The sky is not falling on the music industry

I tend to talk about Big Media (aka the entertainment industry) on this site quite a bit. The reason for this is pretty simple: Big Media constantly complains about how content “piracy” (its term for infringing music and movie downloads and sharing) is costing the industry enormous amounts of money, jobs and sales. It has been a constant drumbeat for the last few decades and the industry uses a variety of increasingly absurd statistics to persuade legislators around the world to enact overreaching legislation that will have a detrimental effect on the Web and users’ ability to share and express themselves legitimately. I have referred to Big Media as the biggest threat to progress and innovation a couple times and I don’t think this is an exaggeration.

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 latest 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 previous post, 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 immediate threat is that we see treaties like ACTA being adopted by more countries and bills like SOPA being introduced again and again. These legislative frameworks are part of a longer term campaign to impose more restrictive and harmful copyright regimes on national legal frameworks and its driven by Big Media. In the meantime the industry is not addressing users’ desire for convenient and reasonably priced content sales options. What it is doing is making more and more inroads into the once free and open Web and that is bad for consumers and businesses. This isn’t to say that content “piracy” is a good thing as a general rule. Content creators should be able to protect their rights and distribute their content in ways they are most comfortable with (and should have the legal authority to do that effectively) but there are many content creators who are exploring alternatives and should be free to do that.

Techdirt’s report is important because it shows the lies behind Big Media’s statistics and the basis on which its draconian requirements are based. What is sorely lacking is meaningful transparency in the industry and these sorts of reports show that what is really suffering is Big Media itself. The artists and creators are discovering new tools and attitudes and are making them work for themselves.

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.

Injecting sanity into UK copyright law

So Much Music

British lawmakers are exploring measures to ease an increasingly absurd music licensing restriction as part of a broader copyright reform initiative. According to the New York Times:

While taking action against file-sharing, the government is offering a quid pro quo by moving to liberalize the rules on personal copying. Surveys have shown that most Britons were either unaware that format shifting was illegal or that they flouted the prohibition anyway.

“If you just tell people, ‘you can’t copy this CD that you bought, for personal use,’ they’re never going to respect you when you tell them it’s wrong to copy for others,” said Simon Levine, an intellectual property lawyer at the firm of DLA Piper in London.

The absurdity in the current position has its routes in a legitimate interest in protecting content creators’ rights including the right to exploit their content commercially. Unfortunately the music industry has taken advantage of this legitimate form of protection a little too far. I wrote about this in about December 2008 and the following bears repeating:

While it may have been conceived to stimulate creativity, the use of copyright has changed over time to effectively become a bar to creativity and innovation because copyright holders have elected to rather use copyright to lock down their works, preventing the exploitation of those works except in terms of licenses they grant. These licenses permit other people to make use of the works by granting them limited rights to the works concerned. Take a music CD as an example. Many people labour under the misapprehension that when they buy a CD from a music store they become the “owner” of that CD and can do with it what they wish. If you take a look at the tiny print at the back of the CD on your shelf you will notice that when you bought the CD you actually licensed the CD from the nebulous “music company” and you have very limited rights to the music which do not include the right to make copies of the music (whether onto another CD or by ripping the CD to your computer) or pass the music around. You can pretty much listen to the CD and appreciate the fine album art in the company of your personal CD playing devices. You can’t play the music in public or make a remix of your favourite tune and share it online. If you do anything outside the very limited parameters of the license granted to you when you handed over your hard earned cash to the cashier, you are committing copyright infringement. That is what licenses do, they set the parameters of your use of the content they are created for and any use outside the parameters of the license is unauthorised and constitutes copyright infringement.

Digital music players are everywhere: iPods and similar music players, phones and a variety of computers. The technical requirement that consumers buy multiple copies of their preferred music for each device and form factor makes no sense. While American copyright law allows consumers to rip their CDs and play the music on their chosen media player or device under fair use, that a personal or private use exception to copyright infringement is excluded from uses of sound recordings (music qualifies as a sound recording in the sense I’m referring to it in this post) that are not copyright infringement in our Copyright Act. This means that under South African copyright law, ripping CDs or otherwise format shifting is illegal and constitutes copyright infringement, at least when it comes to consumers buying CDs and moving that music on to their preferred digital music player.

Hopefully the steps taken in the UK will take begin to take root in South Africa at some point in the near future. The original purpose of copyright protection is being abused by the music industry to protect its anachronistic business model and its profitability. In practice little benefit filters down to artists themselves unless those artists are one of the very few big names. We sorely need copyright law reform and alternatives to the current industry model are popping up again and again, with remarkable success. If anything, the moves in the UK are encouraging because they may be the beginning of a new legal trend that strikes a better balance between consumers’ desires and artists’ interests. I previously wrote the following:

Copyright law was originally and is still intended to foster creativity. What we find, in practice, is that Big Media (my term for the international music and movie industry) is engaged in a cold war against new business models and copyright infringers and, almost in keeping with George W Bush-style rhetoric, have made the choice consumers have one between supporting an aging and increasingly ineffective business model and supporting the “terrorists” (these people may be actual terrorists or something similar from Big Media’s perspective).

This is not an argument against copyright law but rather its application by vested interests that are often at odds with creators’ interests.


Image credit: So Much Music by Martin Cathrae, licensed CC BY-SA 2.0