Sticking it to whom, exactly?

Today, the Wall Street Journal points out that CD and overall music sales have dropped precipitously from the year previous. Michael Arrington sees this as a good thing. Others, like James DeLong, believe that the loss of intellectual property portends a comeback for the reed flute.

We need to recognize record contracts for what they are: venture capital for new talent. A record company fronts a new band money to allow them to record an album, go on tour and otherwise promote themselves.

If making a bet on a new band becomes a greater longshot -- which is to say, the record company has a diminished likelihood of recouping its investment -- then they become less likely to take a chance in the first place.

Can we assume that this decline in fortunes for the record business is due to piracy? We can't say for sure, empirically, but I think most of us would recognize that piracy is quite easy and quite rampant. Even an otherwise honest person, who has no particular interest in the creative industry, will often choose free over not free.

So if piracy takes, say, 20% of music sales, what happens? It looks something like this.

Madonna will sell only 4 million copies instead of the usual 5 million. She does not make the usual extravagant profits, but comes out way ahead regardless.

But a typical "indie" band will sell maybe 50,000 copies if they do especially well. One million lost record sales is the difference between success and failure for 20 such bands. Where established artists are only slightly less successful due to piracy,  smaller artists simply fall off the cliff.

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Arrington speculates that the result will be a move from making money on album sales, to making it in other forms such as tours:

As the marginal price of recorded music continues to fall towards zero, its natural price, bands will need to make money elsewhere. Live concerts will become more and more popular, and will be the largest source of revenue for many artists. Recorded music will be used to promote those live events.

He's right that the cost of reproduction is falling to zero. And certainly, artists have a lot of new possibilities due to the Internet. But it's a big leap to say that less recorded music will result in more people going to shows.

Think of it this way: of the shows an average person goes to, how many are bands whose recordings they've heard? If record companies are less likely to sign and promote a band, resulting in less recorded music and less audience awareness, how can this improve an artist's chances?

Let's remind ourselves that the Beatles stopped touring in 1966. Subsequently, they released Sgt. Pepper's, The White Album, Abbey Road and Let It Be. Could they have made these albums if their only recoupment was touring?

Another of my faves, XTC, stopped touring in 1982, after which they made many of their best, most lavishly produced masterpieces. Today, would they even get signed?

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A decline in business for legal recordings will hurt the smaller bands first. And we won't even know it, because we will never hear them in the first place. It's very hard to cherish the record that never gets made.

Record companies will only take sure bets, which means bland commercial artists, and runners-up from American Idol. The revolutionaries will more likely be found asking if you want fries with that.

It's easy to think that piracy is some sort of comeuppance to those greedy record companies. But such moralizing aside, who exactly are we sticking it to?

PS: The author used to work at a pretty good independent record company and also played in a pretty good band which put out a pretty good record and also turned down a pretty bad record contract.

Comments

[Jim Lippard]

Click my name for a contrary explanation of CD sales declines.

[poptones]

"A decline in business for legal recordings will hurt the smaller bands first...."

Except it doesn't. A decline in major label sales may make them more risk averse, but that doesn't necessarily hurt the "renegades" - we're already hearing of indie bands declining major label deals simply because they don't WANT that deal with the devil - the exclusivity commitment for X albums (and ONLY X number of albums that meet with the label's approval), the producers brought in to make their sound more palatable to the masses, the tour contracts that leave them emotionally and physically exhausted...

For a similar reason, "piracy" does NOT hurt all bands the same across the board. Log onto any p2p service and note how easy it is to find the latest disposable pop pablum - but just try getting someone to share, for example, their complete collection of Creatures CDs or their thirty year old collection of FM recordings.

Ain't gonna happen. If you persevere you might manage to collect all these, but its highly unlikely the people most likely to have such collections - the fans of the artists - will share such large volumes of work in one fell swoop. Even old school rocker Neil Young has acknowledged this - paraphrasing, he said "let'em have their shitty sounding MP3s - that just helps find more fans. And fans come to shows and pay their share."

There exists a natural balance in the market, and "piracy" is as valid a force in that market as any other because it pushes publishers to invent new approaches. That the old school majors are finding it increasingly hard to sustain their unfairly exploitative and formulaic business model is a sign that the system is working, not that it's failing.

[curious]

I don't remember the last time I bought a CD. I have instead bought hundreds of songs on Rhapsody and iTunes. I would not have bought any of these songs if I had not been able to listen to them first on Rhapsody's service. On Rhapsody you can listen to sonds all you want, but you can't copy them to your hard drive unless you pay 99 cents.

I am assuming that Rhapsody and iTunes pays the record companies royalties. Since the record companies don't have any manufacturing or distribution expense for the songs I buy they must make more money off of them then they would if I bought a CD, which for most of the songs I am thinking about I would not have done without Rhapsody because I would not have known about the song. Rhapsody has a nice feature where you can browse artists that are similar to an artist you are currently listening to. I have found many artists that I currently like that I had never heard of before using this feature. So, I don't buy the idea that the decrease in CD sales is hurting the record companies. I think people are just paying Rhapsody and iTunes instead.

[passerby]

"Let's remind ourselves that the Beatles stopped touring in 1966. Subsequently, they released Sgt. Pepper's, The White Album, Abbey Road and Let It Be. Could they have made these albums if their only recoupment was touring?

Another of my faves, XTC, stopped touring in 1982, after which they made many of their best, most lavishly produced masterpieces."

And yet a lot jazz musicians produced great music despite, or perhaps because of, continuous touring...Playing at gigs builds chops.

[poptones]

The only problem with those online services like Rhapsody and itunes is the label's artist makes even less off the sales.

I must admit that, as a linux user, I like rhapsody as well - the stations play good music and it works perfectly on my desktop (better, in fact, than it did the one time I tried to get it working in windows). But if one really cares about rewarding those renegade artists, the best path is still places like Magnatune (), youtube ( http://youtube.com/watch?v=fGm-gwHwgcQ ), and (ick) myspace ( http://www.myspace.com/ostrichhead ) where the artists can connect one to one with a reasonable effort on their part (ie without the personal and artistic expense of signing to a major label deal).

Nearly a decade ago now, former major label artist Jane Siberry used the internet to connect directly with her audience, enabling her to find benefactors (fan) who put up 100% of the money to fund creation of a new CD. Siouxsie Sioux and Budgie put up a website and sold tens of thousands of copies of their own productions. It was so successful they launched their own label and now you find their sold out releases on the shelves at Virgin and in the pages of Amazon.

Sorry, there's just no way you're going to convince me to feel sorry for the suits at Sony and MCA... they've made enough money now; they can afford a comfortable retirement... unlike many of the artists they have milked dry over the years.

[coach handbags]

Good is good and bad is bad
You don't know which one you had
She put your books out on the sidewalk
Now they're blowing 'round

[moncler outlet]

Government spending is poverty. It is the destruction of wealth. Imagine a world of hungry people.