make a living. And, with artists lacking an incentive to create, no more art will be produced, starving our culture.

It seems obvious to many that this could not possibly be true, so last year we looked into the numbers to get an honest picture of the state of things. Now, we’re following up with a closer look at six key markets: Germany, France, the UK, Italy, Russia and Spain. What we found there is similar to what we found last year: not only is the sky not falling, as some would have us believe, but it appears that we’re living through an incredible period of abundance and opportunity, with more people producing more content and more money being made than ever before. As it turns out… The Sky Is Rising!

Not too bad for an industry under threat:

A panicked Entertainment Industry and its destructive metaphors

 

This article was initially published on Mark Lives. This is a modified version.

100 000 Photos of Hope-23

We’re so accustomed to the term “piracy” in the context of copyright infringement that we just accept that it is an appropriate term for what is going on. The Entertainment Industry decries rampant content piracy and how the artists are suffering at the hands of these callous Joe and Janine Publics who couldn’t be bothered to pay for the content they are stealing. Legislators and honest consumers worldwide respond almost viscerally to the “piracy” metaphor applied to the practice of making use of content without permission and to the underlying notion of copyright as property which is capable of being stolen in the first place.

To make matters worse, the Entertainment Industry really seems to have the facts and figures on its side. Well, that is what we are led to believe anyway. In his book, Moral Panics and Copyright Wars, William Patry tackles this topic in some detail (and it is worth reading his book to understand the subterranean dimensions of this metaphorical war on consumers). Some of the figures the Entertainment Industry shares with legislators in the United States (and likely with other legislators in other countries) are 750 000 and the $200 to $250 billion figures. As Ars Technica’s Julian Sanchez explained in his critical article titled “750,000 lost jobs? The dodgy digits behind the war on piracy

If you pay any attention to the endless debates over intellectual property policy in the United States, you’ll hear two numbers invoked over and over again, like the stuttering chorus of some Philip Glass opera: 750,000 and $200 to $250 billion. The first is the number of U.S. jobs supposedly lost to intellectual property theft; the second is the annual dollar cost of IP infringement to the U.S. economy. These statistics are brandished like a talisman each time Congress is asked to step up enforcement to protect the ever-beleaguered U.S. content industry. And both, as far as an extended investigation by Ars Technica has been able to determine, are utterly bogus.

It turns out that the key figures the American Entertainment Industry relied on in its lobbying efforts as measures of the terrible impact content “piracy” was having on the artists (the poor, beleaguered artists) were, in fact, nonsense. These metrics have been massaged, exaggerated and blown out of proportion since their genesis in the 1980s but otherwise accepted as truth by, presumably, well meaning politicians trying to understand an apparent economic menace.

What is emerging from more critical examinations of the Entertainment Industry’s reports on “piracy’s” impact on the industry is that these reports are somewhat self-serving and inaccurate. Mike Masnick, writing at Techdirt, has been writing about this for some time and his posts are insightful and challenge misleading and false assertions made by Big Media. His post, titled “RIAA Insists That, Really, The Music Industry Is Collapsing; Reality Shows It’s Just The RIAA That’s Collapsing” speaks to the music industry’s health in the context of a report which reviewed the music industry around 2010 and 2011 and found that, contrary to the Recording Industry Association of America’s assertions, the music industry is doing pretty well.

The report’s findings confirm what many artists and content creators have reported for years. Even in the midst of all this apparent content “piracy”, the effects on the industry as a whole have not nearly been as dire as Big Media would have us and legislators believe. In fact, as I mentioned in a post I published a little while ago, many content creators embrace this “piracy” because its tends to boost legitimate sales of their content. As Masnick points out, the problem is more a perceptual one based on increasingly obsolete business models Big Media clings to:

The real problem here is that the RIAA ignores the zeros. In the past, under the old system, if you weren’t some hugely successful label musician, you generally weren’t a musician at all. You made zero and you dropped out of the market entirely. So you didn’t count. But thanks to the new opportunities, many more people can make music, release music and make money from music. But that means a lot more competition. So, sure, if you don’t compete with that wider base of competition, perhaps you’re going to make less. But that’s not a sign indicating a decline in health of the overall market. It’s exactly the opposite.

I’m reminded of the early studies when computers were first introduced into the workplace. For about a decade afterwards, there were studies that showed that, on average, offices that had computers on every desk saw productivity decline. So, some argued, companies shouldn’t computerize. But that’s a misunderstanding of statistics. The problem was that many companies didn’t know how to properly use computers. Those that did were thriving. Those that didn’t had negative results — and when you netted it out, early on, the negative results outweighed the positive, but that turned the corner once people started to figure things out.

The same thing is happening in the music industry. Many artists are so used to the way things were that they don’t quite understand how to embrace and use these new offerings. For them, life is definitely more difficult. But as more and more tools have made life easier, there’s more and more opportunity, and those who do understand these things are seeing success.

