"Don't I automatically own the copyright to anything I write? If that is so, then would having a link to any web-page that you didn't write yourself be an infringement? Are links generated by search engines now illegal in Australia?"
Doubtful. The news.com.com.com article goes a little more in to this. He tried the "google defense" and was rebuffed. While it's clear that many Slashdotters do not see the difference between operating a general-purpose search engine and operating a site with the express purpose of providing links to pirated MP3s, the justices in this case did.
"most of us just have a problem with it being taught as a fact instead of a theory."
Congratulations... you're officially the millionth person to misunderstand the use of the word "theory." Those who would like to read along can type "dict theory" into their Firefox URL bar:
The "theory" in "theory of evolution" refers to the first definition of the word:
a coherent group of general propositions used as principles of explanation for a class of phenomena: Einstein's theory of relativity.
A lot of people are tripped up by the second definition of the word:
a proposed explanation whose status is still conjectural, in contrast to well-established propositions that are regarded as reporting matters of actual fact.
When people are boggled by the apparent contradiction when it's explained "evolution is both a theory and a fact," it's because they're trying to apply the 2nd definition of the word "theory." If that's what were being used here, then yeah, it'd could be seen as contradictory. But it is vital to understand that the word "theory" is being used per the first definition, as in "theory of gravity" et al.
Yeah, the English language can be confusing at times; it would have been better if that word didn't have multiple definions, but it does. I hope this has cleared things up for you. Evolution is both a theory and a fact.
"Yes, their margins are "low" at 2%/8%, but low margins does no refute a claim that they are making a "huge profit." Using your reference, warner claimed $3,500,000,000.00 in revenue last year, or (on a 2% profit margin) $70,000,000.00 in profit."
Excellent point. $70MM in net income is an awful lot. But, it's all relative. Apple Computer -- and they're the "good guys" -- made $2B in net income last year and hit a net margin percentage of 10%.
"On a buisiness that focuses on volume, margins don't need to be high. Look at wal-mart."
You're 100% correct. The record industry has been able to do relatively fine on bottom-scraping net margins for pretty much forever. To your point, Wal-Mart managed to hit only 3% net margin last year.
My point is this: "the record companies are insanely profitable" is, as a general statement, a Slashdot meme that's not supported by the facts. Does Warner Records under-pay its artists? Yeah, I think that's a given (find me somebody making under $200K a year who doesn't think they're underpaid). But Warner had only two points to play with last year... if they'd paid more royalties at a cost of two points to their bottom line, they'd be under water.
"It all depends on whose numbers you take. The margins for a label for the artist will appear low because the label claims a lot of expenses that are bullshit. It will pay itself $20,000 for the recording and mark that down as an expense. Pay itself 150,00 for promotion ditto with the fucked up accounting then it will pay the artists ect.. and int he end your left with 2-8 % but it managed to be the lions share of the expenses so in reality it made a lot more money but defered it to another portion of the label. Movies do the same stupid shit with fucked up accounting."
Good points (record labels are masters of funny accounting to avoid paying their artists) but keep in mind that the 2% net margin number I mentioned is what they reported to the street. There's absolutely no benefit to under-reporting your profitability when you're a publicly traded company. Your company's valuation is fundamental to your business.
I don't think you were going this far, but if part of accepting the "record companies make insane profits" theory requires belief that they under-report to their shareholders, then it's time for a bit of Occam's Razor or, as John Galt put it, time to check your assumptions.
By the way, I mentioned that Warner Records posted a 2% net margin last year. By comparison:
Apple computer: reported 10% net margin last year
Logitech: also 10% net margin
Novell: 1% net margin
So, I guess one way to spin it is that Warner is hugely profitable because their net profit margin percentage last year was twice that of Novell. But Logitech and Apple left both in the dust.
"if the RIAA is not going to pay the old kinds of royalties, there is no reason the record labels can not walk away. they could form a new organization or figure out some other method of making their money."
Remember that we're talking about the mechanicals here; the minimum statutory rate paid to composers and lyricists. Record labels have always had the opportunity to pay songwriters whatever they see fit, as long as (generally speaking) it doesn't fall below the statutory mechanical rate.
I've heard that many indie labels do pay performers higher royalties than the big labels (perhaps as an incentive for the performer to sign with the smaller label rather than going with a larger label with a bigger promotional machine); perhaps that's the case with composers and songwriters, too.
At any rate, also remember that the RIAA is just a trade group. One owner of an indie label (one of the aforementioned folks who prided himself on paying higher royalties than the big labels) once told me "I'm a member of the RIAA, but the RIAA does not speak for me."
That's another venerable Slashdot meme. Warner Music Group netted a 2% profit margin and an 8% operating margin last year. This isn't new -- nobody's going to believe this, but the record industry has always generally had shitty margins. The only record companies that typically do well are the media conglomerates who happen to own a record label; they can absorb bad performance into the company's overall numbers. But the record industry has always been, and probably always will be, a hugely speculative business.
"Because, when you get right down to it, someone barely paying you for your work is better than someone NOT paying you for your work?"
You've nailed it. The Grand Unified Slashdot Music Industry Mantra (GUSMIM) appears to be:
"the record industry's business model is dead. Someday all the current and aspiring artists will wake up and realize that they should just record, mix, engineer, promote and sell their own work, give away their music for free, and just be happy with the money they make on t-shirts and live performances. If they don't have the cash, time, or skillset to do all this, well then they're not suited to being musicians, and if they're too concerned about actually making money rather than the pure bliss of giving their work away for free so that everybody can enjoy it, why then they are businesspeople, not musicians."
Slashdotters have been claiming that the record industry is dead for, what, ten years now? But as you've pointed out, they've adapted to new distribution technologies, and succeeded in having the laws changed to fit the new technologies (just as laws change to adapt to technology in lots of other fields).
On a related note... how many of you whom are getting on the RIAA's case about trying to reduce royalties are also big fans of allofmp3.com? Raise your hands! Yup, thought so. I think the mantra can be amended to "screwing the musicians is OK when I do it, but not when others do."
