Big Music: sinking, and sinking fast
p2pnet news view | P2P | Music:- The Big 4 record labels say they’re being devastated by all those wicked file sharers.
Well, the corporate music bidniz is sinking, and no mistake. But file sharing has nothing to do with it.
Vivendi Universal, EMI, Warner Music and Sony Music’s RIAA have no one to blame but themselves.
Their business plans have always been predicated on screwing customers and contracted artists alike. But when they refused to accept they’re now in the digital 21st century, where they’re accountable, and not the physical 1990s, were they weren’t, they signed their own death warrants.
Fred Wilhelms is both an entertainment lawyer and an expert on the trials and tribulations of the entertainment cartels and in ‘The last of the dinosaurs,’ he goes into detail on some of the ills besetting both the Big 4 labels and Hollywood.
However, says Quartz in a Reader’s Write, “the consumer or the potential shareholder, surely one or the other is being mislead here ? I am not happy to take much of what your stating as fact.”
Fred responds »»»
Here’s a recent report on Blue Ray sales vs DVD:
http://nobosh.com/sr/sales-of-blue-ray-digital-downloads-up-big-in-q109/216949/
Blue Ray sales doubled in the 1st Q of 2009 while DVD sales dropped 14% over the same period last year. That seems like there’s more than an offset until you look at the real numbers quoted in the article. Blue-Ray doubled to $230 million. That means an increase of $115 million over the year. DVD sales dropped 14% to $2.9 billion, which works out to a decrease of about $334 million. In the aggregate, there was still a decrease of over $200 million in sales of physical product. The precarious state of the economy is slowing the consumer’s transition to Blue Ray, and the availability of digital downloads is making inroads, too. Download revenue was more than twice the amount from Blue Ray for the quarter.
Let’s get some of the terminology straight, too.
There’s no such thing as box office profit. What has gone up is box office revenue the amount of money made from ticket sales, before deducting any costs. You only get profit after deducting your costs from your revenue.
The revenue has gone up, but the number of tickets sold has remained steady, and, recently, shows signs of starting to decline over the past year’s numbers. This means that the record breaking revenue is more a function of ticket inflation than anything else. Keep in mind that half the box office revenue doesn’t make it back to the producer; half goes to the distributor and the exhibitor. It has been many years since Hollywood depended on box office revenue alone to make a profit. Home sales (tape, disc and download) and TV licensing revenue has become critical for the studios to show a profit.
There’s no doubt that the industry is using filesharing as a scapegoat, but there’s a real reason they’re looking for a scapegoat; the projection on the numbers isn’t good.
The Motion Picture Association of America is in the same as boat as the Record Industry Association of America and:
- All the laws in the world aren’t going to prevent filesharing
- All the DRM schemes aren’t going to stop filesharing
- All attempts at restricting access through throttling aren’t going to stop filesharing
They both have business models based upon creating demand through artificial scarcity for their product (limiting how and when you can access it).
Copyright laws gave control of access through control of distribution, which only made sense as long as you could control distribution. Copyright no longer works as a functioning part of the business model when you can’t control distribution. As the record industry learned, you end up spending more time and energy enforicing your rights than you do actually making money, and that’s not good for business.
But the industry believes it cannot abandon copyright because they have so much invested in it.
Imagine the successful anvil salesman who books a ticket on the Titanic as a reward for years of successful selling. When the ship starts to sink, he faces a dilemma. He can jump overboard without carrying anything and maybe save himself, or he can jump overboard carrying his suitcase full of sample anvils because they have made him a big success in the past and most certainly drown from the burden carrying him down.
You and I can see the wisdom of going empty-handed, but we haven’t made a penny from holding onto copyrights. We have nothing invested in copyrights, so their presence, and the knowledge of their cost, doesn’t affect our thinking.
We know how the story has to end.
“They think they can get somebody to declare a new ending in which they live happily ever after,” says Fred, adding:
“They’ve got as much chance of getting Congress to repeal the law of gravity that is going to send that suitcase of anvils to the bottom of the sea.”
