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The Economics of P2P File-Sharing
brajesh writes "Does P2P file-sharing really affect music sales and in what ways? According to a blog entry at "The Long Tail", a paper from David Blackburn[.pdf], a Harvard PhD student, on the economics of P2P file-sharing concludes that it does indeed depress music sales overall. But the effect is not felt evenly. The hits at the top of the charts lose sales, but the niche artists further down the popularity curve actually benefit from file-trading. Form the paper - "Artists who are unknown, and thus most helped by file sharing, are those artists who sell relatively few albums, whereas artists who are harmed by file sharing and thus gain from its removal, the popular ones, are the artists whose sales are relatively high." But then "File sharing is reducing the probability that any act is able to sell millions of records, and if the success of the mega-star artists is what drives the investment in new acts, it might reduce the incentive to invest in new talent. This is, at its heart, an empirical question which is left to future work." There is also another compilation of studies on economics of P2P."
The hits at the top of the charts lose sales, but the niche artists further down the popularity curve actually benefit from file-trading.
From each according to his abilities; to each according to his need. Lighten up--it's a joke!
P2P file sharing is the right thing to do...it's socialist.
"File sharing is reducing the probability that any act is able to sell millions of records, and if the success of the mega-star artists is what drives the investment in new acts, it might reduce the incentive to invest in new talent."
So what this is saying is, P2P helps smaller independent artists and is detrimental to large "manufactured" pop acts. Which is pretty much common sense, and is why the corporate music industry is so against it.
The argument that "lack of investment" will produce a shortage of talent is clearly ridiculous. How many of the great, truly talented acts we all know and love were the product of "investment" by the music industry? And how many struggled in poverty for years because they loved making music, before finally being signed up by a label and exploited for all they were worth...?
Hopefully this will move the industry somewhat away from acts such as Britney Spears (which traditionally have much higher profit margins and lower risk than smaller acts) and towards a business model that is wrapped around greater diversity and the continual sale of older music (which they usually drop the ball on fast, in order to focus the public on the newer mega acts).
Maybe the records industry could somehow start promoting clusters of artists and whole genres instead of one mega artist? Hmm..
Will code a sig generator for food
Perhpas this is a good thing in the sense that the lesser known artist has a chance to rise up and even out with the more popular artist. Most of the songs I download are not mainstream anyway, why? Because I can turn on the radio or the TV if I want to hear those artists. P2P gives me a chance to search out further for something that might really inspire me. Just because your not on MTv does not mean your music blows. The quality of mainstream music is starting to wear me down lately anyway.
"Nothing, not all the armies of the world, can stop an idea whose time has come." - Victor Hugo
P2P is here. It's not going away and you can't even legislate it out of existance. For right or wrong, there is nothing the various copyright industries can do except adapt to the change. Everything else is just hot air.
Simon
For the past 50-years the only way to be a "successful" musician was to write songs 2:50 long and sell 500,000 records. Ever wonder why everything on the radio sounds the same? If an artist can't break even, they're pretty much worthless in the eye of the label.
Legitimate online digital distribution of music could possibly replace the notion of rock stars with micro-stars in their respected genres. There just needs to be some sort of way to market these niche artists online so the cream rises to the top. A group who could make 80% off of their recordings is not so bad off considering the average signed artist only sees 5 - 15% per record.
When the rest of the 'food chain' below her benefits, who cares if the one at the top, with more then they need anyway, misses out on a few potential sales.
Remember, *nothing* was stolen during the p2p transaction, so she didnt actually *lose* anything, it is only a reduction in the vague concept of 'potential' ( i.e. unprovable ) sales.
---- Booth was a patriot ----
What this means is that being a musician will no longer be a multi-million dollar a year job. It will be a job that pays only thousands of dollars a year, the same thing "the rest of us" get paid. And it also means that more people will be able to be musicians, as opposed to now where being a musician for a living is very difficult. I'll definitely take many musicians making many songs and each making enough money to pay rent over a few musicians making a few songs and making enough to pay everyone's rent. Ask yourself which of these two makes a better society.
