Free Music Does Not Conflict With The Free Market
from the economic-principles dept
An associate editor at PC Mag emailed in a link to an opinion piece by PC Mag Editor-in-Chief Lance Ulanoff complaining that the ongoing demise of DRM is actually bad for the music industry -- and even claiming that it goes against basic economic principles. In this, he's flat out wrong. He starts out by trying to explain "basic principles of content, commerce, and our economy," but fails to recognize that the description he gives for economics fits for allocation of scarce goods, but things are different when you're dealing with infinite goods, where efficient allocation no longer is a question. He follows up this incorrect economics lesson by stating:"Giving up control of content and giving it away free are not rational ideas in a market economy, yet everyone's cheering. Has the world gone mad?"No, Lance, the world hasn't gone mad. The world (or, at least, much of it) has simply started to understand that basic economics still applies to infinite goods -- and if the marginal cost is zero, then a competitive marketplace will drive the cost to zero. It's not irrational. It's very, very rational. It's exactly as the core principles of economics predict. What's not rational is trying to set up artificial scarcity in a manner designed to shrink the pool of resources out there and to shrink the market itself.
Ulanoff also makes some bizarre statements suggesting that very few bands tour or make any money from touring -- when the facts suggest otherwise. 2007 was the best year ever in terms of concert revenue, up 8% over 2006, and continuing nine straight years of rising revenue. Not only that, but the numbers suggest more bands than ever before are performing live and making more money than ever before performing live. It's not just the top bands that are making money from concerts -- in fact, the percentage made by the top 20 acts and the top 100 acts were smaller in 2007, despite the total amount of concert revenue increasing. As we've seen, every single aspect of the music business has been improving, other than selling plastic discs.
Finally, Ulanoff concludes with this whopper of a prediction:
"giving away content free of charge... [flies] in the face of everything we know about a functioning economy. People will become dissatisfied. Artists will stop making content because they're not getting paid. When there is no content, people will stop buying gadgets to consume that content. In short order, one part of our digital economy will collapse, and it could be followed by countless others."As we've already pointed out, giving away stuff for free doesn't even remotely fly in the fact of a functioning economy. In fact, historically, a functioning economy has often been improved by giving away things for free. It's usually called "promotions" or "advertising" however. In fact, Ulanoff's salary is most likely paid for because Ziff Davis "gives away his content for free" and sells ads on top of it. That system works quite well and has for years. As for his claim that "artists will stop making content because they're not getting paid," that myth has been put to rest way too many times before. The artists are getting paid. In fact, more people are making money from music today than at any time in history -- it's just that they're not all doing it through selling plastic discs, but by touring and embracing new business models that help the artist make money through different business models. Rather than collapsing, the digital economy is thriving, in large part due to the implicit (and increasingly explicit) recognition of how free isn't just a useful part of the economy, but it actually helps to grow the economy, by increasing the resource base, providing more efficient solutions and opening up new business models.
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Filed Under: economics, free markets, free music
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The guy wrote a stupid article, totally out of cha
Slashdot beat you to this article bigtime :) With that said, I agree that the points you noted caught me off guard too, especially about where he came up with the magic touring then we know that 50-75% of an artist's money actually comes from there, not CDs. Of course I imagine that'd go down to about 30-40% if they are on their own Label.
What confuses me, is isn't this guy who wrote the article a longtime PC mag guy who is known to be non-shill and also pretty dead on with markets? or no? I assumed with like 15+ something years on PCmag according to his bio, that would be the case.
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Re: The guy wrote a stupid article, totally out of
Heh. Slashdot always beats Techdirt. I have a friend who reads Slashdot religiously, and I read TD religiously; since he is also interested in technology and economics, I send him links to TD posts frequently over AIM...every single time, he says he already knows about that story. Oh well. I keep telling him it's not the news that's interesting, but the editorial content. Slashdot throws up links and people comment...TD writes essays. :)
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Re: The guy wrote a stupid article, totally out of
Also, we should sing "greased lightning" while snapping our fingers menacingly.
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Re: Re: The guy wrote a stupid article, totally ou
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Fish Fry?
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Earth to Editor
Keep up the good fight Mike, as it's obviously still an uphill battle.
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Nothing new for Ulanoff
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Biting the hand?
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free music
I'd rather know that people are enjoying the music I create, rather than worry about making a penny from selling the song.