First they ignore you, then they laugh at you, then they fight you, then you win ~ Mahatma Gandhi
some of the ills - The last of the dinosaurs, October 13, 2009
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October 14th, 2009 at 2:22 pm
I have a suspicion that the reason the monopolists are so keen to implicate the people infringing their monopolies as being the cause of their financial straits is precisely because just as they appealed to the state for a monopoly in the first place, they can now appeal to the state for a tax to compensate them in place of the monopoly.
In other words, “Unstoppable filesharing” = “Internet tax”.
If you can’t sell copies at monopoly protected prices (because people make their own), then demand that the state pays for each copy that the people make (via taxation).
It’s just as corrupt and unethical an idea as a monopoly was in the first place. Paying printers for doing nothing? It’s like ’set aside’ for farmers – easy money if you can get it.
The last thing anyone (apart from me) seems to be considering is abandoning the idea of selling copies entirely (with or without monopoly), and enabling the artist to sell their art directly to their audience in a free market.
Mike Masnick has high hopes for abandoning even selling the work, and focusing on selling niche/authorised goods based upon it, but although fine in its way, I think that’s missing the wood for the trees.
October 14th, 2009 at 2:30 pm
Great article bout how some things never change…
http://arstechnica.com/tech-policy/news/2009/10/100-years-of-big-content-fearing-technologyin-its-own-words.ars
I think the boy has cried “Wolf!” far too many times to be taken seriously any more.
October 14th, 2009 at 2:49 pm
I like it, many excellent points.
but may I add a correction? ‘Throttling’ does not and cannot restrict filesharing it slows (or quite bad attempts at and putting even more stress on a network *looking at you Singtel OptusAsia*) BitTorrent traffic, No the goverments of the favour 3 strikes, and like the french Mr. Nicolas ‘400 copies’ Sarcasm(yes I did
) to restrict encrypted traffic that many people are changing to such Services like OpenDNS
and to quote Adelaide band hip top hoods ‘the mindless acts of greed, might as well tax the air we breathe’
October 14th, 2009 at 3:01 pm
Jon your going to like this
iPred iFAILs
TF: First IPRED case in Sweden that dealt with pirated ebooks(under the IPRED) was thrown out by the Appeal Court and ‘alleged’ Pirate walks free win! lol
October 14th, 2009 at 3:13 pm
@ Andrew:
Yes – I did like it. ;p
http://www.p2pnet.net/story/29727
Cheers!
October 14th, 2009 at 3:28 pm
News.com.au Tech:
More than a third of Aussies have thought about illegally downloading a movie: http://tinyurl.com/yg5bt28 (which is a total load of BS)
Kopyright gone madddd: Kelloggs now your flakes wont be so flaky: ‘lasered flakes: http://tinyurl.com/yl56ddd (lol)
When did you post that? I like it! quick on the gun
October 14th, 2009 at 3:31 pm
Crosbie,
In raising the “tax” aspect as a way to replace actual sale revenue, you have tapped into something that there is mounting evidence to support.
1. John Simson of SoundExchange explains that high performance royalty rates are needed on Internet radio because “the listen has replaced the sale” as the basis for an individual’s enjoyment of music. For reasons he doesn’t care to explain, this starts with the presumption that the record industry is supposed to be compensated every time one “enjoys” music.
2. Jim Griffin’s “Choruss” project, as so eloquently skewered by Jon Newton in various posts here, is nothing more than an tax on all ISP customers to compensate music copyright holders for filesharing by some of the customers.
3. The proposed terrestrial radio performance royalty bill looks more and more like a tax every day, with exemptions being carved out for groups with the political clout to threaten its passage.
The common reasoning behind all these endeavors is that the record industry has a natural right to be compensated forever (or nearly forever) based on copyright ownership, and that their business models, having been overtaken by technology need to be propped up by infusions of government ordered cash from the public. There’s really no logic to it. It is my hope that the a2f2a discussions spend some time exploring the lack of justification for this approach.
October 14th, 2009 at 3:34 pm
25th attempted Suicide at French telecom (Orange) but this one was saved > http://tinyurl.com/yks9m5j
October 14th, 2009 at 4:17 pm
Great analysis, Fred. Noting this one.
