Economics of File-Sharing 265
Umair writes "The Red Herring's got an article by me about the economics of file-sharing, which argues that the music industry should provide insurance...against itself. This is because the contract listeners sign with labels is risky - it lets labels shirk on their end of the bargain. That's why file-sharing isn't just 'theft', it's risk-sharing.
The original, longer, version of the paper is here, which argues that this a situation economists call double moral hazard."
14.4! (Score:5, Funny)
Or sue "teh interweb"
Better still... (Score:4, Funny)
Re:Better still... (Score:5, Insightful)
Re:14.4! (Score:5, Insightful)
Re:14.4! (Score:5, Funny)
I mean...if I can read the lyrics why do I need to buy the CD? Sounds obvious to me!
Legality (Score:5, Interesting)
If you already own the music, is it legal to get MP3's of that music off the internet?
In my case, it would be a collection of around 100 tapes (not CDs, but tapes). The tapes still work, but obviously it isnt the most convient media format. Would it be legal to just get higher quality files of that music? Or is their contention that you dont own a license to the music, but are tied to whatever media you purchased it on? Im sure this runs into what boundaries there are for 'fair use', but IANAL.
Re:Legality (Score:4, Insightful)
One at a time might work (Score:3, Interesting)
One weakness of both articles: free always wins (Score:5, Insightful)
Re:One weakness of both articles: free always wins (Score:4, Interesting)
The ideal situation is, of course, sample music, find what you like, buy it. It's just that in this case it's step 3 that gets the "???".
Re:One weakness of both articles: free always wins (Score:5, Interesting)
But as for this article, it misses the point that it itself initially makes: the companies aren't investing in the search for the artists.
This is enabled by an aspect of the music industry that the author doesn't take into account: MTV and radio. The way it works is basically: Industry says to MTV: play this music video; MTV plays it repeatedly; the video is seen enough times that the song get stuck in viewers' heads; the viewers then request the song on radio; and finally the song gets played so much via radio that everyone knows it and are brainwashed into buying the album, because it's got that song they know and love. The song could be absolute crap in comparison to everything else, mind you, it's just a matter of what the industry decides to support. Generally the looks of the artists are the deciding factor.
Only rarely does truly original, interesting new music get played on the mainstream radio stations, and then it's usually a battle for it to really become "mainstream" (because, after all, it's not a music video on MTV so no one's heard of it).
So, basically, since the recording companies CAN control listeners' preferences, they do. Smarter listeners (the ones who seek out interesting music themselves), on the other hand, have no easy way to connect into the closed media-driven circuit. And they end up downloading music online, or copying it or ripping it, simply because there is no easier way of discovering interesting music short of shelling out tons of cash.
Therefore, the problem that needs to be solved is that the industry needs to do its job and seek out the good music, not make up for its laziness by offering cash-back incentives, as the article suggests.
Until this starts happening, I don't see any reason I should go into Sam Goody.
Re:One weakness of both articles: free always wins (Score:5, Interesting)
This is one of my pet peeves: back in the 1970's, album covers and inserts were an art form. You would buy an album, take it home, open it, put the record on the turntable, and then sit listening to it while you absorbed the cover art and (often) the fold-out section. It was a true multimedia experience, and many of my memories of favorite albums are inextricably linked to the tactile and visual sensations of the album cover. The covers were huge! They filled your entire field of vision! And they were designed by interesting artists who built in elaborate connections to the music itself.
Those days are long gone, and it's a sad thing.
Re:One weakness of both articles: free always wins (Score:3, Funny)
Yes...the record covers, helped along by a few hits of acid.
Re:One weakness of both articles: free always wins (Score:3, Interesting)
Re:One weakness of both articles: free always wins (Score:2, Insightful)
You're right there, and maybe I did go a bit far with the "smart listener" as victim.
I should also note that after reading the "How the Top 40 Works" article, I realize that it's even more of a closed loop than I thought--listener requests have much less influence than "playlists" which are in turn influenced by the labels.
All they are upset about is that they do their job only to have the consumer rene
Re:One weakness of both articles: free always wins (Score:3, Informative)
Re:One weakness of both articles: free always wins (Score:2)
BS. The simple way to discover interesting music is the way people did it from the dawn of Rock n Roll to the end of the 90s . . . word of mouth. You get into a particular type
Re:One weakness of both articles: free always wins (Score:5, Insightful)
There are a number of explanations, the most obvious being enlightened self-interest (you need to pay for music if you want more music down the track) and the acqusition of intangible secondary beneifts (you pay for a warn, fuzzy feeling of goodness and righteousness). Both aren't strong factors in the current market because of the predominant consumer sentiment against the record labels, i.e. consumers think the labels can take the loss associated with infringement or are just ripping consumers off anyway.
It's true that classical economics doesn't model this very well, but classical econimics doesn't model open source/free software process very well either, a fact that has in no way impeded the continued existence of that process.
Re:One weakness of both articles: free always wins (Score:2)
Re:One weakness of both articles: free always wins (Score:5, Insightful)
People would be willing to pay for better service. In fact, they already do. Witness the amazing success of the iTunes Music Store thusfar. This is in spite of the fact that people can download the same songs for free. More reliable searching, faster downloads, and consistant quality are worth about $.99 per song to a heck of a lot of people.
If the RIAA had kept it's focus on pleasing customers they would never have had the problems they're having now. A good lesson for _any_ corporation.
Cheers.
