Does Music Piracy Harm The Music Business?

by | Apr 5, 2014 | !Latest!, !PSInfoVids | 4 comments

Today I started a new video series which I aim to update on a regular basis. Kicking off with my take on the music piracy and how it affects the music business. You may be surprised by my conclusions. Complete with a small rant, here it is:

[youtube 1otaIZWwv70]

Transcript:

Hey this is my first video – and if I like the way it comes out I will probably be posting some of those regularly!
 
Today’s topic was kicked off by one of our members who read my chapter on music piracy and wanted me to explain myself.
 
He said that I must be crazy to write in the Online Music Business Crusher that music piracy does NOT hurt the music business! So let’s take a shot at this now.
 
Does Music Piracy Harm The Music Business?
 
I’m not going to get into the moral or philosophical argument about “stealing” here. For now, let’s just say, that traditional definitions fail when dealing with digital media. So let’s save that discussion for another time, maybe.
 
Meanwhile, many people have a hard time getting their heads around this, because it seems so counter-intuituive. I know exactly how they feel. After all, if people “steal” something – how can that be a good thing for the one who’s being stolen from?
 
This very perception forms the basis of the official logic used by the entertainment industry which, as a result of this kind of thinking, has gone to war on its own customers – at first just by suing people for illegal downloads (which you could compare to being sued for listening on demand), and later by lobbying the unfriendly government near you to impose draconian Internet anti-piracy measures which – if passed – would have ended Internet freedom overnight, and that’s just for starters.
 
And even though they’ve suffered some minor setbacks and defeats (thanks to people who don’t like this sort of thing), they continue forging ahead with their plans. By hook or by crook! (pun intended)
 
But – could they – even by a long shot – be right about piracy hurting the music business?
 
To answer this, it’s a good idea to understand the social, economical and political context at play here – and – we’ll also want to have a look at some statistics.
 
Let’s mark the “birth” of online piracy as the time when Napster got launched between 1999 and 2001.
 
The global size of the music industry at that time – primarily based on record sales – was around $40Bn in 2001, of which the US sold just under $14Bn. By 2012, this has slumped down to just over $5Bn for the US and around $16Bn globally.
 
But, once again, keep in mind that these figures concern record sales only – not the whole music business!
 
Anyway – so far, this DOES sound like the music industry has indeed taken a major hit. Our hearts are bleeding now, especially when we’ve even seen headlines like “The Music Industry is Collapsing, Really!”
 
The scare-mongering hit fever pitch by 2012 when they tried to “protect themselves” through SOPA, PIPA, ACTA and other supposedly-anti-piracy legislation, which just happened to play straight into the hands of friendly organizations such as the NSA and others.
 
So at this point we need to dig a little deeper. And as soon as we do - we discover that today (2014), the global worth of the music industry stands at… just over 130Bn in nominal dollars (still a huge rise – especially when you consider we’re still deep in the great recession)! And that figure does NOT include the so-called “broader” music industry which includes radio, tv, music equipment, stereo equipment manufacturers, and other sectors which depend on music for survival. If we were to include that, conservatively, we’re hovering somewhere around $1.5 TRILLION – a record high!
 
So why is that?
 
Well, for one thing, the physical record sales may be going down (they’re obviously right about that), but digital sales are going up.
 
But that is NOT the reason why the music industry has – in fact – grown since online piracy started. It’s grown because it has compensated for the loss of record sales with many new sources of revenues available which simply did not exist before!
 
For example, through the so-called “360-deals” with artists, record companies now make money on much more than just record sales. They monetize their music indirectly! Which is exactly the point I’m making within the pages of the Online Music Business Crusher.
 
The situation has developed to a point where even record companies now admit that selling records (digitally or physically) is only a minor and relatively unimportant revenue stream (it still has good PR value, but not all that much more beyond it).
 
As a result, today you see growing numbers of record companies – and independent artists – grudgingly, but increasignly willingly GIVING their music away for free.
 
They know that if fans listen to free music by artist X, they will go to his concerts, buy his merchandise, visit his webpage, follow his endorsements – and so on. And all of these things bring much better revenues than music which is now increasingly looked at as a sort of a PR expense!
 
This is clearly proven when you look at the NUMBERS and the fact that the major record companies are actually doing better now than ever before. This in spite of the slumping record sales – which they continue to bemoan – and thanks to the “hidden” parallel incomes – which they never mention.
 
Still, you’d expect to hear about this from some intrepid investigative reporters in the mainstream media, along with praise for the free market which, once again, has triumphed. But you’d be disappointed. There are powerful forces aligned against such reporting and transparency.
 
So, just because the free market has killed an old business model which was bad for consumers, only so-so ok for SOME artists and only really good for record companies and the politicians who supported them with crooked legislation – don’t expect the media to applaud.
 
Also, the fact that, NEXT, the free market replaced this sick model with a natural, unregulated, solution which is good for ALL the parties involved (even the record companies, as we’ve seen) is deliberately being overlooked by parties who have a vested interest in keeping you in the dark. Trust me, this is NOT conspiracy theory.
 
For example, record companies which are unable or unwilling to embrace the new model have a vested interest in complaining. As does the all-powerful media who have nothing to gain and everything to lose by acknowledging that the free market actually works (that’s because their very existence is, today, based almost exlusively on crony legislation).
 
The government has even more to lose. If the people were to realize that its regulations actually stifle business and prosperity, that wouldn’t be helpful to them, would it? There’s a study (which I include in the show notes) which estimates that that the US GDP would have been around 53 Trillion today - as opposed to a mere $15T – had it not been for all the unneccessary, anti-business and ultimately anti-social (masquerading as “for everyone’s good”) government regulations!
 
And even the supposedly capitalist – but in reality “crony capitalist”, in other words anti-capitalist – companies are against the free market – even as they profit from it. That’s because free market means opening doors to competition and, as John D Rockefeller, originally a model of free market ingenuity but later a closet socialist, had said himself “competition is a sin”.
 
But you, the independent artist, should know better.
 
The Internet – that last bastion of the free market, while it lasts – is YOUR oyster. Thanks to it, in 2012, independent music sales accounted for over 32% of the US total, and more than 50% of all music-related turnover – as opposed to less than 5% in 2001.
 
You can use your MUSIC to build a business around it. Like building a road and then selling locations for businesses to set up all around it or selling advertising billboards. You wouldn’t even have to charge for the road use!
 
Or like putting on a free concert and making money from selling concessions. The internet gives you this possibility and don’t believe it if anyone tells you any different.
 
So – is music piracy bad for the music business?
 
Record sales HAVE gone down – but that was more than offset by parallel incomes which emerged THANKS TO the “democratization” of music – or what you might call “music piracy”.
 
So the answer is: of course NOT. You’ve seen the stats!
 
And also think about this: would you rather that people didn’t feel like stealing your music…?
 
 
 

Among the (economic and political) sources used are:
 

4 Comments

  1. studioboss
    studioboss on April 11, 2014 at 1:15 am

    Hey Paul,
    As always,your insite and knowledge of the music bz is spot on!! Love the reserch and factualism!!!!…hhuuuummmmm…(is factualism a word)?????
    Stubo

    Reply
    • PS
      PS on April 11, 2014 at 12:42 pm

      it is now 😉

      Reply
  2. Denny DeMarchi
    Denny DeMarchi on April 29, 2014 at 10:36 am

    Great to see you guys back in action. Fame Games is a great organization !

    Reply
    • PS
      PS on April 29, 2014 at 2:26 pm

      Thanks Denny, good to hear back from ya! 🙂

      Reply

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