Is Piracy the Downfall of the Music Industry?
Mar 29, 2010 at 1:36 PM (A bit of a format departure for the site, below is an academic type paper for your viewing pleasure. Let us know what you think.)
By Will Bryant
It is a 
phenomenal time to be a music fan. There are millions of bands to sample, hundreds of thousands of concerts on a given night and devices the size of a credit card to keep a collection of favorite tunes while you’re on the go. Consumers have more choice than ever before, all thanks to developments in digital technology. Music fans are no longer limited to what the radio stations play or what their local music store sells; they can jump online and have access to a virtually limitless pool of new music. It is a shame that all of this freedom is coming at the price of the music industry.
The RIAA (Recording Industry Association of America) is doing a phenomenal job promoting its recent campaign: piracy equals stealing. They subpoena targets ranging from soccer moms to college kids – anything to get the media abuzz about the injustice of downloading music illegally. In their mind, “The record company incurs the recording costs, while the pirates…steal the profits…artists lose out on royalties, music publishers lose out on mechanical license fees and union members lose payments to the trust funds” (Krasilovsky p70). During the past decade, the RIAA has spent millions upon millions of dollars combating music piracy because, evidently, the technology is causing them to bleed money: “In 2001 the record industry worldwide lost about $4 billion due to piracy, including on-line piracy via peer-to-peer transfers or by other means” (Krasilovsky 70). Those are staggering numbers. Also staggering is the average $6,100 penalty per song the RIAA imposes on “pirates” to deter others from procuring music through non-traditional means. Only a small portion of these fees goes to the artists; the majority is used to support the RIAA and the label’s efforts to curtail piracy. Jammie Thomas-Rasset, a natural resources coordinator and mother of four from Brainerd, Minnesota, became a household name in 2009 when she was ordered to pay $1.92 million dollars for her 24 illegally downloaded tracks (Sandoval). The amount was reduced to $54,000 but it is amazing to think of the money she could have saved if she had purchased the tracks through a sanctioned channel.
“The battle for paying digital customers may have been lost before it had truly begun” (Goldman). Simply stated, the record industry was slow to adapt to the world of digital recordings. The file-sharing site Napster hit its peak in 1999 – around the same time CDs shot up exponentially in price. Instead of embracing the technology as a way of strengthening consumers’ affinity for music, the labels hiked prices even higher. Music piracy was given another shot in the arm with the technological breakthrough of the portable MP3 player. Suddenly the need for a CD player was gone altogether – simply download a few tracks and take them anywhere. But there is a disconnect between the MP3 players and the cost to fill them with music. Rob Sheridan, a record-industry insider best known for his art direction with the band Nine Inch Nails, explains:
“iPods have become synonymous with music – and if I filled my shiny new 160gb iPod up legally, buying each track online at the 99 cents price that the industry has determined, it would cost me about $32,226. How does that make sense? It's the ugly truth the record industry wants to ignore…the idea of music being something you collect in large volumes, and trade freely with your friends.”
And that is exactly what is happening within the labels themselves. Music fans working within the company are exchanging the files with their friends, therefore leaking the material to the outside world. In essence, the labels are to blame for the music’s existence on the Internet. Sheridan continues:
“The RIAA loves to complain about music pirates leaking albums onto the Internet before they’re released in stores.... But you know where music leaks from? From the…source…the labels! Most bands know that once their finished album is sent off to the label, the risk of it turning up online begins, because the labels are full of low-level workers who happen to be music fans who can’t wait to share the band’s new album with their friends…and before long, it turns up online. Why? Because people love music, and they can’t wait to hear their favorite band’s new album! It’s not about profit, and it’s not about maliciousness.”
More often than not, music is being shared with others for the joy of sharing a new artist with others. Many see it as an extension of the artist sharing their material with their fans.
