Earth: Mostly Harmless

Ramblings on music distribution

December 17, 2007 on 12:35 am |
Categories: Uncategorized

This is a bit of a brain-fart, but I’ve wanted to make some observations about digital content distribution for some time - particularly music, but I think what I have to say applies to most other digital commodities. Please note that IANAL (I am not a lawyer) and IANAE (I am not an economist), so I might be talking out of my rear end, so to speak.

In an online marketplace where ‘pirate’ and ‘genuine’ copies are available, the fundamental difference between the two methods of acquisition is that people do not pay for the ‘pirate’ copies, but pay for the genuine ones.

People have both options, to varying degrees. iTunes is easy to use, but BitTorrent clients are getting better all the time in terms of usability. Clearly, a lot of people both ‘buy’ and pirate, but let’s maintain the distinction for the purposes of this discussion.

So everyone, at some level, makes a choice. And the ‘honest’ people, those who buy the ‘genuine’ copies, choose to give money for something they - rationally - needn’t pay for. They are in effect donating to the artist - but also the record label. Aside from any principles they might hold with regards to not pirating, paying makes them feel like they are supporting the artist.

In cases like this, I prefer pragmatic solutions which reflect technological realities. For this reason, I keep coming back to the donation system as the most appropriate model for online content distribution. Not just because it’s the model which accommodates the new realities of the massive copying in the network space best, but because of the buy/pirate choice, it’s already in place in a limited form.

The most frequently suggested alternative distribution model, though, is the ‘big pot of money paid by subscription’ model, in which everyone pays a set fee to get as much music as they like, and it’s distributed proportionate to the number of plays or downloads of each artist by some un-named governmental/co-operative body.
That seems like a sub-optimal solution, because it doesn’t get around piracy - it is still fundamentally incompatible with the large-scale music copying that is, like it or not, going to continue forever on peer to peer networks or via other channels. Instead of chasing people who don’t pay for downloads, the RIAA/IFPI will be chasing people who download but don’t pay a subscription, British TV-licensing style. Not a realistic proposition.
If artist revenue is based on numbers of relative plays, this scheme privileges mediocre music, and assumes that music is to be consumed rather than appreciated. For instance, my Last.Fm most frequently listened-to tracks list, which works on this principle, looks nothing like what I would consider to be my list of favourite songs in any given week. It’s dominated by things that I quite like, and don’t mind having on when I’m working on the computer, rather than tracks which I can’t get out of my head.
If it’s based on the number of downloads, again it doesn’t reflect the degree to which people like the music. I have lots of stuff in my iTunes library that I’ve never listened to - and some stuff that I have only for completeness’ sake (albums with only two or three good songs, anyone?). Similarly, I have songs that I absolutely love but wouldn’t play unless I’m in a particular mood - leading to low levels of plays for those songs.
There are also large privacy issues with giving away information about what you listen to. The potential for corruption is huge, too, given that an organisation would be trusted with distributing revenue fairly.
It also smacks of corporatism. It breaks the link between artist and listener, and means that only artists which can get ‘listed’ by whatever authority is giving out the money can ‘make it’, meaning that while hardcore Swedish neo-Nazi drum’n'bass/thrash-metal crossover might not be socially acceptable, it might be someone’s cup of tea, and have difficulty getting any revenue.
One more problem with this model is that it’s hard to see it working on a global scale. Every scheme that’s been tried on this model has been in a single state (think Canada’s blank CD levy), and even on this scale, has led to problems with determining what music is covered by the scheme, and what music is produced externally to the state. Even assuming the problems of attribution were solved - though it’s hard to imagine those things becoming less complex at a global level - coming up with a global payment infrastructure based on notional quantities of intangible ‘plays’ or ‘downloads’ would be difficult. Not impossible, but very tricky, and open to abuse.

The only other viable solution I can see is for musicians to attract patrons, as many successful visual artists do. But in many ways this is the same as donation, since the end product will end up being distributed for free anyway. The only real difference is that patronage most often takes the form of a commission - i.e. money changes hands before the artistic work is produced, as opposed to donations which most often take place after the music has been produced. The two are probably very complimentary.

But back to the main point. The difference between the current environment and my ideal situation is the degree to which old-model middleman costs are ‘baked-in’ to prices paid by ‘honest’ consumers. Albums on iTunes and the like still have the record company margins in there: CD manufacturing, promotion, legal representation, profit, cross-subsidisation of other artists etc.

This is bad for consumers and artists. Record companies, movie studios and publishers no longer deserve their economically privileged position. Artists needn’t put up with margins being taken on an on-going basis, nor the monopolistic control which this entails.

Compare musicians to a small business - a design company. A hypothetical Acme Widgets Inc. might go to the bank for some capital to buy computers and CAD gear to help design its widgets, retain a legal team from an external company when necessary to defend its interests, and contract with external public relations companies and manufacturers for those services when needed. It might even do some of these things internally if it becomes successful enough, or has regular enough need for them.

If we transpose the economics of the music world to our company, Acme Widgets Inc. would have to engage in a long-term relationship with a single company, which would handle all aspects of financing, legal issues, manufacturing and public relations. While this is in some senses convenient for Acme Widgets, the second company would also maintain an exclusive monopoly over distribution, take a fixed chunk of all revenue, and own the rights to all widgets produced for the next 50 years from date of original design. This gives that second company a lot of power, but it’s the only game in town, since the second company controls the widget-making machines, has exclusive access to the best promotion channels and is the only company willing to lend Acme Widgets any money.

These latter sorts of relationships can no longer be justified. Gutenberg has arrived in the form of Internet distribution, and so no one can now control the flow of of music. Promotion, too, is much less of an issue than it used to be, thanks to ad-hoc relationships with promoters and viral marketing. Micro-financing, live gig revenues, or plain donations, could bridge the monetary gap and give new bands a lift.

By acting like a small company - autonomous and self-sufficient, modern bands can and will make it without the big labels. This is good for music.

There is a counter-argument: that successful bands, through their record company margins, support struggling artists signed to the same label. I don’t actually believe that too much of this really happens, but I can see that a Westlife album probably costs the same or less to make than a John Butler Trio album, and that the former probably brings in a lot more money to the record company. I think this line of argument has some merit, but that micro-financing by fans, cross-subsidy from other things like live revenues and merchandise, and even investment in artists, have a lot of potential to support niche or emerging artists. Patronage might be a solution in this case - dedicated fans who will put up the money for a new album to be produced.

Also, as we call know, musicians aren’t entrepreneurs (well, with a few exceptions). The less savvy among them need guidance, cajoling and occasional ball-busting in order for them to make decisions that are in their best interests. And having someone who takes a cut of any revenue isn’t necessarily a bad idea - it can align interests, with the result being better decisions. What I’m attempting to point out here is the folly of long-term, contractual relationships which bind artists to a particular destiny and corporate vision. Think agent, not A&R man.

And scene.