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Re: free music
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Re: free music
If there were zero professional artists out there making money selling their music, music would still exist. Music is easy to create with the right equipment and some talent. Great music comes from a lot of artists who do it just for the love of it. If the local music store closed today, good music of all genres would still exist.
It's hard to say the same for movies and software, though - two more industries that sell piratable content. Movies are INCREDIBLY expensive to create and take a very long time. If they just gave away movies, the industry would still have to find a way to survive - theaters get into the business of selling the experience more than the movie, producers sell ad placement within the film, etc. The music industry is fighting adaptation right now, but it can adapt. It will be interesting to see what happens to the movie industry when its revolution comes soon after the music revolution.
Software is another issue - free (as in freedom) software already exists and flourishes, but not in all areas. Obviously console video games aren't in the Free Software field. That's going to be a different revolution, but it's coming, too.
The music industry is just a step in the revolution of infinite goods.
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Re: free music
==================
I've seen some people who were wealthy suddenly get "religion" and then begin giving all of their money away. They went broke and then no one gave a rat's ass about them. I am not aware of anyone who said that the village idiot who gave away his money should be emulated by other wealthy people (except by and for those people who stood around raking up the windfall).
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I am more than willing to support artists whom I consider talented and accomplished. Under no circumstances, though, would I listen to free music if it were polluted with sponsor messages or advertisements, and I am repelled by the thought of musicmaking succumbing to the "content-is-a-conversation" model which is devastating journalism and visual arts.
Ideas and talent are scarce, and worth paying for.
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Re:
Look at RoosterTeeth. They offer their videos for free. Most everyone likes them. They support their website, and they themselves, by offering the DVDs, T-Shirts, bumper stickers, and many other things.
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Re:
My guess would be that it would be easier for an artist who hasn't "made it big" to make a living or at least supplement thier income using a digital model. Instead of having a one in a million shot at getting a contract, an artist can make money by selling digital copies of songs to a small, but loyal following and play in smaller venues. (Not to mention selling t-shirts, etc.)
the "content-is-a-conversation" model which is devastating journalism and visual arts.
What exactly to you mean by "content-is-a-converstation model? It sounds like you're describing sites like TechDirt where the conent authors participate in conversations with their readers. I personally enjoy this kind of model very much, so I don't understand who this would devestate, other than organizations who don't realize that I'm not alone in enjoying a more interactive content model.
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Re: Re:
Do you know any professional cellists or jazz guitarists who sell t-shirts and coffee mugs? Do you think they draw enough eyeballs to earn significant income from ads placed on their websites, or worse, within their works?
My point is that a created work is expensive in time and money to produce, and has value independent of its utility to the person filling his iPod or authoring a blog post or user comment.
I will support an idea and its creator. The rest is noise.
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Re: Re: Re:
The business models I described still work for those artists. They still can sell CDs if people want them or they can make money from performing live shows. By promoting their music free, they're likely to grow a larger fan base, since more people will be able to hear their music. And they can adopt business models like the one we described years ago to get their fans to support the creation of new music:
http://www.techdirt.com/articles/20030912/1032238.shtml
Do you know any professional cellists or jazz guitarists who sell t-shirts and coffee mugs? Do you think they draw enough eyeballs to earn significant income from ads placed on their websites, or worse, within their works?
I never suggested either as a business model, so I'm not sure why you seem to think I did.
My point is that a created work is expensive in time and money to produce, and has value independent of its utility to the person filling his iPod or authoring a blog post or user comment
No one said that it doesn't take money to create music, nor that music doesn't have value. What we did say is that value and price are two separate things (always have been), and if the good (the music) is infinitely available, you can't charge for it. You can, however, set up many other business models that will help you make money. In fact, if done properly, you can make even more money that before, because you grow your audience.
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Re: Re: Re:
"Do you know any professional cellists or jazz guitarists who sell t-shirts and coffee mugs? Do you think they draw enough eyeballs to earn significant income from ads placed on their websites, or worse, within their works?" - Again, nobody is suggesting a one size fits all business model. But to ignore the shifting market and maitain status quo is probably not going to work.
"My point is that a created work is expensive in time and money to produce, and has value independent of its utility to the person filling his iPod or authoring a blog post or user comment." - There are many ways to achieve ROI on this, they don't all have to include selling CDs.