Both sides agree piracy is a byproduct of technological advancements designed to enable rapid and robust information exchanges. The question is, why do people download music in the first place? For the past two years, I closely followed the case of Allan Ellis, owner and creator of OiNK’s Pink Palace, a BitTorrent tracker that operated from 2004 to 2007. The site was a phenomenal catalog of independent artists, live recordings and unreleased material from musicians from around the world. Though users were sometimes guilty of sharing mainstream music (i.e. a recent Wilco album), the site was primarily focused on exchanging files not available through traditional channels. Trent Reznor (of Nine Inch Nails) publicly admitted he frequented the site, calling it “the world’s greatest record store” (Westhoff). He went on to explain that the users are “not stealing because they’re going to make money off of [the recordings]; they’re stealing it because they love the band. I’m not saying that I think OiNK is morally correct, but I do know that it existed because it filled a void of what people want” (Westhoff). Interpol, the International Criminal Police Organization, shut down the site in 2007. Ellis was acquitted January of this year.
Is file-sharing morally “wrong?” Legally, “One is allowed to make a digital copy of a CD one owns and store it on one’s home computer, and also to give the file to a friend… Music file-sharing programs simply facilitate this…behavior on a much greater scale” (Callahan 187). As many Americans can attest, just because something is “legal” does not mean it is moral. Callahan continues, “Surveys show that less than 10 percent of music swappers think that piracy is wrong – even though 20 percent believe it hurts artists and not just the record company” (186). Pundits of file-sharing technologies often cite the music industry’s greed and lack of ability to adapt to the change as reasons for the rampant increase in music piracy. Also, fans would be hard-pressed to find fault in sharing music as it’s a form of praise for their favorite artists and potentially “converts” others who may become devotees and even legally purchase their music. In short, “The determination of fans to share music is much, much stronger than the determination of corporations to stop it” (Sheridan).
Is piracy single-handedly killing the music industry? Yes and no. It is true that record labels are bleeding money. They simply can no longer compete with illegally downloaded music and there is no way of keeping up their deterrents. Digital Rights Media (DRM) limitations and RIAA scare tactics, the most recent efforts by the majors, are doing little to curtail piracy. Since music sales represent the majority of labels revenues, it appears piracy is indeed bringing the major labels to their collective knees – the old model used for more than six decades is no longer relevant. Piracy is cutting off the means for their survival. If piracy did not exist, then (theoretically) record labels could continue their paths of artist exploitation. So, yes, piracy is a problem. That said, the labels are extremely slow to develop other means to support themselves; they are not adapting to technology. The major labels desperately need a new approach as Reznor explains, “[Record labels] seem to be doing everything they can to make sure that [their demise] happens as quickly as possible” (Westhoff). For the first time in their existence, they need to rethink their business model. Piracy is hurting them and they are doing very little to turn their situation around. That said, some are optimistic about the future, “The problem for the music industry may actually be its greatest opportunity. Despite the great decline in sales, the Internet has exposed consumers to more music than ever before. But that accessibility has been difficult to monetize” (Goldman).
Piracy is the great scapegoat of the major labels. They are spending more time crying foul than embracing the future of music. Does piracy translate to the end of the music industry? No. Artists are going to continue to record albums and play shows, fans will still support their favorite bands. We may not have as many pop sensations, but the music industry, as a whole, will continue to thrive. Music labels, on the other hand, need to adapt and adapt soon. The old model is no longer relevant.
Music sharing is an inevitable side effect of digital technology. I believe it can be leveraged to increase a band’s visibility and, in time, be monetized so both labels and artists can profit. Either way, there is no going back to the traditional record label model; artists and consumers simply have more control than ever before. The battle of piracy is likely to rage on for a number of years but the music industry is in no danger.