The GeekNights podcast is going strong. Listen!
"File sharing is reducing the probability that any act is able to sell millions of records"
How about file sharing is allowing people to sample the artificial crap the music industry churns out these days and they decide not to waste their money on the product?
I particularly like the Fairshare proposal floated by Ian Goldberg, in which you could "invest" in promising new artists. It gives incentive to get in on the ground floor with a little-known artist, rather than to ride the coattails of a megastar.
Any alternative would be better than the current system.
I couldn't care less about not having mega star marketeed artists... So this must be good.
... from the forgotten corner in europe
P2P is breaking the vicious cycle where the rich get richer and the poor get poorer. It's the only reason all the **AA execs are frothing blood at the mouth about it.
I thought everyone already knew that.
Yeah, but he had formulas, data, charts and stuff. Even used those funny greek symbols and had partial differential equations. It must be right. :)
This will be good for everyone but the current three monopoly publishers. Popular taste will do a better job of finding talent than payolla in the form of coke and whores. A more distributed music distribution system will be more competitive for artists and the money that now flows into a few hands will flow into many. The job will get done and people will still pay the piper.
Friends don't help friends install M$ junk.
I guess it shows how cool the P2P effect is, it makes huge fuckin stars sell less CD's and undergroud ones sell a bit more.
Isn't it what anyone (except the big artists and music companies) would want to see? As someone say, that's very socialist, it's like the tax on fortune and wellfare, or whatever you call that, takes lots from the rich people and gives some to the poor ones.
Big stars all suck according to me anyway, so fuck them and don't try to make us cry because Madonna is gonna sell a few thousand less than expected on the millions she's sellin.
Reminds me of an episode of south park actually...
You just got troll'd!
I think the industry's biggest problem is a lack of diversity. Right now, everything on mainstream radio sounds exactly the same. Even ten years ago, radio was still crap, but at least you could differentiate the music better. Personally, I rarely even listen to the radio at all anymore, and when I do, it's a classic rock station.
Record companies want to go with what's "safe" these days. No one wants to take a risk on signing and promoting an artist that's "different." However, the big rewards come with big risk. I really wish these huge, billionaire conglomerates like WEA and SonyBMG would gamble a little bit more. They're actually losing a lot of good acts who are moving to smaller labels like Koch and Sanctuary. Audium (a Koch label) has become one of the best labels in country music by signing artists who got cut by the majors, like Dwight Yoakam, Merle Haggard, and Dale Watson. Sanctuary is now home to the likes of Iron Maiden and Morrissey, two of England's best sellers ever, who still are putting out good albums. It just kills me how labels will not settle for "just" platinum anymore. You have to go multi-platinum to be a success now. I remember how Capitol was getting disappointed with Garth Brooks when his albums started selling "only" two million copies. This is the same Garth Brooks who single-handedly saved Capitol/EMI from bankruptcy with No Fences and Ropin' the Wind, each of which sold something like over 10 million two consecutive years. He had the top 3 albums in the U.S. for over a year. But if he's only two-times platinum and not ten-times platinum, then he's no good to Capitol! This is the kind of moronic thinking that drives the recording industry. It is pure, unadulterated greed. So much greed that it completely clouds any sensibility they might have.
I hope they do.
Free market ensures that if some fat exec having a hissy fit says 'I'm not playing with you anymore', someone else will be happy to provide the same service (probably at lower cost).
If P2P kills huge record monopolies, and instead we have numerous small companies who make money from selling CDs and un-DRMed downloads *regardless* of P2P, that's free market pwning artificial monopolies right there.
It might very well be that current huge and bloated 'content creation industry' will be 'damaged' by P2P, but it's luridicious to claim that everyone would stop making music, movies and TV just because of P2P's 'effect' on making money with the content.
