Music Industry Squanders $69 Billion Worth Of Free Promotions In 2007
from the got-your-attention? dept
Over the years, we've seen so many bogus reports on the supposed "losses" to various industries due to unauthorized file sharing, that it's about time the story was flipped. Reader SteveD writes in to point out the latest research, claiming that in 2007, the dollar value of all unauthorized music file sharing was $69 billion. The research company that put out the number does clearly state that those numbers are not lost revenue (good), but then goes on to still claim that this shows how damaging unauthorized file sharing is for the industry:"A $69 billion figure is staggering to contemplate, but it effectively illustrates the impact of piracy on the music industry."Actually, I disagree. I don't think it shows the "impact" at all. If anything, you could flip this around (as I did in the title) and use it to show how much goodwill and free publicity provided by fans the industry squandered by trying to turn those fans into criminals, rather than learning to embrace that free labor in a business model that took advantage of all of that free promotion. Sure, the headline is an exaggeration, but it's no more of an exaggeration than claiming that the $69 billion represents the extent of any problem. If there's a problem, it's in the fact that so many folks in and around the industry view this as a problem rather than a huge opportunity and resource.
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Filed Under: amount, costs, music industry, piracy
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69 billion
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Honestly Mike....
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This is of course ludicrous. It's impossible to get a "real" figure for "losses", but I can guarantee it's nowhere near $69 billion. Probably not even $690 million.
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Re:
Go the fuck away.
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Re:
Perhaps this is just an issue between the definitions of "unauthorized" and "unlicensed", but the article did say that the files counted were "unlicensed". Here's the quote...
"In 2007, the value of unlicensed music trafficked on P2P networks was $69 billion US"
Now, maybe you don't believe that they discounted the non-licensed or properly licensed downloads in their numbers, but the article itself states that they did.
that all would have been sold for a "fair market price" if they had not been downloaded
I think this is a fair assumption. When you're tallying up "worth", it sounds quite reasonable to me to come up with a general fair market price. (Now, what that price is and how it was determined could be another story.)
and that all of the downloads represent lost revenue
Both the original article and the TD post mentioned that the numbers were not presented as lost revenue, so I don't see how this applies.
As Mike alluded to, the problem is not the methodology of this study, but the conclusions drawn from the results. Instead of seeing these numbers as an opportunity to make money, they see them as an opportunity to present their tired argument that you need a completely locked-down system to "vital to foster a 'safe' environment".
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Re:
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Trim out the management, eliminate RIAA, increase quality, decrease price, slim down advertising and let the fans do that for you. That is how they can succeed today.
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Re:
Did you stop reading after the first sentence? Here's the second sentence from the original article...
"According to the report, this value should not be viewed as lost revenue, but rather the result of multiplying the number tracks by a fair market value per track."
I believe that the results are being misinterpreted by the study publishers (and the music industry in general), but I don't see how you can say that they are making the false assumption that every download equals a lost sale.
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WOw
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Bailout
You could argue that this is too much but I say nay. Drown them all with money or if we can't do that with money just drown them.
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Re: Bailout
All who are for this signify by stating "I".
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Re: Re: Bailout
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Commissioned Studies
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DVD sales increasing
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Spin on SpinMaster
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IMO, regardless of the words they decided to use, when you consider the context of the article "not purchased" = lost revenue.
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Its EASY to test that $69B figure.
Step 2. Locate the declared losses due to filesharing in each.
Step 3. Add them up. Should equal approx. 69 Billion.
What??
No such entries in the SEC filings for these companies you say?
I'm SHOCKED! SHOCKED I tell you!
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Imaginary Money
The RIAA often cites China as the largest illegal copy market and claims they lose billions of dollars in potential sales in this market. This is a complete lie. As has been pointed out previously by others the reason for the illegal copies is that there is no legal market in China for RIAA products due to extremely strict cultural heritage laws. If downloading was not available there still would be no sales.
I do not download music. I buy CDs from discount stores and garage sales for pennies on the original dollar cost. I will not pay $20 for a CD of dubious quality with only one track I have interest in from a band the record label created and promoted made up of individuals of mediocre talent.
