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The Numbers Behind the Copyright Math
TheUnknownCoder writes "The MPAA claims $58 billion in actual U.S. economic losses and 373,000 lost jobs due to piracy. Where are these numbers coming from? Rob Reid puts these numbers into perspective in this TED Talk, leaving us even more puzzled about the math behind copyright laws. 'Ignoring improbabilities like pirated steaks and daffodils, I looked at actual employment and headcount in actual content industries, and found nothing approaching the claimed losses. There are definitely concrete and quantifiable piracy-related losses in the American music industry. The Recording Industry Association’s website has a robust and credible database that details industry sales going back to 1973, which any researcher can access for a few bucks (and annoying as I’ve found the RIAA to be on certain occasions, I applaud them for making this data available). I used it to compare the industry’s revenues in 1999 (when Napster debuted) to 2010 (the most recent available data). Sales plunged from $14.6 billion down to $6.8 billion — a drop that I rounded to $8 billion in my talk. This number is broadly supported by other sources, and I find it to be entirely credible. But this pattern just isn’t echoed in other major content industries.'"
I haven't pirated music in about 5 years. I also haven't bought any CD's in that time, either. I have moved almost entirely to using Spotify, Pandora, and other subscription services for my music. Music I do buy, I buy electronically. I estimate I spent about 25% as much on recorded musical entertainment now than I did in the late 90's, during the heyday of the CD. This probably results in less revenue for the content owners, but that is not attributable to piracy. An industry's decline due to changing market factors is not necessarily a problem - it's just the natural way of things.
I am a geek attorney, but not your geek attorney unless you've already retained me. This is not legal advice.
Clearly, it's coming from all the economic losses suffered at the hands of DRM and additional copyright enforcement.
"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety."
I'd like to see these losses reported to the IRS.
While I have _a lot_ of vinyl from the 60's and 70's I slowed down buying at later years. Now the CD recordings are unpleasant to listen because of loss of dynamic range (loud mastering) I don't buy them. One reason for the growing sales of vinyl. I don't download either. If the music industry can come up with artists and quality of the past I will not buy anything (new). I believe I am not alone on this.
Ah, but don't you know, all YouTube music is pirated. Even the butterflies.
No matter where you go, there you are. So Enjoy it.
There is a fundamental shift in the underlying business models. (Thank goodness)
a) No longer is the only source of getting a song, buying an album. Now, if you like a song, you buy the song for 1.29, rather than the album for $20 from HMV or wherever.
b) Social media and word of mouth trumps advertising and corporate presentation. It's much harder to convince your audience to spend the $20 for the album with 1 mediocre song, and it's much easier for your audience to talk amongst them selves and realize that the album isn't worth it.
c) Thanks to the digital age, the industry is shrinking. Same for newspapers.
A large portion of the size of the industry was the overhead necessary to distribute physical media. I'm not sure what %, but I'm certain it was significant. This business value is gone and/or going now. What you're left with is the value of the purely creative side, some marketing, some overhead.
If the value of a newspaper in 1990 was $100M, and $60M of that could be attributed to the capital & overhead required to actually produce and deliver the newspaper; now it's 2012, and after inflation the same company finds itself worth $40M because they've lost the need to maintain the infrastructure to do the physical delivery. The same is true for Music (tho not yet for movies, although coming) A very large portion of the value of a music distribution company was the distribution part. That's gone now, thank goodness.
We just need the industry to adapt to the new mode where creation is harder than delivery, because right now I feel like we're not being served well by record company A&R.
But that's just me
The argument that piracy results in job losses is bunk on its face.
Imagine that the MPAA is right, and millions or even billions of dollars really are lost due to piracy. Now imagine that piracy doesn't happen and that all that money goes where the MPAA says it should. The companies of the content industry now have extra billions of dollars in revenue and profit.
Where does this money go?
Do they give all their workers a raise? No, they're not a charitable organization. As publicly-traded corporations, it would even be illegal for them to do such a thing out of the goodness of their hearts.
Do they hire more workers? No, what would they hire more workers for? The jobs they provide are already enough to make these untold billions in profit. Extra people employed (beyond the necessary few extra for shipping&handling of the increased volume in CDs, etc) would just be a drain on the balance sheet. Again, not a charity providing make-work jobs.
Do they pay out bigger executive bonuses, pay out stock dividends, execute corporate takeovers, bribe, erm, lobby congressmen? Yeah, these things seem quite a bit more likely.
The decline in record sales has nothing to do with piracy. It's roughly outweighed by an increase in sales of downloadable music. The only difference is that the revenues end up with other companies such as Apple (or directly with the artists), instead of with the record companies.