I'm still convinced that if the 'content business' would just bite the bullet, restructure to lower expectations (their current legal offerings are grossly overpriced) and instead put down unDRMed DL service with all the content in the world, at uber download speeds, they'd make gigabucks *regardless* of the fact that people would copy the stuff. Why bother with P2P sites and untrustworthy files if you can get a 'legal' proper version, perfect quality, no strings, use as you like within the framework of current law, at a reasonable price?
I know if my choices were 'DL from uberfast official site, 10Mbit/sec, perfect quality, 3-5$ for the full contents of a DVD, ready to be burned to disc if I so choose' and 'grab dvdrip with no extras off P2P at crappy speed and no guarantee of quality', I'd pay a few bucks for no hassle.
Fat execs are unable to grasp the effect of internet and plentiful bandwidth. Their 'product' is PURE DATA, so *gasp*, internet will make distribution of said data much more efficient than their stupid 'manufacture shiny discs' business model.
Current record exces sound like scribes whining when someone invented the printing press, and started mass-producing books that earlier had to be scribed by hand (and were extremely expensive and rare). Today's internet makes reproducing of entertainment so much more efficient and cheaper, so those CD presses belong to the museum, and as costs go down, so must the prices. CD presses had so huge upfront investment required that the companies could create an efficient monopoly. Anyone can trump up a website, and while today the bandwidth is still not free, I expect the price of it to go down so rapidly that in a few years bandwidth costs of sending 10 GB movie file over the internet is fractions of a cent.
In which case you can no longer charge 20$ for a copy of a movie.
Movie theaters are in a deep doodoo as well. They will have to improve presentation quality and service - to make it more like a 'special thing' that movies used to be back at the start of the last century. Improving home theaters are pwning crap theaters, and their offering of 10$ movie showing + overpriced soda is no longer attractive to the customer. ADAPT OR DIE, just like every other business has to.
The fact that the big hits lose sales due to P2P is bad for some labels, and not for others.
E.g. Sony has a lot of big-name hits. So P2P == evil.
Koch Records has a lot of smaller-selling indies. P2P != evil.
However, I have a deep suspicion that RIAA is run by the likes of SONY, and not the ones like Koch.
Also, musicians are keenly aware of the differences: to get on Koch, you pretty much have to have your album finished and mixed. They produce and distribute it, and give you a big percentage. Other ones front tons of money for production and advertising, and give back a smaller percentage -- and they are the ones that stand to lose the most from P2P.
The most interesting thing in all of music these days are mixtapes and mashups. They are both illegal to sell -- no copyrights are cleared, so you'll hear samples, beats and so on from entirely different groups. You can now buy them over the web, or download them from P2P.
http://www.thebricktestament.com/the_law/when_to_
the headline says it's provable: Harvard PhD student, on the economics of P2P file-sharing concludes that it does indeed depress music sales overall
You can't handle the truth.
Richard MacLemale on iTunes.
Music - www.richardmac.com
IMHO it's a bad idea in general to tax internet connectivity (other than perhaps VAT, that is). I wondered once why hooking up to the 'net must cost anything at all. If you and your neighbour decide to exchange data (and arrange that yourself), why should you have to pay anyone for that?
The answer is: you don't. Between you and your neighbour, you'd have to pay for the connecting hardware. And similarly, you don't pay an ISP for data flowing in or out, you really pay them for setup and maintenance costs of the network equipment. The amount of data you move just may be a factor in deciding that cost.
Taxing ISP's to support artists, sort of attaches a flat-fee price tag to all music downloads (or even any download). Which is stupid. Shouldn't it be between you and the artist to decide what you pay for their music? Let us please keep governments (and ISP's) out of that equation.
Without P2P file sharing, it is costly to be popular. Become very popular, and face the need for heavy (costly) internet servers/bandwidth. P2P file sharing takes that pain away, you can be popular without bearing the distribution costs.
