It's much simpler than that: you're just not in their target market.
I'm guessing you have no problem with either (a) just helping yourself to a pirated copy of the same movie, or (b) driving to the store, or (c) just rending the DVD from Netflix. That's perfectly fine -- but not everybody is like you. Maybe they have an issue with piracy, their nearest DVD store sucks or is too far away, or they like to have films on demand, and not gated by when a particular DVD makes its way to them via mail.
There's room for both types of people -- and many more -- in this world.
"How do they expect a DRM encumbered download which costs as much as the DVD to succeed against a superior quality free download which you can play in your standard DVD player and came out months earlier."
This argument is based on the understanding that everybody pirates, or is at least comfortable with pirating.
I understand where this belief comes from. Many Slashdotters do like to download movies via BitTorrent, and they have a lot of friends who do, too. Thus, it's probably naturally to believe that everybody has the same moral compass.
I do not pirate films or MP3s. I could -- I certainly know how, and I have the bandwidth to do it -- but I'd rather not. Many (if not most) people reading this won't understand why this is the case; you might think that I'm just wasting my money, or perhaps I'm too technically inept to find pirated versions of the stuff I buy.
I won't try to explain my behavior, but it's quite clear that there are lots of different types of customer out there (this also explains why you see so many fugly cars, and hideous clothes out there). You are 100% correct that their move won't impress the "Death to DRM / Movies should be a buck and songs should be a dime / information wants to be free" Slashdot crowd, but you're not in their target market, anyway.
As others have pointed out, the hybrid market is doing fine without addressing your particular niche, but the industry is nudging in your direction. The Lexus GS Hybrid appears not to suck too badly.
"
Isn't it just another DDOS blame fest when in reality its just the news spreading around the world and all the collective users of all the collective news sites are clicking the links to try to read the story?"
No. Here's what happened:
The spammer DDOSed bluesecurity.com. Quite well, in fact.
After a few days, Blue Security managed to get a redirect going to a blog they put up on blogs.com, which is run by TypePad.
The spammer then DDOSed TypePad.
Believe me, TypePad gets Farked/Dugg/Slashdotted every day. They can handle the normal traffic spikes. This was deliberate, and it was well documented.
"We are all guilty of assisting this DDOS attack. shame on us."
A drop in the ocean. TypePad can absorb these sorts of things. Make no mistake: TypePad was taken down by a deliberate, coordinated DDOS attack.
"Consumers making copies of legitimate films that they bought is legally protected fair use."
Giving that copy to a friend is not.
I believe you've made an incorrect assumption that the article was referring to backup copies in this instance.
"To count one PENNY of that as so-called "piracy" is fraud of the highest order."
It would also be a pretty stupid thing to do. Do you really, truly in your heart think that the analysts, the MPAA and the WSJ reporter all really think this, or do you accept the more logical explanation that it was referring to making copies for distribution?
"If they pirated a copy by online download, they won't admit it, so you can bet that this category isn't factored in at all. Even in the best case, the numbers are dubious."
Agreed. This is a well-known phenomenon to survey takers. Respondents will tell you what they think you want to hear, or tell you something that puts them in a good light. The survey data may correct for this; it's not stated in the article. But, there are a couple of issues:
If the respondents are being less than honest about how many acts of piracy replaced a sale, that's actually worse for the MPAA.
Slashdotters quite often ignore this phenomenon when they cite studies in which P2P users state that P2P leads them to buy more music, or when P2P users claim that their acts of piracy don't replace sales.
I don't think Slashdotters will be happy until they see a survey that acknowledges that not one act of piracy ever replaces a sale. In the meantime, the studies are improving their methodologies and finally addressing the common criticisms. I think these numbers are getting closer to the truth.
"The majority of people buying a bootleg DVD probably don't know that it isn't legit when they buy it. Thus, one would expect that nearly 100% of those folks would have bought it legitimately."
In my experience, every single person I know who's bought bootleg DVDs has known it's a bootleg. When you come back from China with a hundred $0.99 DVDs (as my friends have), you'd have to be pretty freakin' stupid to think they're legit. Likewise, it should be fairly obvious that the guy in Times Square selling DVD copies of current theatrical releases for $5 is not an authorized agent of the film company. While I am sure that some people are fooled, I disagree with your assessment that the majority are.