"I think they forgot, "...only we have unlimited play money we can allocate toward each search phrase, so we can ensure Google ads always beat out the paid ads from the unwashed masses.""
This is referred to as "opportunity cost." In this case, if they take an ad spot, they lose the opportunity to sell that ad spot to somebody else. If they, for example, get a discounted price of $20 for internal accounting purposes, and it would have sold at $100 on the open market, that's an $80 opportunity cost.
All companies, big and small, in all industries, deal with opportunity costs like these. I help run a company that makes computer peripherals, and we sell our products to our employees and channel partners at 50% off. We can only build so many of them (assembly lines are a resource that must be allocated), and each product that we sell to our employees is a product for which we could have made more money selling at retail.
If anybody reading this thinks for a bit, I'm sure it will be trivial how the concept of the "opportunity cost" affects you, either at your job, or in your personal life.
"We know from simple division that even among iTunes Music Store customers, the average number of purchased tracks is 21. We also know that the number of illegal downloads continues to outnumber legal downloads by 40 to 1. (Both of these stats come from previous - and recent - stories posted here.) People continue to fill up their iPods with music they have obtained elsewhere (legally and illegally). If such a small percentage of music sales can be deemed an "overwhelming success", then what would constitute failure?"
If I were a music industry executive (knock wood), I don't know if I'd use that ratio as a primary metric. There'll always be lots of people who will choose the "free" route. I think that what's fundamentally more important to a record company (and their stockholders, if they're public) is their sales and margins today vs. previous years, and whether their growth is on track. Reducing piracy (either with the carrot or the stick) may be a secondary goal, but their primary goal is to make money. Last quarter Warner did $731MM worth of business, and $100MM of that was digital sales (a new milestone for them). But their total business was down 10% from the previous year. Whether that 10% loss was due to piracy, I don't know -- lots of Slashbots say that "piracy doesn't hurt sales; it actually INCREASES sales by introducing people to more new music" but I'm not sure I buy that.
"Many people think the music industry's run as it currently exists is simply over. It does happen. Industries come and go as times change; they are not static things."
Many people think of the music industry as the Titanic; they've hit that big ol' P2P iceberg of doom, they're taking on water, and Jack Dawson's penning that strongly worded letter to the White Star line. I think of it as more like the QE2. It takes a lot of time and energy to turn that mofo around, but they're doing it. You made some very astute predictions about how the business of making money at music will change; I think you've nailed it. But my bet is that Warner Records will make in the ballpark of $731MM in Q3 next year, and in Q3 2015, and in Q3 2025.
That's some really interesting data, thanks. I think I'd fall into that group as well... if I were at a festival and I saw a CD of local bands with which I was not familiar, I might pop at $5, but no higher.
But the counterpoint is that the market as a whole isn't unknown local bands sold at festivals. Stuff by artists you know and respect is more desirable; while $5 is my top end for a compilation of unknown artists, I'll pay $10 for the next album by one of my favorite bands. In short, "$5 is the right price for compilations of unknown local bands" != "$5 is the right price for mainstream music."... although you probably weren't trying to stretch that point.
If the music market had unit elasticity (where demand scales 1:1 with price), then it would be just so easy: the record companies could just lower their prices to $0.25 per track and make 4X the number of sales (although their net profit would go down, due to some fixed costs that would not drop by 75% if the retail price did). But unit elasticity is all but unknown in the real world, and the record companies don't have much room to experiment: Warner Music posted their numbers last month, and they made something like 1% net profit over the year. I can understand if they're gunshy about experimenting below $0.99.
Kudos to you for supporting emusic. They've seen some success lately and I'd really like to see them do better, so they can convince more artists and labels to get on board.
Your "then / now / forever" observation applies to countless products in my world. I will never buy an SUV that costs more than $40K; nor will I buy a Hugo Boss suit (not than I'm against nice suits; I simply prefer Armani), nor an HP computer, and I will not even buy breakfast cereal -- all for the reasons you mentioned. Yet all of those industries are doing just fine. They simply don't see me as a customer. Same thing with the record industry -- there will always be folks who would never buy a CD for $15 or a track for $0.99. I think that the record industry is fine with letting folks like you go, just as the luxury SUV and breakfast cereal markets are presumably OK with me not being in their base of prospective customers.
"The problem is that 0.99 is not a fair price. Its easier for them to distribute yet the price per song is still higher than just buying the album. If an album has more than 15 songs on it, you're losing money. Forget about "boxed" sets that have ~100 songs on them but retail for ~$40."
Volume incentive pricing is hardly new; it's not "fair" (if I understand your meaning) that a four-pack of bottled water or toilet paper costs much more per unit than a 12-pack. Part of the disparity is often because there's a lower net cost per sale per unit in larger packaging, but the big reason is that the vendor gets more money from you that might otherwise go to a competitor (ie. you might otherwise buy four bottles of water from their competitor next week, so they'd rather sell you the 12-pack and keep you off the market for three weeks). If this concept is actually new to anybody, check the "price per ounce" sticker that many supermarkets provide; note that the larger version of something is almost always cheaper by unit.
We should not expect the music industry to work any differently. If they want to offer an incentive for buying an entire CD, then they're simply following the same practice that countless other industries do. And there's no obligation to set individual track pricing based on (price of CD / tracks per CD). If that pricing works out to be the optimal point on the sales curve, then great. But often it won't.
The ability to individually purchase any track on a CD is something that simply did not exist 10 years ago; for me it's been a money saver. I typically do not want an entire CD; if I can get all I want from a CD for three bucks instead of $14, then game on. Even if the net cost to me per track were less than $0.99 if I clicked the "buy album" button, it's not a good value for me if I don't want all the tracks.
"Wake up RIAA and realize that the price of music drives piracy."
Pricing drives shoplifting, auto theft, and lots of other crimes. Businesses can take this into account, but no matter what industry you're in, there's always going to be a certain percentage of people who will try to help themselves to your product for free and use pricing as a rationalization.
"People will always have an incentive to crack DRM if they can't get the music for a fair price legally."