Really, this is nothing new. Just comparing the raw numbers is likely to mislead you if you don't have knowledge about the music market.
I buy a decent amount of music. I'm just finding that most of the stuff I listen to is not on an RIAA label and tends to be from other countries. The RIAA stuff I do listen to are bands that have been around a long time (like Judas Priest and Iron Maiden). The internet made it possible to find good music from all over the world rather than buying whatever is on the radio, and it turns out people on the other side of the world aren't as eager to move to Hollywood to get screwed over by a big record label.
Let's take a look at the record industry's main customers: Teenagers and young adults. I hope it's no secret that the people who buy the most music are in the 14-25 age bracket.
Now, what did teenagers have to spend their dough on before the 2000s? Well, I was in that precious age bracket just before Napster came into existence, so maybe I may talk about it: Music, fashion and ... umm.... I guess computers counted only if you're a geek. Music and fashion WAS pretty much what teens blew their money on before the millennium rolled over. Throw in a few movie tickets and the odd night out with friends in the local teen bar (yes, such things exist in Europe where you may drink before you may drive, but I digress) and you got what teens wasted money on.
Fast forwards to the present. Now, I'm not a teenager anymore, but I "fortunately" have to suffer from having contact to them. Sidenote, never volunteer for anyone. But I digress again. So I see what they have to pay today. Cellphone bills, online gaming, gaming in general (mostly console outside of WoW, actually), iPod accessories (ok, they double as fashion, actually), ... you get the idea.
In other words, the companies that vie for the teens' money multiplied. It's no longer Diesel jeans and Sony music alone. I don't want to claim that this, in turn, doesn't make them copy music instead of buying it ... but then again, so did we when we were young. Ok, it was tape-to-tape copying rather than downloading it, aside of that, well, you cut corners where you can when your money is tight. And there's hardly a teen who isn't short on cash constantly.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
thinking that because they created it everyone should be buying it and because it didn't sell now they have the "internet pirates" to blame. Maybe they should talk to Ford about the Edsel. Every second movie being a remake and every pop song sounding the same has nothing to do with people not wanting to buy the shit and just download it to see how horrible it really is.
I use to buy tapes and cd\s blindly because I wanted that new album or wanted to discover something new just to find out it was shit work which I just wasted money on. This was improved a bit in the late 90's when some record shops let you listen to the cd's before you bought them. At that time my hit to shit ration improved but by then Napster appeared and I was set to save money and only buy good works. Unfortunately this led to downloading madness which revealed just how bad lots of the music out there was.
by TheSpoom (715771) Uncaring Linux user here. I have nothing to add to this but please continue. *munches popcorn*
To Whom it may concern,
Please count the lack of revenue you are receiving from me in the boycott category. I do not pirate music, but I'm sending another dime to companies that gang up to alienate me.
My grudge goes back a ways - highlights include: Lying to me about CD price hikes in the '80s; taxing my computer media in the '90s, intentionally distributing malware laden CDs in 2000, and now the outrageous legislative attempts.
Sincerely,
One bitter ex customer.
consumers just gained a way to even the playing filed with not getting stuck with worthless music and movies. Now that money has shifted to help out other industries and created new jobs in those. Unless that money is taken out of the country by corporations using off shore accounts and tax heavens that money went back into the countries economy so nothing was lost.
by TheSpoom (715771) Uncaring Linux user here. I have nothing to add to this but please continue. *munches popcorn*
Correlation is not causation.
Religous speak to God. Insane are spoken to by God. When all shut up, one can finally hear Shostakovich in peace
The movie studios (the MPAA & RIAA are just lobbying bodies, they don't actually make any money off media sales) have almost certainly eaten into the profits of the music studios with the advent of the market for home movies to buy/rent. The same can also be said of the video gaming industry, which didn't exist until the early 1980s and only really started making serious money by perhaps 1985 or so. OK, the video and game industries have probably also grown at the expense of other entertainment businesses - cinemas, arcades, bars, bowling alleys, etc. - but I wouldn't be at all surprised to find a correlation between the growth of movie and game sales and the music industries post-1973 decline. They are all competing for the same disposable income, after all.
UNIX? They're not even circumcised! Savages!
There are definitely concrete and quantifiable piracy-related losses
How do we know these losses are piracy related? I tend to think a lot of it is because no-one has to buy an album they don't want just to get two or three songs. Here in Australia that means a $10-$15 song drops to to $1.50. Market correction related losses?.