"More than 40% of their claimed losses due to "piracy" are actually due to legal copying."
Again, you are making the incorrect assumption that "consumers making copies of films they bought" refers to backup copies. If it's patently obvious to you and me that such examples shouldn't be considered, it's not logical to assume that the analysts don't understand this.
I think you're reading too much into that. The article used "making copies" for brevity. You are assuming that this includes "backup copies," but I believe it was intended to be read as "making copies to give to friends, or making copies so that they can have a permanent copy for the price of a rental."
Saying things like (in effect), "ha ha, they are so stupid they think me making a backup copy of something I bought is a loss!" is funny and all, but it's not very intellectually honest. We're all pretty smart here, so I think we all understand that they don't actually think this.
You quoted the second part out of context to lead people to believe that the "In one market..." refers to the current study. Here is the sentence that directly precedes the sentence you picked:
The estimate showing a dramatic increase in piracy is a function of different methodology used in the report. Previously, people familiar with the matter say, the MPAA used figures based on a series of random calculations that estimated how much was lost in each country.
TFA then goes on to explain how the new study uses a different methodology, and the estimates for piracy in China and Russia have gone down. In other words, the article explains that they are correcting their fuzzy math.
"The "brilliant assumption" is that people who pirate movies are going to tell the truth in a telephone survey."
Slashdotters make this brilliant assumption all the time. How many times have you seen this:
"People who use P2P buy more music. The studies prove it!"
In this latest survey, if the respondents are acting as expected (saying what they think the survey taker wants to hear, or saying something which reflects better on them), then the loss to piracy is actually worse than the study states... unless the analysts are attempting to correct for this.
"Of course the study assumes that every "pirated" copy of a movie would be replaced by a ticket or dvd sale, if there was no "piracy"."
R-ing TFA addresses your question:
"Critics have faulted some piracy estimates for equating each pirated DVD with a lost sale, when many consumers would have skipped the movie altogether if they hadn't gotten a cheap or free unauthorized version. This time, the survey specifically asked consumers how many of their pirated movies they would have purchased in stores or seen in theaters if they didn't have an unauthorized copy, giving studios a different picture of their true losses."
You're not alone. Looks like the people who modded you "insightful" didn't RTFA, either.
"They are providing a service: recording, distributing, marketing, providing legal services, etc. The end product is the music, and in many cases the label had just as much to do with the end product (and its distribution) as the artist did. Are the artists entitled to all of the profits derived from this product? If so, why?"
A sentiment I see a lot around here is "I can't believe record companies get all that money! They contribute nothing! That's right, nothing!"
In other words, for many Slashdotters, there is absolutely no difference between a completed CD and, say, a piece of paper with some lyrics on it.
I think this is partially because when an engineer does their job well, or a marketing campaign is executed well, the engineer or the marketer is invisible. So, when you're listening to a song and sounds like the singer and musician are right there in the room with you, the ironic thing is that this "real" sound is likely due to a very good engineer with some very expensive equipment.
And ultimately the record company isn't trying to sell you the engineers, marketers, salespeople, lawyers, backup singers, and office staff who all contributed to making the product what it is. They're trying to sell you the artist. Thus, it's very easy to forget how much work -- provided by people who do need to be paid -- goes into the final product.
"I found that interesting. Executives that have nothing to do with the end product (probably haven't ever even picked up an instrument) are constantly arguing that they should be charging more and padding their pockets."
I work in the computer peripheral industry. I've never designed a mouse or a speaker -- I don't even have an EE -- but I set pricing for those products.
If you want to join a label run by artists, for artists, you can. There are tons of indie labels out there started by guys who've put in the long years working their craft. But ultimately, somebody's got to look after the bottom line.
"Perhaps they should have been showing me pictures of an executive in his Lexus... unable to afford a Lamborghini Diablo becuase I was file sharing"
I haven't met many people in the record industry, but of those I have, none of them owned fancy cars, or would even be considered well off. The only "executive" I've met is a guy who ran his own label. He worked 80 hour days and had fewer than ten employees. When sales dropped, he had to lay off his friends.
I'm sure that Larry Ellison, or whoever it is that's at the top of your particular niche in the tech industry, has several nice cars (I hear he's partial to NSXes, although that may have changed). But I don't think for a second that this represents the majority of people who work in the software industry, and it certainly doesn't justify software piracy to me. I understand that the folks at the top of any industry will have nice cars. That's just the way capitalism works in our society.