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Re: Its EASY to test that $69B figure.
Step 0. Read the article.
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Re: Re:
I think that's a bit of a stretch. I know a high school kid that downloads 1,000+ albums per year. He is more enamored with "sticking it to the man" than the music itself. I would venture to guess that he listens to less than 1% of what he downloads.
There is $20K in "losses" right there, and there is absolutely no way that you can assume that if they hadn't been downloaded those albums would be purchased. Anecdotal, I know, but saying that they would have been purchased if not downloaded is just not true.
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Re: Re: Re:
It's a good thing then that the article clearly pointed out that the number they published was not representative of lost sales.
Anecdotal, I know, but saying that they would have been purchased if not downloaded is just not true.
Who is saying that, other than people who failed to comprehend the original article?
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Re: Re:
That's just splitting hairs. The tracks were not licenced to the P2P network. Whether or not they discounted all the copies of NIN's Ghosts albums to come up with their figures is a minor distinction.
"Now, maybe you don't believe that they discounted the non-licensed or properly licensed downloads in their numbers, but the article itself states that they did."
How could they do that accurately? If I download a file named "Ghosts I.zip", how can they possibly know it doesn't actually contain a copy of the new Guns N Roses album? It's impossible.
"I think this is a fair assumption. When you're tallying up "worth", it sounds quite reasonable to me to come up with a general fair market price. (Now, what that price is and how it was determined could be another story.)"
Erm, no. Any product is worth what people are willing to pay for it. Sometimes that's more than you *think* it's worth, often less. Just because you're trying to sell a candy bar for $20 doesn't mean you lost $20 if it falls out of your pocket - you'd never have gotten more than 50c or so.
Whether you think a CD is worth $20 or $1, this kind of shaky math always assumes that products will have sold at all, which is untrue.
"Both the original article and the TD post mentioned that the numbers were not presented as lost revenue, so I don't see how this applies."
How exactly do you think the industry are going to try and spin this? If they're claiming that music with a value of $69 billion was downloaded illegally, of course they're going to use that as a lost revenue figure.
"the problem is not the methodology of this study, but the conclusions drawn from the results."
I agree. The methodology is the not the issue, it's the fact that they're even trying to present a figure. There is no way of accurately determining what is "lost", if anything at all so, regardless of the methodology, the figure will always be a guess. I have strong doubts that these figures will be used for anything other than tired propoganda, and maybe used to hoodwink some technologically clueless politicians, both in the US and abroad, who want to be seen to be doing something "positive" for the failing economy. I fully expect to see these figures come up again in some propaganda story very soon.
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Re: Re:
No, I know understand that there's no other way at looking at this for most of those people. There's a study that basically says "$69 billion of music is shared illegally". How is that not potential lost revenue? The only question is whether or not these people realise that it represents a theoretical maximum figure and not what they've actually "lost".
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LONG RANT
People are willing to pay for music. This is evident from the success of Amazon.com's music download service, from the success of iTunes, and many many other pay services.
The fact that you are defending piracy as "free publicity" is unforgiveable. The continued success and growth of comercial music creation whether in it's current form or some other business model is tied to the fact that there is value in the music. It is a product that consumers demand, it is a product that consumers are willing to pay for.
For you to say that artists are losing "goodwill" is a strawman argument. You are ignoring the fact that the artist are losing revenue and saying, oh but the goodwill would be equal to the lost revenue. You constantly condemn the the RIAA for using unsubstantiated numbers and you have just commited an agregious violation. Not only do you not have ANY proof that the "goodwill" produced ANY sales at all, but you are attaching it to an astronomical figure.