Works Referenced
Associated Press, “Speaking of Music Piracy...,”Associated Press (linked viaWired), April 8, 2004, http://www.wired.com/entertainment/music/news/2004/04/62995
Callahan, David, The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead, United States: First Harvest, 2004
Goldman, David, “Music’s Lost Decade: Sales Cut in Half,” CNN Money, February 3, 2010, http://money.cnn.com/2010/02/02/news/companies/napster_music_industry/
Krasilovsky, William, Shemel, Sidney and Gross, John M., This Business of Music: The Definitive Guide to the Music Industry, New York: Watson-Guptill Publications, 2003
Sandoval, Greg, “Court orders Jammie Thomas to pay RIAA $1.92 million,” CNET, June 18, 2009, http://news.cnet.com/8301-1023_3-10268199-93.html
Sheridan, Rob, “When Pigs Fly: The Death of Oink, the Birth of Dissent, and a Brief History of Record Industry Suicide,” Demon Baby, October 27, 2009, http://www.demonbaby.com/blog/2007/10/when-pigs-fly-death-of-oink-birth-of.html
Westhoff, Ben, “Trent Reznor and Saul Williams Discuss Their New Collaboration, Mourn OiNK,” New York Magazine, appeared in print November 5, 2007, online October 30, 2007, http://nymag.com/daily/entertainment/2007/10/trent_reznor_and_saul_williams.html
Reader Comments (8)
Nice Job! Trent Reznor has been on the cutting edge, essentially exposing his new music (ie. product) to his fans (ie. consumers) in a forward-thinking way for YEARS. Embrace Creative Commons, let the good stuff shine. There is always a way to monetize if you have something that people want. If music is kept from the fans, well yeah, no one will make a profit! I think Trent is doing just fine, and so can we!
One thing left out of your article is the decline of "Good Audio Sound" Not to be vulgar here, but the sound quality of an MP3 "Sucks" when compared to a high end CD or a good Vinyl Pressing. What would be the point of having a killer stereo system to play a shitty MP3? One way for a band to make money from sales is to press limited edition vinyl and charge good money for it. In the case of vinyl you can't down load it, you have to purchase it and the sound of an MP3 /CD just doesn't stand up next to it. There's a generation of listeners who haven't got a clue what great hifi sounds like. (It's a form of cultural poverty) We used to eat home cooked food, now we eat at MacDonalds :(
Personally I think Piracy stinks, and people who get caught should pay a price. It's hard enough for a band to get a club to fork over money for a performance let alone have their music stolen and passed around like a slave with no rights or protections. If people expect to get everything for free they'll lose interest and music will become wall paper,
which to an extent it already has.
One result of all the piracy and subsequent demise of the record industry is the loss of a clear goal. At one time you knew you had to show case and attract record companies to come to a show in order to get signed. Getting signed was your first hurdle. But it was a clear goal. It's all become very nebulous.
Now the up side to all this is that bands do not need to fit a narrow industry mold any longer. Many artists who would get passed over because they didn't have a certain "Look" or "Sound" now have as fair a shot as anyone else. Trent Reznor is an interesting guy, but I'd point out he came from the former record company system. He's got name recognition big time, but in the case of a small independent artist, too much downloading and not enough buying leads to the poor house.
Now imagine for the sake of argument "Sporting Events" were downloaded like the way music is. How long before that industry moved in to crush the usurpers? When I want something new bad enough I go and "Buy" it online, or find the CD (Which are starting to disappear) As a musician I know that if I steal it I'm as big a scumbag as the next pirate.
Good article BTW, I think this subject really needs to be explored. I hope you will follow up and respond to comments. Cheers J.C.
As a recording artist myself, I fully recognize the awkward state that the music industry is in today. In the age of MP3s and downloading, artists and labels simply have to adapt or suffer the consequences. Piracy only hurts major labels and their artists, those stuck in the old ways. For indies, file sharing offers the potential of acquiring more fans and in turn more sales. Also note the rhetoric - industry desk-huggers who see songs as potential money makers for the corporation call it piracy, while fans and sites that spread the music for the love of the art call it file sharing. It all depends on perspective and, for artists, how you want to use the situation to further your career.
BTW, "losing money" is misleading corporate language that the industry likes to use. You don't take money away from labels and artists by downloading music for free, you just don't give them any. If a major label has invested in an artist/album, it's generally a whole package including concerts, merchandise, etc. If, in the long run, total revenue doesn't match projected profit, obviously you need to change your business model. Don't try to blame the fans, your customers, for your incompetence - you're the business people. Once again, perspective and adaptation.
Through downloading and social networking, artists today have a more direct connection with fans and more personal resources to spread their music globally. By cutting out middle men, artists stand to make a bigger profit per unit. This means that more artists can enjoy success independently on a moderate amount of sales, enough to pay the bills and continue their careers without compromising their art. And this, I believe, is what the unchanging music industry fears the most: that soon, they may not be needed at all.