If "some record executive out there owns a Diablo" provides you the moral rationale to share music, then great... go for it. But I think it would be more intellectually honest to acknowledge that you share music to save money.
"Radio stations do have to pay money to broadcast music, but it's not very much, and (IIRC) it's a blanket license to play all of the music controlled by a label. The cut that goes back to the artists is miniscule -- practically nonexistent."
here in the USA, radio licensing is handled by ASCAP and BMI, two societies that are run by and for artists. More info is here:
It's a separate money stream than the royalties that the artists earn from record sales. Your use of the word "label" isn't the most accurate. ASCAP and BMI are societies that represent artists, composers and musicians, but they are not record labels. Record labels do not get any of the radio licensing money.
"Practically nonexistent" is a relative term. I've heard that even 2nd or 3rd tier artists can get checks for a couple of hundred bucks a month from radio airplay -- and again, that's money that doesn't even pass through the hands of the record labels. A couple of hundred bucks can make the difference between paying the rent, and not paying the rent.
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"So you are obviously an economist, since you know what supply and demand is... but you have never heard of economies of scale."
No, I'm high up in marketing for a major vendor of PC peripherals. As a result, I have to know this stuff pretty well.
I'll try to keep this as simple as possible, but supply and demand is typically a curve, not a flat line. A flat line would be an example of "perfect elasticity," as I mentioned in my original post.
In short, when you're setting up pricing, the curve might show you that a 50% drop in price might only increase sales by 25% (if it were perfectly elastic, a product that cost half as much would sell 2X as many copies, and a product that cost twice as much would sell half as many units. But perfect elasticity rarely happens. For any market that's of sufficient size, you can bet that the big players have hired the appropriately smart people to do the work to understand what the curve looks like. In my particular corner of the world, I already know that selling my product at $89 rather than $99 might reduce the product's net margin by 20%, but it won't increase sales enough to make it as profitable as if I'd left it at $99. So, I don't do it. Understand?
"You think $5 CDs would be a loss?? Maybe if the music business is more bloated than I thought. I can make CDs for less than $3... so the cost of production is not the issue."
I don't think it's an issue of the music industry being bloated... that's not for me to say, but I do understand the realities of selling stuff in retail. First, keep in mind that a CD is sold to a distributor, who adds five points, before selling it to a reseller (retail store). Retailers like Amazon might add 10 or 15 points; brick and mortar retailers might add more. So, if your manufacturing cost is $3.00, you can pretty much rule out setting a retail price of $5.
It's also important to understand the difference between net margin and gross margin. As you've correctly pointed out, the manufacturing cost isn't the big one. If you're selling PC equipment, you also have:
Shipping costs. Somebody's got to pay them.
Sales and marketing. Channel programs, merchandising, all that stuff. This isn't free.
Accruals for price protections and defective returns.
Miscellaneous overhead stuff like renting the warehouse that holds the inventory, and the salaries of the various people who help design, build, sell or market the product.
"You may be right about the current rate bringing in the most money, but you are seriously deluded if you think that/.ers buy the dung that you are heaping."
Well, you're right, in a way. I don't think that most people reading this believe that I'm correct. Slashdotters tend to be experts in server administration and coding and stuff like that; they're not in sales or marketing. I have tremendous respect for the folks who are experts in these areas, but spend a few days on Slashdot and you'll see that it's not reciprocal. There's also the phenomenon on Slashdot that I like to call "I know a little about one thing, so that makes me an expert on a lot of things." It goes with the territory.
"Also, according to the numbers The music industry has been pulling in less money lately. Maybe a valid case could be made that CDs are overpriced."
Oh, they've definitely been overpriced. CD prices have been in freefall over the past few years.
"I guarantee that the music industry DOES care if he buys a CD. BMG does not make its money by being exclusive. That's a horrible comparison."
Perhaps I didn't explain it well enough. If they can be more profitable by setting the price points that will cause some segment of the audience to opt out of buying the product, they'll do it. It all gets back to that supply/demand curve.
"OK, let's try one more time. How about price fixing? Now, that's better."