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Re:
There are a bunch of business models. Here's the one we suggested years ago that's starting to gain some adoption:
http://www.techdirt.com/articles/20030912/1032238.shtml
here's a more thorough explanation of the economics behind it:
http://www.techdirt.com/articles/20070503/012939.shtml
Actually, the business model seems to work especially well for those types of artists... because they use the free music giveaways to *draw* a larger audience and allow them to sell other things, such as concert tickets, merchandise or some of the other newer methods to support an artist:
http://www.techdirt.com/articles/20080115/095022.shtml
In fact, check out how Jonathan Coulton is making a decent living:
http://www.nytimes.com/2007/05/13/magazine/13audience-t.html?_r=1&oref=slogin
I am more than willing to support artists whom I consider talented and accomplished. Under no circumstances, though, would I listen to free music if it were polluted with sponsor messages or advertisements
Yes, I agree. There's no reason to do that at all, but we never suggested that was a good model.
Ideas and talent are scarce, and worth paying for.
Well, not quite. Ideas, once created, are not scarce. That's the whole issue. Once created, they're abundant, and that makes it quite difficult to charge for them. So you bundle the ideas with something scarce (such as access to the person, or the creation of *new* ideas) and you build a model from there.
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You have to be kidding
I know first hand of this because I toured for a couple years and know tons of radio bands that all tell me the same thing. As of now, most touring bands never see a dime from an album sale. That is the truth. They live off their touring, which doesnt pay nearly as much after you pay your manager 15%, pay the booking agent 15%, then pay for gas and supplies, then have to split the rest up 5+ ways between the band members and roadies. The average touring band makes $500 a gig.. You do the math and each band member is lucky to take home $50 for a days's work. Thats barely enough to live on, and none of it goes to savings. Not to mention, hardly any of them have a house or car to pay for because they cant afford it. They ditched those just to be able to afford to tour in hopes it would get better.
You seriously need to get your head out of your ass and see what is going on in the music industry from a real life point of view. No matter how you slice it, it comes down to more bands ending up slitsville because they cant live like this, and you end up with less music to choose from than ever before.
And dont even get me started about new bands, they never even have a chance to get this far cause the record companies have no money to promote them. They simply record thier album, put it on a few shelves, then shove them into a van to tour with a bunch of other unknown bands and wish them the best of luck. No radio play, no magazine ads, no promotion. Thats just how it is. Nobody is making money except the ones that were making money before it got bad, and they even will tell you its 1/4 of what it used to be. Its a sad sad day for music and its only getting worse.
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Re: You have to be kidding
Actually, the article claimed exactly the opposite. Touring revenue for the top 100 acts are down. It's the long tail of artists where the money is up.
The average touring band makes $500 a gig..
And how do you increase that? You get a larger fanbase. And how do you do that? Well, giving away your music is a start... You already admitted that artists don't make music from CDs. So, here I am explaining how they can make more money from concerts and other business models and you're telling me I'm wrong by basically proving my point?
it comes down to more bands ending up slitsville because they cant live like this, and you end up with less music to choose from than ever before.
That sounds nice, other than the fact that it's wrong. There is more music being produced today than ever before in history. There are more people making more music. There is more music available to listen to. There are more people making money from music than ever before. The problem was that in the past you used to NEED to sign a record label deal just to make money -- but that's less and less true today. All I'm doing is showing them other business models, and your response is to say that today's business model doesn't work, so it's dumb for me to suggest better ones? How does that make sense?
And dont even get me started about new bands, they never even have a chance to get this far cause the record companies have no money to promote them.
So then why don't they promote it THEMSELVES by giving the music away for free, and urging their fans to share it with others?
Thats just how it is. Nobody is making money except the ones that were making money before it got bad, and they even will tell you its 1/4 of what it used to be. Its a sad sad day for music and its only getting worse.
And yet, we keep coming across more and more stories saying exactly the opposite. Talking about artists who are succeeding by embracing these new types of models. It's becoming so common that we don't even write about most of them any more.
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Re: You have to be kidding
In spite of your tone the reality is that what you describe is how most musicians (and artists in general) have gone through for the entire time the recording industry has existed.
It wasn't always there, you know. Musicians were there before the RIAA was and some made good livings while others didn't.
Perhaps to you things like talent, performance and so on shouldn't get in the way of making music but they do. Too bad. You don't make it in any other work without some talent in it whether it's music, landscaping, plumbing or whittling.
And perhaps it's getting bad out there because there's simply too much junk? Or because venue owners have come to think that DJs and strippers are an easier way to make a living for them?
The reality here is that the distribution method that the labels have used for 100 years doesn't work anymore and it won't ever come back.
