The Latest Entrant Into The Economically Clueless, Luddite 'Internet Is Evil' Book Category
from the it-must-sell-well dept
Last we heard from Rob Levine, he was saying that people in the music industry shouldn't pay attention to what's popular on file sharing networks, because you can't learn anything from that. That was when he was executive editor of Billboard, and clearly was trying to defend Billboard's obsolete listings of what was popular. Very, very shortly after that heOf course, that's fascinating, since pretty much every study we've seen shows that the market for films and music has increased, and while for newspapers it has shrunk, that's unfairly limiting the market to the paper side. The market for news has continued to grow. Most of Levine's article seems to be made up of typical wishful thinking, carefully choosing how he defines markets, and a strong dose of traditional economic fallacies, with just a pinch of luddism. The article opens with the classic trick of pretty much anyone who's data can't back up what they're selling: use random correlations, rather than any evidence of a causal relationship. So, he talks about the declines of NBC, EMI, the Washington Post and MGM. And, somehow, that's proof that the internet is at fault. I won't go into each case, but there are many, many other reasons why each of those four companies ran into tough times recently, almost none of which has to do with the internet (and much of which had to do with ridiculously bad management).
From there he makes a massive leap to basically blame the tech industry for the entertainment industry's problems. Stop me if you've heard this one before. Apparently, you see, The Pirate Bay, Google & the Huffington Post sucked every other industry dry. This, of course, is not true. It's a made up scare story for entertainment industry executives and politicians. I mean, this kind of scare mongering has been debunked so many times that you'd think Rob must have to pay someone for rehashing such old news. Let's dig into this just a bit:
Over the past decade, much of the value created by music, films, and newspapers has benefited other companies – pirates and respected technology firms alike. The Pirate Bay website made money by illegally offering major-label albums, even as music sales declined to less than half of what they were 10 years ago.The Pirate Bay made a tiny amount of money -- barely a blip on the radar -- and given the continued research showing that those using sites like The Pirate Bay tend to be the industry's best customers, it's entirely clear (unless you are willfully ignorant) that the issue is a business model problem, where the labels failed to offer what consumers wanted. Furthermore, since he brings up "music sales," he's flat-out wrong. Sales of recordings may have dropped, but if you actually look at the real market which Levine conveniently ignores, which includes live, publishing, advertising, direct-to-fan and others, you discover that the money that actually goes to musicians has gone up tremendously. Sure, the record labels are suffering, but that's because they set themselves up to focus only on the part of the business that got disintermediated.
YouTube used clips from shows such as NBC's Saturday Night Live to build a business that Google bought for $1.65bn.Ah, the industry's false line again. YouTube provided free software and free bandwidth (at a huge expense to the company) and combined that with a large community to become the defacto place online for video. Lots of smart folks -- including NBC's Saturday Night Live, eventually learned to embrace that and use YouTube as a tool to gain viewers. In fact, if you want to look at who benefited more from SNL's videos showing up on YouTube, there's a pretty strong argument that it was SNL... not YouTube.
And the Huffington Post became one of the most popular news sites online largely by rewriting newspaper articles.Nice line. If only it were true. It's not. The Huffington Post launched with a ton of new and unique content from lots of people. Huffington called in a bunch of favors and had a ton of her famous friends writing for the site from day one. On top of that, the company has a large reporting staff that does plenty of original and unique reporting -- much of which accounts for its traffic. Yes, it also does some aggregating of content -- but nothing that any other news publication couldn't do as well. If it's really true that HuffPo somehow hurt other media, they could just tack on the same sort of aggregating. Anyone who claims that HuffPo became popular by rewriting newspaper articles is lying.
This isn't the inevitable result of technology. Traditionally, the companies that invested in music and film also controlled their distribution – EMI, for example, owned recording studios, pressing plants, and the infrastructure that delivered CDs to stores.I read this and all I see is that EMI is the horse buggy maker, who invested in wooden wheels and buggy whips just as the automobile was coming around. Look, if you invest in the parts of the business that become obsolete in the digital age, you kinda deserve to die. I'd hate to live in Levine's world where the buggy maker should have been able to stop the automaker. We had our red flag laws that required people to walk in front of automobiles waving red flags, and everyone learned they were stupid.