What WILL happen if artists start giving away there music is THIS:
1) Consumers WILL download it (there is NO question about that)
2) Consumers WILL share it (it happens illegally even NOW)
3) Artists will attempt to earn money in other ways. You have offered examples so lets go with those:
a) They can earn money from concerts. problem 1: some artists are TERRIBLE performers, other artists are STUDIO MUSICIANS who NEVER perform on tour). Problem 2: artists are already making money this way, its how many are making the majority of their money today. Problem 3: to replace the revenue lost from the SALE of their music they will have to raise ticket prices or perform more often (thus blowing your "scarce good" theory - it becomes much much less scarce if they are playing arenas every night of the week.
b) Artists can create "innovative products". Thats all well and good for inventors, but these people are MUSICIANS not INVENTORS. Innovation requires a great deal of research, marketing, fabrication, etc... None of which is what a musician does. At some point your "innovative products" become a musician's flea market, filled with junk no one wants or is willing to pay for. Your "innovative products" have been used for years as promotional material for the MUSIC (this is what musicians do and this is what consumers demand from them). I want to repeat that, musicians create MUSIC. It's important that you understnad that concept, and I think you do but you are CHEAP and want others to pay for your music for you.
I think it a perfect world the RIAA would not be needed, people wouldn't share music to which they do not own the rights. Playing a song for your friend in your house or your car is different from COPYING the music and sending it to your friend. By playing the song for your friend you possibly create demand for the artists works, by giving your friend a copy you increase the likelihood that your friend will NOT purchase from the artist.
In a perfect world artists would have their music available for purchase on their own websites, not through some download service but on their own web site. If the artist choses to make the price of the purchase $0, that is their choice, otherwise all the funds go to the artist who then pays the hosting service, web site managers, etc... The rest would be profit for the artist without the RIAA butting their noses into everything. The RIAA could sell their services to artists who CHOOSE to hire them as rights enforcement. RIAA enforcement should be OPT-IN instead of OPT-OUT.
Giving music away is great for consumers, bad for artists, and detrimental to the industry as a whole. The fallacy of your "infinite goods" argument is that there are not an infinte number of good musicians, there are however an infinite number of bad musicians. So if you like bad music, this is the model for you. Giving all musicians' music away will drive down the average earnings for all musicians, the smart artists will leave the industry and find another industry in which to earn a living (possibly as bloggist or tech consultants).
Innovation should be concentrated on the MUSIC, NOT the packaging, creation of some t-shirt/doll/necklace, etc... Artists should be paid for what they do well, which is create music.
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Re: Re: Re:
You said that the study assumed that all of the shared files were unauthorized/unlicensed. The article stated that they only counted authorized/licensed files. You've given some background that explains that you think that this kind of filtering is impossible, but without this explanation one would have no way of knowing whether you understood the position of the people who ran the study. In other words, there's a huge distinction between "they didn't filter out authorized/licensed files" and "they can't possibly filter out authorized/licensed files".
Just because you're trying to sell a candy bar for $20 doesn't mean you lost $20 if it falls out of your pocket - you'd never have gotten more than 50c or so.
There's that word "lost" again. Yes, plenty of studies like this abuse the term "lost", but the whole point of the TD post is that this study went out of its way to not claim their number equated to lost sales.
How exactly do you think the industry are going to try and spin this?
This is irrelevent to my point, which is that the study itself was unique in that they tried to distance themselves from the the "every illegal download = a lost sale" fallacy. Will the music industry spin this result and try to make the link anyway? Of course.
There is no way of accurately determining what is "lost", if anything at all so, regardless of the methodology, the figure will always be a guess.
Which, I'm guessing, is why the study chose to use the much more objective number of value/worth.
I have strong doubts that these figures will be used for anything other than tired propoganda, and maybe used to hoodwink some technologically clueless politicians, both in the US and abroad, who want to be seen to be doing something "positive" for the failing economy.
On that, we are in agreement. But...just because something is taken out of context or is twisted by a third party, doesn't mean that the original message means something other than what it is.
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Re: LONG RANT
That would explain why many artists who have tried it have found they earned more money by embracing the model.
So, actually, you're wrong.
Want to understand why? Learn about how scaling works:
http://www.longtail.com/the_long_tail/2008/11/the-miraculous.html
You don't need everyone to buy.
People are willing to pay for music. This is evident from the success of Amazon.com's music download service, from the success of iTunes, and many many other pay services.