And no one that I've read here or elsewhere is advocating that artists NOT be paid for their work. What's being discussed is the distribution model for music.
Heck, as far as it goes EMI pushed out the Beatles without much in the way of promotion or airplay in the UK and look what happened. And just why did it happen? Could it be that 5 or 6 years of non stop gigging for little or no money might have helped? Honing their skills and staying focused on what they really wanted to do with their talents (monsterous in hindsight) which was have some fun?
ttfn
John
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PC Mag Goes Downhill
I knew something was up when the "Apple is the fastest laptop" article came out. The real headline should have been "At the exact moment we tested, the top-of-the-line, just-released Apple is faster than the other four we tested".
But hey, if your whole business model is based on corporate support, you're MOST likely to be an unbiased source.
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Re: PC Mag Goes Downhill
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Why I Dropped My PCMag Subscription
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Once again: I will support an idea and its creator. The rest is noise.
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Re:
Er... that's what the record label SHOULD be doing. All the businessy stuff, while the band keeps making more music.
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Re: Re:
What labels? We're discussing *independent* artists who will be ruined by the "business models" you advocate. We're talking about artists who deal with the public directly.
We're talking about Stravinsky, Alban Berg, Jackson Pollack, and even dear old Beethoven. They benefited our culture because their ideas and works were valued and protected.
You are uncommonly stupid, and poorly read.
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Re: Re: Re:
I'm saying there will be a role for new types of labels who will take on these artists, representing them in these business models.
Even if they choose not to sign with one of these new labels, your claim that they'll have no time to write is fairly laughable, given the evidence already available. Maria Schneider had time to write more music (and win a grammy!). Jonathan Coulton spends plenty of time interacting with fans, but produces plenty of new music. Same with Jill Sobule.
You claim the models I discuss are "ruining" artists, when everywhere I look, all I see are success stories. Please back up your statement that these models ruin artists.
We're talking about Stravinsky, Alban Berg, Jackson Pollack, and even dear old Beethoven. They benefited our culture because their ideas and works were valued and protected.
Yes, copyright provides a crutch for some, but it's simply incorrect to suggest that anyone benefited from such a crutch. Yes, it may have made for an easier business model, but that generally meant less content creation, rather than more, and fewer opportunities to profit. I point you to the case of Giuseppe Verdi, who produced music both before and after copyright law was put in place. Before copyright, he produced much more. After copyright, he produced much less, as he was able to rest on his laurels and get paid for work he did in the past.
What you call "valued and protected" is what I call diminishing a market by limiting the amount of resources out there. It harms the artists and it harms culture.
You are uncommonly stupid, and poorly read.
Ah, yes. When you lack a real argument, resort to insults. It's not quite convincing. I will not respond in kind, but will ask you to apologize for making an incorrect statement. I am not at all poorly read. In fact, I spend much of my time reading up on this topic -- and your response suggests that perhaps you could brush up on a few of the economic studies on this topic. Have you read the research of Levine and Boldrin? How about Petra Moser? No? Eric Schiff? Maybe it's time to get beyond what you think is happening and actually read the research on the topic.
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PC Mag Gives Away Content for Free
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We covered this already
Kinda reminds me of the sub-prime mortgage failure, but over a longer span of time. Obviously, these problems are coming to light now because more people are willing to speak out about how cruel and horrible RIAA-affiliated companies are. Or maybe it's a "rats are leaving the sinking ship" mentality.
So, given this knowledge, why would anyone sign with a major? Are we all a little delusional? Are we all rock stars, at heart? I don't know, but if you look at the evidence, and all of the detrius left in the wake of a single successful band, the only rational choice would be to not sign at all.
Touring Musician: You seem to be speaking from the point of view of a band which is already signed. It's obvious that you got screwed. You reference "radio bands" as your source of information. As far as I know, independent artists are rarely heard on the radio. It's too bad, because radio should at least promote local independents, but I'm not going to discuss the economics of radio ownership, ties to big business, etc. Your beef seems to be with Mike's idealistic impressions based upon an RIAA-free world. Touring Musician, you are beholden to the RIAA. They have you by the 'nads and it is painful. You mention that new bands are being signed, given no promotion, put on in a van, and sent out to tour. In this case, why even sign? If you can get in a van and tour with 0 profits from sales, no promotion, no effort at all by big media, why expose yourself to such risk? It looks like you and Mike are starting from different initial conditions.