But, Levine thinks red flag laws are the answer to saving his incompetent buddies in the entertainment industry. You see, he blames one of the few good regulations out there, which he hopes gets taken away:
The internet changed all this, not because it enables the fast transmission of digital data but because the regulations that enable technology companies to evade responsibility for their business models have created a broken market. Scores of sites now offer music, while hundreds of others summarise news. Part of the problem is rampant piracy – unauthorised distribution that doesn't benefit creators or the companies that invest in them. It also puts pressure on media companies to accept online distribution deals that don't cover their costs.Anyone who thinks that the market didn't change because of the ability to more efficiently distribute data is making a joke. But, let's go on. Levine is, again, misrepresenting reality. The laws he's talking about -- mainly the DMCA's safe harbor -- do not allow tech companies to evade responsibility. Levine is, again, being intellectually dishonest. The safe harbor merely means that liability is properly applied to the actors actually doing the infringement. Apparently Levine prefers to blame Ford for any car accident.
As for that last line about "pressure on media companies to accept online distribution deals that don't cover their costs," that's a howler. Just take a look at the "deal" that Pandora has for streaming music, which has set up Pandora to never be profitable. And what "costs" do the record labels have for those deals? It's a sunk cost. They recorded the album and they just hand over the digital files to Pandora. No marginal costs at all.
But the underlying issue is that creators and distributors now have opposing interests. Companies such as Google and Apple don't care that much about selling media, since they make their money in other ways – on advertising in the first case, and gadgets in the second. Google just wants to help consumers find the song or show they're looking for, whether it's a legal download or not, while Apple has an interest in pushing down the price of music to make its products more useful. And this dynamic doesn't only hurt media conglomerates – it creates problems for independent artists and companies of every size.Another favorite of the entertainment industry. It sounds good if you aren't actually thinking this through. But there's a weasel phrase in there that lets Levine say something that he can insist is true, while it's totally and completely misleading. He says they don't care about "selling media." But that assumes that selling media is the only way for the entertainment industry to make money. Google and Apple care very much about making sure that content creators get paid, because they need content creators to keep making money to keep producing works (which, by the way, is happening, as we have record numbers of new music, movies, news and other products coming out each year -- a fact that Levine seems to completely ignore). But they know that there are better ways to get them paid than just "selling media." In fact, when you just look at the music industry alone (the industry Levine should know best), he must know that actual artists are now making significantly more than they did in the past, thanks to the industry shifting away from "selling media" to other business models.
Then he jumps in with the luddite's favorite line about how everyone who disagrees with him tosses out "information wants to be free." Of course, as Cory Doctorow pointed out last year, the only people who seem to toss out that line are entertainment industry execs pretending that's what people who disagree with them say.
The crux of Levine's argument (and the title of his book) is that all of this shows the problem of "free riders." This is another popular entertainment industry trope, which sounds good... other than the fact it's economically clueless. Yes, there are certain areas of economics where free riders can be a problem. But there are also such things as positive externalities and economic growth created because of free riders. There's a serious book to be written on the subject, but it's not this one.
Certainly, copyright laws need to be updated for the digital age. Many reformers say they favour protection, but view any attempt to enforce it as unacceptable. This doesn't make sense: a market can't be based on voluntary payments, and laws don't work if they can't be enforced. There needs to be some penalty for illegal downloading, although slowing the access speed of a lawbreaker makes more sense than cutting their account entirely. By the same token, why should internet users be allowed to access sites that clearly – and that last word is important – violate UK law? If the UK simply declines to enforce its laws online, it will leave many of its businesses vulnerable as the internet becomes more important to commerce in the years ahead.Note the implicit -- but false -- assumption in there. Without copyright, the only business model is "voluntary payments." That's funny, I didn't realize I had ever been "forced" to pay for all of those CDs, concerts and movies... A market is always based on "voluntary" transactions between willing buyers and sellers. That's the definition of a market. How can he say otherwise?
