The Economics of File Sharing 342
Howzer writes "A great Salon article popped up today, and it appears Stan Liebowitz at the Cato Institute is having second thoughts about his paper that was published on May 15. It seems the facts simply don't support his earlier assertion (& the well-known position of all the major recording labels) that downloading hurts music sales. It's good to see this argued from another angle, especially by a guy like Liebowitz."
Methods for gathering Pirated Music Data (Score:4, Insightful)
Personally, I have purchased more music since buying a cd burner. My interest in music has increased as well. Now only if the iPod would drop in price.
Okay let's get the facts straight... (Score:2, Insightful)
I haven't bought more than 2 or 3 CD's in the last 3 years. I have downloaded probably 1000 or more mp3 files in that same time period. But this does NOT mean that I would have bought those files had I not downloaded them. I may have bought 10 or 12, but not all of them.
So should they stop mass file sharing? Yeah probably. Will I be happy about it? Not one bit, but I'll accept it.
Also in other news I heard yesterday on the radio that a couple of the labels will be selling singles online for $.99 and albums for under 10 bucks. If that happens, I wouldn't mind forking over the cash every now and then when there's something actually worth buying.
Just my $.02
of course not (Score:5, Insightful)
I can tape the song off the radio just like I can download it off the Internet, but I still want to buy, buy, buy.
Why does this not register with label execs, economists, etc.?
Someone finally gets it! (Score:3, Insightful)
Look, I hate to say it, but for every person on this website who has dismissed:
a) people dont like to freeload
b) there was always piracy going on, audio tapes, etc
c) its all good, chill. remember the vcr, the cd, all these things were supposed to spell the demise of music. guess what - humans couldn't live without some form of (even if its economically motivated) altruism! oh, the horror!
I told you so. If this ends up being the magic 'discovery' of filesharing, I'm going to cry. I've been saying this all along.
But its just basic math! (Score:2, Insightful)
Re:Methods for gathering Pirated Music Data (Score:5, Insightful)
Back around 1980, I was a DJ. I had access to a HUGE vinyl library and a high-end cassette recorder -- so I could tape whatever I wished.
Until a year ago I had better online access, and could download whatever I wished. Since then I've moved and my connexion speed went to hell, so I've stopped downloading music.
There have been two periods in my life when I *bought* a lot of music: when I was DJing, and when I had good download access. Conversely, I *didn't* buy any music when I had NO access to free music.
On thinking about it, the reason is simple: when I have good access to free music, I also get to sample lots of stuff I've never heard before, that I can listen to when I'm in the mood to care about it (not just when some crap radio station sneaks a song in between commercials). And I want to own what I want listen to.
Since I've not been able to reasonably download music (26k tops is not "reasonable"), I've not bought a single CD. Coincidence? You decide.
DRM Negates Productivity Improvements (Score:2, Insightful)
True, there is no way to plug the "analog hole." However, to revert back to it as the only mechanism for copying is to effectively undo 30 or more years of productivity enhancement through technology and features such as copy/paste. The point of technological advancement is to automate manual processes such as transcription.
Estimating the lack of productivity seems popularly acceptable for damages alleged by computer viruses. If we did a calculation for the lost productivity costs of DRM difficulties imposed on legitimate copying in business and academic work, it would likely be a large number, perhaps dwarfing the revenues protected by DRM. Therefore, Mr. Liebowitz's argument founders on a zero, or perhaps even negative, sum.
Re:Okay let's get the facts straight... (Score:5, Insightful)
Technology changes things. In some ways better, in some ways worse. It changes peoples behaviour, and it changes the machanics of society.
The question everybody should have been asking all along is, "Does it hurt sales so badly that nobody will want to make music?" The answer seems to be an overwhelming NO, so if thats the case, history suggests that we are should tolerate it until it finds its natural 'fit' within social behaviour and the economy. Just because it facilitates illegal behaviour does not mean that this illegal behaviour is going to have a negative impact on the market - and if you think about it, many discoveries, social patterns and values we hold up as examples of our progressive society started up as being illegal behaviour until we came to terms with its perceived threat and realized that many things we perceive as threatening or damaging can be channeled in a positive socioeconomic direction.
people want to listen to their stereos (Score:2, Insightful)
Something I haven't seen anyone (in the press) really correlate directly:
Put those together, and I think you have a more powerful impetus for buying CDs than the "people are honest" and "sample before you buy" theories represent. It's much easier to buy the music than it is to figure out how to get good sound from your MP3 collection.