Bovine manure (Score:4, Insightful)
1. Because it's cool
2. Because they're afraid of RIAA subpoenas
3. Because they're too dumb to run a filesharing program
That's it. Myself, I don't think compressed music is worth 90% of the price of uncompressed music, especially considering the fact I don't get the original artwork. I've bought a couple of tracks on iTunes, though - the ones I couldn't find on CDs. For everything else I use Half.com.
Re:Bovine manure (Score:5, Insightful)
Hard to believe, but there are a whole bunch of honest people still out there. If there weren't, who would all the dirtbags rip off?
Re:Bovine manure (Score:3, Insightful)
The idiots, the morons, the feeble of mind? (I don't think, for example, Nigerian scammers primarily rip off the honest people, but they're still definately dirtbags.)
Fair beats free. (Score:5, Interesting)
When I do download off the net, it is not infrequently followed by purchases at a store somewhere. Maybe the same songs, maybe the same artist, mabey different mixes. Stuff like VS tracks I haven't been able to find retail, certainly not in compilations.
But again, it's not a suprise to me. I first heard both TMBG and BNL off of boarrowed cassette copies. Eventually I was able to barrow a copy of Apollo 18, now I own something in the neighborhood of 20 TMBG cds have gone to concerts and lament the fact I didn't get to grow up listening to them. BNL, the story isn't too different, aside from the lower album count. I bought the Saturday Morning Cartoon CD, because it has a song called Speed Racer on it, and I thought MAYBE it'd be Go Speed Go by Alpha Team. It wasn't but the CD didn't suck either.
Which ties nicely into the article sparking this thread. I pay the distributers to find the music I want to listen to. There job is to search for me. And they failed miserably with Go Speed Go. It was a hard song to find. I spent a lot of time looking. So what exactly AM I paying them for in that case? It certainly could have been harder, but it could have been much easier too. The stuff I want is getting lost in the stuff they're telling me to want. As I suspect happens with almost everyone who's not 13 to 15.
So how to I redress that imbalance? I share, I download. If it's something I really want, I buy. Not only do I take on the responsability of searching for myself, since they've abandond me despite my willingness to spend money, and I punish them for not keeping their part of the deal. I download stuff I think friends might like. I share copies I decided I don't like to improve network availability for those who do like them. And the random good song from the people who produce one decent song, and nothing else but crap, I just keep. It's my tax on them.
When they decide to live up to their part of the bargain, I'll consider revisiting mine. They better hope I don't get too set in my ways. Habbits are hard to break.
Free does not always win (Score:5, Insightful)
Music, video, and software are all obvious examples. Why buy music one can record from the radio virtually free? Largely because its a hassle and takes time. Why go to the movies or rent a DVD when you can just wait for it to come out on TV? Again, time spent watching commercials and the inconvenience of scheduling are worth more than the few bucks. Why pay the M$ tax when you can just download linux for free? Because it takes time to both do it and acquire some technical knowledge.
Re:One weakness of both articles: free always wins (Score:5, Insightful)
If your particular "crossover point" is under a penny, that doesn't invalidate the author's interpretation of human behavior in economics terms. The law of supply and demand has already weeded you out.
The author's paper has changed my opinion. It was extremely insightful, and therefore very persuasive. It doesn't require that we trust the author's expert opinion about anything in particular. Instead he draws from real-world examples that demonstrate common-sense economics concepts, applies formal economics terms to them, and then uses those terms to distance the reader from the emotional impact of "stealing music" and "starving artists" and allow the reader to think about the risks and expectations involved in buying music.
Some users have been misinterpreting "moral hazard" to mean something about placing a "morality cost" on the act of copyright infringement. Some then use this as an opportunity to state that their particular "morality cost" is near zero. That's not what the author meant by "moral hazard". The term doesn't specifically refer to morality, but rather refers to the hazard inherent in trusting that a record label will only charge a fair price, especially when we can't see what they're doing or how they're doing it.
Others might interpret the point of this paper to mean other things, but in my interpretation: people who use the term "moral hazard" as an opportunity to talk about how much people value the legal risk of copyright infringement are missing the point and should be considered offtopic; and people who misunderstand "moral hazard" and think it's talking specifically about the value of that legal risk are probably not reading or not understanding the article.
The article makes good sense, and is worth the time it takes to read it carefully: when I buy music I can't help but wonder if the "agent" (the label) is pricing fairly or unfairly, because I can't see how their business process works. Also, now that the author brings it up, it would help if there was some kind of "insurance" such that I don't have to pay so much if the music I buy sucks, but also if I don't have a chance to abuse this "insurance".
Re:One weakness of both articles: free always wins (Score:2)
I agree that this is a misunderstanding. I also agree with most of the comments you make. They were very interesting articles. But even if it would be obvious to most economists, I still think the articles failed to address the specific question of why consumers would be motivated to stop using file-sharing. Suppose I have, on the one hand, the RIAA offering me one
Re:One weakness of both articles: free always wins (Score:3, Insightful)
This reminds me a lot of how public transport works here in Austria where I am living at the moment. There are no entry or exit "barriers" so its pretty easy to just walk onto a sub
Re:One weakness of both articles: free always wins (Score:4, Interesting)
I'm repeating myself a bit here, but I don't really think I'm qualified to talk about consumer behavior. I am not a psychologist. Economics says that there probably exists a curve to describe how much of the population will evaluate that cost/benefit decision one way or the other. Many would argue that this broad economic view of the decision isn't really adding anything to the discussion -- of course some people will switch and some won't. A more interesting discussion would cover why people switch and why they don't: how much people value the money it takes to buy music legally (an easy discussion) and how much people value the moral and legal risk involved in breaking copyright law and downloading copyrighted music (a much harder discussion).