*Some* people are today. What we're worried about is in the future. When more and more musicians realize they're giving music away and making more money, you don't want to be the musician holding out.
The fact that you are defending piracy as "free publicity" is unforgiveable.
Please explain how showing musicians how to make more money is "unforgiveable"?
The continued success and growth of comercial music creation whether in it's current form or some other business model is tied to the fact that there is value in the music.
No one said anything else. You seem to be confused between value and price. They are not the same. Price is impacted by value, but price is determined by supply and demand. If supply is infinite... well, price is going to come under pressure. That doesn't mean there's no value, however. In fact, it's quite valuable. The trick is using that value to increase the price of some scarce good.
For you to say that artists are losing "goodwill" is a strawman argument.
It is not a strawman. A strawman is a made up argument that I knock down. I am not knocking down the fact that they are losing goodwill.
You are ignoring the fact that the artist are losing revenue and saying, oh but the goodwill would be equal to the lost revenue.
There is no revenue "lost." You cannot lose revenue you never had. There IS a business model decision, and that decision may result in less revenue than other options. Your argument is that giving away music will result in less revenue -- that's a business model decision, not about "loss."
I, on the other hand, have presented evidence in both economic models and individual examples that show that giving away infinite goods can and often does increase income via a larger market for scarce goods.
Finally, I never said "goodwill equals the lost revenue." First of all, that's because I don't believe there's "lost revenue" but more importantly because I never have said that you should just give away music for goodwill's sake and sit back and expect to make money. I have made it clear (though you seem to have missed the message) that the idea is to put in place a comprehensive business model that allows you to earn more money, in part thanks to the goodwill.
But you claiming that I said "goodwill will equal lost revenue" -- THAT is a strawman. It's an argument I did not make that you have chosen to knock down.
You constantly condemn the the RIAA for using unsubstantiated numbers and you have just commited an agregious violation. Not only do you not have ANY proof that the "goodwill" produced ANY sales at all, but you are attaching it to an astronomical figure.
We're still talking about your strawman, so I'm not sure what I have to defend. I never said goodwill produces sales. I said a good business model, combined with a good product produces sales.
1) Consumers WILL download it (there is NO question about that)
That happens either way.
2) Consumers WILL share it (it happens illegally even NOW)
Yes.
a) They can earn money from concerts. problem 1: some artists are TERRIBLE performers, other artists are STUDIO MUSICIANS who NEVER perform on tour). Problem 2: artists are already making money this way, its how many are making the majority of their money today. Problem 3: to replace the revenue lost from the SALE of their music they will have to raise ticket prices or perform more often (thus blowing your "scarce good" theory - it becomes much much less scarce if they are playing arenas every night of the week.
I'm not sure why this needs to be repeated, because I have addressed these critiques in detail. But, once again, let's dispel your myths...
"Not everyone is a good performer."
Nor did I say that concerts are the only way to make money. So, I'm not sure why this matters.
Trent Reznor made $1.6 million in a week selling other scarce goods that had nothing to do with concerts.
Performances can be a lucrative part of the business model, but they don't need to be.
Finally, saying that not everyone likes to perform and therefore we should allow them to use a gov't granted monopoly to boost up their business, is like saying of shop owners "not everyone likes to work 9 to 5, so the gov't should pass a law saying shops can only be open from noon to 3.
If you don't want to do what it takes to be successful in the market, I have no sympathy for you.
What about studio musicians
We've discussed studio musicians at length. Most are already paid on a work-for-hire basis anyway, so there's no reason for that to change. You pay the musician for his or her time and that's that. Problem solved.
Problem 2: artists are already making money this way, its how many are making the majority of their money today. Problem 3: to replace the revenue lost from the SALE of their music they will have to raise ticket prices or perform more often (thus blowing your "scarce good" theory - it becomes much much less scarce if they are playing arenas every night of the week.
These are both the same effective issue, and ignores pretty much everything we've written (good work!). The evidence is quite clear, that in embracing your fans you INCREASE THE SIZE of your audience. So, you don't necessarily have to raise ticket prices or perform more often.