The Entertainment Industry’s focus tends to be regimented licensing arrangements which appear to be designed to protect a business model which developed before the Internet went mainstream and which is designed to protect entrenched distribution channels. The industry has made excellent use of metaphors like “pirate” and “piracy” to malign consumers who obtain and share content illegally and without making use of existing, yet inconvenient and overly restrictive, distribution channels.

An example of this contorted thinking is a recent article in Japan Today titled “A month after download law, consumers spending less on music: survey” about the negative impact a draconian copyright law has had on legitimate music sales in Japan:

On Oct 1, knowingly downloading copyrighted music and video in Japan became punishable by up to two years in prison and a 2 million yen penalty. The law was passed in June after the Japanese music industry, the second largest in the world after the U.S., reported continued financial losses, with analysts suggesting that just one in 10 downloads were legal.

Since the law came into effect, there have certainly been some changes, and many Internet users have become reluctant to click that download button for fear of receiving a hefty fine, meaning that the law has been a success in a way.

According to a recent statistical survey, however, since the law was passed, sales of music in Japan have continued to fall and consumers are actually showing less interest in music than ever before.

Livedoor News reported that the results of a consumer survey show that more than 68% of respondents spend “0 yen” on music in an average month; the highest the figure has been in almost 10 years.

According to a recent statistical survey, however, since the law was passed, sales of music in Japan have continued to fall and consumers are actually showing less interest in music than ever before.
Livedoor News reported that the results of a consumer survey show that more than 68% of respondents spend “0 yen” on music in an average month; the highest the figure has been in almost 10 years.

As the Internet increasingly becomes a part of our daily lives and sharing our lives more frictionless, consumers expect to be able to obtain their content just as easily. Rather than making a concerted effort to change its business models and embrace the Internet and the opportunities it presents, the entertainment industry has adopted a protectionist strategy and has lobbied legislative bodies to clamp down on consumers who defy the industry. Those consumers are labelled pirates and branded criminals and yet there is a wealth of anecdotal evidence that consumers will generally pay for content they can conveniently obtain at a reasonable price. I believe this is why so many South Africans create foreign iTunes accounts to buy content from the iTunes store even though the complete iTunes store isn’t available in South Africa yet.

Terminology that depicts consumers frustrated with irrelevant entertainment industry business models is more indicative of a failing industry unwilling to adapt to changing technologies, consumers’ demands and new business models than it is an indication of a real threat to artists and to rights-holders. Clearly unauthorised content use is problematic and rights-holders are entitled to determine how their content may be consumed but labelling consumers who are desperately seeking alternatives to conventional distribution models and media formats as pirates is more likely to further alienate consumers and aggravate the problem.

Content creators need new attitudes not new censorship

Proposed American censorship legislation, sponsored by the entertainment industry, has sparked a terrific debate about piracy (a problematic metaphor but I’ll use it in this post) and business models. Much of the debate is happening in the United States where the threat to the infrastructure that underlies the Internet has focused minds on underlying challenges and possible solutions. One of the more spirited debates I listened to was on This Week in Tech 332 between tech journalist and podcast innovator, Leo Laporte, and Nilay Patel, formerly a practicing lawyer and, more recently, one of The Verge‘s founders. You can watch the episode below. The debate kicks off near the beginning of the episode and while Leo and Nilay skirt around what I believe are stronger points, its a terrific introduction to many of the issues:

This debate sparked a post by Trey Ratcliff on Google+ titled “Five Reasons Why I Don’t Care if My Stuff is Pirated – A New Way of Thinking“. Ratcliff mentions considerations which are not novel but are increasingly important as content creators explore alternatives to conventional thinking that locking content down is essential to successfully exploiting that content commercially. This new thinking has been illustrated time and time again in the music industry with artists like Nine Inch Nails, in the book publishing industry by authors like Paulo Coehlo and, locally, photographers like Catherine Scott who recently revealed her Creative Commons-based strategy for promoting her work.

The entertainment industry’s focus tends to be regimented licensing arrangements which appear to be designed to protect a business model which developed before the Internet went mainstream and which is designed to protect entrenched distribution channels. The industry has made excellent use of metaphors like “pirate” and “piracy” to malign consumers who obtain and share content illegally and without making use of existing, yet inconvenient and overly restrictive, distribution channels. As the Internet increasingly becomes a part of our daily lives and sharing our lives more frictionless, consumers expect to be able to obtain their content just as easily. Rather than making a concerted effort to change its business models and embrace the Internet and the opportunities it presents, the entertainment industry has adopted a protectionist strategy and has lobbied legislative bodies to clamp down on consumers who defy the industry. Those consumers are labelled pirates and branded criminals and yet anecdotal evidence is that consumers will generally pay for content they can conveniently obtain at a reasonable price. I believe this is why so many South Africans create US iTunes accounts to buy content from the iTunes store even though the official iTunes store isn’t available in South Africa.