A discussion that tries to answer these questions must deal more with psychological issues than with economic issues, so it might be offtopic for this article. I won't stop others from discussing it here, but I don't have much to contribute. I'll leave this particular sub-topic to people with more interest in psychology and predictive consumer modeling than in economics.
Re:One weakness of both articles: free always wins (Score:5, Insightful)
I've bought from iTunes, but I'm not impressed by it. Why not? Well, I tested it by taking some of my favorite CDs and looking them up on iTunes. I couldn't find any of them. My conclusion is that iTunes, good as it may be for others, just doesn't cater to people with my tastes.
I don't think that it matters what my tastes may be. When I look around me, I find a lot of really good musicians, who have never been recorded by any label, and never will be. When I mention this to other people, they always agree, though they give different examples. So I conclude that there is a lot of music in the world that I'd like if I could hear it, and I'd pay for recordings of it. But iTunes doesn't find it for me. Neither do any of the other commercial music suppliers.
OTOH, there are people who do find me the music that I like. And when they recommend a CD, I'll buy it without listening to it. But those people don't work for Apple, or for any of the labels. Some of them are online, and have web sites that include their own reviews of recordings plus links to the musicians' web sites. This works well, and I've bought a number of CDs this way.
What we need now is a good, systematic way for such reviewers to get a bit of pay for passing out such time-saving information.
This is all doing an end run around the traditional recording industry's distribution channels. But why should I care? That industry hasn't done a good job of supplying me with music. Now I can find good music by spending some time listening more or less at random, and by listening to the advice of others with tastes like mine. If someone can save me some of this time, I'll be willing to pay them. But I don'tsee the recording industry doing it any time soon.
Re:weak argument (Score:2)
All the file sharing and downloading I do is legal, thanks.
Re:weak argument (Score:2)
However, the overwhelming majority of file sharing taking place is of the illegal copyright infringement variety.
And here I thought... (Score:5, Funny)
Re:And here I thought... (Score:2)
They should provide insurance? (Score:5, Insightful)
BTW, has anyone recieved their settlement check? [musiccdsettlement.com]
Re:They should provide insurance? (Score:2, Interesting)
I do think, however, that the fact that some (most? all?) of those production costs are recouped in the theatrical release represents a substantial failure in your comparison.
-Peter
Re:They should provide insurance? (Score:2, Interesting)
I'm not sure the fact that some movies make money (I would certainly hope they do!) represents a failure. Something to keep in mind, is that if a movie might suck, it doesn't get made (well, sometimes!). You can crank out a wide-release CD MUCH much cheaper than even a limited release film. That's why there seem to be so many unprofitable CDs as opposed to movies. I think this aspect is indicitive of the original author's point that the record industry doesn't seem to care as much about producing q
Re:They should provide insurance? (Score:2, Insightful)
Movies (potentially) make back their production costs in theatrical release.
Then they go on sale for $14.99 on DVD. None of that money goes to the production of the film itself.
Music CDs don't have something comparable to a theatrical release. If they don't make up the production costs on the CD they aren't making it back at all.
Therefore your analogy is busted.
I hope this is clearer.
-Peter
Re:They should provide insurance? (Score:2)
It's called a live performance. It's quite possible for an artist to recoup their production costs in ticket sales.
Re:They should provide insurance? (Score:5, Interesting)
Re:They should provide insurance? (Score:3, Insightful)
No.
Because by the time a film has been released on DVD, it has already generally made back its production costs and turned a profit. DVD sales are just additional profit, which is why they can be sold cheaply.
The record industry doesn't have an equivalent of movie theatres. They make all their money from album sales, although apparently some of the
Re:They should provide insurance? (Score:5, Informative)
Re:They should provide insurance? (Score:2)
Re:They should provide insurance? (Score:2)
most of the people making living out of music get their daily money from live performances and not from cd's which they use mainly just to promote themselfs.
though strictly speaking, most people that make their living out of music are music teachers. the artists as they appear on media are but a tiny grain in comparision.. and of all artists that make new music the filesharing potentially 'hurts' only a tiny percentage.
.
Re:They should provide insurance? (Score:2)
Actors & directors get paid up front; musicians get money from concerts. Income from the concert is part of the equation.
Re:They should provide insurance? (Score:2, Insightful)
umm... no. A concert is more akin to a play than a movie. It can be given only in one place at a time and the number of venues is small. Think about it. A movie opens on 3000+ screens and runs for weeks while a concert is one night only, one place, maybe a total of 50 performances on a tour. Bad analogy!
Re:They should provide insurance? (Score:2)
Uh, as I said...
They make all their money from album sales, although apparently some of the big labels are trying for a cut of concert profits now.
Re:They should provide insurance? (Score:3, Informative)
That's just not true, even though the RIAA wants you to believe so...
Radio, TV, Movies, Internet, Closed-circuit radio (like when you are on-hold, or on an elevator, etc.). Songs are recycled many times, on compilations and "Hits" CDs (significantly lowering costs), and also recycled when songs are "covered". CDs are less-than half as long as DVDs, and don't need advanced processes to create the m
Re:They should provide insurance? (Score:3, Informative)
You are making a HUGE assumption: Cause and effect.