Now, if the studios partnered with, say, Adaptec or Nero to create an application that could burn traditional CDs from uncompressed (or extremely high-quality MP3) sources bought and downloaded at burn-time from the labels, that provided a way for the average computer owner to burn mixed CDs that would play in her stereo, I think you'd see huge uptake. (You'd also see the death of the much-decried "album" with one decent tune and nine crap filler tracks, which is the pigfeed trough^W^Wbusiness model the RIAA member companies are fighting so hard to maintain...)
Re:Okay let's get the facts straight... (Score:3, Insightful)
Well thats interesting, but are you going to tell us why? Just because _you_ have bought fewer CDs because of your access to downloaded music doesn't mean others have. Personally speaking I can say honestly that I have bought more music as a result of first sampling it from downloads. Many of my friends do the same.
What I have said here proves nothing. It's just one single anecdotal example, just as your example is.
I'm not saying you're wrong about downloads hurting sales, just that you haven't provided any convincing argument or evidence to back up what you say. "I buy less therefore everyone must buy less" is not enough and doesn't convince me.
Re:I'm confused too (Score:2, Insightful)
So, is there a correlation between the kinds of music that fail to sell as expected and the kinds of music that are massively downloaded ?
We seriously lack solid figures on these points, both due to the fact that expected sales figures are confidential marketing data, and P2P traffic is everything but public and official.
And your average congressperson will (probably) just listen to the RIAA drivel and vote the Hollings Bills as they are told, which won't help.
Not enough data (Score:2, Insightful)
Re:Okay let's get the facts straight... (Score:3, Insightful)
This dude's argument on fair use is also total fucking horseshit, once you realize that it's not about text. Consider the Mona Lisa. To translate fair use as he understands it for text (read a paragraph, retype it) into images, audio, or video, you'd have to repaint the painting yourself or reshoot the movie yourself. Wow, that's great policy, legislate technology back into the dark ages! That's the hallmark of good policy! Bring back the buggy whips! Hey, let's make this whole thing really simple and just shoot those whining academics! Those dangerous intellectuals!
I'm so sick of neanderthals like you requesting that we legislate away the future in order to preserve the questionable past. Go crawl back in your cave, caveman.
Who cares (Score:2, Insightful)
Labels and publishing companies will continue to hide under the umbrella that file swapping is hurting the artist.
No.....what realy hurts the artist are slimy record execs who sign artists to crap deals and only give them a 10th of the profits. Which they then get the luxury of spliting amoung their bandmates and leaches like managers, business advisors, attorneys, and oh yeah and uncle sam. Not to mention they have to recoup every penny that were alotted for a recording budget before they see a dime.
So who really loses? The industry has been screwing the artist for years. The only ones who benefits are the fortunate few who sell millions of albums and those are far and few between.
Don't belive these cry baby record companies whose only real intent is protecting their old dusty business model.
I say out with the old and in with the new! Believe me they got it coming!
DRM and perpetual copyright (Score:3, Insightful)
I wonder whether he understands DRM technology. If a DRM locks up a work, you certainly won't be able to go to a library and copy a page to cite in a paper, so goodbye fair use. (He seems to think the analog hole does away with DRM.) And whenever the copyright term is reached (if it ever is), the work will still be locked up--so the DRM effectively makes the copyright perpetual.
Re:Okay let's get the facts straight... (Score:2, Insightful)
But the artists aren't the ones that make the money off the CDs, the record companies are. So unless you're only pirating live music, you are costing someone money. Someone who probably doesn't deserve the money, but someone nonetheless.
Re:Well, personally... (Score:4, Insightful)
Just because they didn't lose any revenue doesn't make this not stealing.
The Network Effect (Score:2, Insightful)
He's famous for "disputing" the network effect for computers and now he can't explain why file sharing isn't hurting sales.