October 14th, 2009 at 6:33 pm
I agree Fred. Item 1 is particularly poignant.
The problem with an industry that produces products no-one needs (copies) is that it simply has no option in terms of improving its product or business. There is nothing it can do. Perfect digital copies cannot be improved further, and they cannot be produced more cheaply in a factory or supplied more conveniently than kids can produce and supply them at home (at $0 and very easily). The copy manufacturing industry’s only hope for continued revenue is to pretend that it has a perfectly sound business, but that it is scuppered by thieves (rather than the fundamental nature of information and digital communications technology), and thus to seek compensation.
So, like an apple grower would complain to the parents of kids who scrumped from their orchard, demanding compensation for their loss, the industry goes to the government to demand compensation for their loss of revenue. However, they first have to spend years consolidating the notion that unauthorised copying=theft, and that it adds up to a considerable loss to the industry and the nation’s productivity. This is why there are anti-camcording laws for cinemas, not because cam-cording is a problem, but to create greater public awareness of their claim that it is theft. It’s also why they sue really innocent victims, and make such a deal about students. It’s to make out that the theft is home-grown and engaged in by those who really shouldn’t be sued. There must be another solution… I know! How about taxation? Yes! That’s it.
The thing is, paying a monopoly holder $1 for something that costs them a penny to make is already taxation. It’s more like paying $1 for a cigarette that costs a penny to make with 99 cents going in duty, except that the duty goes to the corporation instead of the state. It is quite unlike paying $1 for a cigarette lighter that has to sell in a free market, where the $1 is likely to represent much more cost than profit. We can only hope that governments of all countries will think twice before ensuring multinational copyright holding corporations can continue to siphon what is effectively a tax from their populations, with 99% profit and only 1% creative productivity in return.
So, one could suspect that all the apparently futile actions on the part of the industry are not as stupid as they may at first appear. They overtly demonstrate that the industry is running out of options, but all the while subliminally demonstrate that their business is otherwise perfectly legitimate and wholesome and what keeps people entertained and informed, and must be preserved at all costs, via taxation if necessary.
We’ll keep quiet the dirty secret that the industry had become highly inefficient, charging $1 for something that cost a penny to make, and that the equivalent tax effectively goes straight into the corporations’ pockets – who no longer even have to bother producing the copies they can no longer sell. The contracted artists still have to wait 10 years before they see their advance recouped – if they’re sufficiently popular. No doubt the tax disbursement will only be provided to high volume publishers to disburse to their artists – not individual artists directly.
And why are newspapers pretending to put their best stuff behind a paywall? So they can price it and claim a share of a forthcoming Internet tax. You can’t claim any compensation for that which you give away.
October 14th, 2009 at 9:13 pm
Crosbie,
If there’s an upside at all to the prospect of an internet tax, it is going to be the fun of watching the various factions of copyright holders war with each other over who gets what share. If the record industry gets $5 a month from every ISP customer to cover the supposed “cost” of file sharing, how much should the movie industry get? Music publishers (who are already claiming that every download is a public performance)? Book publishers? Software developers? Graphic artists? Photographers? It’s going to be a bloodbath.
October 14th, 2009 at 9:19 pm
@Fred,
A bloodbath? I doubt it, try they will push for $5 EACH! Not in total. Movies want and will get $5, music industry gets $5, publishers of music $5, performances $5, software developers get $0.50 because no one cares about us, Graphic artists? Photographers? nothing, only the “collection” agencies, labels/studios will get their $5 each, and the news media will want $10 for “all you can eat” Fox/CNN News. Independents or BBC/CBC/Guardian etc.. will be blocked or throttled out of existence.
The rest can’t organize well enough to scream and bribe, i mean contribute, enough to ‘earn’ their $5 tax.
October 15th, 2009 at 12:49 am
@Crosbie/Fred/Robert:
You’re collectively repeating a rant I started a while ago, in response to all those wanting to see a “levy”, whether it be on internet use, or whatever. It’s a total Pandora’s Box!
This point needs to be completely driven home until it sinks in with everyone.