Also, I'm not sure what's wrong with performing more often? Most musicians I know would love it if there was enough demand to allow them to play more often.
And, uh, playing more often doesn't get rid of scarcities. I'm not sure how you figure that.
Artists can create "innovative products". Thats all well and good for inventors, but these people are MUSICIANS not INVENTORS
I didn't say they had to invent anything. I'm not sure where you got that from. It appears to be another strawman.
I think the argument you're *trying* to make is that since they're musicians they shouldn't have to worry about the business and marketing angle. And I agree. I'm not sure why you think that's a point in your favor. It's not. I've already explained that musicians who don't want to be involved in the marketing and business side of things should find managers and record labels who handle that aspect -- just as they do now.
So... what have you proven? So far, nothing but a lack of reading comprehension skills.
I want to repeat that, musicians create MUSIC. It's important that you understnad that concept, and I think you do but you are CHEAP and want others to pay for your music for you.
As noted, I've addressed that repeatedly. As for the claim that I am cheap, I take offense at that. I spend an awful lot of money on music every year. I just ordered over $200 worth of music.
In a perfect world artists would have their music available for purchase on their own websites, not through some download service but on their own web site.
Define "perfect world"? I think that's your problem. We're not trying to define a perfect world. We're explaining basic economics, and the REAL WORLD concerning what forces are impacting music.
If the artist choses to make the price of the purchase $0, that is their choice
Sure, in your theoretical perfect world. Out here in the real world, we recognize that price is set by the MARKET, not the seller alone.
Giving music away is great for consumers, bad for artists, and detrimental to the industry as a whole.
Tell that to the musicians making more money than ever doing that. I have seen no evidence that it is bad for artists or the industry (other than the industry of making plastic discs). So far, the evidence shows that it's good for consumers, great for musicians and fantastic for the overall music industry.
Thanks for your time.
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> great for musicians and fantastic for the overall music industry.
> Thanks for your time
Nice job with the stellar proof, King Rebuttal. I somehow missed the proof that free so good? Thanks for my time? I don't get it.
You spent $200 on music, so you have the floor. (if you like, you use REAL WORLD in all caps again, for emphasis.)
Oh, and the long tail thing made for a great book title, but is lasting about as long as web 2.0. Go wash up now, you mom has dinner ready, and it's a school night.
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Re:
You miss a lot, don't you?
Try using the search engine. We have provided plenty of links to studies that show how removing protectionist barriers increases market size, and we've supported that with evidence on the ground level of musicians embracing these concepts to make more money -- some of which I noted in the comment.
To then claim that you missed the proof... well, there's only so much we can do to lead you to the water.
Oh, and the long tail thing made for a great book title, but is lasting about as long as web 2.0.
Huh? I didn't say anything about the concept of the long tail. I linked to a blog post by Chris Anderson, which is on the long tail blog, but has nothing to do with the long tail.
Your reading comprehension levels are astounding.
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You all just want it free
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Re: You all just want it free?
Matt Sylvestre blustered:
Lots of drive-by commenters seem to claim that sort of thing, yet I've never seen them back it up. What makes you say that? Please explain.
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success in the music industry
(mho, this fellow ian rogers seems quite clever)
http://www.techcrunch.com/2008/11/19/ian-rogers-on-the-death-of-the-music-cd-business-i-d ont-care/
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Cute spin on the title.
I had a feeling there would be a "freeconomics" message in this blog and I'm glad I wasn't let down.
No point in trying to challenge the reasons why the faux title wouldn't work in freeconomics, especially after reading the rebuttal from a "long rant".
Maybe on the next blog. ;)
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Re: success in the music industry
(mho, this fellow ian rogers seems quite clever)
http://www.techcrunch.com/2008/11/19/ian-rogers-on-the-death-of-the-music-cd-business-i-d ont-care/
Actually, we had that a day before TechCrunch did:
http://www.techdirt.com/articles/20081118/1711512873.shtml
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Music playlist for myspace
Myspace Playlist
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Re: Re: Re: Bailout
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