Agreed, but for many people, "fair price" has been sliding downward so that it's below whatever price the industry sets. Remember six years ago when CDs were $20 and online tracks were $3 and hard to come by? People justified P2P usage back then because CDs were so expensive and legit online tracks were expensive and offered little selection. Today, new CD releases are south of $15 and selection of online music is plentiful at $0.99 and below. Yet this price is still not "fair." For many people, it never will be. Those people likely aren't high on the record companies' target audience... unless you're counting lawsuits.
"I imagine the music industry is scared to death of sliding music prices, even though that's where it's going to head eventually. There is some point between "overpriced" and "free" at which both consumers and most artists will be happy."
...and the industry has found that at $0.99. The iTMS has been an overwhelming success, despite the fact that everybody on Slashdot hates it because the pricing isn't "fair" and because the product is DRM-laden.
You are not going to believe this, but if online music pricing dropped to $0.80, $0.70, or even $0.50, I would not buy more. I buy all the music I want online, and $0.99 is not a burden to me. It's conceivable that I'm the only consumer on the planet for whom there's no elasticity between $0.99 and $0.50, but that's highly unlikely. Pricing theory is all about finding that point on the curve that makes the most profit, even if it means that you're limiting your potential customer base.
"Those artists who expect to become millionaires from a popular record (and who don't tour), are going to be sorely disappointed. Those artists who are happy making a decent living, and who actually produce good music, will prosper."
This sounds a lot like many arguments I hear for lower music prices which end with some form of "artists will just need to accept their new place in society." Why should they want to do that? Many people would trade fame for money, but many would not. If I offered to make you more well-known but your salary would have to drop by $20K a year, would you do it? Do you think everybody would take me up on my offer?
"Selling a couple xian tunes w/o drm isn't going to exactly cause a wave of common sense to break out. Does anyone actually listen to this crap?"
Norah Jones has had a couple of multi-platinum albums in the past five years. She's a bona fide star. Relient K are one of those "crossover" Christian bands that have managed to release three consecutive gold albums. By the way, I found this data with about two minutes of Googling.
Per Ars Technica, these artists were picked because their audience skews older. P2P usage skews younger. The Slashdot demographic is also younger, so most people reading this see the world as one where everybody uses P2P to get their music and nobody listens to lame artists like Norah Jones, but EMI is apparently looking at the big picture.
"I have good friends who are musicians, and they are seeing huge declines in their incomes from music sales, even though they seem to have larger fan bases and draw greater crowds at concerts."
Cue the "we don't owe your friends a living" straw man builders in three, two, one...
"While most of us here at/. buy our music legally, this is not the case for the majority of people with MP3 players and digital music collections."
That doesn't strike me as correct, although I don't have any hard data to back it up, either. I'd say that a higher percentage of Slashdotters than the average populace do indeed fly the Jolly Roger with pride. At the same time, MP3 player ownership is so pervasive nowadays that the percentage of owners who stick to legit content is probably higher than many Slashdotters think. Hardcore pirates tend to skew to male, under 30, and when they see a 50-year-old with an iPod, the typical assumption may be that they pirated most of their content, but I'm not so sure. FWIW, I'm slightly older than the typical Slashdotter. My iPod has some 1,800 tracks on it. A few are rips from friend's CDs (which is indeed technically illegal), but the rest are either from my own CD collection or purchased from the iTMS. I have never used a P2P app to pirate music.
"Wasnt there a little girl who got sued over dowloading music?"
Yup, because her mom had put her ISP bill in her daughter's name. Likewise, if you saw fit to sue another business, and the business owner had put the business in their dog's name, then you'd have sued a dog. You would not have deliberately sued a dog, and the RIAA did not deliberately sue a minor. In many other cases, the parent has been sued or threatened due to the downloading activity of a kid in the house.
"Didnt her parents have to pay some rediculous settlement?"
I believe her mom settled for the standard $3K, even though the girl made some sort of public apology. She (along with some other kids whose families were sued) later appeared in a Pepsi ad during their first iTunes promotion. Pepsi paid her well over $3K, so it's a happy ending of sorts.
I'm enjoying the heck out of the fact that your post was modded "informative."
If you (or anybody else reading this) would like to know more about criminal copyright infringement, you can read S 506 of copyright law, "criminal offenses," right over here.
A good way to learn about actual cases of criminal copyright infringement is to google on "criminal copyright infringement." Or, just keep reading Slashdot... whenever somebody gets jail time for an extreme case, it's usually covered in the YRO section.
"I think the point was that we the common folk get to surrender our life savings, educations, cars homes, etc., while the CEO gets off just giving his kids a stern talkning-to (okay, he's a CEO so it qualifies as worse that the talking-to I got as a kid). "
I am not sure I understand. Cases of false identification notwithstanding, I believe it's the record industry's intention to go after the file-sharing "whales," folks who have in excess of 1,000 songs in their share directory. The article doesn't go into specifics, but the impression I got was that his kids just downloaded a few tracks. I don't think the data's there to assume otherwise.
Anyway, I wasn't aware that anybody has lost their house as a result of paying a record industry settlement. Do you have a citation? I thought the settlements were on the order of around $3.5K.
Yup. Just compare the Slashdot zeitgeist on whether we should respect the rights of OSS programmers who release stuff under the GPL, vs. whether we should respect the rights of musicians who release music for sale.
If the notion that we should give each equal respect -- by that, I mean honoring the terms under which they offer their work -- is just plain nonsensical to you, then there ya go. Both fluch and Orwell are right.
Agreed with your points (the list was my summary of popular opinion around here, not a reflection of my own views). I think it's a common belief around here that software developers (in particular, OSS developers) should have their rights respected to a greater extent to artists or record companies, apparently for the primary reason that we have empathy toward OSS developers, whereas we don't feel that much of a connection with people in the music industry (no matter what side of the mixing board or mahogany desk they're on). But as you put it, that's a really dangerous slippery slope.
When the focus is on record company management, rather than talent -- there's a similar slippery slope. It may seem perfectly reasonable to ignore somebody's rights once they make over a certain arbitrary amount of money; I think this is because the perception is that anybody who makes more than $BIGNUM is likely greedy, or undeserving of that wealth, or perhaps would not miss it. But I'm a big believer in karma here... my definition of $BIGNUM may be completely different than yours, and if I base my decision whether to violate somebody's rights based on my perception of their wealth, there might be somebody out there who feels perfectly at ease violating my rights because my wealth is higher than their arbitrary definition of $BIGNUM.