October 15th, 2009 at 3:03 am
There’s an old joke…. Guy to girl, “Would you sleep with me for a million dollars? Girl: Sure. Guy: “How about for 10 cents”? Girl: “What do you think I am?” Guy: “What you are has been established, now we’re just haggling over the price”.
Guys – Whilst I agree that we don’t need anymore taxes. What about the concept of 1 cent per Gigabyte. IF it all goes away and we just continue doing what what we would like to do?
At 1 cent per Gigabyte It would add an approx 3.65 per year to the average internet users bill. Pay the industry all that they want and more and remove the criminilasation. (With the exception of Surfer.)
If everyone downloaded their full 80 gigabytes requirement for watching (i.e.: Totally replaces TV) then the total monthly cost is 80 cents
Before you say nay – what is your current cable bill?
If we could get guarantess that the 1 cent per only grows at cpi figures, then I for one would vote in favour of such a proposal.
October 15th, 2009 at 4:47 am
Thomas, one pays the distributor to distribute, and the artist to create art. Thus we pay the ISP to distribute the bits we would send and receive, and we pay the artist to produce the art we expect to enjoy.
Why pay a copyright holder for copies we can make ourselves for nothing? That’s an 18th century protection racket.
As you allude to, it’s the principle that matters, especially concerning laws and taxes. If individuals want to treat publishers as deserving charities that’s up to them.
The idea of a tax is being built up softly, by a shoal of piranhas attempting to persuade a school’s headmaster that the lagoon is perfectly safe for children to swim in. And as Fred and Robert observe, while only one or two fish may appear aggressive at the moment, every piranha is going to fight like hell for its share when dinner commences.
If you thought monopolies were difficult to stop once started, taxes/levies are worse. It may start off as a cent per gigabyte, a veritable mosquito bite, but Reindeer get bled to death by mosquitoes.
Just 1 cent to make it all go away? That’s how the nightmare of a 21st century protection racket begins, not how it ends.
October 15th, 2009 at 11:11 am
” Guys â Whilst I agree that we donât need anymore taxes. What about the concept of 1 cent per Gigabyte. IF it all goes away and we just continue doing what what we would like to do? ”
That already existed.
It worked fantastically.
The sales figures were off the charts ( no pun intended ).
They paid their pound of flesh like they were supposed to.
They were shut down.
AllOfMP3.
That was their model.
They paid the russian version of the labels collective society.
They were legal.
It was EASY to track what artist was getting downloaded, a nice
trail to track.
It was DRM free.
Better quality automatically cost more, due to a per byte charge.
It was FANTASTICALLY SUCCESSFUL until the labels, being unable
to shut it down pressured CC companies to not allow purchases to
them.
The model was already running and in place and proven Tom.
One has to ask why it was really shut down.
October 15th, 2009 at 11:52 am
They will always tell you that it’s a fair, market-driven business. Then when the market has had enough of the BS it goes its own way; suddenly it’s no longer “fair.” Suddenly the laws must be created to protect them. Suddenly they are important… critical to the economic well-being of all of us. Suddenly they feel that rules of legal fair-play no longer apply to them. Suddenly they are irrelevant.
Suddenly they are gone……. thankfully. All things must pass. (Harrison)
October 15th, 2009 at 12:20 pm
The problem for them is that since they started their terrorist activities we put our nose under the hood of their business and we realized what a pack of parasites and criminals their are and now we want them dead.
So basically they are dying.
Good ridance!
October 15th, 2009 at 12:27 pm
AllOfMP3 is still up but under another name.
And you are right it is a perfect platform to collect money for artists so was Napster by the way.
Now everything is turning anonymous and encrypted so no one can know what is shared nor by whom.
October 15th, 2009 at 12:34 pm
” AllOfMP3 is still up but under another name. ”
Yeah, I know, but last I remember the same problem applied for US users.
The CC companies have been pressured to refuse to honor purchases to
them. It’s total bullshit.
That model left a perfect trail for the artists to know EXACTLY how much of
their stuff was downloaded, and thus how much they may have been owed.
It was also an excellent way for the industry to know just who was REALLY
popular.
It was also easy for non label people to have their songs on it, and thus know
exactly how well they were doing compared to more ‘mainstream’ artits.
they could make their own deal, and easily track it.