First of all, I would dispute those numbers greatly, in no small part due to "creative accounting", but let's not worry about that for the moment. The main issue is: what would improve CD's profitiablity? It is quite likely that lowering the prices on their CDs, would make them significantly more profitable, and in-turn fix those numbers to
Re:They should provide insurance? (Score:2)
I call baloney. Production costs for a modern top-40 cd are nowhere NEAR the costs to produce a motion picture. Maybe 1/100th the costs. THAT'S why there's a little thing called free radio. Music creation costs are relatively so low, they can play the songs for FREE to try to induce you to buy the cd.
Re:They should provide insurance? (Score:2)
Where in my post did I say the production costs were the same?
If a top-40 CD costs $1 million, that's still a million dollars that the record label has to shell out and hope they make back on sales.
Pretty much any major film is going to at least break even just on ticket sales at the theatre.
This is not that hard to figure out. Look at the box office figures for the next few big name
Re:They should provide insurance? (Score:3, Interesting)
See for example How Top 40 Radio Works [howstuffworks.com].
Or oddles of links on Google [google.com].
-Peter
Re:They should provide insurance? (Score:2, Insightful)
The "value" of something is not dependent solely on the cost of raw materials and labor. This is more obvious with scarce goods, such as artwork.
Howev
That was about as clear as mud...... (Score:5, Insightful)
How does one define "unsatisfactory" with music? Kind of complicated to measure.
File sharing is not simply theft.
Correct. It is not theft, it is copyright infringement, a civil issue. You can't go to jail over it, but you can over theft.
In an extreme case, the labels might begin to impose costs beyond the actual search and production costs for which listeners are actually interesting in paying just to feed the bottom line. That is exactly what the recording industry did well before file sharing existed. The result? Alienated and disgruntled customers.
And the industry continues to do so. It hasn't reduced prices since CDs came into existence, which is at least curious, since the cost of pressing those CDs must have dropped through the floor since then.
Re:That was about as clear as mud...... (Score:2, Informative)
You most certainly can go to jail for copyright infringement, if you live in the U.S.:
http://www.usdoj.gov/criminal/cybercrime/17-18red. htm [usdoj.gov]
~~~
Double - moral hazard? (Score:5, Funny)
Filesharing (Score:4, Funny)
This is the crux of the problem, although they have scared the P2P Kazaa kiddies off with the RIAA's actions that has done nothing but make the P2P more well run and it is now the dominion of
An analagous situation can be seen with the "War on Drugs", all it has done is improve the quality of the drugs being used!
Morals? (Score:5, Funny)
They don't.
Moral Hazard (was Re:Morals?) (Score:5, Informative)
It's just how academics talk.
not a brand identity (Score:5, Insightful)
I don't think the music labels are big on making themselves a brand identity. Aside from text in music videos, and small icons on cds, they are not recognizable to most. A brand identity implies that everyone knows the brand, even if they have never used the product. Coke can be classified in this way, since it is one of the most recognizable logos around. -Kilka
Re:not a brand identity (Score:2, Insightful)
Re:not a brand identity (Score:2, Interesting)
That might be the case for bigger labels ( Motown [motown.com] ain't what it used to be), but most small labels (many of which have deals with bigger companies) are big on creating that identity.
Def Jux [definitivejux.net]. Kill Rock Stars [killrockstars.com]. Blue Note [bluenote.com]. Ninja Tune [ninjatune.net]. Invisible [invisiblerecords.com]. Fat Possum [fatpossum.com]. Tooth & Nail [toothandnail.com]. Trojan [trojanrecords.net]. Moon [moonskaeurope.com]. Death Row [deathrowrecords2000.com]. Every one of these labels has a very distinct brand identity, and, as a result, devotees generally have a very good idea what
Morality? Please... (Score:4, Insightful)
In the case of stealing from the grocer, morality is somewhat different because the lemon pool you are drawing from is finite and depletes the supply. But copying a bunch of data to your 120G hard drive that is only utilised to 20% has no perceived cost and does not deplete any one else's resource.
The issue is more complicated than what is stated, and the equalisation schemes suggested do not take away from the fact that downloading a piece of data has almost no variable cost. Do economics work when 0 is in the denominator?
Re:Morality? Please... (Score:3, Interesting)
The vast majority of people pay the bakers for their bread, not because they'll be caught if they don't but because it is right to do so.
There's an intuitive idea of ownership deeply ingrained in us. Some ideas, like we all own the jungle together, and we'll let you use this part of the jungle for a while, to the benefit
Re:Morality? Please... (Score:2, Interesting)
Maybe they'll have to find a cost that both consumers and bands can agree on to prove that the recording is worth it. Maybe recordings will go by the wayside completely. Maybe recordings will only be done during live shows. Maybe
Zero dollar economics (Score:5, Interesting)
When the dollar amount goes to zero, you evaluate a choice by how it affects your perception of yourself, and how it affects the possibility of future tangible assets. In this case, yes, the dollar cost to the consumer is near zero. However... there is a perceived dollar benefit (not having to buy the music) plus a perceived moral benefit, because the RIAA has been acting like the bad guy. The RIAA has been trying to counter this by upping the dollar cost (suing) rather than upping the intangible benefits. If they dropped the dollar cost, this would up the perceived moral value of keeping the RIAA afloat. But because they've become accustomed to dollars-only economic measures, they aren't likely to get this soon.