"As to P2P filesharing, I'd take the probably here unpopular view that it is a plain violation of the rights of the artists and/or recording companies."
I think that's a mischaracterization. I'd wager that even the most rabid P2P enthusiasts recognize that copyright law exists and that making unauthorized copies via P2P is a violation of same; the common view is that we don't need to pay attention to those rights for one or more reasons:
Artists simply do not deserve the same level of respect that is owed to, say, an OSS developer who releases code under the GNU license. ie, all artists are equal, but some are simply more equal than others.
Artists already make enough money. P2P lets you even the score a bit.
Artists don't make enough money, because the record companies don't let them have any. That is, this is an acceptable exemption from "two wrongs don't make a right."
Wouldn't have bought it anyway. Since it's so readily available via P2P, why would I?
Most of the money goes to various record company employees rather than the artist, not a single one of these employees had any effect on the production of the music. The record company isn't needed any more. In fact, I regularly produce, engineer, master, distribute and promote hit music in my basement.
If the artists are in it for the money, they're businesspeople, not artists. I don't owe them a living.
I instead choose to fund artists by going to concerts and buying t-shirts. This means that I've gone to 50 concerts this year and bought 150 t-shirts. It also means that I have to restrict my music piracy to only those bands and artists who play in my area and/or sell merchandise.
I may have missed a few, but I think that covers about 90% of the populace.
Not quite -- for making unauthorized copies available. It's just two words, but an important distinction. If the library made their own copies and sold or lent them, there'd be an issue. But (much to the RIAA's chagrin, I'm sure), you can generally lend, sell, trade, etc. originals as much as you like. I know that many people reading this will say "what's the big deal if I lend the CD I bought to my friend Billy, vs. burning him a copy?" but the law has countless examples of many seemingly meaningless distinctions.
"FUCK! Quickly! Close down all those public libraries! They're "making available" all those copyrighted books! Anyone could take one home and photocopy it, scan it, or even copy it by hand."
You're being sort of silly here, hopefully on purpose. Stores "make available" books and CDs, as well.
If you borrow a CD from the library, take it home, rip it, and put it in your share directory, then you're running a significant risk of being your very own John Doe at some point down the road, because the way the record industry sees it, somebody might use a P2P program to download it from you (thus making their own unauthorized copy). But the library would not be liable.
"There isn't a single unlicensed track anywhere on my iPod. Not even one unauthorized sample. If the music cartels start charging me for music that I haven't downloaded, ripped, or otherwise pirated, then I'm going to have to stop spending money at iTMS and my local funky CD shop, and treat that "royalty charge" as a blanket license to their entire library. I've never waded into the content-piracy cesspool so far, but I sure as heck can't afford to pay for music twice, so that may be where I have to go."
I think there's a lot of misunderstanding. If, in the unlikely event that Universal gets Apple to pay them a license fee for each iPod sold, that charge will not be passed along to you. Market demands, pricing theory and elasticity are bigger drivers here. The next generation of iPods will still be priced at $99, $129, $149, $299 or what have you -- if they pay, say, a $0.50 fee per player to Universal, they're not going to add $0.50 to the retail price.
It's likely that Apple already pays half a dozen licensing fees for each iPod it sells. Lots and lots and lots of the items that we buy causes the manufacturer the pay a licensing fee to somebody, somewhere. That THX logo on audio gear? No, it wasn't free for the manufacturer to put it on, and the fact that you indirectly paid for it absolutely does not give you the right to, say, pirate films from LucasFilm or games from LucasArts. Closer to home, that "Made for iPod" logo you see on iPod accessories costs the accessory manufacturer somewhat dearly, and that money goes to Apple. But, again, it doesn't give you the legal or moral impetus to pirate OSX or steal an iPod.
Thus, it's a really weak stretch to assign moral equivalence to Apple potentially paying a license to Universal, and piracy of an "entire library" of music. If you really would rather have some music for free rather than pay for it, then that's great -- whatever you feel comfortable with. But you don't need an excuse to do it, and some licensing fee paid by Apple certainly wouldn't be a good excuse anyway.
"They sue, we move to dismiss: "We've already paid for the licence to do this your honour"
Bad logic. The next iPod you buy will likely be priced at $299 or $249 or some other round number; if Apple pays a buck in licensing fees to Universal or some other outfit, they won't add a buck to the retail price.
Apple recently paid Creative $100MM to license the Zen patent; that's likely paid for in one way or another by future iPod sales; and I'm sure that there are other licensing fees that Apple must pay per piece sold. And, the next PC you buy might have, say, some Adobe software on it for which the PC vendor might have paid Adobe a buck or so.
Yet none of these facts give you the legal or moral right to help yourself to a free Sound Blaster, or help yourself to all the Adobe software you want.
By all means, pirate all the music you want if that's your thing -- whatever works with your moral compass. But it's intellectually dishonest to excuse this with the fact that some manufacturer may have paid a license fee to a record company when you bought some device.
"People are paying for AllOfMP3.com right now (when they could get it for free on P2P), a similarly priced legit store would make a fortune for the RIAA."
I don't follow. Mechanicals alone are around $0.07 a track by law, and I think that the artist should get at least something. Even if the record label didn't pay the performers at all (perhaps using the common rationale that musicians should be doing it for the love of the art, and not financial reward), it's hard to make money selling tracks at $0.10 when your mechanicals might be more than that. When you sell for less than the cost of production, you can't make that back on volume.
It's clear that as a group, Slashdotters profess a greater knowledge of the supply/demand curve, production costs, and other grim realities of the recording industry, than the record industry itself. This raises the question: why don't you -- or anybody else reading this -- do just that? Start your own online record store, sign artists, pay for production and marketing, and sell albums for a buck each or ten cents a track, just like allofmp3. You said that the existing record companies would make a fortune doing that. Why not make that fortune yourself? The solution is quite clear as day to you -- I think you just need to take the initiative to make it happen.
