The New Yorker this week (article
not available online) reports that the record industry is in free-fall, with
sales down 50% from peak levels several years ago. The RIAA is starting to
sue people that allow others to copy their music $150,000 per 'offense'. Satellite
TV companies run adds comparing satellite 'theft' to stealing cars. Software
and music companies, with the support of politicians like Orrin Hatch, are
seeking legal opinions on new technologies that would wipe out the hard drives
of anyone downloading copyright material without paying. And movie companies,
fearing massive peer-to-peer copying of films even before they hit the screens,
are studying complex copy-blocking algorithms and trying to prohibit the
sale of DVD copying machines. When you Google 'file sharing' you get sponsored
ads from companies hawking file-sharing blocking tools to corporations, warning
of legal and security consequences if companies don't buy their wares, and
equating employee file-sharing with "pornography and on-line chat". Horrors.
It's people versus corporations, and it's guaranteed lose-lose unless the
entertainment and information industries shake off their hoary thinking
and start to get creative, reasonable and accommodating. Our parent magazine,
Salon, reported earlier this year on entertainment heavy-weight John Snyder's
pragmatic appeal to the record industry to
Embrace File-Sharing or Die
. In the face of armies of well-paid corporate lawyers, the courts have
generally sided with business over people, except in extreme cases where even
this reactionary cadre realizes the unenforceability of their decision. At
least a quarter of a billion people are guilty of violating these laws, and
Snyder rightfully points out that this means the laws, not the people, have
to change.
Let's look at this from a purely economic perspective, and set aside for
a moment the political, legal and moral issues. At the same time consumers
have become increasingly reluctant to pay $20 for a collection of over-hyped
music on a CD that costs fifty cents to make, they have actually been willing
to spend more than ever before on the technologies that 'play'
the content. That's right, a recent survey shows consumers are moving upscale
in their entertainment 'hardware' purchases, because they see more value
for their dollar there. And while CD sales (at least of mass-marketed titles)
are off 50%, the total number of titles issued by the Big 5 (who generate
85% of all music sales) is also down 50%. Cut the supply in half,
why is the industry surprised that demand has declined accordingly?
Snyder quotes Tim O'Reilly on the supply-demand principles that are now
governing the entertainment industry:
Obscurity is a far greater threat to authors and creative artists than
piracy.
Piracy is progressive taxation.
Customers want to do the right thing, if they can.
Shoplifting is a bigger threat than piracy.
File-sharing networks don't threaten book, music, or
film publishing, they threaten existing publishers.
"Free" is eventually replaced by a higher-quality paid
service.
The solutions follow pretty obviously from O'Reilly's principles, and apply
across the entire spectrum of entertainment and information industry sectors,
not just to the music sector (just look at the battle over TiVo and PVRs,
though, as Snyder points out, there are important differences in user experience
between music, film, television, literature and information content that have
especially hurt the music industry, so far):
- Content must be made much more affordable, in creative ways.
Allowing subscribers to pay an all-you-can-eat flat monthly fee, the model
that Satellite Radio is pursuing, is one possibility. Letting users compile
their own CD's of just the songs they want is another. Sponsoring of groups
and songs by major corporations, like PBS does with its content, is a third.
Consumers got the idea that entertainment should be free from the
fact television programs always were, and guess who's model that is?
- The artists need a bigger say in the model that's used. They're
stuck in the middle right now, and some, like Joni Mitchell {"I hope the whole
[commercial music industry] goes down the crapper. It's a corporate cesspool")
are furious about it. Rightfully so.
- Multiple models for different income groups should be considered.
Let the radio-quality music go for free, subsidized by premium-quality versions
(perhaps with a personal greeting from the artist, like a signed art print?)
for those willing and able to pay vanity prices. Or just view the CD as 'free'
advertising for the live tour, since consumers seem more willing to pay $100
for a live concert ticket than $10 for its CD.
- The last two bullets above are the key ones. The default
scenario, the one that will occur if we do nothing, or try to leave it
to the courts, or squabble until it's too late, is that the existing publishers
will die, there will be a 'dark ages' during which only free, amateur content
will be available, and then as consumers grow dissatisfied and want more polished
product, they will choose (not be forced) to pay for the quality.
That's not necessarily a bad thing, and it's certainly consistent with Economics
101.
- As Snyder suggests, the industry needs to reinvent itself,
working collaboratively with competitors, artists and consumers, instead of
with lawyers and peer-to-peer saboteurs as they're doing today. A model to
follow in doing this? The very technology companies whose reinvented, sexy,
feature-packed, value-added, inexpensively-priced players carry their content.
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MADE IN CANADA
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Spanish translation of my post 'Old Friends Who've Just
Met' can now be found 
