Cabbies & record companies

If I give a friend a lift in my car, should BP refuse to sell me petrol to punish me for depriving cab companies of revenue?
No-one is proposing this. So why is the government proposing that ISPs cut off services to people who swap music files?
The analogy holds because the cab firm and music company both lose potential business to people giving stuff away for free; the stress here is on “potential”  - there’s no out-of-pocket loss, so the Daily Mash is, unusually, wrong.
If anything, my analogy breaks down because it’s too friendly towards the music business. For example:
1. It is not the case that music industry revenues fall one-for-one with each file download. The alternative to downloading a CD is often not purchasing the CD legitimately, but rather going without it entirely.  One paper (pdf) estimates that the music industry loses only one CD sale for each five downloads. Another study estimates that those who download music heavily spend more on CDs than others (though correlation isn't causality). However, Stan Liebowitz has gathered more pessimistic evidence; see also this paper of his.
2. There’s no evidence that file-sharing is choking off creativity. As Chris Anderson says in Free, there are more bands making more music than ever before. The fundamental justification for copyright laws - that they are necessary to incentivize creativity - doesn’t seem to be relevant, at least yet.
3. File-sharing can act as a form of free publicity, which allows artists to make money from tours. Alan Krueger points (pdf) out that it has led to a surge in prices for concert tickets.  And artists can monetise the publicity in other ways, such as by selling merchandise. It’s not just rappers such as 50 cent (or 31p as he’s known in England) who do this: at her gigs you can buy a Kate Rusby frisby (or frusby).
In a longer historical context, what is unusual is that musicians have ever made money from recorded music. Until around the 1930s, their money came from performing or selling sheet music - and, as Tom Watson points out, some musicians feared that recording would ruin music. So what if we return to that sort of business model? Thanks to the same internet that’s depriving them of CD sales, artists also have far more ways of getting themselves known now than their predecessors.
4. Record companies could protect themselves from downloading by increasing the superiority of the CD over the file - for example, by including better liner notes; Hal Varian suggests ways of doing this (pdf).
5. Record companies in themselves are of no value. They are mere middle-men, connecting musicians and audience. If there’s a way of cutting them out, what exactly is lost, as long as musicians can still make music?
On balance, then, isn’t there a stronger argument for protecting cab firms from people giving lifts to their friends than there is for protecting record companies from file-sharers? Could it be that we don’t protect cabbies from thieves who give other lifts simply because cabbies don’t have dinner with Peter Mandelson? Or could it be that our intuition is wrong, and we should protect cabbies?
(I write this as a dinosaur who still buys CDs.)

Comments

[john b]

This is the best elucidation of the argument against the record companies on P2P that I've ever seen. And it's one that I've tried to make myself many times. Great stuff.

[Zorro]

Well said! (And bang on, even re the usually on the ball DM)

[Matthew]

I wonder however if filesharing being better or as good or not that much worse for the band (presumably BP in the analogy) would hold if free downloads were completely legal? I don't download music for free wholly because it is illegal - partly the fear of breaking the law and partly because its illegality makes it harder (than say itunes).

[georges]

I don't think your analogy makes any sense at all. If I want to get home from a night out, you can't really say that anyone wrote or composed my journey home. The actual route may vary according to traffic circumstances, and this will not be vital to my experience of the journey. There's no "intellectual property" involved in the trip. But if I want to see "Inglorious Basterds" or listen to the new Arctic Monkeys album, then I'm seeking to experience something that others have painstakingly devised specifically for my viewing or listening experience.

Would shoplifters buy everything they shoplift if they couldn't get away with shoplifting any more? Probably not. Might people develop a taste for a particular food after first shoplifting it, and later start buying it legally? Entirely possible.

[[email protected]]

Worse still, it all of a sudden appears to have happened after a chance meeting on holiday.

In a democracy surely it is good to keep up at least the pretense that those with more money than everybody else don't wield more power than other people

[georges]

Matthew

Would you gatecrash a concert? IF not, why not?

[grant heinrich]

As it is now easy to find most information using Google, it is undeniably easy to find any piece of music using torrents.