Easy, it's a variation of the network effect. If there is more music, if people are hearing more artists and being exposed to music styles they've never heard before, naturally they'll spend more money on music. Some of that goes to hard drives, CD-R's, etc. but some (most?) goes to legal CD's and concert tickets.
I think this guy needs to read Asimov's The Foundation series and take some pshycology courses before he becomes completely irrelevant!
Re:everything going to be all right... (Score:3, Insightful)
But, I've had it since birth
The joke is, if youre Darwinian, you'd recognize that all this technology COULDNT kill the music industry. Why? If we all stopped buying CDs, and EVERYONE copied, the record companies would crumble, musicians would stop publishing music, and there'd be nothing left to download. Social patterns always ensure there's a balance (like, if everyone littered, we couldnt move, if everyone was a conservative, we wouldnt have important liberal influence, if everyone was a liberal, we wouldnt have important conservative influence)
And if one insists that we do put the record companies out of business - really - so what? The whole cycle of small labels getting grassroots support (where people are much less likely to rip off local artists than megapopstars) starts again, and we're out a few hundred thousand guys in suits. boohoo. Music is 5% of the USA's GDP to be sure, but to think all that would come off the GDP instantly assumes that absolutely nobody comes in to take the place of the fallen dinosaurs, and that this collapse happens overnight. Highly unlikely.
Re:Okay let's get the facts straight... (Score:3, Insightful)
Re:Okay let's get the facts straight... (Score:4, Insightful)
I don't own a lawnmower. I borrow my neighbours. This affects sales of lawnmowers.
So should they stop sharing of lawnmowers? Yeah probably. Will I be happy about it? Not one bit, but I'll accept it.
I sometimes hitch a lift with a friend rather than use my own car. This affects petrol sales.
Should they stop people hitching lifts? Yeah probably. Will I be happy about it? Not one bit, but I'll accept it.
I often drink water out of the tap, rather than buying it. This affects bottled water sales.
Should they stop people drinking out of taps? Yeah probably. Will I be happy about it? Not one bit, but I'll accept it.
I sometimes think about naughty things, rather than looking at porn. This affects porn sales.
Should they stop people thinking naughty things? Yeah probably. Will I be happy about it? Not one bit, but I'll accept it.
(I'm not sure what my point is. Draw your own conclusions...)
From the Salon article... (Score:5, Insightful)
DRM, as I see it, is merely the protection in the software, on a CD or whatever, that would allow micro-payments. It doesn't do this yet, but in principle it could. That's what I view as closer to ideal. They can let you do a lot and you pay a higher price, or let you do only a little in which case you'd be paying a lower price.
I read this with a sinking feeling in my stomach. What do you think he means by "higher" and "lower". In this case, I doubt that the price will be lower than the current cost of music. The record industry doesn't lower prices.
If DRM with micro-payments is succesfully introduced (read legislated) it wont mean that I pay less for music. The record companies will charge me for my copies. They'll charge me for each time I play it. And though initially I paid 99 cents for that song, after a year, I've payed $5 for that one song and I will keep paying for that song in perpetuity.
The record industry has a very bad record (no pun intended) at passing along savings to the consumer. The CD was supposed to make the whole process cheaper, lowering prices for the consumer. But that never happened. Instead, the prices went up (which they justified by saying that new technology costs money) and they stayed up.
So, if they can release music digitally in a way that prevents copying and tracks your use of that music, the price wont drop. It will increase, despite their cost savings on distribution.
sweat
Sample and Buy (Score:2, Insightful)
But for almost all of the songs I've downloaded I never had any intention of buying the CD. This is because the CD is $15 for one friggin song. And frankly if the song was $1 I still wouldn't pay for it. The songs I download (as opposed to buy) are songs that I wanted to hear once or twice for some reason and never listen to again. Or, somebody told me about a cool song on a CD they bought, so they mail me a copy.
I'd say about 90% of what I listen to/download in MP3 form is stuff that doesn't last on my machine for more than 24 hours. The other 10% generally becomes a CD purchase eventually. In fact, the main reason I haven't bought many CD's lately is as a quiet boycott of the industry.