I personally am spending more than ever on music but it's all from Beatport etc. I'd be surprised if the RIAA is counting much of that money.
Great spirits have always encountered violent opposition from mediocre minds -- Albert Einstein
The Recording Industry Association’s website has a robust and credible database that details industry sales going back to 1973, which any researcher can access for a few bucks (and annoying as I’ve found the RIAA to be on certain occasions, I applaud them for making this data available). I used it to compare the industry’s revenues in 1999 (when Napster debuted) to 2010 (the most recent available data). Sales plunged from $14.6 billion down to $6.8 billion — a drop that I rounded to $8 billion in my talk. This number is broadly supported by other sources, and I find it to be entirely credible.
OK, you find it credible twice. Any particular reason?
Also:
Are you claiming that Napster has something to do with this? If so, how much, and how do you know?
How do you take the economic melt-down into account?
How do you account for aging Baby Boomers who are losing the ability to justify shelling out for yet another remastering of LPs they bought 40 years ago?
Why calculate on revenues rather than profits?
How much of those revenues are the inherent cost of pressing a CD and putting it in a plastic box, which was *much* more common back then?
Who's losing jobs? Are musicians giving up because they can't find a gig and a sharecropper contract? Or do executives just need to hire fewer people to count their money?
These raw numbers are meaningless.
Sheesh, evil *and* a jerk. -- Jade
Ah, but don't you know, all YouTube music is pirated. Even the butterflies.
I've been wondering why YouTube apparently isn't being hammered with take-down notices. You find a published song or bootleg recording, watch it, and it's still there several years later.
Maybe the labels tacitly acknowledge that it's good advertising.
Sheesh, evil *and* a jerk. -- Jade
What didn't help is that a movie DVD on the whole was (and probably still is) cheaper than most CDs to buy. DVDs have more content, the original content is much more expensive to produce, and yet a DVD movie costs less money to buy than a CD. For any economically savvy person that was a clear indication that we were being gouged on CD prices.
I believe it is similar in the USA, but in the UK the story went like this :-
1) First the motorcycle manufacturing industry was in trouble. The Government told them to f#@k off.
2) Then the electronics industry was in trouble. The Government told them to f#@k off.
3) Then the shipbuilding industry was in trouble. The Government told them to f#@k off.
4) Then the mining industry was in trouble. The Government told them to f#@k off.
5) Then the railway equipment and train building industry was in trouble. The Government told them to f#@k off.
6) Then the car making industry was in trouble. The Government told them to f#@k off.
7) Then the steel making industry was in trouble. The Government told them to f#@k off.
BUT
8) Then the entertainment industry was in trouble and the Government said "OH MY GOD WE CANNOT ALLOW THE ENTERTAINMENT INDUSTRY TO FAIL! We must give them tax breaks, subsidies, knighthoods and do everything we can to keep this luvvly bunch of luvvies in the manner to which they are accustomed!"
I put this down to the fact that the vast majority of politicians are "humanities" people. They have degrees in history, English, fine art, psychology, PPE; hardly ever science and technology. They (like most people) see entertainers face-to-face, they are charmed by them. Unlike ships, cars and electricity which are "just there".
So politicians love the entertainment industry, which is why its pronouncements are so dangerous.
PS: Some might point out that Mrs T , about the worst offender in this, had a science degree. Very unusual for a politician. There is a different explanation for her. Having changed careers she wanted to justify it by destroying what she left behind, and getting her own back for being the junior in the lab etc.
Perhaps the lesson is that there can never be intelligent support for technology in government, except in wartime or for fads like wind generators, the workings of which any humanities guy thinks he can understand more than a nuclear power station for example
The underlying problem is, that creating (nearly) perfect copies of a work used to require a high investment first in the copying machinery, be it the printing press or the vinyl press or the polycarbonate press, and then in creating the master copy, be it a proofread typesetted one or the matrix for pressing vinyls or CDs. But the actual copy, once the copying machinery was installed and the master copy created, was cheap.
Thus there was a business model in investing heavily in copying machinery and then look for works of which a large number of copies could be sold. The only risk was that one created a master copy of a work which didn't sell. Everyone was thus looking for works which were already bestselling and created their own copies of them. Because of that the copying enterprises which first started to copy a work seeked protection from competition, thus the institute of copyright (or imprimatur) was installed already at the end of the 15th century. Before one could start selling copies, one had to get the permission from the authorities to do so. Only in the 18th century, with the Statute of Anne in 1710, it was recognized that not only the people investing in copying equipment and creating master copies should profit from a work, but also the actual creators, which then could either be hired to create the work or license their own works for copying.