Touring Musician is talking about bands who are already on the RIAA hook. Mike is more concerned with people making music now, who haven't signed with anyone, but who are considering their options. Hopefully, a new model of music distribution will rise out of the ashes of the RIAA. In the meantime, for bands in debt, you may need to resort to creative methods to get out from under your contracts.
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Re: Artist Entitlement
Normal people, many of whom work jobs with not-impressive pay, have to work shifts, nights, travel, hold multiple jobs, and so forth. They work hard, they barely get by. What exact magical quality of artists justifies that anyone who puts out music should expect this isn't the average condition of musicians?
Great musicians (and that includes great self-promoters, great self-managers, as well as the musically talented) do okay for themselves. Maybe there won't be any more "Rush, Boston, Chicago, Rolling Stones, Beatles" type artificially inflated mega-bands with stars that are super-rich. So we're pulling the plug on artificial scarcity and this kills this fake utopia of overwhelming success. Colour me absolutely distraught! (NOT!)
If a band has to tour to survive, adapt to changing market conditions, and being good at music alone is not enough, THEN TOUGH! That's what people in every industry have had to learn - how they used to do things isn't good enough in a global world! You need to develop new skills, open new markets, and aggressively compete. And some will fail. Why should music be inherently exempt from this economic reality?
Some subset of artists will demonstrate (are doing so) that it is possible to find a workable business model in a changing world. They'll prosper, although maybe only to a point of being able to get by comfortably, not being rich. What is wrong with that outcome? Some will fail, because they refuse to adapt, can't adapt, or are trying to cling to outmoded thinking about markets. Welcome to Music as a means to eat (aka a business). Every business has had to learn those same lessons, why should musicians be exempt?
So, yes, file sharing probably does mean more bands have to tour and make money off of live appearances. People make no money off of their albums if they get freely shared, but then the RIAA made sure they mostly didn't make much of anything anyway. So touring is still the only way and it now takes more gumption. With more bands making music, there is more competition. Some will fail. Eventually, as the economy shifts and settles again, we'll find out what an equilibrium number of bands that can get by decently on touring proceeds is. The number of actual bands will vary around this value, with some failing and some doing very well for themselves. Just like every other form of employment that isn't magically exempt from the laws of economics.
There will be a lot of good music. There will be a lot of ho-hum music. There will be fewer megastars and megabands and the RIAA may well go belly up. More bands than before will find ways to get by and some will do so comfortably, others not so much. Those that do well will have more talent, more business savvy, more PR ability than their competitors. Maybe time to stop cutting classes to hang out and jam... because instrument ability or songwriting is no longer the key to success (nor is fake scarcity promoted by a profiteering oligopoly).
All in all, I think this is a much healthier situation with much more invention, innovation, and fresh creation for consumption. Woe betide you if you won't adapt, but life has a way of forcing that or squishing you. Que sera sera.
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Re: Re: Artist Entitlement
Rush have been in control of their own destiny from their first album in 1974. They even created their own independent record label to produce and market their first album due to indifference from the major record labels.
If anything, Rush is the perfect example of a band that could do very well in the internet age.
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Amen
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Artist entitlement
Its the biggest bunch of crap for musicians to feel like they are entitled to a free ride because they recorded a semi decent song. As a musician myself I spit on those who feel like they need their stardom recognized now.
further you were getting screwed somewhere down the pay scheme if someone told you your only getting paid $500 for a live show. I've played empty bars and got $400 regularly, and touring the eastern seaboard of the US recently netted us $1500 a night gross. Sure we had bills to pay outta that, but everyone does. If you can't make ends meet @ $200 per musician for a 4 hour gig... then you need to flip burgers.
Not come here and whine that your not getting rock star treatment.
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Lance Ulanoff is Wrong - Often
The last three editors at PC mag have all driven this COMPUTER magazine away from its core competencies. Michael J Miller kept trying to turn it into a car mag, Jim Louderback put a music slant to it, and now Lance, who is taking us God knows where. IS there anyone at Ziff Davis who will save us from this claptrap?
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Giving it all away
I know one musician who works opposite the Techdirt model - concerts for free and sell CDs. He puts out a couple CDs per year and travels around doing concerts and selling plastic. He quit his day job and says he's never going back, so he must be doing something right.
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Seriously, are artists that stupid?
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Re:
Brittney is a fine example of what the recording industry has created... a child star who feels entitled to stardom, not a creative artist responding to fans and/or creative impulses.
Music must diverge from Stardom, that is where everyone thinks they must sign... so they can be a star!!
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