Dissonant Music

On almost every college campus and most place where music lovers congregate the issue of music piracy on the web is being discussed. Illegal distribution of music on the web has cost the music industry billions. There are numerous sides to this issue. Sean Brady in his post provides his provocative, well-researched view.

I am sure many of you have comments and views on this one. Later!

Sean Brady's post:

In Lecture 4, Professor Vesonder discussed with us many ways to ruin a project, including pushing a new technology to market too quickly. One of the sub-issues raised was whether the market/environment was ready for the new technology.

Professor Vesonder recalled a project that was impacted by this issue, AT&T's a2b music service (launched in 1997) which delivered songs to users via the Internet . At the time, the market/environment was not ready because this service was forced to compete with other services that offered the same product at no cost. AT&T's business model was therefore not viable. Today, under different market conditions, the leading legal music download service is iTunes, selling more than 50 million tracks since last April, easily outdistancing all other download services. A discussion followed on the fairness of iTune's current price scheme. After further consideration of this issue, I would like to share the following thoughts:

Have you heard "Bad Moon Rising" played on the radio lately? How about "Proud Mary" or "Born on the Bayou?" The answer is probably yes. These songs, and others from the Creedence Clearwater Revival catalog, have been played continuously, on one station or another, and under one programming format or another, in every market since they were released thirty five years ago.

Earning untold tens of millions of dollars in royalties in the process. But not for the person who wrote them, CCR frontman John Fogerty. He hasn't realized a cent from those songs for over thirty years. To escape his contract, his record label forced him to sign over the rights to his own music.

Fogerty's situation is by no means unique. In fact, this industry has left many of rock and roll's pioneers poor and forgotten, after having built its fortunes on their talents. But Fogerty's case has always struck me as the most glaring. I unavoidably think of it when the record labels and their umbrella organization, the RIAA, invoke "fairness" when discussing their policies and practices.

Nonetheless, let me make the RIAA's case, in terms its socially-conscious, politically-sensitive membership may be uncomfortable stating (if not the association itself):

-- We live in a society which recognizes intellectual property rights, and for good reason

-- Those who hold the rights to intellectual property, like any other property, are free to dictate the price at which it may be purchased

-- Those who obtain intellectual property without the consent of its rightful owner are guilty of theft, and stand to be prosecuted

Note that these stipulations are entirely consistent with the following time-honored American principles, respectively:

-- The right to private property

-- Our commitment to a free market

-- The rule of law

Using such arguments, along with the aforementioned appeal to our sense of fairness, the RIAA has embarked upon an aggressive campaign to stop file sharing, culminating, most famously, in the shutdown of the original Napster. It has also filed suit against a number of file-sharing software developers and most infamously, individual downloaders. This, in turn, has paved the way for the launch of several new for-profit download services, such as Apple's iTunes.

So, how do these services determine their pricing? No differently from the companies found in any other industry. It is extraordinarily simple:

The potential provider determines the cost that will be incurred producing or performing the good or service, and the price a consumer would be willing to pay for said good or service. If the former is greater than the latter, the good or service is not likely to be produced or performed. However, if the latter is greater than the former, the good or service is likely to be produced or performed, and at a price a lot closer to the latter than the former.

As you may have noticed, the above calculus is entirely indifferent to "fairness". And yet, the RIAA, the download services, and their defenders insist upon appealing to us on ethical grounds. So, is it fair, as they contend, to charge consumers a dollar per downloaded song?

For example, they often remind us of all the album sales the industry stands to lose with such a business model. By making this argument, the defenders seem to concede the longstanding charge that most albums contain a lot more in the way of filler than hits. Why, otherwise, would album sales drop so precipitously? Then again, why wouldn't this new option have the exact-opposite -- or at the very least, a mixed -- effect? Think of all the additional tracks the companies stand to sell, now that consumers are freed from the obligation to purchase entire albums -- heretofore a major disincentive! (Young MC, anyone? How about Crash Test Dummies?)

But in the end, if we are to gauge fairness, the issue of album sales only serves as a distraction. No, we need to concern ourselves with the actual costs incurred by the online services to deliver music to consumers, and compare it with the conventional means of production and distribution. We also must examine, in close detail, the intrinsic value of the product delivered.

Until relatively recently, we received hard copies -- on vinyl, cassette, or compact disc -- and in shrink-wrapped packaging. Artwork, lyrics, and liner notes. In short, tangible objects, which could be shared with our friends, displayed on our shelves, even autographed by the recording artists.

Regardless of the format, production required light manufacturing. Distribution was achieved in stages, involving warehouses, and the loading and unloading of trucks, until the product arrived at our local record shops. Our selections were purchased with the assistance of clerks, stationed behind counters and cash registers, and then slipped into clean, crisp bags, for the journey home.

Imagine the costs -- indeed, the sheer overhead -- associated with such a system of production and distribution. Now contrast that with the recording industry's latest business model.

It proposes to sell us music as data -- zeroes and ones. Highly-compressed, low-bit-rate files, to be specific. An inherently fragile form, really, subject to corruption, deletion, infection with malicious code, or even obsolescence. Indeed, imagine the issues which will be raised following the sudden catastrophic loss of one's entire music collection -- amassed at a cost of hundreds, if not thousands of dollars -- upon the inevitable failure of the hard disk drive.

But wait, there's more! Proprietary codecs and formats. Copy-protection schemes and digital-rights management. Limited, even device-specific transferability of files. All to be stored on computers we are expected to purchase and maintain, of course.

And as for the distribution system itself? An entirely automated process, really: a few servers utilizing off-the-shelf operating systems and running not-particularly-complicated software. Bandwidth purchased in volume. A chief site administrator, a small technical staff (maybe they can be outsourced!) and a few hundred CSRs, (they will be outsourced) and the operation is more or less complete. We log onto our accounts, make our selections, authorize payment, and -- just like that -- our purchases are digitally transferred over the Internet. With exactly half of said transfer on our dime, utilizing our broadband connections.

To summarize, never before has an industry been in a position to realize such cost efficiencies in so short a period of time. It is historically unprecedented -- far, far beyond the simple elimination of bricks-and-mortar outlets (a business model exploited long before the advent of e-commerce by catalog companies.) And at a dollar per downloaded song -- roughly comparable to the rate we have grown accustomed to paying over the past fifteen years, at twelve tracks to a conventional album, priced around $15 -- it's obvious the record labels have no intention of passing any of those savings along.

Wait, maybe they've decided to offer the artists a bigger cut instead.

(Pause.)

Okay, everyone can stop laughing now.

"FAIRNESS?" The record labels don't know the meaning of the word. Just ask John Fogerty.

But then again, "fairness" has nothing to do with it.

The only question I have is, how long before we start to see e-S&H? After all, bandwidth don't grow on trees, you know.