October 23 was potentially one of the biggest days in the music industry this decade. No, there wasn’t an important new record release and I don’t know yet if an amazing guitarist was born. In this case, the effect on music was more indirect. The popular downloading site oink was finally shut down.
While the major effect of the legal action was to prevent people from having easy access to an unending reservoir of illegal downloads, there also was an endless series of debates all over the Internet. People who were in favor of downloading got into it with those of us opposed and many innocent bytes were sacrificed. While some people were honest and said that they just liked getting free music and didn’t care about the consequences, others tried to explain why their actions weren’t wrong. Five main lines of reasoning appeared over and over again. Some of them made more sense than others, but ultimately none of them convinced me. Need some counter arguments RIAA? Feel free to use these; we’ll discuss my royalty rate later.
Record companies rip off the artists. It’s best to steal the albums and support them more directly.
There is a grain of truth to this. Record companies do engage in creative accounting skills to minimize royalties and have a history of siphoning off as much money as possible. However, the case against the companies does tend to be overstated.
Examine Steve Albini’s alleged smoking gun. He breaks down typical costs to show that, ‘The band is now 1/4 of the way through its contract, has made the music industry more than 3 million dollars richer, but is in the hole $14,000 on royalties. The band members have each earned about 1/3 as much as they would working at a 7-11, but they got to ride in a tour bus for a month.’
At first glance, the numbers look good – although you do have to ignore the fact that a band that sold 250,000 copies of their album would probably gross more than $50,000 on a five week tour – but a closer examination shows some sleights of hand happening. Some of the charges are for new instruments, food, performance wardrobe, and a massive party for the band; these are expenses that they would have had anyway. What’s the difference between my company giving me a free computer and them giving me money so I can go out and buy a computer? Sure I might save a few dollars, but the end result is going to be similar. More importantly, one massive item is presented at the beginning of the line item and then is forgotten about. Yeah the band members only made a few grand apiece if you ignore the $250,000 advance that they were paid. Albini manages to remember to subtract it from the band’s royalties, but forgets about it when it’s time to figure out how much money they made.  Record companies have the upper hand, but not to the degree that it’s made out here.
Moreover, the underlying argument assumes that record labels are smart enough to scam artists but not smart enough to ever find new ways of making money. If everyone gets the album for free, how much longer will recording contracts give all of the merchandise income to the band?
Records should be used as free publicity.
I don’t want to be dogmatic here. There definitely can be a case to be made for bands to build up their reputation by having their music spread as far as possible. Phish would never have played arenas if not for the word of mouth created by allowing taping. Having said that, this falls apart in two ways, one philosophical, one practical.
While capitalism is far from perfect, at the heart is a rather interesting proposition. Companies put forth goods, figure out a way of selling them, and then people have the right to either buy or to decline. Downloading reverses that. It doesn’t matter if artists have had meetings to decide what process will work for them, the downloading cabal has their own plan. This is the business model you should follow and we’ll make sure that it’s the only one that will work. It’s one thing to make an argument that this is the way to maximize your profits, but cutting off other approaches seems to cross a line. I’ve received enough joy from music that it doesn’t seem unreasonable to follow the requests of the creators.
As a practical matter, this plan has limits. If a band started handing out free discs in 1995, they would have had a chance to ride that publicity. When people are downloading hundreds (if not thousands in this age of terabyte hard drives) of artists at a time, it’s less likely that they’re making sure to give everyone a few bucks. If they could afford to do that, they wouldn’t have started downloading in the first place.
Bands should make money by touring.
This argument is a favorite among Slashdot users. An album is just recorded once so why should a band be able to keep getting paid for it? When I pay for a live performance, at least I’m getting something new.
While concerts are going to have to become a more important part of the music industry, this answer is not the panacea that its proponents think it is. The skills involved in creating a live show are similar but not identical to those used in crafting an album. Phish and the Dead never could quite get the studio to work for them the way that they wanted after all, so it shouldn’t be shocking that some artists are better in the studio. I love listening to Mojave 3 on a bleak, rainy day, but it doesn’t follow from that that I’d like to see them live. Not all forms of music translate to the live experience and it would be a shame to lose them.
Another thing to remember is that the concert experience is frequently subsidized by the labels. As expensive as tickets are now, imagine how bad they’d be if artists were more dependent on them as their sole source of income. The concert industry isn’t exactly at its healthiest right now; can we really add additional burdens to it?
Record companies are dinosaurs.
There’s no argument about the factual nature of that statement. The major labels have been fighting downloading from the days of Napster. Rather than evolving and finding other models, they’ve been content to try to use the legal system to keep their profits. However, using an antiquated model is not always a bad thing. Baseball teams make plenty of money off of the additional advertisements they’ve smuggled throughout the stadium, but the obsolete 1980s model was a much more pleasant experience.
Not all changes are in fact progress. There’s no way to know that this model will be replaced with something better or even equally good.
Even if it’s wrong, it’s great for the consumer to have infinite free albums.
That’s true up to a point. As someone who has resisted the lure, I confess that I am occasionally envious of those who do not have the block I do. I’m still behind on my Live Phish purchases because I have to spend money on new roofs and student loans. If I were willing to play the bit torrent game, I’d have the whole collection. Yet, there’s a diminishing return after a point. Buying an album or two a month is exciting. You have new music to listen to for a while. Downloading an album a day almost becomes a chore. If you have any obsessive traits in you, you can easily download more music than you can ever listen to. As any tape collector knows, the first few tapes are a lot more exciting than the 500th.
At least that problem is not likely to be a permanent one. Right now we’re at the turning point. Money is flowing out of the system, but it isn’t actually affecting the budgets to create albums. That’s not sustainable. While there are people who can churn out amazing songs in their spare time after their day jobs, perfecting music takes time and energy. When you buy an album, part of what you’re paying for is the ability to albums to be created; the other models above force musicians to spend their time creating cool t-shirt logos instead of tweaking the lyrics of the second verse.
Sure there will always be plenty of music even in the worst-case scenario, but remember the example of the old mp3.com. That site had plenty of bands that offered their music for free downloads. There’s only one problem. Few of them were any good. I spent days clicking from song to song but none of them have ever made it to my iPod. The labels were an effective filter. They might have been overly restrictive at times, but the flip of that is a flood of music that makes it incredibly difficult to find the bands that you might actually enjoy.
The case against illegal downloads only goes so far. I wish that people would stop or at least just use downloads as a trial, but it’s hard to compete with free. Who has time to worry about the long-term consequences of their actions when they’re busy finding Pitchfork’s top 100 Indie Albums? I’d love to have a solution to present, but for now I’ll just stand on the corner and preach doom. It’s hard to see much of a future for the music business right now, but maybe something will emerge. Until then, I appreciate the offers for invites that I’ve received, but I’ll pass. Someone has to be the last holdout.
 Note: It is possible I have misread this. I’ve checked it a dozen times, trying to see how the $250,000 bonus is accounted for but there is a chance that it’s in there somewhere. I don’t see it anywhere, but the error is so glaring that it seems hard to believe it was made.
David Steinberg got his Masters Degree in mathematics from New Mexico State University in 1994. He first discovered the power of live music at the Capitol Centre in 1988 and never has been the same. His Phish stats website is at http://www.ihoz.com/PhishStats.html
He is the stats section editor for The Phish Companion and is on the board of directors for the Netspace Foundation. You can read more of his thoughts at http://www.livejournal.com/users/thezzyzx.