What I think would really benefit online music sales, would be a ubiqitous, easy to use, safe (and possibly anonymous) micro-payment system. Something that would allow any artist to hook up easily, and allow any casual downloader to hit a button, and throw a small amount of money their way.I know there are some widely used systems (PayPal comes to mind), but each of those still have some important drawbacks. Small online payments that are easy to use for anyone simply aren't here yet.
A few points here :
1. True, filesharing might reduce the incentive to invest in new acts. But it definately reduces the need. If you don't need millions of dollars to launch your album, just a laptop and a podcasting site, then who needs investment? I think what will happen is that the promotional aspects of the music biz will survive in a substantially reduced form (after all, people still need to hear about you!) but the whole production and distribution megalith will go the way of the 8-track.
2. I agree, though, that P2P itself means next to nothing to a small unknown artist. Nobody is going to type your name into Limewire if they have never heard of you, obviously. Internet radio and podcasting are muhc more meaningful and useful tools for such artists. You get a podcaster to listen to your music, they play it for people, those peopel go to your website, etc.
3. It's said a lot, but it bears repeating : even Britney Spears makes only pennies per CD. The big name artists make all their money on touring. So there's no reason to worry about the ten cents you might be 'stealing' from Britney if you download a song. If you love her and want to support her, go to her concerts, buy her clothes, her perfumes, whatever. She gets a lot more money out of that.
Essentially, the music industry has reacheed the point where it is almost completely parisitical in nature. And like any parasite, it wants to control its host, and fears the light of day. Right now, they exploit the fact that the people and most importantly the legislators don't really grasp the issue at all. When you say to someone "Should they be allowed to steal our music?" and they know nothing of what is truly going on, it's hard to blame them for saying "Gee, I guess not!"
But we don't have to worry about that. This revolution requires no propaganda on our side. With every MP3 player, every iPod, every DVD player sold, our view sells itself. Eventually the RIAA and its bloodsucking ilk will be reduced to the level of rambling lunatic old men defending their collections of old cans and newspapers with bloodthirsty vehemence, oblivious to the fact that nobody wants them any more.
Michael J. Bertrand, AKA Fruvous or FruFox My
Previously, all I've seen is supposition (which is essentially worthless) and surveys (which I am always loathe to trust no matter what the conclusion; they're too easy to skew).
I've not RTFA, but assuming he actually did some proper research, this might just be a useful piece of work; it would certainly make a change in this area.
It's official. Most of you are morons.
Remember, *nothing* was stolen during the p2p transaction, so she didnt actually *lose* anything, it is only a reduction in the vague concept of 'potential' ( i.e. unprovable ) sales.
When every anyone argues that nothing is stolen, meaning that nothing is physically taken, they always seem to overlook one key factor...the person involved in the acquisition unquestionably now has something of value in their possession. I'd like to see someone justify the notion that by virtue of the fact that Persion A has created something of value, that Person B is automatically is entitled to whatever benefit it may bring.
I'm not a fan of the *AA monopoly at all, but I do think the entitlement mentality that seems to be a large part of the p2p ethos, is rather repugnant.
Talking about not hearing the other sides argument. The point is that small artists don't *need* a record label any more. So we don't care how they invest their money - except that suing grandmothers doesn't seem like the best use.
We also have the classic "free" vs. "free" equivocation. I don't want to get music for free. I want to support the artist. But I much prefer to buy albums directly from the artists. And I hate stupid restrictions. "Liberian Acapella" is one of my favorites. They sing at churches and sell their self produced albums. I have many albums from Magnatune (a "record label" that does distribution only). Another favorite is David Bellugi from Italy.
That said, I am a copyright Nazi. I confiscate and destroy illegally copied RIAA music whenever I find it, give my teenage daughters a lecture on "playing by their rules if your going to listen to their music", and threaten to take the $3000 out of their bank account if they get caught distributing copies (I realize the lawsuits are for online distribution, but the principal is the same). Of course, the fact that I can't stand most of the music has *nothing* to do with this...