I like mindless trance. I listen to Digitally Imported, and if I could get those songs on a CD, I'd be willing to pay $10. Sadly I don't know the artists or songs, nor do I think that any of it could be had for $10. So it's Internet radio for me. No commercials, well-mixed.
I dunno. I think the industry is stupid and paranoid and Hilary Rosen is a friggin idiot mouthpiece. On the other hand, the file-swapping community is defensive, hostile, self-righteous, and unwilling to obey the law. But then, CD's are monstrously overpriced and the quality stinks. In the end, people who want free copies of the music bad enough will get it and the industry can't stop them. Also in the end, the industry will find a way to protect their business model since it's easier to lobby politicians than try to ease their way into an ungodly lucrative market waiting to be tapped: a good on-line subscription service.
If the RIAA had all its labels agree to a subscription service where you paid a flat fee of, say, $9/mo to use the service, and then a bandwidth fee (something minimal - like
Release some songs on the site only. Release some on the CD only. Cross-market. If you buy this CD for $10 you get, as a side benefit, $5 worth of free downloads on the subscription service. A month of no subscription fees. There's an endless marketing potential here, to speak nothing of the possible advertising revenue.
Re:Well, personally... (Score:2, Insightful)
Oh.. did you mean to say just because the didn't lose any revenue doesn't make this not copyright infringement? that actually makes sense.
Re:Okay let's get the facts straight... (Score:3, Insightful)
There's your flaw. Isn't it obvious? Some people want the CD. Why? You can hold the CD. It has cover art and liner notes. It has the whole album as the artist (theoretically) wants it. It is in full quality, and can be copied to MP3s if desired. A person can build their CD collection (people enjoy this). You can just go out and buy the CD and listen to it, you don't have to search for it and wait to download it and burn it.
Nobody is donating anything. Many people find these reasons good enough to buy music from their favorite artists. I doubt that even 1% of people who buy CDs based on MP3s they downloaded are doing so for any sort of "moral" or guilt reasons.
mark
Recession (Score:1, Insightful)
A synopsis (Score:5, Insightful)
Here, effectively, is what Stan Liebowitz has just said.
And I'm done with listening to egomaniacs like Liebowitz. I'll stick to my Magic 8 Ball for my predictions on how DRM and P2P will turn out. It might not be more accurate than chumps like Liebowitz, but at least it doesn't collect a fat fee every time it spouts a random prediction.
Not as good a view as we might like to think (Score:3, Insightful)
This article gets a positive spin on Slashdot simply because he believes that file sharing isn't really hurting CD sales.
But reading the article further, he merely looks at the numbers, with apparently no attempt to find out what's behind them. Aside from blaming the 5% drop on the recession, he doesn't really dig deeper, looking into the possiblity that maybe filesharing is acting as a try-before-buy, as is often advocated here.
The real corker though, is that this guy comes down squarely, firmly, and uncompromisingly on the side of DRM. Fair use on text? You can always retype a paragraph. Music or video? you can always get fair use by paying some money. Can't privately produce digital content? Blame some other supposedly non-DRM law, without realizing the obvious - that these laws are all part of a Web of Paranoia on the part of the entertainment media industries.
The music industry may need file-sharing (Score:3, Insightful)
File sharing and Internet radio may start to look like an attractive promotional channel to the music industry, as Clear Channel slowly tightens the screws.
Thank God DRM still allows for Fair Use (Score:3, Insightful)
In this presentation, I will show how my new compression method's artifacts are more subtle than the ones made by the excellent Sorenson codec. [Type type type] This ASCII-art representation of a scene from The Matrix is the source that I have started with. Notice how the curly-brace I typed on the right side of the image, is very well-defined and clear.
Now I will show how it looks when encoded/decoded with Sorensen. [type type type] In the ASCII-art representation on the left, look at the loss of detail. The original curly brace is replaced with a square bracket...
Would I have bought all those CDs? (Score:2, Insightful)
Not alone in my suspicions (Score:3, Insightful)
My college exposure to economics left me deeply unimpressed. They make major unwarrented assumptions about human behaviour. My professor waved away my objections by appealing to the law of large numbers.