I'm guessing he really means "voluntary" in the idea of "tips" or "donations," but that again presumes (totally falsely) that the only way to make money is from the direct sale of media. It's not. And he must know that.
Honestly, for all the trouble I've given Levine in the past, I always thought he was pretty sharp on the larger issues. But this column (and, I presume the book it advertises) seems to have simply taken all the tropes, ignored all the data, misrepresented wherever possible, and packaged it all together under a silly economically ignorant title. I'm sure it'll sell just great. Thankfully, though, if you read through the comments on his article, nearly every one of his ridiculous statements is dismantled item by item. Ah, crowdsourcing to the rescue.
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Filed Under: economics, free rider, internet, regulations, rob levine
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Re:
As noted in my post. :)
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talking about mine?
And as I plugged i the comments, I'm even doing a panel on bittorrent and why it's lasted 10 years at Dragoncon in exactly 3 weeks time (I mean exactly, as in 1pm, Monday september 5th)
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Re: talking about mine?
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I suppose a "serious" book on the subject is one that would support your opinions?
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Not at all. There are plenty of serious books I disagree with. This book is a joke.
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Hey, I've got an idea! Write a book!
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Levine is right!
/sarcasm, if you haven't figured it out.
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Whaaaaa, Whaaaaa, Whaaaaaaa.
/ Here, let me lay a song for him on the worlds smallest violin.
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Don't be daft. It's hot news that's protected. Rehashing old news is just fine!
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Mike, you're again blinded by your premises.
"The public hasn't lost its appetite for television, journalism or film; shows, articles and movies reach more consumers than ever online."
And the next sentence states the OBVIOUS and refutes your rant:
"The problem is that, although the internet has expanded the audience for media, it has all but destroyed the market for it."
I'll trouble you to READ ALL before jumping into your mania.
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Re: Mike, you're again blinded by your premises.
films made more money than ever before again where has the market disappeared?
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Re: Mike, you're again blinded by your premises.
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Re: Mike, you're again blinded by your premises.
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Fun times with basic logic
If businesses can't figure out how to take advantage of this then they are doing it wrong. Simple as that.
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Re: Mike, you're again blinded by your premises.
"The public hasn't lost its appetite for television, journalism or film; shows, articles and movies reach more consumers than ever online."
The second paragraph does not claim he never said this. It said "the market has expanded," which is in fact what Levine denies... as you point out:
And the next sentence states the OBVIOUS and refutes your rant:
"The problem is that, although the internet has expanded the audience for media, it has all but destroyed the market for it."
One biased sentence does not "refute" anything. And not only is it not "OBVIOUS," it's patently false. The market has grown, not shrunk. Levine's problem is that he only considers certain industries within the market - the legacy industries that are losing money.
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Re: Mike, you're again blinded by your premises.
Moron troll reality:
"The public hasn't lost its appetite for... film... The problem is that (the internet) has all but destroyed the market for it."
Actual reality:
July 2011 is the highest grossing month in box office history - http://www.boxofficemojo.com/news/?id=3235&p=.htm
If "destroying the market" is making the most gross revenue ever recorded, I don't mind the destruction of the market, personally.
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One thing I object to
I can't believe it took you until the afternoon to get to this! :)
While I certainly understand we have different points of view, there's one thing here that is untrue and, I think, unfair. In the first paragraph, you say, "Very, very shortly after that he was out of a job." The implication, if I read this right, is that I was somehow ousted.
This is untrue. I was never "out of a job." I resigned, for reasons that had very little to do with Billboard; I liked it there, but I got a great book deal and I wanted to leave New York for personal reasons.
Obviously, I disagree with everything else you wrote as well, but I think it's an interesting discussion to have (although maybe in a different tone). But I would appreciate if you would correct or at least clarify the reason I left Billboard.