What I really need is some official RIAA materials on copyright violation, so that we can be clear that the copyright Nazi thing is part and parcel of RIAA music, and not something I am making up.
My friend say that when he downloads, he ends up getting songs he wouldnt buy in the first place. He also feels that many of the songs inspire him to either buy from iTunes or Amazon.
Although, he prefers to buy used because he thinks that the music industry has bigger issues than online file trading - such as controlled product marketing (marketing what it thinks is good music), the recent recession, an increase of used music sales, and an overall poor quality of the bands the music industry choose to promote.
Ultimately these guys are the middle men. THey jack up the price for the interest of the middle men, not the artist.
Perfect examples are the cost of the CD compared to the LP - and the forth coming increase of iTunes song prices.
It was a socialist/communist nation that put the first man into space.
;-) say that it was really a dictatorship and a poor example of communism. Now you cite it as an good example. Well which is it?
Uh huh. When the Soviet Union is offered as evidence of the failure of communism the commies
The first man in space was put there by brilliant hardworking scientists and engineers. Too bad circumstances forced them to serve such an abomination of a government. They deserved better.
How the heck can it be socialist? If anything it's anti-socialist and, since everything is tied back to economic profits, it's moreso communist.
;-)
It's anti-communist but not anti-socialist. Socialism allows profits, it merely taxes the profits into insignificance to redistribute wealth from producers to non-producers. It merely looks like communism since the the would be producers say why bother and don't even try.
Note to flamers: anything taken to an extreme is bad, pure capitalism or pure socialism, the argument is merely about what the mix should be.
I don't understand what being most popular on the charts has to do with it...
;-)
If I download an album and like it, I will buy it.
Music has a network effect. The more people who listen to a given artist the greater the demand for that artist.
It seems to me rather, that Blackburn suggests that the only reason the chart toppers top the charts is because consumers are focused on very few artists, as opposed to having their attention drawn to more artists via P2P.
There is too much music to listen to, too many slashdot posts to read. Some sort of ranking system is needed in both areas. The charts, the radio, etc are a convenient form of ranking, performing the same function as the slashdot moderation system. The real complaint is about the quality of this ranking system.
Does this mean that record labels will make less money? No, they are buying the same amount of albums (or more)
That is about as naive and self serving as RIAA saying they are losing money. What you and they state are your respective desires. The truth is that we don't really know since the question is not whether sales are up or down, it is what would sales have been in 2005 had there been no P2P. Realized sales vs. potential sales.
But now record labels will have to have a larger pool of more diverse talent to satisfy the consumer who is more aware.
That is also naive. There has always been a niche music market where individuals combed collections for odd titles, sought out new bands homemade tapes, communities that traded such bootleg tapes, communities that traded the most popular commercial tapes, etc. P2P is *not* exhibiting new listening or sharing behaviors. It is just a more convenient mechanism to do so. The word processor replaced the typewriter, P2P replaced recording an LP to casette and handing it to someone.
Trading music, like sex, is not something the "current" generation has discovered. It's been going on for a while, the current generation is merely not well informed about what the previous generation was up to. Face it, when grandpa and grandma went to woodstock she probably blew a roadie to get him a bootleg Hendrix tape.
To me that's the key point.
Lack of price response.
A lot of very good movies are on sale this weekend at $3. A lot of releases from the last year are either $5 or $8. Why the hell would I ever download a movie?
OTH, Music in the same add is on "sale" for $16.99. For that $16.99 I would get about 9 minutes of material I might listen to more than once. I know the physical cost of production was under 50 cents. I would have multiple reasons to p2p under that scenario
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
It's now shown that it can be done.
It's also one of the few number 1s that I'd rate as a fine single in about a decade.