The theories might be worth something if humans were linear elements, but we are not. Economics seems to be useless for predictions, so it's not really science, but they appropriate the language of science to gain credibility.
-which take advantage of more recent developments in the mathematics of non-linear systems.
Given that economics seems to have a shallow grasp of linear system dynamics, how much of this new book's useage of non-linear systems is really tough scientific thinking, and how much is appropriation of new buzz to get attention?
Re:Pseudo-Libertarian (Score:4, Insightful)
Anyone who reads Declan's politech mailing list or any other list where the Cato Institute frequently releases its propaganda has had his face rubbed in that.
However, what struck me about the Salon interview is... the poor quality of the thought that underlies the Cato Institute pronouncements. on various issues... the detachment from reality.
I read the article and kept wondering what rock this guy had been living under for the last few years.
"and then he tried to transfer the sound to the digital audiotape that he had, and it wouldn't do it. He blamed DRM for that.
I wrote him back and said, look, be mad at the Digital Home Recording Act. That's what said you can't record from a digital source onto a digital audiotape. It has nothing to do with DRM."
Being locked out of the use of one's own software and hardware AND intellectual property to protect corporate copyright holders is irrelevant to DRM? What's this guy smoking? I think we all need to know so we can avoid it.
His comments about fair usage in an academic context... perhaps he hasn't used computers long enough to have gone through changes in digital format, perhaps he thinks that floppies were always 3.5" and CD-Rs were the first portable mass storage.
Perhaps he really has no clue that a DRM imposed by a company that no longer exists in a legacy media format might make it impossible to access information necessary to legitimate academic research... anything from a masters' thesis to a kid trying to find out what music in the early 21st century sounded like.
I guess "no clue" is the best way to characterize this guy. Is he typical? I strongly suspect so.
Why are we taking the pathetic assholes at the Cato Institute seriously?
Not that they're totally useless, if they happen to support your position on censorship (government ONLY, they don't seem to understand that free-enterprise censorship exists) by all means use them to bolster your position's credibility, when dealing with government officials, if they aren't familiar with the Cato Institute, it might help.
Just don't take them seriously even if they happen to be on your side.
No Network Effect? Handwaving? (Score:3, Insightful)
I have to question his credibility just a little bit. No network effect? The term "path dependence" is fairly well distributed through the economic literature, and I can't recall the name, but I once tried to work through a paper on it from someone at the Santa Fe Institute [santafe.edu]... not exactly a bunch of intellectual lightweights (at the very least as credible as anyone from the Cato Institute). The paper supported the network effect.
The Salon article almost presents Leibowitz as having debunked the concept rather than challenged it. Lots of handwaving if you ask me.
But then again, that's been my experience with econ in general. : )
Re:TANSTAAFL (Score:3, Insightful)
Subtle difference, but no you are not. You are infringing on their copyright. The whole justification behind the constitutional protection of intellectual works is that the founding fathers could not reasonably ascribe to them the attributes necessary to be considered "property". Hence copyright law and property law are two distinctly different animals. "Theft" is a property law term and is not applicable when discussing copyrights.
What part of "exclusive right... don't you understand?
I don't think that's what the poster was challenging. I think they were arguing that a Britney Spears album does not qualify as a science or a useful art and therefor is unworthy of copyright protection. It's a good point, but do we want to turn judges into music critics (or, more frightening, vice versa)?
Its amazing the lengths that people will go to justify intellectual property theft
It's amazing that people don't understand that the term "intellectual property" is a phrase cooked up by interests vested with copyright to try to extend property protection to cover things that the consitution specifically forbids it to cover.
Re:TANSTAAFL (Score:3, Insightful)
And copyright infringement isn't theft, just like trespassing isn't armed robbery, even though both are wrong.
>The founding fathers realized that to promote the arts and sciences, there must be an incentive for the producer thus protections were afforded to the creator.