The other major factor here is that customers aren't just ditching the dollar cost- they are choosing to offer it more directly to the producers (in the goods sense, the producers mean the musicians and the small labels bringing them to market.) People aren't just ditching music. They're trading and sharing- and many are contnuing to spend, just in ways that don't benefit the RIAA. So the perceived-intangible-value really is getting a field demonstration.
Re:Morality? Please... (Score:2, Interesting)
Let's go through core numbers for the capitalist model (the one they teach you in school), which is that maximum efficiency is when marginal price (MP) equals marginal cost (MC).
MP=MC occurs when price = $0, since marginal cost is $0.
What this means is that the music industry is most efficient for our country at price = $0. Unlike most other goods, having a gluttonous appetite for music do
Contract. (Score:5, Insightful)
Is there a way out of this mess? Can the record industry offer it's own insurance, so listeners do not have to file share? Can it do so without creating a double moral hazard? Yes - by shifting to a more sophisticated contract.
I'd rather just get the RIAA out of the distribution side of music, they don't belong on this side of the fence. With the RIAA trying to control the distribution channels, they just strangle new technologies and screw the artists who they supposedly support.
With Senator Orrin Hatch the riaa whore and Corporate Elected Criminal is just trying his damnest to go after these p2p users, using piracy as an escape goat to mask the problem that only concerns the RIAA. Control of distribution.
iTunes and Napster2 already show people will buy music online. Just need to get more Indie/Alternative music available, which even cuts more into RIAA funds.
Re:Contract. (Score:4, Insightful)
The RIAA is NOT in the distribution business, they are in the association business, hence Recording Industry Association of America. They represent the rights and needs of their members. Whether or not record labels go to digital distribution of music or not is not up to the RIAA, it is up to each individual member company.
Simply put, copyright protects five basic rights of the holder. One of those basic rights is distribution. Whether you call file sharing stealing or not, it still violates creators rights by denying them the ability to control distribution. In the case of the RIAA member companies, many creators have signed the distribution rights to their mechanicals over to the record labels. This means the record labels (the RIAA member companies) can distribute and sell the actual physical recordings. In many cases the creator still maintains the publishing rights which means they can sell the right to transcribe sheet music and allow alternate arrangements to be made.
The point is, file sharing might be sharing and not stealing but it is still distribution of intellectual property and it is illegal without a prior consent of the copyright holder, period. Whether people will or will not purchase music online is irrelevant because it is up to the copyright holder to determine how they will distrute music. If a few small musicians make a killing at this method of distribution, great, but not every artist has to follow their lead.
Personally I'd rather purchase the CD and rip the music however I choose. I hate MP3s and tend to not like listening to music on my computer anyway. I've taken some CDs to work and ripped them to my computer there but this is within my rights, in the US, under fair use. I'm not happy with compressed audio files and if I must listen to them I want to be able to control how they are made.
Re:Contract. (Score:2)
this has gone far enough (Score:2, Insightful)
What bothers me most is that premiums on automobile, homeowners, life, and health insurance are going to be steadily raised to cover the losing business investment in recording insurance.
No matter which way this goes the consumer will end up paying from both ends and the pyramid will continually funnel the money upwards.
Re:this has gone far enough (Score:2)
Could you elaborate on this point? What is recording insurance? And, whatever it is, wouldn't the rates for it have gone through the roof in recent years (since file-sharing), so as to cover the losses you're talking about?
A big fucking factory (Score:5, Insightful)
1. Create catchy sounding music by whatever means necessary, doesn't need to be original or high quality, just needs a hook.
2. Play it on the radio and tv, push the musicians into the public eye with advertising
3. Clubs, shops, other tv/radio stations etc will start playing the song because everyone else is, at this point you have successfully made a 'hit'
4. Sell, rake in profit
After a set number of years a song will have left most peoples memories so it can be 're-released' using its original familiarity to create an instant hit, you must make sure that the re-release or re-mix has an extra underlaying beat or melody or is faster or louder so that the original pales in comparison and people will buy the new song, alternatively parts of the melody can be broken down and re-used as scrap - you will probably notice scrap melody in anything by Blue or Justin Timberlake and many others - it sounds like something you've heard before but you just cant put your finger on it.
And remember the all time rule of the entertainment industry: If it worked the first time, do it another 10
(Big Brother, PopStars, Making the Band, Generic boy/girl bands that all sound the same, teenage girls that all sound the same, Changing [rooms|places|clothes|wives], Im a celebrity [insert something here], The worlds worst x, something island x, Airport/Cruiseliner/Hospital/Cops)
PS as a brit im really sorry for Popstars, but here we now have Fame Academy 2! its much worse and they dont even have that cool guy that tells everyone they're shit. I think we just finished Big Brother 3
double nonsense (Score:4, Interesting)
Of course, as whirled bank types are wont to do, they might actually distort reality to make their models fit onto it.
He recognizes early on that the labels are expected to "take on the risk of talent search, artist development, and distribution costs, in exchange for profits", but then only focuses on talent search.
Downloading files from Kazaa is not doing the work of a talent scout: it is about getting stuff for free. Pretending it's about being a talent scout is laughable.
Also, who's doing the work of artist development and music production (those mp3 are usually recorded in studios...)? The problem is, the labels are often shirking those responsibilities too.
I recognize that downloading copyrighted music is illegal. I also think it served a good purpose: CD prices have gone down - at least in Canada - and we are getting better legal ways of buying music.
While his description of the problem stinks, this is a case of "moral hazard" if that's what you want to call it.
