Recording Industry Testing Out New Theory: It Deserves More Money Because It Lets You Transfer Music

from the the-audacity-of-greed dept

Wed, Apr 16th 2008 8:46am — Mike Masnick

William Patry has a long, but fascinating, discussion on the latest trick being used by the recording industry to try to squeeze more money out of you: telling governments that because it's now willing to let people transfer the music they legally purchased between devices, it deserves extra money for it. To back this up, it's claiming that there's obviously value in being able to transfer music around, otherwise why would people want that ability. The audacity of such a statement from the industry shouldn't be understated. After all, this is the same industry that has, for years, ignored pleas from fans all over the world to get rid of DRM because it would make digital files increase in value. And, now, that the industry has finally been forced to recognize this, it seems to be claiming that all of the value belongs to the industry itself, and it's the government's job to hand over that "value."

The reasoning for this seems to go back to the psychological explanation for why the recording industry keeps getting itself into trouble (and it's similar to the story we had recently about bloggers worrying about a new aggregator). They assume that all of the "value" needs to be captured by them, and not anyone else. In economics, this is effectively an industry telling the government that it needs to be compensated for all of the positive externalities it created -- even if it's better off at an absolute level. Basically, the industry is so overvaluing its own content, that it assumes that any additional value that people get out of music, even if it's through no effort of the recording industry itself, should be entirely converted to more revenue for the industry. As an analogy, it's like your automobile maker demanding an ongoing cut of your salary, since without the automobile, you wouldn't be able to drive to work. Unfortunately, though, unless you're a copyright wonk, you might not even notice that the recording industry is trying to do this. Instead, it presents its case in a logical fashion, focusing on how much "value" it's suddenly creating by "allowing" people to transfer the music they already legally purchased to the device of their choosing.

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Filed Under: copyright, externalities, recording industry, taxes, value, william patry

30 Comments

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Anonymous Coward, 16 Apr 2008 @ 9:33am

Wait could this be their attempt to rid themselves of DRM by charging a fee. It could. Wow you are shortsided, Mike.
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Anonymous Coward, 16 Apr 2008 @ 9:34am

Re:
Uh... Don't add it in the first place?
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Anonymous Coward, 16 Apr 2008 @ 9:40am

Re: Re:
Don't steal music. Consumers and the industry have created the problem and no one will admit to it. It is just a back and fore that is hurting both sides.
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Greg, 16 Apr 2008 @ 9:44am

Re:
I'll take the DRM over them trying to charge people for exercising their Fair-Use rights.
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AJ, 16 Apr 2008 @ 9:48am

I'm going to stand in an elevator with a sign saying "MPAA ROYALTY COLLECTOR" and charge people who do not put their fingers in their ears a $1 usage fee. I'll let you know how it goes :)
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CVPunk, 16 Apr 2008 @ 9:51am

what?
don't steal something I purchased? that makes sense.
I think Mike is saying that the recording industry is trying to charge additional fees for music that you bought but want to transfer to say your iPod or other music playing device, not stealing music.
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Anonymous Coward, 16 Apr 2008 @ 9:53am

Re: Re:
But how else would you justify charging extra? Spread the disease, then sell the cure!
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Nick (profile), 16 Apr 2008 @ 9:55am

In a way, iTunes is already doing this by charging a premium for non-DRM files. Why would the industry need help from government? If they think there is more value, they could just try charging more and let the market decide. Besides, you cannot reset customers beliefs going back 40 years starting with the reel-to-reel, then cassettes, the ill-fated MiniDisc, then CDRs, then MP3s that the ability to copy music you purchased (or have not) is an inherent consumer right.
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Martyburns, 16 Apr 2008 @ 9:57am

My 'Value Recognition Strategy'
When I buy a CD, it is essentially useless. I can't use it without a CD player, and hence it has no value to me.

I want to sue the record company for the value of a suitable CD player.
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Luke, 16 Apr 2008 @ 10:04am

Re:Nick
I just want to clarify that iTunes isn't charging a premium for the non-DRM'd files anymore - although I couldn't tell you how successful they were when they were doing it.
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DanC, 16 Apr 2008 @ 10:14am

Re:
iTunes is already doing this by charging a premium for non-DRM files.