Funny how any mention of it tends to be a ‘thread killer’ when it comes
to discussion of workable business models.
October 15th, 2009 at 12:44 pm
With all the BS and crap the entertainment industry is trowing around themselves, no wonder people don’t want to buy their stuff anymore!
It is so easy to convince people no to buy anything form these parasites anymore.
This is the list of their crimes:
The spectrial in Sweden, the corruption of justice and governments, the 3 strike laws they try to pass, the treat to our freedom and privacy, the countless random and unjust law suits against internet and non-internet users, the harassment against people developing software they don’t like, the thievery of domain names and trademark (The shareaza scandal!), the destruction of legitimate and contributing corporations, the copyright infringement they commit themselves with impunity every day, the ripping off of artists.
October 15th, 2009 at 12:52 pm
Of course, Big Media is facing such a severe financial crisis that only government intervention can possibly save them. They’ve been telling us this for many decades, and as every new technology emerges, sends a new generation of lobbyists to Washington with their hands out.
October 15th, 2009 at 1:41 pm
@Thomas
“What about the concept of 1 cent per Gigabyte.” No, no, a THOUSAND times NO!!! First and foremost, any tax collected will go straight into the coffers of the RIAA, thus preserving them in perpetuity. Those dinosaurs need to die and go extinct in the tar pit they are wallowing in, not being offered a helping hand out of it under the condition that they promise to “leave us alone”
My second point is taxes have a tendency to go up, no matter how much politicians promise they won’t. If you live in the U.S look at what the income tax started out as, then look at what it is now. How’s your state sales tax; is it the same as when it was first implemented? You can bet the RIAA and any other organization with their hand in the tax jar will be lobbying congress year after year to get that net tax jacked up.
October 15th, 2009 at 3:28 pm
Monkey,
There’s precedent for both your predictions.
As far as no money getting to the artists, the major record labels now all recognize what is known as “administrative revenue,” which is money that comes in that is not directly linked to the exploitation of an individual song or artist. The most common example historically has been the blanket licenses granted by labels to record clubs. The clubs pay a lump sum up front in return for permission to issue copies of whatever records they want to offer to their members. The club doesn’t have to offer everything in the catalog, just what they want. Add to that the fact that the payment is made in advance of the club offerings, so neither the label nor the club knows which CDs will be purchased and which will not. On top of THAT, consider that the upfront payment is usually the last money received from the club, which often doesn’t even bother to report sales unless the label is affiliated with the club. All this results in the labels having a large chunk of cash from the club and no legitimate way to decide what artists should get how much of it. Now while they could set a chunk of it aside for some later determination, that’s not what they’ve done. Instead, they declare the club license fee to be “administrative revenue” and therefore there are no royalties paid on it. The parallels to a blanket tax are clear. They won’t pay the artists, and they will get away with it because they know that any individual artist’s share of the tax revenue is too small for them to go to war over.
And as to the precedent for tax increases; look to what SoundExchange is pulling right now with the Internet radio royalty rates. Remember the settlement they reached for 2008-2011 rates involved a kicker clause; anyone accepting the low rates in the settlement had to agree to not challenge the rates SoundExchange would ask for in the 2011-2016 round. Is there anyone at all surprised that the proposed new rates for 2011-2016 jump by an obscene amount over the current ones?
I used to be in favor of a general tax because I thought it could be properly administered so that artists would get their share, and that it would properly supervised to remain at reasonable levels. I have become resigned to the fact that neither goal is attainable while the current big players are on the field.
October 16th, 2009 at 6:52 am
OK Guys – great comments.
Sorry for my lengthy absence. You guys sleep when Im awake and sometimes when Im awake I have to go to things like court etc….
My considerations are fairly carefully thought out. I have considered that the constitution of most countries allows for a double dissolution of westminster based parliament structure if event X happens.
So if we suggest to the governments that THEY collect the 1 cent per GB IF a no tamper clause under any circumstances is entered into
the constitution with appropriate traps for sneaky ammendments, then I would suggest that the Governments of the world would do the sums.
i.e.: They get to collect the money and content companies have to prove downloads to them.