His solution has some merit in that it might encourage labels to try developping unconventional artists (assuming most of the people that hear the songs decide to not ask their money back, and that this type of contract makes them more likely to try new things).
OR - You could of course just provide free music- radio is after all one way to do that, and all the label types know that radio play sells albums.
We don't need new contracts so much as new business models. Keep providing free music, since that works. Also take advantage of new distribution (bye bye music stores with underpaid staff, hello iTunes).
And use all this to promote live music. Since it's easy to keep track of what people buy, you can tell them when their favorite bands are playing near them. Is this so complicated?
Of course, this type of arrangement might be the death knell for large labels... in a market like this, you could arrange to have smaller regional players.
Umair Haque's proposal seems custom-designed to evade most of the issues, and keep the big labels alive. I'm not so interested: they've proven to be companies that don't care about art or artists, and are willing to gouge consumers. Enough!
Re:double nonsense (Score:4, Informative)
I'm the author. Thanks for discussing my piece. Here are some points to consider.
1) Moral hazard does not mean the record industry has 'morals'. It's a technical [investopedia.com] term [econlinks.com] - like grep, or chmod. It means that one party in a contract can take hidden action - like your babysitter - because you can't effectively monitor or influence them.
2) I'm arguing that the record industry should provide free music - not the other way around. Insurance is just another form of free music - whether you get reimbursed in money that you can spend on free music, or free MP3's, or free music vouchers.
3) An efficient market is not a monopoly. An efficient market for music is what all of us really want: a place where we can pay as much for music as the value we derive from it. The problem we're all facing is that the market for music is inefficient - that the music industry can price-fix, gouge, shirk on it's contract, and earn more profits by exploiting such tactics.
4) I'm not 'trying to give control to the RIAA'. In fact, it's the other way around. Read what DVD Jon has to say about buying into DRM [nanocrew.net] - iTunes is nice, but by buying into it, you're also buying into DRM. I'm trying to argue that DRM sucks - and that entirely new business models are the only thing that will work - and iTunes is just the same old model wrapped in a nice interface. I'm trying to prove why the RIAA wants the game to stay the same - so it can keep selling the same old risky contract to all of us, in exchange for greater profits.
4.1) Not all MBA's are beancounters. Get over it.
Umair
Re:double nonsense (Score:3, Insightful)
Yeah, weird. I mean, all the other World Bank emeritus economists have Slashdot accounts...
(But seriously, Slashcode would be improved if people directly mentioned in an accepted story were auto-emailed special passwords they can use to post comments about their story with a a +2 "Primary Source" bonus)
I'd Like to see that .... (Score:4, Funny)
hmmm ... restaurants that had a return policy on food after eaten ... hmmmm fully proccessed or partial ... on second thoughts I don't want to know or see that!!
They left something out (Score:5, Interesting)
But their efforts in Congress and the courts are useless. They're just breeding smarter file sharers. Especially those in the technology business, people who have maybe worked on projects together over the years. A group of friends who exchange playlists the old fashioned way: ASCII text. They can swap songs and entire CD's in compressed, encrypted formats because we- I mean they -don't make their collections available to the public and know enough about transfer protocols to make detection damn difficult. Or maybe they snail mail CD's, thumb drives or USB hard drives for the really big jobs.
As usual the bullies pick on those least able to defend themselves.
Record Labels are Obsolete (Score:4, Insightful)
CD stamping? Cost has become so cheap that it's hardly part of the equation.
Promotion? I suppose, but at the cost of an artist's livelihood. In effect, the artist is paying for it anyway, so they could just hire an advertising firm and be done with it.
Talent selection? OK, if this were the case, would we not all be listening to at least a portion of the top 50 most of the time? Why is it then that many artists that aren't signed to a major label become cult phenomenons on the internet?
Places like Magnatune [magnatune.com] try to advance the definition of the record label to something more useful, and I sincerely hope they succeed. But to the rest of the labels, my message would be simply evolve or die. Because if you don't evolve, you're simply not going to get my money one way or the other.
IMHO a coinfusing and unconvincing argument (Score:2, Insightful)
(...) There is no monitoring mechanism, so listeners cannot tell what the labels are doing; conversely, labels cannot really tell what listeners' preferences are.
To start, of course labels can tell what listeners' preferences are:
1) Focus Groups/Market research
2) Sales Charts
3) Payolla effectiveness
On the other hand, listeners do not know less about what labels are doing than, say, drivers do about what automakers are doing. In both cases the final output offered to consumers is t
Oh! (Score:2)
They forgot to mention radio (Score:4, Insightful)
The current arrangement with the media conglomerates and the airwaves hurts both the public's ability to find out what is good music and the propensity of the producers to find out what the people want. They are more concerned with pushing a predetermined set of artists who they deem shall be successful, than they are with finding out what people like. So people will turn to file-sharing where they can find lots of good music that they would never hear on the radio.
flawed analysis (Score:2, Interesting)
More than consumer/artist involved (Score:5, Insightful)
The author assumed that media companies mediate between consumers and artists. Another major factor is that media corporations mediate between both consumers and artists and government [opensecrets.org]. The very existance of copyright laws is a mechanism created by government. Other societies have sometimes used other mechanisms to fund the arts-for example in the old Soviet Union, artists received a stipend from the state. In the 1700's, artists such as Mozart would sometimes find patronage from members of the nobility.