On a related note, do you have any insight into why Magnatunes isn't more popular? They sell albums for as low as $5, which is almost a third of what they cost in stores. They pay their artists half of the sale price... do you think that's their mistake? Do you think they should go the allofmp3 route and pay artists nothing, then sell albums for $2.50 each? Do you think that Magnatunes are simply being greedy? Could they sell those albums for $1.00 each if they really wanted to?
Because record companies are ultimately in competition with each other, as well as in competition with other sources of entertainment. There are hundreds of labels who are members of the RIAA, and thousands more which are not.
That's why CD prices have been in freefall over the past several years. $18 - $20 CDs were pretty common five years ago; the average price of a new CD is now sub-$14.
Slashdot Mirror
"Don't I automatically own the copyright to anything I write? If that is so, then would having a link to any web-page that you didn't write yourself be an infringement? Are links generated by search engines now illegal in Australia?"
Doubtful. The news.com.com.com article goes a little more in to this. He tried the "google defense" and was rebuffed. While it's clear that many Slashdotters do not see the difference between operating a general-purpose search engine and operating a site with the express purpose of providing links to pirated MP3s, the justices in this case did.
"most of us just have a problem with it being taught as a fact instead of a theory."
Congratulations... you're officially the millionth person to misunderstand the use of the word "theory." Those who would like to read along can type "dict theory" into their Firefox URL bar:
The "theory" in "theory of evolution" refers to the first definition of the word:
A lot of people are tripped up by the second definition of the word:
When people are boggled by the apparent contradiction when it's explained "evolution is both a theory and a fact," it's because they're trying to apply the 2nd definition of the word "theory." If that's what were being used here, then yeah, it'd could be seen as contradictory. But it is vital to understand that the word "theory" is being used per the first definition, as in "theory of gravity" et al.
Yeah, the English language can be confusing at times; it would have been better if that word didn't have multiple definions, but it does. I hope this has cleared things up for you. Evolution is both a theory and a fact.
"Yes, their margins are "low" at 2%/8%, but low margins does no refute a claim that they are making a "huge profit." Using your reference, warner claimed $3,500,000,000.00 in revenue last year, or (on a 2% profit margin) $70,000,000.00 in profit."
Excellent point. $70MM in net income is an awful lot. But, it's all relative. Apple Computer -- and they're the "good guys" -- made $2B in net income last year and hit a net margin percentage of 10%.
"On a buisiness that focuses on volume, margins don't need to be high. Look at wal-mart."
You're 100% correct. The record industry has been able to do relatively fine on bottom-scraping net margins for pretty much forever. To your point, Wal-Mart managed to hit only 3% net margin last year.
My point is this: "the record companies are insanely profitable" is, as a general statement, a Slashdot meme that's not supported by the facts. Does Warner Records under-pay its artists? Yeah, I think that's a given (find me somebody making under $200K a year who doesn't think they're underpaid). But Warner had only two points to play with last year... if they'd paid more royalties at a cost of two points to their bottom line, they'd be under water.
"It all depends on whose numbers you take. The margins for a label for the artist will appear low because the label claims a lot of expenses that are bullshit. It will pay itself $20,000 for the recording and mark that down as an expense. Pay itself 150,00 for promotion ditto with the fucked up accounting then it will pay the artists ect.. and int he end your left with 2-8 % but it managed to be the lions share of the expenses so in reality it made a lot more money but defered it to another portion of the label. Movies do the same stupid shit with fucked up accounting."
Good points (record labels are masters of funny accounting to avoid paying their artists) but keep in mind that the 2% net margin number I mentioned is what they reported to the street. There's absolutely no benefit to under-reporting your profitability when you're a publicly traded company. Your company's valuation is fundamental to your business.
I don't think you were going this far, but if part of accepting the "record companies make insane profits" theory requires belief that they under-report to their shareholders, then it's time for a bit of Occam's Razor or, as John Galt put it, time to check your assumptions.
By the way, I mentioned that Warner Records posted a 2% net margin last year. By comparison:
So, I guess one way to spin it is that Warner is hugely profitable because their net profit margin percentage last year was twice that of Novell. But Logitech and Apple left both in the dust.
"if the RIAA is not going to pay the old kinds of royalties, there is no reason the record labels can not walk away. they could form a new organization or figure out some other method of making their money."
Remember that we're talking about the mechanicals here; the minimum statutory rate paid to composers and lyricists. Record labels have always had the opportunity to pay songwriters whatever they see fit, as long as (generally speaking) it doesn't fall below the statutory mechanical rate.
I've heard that many indie labels do pay performers higher royalties than the big labels (perhaps as an incentive for the performer to sign with the smaller label rather than going with a larger label with a bigger promotional machine); perhaps that's the case with composers and songwriters, too.
At any rate, also remember that the RIAA is just a trade group. One owner of an indie label (one of the aforementioned folks who prided himself on paying higher royalties than the big labels) once told me "I'm a member of the RIAA, but the RIAA does not speak for me."
"Because they're making a huge profit?"
That's another venerable Slashdot meme. Warner Music Group netted a 2% profit margin and an 8% operating margin last year. This isn't new -- nobody's going to believe this, but the record industry has always generally had shitty margins. The only record companies that typically do well are the media conglomerates who happen to own a record label; they can absorb bad performance into the company's overall numbers. But the record industry has always been, and probably always will be, a hugely speculative business.
"Because, when you get right down to it, someone barely paying you for your work is better than someone NOT paying you for your work?"
You've nailed it. The Grand Unified Slashdot Music Industry Mantra (GUSMIM) appears to be:
Slashdotters have been claiming that the record industry is dead for, what, ten years now? But as you've pointed out, they've adapted to new distribution technologies, and succeeded in having the laws changed to fit the new technologies (just as laws change to adapt to technology in lots of other fields).
On a related note... how many of you whom are getting on the RIAA's case about trying to reduce royalties are also big fans of allofmp3.com? Raise your hands! Yup, thought so. I think the mantra can be amended to "screwing the musicians is OK when I do it, but not when others do."
