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Common Errors about Music Piracy

Killing Music Do pirates steal money from musicians, and make it harder for new artists to break through? Or are they simply renegade librarians using a new technology that exposes the outrageous injustice of cartel pricing in the music industry? A brief look at some of common mistakes concerning file sharing piracy.

 

1. Every Pirated Copy is Lost Revenue

The notion persists that piracy is theft, a view I have argued against (forgery being closer in tone to the actions in question). However, the ‘theft’ fiction encourages the idea that the legal rights holder loses money with every pirated copy. It is true that some pirated copies end up in the hands of people who would otherwise have purchased the material, and these are lost sales. However, the typical pirate could not afford to buy all the material they acquire, and certainly would not purchase much (if any) of it were it not for their access to technology allowing them to acquire it without paying any per-download fees.

The majority of pirates I have spoken to are either very poor or at least lacking in wealth, and in some cases this provides their direct motive – the people concerned can’t afford to get the media legally. However, many people who engage in widespread piracy have a different kind of motivation, and may in fact view what they are doing as essentially an altruistic sharing of media that they have enjoyed with others. This perspective is based entirely on the viewpoint of the consumer, and conveniently ignores the producers of the relevant media entirely. A similar situation occurs with public transport in some cities: travellers who bought a day ticket will sometimes pass it on to a stranger when they are finished with it, viewing that exchange solely from the perspective of the lucky recipient of free travel and ignoring the loss of revenue to the operators of the transport system. Whether you think this behaviour is morally acceptable depends greatly on your own moral ideals.

Compulsive hoarding of media content is comparatively common among file-sharers, and the willingness to open this personal library to others is one of the things that sustains contemporary media piracy. I have termed the collective set of media available through file sharing the black library in reference both to it’s current illegality on the one hand and to the fact that only data changes hands not money, hence considering it a black market would be misleading. The existence of the black library is a sign that money is being lost, but it is not conclusive proof that the library itself can be held wholly responsible for that loss, and certainly the scale of the losses cannot be determined by the number of copies of a file being shared multiplied by the retail price of the associated media.

The conclusions to be reached depend upon the assumption taken into the reasoning. If sale of music media as a product is presumed, the losses are the sole responsibility of the pirates who are therefore cursed by some musicians as no better than thieves. Of course, they are a lot better than thieves in one sense since the ‘victims’ do not lose anything tangible when an illegal copy is taken, and even contribute some tangible benefits such as brand awareness (although not to a degree comparable to the presumed loss of revenue if media-as-product is assumed). That music piracy is not quite theft does not mean that it is morally permissible, however, as this is a seperate issue.

The alternative perspective, the one seldom recognised by the beneficiaries of music revenue, is that the media companies are partly responsible for the loss of revenue by pugnaciously sticking to a pricing model predicated on antiquated distribution technologies. If media corporations had recognised the potential for file sharing to revolutionise the music industry they could have offered competitive services years ago and potentially raised billions of dollars from business models such as the Open Music Model or adaptations of radio airplay payment schemes. They did not. They insisted on seeing the situation in terms of the losses implied by the older, obsolete technology. Furthermore, by forcibly cracking down on the illegal activities of pirates they entrenched the issues surrounding the black library in terms of corporations-vs-individuals, an entirely self-defeating approach that galvinises pirates into a more dedicated subculture.

It is worth remembering that if we go back a century or two, musicians were in no way dependent upon sale of recordings since the technology did not exist to do so (gramophones did not appear until the 1870s). Musicians still made a living before audio recordings – they performed concerts and were paid by the audience, or they received money from some wealthy patron. The rise of media technology in the twentieth century – including radio and television – allowed a few succesful musicians to earn astronomical revenues and become as rich as the other beneficiaries of media technology, film stars. However, the idea that musicians are entitled to earn revenue from sale of recordings is dependent upon the technology that allowed recordings to be sold. Now that the technology has dramatically changed such that infinite reproduction and deployment of recordings is trivial, we should expect the economics of music to alter dramatically.