Also, please don't forget to point your readers to the piece I just wrote for Wired UK -
http://www.wired.co.uk/magazine/archive/2011/09/ideas-bank/robert-levine
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Re: One thing I object to
That is all.
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Re: Re: One thing I object to
I agree. While I don't agree with Mr. Levine's view of the world, I must say that my impression of him as a human being just jumped through the roof.
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But I mean, this is a comment on the internet we're talking about, which means tact and politeness are about as common as high class and reputable businessmen in Mos Eisley.
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Re: One thing I object to
Thanks for the wired link now we can refute your claims in the comments section over yonder.
CN'E(d)
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Re: One thing I object to
Why didn't NBC buy YouTube? Seems like it would have been a good business decision...according to you. That is the problem with your industry, you overlook successful business models and cry to the government for monopoly rents.
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Re: Re: One thing I object to
Props to you, Robert.
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Re: Re: One thing I object to
Why didn't NBC buy YouTube? Seems like it would have been a good business decision...according to you. That is the problem with your industry, you overlook successful business models and cry to the government for monopoly rents."
I would go even further to say, if these "problem" sites are SO big, SO popular, and have such a BIG impact, why then dont the studios DO THE SAME THING THEMSELVES? Or like the poster above says, buy them. Why is the ONLY response to be ever more increasing enforcement, restriction and lawsuits. This leads to only one of two conclusions:
1) "piracy" is not anywhere near as big a problem as they make it out to be, and in fact may even be helping them.
2) They have a corporate culture of myopia and willful-blindness, and a disingenous, crippling "not invented here" syndrome that makes them institutionally incapable of progress.
So which is it? Because the math doesnt add up here. Either "piracy" is a huge enough problem that the industry needs to find a way to work with/use it, or its marginal and has no real impact and all these false-flag operations are taking valuable time and resources away from actually creating things people want to buy.
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Re: Re: One thing I object to
I think was in Viacom that showed how badly the TV networks wanted Youtube in emails.
And thank God they didn't get it or it would have been transformed into another failure like Hulu, Joost and the dozens more ones that they bought and actually ruined.
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Re: One thing I object to
Care to elaborate? Didn't think so, would hurt your books sales. Funny thing is though, you wrote a book to lament the dying of the market for content. Oh the irony.
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Re: One thing I object to
This is the height of intellectual dishonesty from someone with your background. You know full well that the only industry's trying to use the law to regulate communications online are the media companies and law enforcement. Yet you falsely claim that Google is trying to get laws rewritten to suit their needs. The truth is, google is trying to get laws UNwritten, because the original authors were media industry shills. Theres a huge difference, and not mentioning that in conjunction with this statement is misdirection approaching an outright lie.
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Re: One thing I object to
Was not the implication that was meant at all. It was, literally, that very soon after that you were no longer working at Billboard. What happened and how was not part of the implication. Just as a way of explaining why you seemed to have disappeared. I'll clarify.
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Re: Re: One thing I object to
I think without meaning to, you 'mythbusted' him.
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Re: One thing I object to
http://www.wired.co.uk/magazine/archive/2011/09/ideas-bank/robert-levine
Mr. Levine -
It's certainly nice to see some civility on this topic, especially considering the usual tone from the "copyright maximalist" trolls on this site. (You didn't call anyone a "freetard" who "drinks Kool-Aid," didn't say anyone who disagrees is "pro-piracy," and didn't insult anyone personally.) For this, you should be commended.
However, there are a number of points where you are being misleading, whether you intend it or not. I'll focus on only the most egrarious example, from the Wired article you linked to:
[I]t would be foolish to let certain companies write laws to prop up their business models -- even if those companies happen to be in the technology business.
The idea that the technology industries are the ones that "write laws to prop up their business models" is completely laughable on its face. Certainly, technology companies lobby the Government, but they're far outspent by the RIAA and MPAA. The *AA's have been spending huge amounts of lobbying money for decades, of course, but recently have ramped up their efforts. In fact, in Q1 of 2011, the RIAA vastly outspent Google in its lobbying efforts ($2.1 million vs. Google's $1.38 million). Also, in just Q1 of 2011, the MPAA gave more money to law enforcement agencies directly ($400,000) than Facebook's total lobbying budget for the entire year of 2010 ($351,390). And that's despite Facebook and Google increasing their lobbying funds dramatically.
