David Louis Edelman David Louis Edelman

Bad Economic Models for Entertainment

I bought Bruce Springsteen’s roots/folk/New Orleans jazz album We Shall Overcome: The Seeger Sessions a couple of weeks ago. I unwrapped it in the car, popped it into the CD player, and enjoyed it full blast all the way up to Baltimore and back.

Bruce Springsteen's We Shall Overcome: The Seeger SessionsA couple days later, the CD made its way to my computer, where all my music ends up. But Sony chose to release We Shall Overcome as a DualDisc (one side CD, one side DVD), and because the DualDisc doesn’t conform to the industry’s CD specifications, the damn thing won’t play on my PC. I can’t rip it to the hard drive either.

For me, the ability to listen to music on my PC isn’t optional. I don’t even own a stereo, and probably 80% of my music consumption takes place through Windows Media Player on my desktop PC. (The other 20% being in the car.) After several hours of frustrated Google searches for “crack DualDisc DRM” and “rip Seeger Sessions CD,” I finally just fired up BitTorrent and found a bootleg copy of the music. Problem solved.

This, of course, is illegal. Even though I own a copy of We Shall Overcome and am just looking for a way to play it on my computer, there’s no reason I couldn’t have downloaded some other album that I don’t own. According to the RIAA, I should be punished with a stiff fine.

But as anyone knows who’s been following this whole debate, the music industry brought this on itself. Industry pundits have been charting the rise of broadband Internet access and cheap computer hardware for years now. Any forward-looking industry would have tried to take advantage of this flourishing tide of consumer technology before it crashed on top of them. But the recording industry squandered its chance to build a digital jukebox system.

Instead the RIAA concentrated its efforts on meritless lawsuits against ordinary (and often innocent) consumers
in a vain attempt to scare people away from their Napster or Gnutella clients. These efforts, of course, are failing miserably. Now, because of the recording industry’s bad gamble, their profits are plummeting and the bastard children of Napster have put large-scale music piracy in the hands of any 8-year-old with a PC. Steve Jobs has the recording industry over a barrel with his iTunes store, and there’s nothing the recording industry can do about it.

Why have the RIAA’s efforts failed? Are we, the public, simply a group of amoral, opportunistic thieves?

No, of course not. The problem is this: the traditional economic model for distributing music is a historical aberration that’s unsustainable in the long term.

We all know how things worked in the music industry since the middle of last century. You walked into your local Tower Records and shelled out $15-$25 for a CD. Once it left your hands, that $15-$25 got carved up by retailers, wholesalers, payment processors, distributors, record company executives, promoters, agents, managers, etc. The artist ended up with maybe $1 to $2 of this in the end, if they were lucky. (Then the government took its 30%.)

Far be it from me to knock the work that these middlemen do. In the twentieth century, these people were necessary for artists to get exposure and sell their work. But does all their effort improve the quality of the artist’s work? No. (Although one could argue that many a meandering batch of songs has been sharpened and focused into a classic album by a good producer.)

This is the thing that has the RIAA quaking in its (stormtrooper’s steel-toed) boots. What if all the record companies went under tomorrow? What if there was nobody around to pay music artists large gobs of cash and foot the bill for their ultrasmooth high-tech studio production wizardry? What if there was no record company pushing artists’ work into the stores and in the consumers’ hands? Would the music industry dry up? Would people stop making quality music?

No.
The fact of the matter is, the quality of the music scene en masse would not suffer one iota. It would actually improve. Big music publishers are geared to deal with bland middle-of-the-road artists that sell the largest amount of albums, because they have all of their infrastructure to pay for. They can’t afford to deal in small niche products.

But browse around iTunes or any of the indie MP3 websites out there, and you’ll find literally thousands of starving bands that are every bit as good as the ones that hit the pop charts. Are some of these budding artists just in it for the money? Well, sure. But artists have been subsisting on minimal wages since time immemorial simply for the love of their art, and they’d continue to do it long after the record companies dried up too. Few people go into the arts as a way to make tons of cash; they go into the arts because they’re compelled to by the Muse.

Besides, people like to support their favorite artists, and I’m not just talking about the Corporation for Public Broadcasting. I’m talking about a long tradition that goes back to those dudes that used to travel from town to town telling stories and singing songs in exchange for food and a place to sleep.

So we’ve got a basic lesson of economics here. Take two albums of equal quality.

  • Album #1 can be downloaded instantly from the artist’s website for a low price, you can share it with your friends, and you can have the satisfaction that 70-80% of your money is going to support the artist.
  • Album #2 costs twice as much, comes with DRM software that restricts your ability to spread it around to your friends, and supports a network of outmoded middlemen who siphon off all but 5-10% of the profits from the artist.

Which do you choose?

If you chose Album #1, congratulations, you’re ready for the next economic model of entertainment.

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  1. Weldon on May 29, 2006 at 12:18 pm  Chain link

    I think you are wrong to completely discount the job that the record companies do to find artists, develop them, and promote that music to the public. If the industry moves towards your model #1 where each artist has their own website, you face a problem of finding the proverbial needle in a haystack when confronted with a bewildering array of choices.

    I don’t think that the current situation is working, but neither do I think that complete disintermediation between artist and consumer is the nirvana that you make it out to be. Do you also advocate self-publishing for writers? Why not when you could so easily put up a website with a simple online store for the public to buy PDF downloads or a printed copy by mail?

    The public uses publishers and bookstores to help present them with stuff that isn’t complete crap. The system sometimes lets us down, but it generally works most of the time. The public uses record labels, music stores (even iTunes), and radio stations in the same way. The system generally works and the system produces artists that sell many millions of albums.

    I don’t think that the system of record labels and their A&R activities is going to go away. What I do think will happen is that the public and the record labels will renegotiate how music is purchased and played electronically over the next few years. The record labels will continue to provide a valuable service in finding and promoting artists that the public will enjoy. As long as they continue to do that, the method of distribution will not change the industry as much as one might think.

  2. David Louis Edelman on May 31, 2006 at 2:52 pm  Chain link

    Thanks for commenting, Weldon, and I think you’ve got some good points.

    I don’t necessarily think that because the record companies will disappear, that all intermediaries between artist and consumer will disappear. You’ll always have publicists, producers, promoters, etc. But the main raison d’etre of the record labels — i.e. “we can distribute music to hundreds of thousands of people, and you can’t” — is rapidly disappearing.

    So you still have filters and intermediaries, but they’re no longer in the employ of these megacorporations, but in the direct employ of the artist. A meaningful power shift, I think.

    Oh, and this shift is going to happen to book publishing too. No question.

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