I guess it's time again to explain how the labels were price fixing, and why they got nailed, and why it wasn't such a good thing for lots of people. I take it that you're of the understanding that it relates to the fact that CDs all tend to cost about the same, but that's not correct. Sorry.
Here's what happened:
Best Buy and Wal-Mart started selling CDs at the front of the store. They sold them as loss leaders; ie. they made sub-standard margins (or even lost money), because they were draws to get customers into the store. Best Buy had that store full of electronics, and Wal-Mart had that store full of clothes and other crap. That's where the real money is.
A couple of retailers that primarily sold CDs (Tower Records, TWE, and one more which I forget) were understandably annoyed. Unlike Best Buy and Wal-Mart, they didn't have a store full of high-margin stuff to sell. For them, it was either make money on the CDs, or else. But Wal-Mart and Best Buy were spending millions on circulars advertising prices that Tower et al. just couldn't hit.
So, they went to the record companies (notably Universal) and asked for help.
Universal set them up on a MAP program. That stands for "minimum advertised price" and lots of industries do it (including the PC peripheral industry). Universal helped fund Tower and TWE's ads, as long as Tower and TWE didn't advertise CDs for below a certain price. They could sell CDs for any price they liked, but if they printed prices in ads, it couldn't go below the MAP.
Wal-Mart and Best Buy noticed this and effectively got the government to bitch-slap Universal.
The net result is that Tower Records went into bankrupcty and has been sold several times. Wal-Mart and Best Buy continue to sell CDs as loss leaders, and are contributing to the extinction of the independent record store. Music has become more homogenized, and CD prices didn't go down as a result of the settlement.
This is good news for you if you happen to like the music that Wal-Mart and Best Buy sell, or if you subscribe to the "what's good for Wal-Mart is good for America" philosophy. It's not so good for you if the local Wal-Mart or Best Buy have helped your local indie record shop close its doors.
And, of course, MAP programs continue to this day in lots and lots of industries. The moral here is not to try doing MAPs if there's the chance that this will piss off Wal-Mart or Best Buy.
"Technically, if she doesn't sell it, then no, it's fair use."
This is one of those things that every Slashdotter "knows," but is not true.
Smartass remarks aside, it's highly unlikely that you'd ever see the inside of a courtroom for giving a few copies to your girlfriend. But this does not qualify it for "fair use." Fair use is a doctrine, a set of guidelines -- a test -- for determining whether an act of copying is permitted. It covers things like "teaching," "news reporting" and "criticism" but "sharing copies among friends" is noticably not listed as an example. Slashbots like to make statements like "but I'm teaching my girlfriend about the music by giving her copies." Whether this is a smart thing to say is, as the math texts put it, an exercise left for the reader.
I think that many Slashdotters are of the perception that businesses are obligated to set their pricing based on material cost (which, believe it or not, is typically a small portion of the cost of sale). Or, perhaps to be more accurate, they know why a Ferarri costs more than a Honda, and a Honda costs more than an Kia, even though the cost of the components (the metal and plastic that makes up the car) is about the same for all three. They probably also understand why a shirt from Hugo Boss costs more than a shirt from Kenneth Cole, which costs more than a shirt from Sears, even though the material and manufacturing costs are the same for all three. But when Slashdotters observe that the material costs for CDs and DVDs are approximately the same, they hit a mental block and don't quite get the principle of supply and demand that drives pricing in other industries.
If you're not sure how supply and demand affects pricing of DVDs vs. CDs, think for a few moments about how you use a DVD, and how you use a CD. Few DVDs are worth buying for me, because realistically, I'd only watch it once or twice. A DVD has to be pretty cheap in order for me to watch it. On the other hand, I'll listen to a good CD hundreds of times or more. It's all about the enjoyment you get out of the product. You might enjoy wearing that Kenneth Cole shirt rather than the Sears shirt. It fits better, and it's more flattering, or maybe it just makes you feel better. You enjoy driving that Ferarri more than the Kia. So, if the difference is worth it, you'll pay more. Get it?
If I'm not connecting with you, maybe somebody else can explain it better.
"A mass production model that wants $20 for a CD instead of selling a couple million copies at $5 a pop doesn't make sense."
