Wednesday, March 26, 2008

The strawmen that break the camel's heart

Blogging ping-pong: Billy Bragg calls for a slice of the Bebo cake; Michael Arrington responds on TechCrunch; and then econsultancy responds to the response.

eConsultancy's views - and sympathy - sits with the major labels. It rails against Arrington for suggesting that recorded music's value is slipping towards zero, and marshalls some political and legal arguments in its defence:

When somebody downloads a song (or software product) without paying for it, it is a violation of the rights holder's intellectual property rights assuming that the rights holder has not authorized it to be downloaded without payment.

Whether you agree with the concept of intellectual property or not, we live in a world where the legal systems of most developed nations have embraced the concept intellectual property rights, and short of an abolition of these, there can be no argument that piracy of recorded music is not an egregious violation of these rights.

Well, actually, you can certainly argue about 'egregious'- 'de facto', maybe. But this is missing the point in a way that even a Brighton and Hove Albion striker would smirk at.

Yes, it breaks the law. But that doesn't mean it isn't happening. Indeed, when so many otherwise law-abiding people break a law so often, the conclusion should not be that the law is a good one.

But econsultancy are about to use the 'stealing a CD' metaphor:
Few people would walk into a music store and steal a CD but the disinhibiting nature of the internet has helped foment a widespread belief that anonymous digital theft, on the other hand, is [seen as being] acceptable.

To hear this argument being trotted out in 2008 makes it feel like you're in an episode of Torchwood and webpages from the late 90s are being served to you through some sort of time rift. In case you've fallen through a timewarp: Not paying for a digital download is only like stealing a CD if you steal from a magical CD shop where each item replenishes itself on the shelf. And in such a shop, the value of the CD for sale might be seen to be almost nothing, since its perpetual supply would suggest a pricepoint at approaching zero. You might give the storekeeper something to compensate for his work at providing a physical environment, and for his time; but the CD itself? It costs him nothing to create a new one, so it's hard to see why he could legitimately charge more than a token for it.

This doesn't, of course, make it right. Artists should get paid. It's just that we're in a new world where the previous value of an artefact - its scarcity - has been removed. The rules are different; the intellectual property rules, created when it was possible to limit supplies of recordings (indeed, impossible not to) need to change, too.

Arrington's belief - that recorded realises its value is promotional, not commercial, and to make money, that which is scarce should be exploited for its rarity - makes perfect economic sense. EConsultancy even summarises the point, with a little bit of raging:
* Artists and record labels to offer an in-demand product (recorded music) for free when the greatest fixed costs in the business are related to the production of this product.

* Artists and record labels to subsidize the give-away with "live music, merchandise and limited edition physical copies of music" - all things that naturally appeal to a much smaller subset of the market.

But the costs of a CD don't lay in the recording: the largest chunk of a record company's costs are in shipping, distribution and overhead. The average CD price contains just seventy-odd cents' worth of making the actual music.

It's not that expensive to make a record. It's pricey to promote, pricey to cart about - but, unless you over-indulge your acts, by flying The Happy Mondays to Isle Of Drugs, or allow them to hire sixteen piece orchestras, actually getting them to go in and make a record doesn't, in the scheme of things, cost that much. Half as much as the marketing.

eConsultancy then goes on to demolish what it claims are the "two myths" of the future of the music business:
The internet has eliminated the need for middlemen (i.e. record labels)

But whoever has said this? The point is that the new middlemen for the new world aren't record labels, not that there won't be any. Thom Yorke isn't going round people's houses with the new album on a pendrive - there are still people in the middle providing services. It's just they're not being brought in by an extra layer of management any more.

You'll still need the labels, we're warned:

Yet few critics place any importance on the fact that both Radiohead and Nine Inch Nails were the beneficiaries of major record label promotion and that their ability to eventually go direct to their fans stems from the popularity that was cultivated with the investment of the record labels.

That investment cannot be devalued. After all, EMI, for instance, estimates that only 5% of its acts are profitable. In other words, record labels act like venture capitalists in many ways, and I don't see Arrington calling for the demise of his VC friends.

95% of what EMI does fails to make money, in other words. And it fails to make money because the company is badly organised, and can't cope with smaller artists selling smaller records to dissipated niche markets; because it overpays and overproduces. EMI losing on 19 out of every twenty bands it works with isn't a reason we need record labels - it's the reason why we don't. How is showing that a company has no idea how to make money from most of its product meant to convince anyone they're the right people to cope with the future?

Yes, there will still be a need for someone to invest - but cut out the enormous cost of physical manufacture and distribution, and the sums get smaller. Cut the need to sell hundreds of thousands to break even, and the attractiveness to smaller investors grows. Move on from four companies signing up everything in site, and then not knowing how to sell them nineteen times out of twenty, and smaller labels and smaller bands might have a better future.

Onto the other myth:
Piracy primarily reflects a consumer backlash against "evil" record labels.

This is the sort of strawman that would make Worzel Gummidge ashamed. It's like me saying that there's a myth that bloggers want to kill the Queen, and then delivering two paragraphs comprehensively dismissing the idea. Nobody suggests that this is what's going on, and so to then disprove the myth is to value the pyrrhic above the empiric. A consumer backlash against labels which have been slow to act, which have been proven to conspire to overcharge the public, which have been unable to respond to consumer demands, maybe; but who has ever suggested that everyone is busily scouring the torrents for a Blur album in order to punish EMI?

eConsultancy ends by predicting, if things don't change, everyone will lose:
But the most dangerous unintended consequence of digital music theft is that it could eventually hamper the creation of music itself.

If making the music we all love is not a financially-viable enterprise for artists because we continue to steal it and devalue the costs (in both time and money) of producing it, more and more of them may have no choice but to stop creating that music.

They even quote Adam Smith to back up their point:
In his seminal book, The Wealth of Nations, Adam Smith noted:

"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages."

We should remember this and recognize that it applies to more than just the people who produce the food we eat. It also applies to the people who produce the music that satiates our souls.

But this assumes that music can only exist when the people who make it are buying yachts and owning half a Hampstead Street. An awful lot of people already make no money at all from their music - playing down the Dock Road on a Saturday night for drinks; putting out self-financed vinyl 7 inches for the love of it; humming to themselves. A reorganised world which takes advantage of the new opportunities offered by digital distribution and a global market might mean more people can make a little from music; it will almost certainly mean those who make a massive amount will make less. But even if nobody pays anything ever again, we won't suddenly live in a silent realm: some people make music because they love to make music.


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