 

2. You Can’t Compete with Free

A common justification for music cartels turning to legal bullying rather than new business models in the wake of file sharing is that ‘you can’t compete with free’. This argument is confused about basic economics. According to the standard perspective on pricing, competitive markets tend towards selling at or near the cost price of goods (marginal price). No vendor makes a profit selling for cost, so sellers add value in order to charge above the base cost. It doesn’t matter in this scenario whether the cost of goods is thousands of dollars or zero, you make profit by finding ways to add value or to take advantage of scarcity. As Mike Masnick suggests, saying you can’t compete with free is admitting you can’t compete at all, and vendors unable or unwilling to compete deserve to go out of business.

There’s an easy way of seeing through the ‘can’t compete with free’ error when we think in terms of pizza. There’s always free pizza in a dumpster somewhere, yet we all happily pay for pizza. Our money is courted by the added value pizza vendors offer: a choice of pizza, reliably superior quality, pizza guaranteed to be free of contaminants, pizza in 30 minutes or less (generally faster than dumpster searching) and pleasant environments in which to eat pizza. No-one thinks dumpster pizza cannot be competed against, even though it is free. 

The files in the back library aren't quite as bad as dumpster pizza, but they are often lower quality and always higher risk than legally acquired music, plus what's available is only a fraction of all the media that could be offered. Commercial music downloading services could compete with the (free) black library by offering greater choice, better and more consistent quality, files free of viruses, a hassle-free download experience and a more pleasant access environment. The black library isn’t an undefeatable commercial threat, but the early adoption of a viable business model for the new technology that media cartels simply don’t want to accept. It isn’t monetized very well, but the music industry will need to introduce monetized versions of file sharing models if they want to remain competitive in the long term. If they refuse to compete with the new technology, they deserve to go under, as I argued in File sharing and the Pony Express.


3. Piracy Hurts New Artists

Back in September 2009, Lilly Allen claimed that “for new talent... file sharing is a disaster as it’s making it harder and harder for new acts to emerge.” This view – that music piracy hurts new artists more than established musicians – makes a fundamental mistake about the old music-as-product paradigm by believing it was beneficial to new and emerging talent that albums were priced expensively.

There are, crudely speaking, three grades of musicians working in the Western world. Firstly, there are the megastars like Allen who receive considerable media attention and benefit from vast marketing spends. These superstars make orders of magnitude more income than anyone else in music, and the decline in album sales since file sharing broke has narrowed their revenue slightly. They all still earn millions of dollars from touring and particularly from the licensing of their tracks in TV, film and advertising.

Secondly, there is the middle tier of artists who have a fanbase and regular income but who lie outside of the major corporate marketing spends. Artists of this kind either tour constantly in order to make money or have another source of income (e.g. their own record label). Although the current situation has cost these artists some revenue, they had always been dependent on making money from music-as-service and have not (as far as I can ascertain) lost out greatly from the new situation, even though many are feeling the pinch as retail revenues fall.

Finally, there’s a lower tier of musicians, signed or unsigned, who have too little name recognition to be earning well and who barely scrape by as artists but stick with it because they believe in their music or because they enjoy performing. Artists on this tier receive next to no promotion, media attention or marketing spend and their albums are at best merchandise they sell at their gigs that stem their losses by a small amount. To suggest that these musicians are worse off under the effects of the new technology is extremely peculiar – if anything, some have benefited from file sharing in that their music has been heard by a wider audience who would never have discovered them otherwise. Unfortunately, there are so many artists on this tier that the boost to brand recognition has been fairly trivial. These musicians would not be better off under the old music-as-product paradigm, but they would be much better off if a reasonably monetized file sharing system such as the Open Music Model were in place.

Despite Allen’s objection, it isn't likely that file sharing has made it any harder for new acts to emerge, and indeed the music-as-product model was already toxic to the fostering of new talent. Moving forward to a music-as-service model like Open Music wouldn’t necessarily solve this issue, but it wouldn’t leave new and emerging acts any worse off, and it might in fact leave them in a better situation, since the new technology encourages consumers to listen to music by many different artists, rather than just the commercial mainstream.