Agreed. CDs haven't been $20 in the US for ages. The average price for a new release is down to $13 or $14. This is supply and demand at work again. Selling a CD for $5 doesn't make much sense, either, as it would likely be negative margin (a retail price of $5 would likely mean that it was sold into disti for about $3, which is likely below the cost of sale).
I think you may also be making the assumption that the CD market has what's called perfect elasticity, in which a $5 CD will sell 3x as many copies as a $15 CD.
"The result is I simply quit buying CD's. How is this profitable?"
One thing that the pros understand, that lay people often haven't learned, is that it's not necessary to get every potential customer to be a success. This is why that Kenneth Cole shirt costs $150, when they could probably sell it for $20 and make a profit. The secret is to find the optimum price point on the supply/demand curve (if a market has perfect elasticity, that curve would be a straight line at a 45 degree angle... but almost no industry is like that). So BMG doesn't sell you many CDs, and Kenneth Cole probably doesn't sell you many shirts, either. My guess is that both of them are fine with this.
"I do see a new type of record company that would be entirely digital... with a lower cost of download, a lower cost of doing business, and higher share of the profits for the artists... the main issue that such a record company would have would be promoting newer talent effectively. This is really the main obstacle, especially with the large infrastructure and highly restrictive contracts currently in place between all the players and the central recording studios."
Agreed. Magnatune covers all of those bases. They keep their costs down by not giving their artists any production assistance. This allows them to adopt a "payment optional" model and their artists get a healthy chunk of the sale. In other words, it's many Slashdotters' idea of the perfect record label.
"To say otherwise would be to admit that they could be selling the downloads at lower cost to the consumer than the equivalent CD."
Sony, like all other companies, has the right to charge what the market will bear. You have this right, too. If you only needed $20K per year to live on but you've managed to snag a job that pays you $50K a year, you're not obliged to "defend" this to anybody.
"It's unfortunate, too, because a reasonable pricing model for online downloads of music could have been arranged where:"
The iTMS has not exactly been a colossal failure. Looks like Apple and the record companies have figured out that $0.99 is a pretty good price to sell music at for the time being.
"However (and not too surprisingly), the labels have decided that any savings that arise should all be kept by themselves."
Lots of people operate in the same way. If you're making $50K at that job and your costs go down (you move into a smaller house, or your girlfriend moves in with you and suddenly you're a DINK), you're not going to give some of your salary back to your employer. That would be just silly.
The iTMS has been a huge success and, whether we like it or not, the record companies are laughing all the way to the bank.
"They didn't produce anything."
Are you sure about? A piece of paper with some song lyrics is not the same as a completed recording that's been engineered, mastered, produced, and promoted.
"...and music publicity should be free (radio/touring)."
I have a pretty good voice and a sheet of paper here with some pretty good lyrics. I would like to get it recorded and produced, and then into heavy rotation on radio stations nationwide. I would also like to start a multi-state tour. I would like to get this all done, as you've put it, for free. Can you give me some suggestions for doing this without outside assistance?
"They just aren't needed any more."
That's great news. Have you considered going into business in helping artists do all of this without a record company? I presume you'd want to work for free, though. It wouldn't be fair for you to take a cut of sales in exchange for your expert assistance, because then you'd be just as bad as the record companies.
"I can't help but think that, as self publishing and self publicizing becomes more doable, that there is no way that the old model of the recording megacorps can continue to hold up."
The "the Internet is going to kill the record companies" meme has been around for almost ten years. It's often based on a presupoosition that the record companies aren't smart enough, or capable of hiring people smart enough, to know how to leverage the Internet. The trouble is, the paid download business still has a positive rate of growth, and there are still a lot more artists and bands who want contracts than can get them. The record companies seem to get this Internet thing just fine. And the record companies see themselves in the business of selling music. Moving from CDs to online is just another format change to them.
The "the record companies are doomed" theory also seems to rely on the assumption that most musicians are bit-heads, and have the skill, time and patience to do their own recording, engineering, producing, distribution, publicity, and marketing -- or, if they don't, then they have ample cash available to hire all these experts.
In short -- I don't think the Internet is the panacea that many see it as. It's also done wonders for the real estate business, but people still hire real estate agents.
If you disagree... do you have an estimate on when the record companies will be obsolete? Do you think it will happen in the next year, or is it more of a five or ten year thing? There are no right or wrong answers, of course... I'm just interested in your estiamte.