So it's a farce that arguments about piracy focus on a single individual downloading rather than trying to calculate the total sales lost when a downloader then shares with another 100 or 1000 people. Somewhere along the lines, some buyers must be lost.

Put simply, it's the network effect that is killing labels, not individual downloads.

The result, which few of the piracy cheerleaders seem to have considered, will be three things:

1. Major labels will still be here 20 or 50 years from now. They own their publishing so they are paid whenever a song is played in an ad, cafe, on radio. They therefore have cashflow and cash reserves; they may downsize, but they'll still exist.

2. Most musicians will be amateurs, and those amateurs will be rich kids.

As most of the commentators on the music industry at present are overconfident Californian technology geeks, they assume that they could turn out an album given a quiet weekend to work on it.

But it is simply not possible to write a good album part-time, so the only people who will be able to "make time" (read: not have to work), are Sir and Lady Whoever's spoiled brats.

If you want Billy Bragg replaced with Otis Ferry, keep supporting the pirates.

3. And now you'll argue, musicians can make money through touring! Again, not correct, because the death of small labels has broken the chain that used to make touring possible.

There is a point in a musician or band's development where they need to work fulltime on music to create something of value. This is well before they are considered an interesting act to tour.

But with small labels wrecked by piracy, they can't support these "new" acts - not just in terms of traditional tour support (stumping up money to support touring) but in providing connections to local promoters and venues who might use the act, and in paying a kid and an expensive designer to do the website and full-time effort required on facebook, myspace, forums, etc.

Big labels, meanwhile, just aren't set up to support this "entry point" of being a full-time musician who won't be a top 10 act. They are geared up to do high-reward investment - they can't afford to do bands that won't sell at least 300K+ CDs, and they are unlikely to change this. (It's more likely that the people who want to work on sub-300K sales bands will leave big labels to start their own small labels - except now they can't afford to.)

Yes, the band can do this themselves. But contrary to what the Californians believe, it is not physically possible to market a band, be in the band, and have a full-time job at the same time. Let alone make an interesting album through this period. That needs a level of time and introspection not really available to someone doing a 40 hour week then another 20 hours on marketing and trying to rustle up these elusive touring gigs.

Touring is an expensive undertaking that requires significant capital; most people don't have the capital, and those that do seem to be too busy breaking into parliment to protest foxhunting (though if Otis really did want a career in music, could just tap his dad's contacts and leverage his existing profile to have a music career tomorrow).

It's very simple to say that piracy somehow creates opportunities for bands, and god knows it's a popular idea in California right now.

But the truth is that the bands and labels would much rather make the decision themselves about what of their work should be given away free rather than leave it up to a couple of spods in their bedroom with a Pirate Bay poster tacked up on the wall.

Finally - as you're a CD buyer, our label's 4 most recent CDs are available for £20. http://process-recordings.com/specials.htm. £5 a CD, to me, is not a huge price, but it's more than a lot of people will pay.

PS are you serously credulous enough to believe anything Chris Anderson tells you? Surely you've seen the endless rebuttals of his Long Tail theory?

[ortega]

George,

The cab driver who is waiting to take you home, in vain since you accepted your friend's lift, has also painstakingly paid his licence, car, petrol, taxes, etc. Even may happen that your friend takes a shorter route that he learned from an that taxi driver, who will no get any copyright from it.
That is the nature of commerce: you anticipate capital, money or work, without knowing if anyone will want it.
I do not know in GB but here, in Spain, authors get money even from the sales of blank CDs or DVDs, like the ones you may use to record your wedding.
As far as I know, no cab drivers gets his share of the petrol taxes.

[Matthew]

Would you gatecrash a concert? IF not, why not?

Posted by: georges | August 27, 2009 at 10:55 AM

No, but I have no idea what point you are making. As I said I also am unwilling to download music illegally.

My point to Chris was more that there might be a sort of fallacy of composition here, in that filesharing is OK and possibly beneficial if done by a small minority, but unlikely to be so if done by a large proportion of people.