Of course, consumers who are intent on downloading content with no intention of paying for it will do that anyway. The true criminals will never pay for content as long as there are effective channels available to them. New channels open up just as the entertainment industry closes off old ones. Napster and similar peer to peer file sharing sites were put out of business and consumers co-opted BitTorrent for their content downloads. When consumers tormenting content discovered their activities can be tracked, they discovered a wealth of content in newsgroups at faster download speeds and the added benefit of SSL encryption which disguises their activities. Unfortunately the so-called Copyright Wars just escalated at each step to the point where the entertainment industry is playing a losing game of Whac-A-Mole, constantly several steps behind savvier consumers.

Although the entertainment industry shows no signs of relenting in its efforts to stop what it regards as content piracy (and becomes one of the most significant threats to human rights and innovation in human history), creators are embracing a different model that embraces piracy as yet another distribution and promotional tool. Ratcliff describes this very nicely in his Google+ post when he states the following:

3) The “pirates” are part of my community. Not everyone in the community has equal means. Pirates are not cretins riddled with immoral behavior in every part of their life. These are all generally good people who would gladly support me, their friendly local neighborhood artist, if they could easily afford it. They can’t now, but they will be able to some day… I give them something now, and they will give me something later. For example, 24 years ago in high school, I used to pirate Sid Meier games on my Amiga (including a game called Pirates). Now that I have money, I buy every single game that Sid Meier puts out.

4) Pirates have friends that have money. It’s still word-of-mouth, the most effective friend-to-friend marketing in the world. If pirates like what you do, they’ll tell their friends. Not everyone is so handy with bittorrent and this sort of thing. Since I make purchases simple on my website at http://www.StuckInCustoms.com , many will come make the purchase because it is easier than pirating.

Of course the proof is in the pudding, as the saying goes. Its all well and good to accept piracy and release content under liberal licenses like Creative Commons licenses but an important reason for creating that content in the first place is to make money. When Nine Inch Nails released Ghosts I-IV under a Creative Commons license (it was freely available through torrents and free downloads elsewhere with Trent Reznor’s blessing), the band sold all 2 500 limited edition premium bundle priced at $300 in a matter of days, despite the albums themselves being freely available. More recently, popular American comedian Louis CK distributed a new release digitally online and, allowing for piracy (which he acknowledged and apparently accepted), he made in excess of $1 million in 12 days through his website. He produced and directed the production independently. The following paragraph from Louis CK’s 13 December 2011 statement is revealing:

The show went on sale at noon on Saturday, December 10th. 12 hours later, we had over 50,000 purchases and had earned $250,000, breaking even on the cost of production and website. As of Today, we’ve sold over 110,000 copies for a total of over $500,000. Minus some money for PayPal charges etc, I have a profit around $200,000 (after taxes $75.58). This is less than I would have been paid by a large company to simply perform the show and let them sell it to you, but they would have charged you about $20 for the video. They would have given you an encrypted and regionally restricted video of limited value, and they would have owned your private information for their own use. They would have withheld international availability indefinitely. This way, you only paid $5, you can use the video any way you want, and you can watch it in Dublin, whatever the city is in Belgium, or Dubai. I got paid nice, and I still own the video (as do you). You never have to join anything, and you never have to hear from us again.

These successes are not limited to well known artists. Smaller artists are similarly successful in their efforts to promote themselves outside the conventional entertainment industry model, albeit on a smaller but still meaningful scale. Catherine Scott wrote about her experiences as follows:

I get a lot more commissioned work – which ends up more lucrative for me. I never have to worry about selling an image – or frankly theft of an image, and so far, have been wonderfully busy, with a varied audience and client base.

Ratcliff seems to be enjoying substantial success in spite of the piracy he is both aware of and accepts:

5) Last, and most important, as soon as I opened everything up, our business has grown and grown. Our team now of about 10 people are happy and everything is profitable. It is strange to see a chart over time that shows an increase in revenues and an increase in piracy. Now, piracy is not the reason that revenues are increasing, but they are not hurting revenues.

On the other side of the fence, artists who aspire to be signed to labels and publishers have found that their rewards have been less than expected and they often lose their rights to their content and control over its release in the process. When the entertainment industry talks about harm suffered by artists due to piracy, they really should refer to the harm to the industry’s profitability. Artists rarely feature as stakeholders. The entertainment industry probably does more harm to creative expression than pirates through its approach to content licensing, both from artists and to consumers.

I really like Ratcliff’s approach to his work and to so-called pirates. His point that these consumers like his content enough to take it, albeit without paying, is a terrific one. Consumers wouldn’t bother to pirate content if it didn’t appeal to them and, like Ratcliff and many other creators, I believe that fans will support the content creators they love and while some won’t pay for that content, those who can, will. The fact that there is so much casual content piracy has more to do with the entertainment industry’s attitudes than it does with consumers’ dubious intentions. In a sense, the entertainment industry created a pirate culture and its come hime to roost.