"For me something that is mutually beneficial would support both the artists and the consumer; paying for music ain't. I'd rather see no one pay for music and watch the record labels go down in flames (artists can still make money touring), so that when I do want to buy an album I can know that the artist is getting a reasonable cut of the sale."
The "they should just be happy with making money touring" line gets thrown around a lot, but a few weeks ago when Slashdot covered news of concert ticket prices going up because of piracy, Slashdotters replied with a collective call of "bullshit."
I think many Slashdotters honestly and truly think that if an artist makes more than, say, $10,000 a year at their craft, then it's simply not fair. It's the "if you're trying to make money, then you're a businessperson, not an artist" mentality. It's sad that many see technology as a way to put others in their place.
The good news is that it's already possible to opt in to the business model of releasing your own stuff without the benefit of a record label (which means that you're on your own for recording, mixing, producing, and promotion -- tough old beans if you're not an expert in all of these disciplines!), and then try to make your money only by touring. I guess this presupposes that you find touring to be fun or glamorous. There are indeed some bands who do pretty well at touring even though they no longer release CDs -- but it was CD sales that got them to that point.
"Your point isn't valid. ROMS will pay royalties if the artists register with them. Trick is, most US Artists either don't care, or are told not to by their labels/RIAA."
Would you register with them?
Let's say you wrote a little software utility that you sell for ten bucks. Maybe you wrote it with five other people, so you make about a buck fifty a sale. Then you discover that your potential customers are downloading it from a Russian site that is utilizing a loophole in Russian law that allows them to sell software for $0.10 per megabyte.
"No problem," the Russians tell you. That outfit sells your software for a buck. Giving you 10% royalties, you'll make ten cents for each copy of your $10 software that they let their customers download. Just register with us, and we'll be nice and legit and send you that ten cents." Ten cents which, of course, you'd have to divide with the other five people, so you'd make two cents per sale.
Would your response likely be something like "sign me up!", or would it more likely be something that rhymes with "duck shoe" ?
"Wrong! Some buyers are willing to pay $1 a song. The fact that people are still pirating and using grey-market sites like allofmp3.com shows this. Anyone that has taken Econ 101 knows that the supply and demand are not matching up here. "
That's a good basic fundamental for Econ 101, but in the real world, the supplier gets to pick the point on the curve that's optimum for them. That point may not be the point of highest volume, or -- and this is the tough one -- the point of highest profit.
The iTMS is a runaway success by any means. My guess is that Apple is perfectly happy with the volume and growth. Plenty of Slashdotters say things like "If only songs were $0.80 or $0.50, then I'd go legit, but in the meantime I have no choice but to pirate" (you may laugh, but that's a common attitude around here). Frankly, I don't think there's a lot of elasticity between a buck and $0.80, but even if Apple's research shows otherwise, it may not be worth their while in the long term to take pricing to $0.80 at this point.
Music is somewhat of a commodity item (which is why, believe it or not, it's a low-margin industry), but this point can be explained better by looking at luxury goods. Most people would say that Ferarris are too expensive. Ferarri might have higher sales and even higher profitability if they lowered their price points. Yet their prices are only going up, and Ferarri sells every last car it can build.
Slashdot Mirror
It's much simpler than that: you're just not in their target market.
I'm guessing you have no problem with either (a) just helping yourself to a pirated copy of the same movie, or (b) driving to the store, or (c) just rending the DVD from Netflix. That's perfectly fine -- but not everybody is like you. Maybe they have an issue with piracy, their nearest DVD store sucks or is too far away, or they like to have films on demand, and not gated by when a particular DVD makes its way to them via mail.
There's room for both types of people -- and many more -- in this world.
"How do they expect a DRM encumbered download which costs as much as the DVD to succeed against a superior quality free download which you can play in your standard DVD player and came out months earlier."
This argument is based on the understanding that everybody pirates, or is at least comfortable with pirating.
I understand where this belief comes from. Many Slashdotters do like to download movies via BitTorrent, and they have a lot of friends who do, too. Thus, it's probably naturally to believe that everybody has the same moral compass.
I do not pirate films or MP3s. I could -- I certainly know how, and I have the bandwidth to do it -- but I'd rather not. Many (if not most) people reading this won't understand why this is the case; you might think that I'm just wasting my money, or perhaps I'm too technically inept to find pirated versions of the stuff I buy.