[Alex]

The numbers are in. According to the MCRS-PRS's own chief economist, who can hardly be accused of "supporting the pirates", the music biz is growing overall and growth in revenue from live performance more than compensates losses in recording.

http://www.techdirt.com/articles/20090723/0351345633.shtml

It's an unproblem.

[Andrew Duffin]

All agreed, your point (5) is especially cogent.

Basically the suits have noticed that, thanks to the internet, they no longer add much value, so they're recruiting the force of the state to help them keep their snouts in the trough.

Ultimately, they'll fail, but they are still powerful, so it will take some time.

Incidentally, we do protect cabbies: have you not noticed how taxi licences are surrounded by a huge torrent of bureaucracy, are strictly limited in numbers, and carry all sorts of un-necessary conditions? (Such as, e.g., the requirement for all black cabs in Ayr to be seven-seater vehicles etc etc). These things are just barriers to entry, raised by the local authorities, at the behest of the cabmen themselves, in order to protect their profits. Just like the record companies, really.

[markwoff]

I bought a bag of chips the other night. This guy outside the shop asked me if he could have one, but I told him he had to go and speak to the farmer who originally grew the potatoes.

[A comment what I first wrote on the Guardian commentisfree forum:
http://www.guardian.co.uk/commentisfree/2009/aug/25/filesharers-music-internet-industry ]

[Sara]

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Susan

http://disturbialyrics.net

[grant heinrich]

- It's an unproblem.

As the article to which you link points out, legacy acts like the Stones and Madonna make by far the majority of that touring revenue.

Little of it is available to new artists.

Which means, as already mentioned, that it is difficult to impossible for new acts to become full-time musicians.

And so the full-length albums of the future will be written mainly by amateurs, and they'll be crap.

You can describe the amateurs more kindly as "part-timers," if you'd like. I'd called them "people with good IT jobs", and so I can understand why Techdirt is 100% behind their ascent. Bad guitarists, unite.

[jameshigham]

So why is the government proposing that ISPs cut off services to people who swap music files?

Oh yes. Nicely argued.

[Sam]

"The analogy holds because the cab firm and music company both lose potential business to people giving stuff away for free; the stress here is on “potential” - there’s no out-of-pocket loss, so the Daily Mash is, unusually, wrong."

But, of course, the analogy breaks down because you are entirely free to offer lifts to your friends in your car, whereas you probably don't have the right to give copies of books and music that you own to your friends.

1. Agreed - the idea that the "music industry" loses the list price for a single for each illegal copy made is absurd.

3. Sure, file-sharing can be great publicity.

5. This is nonsense. Some kind of middle-man is of immense value. It doesn't need to be a record company, but compare, for example, the quality of published fiction with the quality of internet fan-fiction. There is value in a publisher as a filter to remove the worst of the dross, and to help authors, artists etc. improve their product. (Granted, with the big labels, that tends to mean "tell the artist to sound just like this other already successful artist".)

Now, maybe you can replace publishers with some kind of online crowdsourced voting scheme or something. I'm not convinced, but it's conceivable. I'm not sure you can crowdsource a good editor very well, though.

So I agree that peer-to-peer distribution of music might actually be to the net benefit of the artist. Some artists agree with you, and others don't. This is fine - artists and labels who think that peer-to-peer distribution might be of benefit are free to permit the copying of their work. Nothing is preventing them from doing that. If they do well out of it, more artists and labels will copy them. If they don't, the argument is empirically disproved.

[Patricia Shannon]

Chris and those who agree with him, please list the links to the music and software that you have posted on the internet for free download.

www.myspace.com/patriciashannonsongs

[john b]

"And so the full-length albums of the future will be written mainly by amateurs, and they'll be crap."

You forgot the bit where you provided evidence that amateurs would be crap.

AIUI, Oasis wrote their only good album while combining a range of crap jobs with local gigging, and all of their increasingly dreadful ones while being megarich popstars.

On the less mainstream end of things, the most interesting electronic musicians I'm aware of make their money from DJing and remixing major acts, whilst their own albums are home-recorded endeavours that are financially irrelevant.