I like the fun use of the word's "File sharing" as a replacement to "Stealing" It reminds me of the George Carlin routine about how "Shell Shock" morphed into "Post Traumatic Stress disorder" I'm not a defender of the Music "Business " at all, but their machine did serve a purpose, to let the Artist focus on the art rather than the business. All to often I find myself spending more time on-line promoting than I do writing songs. And if you're trying to make a go of it in NYC you know you have to be musician, showman, promoter, agent, internet wizard and bean counter all rolled into one.
Maybe we're all missing a larger point. Perhaps the Record company of the future is smaller and leaner and does not take such a huge chunk of Artist royalties. They partner with the artist and for a reasonable fee take some of the laborious chores off the hands of the Artists. They keep their over head down and focus on making a respectable living rather than being the next Clive Davis. I'd gladly do a split of say 60 me, 40 them or there about provided the Record company handled web presence and updates, helped get quality gigs, wasn't looking to own publishing rights out right, got the band press etc etc. Contractual agreements would have to be amicable to both parties. This company of the future starts from the jumping off point of new media, downloading, "File sharing", multiple web and music sites rather than starting from the old model. (Whoops there I go again, I must be dreaming)
It is a phenomenal time to be a music fan indeed!
The internet has changed everything just like TV changed everything and the radio changed everything before that. Radio and recordings made it possible to take music home, stealing a little bit of thunder from the live music scene. Venue owners and bartenders probably got shaky in the knees for fear of losing the live act. MTV came along and took Radio for a ride, turned popular music into an image rather than a sound. Radio jockeys and boom-box makers lost jobs. Music Video producers and Carson Daily made bank. People adapted.
Now the internet is here and who knows what's going to happen. Through it all, though, during both TV and Radio reigns, somebody made out like bandits; somebody will make out like bandits with the internet too. Already, teen sensations like Ashor Roth and Vampire Weekend have learned internet tricks that promote their music to huge niches of fans. Guaranteed there was some marketing genius behind these (excuse my opinion) talentless hacks who made a fortune. Blogs like Pitchfork and numerous other smaller blogs have found ways to monetize streaming music with advertising. Streaming is legal, yet musicians make no share of the gold. In a sense, they get free advertising, but no ones going to buy their music
The debate comes down to ownership.
Ownership of music is really something that has only happened recently. I'm only guessing, but I can't imagine it was very long ago that the first recordings were made. Ownership before then was a king or master owning some jester or harp player. So it's almost satisfying, in sick way, to watch the industry essentially burn... a couple of slave owners shooting up in flames. Ownership was something they created as a way to promote music, to essentially monopolize it. If you've seen Jimmy Cliff's "The Harder they Come," you know that individual artists, at least in Jamaica, have no muscle up against the record industries. It seems similar here too. In order to get your music heard, you had to go through the industry. They had the recording equipment, they had the jockeys in their pockets, they had everything.
But with the internet, all it takes is a fresh young brain to mobilize and promote bands; a popular, brave and respected member of the music world. Blogs. Facebook. What look like innocent hipster arenas and teen, virtual hang out spots may turn into a single giant web of promoters, marketers, visual engineers, audio engineers... a couple of college dudes who wake up and have kids and realize they need cash. I'm only guessing because if I knew the way, I sure as shit wouldn't be telling you, but, unless the internet really does prove to be as mysterious as it seems, somebody's going to figure out all the loopholes and windows. Maybe they already have.
When all is said and done, if you are an extremely good musician and want to make money, you'll find a way to do it. I'm sure the Fleet Foxes and Taylor Swift have some money. If you want a fast ride in fame, find someone who's good at making connections in mass amounts and do your hair funny, pretend you can sing. But always make sure your boobs are big first and your eyes glimmer like the stars...
But for me, I'll huddle myself in a dark bar and enjoy the underground scene. As there is less and less money for the more talented, they'll be seen in dive bars. And cheers to that. That's where music should be listened to anyways. Who cares how many CDs you own or days of music are on your ipod. Who cares how much money Keith Richards made.
The record industry is done, sure, but certainly not the music industry! We live in an exciting time.
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Yeah! You bet, Piracy is a very cruel crime that promotes economy downfall.
It has stolen billions of dollars in different industries.