"I think they forgot, "...only we have unlimited play money we can allocate toward each search phrase, so we can ensure Google ads always beat out the paid ads from the unwashed masses.""
This is referred to as "opportunity cost." In this case, if they take an ad spot, they lose the opportunity to sell that ad spot to somebody else. If they, for example, get a discounted price of $20 for internal accounting purposes, and it would have sold at $100 on the open market, that's an $80 opportunity cost.
All companies, big and small, in all industries, deal with opportunity costs like these. I help run a company that makes computer peripherals, and we sell our products to our employees and channel partners at 50% off. We can only build so many of them (assembly lines are a resource that must be allocated), and each product that we sell to our employees is a product for which we could have made more money selling at retail.
If anybody reading this thinks for a bit, I'm sure it will be trivial how the concept of the "opportunity cost" affects you, either at your job, or in your personal life.
"We know from simple division that even among iTunes Music Store customers, the average number of purchased tracks is 21. We also know that the number of illegal downloads continues to outnumber legal downloads by 40 to 1. (Both of these stats come from previous - and recent - stories posted here.) People continue to fill up their iPods with music they have obtained elsewhere (legally and illegally). If such a small percentage of music sales can be deemed an "overwhelming success", then what would constitute failure?"
If I were a music industry executive (knock wood), I don't know if I'd use that ratio as a primary metric. There'll always be lots of people who will choose the "free" route. I think that what's fundamentally more important to a record company (and their stockholders, if they're public) is their sales and margins today vs. previous years, and whether their growth is on track. Reducing piracy (either with the carrot or the stick) may be a secondary goal, but their primary goal is to make money. Last quarter Warner did $731MM worth of business, and $100MM of that was digital sales (a new milestone for them). But their total business was down 10% from the previous year. Whether that 10% loss was due to piracy, I don't know -- lots of Slashbots say that "piracy doesn't hurt sales; it actually INCREASES sales by introducing people to more new music" but I'm not sure I buy that.
"Many people think the music industry's run as it currently exists is simply over. It does happen. Industries come and go as times change; they are not static things."
Many people think of the music industry as the Titanic; they've hit that big ol' P2P iceberg of doom, they're taking on water, and Jack Dawson's penning that strongly worded letter to the White Star line. I think of it as more like the QE2. It takes a lot of time and energy to turn that mofo around, but they're doing it. You made some very astute predictions about how the business of making money at music will change; I think you've nailed it. But my bet is that Warner Records will make in the ballpark of $731MM in Q3 next year, and in Q3 2015, and in Q3 2025.
That's some really interesting data, thanks. I think I'd fall into that group as well... if I were at a festival and I saw a CD of local bands with which I was not familiar, I might pop at $5, but no higher.
But the counterpoint is that the market as a whole isn't unknown local bands sold at festivals. Stuff by artists you know and respect is more desirable; while $5 is my top end for a compilation of unknown artists, I'll pay $10 for the next album by one of my favorite bands. In short, "$5 is the right price for compilations of unknown local bands" != "$5 is the right price for mainstream music."... although you probably weren't trying to stretch that point.
If the music market had unit elasticity (where demand scales 1:1 with price), then it would be just so easy: the record companies could just lower their prices to $0.25 per track and make 4X the number of sales (although their net profit would go down, due to some fixed costs that would not drop by 75% if the retail price did). But unit elasticity is all but unknown in the real world, and the record companies don't have much room to experiment: Warner Music posted their numbers last month, and they made something like 1% net profit over the year. I can understand if they're gunshy about experimenting below $0.99.
Kudos to you for supporting emusic. They've seen some success lately and I'd really like to see them do better, so they can convince more artists and labels to get on board.
Your "then / now / forever" observation applies to countless products in my world. I will never buy an SUV that costs more than $40K; nor will I buy a Hugo Boss suit (not than I'm against nice suits; I simply prefer Armani), nor an HP computer, and I will not even buy breakfast cereal -- all for the reasons you mentioned. Yet all of those industries are doing just fine. They simply don't see me as a customer. Same thing with the record industry -- there will always be folks who would never buy a CD for $15 or a track for $0.99. I think that the record industry is fine with letting folks like you go, just as the luxury SUV and breakfast cereal markets are presumably OK with me not being in their base of prospective customers.
"The problem is that 0.99 is not a fair price. Its easier for them to distribute yet the price per song is still higher than just buying the album. If an album has more than 15 songs on it, you're losing money. Forget about "boxed" sets that have ~100 songs on them but retail for ~$40."
Volume incentive pricing is hardly new; it's not "fair" (if I understand your meaning) that a four-pack of bottled water or toilet paper costs much more per unit than a 12-pack. Part of the disparity is often because there's a lower net cost per sale per unit in larger packaging, but the big reason is that the vendor gets more money from you that might otherwise go to a competitor (ie. you might otherwise buy four bottles of water from their competitor next week, so they'd rather sell you the 12-pack and keep you off the market for three weeks). If this concept is actually new to anybody, check the "price per ounce" sticker that many supermarkets provide; note that the larger version of something is almost always cheaper by unit.
We should not expect the music industry to work any differently. If they want to offer an incentive for buying an entire CD, then they're simply following the same practice that countless other industries do. And there's no obligation to set individual track pricing based on (price of CD / tracks per CD). If that pricing works out to be the optimal point on the sales curve, then great. But often it won't.
The ability to individually purchase any track on a CD is something that simply did not exist 10 years ago; for me it's been a money saver. I typically do not want an entire CD; if I can get all I want from a CD for three bucks instead of $14, then game on. Even if the net cost to me per track were less than $0.99 if I clicked the "buy album" button, it's not a good value for me if I don't want all the tracks.
"Wake up RIAA and realize that the price of music drives piracy."
Pricing drives shoplifting, auto theft, and lots of other crimes. Businesses can take this into account, but no matter what industry you're in, there's always going to be a certain percentage of people who will try to help themselves to your product for free and use pricing as a rationalization.
"People will always have an incentive to crack DRM if they can't get the music for a fair price legally."