Now the business model was complete. It was founded on the fact that creating a single copy of a work was nearly as difficult as creating hundreds and thousands of them, thus people creating multiple copies could always undercut people creating a single copy in price, making it thus attractive for nearly everyone interested in a copy not to copy themselves, but buy a cheaper copy from a copying enterprise. And it encouraged people creating works which were easily to copy and thus being sold in large numbers. Finally a legal framework was created to fend of competitors by making it unattractive to invest heavily in copying equipment and copying exactly the same works that were already copied by others.
But this whole business model of being able to create cheaper copies than those interested in actually owning a copy is shaky, because now the investment necessary to create a single copy is less than go out shopping for a copy. Copying equipment is cheap, $100 will be sufficient, and can be used for as many works as one likes. Every copy can be a master copy. The big price advantage of the guys with the copying machines is gone. And thus also the main income stream for creators of copyable works breaks down. They had a quite strong negotational position as long as there were only a few entities able to create affordable copies, because they could sell exclusive copyrights to only one of them and were able to police all the others trying to create unlicensed copies. Now they have to basicly negotiate with each single person interested in a copy, because each person can create the copy for themselves, and policing unlicensed copies is nearly impossible.
It might be, that the business model of creating an easily copyable work and then selling as many copies as possible is gone forever, because creating copies itself is no longer a business model. There is no compelling reason anymore for the consumer to have the act of copying done by someone else, because everyone can create perfect copies for cheap.
Actually, here's another idea for where at least a part of those 8 billion are coming from. Now probably none of them accounts for 8 billion by itself, but I do believe it adds up.
1. Just the economy and more importantly how it impacted culture. In 1999 it was in the middle of a bubble, and everyone who got some of that money was flaunting it somehow. Buying stuff to show you can was expected.
Nowadays we're still on the tail curve of a depression, where a bunch of people lost their homes, unemployment is still very high, a bunch of people ARE having less disposable income (the median family income didn't follow the GDP per capita, so pretty much everyone south of the median is getting shafted) and most importantly this creates uncertainty for the future. It's looking like a lot less of a good idea to blow all your money on entertainment and luxuries when you're not sure if next year you'll be able to afford the essentials (medical care included) and/or keep your home.
A bunch of other industries are feeling the same pinch, so I fail to see why the RIAA would think they're exempt from it and should see the same income as at the apex of a bubble and of economic optimism, if it weren't for those pesky pirates.
2. Less free time for that entertainment. We just had a front page article yesterday about how overtime demanded is steadily climbing.
3. Competing with other forms of entertainment. You can see the movie industry and TV having the same problem. Less people are going to the movies when they can play WoW or TOR or whatever for a month instead. And it's not just games. Social networks for example also sink a heck of a lot of the time left after that overtime.
It's stuff that was still regarded as (borderline) stuff for socially dysfunctional nerds in 1999. The idea that if you play Ultima as an adult you're probably one of those 40 year old virgins living in mom's basement was flung around by many a lot more seriously than nowadays.
Internet access also was spotty and slow, and frankly there wasn't all that much to do on the Internet, compared to nowadays.
The whole culture was more favourable to sitting and listening to a record as a way to pass the time, while nowadays it's at best something you use as background music while doing something else. And not just while you sit at home but also...
3. Share of the MOBILE entertainment. Frankly there was not much more you could do in 1999 on the road than listen to some music on your walkman or CD player or, if you were really high tech, MP3 player. Sure, you could use a gameboy, but see again, a lot saw that as stuff just for kids, and it also didn't help that most of those mobile games WERE made for kids.
There was a lot of music bought just to have something to listen to while you're on the bus or train or plane.
Nowadays even kids have phones capable of doing much more than that, including again Internet stuff. That's got to mean less albums you need to buy just to keep from being bored out of your skull on the road.
Which in turn sets the stage for the next point...
4. A different culture among the youth. Which, honestly, was always a big target demographic there.
It used to be that music was a major topic in high school, and buying the same records that the rest of the lemmings were persuaded by marketing hype to buy, was the way to fit in. There were a lot of Britney Spears albums (chosen as an example because she had her first album in 1999) and whatnot bought just to fit in with the cool kids who were listening to Britney Spears.
And don't kid yourself if you were all counter-culture, the same applied there. There were a lot of The Cure and Sex Pistols albums sold to kids who wanted to fit in with the goth and respectively punk gang. We were so independent and defying convention and totally unlike the rest of the sheeple, and whatnot... that we bought the exact same clothes, music, etc, as a group we were trying to fit in. Yeah, different and independent my ass.
