Wednesday, July 14, 2010

Too Much Good Music (And Too Little Brains)

I just watched Gorillaz newest music video, "Stylo." I'd embed the video from YouTube, but I can't. The record companies won't let me. Why? Because they have decided to abandon Econ 101 and just pretend that the world works the way that they want it to.


After seeing the music video, I immediately went and pirated the album. I downloaded it from someone, somewhere, for free. The music companies have been trying to convince people that this is stealing. That is wrong.

Stealing is the deprivation of something finite from an owner. If you have a lamp, and I take it, you no longer have a lamp. What is happening is copyright infringement. That's why no one has ever been arrested for file-sharing. They can sue, which they're doing, but it isn't doing much since file-sharing is more prevalent now than when they started this stupid crusade ten years ago against Napster.

The various entertainment companies are trying very hard to equate copyright infringement with stealing, with limited success. It's easy to see why, since old laws and legal vocabulary were written long before anything like the internet had even been dreamed up. Laws assume scarcity. Economics is the study OF scarcity. If there is no scarcity, such as with digital information, the old words fall apart. They are inadequate to describe the world as it is now. Instead of realizing this, the companies, and truly the courts too, are trying to shoehorn old words into the new world and somehow make it work.

Well, guys, it's not working.

The Concept

Generally, copyright didn't cover actually copying things since, at first, there was no need. It was difficult and expensive to copy things, so copyright primarily dealt with the profiting from copyright work. I only infringed someone's copyright if I copied their work and then tried to sell it. As copying technology advanced, the issue of whether the mere act of copying was in fact illegal needed to be addressed. This issue came to the fore back when VHS tapes and audio cassettes were introduced.

Back then, the entertainment industry hemmed and hawed and sued a lot of people over the assured destruction of the industry that this copying technology would bring about. The interpretation that knocked down the industry's arguments at the time was that the devices had legitimate uses aside from just copying, so the legality of the copying itself wasn't really touched upon. But since then it's been generally held that people have the right to make copies of their crap, otherwise known as "backups." Where things get squiffy is then distributing those copies. For if I am not profiting from the distribution, what's so different from me copying a book and giving it to my friend or simply letting my friend borrow it when I'm done. The end result is the same, all that's different is the nature of the distribution network.

Instead of trying to deal with this head-on, everyone simply side-stepped it with the Digital Millennium Copyright Act, usually referred to as the DMCA. There are lots of details to the DMCA, but the primary point of it is to make illegal the circumvention of things meant to prevent copying. So, let's say that you buy a DVD. Making a copy of that DVD is technically legal. But if that DVD is wrapped up in something meant to prevent that copying, circumventing that is illegal. You can see how this is more than a bit stupid. It's illegal to get around something meant to prevent you from doing something that's legal. It would be like making it legal to drive on the highway, but illegal to use entrance ramps.

Why would they ever do something this ridiculous instead of directly addressing whether copying is legal or not? Because rationally, econmically, and freaking logically,the issue only becomes a problem when people try to sell those copies. It's easy to see why; if someone buys a copy of Indiana Jones from me, that means they would have likely purchased a copy from the actual creators, thus depriving them of a sale. Copyright is directly concerned with this theft of sale.

The entertainment industry is now adapting this argument for modern times and in doing so have abandoned any semblance of logic. The argument is that if I could not have gotten the Gorillaz album for free, I would have bought it. This is wrong in every way imaginable.

First, there is a fundamental difference between something that is free and something that costs anything. Economics, and thus business, are concerned with things that cost something. Something that is free is disconnected from this mechanism. It can come into play in different ways, but in the raw dynamic of a transaction, it doesn't add up. It's the equivalent of dividing by zero.

Basically, you can't include something that is valueless into equations involving things of value. Before, a copy of Indiana Jones and a legitimate copy of Indiana Jones were both finite and both had value. In this situation, one is valueless and infinite. Someone downloading something for free does not mean that they were a likely sale. If anything, since free is going to bring out the maximum number of possible consumers, it can be assumed that the vast majority of those downloading would have never bought. Again, to say that this logic is incorrect is to reject the concept of a demand curve, which is kinda' sorta' the foundation of all modern economic theory.

The Old World

The world used to work the way the record companies liked because of the nature of data distribution. Data are essentially valueless and infinite. The data's nature is dependent on its distribution network. Ever hear people complain about the death of theater? There's a reason for that. At one time, theater and live music was very valuable because it was the only way to get it. You could hear a local band, but very good live music and theater was expensive because it was so rare.

The distribution network was very limited. The data was theoretically infinite. Once I heard a song, I could sing it, perform it, even write it down as sheet music. But the network for accessing the original work was so limited, music was thus valuable. The emergence of recorded music reduced the value of performed music, so we saw the loss of many of the small, local theaters that used to pepper the towns of America. Living in Rhode Island, I have five or six old theaters within fifteen minutes that have been converted to antique stores, or offices, or condos.

Strangely (or not), this had the opposite effect on good music. The music that was good enough to warrant being recorded and distributed increased the value of live performances. We started to see the emergence of music superstars, whose tickets would go for large sums of money, who attracted massive followings, and saw their revenue stream increase by orders of magnitude. Look at modern band tours. What are they but traveling minstrels with a fan-base in multiple areas? This was all possible with recorded music and not before.