Agreed, but for many people, "fair price" has been sliding downward so that it's below whatever price the industry sets. Remember six years ago when CDs were $20 and online tracks were $3 and hard to come by? People justified P2P usage back then because CDs were so expensive and legit online tracks were expensive and offered little selection. Today, new CD releases are south of $15 and selection of online music is plentiful at $0.99 and below. Yet this price is still not "fair." For many people, it never will be. Those people likely aren't high on the record companies' target audience... unless you're counting lawsuits.
"I imagine the music industry is scared to death of sliding music prices, even though that's where it's going to head eventually. There is some point between "overpriced" and "free" at which both consumers and most artists will be happy."
...and the industry has found that at $0.99. The iTMS has been an overwhelming success, despite the fact that everybody on Slashdot hates it because the pricing isn't "fair" and because the product is DRM-laden.
You are not going to believe this, but if online music pricing dropped to $0.80, $0.70, or even $0.50, I would not buy more. I buy all the music I want online, and $0.99 is not a burden to me. It's conceivable that I'm the only consumer on the planet for whom there's no elasticity between $0.99 and $0.50, but that's highly unlikely. Pricing theory is all about finding that point on the curve that makes the most profit, even if it means that you're limiting your potential customer base.
"Those artists who expect to become millionaires from a popular record (and who don't tour), are going to be sorely disappointed. Those artists who are happy making a decent living, and who actually produce good music, will prosper."
This sounds a lot like many arguments I hear for lower music prices which end with some form of "artists will just need to accept their new place in society." Why should they want to do that? Many people would trade fame for money, but many would not. If I offered to make you more well-known but your salary would have to drop by $20K a year, would you do it? Do you think everybody would take me up on my offer?
"Selling a couple xian tunes w/o drm isn't going to exactly cause a wave of common sense to break out. Does anyone actually listen to this crap?"
Norah Jones has had a couple of multi-platinum albums in the past five years. She's a bona fide star. Relient K are one of those "crossover" Christian bands that have managed to release three consecutive gold albums. By the way, I found this data with about two minutes of Googling.
Per Ars Technica, these artists were picked because their audience skews older. P2P usage skews younger. The Slashdot demographic is also younger, so most people reading this see the world as one where everybody uses P2P to get their music and nobody listens to lame artists like Norah Jones, but EMI is apparently looking at the big picture.
"I have good friends who are musicians, and they are seeing huge declines in their incomes from music sales, even though they seem to have larger fan bases and draw greater crowds at concerts."
Cue the "we don't owe your friends a living" straw man builders in three, two, one...
"While most of us here at /. buy our music legally, this is not the case for the majority of people with MP3 players and digital music collections."
That doesn't strike me as correct, although I don't have any hard data to back it up, either. I'd say that a higher percentage of Slashdotters than the average populace do indeed fly the Jolly Roger with pride. At the same time, MP3 player ownership is so pervasive nowadays that the percentage of owners who stick to legit content is probably higher than many Slashdotters think. Hardcore pirates tend to skew to male, under 30, and when they see a 50-year-old with an iPod, the typical assumption may be that they pirated most of their content, but I'm not so sure. FWIW, I'm slightly older than the typical Slashdotter. My iPod has some 1,800 tracks on it. A few are rips from friend's CDs (which is indeed technically illegal), but the rest are either from my own CD collection or purchased from the iTMS. I have never used a P2P app to pirate music.
"Wasnt there a little girl who got sued over dowloading music?"
Yup, because her mom had put her ISP bill in her daughter's name. Likewise, if you saw fit to sue another business, and the business owner had put the business in their dog's name, then you'd have sued a dog. You would not have deliberately sued a dog, and the RIAA did not deliberately sue a minor. In many other cases, the parent has been sued or threatened due to the downloading activity of a kid in the house.
"Didnt her parents have to pay some rediculous settlement?"
I believe her mom settled for the standard $3K, even though the girl made some sort of public apology. She (along with some other kids whose families were sued) later appeared in a Pepsi ad during their first iTunes promotion. Pepsi paid her well over $3K, so it's a happy ending of sorts.
I'm enjoying the heck out of the fact that your post was modded "informative."
If you (or anybody else reading this) would like to know more about criminal copyright infringement, you can read S 506 of copyright law, "criminal offenses," right over here.
A good way to learn about actual cases of criminal copyright infringement is to google on "criminal copyright infringement." Or, just keep reading Slashdot... whenever somebody gets jail time for an extreme case, it's usually covered in the YRO section.
"I think the point was that we the common folk get to surrender our life savings, educations, cars homes, etc., while the CEO gets off just giving his kids a stern talkning-to (okay, he's a CEO so it qualifies as worse that the talking-to I got as a kid). "
I am not sure I understand. Cases of false identification notwithstanding, I believe it's the record industry's intention to go after the file-sharing "whales," folks who have in excess of 1,000 songs in their share directory. The article doesn't go into specifics, but the impression I got was that his kids just downloaded a few tracks. I don't think the data's there to assume otherwise.
Anyway, I wasn't aware that anybody has lost their house as a result of paying a record industry settlement. Do you have a citation? I thought the settlements were on the order of around $3.5K.
"Just some people are more equal than other."
Yup. Just compare the Slashdot zeitgeist on whether we should respect the rights of OSS programmers who release stuff under the GPL, vs. whether we should respect the rights of musicians who release music for sale.
If the notion that we should give each equal respect -- by that, I mean honoring the terms under which they offer their work -- is just plain nonsensical to you, then there ya go. Both fluch and Orwell are right.
Agreed with your points (the list was my summary of popular opinion around here, not a reflection of my own views). I think it's a common belief around here that software developers (in particular, OSS developers) should have their rights respected to a greater extent to artists or record companies, apparently for the primary reason that we have empathy toward OSS developers, whereas we don't feel that much of a connection with people in the music industry (no matter what side of the mixing board or mahogany desk they're on). But as you put it, that's a really dangerous slippery slope.