I won't try to explain my behavior, but it's quite clear that there are lots of different types of customer out there (this also explains why you see so many fugly cars, and hideous clothes out there). You are 100% correct that their move won't impress the "Death to DRM / Movies should be a buck and songs should be a dime / information wants to be free" Slashdot crowd, but you're not in their target market, anyway.
As others have pointed out, the hybrid market is doing fine without addressing your particular niche, but the industry is nudging in your direction. The Lexus GS Hybrid appears not to suck too badly.
" Isn't it just another DDOS blame fest when in reality its just the news spreading around the world and all the collective users of all the collective news sites are clicking the links to try to read the story?"
No. Here's what happened:
Believe me, TypePad gets Farked/Dugg/Slashdotted every day. They can handle the normal traffic spikes. This was deliberate, and it was well documented.
"We are all guilty of assisting this DDOS attack. shame on us."
A drop in the ocean. TypePad can absorb these sorts of things. Make no mistake: TypePad was taken down by a deliberate, coordinated DDOS attack.
"Consumers making copies of legitimate films that they bought is legally protected fair use."
Giving that copy to a friend is not.
I believe you've made an incorrect assumption that the article was referring to backup copies in this instance.
"To count one PENNY of that as so-called "piracy" is fraud of the highest order."
It would also be a pretty stupid thing to do. Do you really, truly in your heart think that the analysts, the MPAA and the WSJ reporter all really think this, or do you accept the more logical explanation that it was referring to making copies for distribution?
"If they pirated a copy by online download, they won't admit it, so you can bet that this category isn't factored in at all. Even in the best case, the numbers are dubious."
Agreed. This is a well-known phenomenon to survey takers. Respondents will tell you what they think you want to hear, or tell you something that puts them in a good light. The survey data may correct for this; it's not stated in the article. But, there are a couple of issues:
I don't think Slashdotters will be happy until they see a survey that acknowledges that not one act of piracy ever replaces a sale. In the meantime, the studies are improving their methodologies and finally addressing the common criticisms. I think these numbers are getting closer to the truth.
"The majority of people buying a bootleg DVD probably don't know that it isn't legit when they buy it. Thus, one would expect that nearly 100% of those folks would have bought it legitimately."
In my experience, every single person I know who's bought bootleg DVDs has known it's a bootleg. When you come back from China with a hundred $0.99 DVDs (as my friends have), you'd have to be pretty freakin' stupid to think they're legit. Likewise, it should be fairly obvious that the guy in Times Square selling DVD copies of current theatrical releases for $5 is not an authorized agent of the film company. While I am sure that some people are fooled, I disagree with your assessment that the majority are.
"More than 40% of their claimed losses due to "piracy" are actually due to legal copying."
Again, you are making the incorrect assumption that "consumers making copies of films they bought" refers to backup copies. If it's patently obvious to you and me that such examples shouldn't be considered, it's not logical to assume that the analysts don't understand this.
I think you're reading too much into that. The article used "making copies" for brevity. You are assuming that this includes "backup copies," but I believe it was intended to be read as "making copies to give to friends, or making copies so that they can have a permanent copy for the price of a rental."
Saying things like (in effect), "ha ha, they are so stupid they think me making a backup copy of something I bought is a loss!" is funny and all, but it's not very intellectually honest. We're all pretty smart here, so I think we all understand that they don't actually think this.
You quoted the second part out of context to lead people to believe that the "In one market..." refers to the current study. Here is the sentence that directly precedes the sentence you picked:
TFA then goes on to explain how the new study uses a different methodology, and the estimates for piracy in China and Russia have gone down. In other words, the article explains that they are correcting their fuzzy math.
"The "brilliant assumption" is that people who pirate movies are going to tell the truth in a telephone survey."
Slashdotters make this brilliant assumption all the time. How many times have you seen this:
"People who use P2P buy more music. The studies prove it!"
In this latest survey, if the respondents are acting as expected (saying what they think the survey taker wants to hear, or saying something which reflects better on them), then the loss to piracy is actually worse than the study states... unless the analysts are attempting to correct for this.
"Of course the study assumes that every "pirated" copy of a movie would be replaced by a ticket or dvd sale, if there was no "piracy"."