Sadly, though, the recorded good music brought down the value of average or poor live music to its level, i.e. fifteen bucks for a CD. This was untenable for most live venues and we saw the aforementioned death of all of those theaters. The ones that survived were the ones that were in an area of sufficient density that the reduced market still brought enough consumers through the doors. Life couldn't have been better for the consumer, though. Recorded music made good music cheaper than it had ever been before. More musicians were able to reach the big time, more money was being made, and the entire industry increased in size. The cheap availability of the music meant that more fans were created.

We are now seeing the same thing happen again. The value of music has dropped. Free recorded music is bringing down the value of ALL recorded music to its level. But, like the theaters of old, this means that the old infrastructure must die. It's an unfortunate fact of basic economics. Lots of people are going to lose their jobs, a big, hot mess is going to be made, but in the end, there will be more good music, reaching more fans, generating even more money.

This is a critical point missed by many pundits and industry reps: this isn't a zero-sum game. More music creates more fans, which creates more music, which raises the value of finite goods. Live performances will becomes even MORE valuable to more performers. Free completely democratizes the music. Anyone who wants it can get it and become a fan. The barrier of entry, the cost of the CD, is no longer. Music is free.

I'm sure we'll hear arguments like "artists need to make money!", and "these companies have a right to sell their product for a profit!" Those are correct, I guess, but just because artists need to make money doesn't mean that they will. Theater owners of old needed to make money. Actors back in they day had a right to be paid for their performances. It didn't matter. What they did no longer had value. It's called progress. We don't hear a moral cry when those poor wagon wheel makers were put under by the automotive industry.

A World Without Piracy

The cry of the record companies is juxtaposed with Tens of thousands of songs, if not hundreds of thousands, with dozens to hundreds being uploaded every day. Many of the music if available free for download, and LOTS of it is excellent.

With that in mind, think about the argument du jour of the record companies: if I couldn't pirate Gorillaz, then I'd be forced to buy. When there is a massive resource that is literally screaming for me to use it, and is totally free, and if I couldn't pirate Gorillaz, then I'd simply not listen. Paying for Gorillaz means that it's valuable enough to buy over all of the free alternatives. The vast free alternatives.

If I truly like music, I don't even have enough time to buy. There's so much good music out there, I can't pause to spend money. I don't want to bother going out to the record store. The "next" button always has the possibility of good music. Hell, even when the music is free, I don't linger on a single artist for long. The potential for another good musician always has me pressing the next button. The promise of discovery makes the world of music so much more exciting and enticing. I'm no longer limited by the shelves of a record store.

The Last American Model

The recorded music model used to work because the record labels controlled easy access to good music. They were literally the only game in town for global distribution. You could either pay, or rely on finding good local bands. And heaven help you if you lived outside of a major city. The local bands likely weren't very good, and the few bands that were good probably left for greener pastures very quickly. You could move to a city and listen to all of the good bands congregating at the urban venues. But there, the good ones were likely selling CD's to drive up the value of their tickets, thus making listening to the best bands an ever-increasing expense.

You can see why paying for recorded music was a great value opportunity in that world.

But now that model no longer works. Not because people are stealing, but because there is so much friggin' music out there that we can actually get that the old model has lost value. Scarcity of new music was the reason albums were valuable. There is no longer scarcity. Even IF we all stop file sharing, there is still no scarcity. People, like me, will just move to sites like TheSixtyOne and Uvumi and listen to all the bands giving their music away in hopes of getting me to come to a concert.

Unlike before, the record labels are not the gate keepers to quality music. What they have is high-quality, certainly, but so is the stuff that is being given away for free.

The New Old World

Watching the Gorillaz music video, I thought about the economic realities for much of the music biz. First, a description of what record companies do. Record companies send out scouts to find the next big band or sift through demo tapes sent in by hopefuls. After a band or musician is selected, they front the money to hire a high-end producer, put them all in a studio to record an album, and then pay for very expensive things like media manufacture, advertising, and music videos.

Think about that. There is a LOT of stuff of great value in that. They are a scout and arbiter of taste. In an era of thousands of musicians and bands forming every year, an arbiter of taste is a great idea. More than a review outlet like Rolling Stone or Pitchfork, but a company willing to seek out quality and nurture it. I worked in a radio station for awhile. We got so many CD's every week that, even with five people listening to them for hours every day, we never got through so much as a tenth of the total pile.

Even if we assume that with fantastic off-the-shelf production software, bands can create all of their own music and rely on the internetpipes to provide criticism and direction, we're still left with the many things that require a large initial investment. Gorillaz's Stylo has Pixar-level CGI, a car chase in the desert, and Bruce Willis. You can't do something like that on a shoestring budget.

But, no. The record companies just continue to tilt against windmills. And it's only getting worse. As mentioned, before, if I was a band, I had to hope the record labels would take me to be a success. I had to move to a large venue, a city, and play my heart out to be noticed. There was no distribution network. The record labels provided that. No wonder the labels treated most musicians like shit. The musicians needed the labels more than the labels needed them.

Now, a good band can be heard anywhere. A great band from Berlin is right here on my desktop. All of the good music in the world is just a click away. And back to my hypothetical band, now that they can hand their music out anywhere, when they come to a city that they've NEVER played before, they have an audience that will pay to see them.

What the record companies used to do that was so valuable, distribution, is no longer valuable. But the other things that they do are suddenly more valuable. Everything that they do aside from the distribution is valued according to the abundance of music. If good music is everywhere, putting forth money and time to get the great music above the din is incredibly valuable. Advertising, filtering, and management are still worth money. Only, now, the record companies need to foster good relationships with musicians, as opposed to just screwing them. This will obviously be difficult.

Oh, and in the end, I found the Stylo video on some French website. Fuck you, EMI.

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