When the focus is on record company management, rather than talent -- there's a similar slippery slope. It may seem perfectly reasonable to ignore somebody's rights once they make over a certain arbitrary amount of money; I think this is because the perception is that anybody who makes more than $BIGNUM is likely greedy, or undeserving of that wealth, or perhaps would not miss it. But I'm a big believer in karma here... my definition of $BIGNUM may be completely different than yours, and if I base my decision whether to violate somebody's rights based on my perception of their wealth, there might be somebody out there who feels perfectly at ease violating my rights because my wealth is higher than their arbitrary definition of $BIGNUM.
"As to P2P filesharing, I'd take the probably here unpopular view that it is a plain violation of the rights of the artists and/or recording companies."
I think that's a mischaracterization. I'd wager that even the most rabid P2P enthusiasts recognize that copyright law exists and that making unauthorized copies via P2P is a violation of same; the common view is that we don't need to pay attention to those rights for one or more reasons:
I may have missed a few, but I think that covers about 90% of the populace.
"She's in trouble for "Making available"?"
Not quite -- for making unauthorized copies available. It's just two words, but an important distinction. If the library made their own copies and sold or lent them, there'd be an issue. But (much to the RIAA's chagrin, I'm sure), you can generally lend, sell, trade, etc. originals as much as you like. I know that many people reading this will say "what's the big deal if I lend the CD I bought to my friend Billy, vs. burning him a copy?" but the law has countless examples of many seemingly meaningless distinctions.
"FUCK! Quickly! Close down all those public libraries! They're "making available" all those copyrighted books! Anyone could take one home and photocopy it, scan it, or even copy it by hand."
You're being sort of silly here, hopefully on purpose. Stores "make available" books and CDs, as well.
If you borrow a CD from the library, take it home, rip it, and put it in your share directory, then you're running a significant risk of being your very own John Doe at some point down the road, because the way the record industry sees it, somebody might use a P2P program to download it from you (thus making their own unauthorized copy). But the library would not be liable.
"There isn't a single unlicensed track anywhere on my iPod. Not even one unauthorized sample. If the music cartels start charging me for music that I haven't downloaded, ripped, or otherwise pirated, then I'm going to have to stop spending money at iTMS and my local funky CD shop, and treat that "royalty charge" as a blanket license to their entire library. I've never waded into the content-piracy cesspool so far, but I sure as heck can't afford to pay for music twice, so that may be where I have to go."
I think there's a lot of misunderstanding. If, in the unlikely event that Universal gets Apple to pay them a license fee for each iPod sold, that charge will not be passed along to you. Market demands, pricing theory and elasticity are bigger drivers here. The next generation of iPods will still be priced at $99, $129, $149, $299 or what have you -- if they pay, say, a $0.50 fee per player to Universal, they're not going to add $0.50 to the retail price.
It's likely that Apple already pays half a dozen licensing fees for each iPod it sells. Lots and lots and lots of the items that we buy causes the manufacturer the pay a licensing fee to somebody, somewhere. That THX logo on audio gear? No, it wasn't free for the manufacturer to put it on, and the fact that you indirectly paid for it absolutely does not give you the right to, say, pirate films from LucasFilm or games from LucasArts. Closer to home, that "Made for iPod" logo you see on iPod accessories costs the accessory manufacturer somewhat dearly, and that money goes to Apple. But, again, it doesn't give you the legal or moral impetus to pirate OSX or steal an iPod.
Thus, it's a really weak stretch to assign moral equivalence to Apple potentially paying a license to Universal, and piracy of an "entire library" of music. If you really would rather have some music for free rather than pay for it, then that's great -- whatever you feel comfortable with. But you don't need an excuse to do it, and some licensing fee paid by Apple certainly wouldn't be a good excuse anyway.
"They sue, we move to dismiss: "We've already paid for the licence to do this your honour"
Bad logic. The next iPod you buy will likely be priced at $299 or $249 or some other round number; if Apple pays a buck in licensing fees to Universal or some other outfit, they won't add a buck to the retail price.
Apple recently paid Creative $100MM to license the Zen patent; that's likely paid for in one way or another by future iPod sales; and I'm sure that there are other licensing fees that Apple must pay per piece sold. And, the next PC you buy might have, say, some Adobe software on it for which the PC vendor might have paid Adobe a buck or so.
Yet none of these facts give you the legal or moral right to help yourself to a free Sound Blaster, or help yourself to all the Adobe software you want.
By all means, pirate all the music you want if that's your thing -- whatever works with your moral compass. But it's intellectually dishonest to excuse this with the fact that some manufacturer may have paid a license fee to a record company when you bought some device.
"People are paying for AllOfMP3.com right now (when they could get it for free on P2P), a similarly priced legit store would make a fortune for the RIAA."
I don't follow. Mechanicals alone are around $0.07 a track by law, and I think that the artist should get at least something. Even if the record label didn't pay the performers at all (perhaps using the common rationale that musicians should be doing it for the love of the art, and not financial reward), it's hard to make money selling tracks at $0.10 when your mechanicals might be more than that. When you sell for less than the cost of production, you can't make that back on volume.
It's clear that as a group, Slashdotters profess a greater knowledge of the supply/demand curve, production costs, and other grim realities of the recording industry, than the record industry itself. This raises the question: why don't you -- or anybody else reading this -- do just that? Start your own online record store, sign artists, pay for production and marketing, and sell albums for a buck each or ten cents a track, just like allofmp3. You said that the existing record companies would make a fortune doing that. Why not make that fortune yourself? The solution is quite clear as day to you -- I think you just need to take the initiative to make it happen.
On a related note, do you have any insight into why Magnatunes isn't more popular? They sell albums for as low as $5, which is almost a third of what they cost in stores. They pay their artists half of the sale price... do you think that's their mistake? Do you think they should go the allofmp3 route and pay artists nothing, then sell albums for $2.50 each? Do you think that Magnatunes are simply being greedy? Could they sell those albums for $1.00 each if they really wanted to?
"Why would the RIAA, a cartel, lower prices?"
Because record companies are ultimately in competition with each other, as well as in competition with other sources of entertainment. There are hundreds of labels who are members of the RIAA, and thousands more which are not.
That's why CD prices have been in freefall over the past several years. $18 - $20 CDs were pretty common five years ago; the average price of a new CD is now sub-$14.