"Nothing is preventing them from doing that. If they do well out of it, more artists and labels will copy them. If they don't, the argument is empirically disproved."

...reminds me of the economist who doesn't pick up the gbp50 note he sees on the street, because somebody else must empirically have picked it up already.

[georges]

Ortega

This must be the slow class.

There is something called "intellectual property". If you illegally download a movie or music recording you are flouting it. If you accept a lift home from a friend you are not. That is precisely why an illegal download is illegal, but accepting a free lift home from a friend is not and never could be.

There is an argument to be had about the nature and extent of intellectual property rights - the Lawrence Lessig creative commons argument. But the argument here is basically that nicking stuff is okay and even virtuous - a kind of unpaid promotional activity for the theft victim.

With thefts of music recordings running so high of course live concerts become the main income for musicians - but only if they can prevent thieving activities at concerts. If 90% of people attending concerts were gatecrashers who stole T-shirts the touring companies would be in the same terrible state that recording studios now are.

It may be impossible to reduce internet music theft to the level of stock losses Tesco suffers from shoplifting. But that doesn't make it good.

There is one business model that is so far proving immune to the effects of download theft. One company that has proved it can "break" new artists and give them careers. That company is Syco - Simon Cowell's company. Cowell refuses to work with artists who write their own material - they are just performer entertainers. If you like the kind of product Mr Cowell provides, carry on downloading. If you don't - think again.

[PeeG]

Rarely for you, this post is rubbish.

Firstly, read the government statement more carefully (it's only 5 pages long). The government is not proposing file-sharers be cut off. They are proposing that the sanction of suspension of SOME internet services be CONSIDERED as part of the consultation process. Fairly reasonable.

Secondly, your analogy to taxi drivers is nonsense as they do not enjoy the benefits of copyright law for their CREATIONS. Looking at the point of intellectual property it promotes innovation and grants a temporary monopoly for exploitation to creators. This would not seem appropriate for cab drivers journeys.

Unlike you not to get to the underlying issues. The flippant approach in this post does you an injustice.

[john b]

"There is something called "intellectual property". If you illegally download a movie or music recording you are flouting it. If you accept a lift home from a friend you are not. That is precisely why an illegal download is illegal, but accepting a free lift home from a friend is not and never could be."

If this is the slow class, you're in the right place.

There isn't something called 'intellectual property'. There is a decision made by governments to grant certain people a monopoly on making a particular kind of thing, whether that's a bagless vacuum cleaner, a new AIDS drug, or a CD with a particular type of music on it. This decision is made in the general interests of society, as a way of stimulating people to produce things that are socially useful.

A very well-funded lobby exists trying to pretend that these monopoly rights are something other than an unfortunate-but-necessary restraint on trade and freedom. This includes the invention of the meaningless term 'intellectual property' - as if me using my own resources to make a thing that you thought of first were analogous to me stealing a thing from you.

[Philip Hunt]

Grant Heinrich: And now you'll argue, musicians can make money through touring! Again, not correct, because the death of small labels has broken the chain that used to make touring possible.

I have a friend who is a musician. She makes money through touring. She is not signed to a label. Ergo, your argument is wrong.

[Minnie]

I like Rock blues on the whole and a lot of what I have downloaded for my personal use is unavailable for 'legal download'. As a more mature music listener I am definitely not going to go out and buy cd's so where is the loss to the poor music industry. I download it or go without and as far as I'm concerned this is better for artists than nothing. Does anyone really believe that anything Mandleson is behind(pardon the pun) is honourable? Where was the outrage in the 70,s when as teenagers we used to record of the radio and other peoples albums onto cassette tape. I also have a couple of hundred vinyl albums in the attic bought and paid for so I think the money grabbing music industry has had enough of my money.

[georges]

john b

Physical property only exists because of governments and lawmakers. What's your point exactly?

[georges]

Philip Hunt

Your musician friend can only make money from touring if she can exclude people who haven't paid from attending her concerts.