And there is more than just money going back and forth. There is a revolving-door poicy between high-end positions in the Government, and lobbyists for the MPAA and RIAA - far more than the tech industries. The effects on public policy have been obvious. In the past twenty years of copyright law, Congress has passed not one law that favors consumers over legacy content industries. Not one law that favors technology industries over "big content."
In the end, of course, it really doesn't matter who spends the money. What matters is whether the laws that are being written and enacted benefit the public, since the public is supposed to be the sole beneficiary of copyright laws. So far, "big content" has made an enemy of the public. The laws that they propose directly harm public interests, and do so solely to save inefficient business models, which never benefitted consumers (and often not artists) in the first place.
So, if Google and Apple (or whatever the latest tech-industry bugaboos) are throwing money at Congress to prevent these laws from passing, my only reaction is, "Good for them - I hope next year they throw around even more."
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Re: One thing I object to
Nice way to skip over anything else. Gotta love to see Mike's next article on some of your ramblings where he'll certainly triple check to make sure there are no ambiguities in there.
What's you reply gonna be then? Nothing cause you can't refute any of his points?
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cd prices
A simple example for mr Levine: I just bought Battles brand new album for 9,99 euros including shipment from the UK to my door in The Netherlands via an internetcompany (sorry!), while the same album in a Dutch recordstore costs at least 18 euros (excl. shipping to my door). Do I think recordstores have a 2000 % profit margin and just love ripping customers off? No, but I do know that they won't be in business for long. It's called progress.
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Entitlement Industry
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But it is the inevitable result of technology. Personally, I think a much better analogy than buggy whips would be AT&T with Cds being more akin to having a land lines for a phone. The number of people I know who even have a land line anymore is very, very limited. Probably less than the number of people I know who don't have cell phones. Technology changes markets, pure and simple, and you either adapt to the market or you go out of business.
"while Apple has an interest in pushing down the price of music to make its products more useful."
Well, that's pretty much how business works (well unless your the entertainment industry who lobbies one party, or big oil who lobbies the other party in order to protect their businesses). In fact, he pretty much summed up Walmart's business model and continues to grow hand over fist while the entertainment industry continues to struggle.
"The Pirate Bay website made money by illegally offering major-label albums, even as music sales declined to less than half of what they were 10 years ago. "
I'm not convinced music sales have declined at all, much less by half. CD sales have gone down (significantly for the major labels) and MP3s/digital files have not picked up the difference (for the major labels) but how many of those sales have actually shifted to band/musicians that are not reported in industry stats? Some of these agencies can't even keep track of their major artists (at least to pay them), so I'm suppose to believe they can keep track of every small band that's selling like a few hundred albums?
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It also puts pressure on media companies to accept online distribution deals that don't cover their costs.
It takes money to press, burn, and distribute physical media such as CDs or DVDs.
Once the server has been set up, the software installed and/or the plugins written, and the network pipeline is assured, it costs as much to "manufacture" 1 copy of a CD as it does 10,000. So long as the servers are maintained and the pipe is there, you could produce 1,000,000 copies just as easily and for the same cost.
This paradigm however is not new. I think it was Bob Norton (of Norton Anti-Virus) who noted this potential shift in production methods away from physical products to digital ones. And this was back when the Internet had NO commercial traffic allowed on it. He made a profit by giving away his software and selling the updates. Because he embraced the paradigm he is now quite wealthy. And the last I saw, the company wasn't doing too badly either.
If these stick in the mud companies refuse to embrace the paradigm, that's their fault. The no-physical-product business model has been around for decades. It's been proven to work.
The same rule applies to them that applies to all businesses at all times throughout human history: adapt or die.
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http://scallywagandvagabond.com/2011/08/how-the-internet-came-along-and-destroyed-culture/
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