| Finally, someone I can relate to on the issue of file sharing! And one who knows more than myself about it, to boot...
According to Per Sundin, CEO of Universal Music, the decline in
music revenues in the past 8 years can be fully attributed to (read: blamed on)
illegal file sharing. If this were actually true, many of us might even
respect his decision to go after pirates as fiercely as the music
industry is doing right now. However, the past 8 years have seen a lot
more changes in the landscape of home entertainment than Per Sundin
would like to admit, and some of those changes have had a massive
impact on music profitability — much more so than any amount of piracy.
Let us refresh our memories and take a look at what actually happened during and just before the past 8 years:
1. First, the explosive rise of computer and console gaming. This
competitive ‘third element’ has appeared in the entertainment
landscape, beaten both music and movies to the curb and taken a huge
cut out of the music industry’s revenues. Consumers don’t have
infinitely-deep pockets, and billions of ‘recreation dollars’ that used
to go almost exclusively to music, are now going into gaming.
2. International trade agreements have allowed consumers to buy
their music across borders, rather than accepting local prices on music
based on the ‘relative wealth’ of nations, rather than the actual value
of the product.
3. New forms of distributable media, most notably MP3s but also CDs,
have become mainstream. These new media don’t degrade over time and
rarely break at all, making music rebuys a thing of the past, and
allowing the second-hand market for music to thrive and expand - both
of which take a cut out of the music industry’s former revenues.
4. Radical technological innovation has taken place in the field of
music creation, processing, mixing, and mastering. Recording hardware,
CD burners, music software, and media encoders have evolved to the
point where most artists can actually afford decent-quality equipment
to do their own recording and producing. Furthermore, this has fostered
literally thousands of smaller, specialized studios that are
challenging the ‘Big 4′ with lower prices, better terms for artists,
genre-specific expertise, etc. Successful artists can now leave the big
labels and start their own recording outfits on relatively modest
budgets. Naturally, super stars like The Beatles or Frank Sinatra have
always had this option, but the recent technological advances have
lowered the bar drastically. This development is depriving the ‘Big 4′
of many of their former cash cows, who now use the major labels for
their advertising and distribution infrastructure alone.
5. The World Wide Web has become an omnipresent force in the world,
allowing cheap, end-to-end distribution of digital music, increasingly
cutting out the corporate music distributors, who deal in trucks and CD
covers, rather than bytes and bandwidth. With iTunes leading the way
(very successfully ‘competing with free’, I might add), billions of
songs are now purchased digitally rather than physically, no longer
necessitating the big labels’ distribution networks.
6. The total number of radio stations, music television networks and
other ’streaming’ sources of music has grown exponentially, giving
music fans a huge selection of free (and legal) music options.
Satellite radio, DAB, and internet radio broadcasts have made it
trivial for consumers to simply tune into a channel broadcasting the
exact sub-genre of music that they feel like listening to (they can
even have a stream created for them dynamically, e.g. on Pandora),
making the *purchase* of music entirely optional for the casual
listener.
7. A massive selection of entertainment alternatives (home
computing, console gaming, mobile devices, etc.) have appeared in the
home, effectively marginalizing music as an activity. 15-20 years ago,
youths would regularly visit each other just to listen to music
together; today, that is virtually unthinkable without some form of
activity involved, such as playing Guitar Hero or Rock Band, or dancing
at a concert.
8. And finally, the music industry itself has embraced the
opportunities of digital media, at last letting consumers buy *single*
tracks at a time rather than forcing entire albums full of ‘fillers’ on
them. Looking at the RIAA’s own sales figures for the past 10 years,
there is a *direct* correlation between the break-off in album sales
and the introduction and increase in single track digital sales.
Looking at the actual numbers, it is abundantly clear that the vast
majority of consumers never wanted to buy full albums in the first
place, but were merely forced to by the lack of affordable single-track
media. Now that the digital revolution has arrived, countless millions
of 16-track album sales are being turned into 1- or 2-track sales,
*decimating* the former revenues on music. THIS is the real reason why
the music industry is hurting.
In other words: The “it’s common sense” argument that the music
industry is peddling in their attempt to tie the declining revenues to
piracy, simply doesn’t hold. It is not as clear-cut as the industry
believes; the true reason for the decline is something they are still
unwilling to face, but will have to face sooner or later:
The fact is that the music industry’s revenues have been
artificially inflated for decades because of limited consumer options.
The last 15 years of innovation have lifted those limitations,
effectively leaving the music industry with an obsolete, defective
business model of monopolized production technology, forced album
bundling, and almost nonexistent competition in the realm of home
entertainment. What is happening now - the decline of music profits and
the piracy witch hunt by the music industry - is merely the panicked
struggle of a dying business model, a complacent industry’s refusal to
accept its diminishing role in a digital world. The pirates are not the
reason, and the decline is the not the disease. It is the cure.
This is a guest post by Jens Roland.
Jens is a computer scientist by training, but a technology forecaster
by trade. He has worked at international think tanks as a consultant
and researcher in emerging technologies and has written more than 300
articles and a book on the subject. |