Unless they changed their minds, Apple dropped the price of their DRM-free tracks to $0.99 late last year to match Amazon's offering.
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Nick (profile), 16 Apr 2008 @ 10:18am

to Luke and DanC
Ok, I was not aware of this. So is it safe to say the market did already decide that perceived value on the side of the seller does not equal a perceived value on the side of the buyer?
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PaulT (profile), 16 Apr 2008 @ 10:19am

Re: Re: Re:
Ahh... the industry shill. Never bother to give a name, do you?

The industry created the problem because they tried to ignore what the consumer wanted. The consumers got it anyway, so now the industry's trying to make silly claims to get back some of the money they lost.

The solution is the same as always - give the customer what they want and the consumer will buy it. Just because they're finally meeting one demand (no DRM), it doesn't mean they're doing it all right and doesn't mean they're meeting all the consumer demands. Sitting back and going "wah! people are stealing" instead of meeting demand is what got them into this position in the first place.

As for the claims in the article:

"To back this up, it's claiming that there's obviously value in being able to transfer music around, otherwise why would people want that ability."

Yes, that's right. There's a definite value. I consider that value when I purchase music. I didn't buy DRM music because it didn't offer this value. I consider this ability to be already included in the price when I buy MP3s, just as I consider the resale rights of CDs to be included when I buy CDs.

Taking these rights away from me or trying to charge me extra for them will just result in lower sales as the product becomes less valuable. I really wish it wasn't so hard for people to understand this.
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Anonymous Coward, 16 Apr 2008 @ 10:20am

So music industry wants to charge me a 'tax' for my mp3 player because it allows me to format shift my music? So what if all my music purchases are MP3 to begin with? I have to pay a format shift tax when I haven't format shifted? Take it the other way, I buy an MP3 song then convert it to CD (stupid, but possible) so where will the music industry collect a format shift tax for that? Or what if I simply convert the MP3 format to another digital format?

Stupid music industry trying to get someone else to earn their revenue for them.
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TheDock22, 16 Apr 2008 @ 10:23am

Stupid RIAA
You mean they honestly want to charge me taxes because I may or may not be ripping my files from cds to use on my iPod? That is ridiculous! If the RIAA is actually successful then I WILL start pirating music! I see no reason to have to pay them for taking my legally owned music and transferring it to my iPod! I do not share them. In face my music computer is not even setup with any P2P software. The RIAA needs to quit treating us all like crooks.
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comboman, 16 Apr 2008 @ 10:32am

This is in the UK folks
The summary doesn't say so, but this proposal is for the UK, where currently it is not legal to format-shift music that you own (unlike the US/Canada/etc where it is legal for personal use only), though of course people do it anyway and no one has ever been arrested for it that I know of. The UK music industry wants to be compensated for a narrow exemption to copyright law that other countries already have. Further, they want to be compensated by the government rather than by consumers (since it applies to music already sold as well as new music).

The other interesting bit in the article is that most of the UK music industry "losses" are not due to piracy but due to the "unbundling" of CDs into individual digital tracks. In other words, they count the fact that you don't have to buy a full albums worth of dreck to buy the one good song off iTunes that you wanted as a net loss. Bought one song for $1, didn't buy the other nine for $9, therefore it's a loss of $8. Mindbogglingly "creative" accounting.
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Ahmet Ertegun, 16 Apr 2008 @ 10:58am

Re: Stupid RIAA
Sorry, they're already charging you taxes because you may or may not be ripping your files. Maybe not "you" personally, but they're taxing the cost of blank "music" CD's, and have always taxed the cost of blank cassettes. Because, of course, nobody might ever want to record something they've already paid for the rights to.
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PaulT (profile), 16 Apr 2008 @ 11:06am

Re: This is in the UK folks
Creative accounting of course, but as ever it shows the recording industry always leaves out one, very important, factor whenever they consider these things - quality.