The copyright laws in the United States today go substantially beyond the mechanisms first mandated by the constitution--the concept of "limited time" for Copyrights is getting streched. I personally don't think the Founding Fathers really meant for Copyright to be such a big part of people's lives. Had they understood how information technology would evolve, I think they'd have wanted a substantial mechanism for funding freely available educational and cultural material--just as much as they wanted infrastructure like roads and bridges.
Instead, what we have now are major media monopolies that actively work to get greater concessions from government and media companies that are major recipients of corporate welfare [nader.org].
One problem: The artist still gets screwed. (Score:2, Insightful)
As a result, I don't think fixing the distribution side of the problem is enough. The agents in this equation can
Bzzt. (Score:2, Interesting)
He says that music pricing needs to vary in order to convey information to customers about what they're getting. But the value of music isn't intrinsic to the music. What I may be willing to pay $1.25 for, you may only be willing to pay $.02 for. The fact that the RIAA has valued this particular song at a given price tells me nothing about its value to me. The complete inaccuracy of t
Some Tools for Thought... (Score:5, Interesting)
The article addresses market failure through the lense of information asymmetries, moral hazard and agency costs. These explainations are classic economic (Ronald Coase) explainations of why there is a failure in the music market. Yet, the fundamental argument of this paper - that double moral hazard and information assymetries cause market failure in the music industry - misses the fundamental point of market failures in ALL information markets(software, music, art, books, etc).
Information goods resemble public goods. Consider the three tenet assumptions in properly functioning markets. The assumptions are 1) that the good is rivalrous, 2) that the good is excludable, 3) that there is full information when purchasing the good. Combinations of these three assumptions results in various types of goods, which require different economic models to solve. For instance, if the good is non-rival or non-excludable, the good is considered a public good. Some examples of public goods are public parks, the sun, air, etc. These types of goods are non-rival because your consumption doesn't deplete the good such from other users/consumers. Likewise, these goods are non-excludable because it is very hard to put a fence around it, and hence, rationing such good by a price mechanism.
Now, consider information goods in this sense. Information goods resemble public goods because they are non-rival and non-excludable. My consuming the information doesn't deplete the good and prevent others from using it and excluding others from consuming information (putting a fence around information) is very difficult. The fundamental problem within the music market is that we have a market failure from the start precisely because music is 1) non-rival 2) non-excludable.
The author tells us a story about the music market needing risk insurance, yet fails to consider the very notion of economic exchange in information goods. The problem with music is this. Consumers want music and indicate their preference for music by voting with their dollars. Yet, when the marginal cost of distributing the good is nil, and those that shouldn't be excluded from the market are being excluded, we have a problem. When you want to reward creators of music, and not exclude anyone from the market without specific reason, what is the right price you should sell your music?
I agree that there are problems with value indicators, (i.e. price of all music is the same ($12) and consumers can't reward music creators based on societal value), but I still see some fundamental flaws in his argument.
So who's working on the economic problem of information goods? Enter Suzzan Scotchmer, Brad Delong, John Zysman, Steve Weber, and Hal Varian.
These people are all Berkeley professors who discuss micro/macro level frameworks that give us tools for thought in information markets. There is an academic revolution going on at Berkeley and I'm very thankful, I am here to witness it.
For your reference, I am an undergraduate at UC Berkeley and have studied information economics for some time now. More information about me can be found here: www.dyoo.tk
I dunno... (Score:2)
The solutions for the music industries problems (Score:2)
2.better music. If those artists with REAL talent (as opposed to those with no tallent that only get support because of their good looks or whatever) got support, people would buy because its good. For example, I recently bought a CD full of Australian songs because the songs are good and the arti
The reson this is all a load of crap (Score:3, Interesting)
It gets pretty tiresome to see all of the "analysts" posting why they think P2P apps are popular when the real truth of the matter is that humans as a species will choose the free route to obtaining goods and/or services whenever possible. Hell, even those that know that what they are doing is wrong will still download the music for free. It's not "really" illegal if you don't get caught and you are only hurting a big mega monopoly and not some poor individual.
Sure, services like iTunes are selling tons of music, but I would wager my services as a fluffer for the gay porn industry that the iTunes buyers are the same people that have bought music legitimately all along and the "Napster" thieves will never buy music no matter how cheap it is as long as it's available for free elsewhere!
Bad Economic Analysis (long) (Score:3, Insightful)
The author asks "So what if, under such a contract, the interests of the record labels (the agent) diverge from the interests of the listeners (the principal)?" Well duh! *Any* industry can be thought of in an asymmetric information principal-agent context with respect to consumers (do you know exactly how every good and service you buy is produced?!), and their interests will trivially conflict (businesses maximize profit, consumers maximize their satisfaction). What's so special about the music industry here? How is the industry's attempt "to impose costs beyond the actual search and production costs for which listeners are actually interesting in paying just to feed the bottom line" different from *any* other for-profit business? Since when do consumers need to know the exact production costs of everything they buy for markets to function well?
Furthermore, the reasons the author gives for the information asymmetries in the music industry are bogus. He claims that under uniform pricing schemes "prices do not serve their usual function of providing an informational feedback loop between labels and listeners". I suppose he never heard of 'sales figures' as an information feedback loop! The author claims that information problems are compounded because "music is an experience good - its value is not directly knowable to buyers until they have begun to consume it." True, but irrelevant! Most people have the opportunity to know more about the CD they buy before they buy it than they can know about most other goods they buy; they can listen to singles on the radio and TV, listen to 30-second samples of every song on sites like Amazon, listen to the whole album in the music store or even borrow the CD from a friend. If there's a problem, it's not that we don't know whether an album has crappy songs, it's that we're forced to buy the crappy ones with the one or two good ones that we like. It's *not* an information problem. Further, consumers need *not* "coordinate amongst themselves" to influence labels any more than they need to "coordinate amongst themselves" to influence any other manufacturer: sales and commercial success speak for themselves.
