There’s no doubt that the music industry is in crisis. According to the International Federation of the Phonographic Industry (IFPI), global music sales dropped 25% from $38 billion in 1999 to $29 billion in 2007. Since 2001 the total European music market has lost 22% of its value, according to the British Phonographic Industry (BPI). This dramatic decline in revenue has caused large-scale layoffs inside the industry, and has driven music retailers, such as Tower Records, out of business. The question is: what kind of crisis is this; what are the real causes; and what should be done?
Monopolies at play
The recent government legislation is largely based on file sharing statistics presented by industry associations that, for the most part, represent the interests of the world’s big four: EMI, Warner, SonyBMG and Universal. Collectively they control over 71% of the music market (IFPI 2005). But many argue that their piracy statistics are based on highly questionable figures, which could be described, at best, as upper bands of the unknown. For a start, piracy is not the same as theft. File-sharers download much more music than they would ever buy. The IFPI estimates over 40 billion files were illegally file-shared in 2008, but the nature of file-sharing technology makes it almost impossible to work out how many shared files are copyrighted material. Surveys often involve very small sections of the population. Entertainment Music Research published figures claiming that “39% of music fans download songs from illegal sites” – but they only surveyed 1,500 people. The monopolies also claim that sales began to dip exactly around the time the first music file-sharing site, Napster, was set up in 2000. The Recording Industry Association of America (RIAA) claimed that Napster was responsible for a 30% decline in sales, and filed a successful lawsuit that had Napster shutdown. However, if we study the Dow Jones Industrial Average (DJIA) we see that the US economy also declined sharply during the same period.
At the same time, average retail prices for CDs increased from $13 in 1997 to $17 in 2002 (RIAA). The combination of the recession and the industry’s high pricing strategy is another way to explain the shrinking sales since 1999.
Labels under attack
So are we buying less music? No, total consumption in the US rose by one third between 2003 and 2007 (IFPI). While physical CD singles plunged 43% in 2008, single track digital downloads rose 24% to 1.4 billion units globally. The UK saw the biggest increase in digital sales in 2008, up by 45% (BPI). Consumers are buying music – just not from the monopolies. The truth is that the technological revolution has shifted power away from big business in favour of many small labels, artistic teams and consumers. Many musicians no longer see a "record deal" as an integral part of their business plan. Inexpensive recording hardware and software has made it possible to create high quality music in a bedroom and distribute it over the internet to a worldwide audience at little or no cost. In 2006, the UK band Shikari sold out at the Astoria, one of London’s best known venues, after generating a fan base of around 40,000 on the networking site, MySpace. The unsigned pop group Koopa made it into the top 40 in 2007 with a self-released, download-only single (Independent Feb 2007).
In a desperate attempt to claw back profit, the ageing music monopolies have responded by attacking consumers. As of 2001, IFPI’s priority has become “fighting music piracy,” and it invited governments to join the fight. The monopolies have carried out a series of threats, litigations and lawsuits against thousands of individuals. They have also tried to sabotage file-sharing sites by uploading fake files. And, they have developed watermark technology to prevent media from copying, known as DRM.
These aggressive tactics have pushed many consumers even further towards alternatives. Who wants to spend money on media they cannot copy for a friend? Also, a recent survey by Ipsos Mori found that people who illegally download music also spend more money on music than anyone else, suggesting that government plans to punish core customers could further harm the industry.
But isn’t piracy bad? How are musicians to make a living? The reality is that most musicians never manage to make a living under capitalism. Only a fraction ever get offered contracts with major labels. Those that do are usually contractually obliged to sell up to 500,000 copies of their recording in order to recover advances and production costs (Fisher 2004). Most bands will never sell more than a few thousand copies, and therefore never see any royalties, and will often earn less in total than a supermarket worker.
The Internet can provide us with an unlimited supply of songs, yet the music industry insists we still pay CD prices. Online music stores, such as iTunes, Amazon and Microsoft, all charge between 69p and £1.29 per song. iTunes alone has sold over six billion songs, yet, the artists continue to get only a tiny percentage of that money. The conditions for piracy to develop are created by the profit driven system – capitalism creates piracy. No wonder people are challenging the monopolies, showing that they can’t stop progress forever. Here a few interesting examples:
Free: In some cases, music could be given away for free, as a loss leader, with the intention of promoting associated products, such as concert tickets and merchandise. This is what the artist Prince did with his recent album – a decision that infuriated the music monopolies. The UK arm of SonyBMG withdrew from Prince’s global deal, and HMV called the move “absolute madness.” This model would probably better suit established artists.
Pay what you want: Websites, such as Magnatune, offer music on a ‘pay what you want’ basis. Interestingly, according to Magnatune, consumers are spending more on average than if there was a fixed $8 price. Those who choose to pay less per item, often end up spending more in total. 50% of the sale goes directly to the artist (still too low in my opinion).
Pay by popularity: Some sites, such as Amie Street, have variable pricing based on demand. Songs start free, or cheap, and rise in price as they become more popular. This gives new artists exposure, whilst creating an incentive to produce better quality music in order to increase popularity, and thus increase the price of your songs. Here, 70% of the sale goes to the artist – that’s many times more than from the music monopolies.
Subscription: A subscription model might allow the consumer to download as much music as they like from a particular online store, and keep it, for a monthly fee. Consumers could also choose where their money goes. For example, they might choose for a larger proportion of their subs money to be sent to small artists, or a single artist they really love. Alternatively, the consumer could subscribe directly to the artist; the latter would then receive 100% of the sales money.
Tax the Internet: This is not a new idea. In fact, the music industry has been taxing blank media, such as tapes and CDs, for many years, in order to ‘compensate’ the monopolies for ‘losses’ made when, for example, you copy an album and give it to a mate. Tax is the least progressive model. It would increase the cost of using the Internet, and would reduce the incentive for record labels to release new music.
Many of the models listed above have great potential, and would cut out the parasitic middle-men, allowing much more money to go to the artistic teams. The question is, though, will they survive under capitalism? History shows us that big business will eventually dominate. Corporate propaganda is already succeeding in manipulating governments into passing restrictive laws, which are likely to hinder creative people and consumers. The competitive forces of the market will gives rise to market leaders, like iTunes and Amazon, which are likely to snuff out competition. New socialised economic models are unlikely to survive unless the economy as a whole is socialised. Public ownership and democratic control of industry is the best way guarantee prosperity for all.
The question of ownership
A publicly owned national, or international, music distribution website could be established, where all musicians and consumers could be brought together – imagine, one website containing all the world’s music; all downloadable for little or no cost. Publicly owned recording studios could provide easy access to equipment, giving equal opportunities for artists from poor backgrounds, diversifying music.
In a socialist economy, the cost of living would be drastically reduced, thus artists would find it much easier to survive financially. The working week would be much shorter, freeing up time for creative activity. What about all the lost jobs? If we had a planned economy, we could relocate workers from areas of economic decline, such as the ageing major record labels, and move them into areas of growth, like the growing live music scene. Under capitalism, unfortunately, few of these things are possible.
New technology has made it virtually costless to pass on ideas, including music. The giant corporations have lost their monopoly, and are desperately trying to sustain their profits by criminalising consumers and making the public pay. This is another clear example that shows that capitalism has become a fetter on society.