 

4. File Sharing is Unethical

In the first of the John Peel Lectures, Pete Townsend of The Who criticized Apple’s iTunes for providing only a fraction of the services that the recording industry used to deliver to musicians. He’s right, and the idea that it is acceptable to charge prices for music files equivalent to physical distribution without any of the marketing or talent-development contribution is absolutely shocking. The cartel-set price of albums limited the number that a typical person could afford to buy, and sustaining that pricing strategy with music downloads is a scandalous abuse of the new technologies. As ever, only the already successful artists have significantly benefitted. New artists would and will benefit from a lower cost for access to music, something that sensible monetization of file sharing would provide.

Townsend, like Allen, is irate about illegal file sharing, likening the unauthorized copying of his songs to the theft of his son’s bike, an asinine comparison that is rooted in the continued predication of the music-as-product model. He states:

...if someone... pretends that something I have created should be available to them free (because creativity has less value than an hour’s work by me as a musician in a pub) I wonder what has gone wrong with human morality and social justice.

I won’t defend the ethics of pirates when it comes music – Townshend is justifiably irritated by the disrespect of musicians implied in sharing their creative output without permission or remuneration. However, the renegade librarians are not wickedly immoral so much as they are people who object to the music cartels and are taking advantage of the new software and hardware to circumvent corporate domination of music for their own, personal gain. The musicians are merely the unseen victims of this commercial rebellion, which like most ethical issues results from a clash of ideals (in this case, capitalist traditionalism versus anti-corporate ideals). It should also be noted that people are sadly lacking in willpower when faced with new technology, and the commercial sector has typically used this to their advantage by raking in cash from consumers eager to play with new gadgets. Their failure in this case reflects as badly on industry as it does on individuals.

Conversely, when it comes to Townshend’s cries in respect of “social justice”, I tend to side with the pirates. There was no social justice in the music-as-product business model, a system that favoured the few against the many, that did increasingly little to help new artists that were not pin-up friendly, and which now refuses to accept the market circumstances implied by file sharing technology and prefers to use legal bullying in order to preserve an unjust monopolistic cartel. The price of music downloads is only fractionally reduced from that of physical product despite radically reduced overheads for distribution, the evaporation of investment in talent development that Townshend observes, and the purchaser having no option for later resale to recoup some of their investment. Music publishers are gouging consumers and abusing musicians: frankly, I can understand why pirates don't want to co-operate with them, even if I also believe the pirates aren't being much fairer to the musicians.

File sharing is not inherently unethical, but the resistance to a sensible monetization scheme makes the black library what it is: outlaw file swapping. A music-as-service approach – most likely something like the Open Music Model’s monthly service fee for unlimited, DRM free music downloads – would instantly remove the immoral dimension of piracy, and with this entirely attainable possibility in mind the music industry as a whole could be claimed to share responsibility for unethical aspects of contemporary file sharing with the pirates. It is they, not the pirates, who have refused to come to terms with the market implications of new technology. They resist because it’s hard to let go of the familiar profitability of the old music-as-product model.  But the longer they cling to the older model, the worse piracy will become and the worse the situation will be for musicians. When it comes to the ethics of file sharing, both sides of the dispute bear a proportion of the blame.

Comments

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The large rights holders are leeches and can, as far as I'm concerned... how to put this politely... go and die in a fire.

That said, I quite appreciate the small fractions of a cent Albireo gets for each listen to a track over a legal streaming medium. Between that and online track and album purchases, we've racked up... ooh... tens of dollars. Total, not each. It's still fun.

One comment? I'm disappointed... I must just be saying what everyone already thinks to get so little response on this issue. Either that or it isn't the hot button issue it used to be.

Peter: Your viewpoint on the corporate rights holders is one that is, I'm sure, shared by many. :)

Smaller bands - like yours - are always going to make little money from their music, but of course, you don't do it to be rich. I feel the same way you do about your streaming revenues when I think of my early fiction books. I think I may have made $100 with those. ;)

All the best!

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