What *is* unique about the music industry, the movie industry, the software industry and information goods in general is that the internet has transformed them into *pure public goods*, like, for example, national defense. There are two characteristics that define pure public goods: (1) their consumption is non-rival (my consumption of one unit does not affect the ability of anyone else to consume the good. Think of the effect on your neighbor's consumption of his music if you digitally copy one of his CDs, or his consumption of national defense if you increase your household consumption of it by having a baby, compared to the effect on his consumption if you drive away in his car) (2) their consumption is non-exclusive (you cannot prevent a newborn from 'consuming' national defense, and it's difficult or impossible to prevent people from copying information in the internet age, whereas it's possible for your neighbor to prevent you from using his car). Another way to think about pure public goods is that they have high fixed costs of production for the first unit and zero marginal costs of producing additional units.
Pure public goods are a well-understood type of market failure (you'll see them discussed with 'externalities' in most Economics textbooks). The producers of information goods have attempted to solve this problem by making information goods 'exclusive' (a.k.a. DRM) which is sufficient to solve the market failure and eliminate the 'free-ri
risk: full previews is already the norm (Score:3, Interesting)
Actually, though, the article's writer doesn't seem to be aware that having an album streamed entirely over the net is becoming more the norm with every passing day. With that capability, consumers can make the purchasing decision without assuming much risk.
The bigger problems seems to be that the consumer doesn't want to spend the time previewing so many songs. In other words, the "mental transaction costs" outweigh the supposed benefits of finding new stuff.
I'm not saying that clearchannel radio is a good way to introduce consumers to new music. But it is an example of how consumers can have exposure to music without needing to expend mental transactions.
There needs to be a painless way to learn about and listen to new music. One such, solution, iRATE radio continuously downloads mp3's and lets users choose which one to keep and adapts to user preferences (see my interview with the creator Anthony Jones [kuro5hin.org]).
I've already written a substantial essay advocating a voluntary compensation model for music (see sharethemusicday [sharethemusicday.com]. )
In addition to tipping, content aggregators like Universal can provide value by simplifying the task of managing music files, improving the download client and allowing users to create "share lists" that are easily accessible. I would gladly pay for that.
If a content aggregator company could create a download client that simplified file management, allowing sharing of music lists and user recommendations and allowed for a tip jar, then everybody would be interested. Musicians could pay a small fee for music hosting (and maybe fan support like forums, web hosting, etc). They would do it if tipping became perceived as a reliable revenue source. Users could pay for the download client (plus access to updates). This kind of service would make money, satisfy fans who want unlimited downloads and satisfy musicians who want tips.
Errr... ummm... (Score:4, Insightful)
You don't trust the record companies or agree with their price structure. So you go around them... betting that your time is worth less than the extra money you're spending for the "service" of the record companies packaging and delivering it to you.
He's basically saying if the record companies stopped being such tight-asses and gave you the benefit of the doubt, or cut listeners some slack with well-thought-out services, then it wouldn't be an issue (duh).
Re:Double Moral Weight (Score:5, Insightful)
The problem is with the way we buy music, but have no ability to return it if it sucks. So the music industry has no incentive to make the product satisfactory, so long as they can find a way to get us to buy it (albeit making the song good is a good way to make us buy it). So music pirates' response to this is a form of risk sharing--We diversify the risk of a song sucking over everyone who downloads it. Because we have pooled our resources and invested less in any one product, we have less unique risk (from bad mp3s). It's not a very good analogy, but it makes some sense.
Re:Double Moral Weight (Score:2)
Re:Double Moral Weight (Score:5, Insightful)
The moral impact of downloading music for me is ZERO, in spite of what some MBA monkey tells me. 'Risk sharing' isn't going to scare me into sharing less.
I understand the author cites Risk Sharing as a primary reason why people aren't buying music. Read the article, and you can see some definite implications of record companies' misjudgements.
The author claims that the reason why people aren't buying music is that because they don't know whether it is any good. This risk, the risk that the music you just bought for $18 totally sucks, is the risk he talks about.
When he says that people are mitigating risk via file-sharing (i.e. risk-sharing) he implies that by one person buying the cd (or taking some other cost to self, including risk of legal action) and distributing it to others, then others get to "try" the music without risk.
Of course, this brings up the fundamental problem which I believe lies within--Are people willing to pay for music? Currently Steve Jobs and others are trying to prove their particular answer.
There's an easier way to solve all this (Score:2, Insightful)
Re:There's an easier way to solve all this (Score:2)
They do have quite a number of good (though alternative) bands signed, so why not at least check them out. I'm sure the RIAA would hate you for it - but isn't that part of the point?
Jedidiah
Re:Double Moral Weight (Score:2)
I got that too and I don't believe it.
I feel no contract/bond with a record company. I download things because its free. Period. "Risk of me liking it or not" has nothing to do with it.
Lets take a look at singles or a entire cd I heard in a store or from a friend. I know exactly what I am going to get. No risk in buying music I may not like. I heard it all. Either I like it or I don't. There are lots
Re:Double Moral Weight (Score:3, Informative)
Read the damn article.