[georges]

Minnie

"Where was the outrage in the 70s when as teenagers we used to record of the radio and other peoples albums onto cassette tape?"

As teenagers we used to steal sweets and stuff from the local corner shop too.

[tim f]

Grant: what you seem to be suggesting is that powerful record companies will no longer have the ability to discover bands before they have built up a bank of tested material and nurture them in such a way as to produce a "professional" album of radio-filler that sounds the same as everyone else.

Good.

If it takes a little bit longer, a few more local gigs and a bit more talent to get signed, all the better.

In fact even better still if the whole process of being "signed" is done away with and bands simply contract out production/promotion where they need to.

[john b]

@georges, pretty much every society beyond jungle tribes has a concept of physical property. The concept of IP was invented in the 20th century by lobbyists for the entertainment, software and pharma industries. See the difference?

[Sam]

"I download it or go without and as far as I'm concerned this is better for artists than nothing."

But I'm afraid, Minnie, that as far as the artists are concerned, this is exactly the same as nothing.

"As a more mature music listener I am definitely not going to go out and buy cd's"

Because purchasing CDs is immature? Because teenagers have more money than you? Or just because you're trying to rationalize away your criminality?

"I also have a couple of hundred vinyl albums in the attic bought and paid for so I think the money grabbing music industry has had enough of my money."

That's fine. You're free to stop consuming their music. You're free to listen to the radio, or to one of the many online music-streaming "radio" services. You're not free to just copy all their music without permission.

[charlieman]

Let's assume that in a different world Stephen Hawking was a brilliant musician rather than a brilliant physicist. In his mid 20s he'd have done some great gigs, and 10 years later he would have been playing a one hour set in five minute segments attended by nobody. No doubt, he would have composed fine work at home on the computer, but the freetards would have given it away.

There's a simple problem with the "earn your money from T-shirts and concert" argument; if you aren't cool, you don't get any money from your creation.

[Jon]

@ John B

Your theory of how the term "intellectual property" was coined is implausible from a legal-historical perspective. It has been understood since at least Bentham's day that property does not consist in physical objects but in abstract objects, namely bundles of rights over physical objects. Seen in this light, the extension of the term "property" to cover ideas and inventions is quite natural: in this case, the physical objects are the tokens/instantiations of the idea/invention.

If the motive of the lawmakers was simply to make people think that infringement of copyright was equivalent to theft, then the easiest way to achieve that would have been to include intellectual property within the definition of property in the Theft Act 1968. But this was not done, and it remains the case that one cannot steal information in English law.

Finally: yes of course the scope and content of intellectual property is partly controlled by government, but as others have pointed out, the same is true of every other form of property.

[georges]

This may be relevant:

http://www.thedailymash.co.uk/index.php?option=com_content&task=view&id=2011&Itemid=59

[georges]

tim f

I'm no fan of the major labels. I really really want the Chris Anderson "Long Tail" idea to be right. But what if it isn't, and we're headed for a period of greater industry concentration? We could get something even worse than the old major label system.

So far the big winners seem to be Simon Cowell and Syco. Cowell can deliver massive Number One albums with unusually high sales, even with zero radio play, zero gigging, zero twittering etc. Historically, this is incredible. What he's really selling is TV entertainment in which the music provides memorable TV talking-point moments - ideal for Youtube & water-cooler conversations.

I'm sure a few talented artist will break through the Cowell system and actually contribute something to music. Where once they might have formed a punk band and gigged, now they'll audition for "Britain's Got Talent". But they will be the exceptions. Cowell doesn't want artists. He specifically says that he wants nothing to do with people who write their own material. He just wants performers.

It's interesting that Cowell doesn't care about the songwriter's royalties. Previously people in his position would have been angling for a cut, because that was money worth having. Cowell doesn't care if Leonard Cohen gets all the songwriting royalties on Alexandra Burke's performance of "Hallelujah" (I'm thinking half the people posting here anyway think Cohen isn't entitled to that money…?). Why? Because he owns the TV company that owns the shows, the formats, the franchise. That's where the money is now.

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