Unfortunately, there's no reliable indicator what what would have happened if the internet wasn't available - e.g. would the people buying the $1 song instead of the $10 album have bought the full album if the single download wasn't available? the assumption on the industry's part always seems to be "yes", I'm not so sure.

Either way, it's typical that instead of looking at exactly why the other tracks on the album aren't selling so well (quality probably being a big factor), they instead revert to legal action for "losses".
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Nick (profile), 16 Apr 2008 @ 11:14am

The cold hard truth that the record industry must face is that that the market for music using their old strategy is shrinking. They are going to need to let artists go. They are going to need to lay off employees. Their presidents are going to need receive less compensation. There is no amount of creative accounting or anti-consumer business model shifts that are going to save them. They must die, the sooner the better. Upstarts who understand the new music economy with take their place. It's innovators dilemma.
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cantalwayswin, 16 Apr 2008 @ 11:43am

stop paying for music
stop paying. openly revolt. Buy one CD and force everyone you know to take the free mp3s from you. bankrupt the labels and start over clean.
Hmm. I wonder if that would work for taxes too...
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Brian, 16 Apr 2008 @ 12:08pm

Re: My 'Value Recognition Strategy'
NO NO NO!!! You might have this a little backwards...

The value of the CD is that the record company is providing you with the ABILITY to play the music in a CD player. The cost is: the price of the CD.

The record company is then trying to argue that because you can now do MORE with the CD (as in copy it somewhere else), you should send them more money over the original price of the CD.

So, to go with the car analogy again: you buy a car for a certain price, then realize you can use the car for more than you originally intended so you should give the car manufacturer more money.
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Rational Beaver, 16 Apr 2008 @ 1:07pm

Nature of the Beast
Coke should start charging extra because you can poor it into your own cup. Maybe require licenses for those who want to carry it in a cooler.
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Anonymous Coward, 16 Apr 2008 @ 2:48pm

Not yours anymore
Once you sell your product it is not yours anymore. It belongs to the person who bought it and they can do with it as they please. Why does the RIAA not understand this. Do they really think that they can control a market in which they don't own the product in anymore. Companies that sell stock don't get a dime more then their IPO price even though it jumps 200% in the next day. Why does the music industry expect any different. Increased value is a part of the free market and why people buy certain items. If there was no value in the item people would not buy it. So the RIAA should be so lucky that people create value for them so their product is worth something. We should be charging them extra for doing this work for them
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mwwm, 16 Apr 2008 @ 4:18pm

This is already happening in many countries.

My example from Finland:

Teosto/NCB AND Gramex ask dj's/radio stations and such to pay a "mechanization fee" when using their own records in other formats.

Yes, two separate organizations.
http://www.teosto.fi/en/index_en.html
http://www.gramex.fi/

For example, when they're moving albums from compact discs into their hard disk-based systems.

They are also trying to get all hard disks under taxation, no matter what their use is.

Blank media has already been taxed for ages, including cd/dvd's, flash ram inside mp3/media players, discs used in PVR's and such. And of course the fee is raised every year.

Example prices for a DJ:

Gramex:

# of tracks, fee in euros per year
1-300, 200 €
301-500, 220 €
501-700, 240 €
over 700, 1.28euros EACH!
Plus tax, 22%

Teosto:
4% from ticket prices.

+ other fees that apply the restaurant etc.
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PaulT (profile), 17 Apr 2008 @ 12:08am

Re:
Yeah, that sucks but you're talking about professional use. There's a world of difference between charging other professionals for additional uses (which they then use to improve efficiency and make more profits) and charging the end consumer (who is only using the product for entertainment purposes).
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Twinrova, 17 Apr 2008 @ 4:10am

Re: Not yours anymore
Once you sell your product it is not yours anymore.
Actually, this isn't true anymore. Many companies are now stating if a consumer alters its products in any way, the consumer is liable.

Take a look at the recent changes Microsoft did to XBox360 modders. If the patch catches anything out of the ordinary, Microsoft effectively shuts the box down.

Sony is also doing this with the PSP and PlayStation 3.

In the software world (and we've all seen articles here), if a consumer changes code, there's trouble on the horizon because of it.