I would suggest it was a simple solution requiring very little thought by any politician.
Of course, the proviso on behalf of the people of the world that ACTA, DPI and everything else get kicked out of the legislative sniffing agenda.
Am I dreaming? Maybe.
@Dreddsnick, thanks for that. I had looked at those guys a long time ago but their model was per mp3 download stream.
I am suggesting that both p2p downloaders and non p2p downloaders pay the tax. thereby negating the differentiation between consumer utilisation.
Sort of like the Canadian, German and Italian/s[anish media tax. A brilliant idea that in Canada has returned 156 mill to artists in just six years. Not bad for a small country of freezing cannucks. (If I got those numbers wrong please dont shoot me – long time since I looked at the numbers.)
@Monkey D Luffy. 27 years ago when I got out of university, (I went to a communist university to study economics – think about it….) I would have agreed with you but then my solution was – It’s OK – if we have a corrupt Government we’ll just ring up Che and ask him to bring his Bolivians with him.
Today, having a considerable amount of grey hair, I would take a senior minister out to dinner and whisper in his ear about re-election possibilities and a Prime-minister-ship if he floated this legislative idea.
BTW that’s the only advantage of growing old. The people that you went to uni with, skinny dipped with, played rugby/soccer/chess with are suddenly running countries, states and economies.
So…. He/she would become excited. Then you explain the workings and voila – instant siolent lobbying revolution.
There are some memes that all the money in the world from the RIAA member companies cant buy. An automatic free election landslide.
Because the politician that first carries this over the line in any country of the world will get the mandate to lead.
That in itself makes thinking about this idea worthwhile – instead of just dismissing it becasue it has the horrid three letter word in it.
@Rick
‘They will always tell you that itâs a fair, market-driven business. ‘
I have no real answer for this qquote of Harrison except to repeat my earlier comment. A booby trapped Constitution that holds this legislation sacrosanct to 1 cent per GB plus CPI after 5 years (for example).
After all, every year we are growing that 1c per GB by about 2 billion dollars automatically.
That is not allowing for the increases from bandwidth expansion.
In five years my monthly allocation (download allowance CAP) of bandwidth in Australia has moved from 300 MB to 9 GB with one carrier and from 2 GB to 40 GB with another carrier.
At that rate of exponential growth, the 1 cent model will grow at the same consumption rate.
Build it – and they will use it is the first rule that any ISP learns.
The Spreadsheet model that I have built combining my estimates of ED2K (only) growth over the next 10 years would suggest that the conetn industry could afford to shut down all other retail operations within 5 years if they adopted this model of financing their content delivery.
i.e.: All content is free. Content carriage delivery is per claims of content download on a total monthlty statement delivered to each government around the world, monthly. Anything not claimed is delivered straight to the various indie producers of all content types.
Guys it does have legs.
And the reason it has legs, is that it’s equally affordable in every nation around the world. Right now. Today. Therefore it’s a FAIR system.
All it needs is bullit proof legislation.
Now I’m an economist, not a lawyer. So lawyer dudes, political science majors get those thinking hats on……. How the hell can we coral future political parties from altering todays legislation.
Now that you have your homework assignments – go forth and draft…..
October 16th, 2009 at 7:08 am
BTW, I now firmly believe that the level of technology globally in the hands of the average man in the street is of a high enough caliber to make the future monopoly of Telcos a potentially moot point.
WIFI, WIMAX and VHF digital Data streams will not go be able to be taxed.
Therefore in the future local communities will nominate a single “collector” who will download from the net and share locally.
We all know that technology will always be three to four steps ahead of Uncle Sam and five to six steps ahead of anybody who is dumb enough to get suckered into workling for the RIAA.
Anyone not convinced?
Read my article on WIFI Kiosks.
http://www.perceptric.com/blog/_archives/2009/9/27/4333370.html
The tax is only dangerous if Governments try to tamper with it.
I think Government has learnt that there is only so much milk that each cow has and to get more milk out of the cow one has to supplement the feed.
Besides, if government tampered with this, I really dont think they would survive the next election. Especially if the opposition party said – we’ll put it back to where it was.