They also recognized that copyrights are a limitation on freedom of speech and a government-granted monopoly, and therefore should be restricted (note "limited times", which has been routinely ignored by Congress and will hopefully be restored by Eldred vs. Reno). By placing limits on copyright, the Constitution clearly emphasizes that intellectual property is not equivalent to physical property. (I just had this debate with Bush2000 on FR, scary. Obviously you're much more reasonable.)
I agree that copyrights should be protected (although not in perpetuity), but overstating the impact of piracy plays right into the hands of those who would remove our rights for their benefit.
Re:Not as good a view as we might like to think (Score:2, Insightful)
Actually, he does say that the download market is significantly larger than the sales market, and unless a 15-20% drop were seen in sales (when the economy picks up), the evidence would not support his "sky is falling" accusations published by Cato.
Implicitly, he states that people want to own the music, and that the downloading is peripheral to the purchasing. Nothing wrong here.
As for DRM... from an economics standpoint, I imagine he is right: People will not pay as much for fewer rights, and from a purely theoretical standpoint, nothing is wrong. He does state in his conditions:
And, he goes on to describe what he considers DRM to be:
As much as I hate the idea of paying for EVERYTHING, rather than just a lump sum unlimited usage fee, the evils of DRM are mostly in the implementations: there has to be a way for "independants" to create and duplicate content (and to be afforded the same protections that DRM offers the majors). Since the implementation is far beyond his area of expertise, give him a little room to squirm!
Re:Pseudo-Libertarian (Score:2, Insightful)
Here's a brief lesson in AVOIDING having liberties threatened by commercial entities. Stop giving money to that entity.
Very simple, eh?
Libertarians stand for free markets, government that operates on the rules outlined in the U.S. Constitution, and personal responsability.
A government that punishes success (anti-monopoly laws, welfare programs, tariffs and protectionism) is no different than the government that invades the home, confiscates weapons, and violates other civil liberties.
You cannot have it one way and not the other. The only way to achieve true market integrity and prevent "uber-corporations" from taking over (a nonsensical conspiracy as it is) is to leave the power of choice to the consumer. This is NOT a role of government, and mandates that government NOT be involved.
The free market only fails when government regulations prevent it from being truly free (see health insurance, et al).
Now, to the issue of the article.
Nowhere is it stated that "downloading is hurting record sales, we need to help the poor wounded record companies".
Rather it states, quite plainly, if people shift thier desired form of media -in this case from CD to strictly MP3- then in the long run CD sales will suffer. This is the EXACT same thing that occured when people shifted from record to 8-track, from 8-track to cassette, and cassette to CD.
Regarding copyright, it merely examines the flaws in current copyright legislation and possible ways to preserve a market where the artist is able to receive adequate compensation for their work.
If ignorance is bliss, then more and more I've determined the mass of slashdot readers must be the happiest people on earth.
quoth tha Ranger
You are right, Bill Gates has little power... (Score:3, Insightful)
But that doesn't tell the whole story. There are many threats that individuals (especially wealthy individuals) and corporations (especially powerful corporations) pose which do threaten my freedoms. Perhaps it is easier for government with its coercive powers, but it is quite common with corporations as well. Those who ignore this by insisting that all threats to liberty come from government do no service to liberty.
If the threat to my liberty is my daughter's asthma, it doesn't matter to me whether she dies because some factory nearby is pumping toxins into the air or because the government forced me to accept socialized medicine which was inferior.
If the threat to my liberty is my inability to market my next-big-thing computer program, it doesn't matter whether it is because the government taxes new businesses too highly or because investors think the idea is so good MS will steal it from me.
If the threat to my liberty is an economic collapse caused by insufficient resources, it doesn't matter to me whether those resources are lacking because of a command economy like Communism or because some corporation has figured out a way to overcharge all the rest for a second-rate product. It doesn't matter whether it's because the government taxed us too much or because the government borrowed too much. If the money is removed from the economy, it doesn't matter if it goes to the Microsoft tax, to the income tax or to buy Treasury bonds. (Actually it does matter somewhat, since these are coming from different parts of the economy. But any of them can harm the economy by starving it of resources.)
Yes, the corporations and the wealthy do exert power through the government as well, but that is not the primary way they threaten my liberty.
Eternal vigilance only works if you look in every direction.