Nowa
A polar bear is a cartesian bear after a coordinate transform.
I'll tell you how to increase income amongst the unemployed and shit-workers! ,thieving music industry and it languishes.( I wish)
Quit buying music altogether. Sound counter intuitive?
Here's how this works so you can imagine how many can prosper:
Everyone finally gets a blast of intelligence and quits funding the corrupt
Musicians promote themselves by distributing their recordings, free, take over their own publicity via modern resources (internet).
Musicians make money playing live. the biggest moneymaker, this time tour is funded and profited by musician not industry.
Imagine talented musicians rising like cream for all to see rather than getting the powdered creamer from industry picks.
Picture prices for live shows dropping with no industry cut. Pepperland will fill with music again if you only get rid of the Blue Meanies.
There is no need for a parasitic, unwelcome, unneeded industry for this scenario and so many MORE people will find a new avenue of income doing what they actually LIKE to do. The world needs a bit more of that, don't you think so.
The industry, just let it die. Quit buying music. Music is free (intangible). Performance/labor is paid (concrete).
Wanna see why musicians need the industry like worms need jet engines? http://www.negativland.com/albini.html Educate yourself and understand the true nature of the industry we fight to kill.
*Repent!Quit Your Job!Slack Off!The World Ends Tomorrow and You May Die!
So, claims are regularly made suggesting that the music industry is failing, usually followed by claims that tougher laws are needed to protect the hard working people in the music industry.
Small problem - it's not true.
The music industry is not in as bad a situation as claims would suggest. Here are some interesting statistics:
Music publishing revenues are on an upward trend.
Worldwide Music Publishing Revenues (2006 - 2011)
http://grabstats.com/statmain.asp?StatID=69
$8.0 billion (2006)
$8.3 billion (2007)
$8.6 billion (2008)
$8.9 billion (2009)
$9.1 billion (2010)
$9.4 billion (2011)
Live music (concert) revenues are on a upward trend.
Worldwide Live Music / Concert Revenues (2006 - 2011)
http://grabstats.com/statmain.asp?StatID=70
$16.6 billion (2006)
$18.1 billion (2007)
$19.4 billion (2008)
$20.8 billion (2009)
$22.2 billion (2010)
$23.5 billion (2011)
The entire industry's revenues (*) are on an upward trend.
Worldwide Music Industry Revenues (2006 - 2011)
http://grabstats.com/statmain.asp?StatID=67
2006 ($60.7 billion)
2007 ($61.5 billion)
2008 ($62.6 billion)
2009 ($65.0 billion)
2010 ($66.4 billion)
2011 ($67.6 billion)
* The "entire industry" is defined as "Revenues are for record labels, music publishers, recording artists, performing artists, composers, concert venues and merchandise, companies; includes revenues from sales of physical recordings, digital music services (online and mobile), music publishing and live music."
What is most interesting about these numbers is it supports what I have felt for a long time - the major players in the music industry have realized that CD sales are nice but that's not how to get rich - the big money (almost 2.5 times the money...) is in concerts. That is why acts like 'N Sync and Britney and Beiber and U2 and Lady Gaga and damn near everyone are regularly on tour. They've realized that people are spending more and more on actually going to the concert to experience the music. They realized that the be financially successful means touring a lot. CD sales makes one wealthy but a concert tout makes one rich.
These numbers show that the music industry isn't failing. It isn't even shrinking. The _industry_ is growing, across the board. Yes, there are individual companies that might be suffering and there are individual bands that are suffering and there are probably specific geographic regions that are suffering but the industry, as a whole, is thriving - it is growing.
One thing I do agree with the music industry, however, is that the internet is a big reason for this - we just disagree on the direction their profits are headed...
When I grew up, everyone I knew as music mad, we spent every penny we could on vinyl and later CDs. It was the soundtrack to our lives and it meant something to us. We bought the best HiFi we could afford to play it and would just sit in each others bedrooms playing our new stuff and reading lyrics etc.
Fast Forward to 2012. All my nephews, nieces and they friends barely care about music. It's just something they dance to in clubs or listen to on a tinny mobile phone speaker. None of them have a HiFi, none buy any music, none care. As someone said, in the rare case they want to hear a track, they'll fire it up on YouTube.
Most older people have all they want, having bought the same albums on LP, CD and maybe SACD. They rarely buy anything new.
IMO, the reason music sales are down is because the world has changed and NOT because of piracy. Music habits have changed.
I want a list of atrocities done in your name - Recoil