There's no such thing as true ownership when it comes to "intellectual" property. Companies suing companies and consumers to protect this "property" is a clear sign ownership is long dead.

Even the used CD you own isn't yours despite any claim to the contrary. Sure, you can sell it or loan it out, but actually taking a copy of the source, converting it, and distributing it to other devices is where the industry wants you, the consumer, to pay for it.

I tend to agree it's a bad decision by the industry, but they're going to get their way. Just as they have with DRM, initial pricing, and distribution.

And the sheople will go along with it because they have no alternative.

In order for the system to change, steps must be taken:
1) Recording artists must realize the stupidity of their managers to go along with any practice that makes it difficult for consumers to obtain their music. Any managing unit supporting RIAA should be abandoned by the artist.

2) Consumers must stop buying music until the industry gives in. Sure, it's nice to have a song to listen to when you want to, but as long as the money continues to flow, the industry won't change.

3) Consumers must educate themselves to understand the difference between a manager and an artist and how revenues are split between them. Then, and only then, will consumers understand why bands tend to favor managers who can get them radio play. $0.25 of $1.00 (guestimate here, folks) beats $0.00 any time.

As long as people think $24.99 is a cheap price for a distributed product that costs $2.92 to make, the less change will happen.

Enjoy your music, folks. Expect to pay more for it next year.
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Wolfger, 17 Apr 2008 @ 6:26am

I don't get it.
There's no extra fee for playing a record on multiple turntables, a cassette on multiple tape decks, or a CD in my car, my home entertainment center, and in my laptop. Why do they expect to get an extra fee for me using an MP3 on multiple devices? When the MP3 is a higher profit margin than the CD to begin with! There's thievery going on in the entertainment industry, but it's not the consumers who are doing it.
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Nick (profile), 17 Apr 2008 @ 7:54am

Many companies are now stating if a consumer alters its products in any way, the consumer is liable.

Just because the are saying this does not make it true. The have no legal right to do this. In your example with Microsoft, this is more of a "code is law" thing that Lessig talks about in Code and Code 2.0. But just like the record companies saying that a promo CD is their property simply by printing this on the insert does not make it true.
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Glenn.Isaac, 17 Apr 2008 @ 7:55pm

People who badmouth and rape people in the music industry are stupid and dishonest.
Why talk so much trash against an industry that has been providing you all the dope music you've chosen to use as a soundtrack to your life since it began? People in the music industry have been working to entertain you for a long long time -- before it made economic sense to do so. Especially Independent labels. These are real people working hard to provide you a product that you CAN NOT LIVE WITHOUT. People who set up parties that you have to pay to get in to. Rip them off if you want, but stop lying to yourself, saying they deserve it. Nobody deserves being raped like this, guys. People are losing their homes, retirements, and security all because they set out to make music you like (Indie guys, especially). Be honest about your fucking them over, at least.

By the way, I support file sharing, and freely downloading music, and the "infinite goods = zero marginal cost = zero price" truth. I think its because I support the truth. Honesty, people. Honesty. Even if you feel the industry hasn't been honest with you - it doesn't matter. Be honest, people. You are fucking up the industry. Embrace it or shut up.
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Glenn.Isaac, 17 Apr 2008 @ 7:58pm

Either be honest, or shut up - You are stealing.
Why talk so much trash against an industry that has been providing you all the dope music you've chosen to use as a soundtrack to your life since it began? People in the music industry have been working to entertain you for a long long time -- before it made economic sense to do so. Especially Independent labels. These are real people working hard to provide you a product that you CAN NOT LIVE WITHOUT. People who set up parties that you have to pay to get in to. Rip them off if you want, but stop lying to yourself, saying they deserve it. Nobody deserves being raped like this, guys. People are losing their homes, retirements, and security all because they set out to make music you like (Indie guys, especially). Be honest about your fucking them over, at least.

By the way, I support file sharing, and freely downloading music, and the "infinite goods = zero marginal cost = zero price" truth. I think its because I support the truth. Honesty, people. Honesty. Even if you feel the industry hasn't been honest with you - it doesn't matter. Be honest, people. You are fucking up the industry. Embrace it or shut up.
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