R-ing TFA addresses your question:
"Critics have faulted some piracy estimates for equating each pirated DVD with a lost sale, when many consumers would have skipped the movie altogether if they hadn't gotten a cheap or free unauthorized version. This time, the survey specifically asked consumers how many of their pirated movies they would have purchased in stores or seen in theaters if they didn't have an unauthorized copy, giving studios a different picture of their true losses."
You're not alone. Looks like the people who modded you "insightful" didn't RTFA, either.
"They are providing a service: recording, distributing, marketing, providing legal services, etc. The end product is the music, and in many cases the label had just as much to do with the end product (and its distribution) as the artist did. Are the artists entitled to all of the profits derived from this product? If so, why?"
A sentiment I see a lot around here is "I can't believe record companies get all that money! They contribute nothing! That's right, nothing!"
In other words, for many Slashdotters, there is absolutely no difference between a completed CD and, say, a piece of paper with some lyrics on it.
I think this is partially because when an engineer does their job well, or a marketing campaign is executed well, the engineer or the marketer is invisible. So, when you're listening to a song and sounds like the singer and musician are right there in the room with you, the ironic thing is that this "real" sound is likely due to a very good engineer with some very expensive equipment.
And ultimately the record company isn't trying to sell you the engineers, marketers, salespeople, lawyers, backup singers, and office staff who all contributed to making the product what it is. They're trying to sell you the artist. Thus, it's very easy to forget how much work -- provided by people who do need to be paid -- goes into the final product.
"I found that interesting. Executives that have nothing to do with the end product (probably haven't ever even picked up an instrument) are constantly arguing that they should be charging more and padding their pockets."
I work in the computer peripheral industry. I've never designed a mouse or a speaker -- I don't even have an EE -- but I set pricing for those products.
If you want to join a label run by artists, for artists, you can. There are tons of indie labels out there started by guys who've put in the long years working their craft. But ultimately, somebody's got to look after the bottom line.
"Perhaps they should have been showing me pictures of an executive in his Lexus ... unable to afford a Lamborghini Diablo becuase I was file sharing"
I haven't met many people in the record industry, but of those I have, none of them owned fancy cars, or would even be considered well off. The only "executive" I've met is a guy who ran his own label. He worked 80 hour days and had fewer than ten employees. When sales dropped, he had to lay off his friends.
I'm sure that Larry Ellison, or whoever it is that's at the top of your particular niche in the tech industry, has several nice cars (I hear he's partial to NSXes, although that may have changed). But I don't think for a second that this represents the majority of people who work in the software industry, and it certainly doesn't justify software piracy to me. I understand that the folks at the top of any industry will have nice cars. That's just the way capitalism works in our society.
If "some record executive out there owns a Diablo" provides you the moral rationale to share music, then great... go for it. But I think it would be more intellectually honest to acknowledge that you share music to save money.
"Radio stations do have to pay money to broadcast music, but it's not very much, and (IIRC) it's a blanket license to play all of the music controlled by a label. The cut that goes back to the artists is miniscule -- practically nonexistent."
here in the USA, radio licensing is handled by ASCAP and BMI, two societies that are run by and for artists. More info is here:
ASCAP radio licensing
BMI radio licensing
It's a separate money stream than the royalties that the artists earn from record sales. Your use of the word "label" isn't the most accurate. ASCAP and BMI are societies that represent artists, composers and musicians, but they are not record labels. Record labels do not get any of the radio licensing money.
"Practically nonexistent" is a relative term. I've heard that even 2nd or 3rd tier artists can get checks for a couple of hundred bucks a month from radio airplay -- and again, that's money that doesn't even pass through the hands of the record labels. A couple of hundred bucks can make the difference between paying the rent, and not paying the rent.
I'm not on Blue Frog's list. This morning I got the note below. It's clearly a joe job; that is, sent by a spammer to discredit the Blue Frog people:
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"Actually, I think you're thinking of "unit elasticity," or an elasticity of 1."
Ah, you're right. Since I work in the real world and never run into unit or perfect elasticity, I tend to mix those terms up. :-)
"The correct answer to this question is "You are not a part of our target market.""
You put it better in nine words than I could in three paragraphs -- thanks. I hope somebody mods you up.
"So you are obviously an economist, since you know what supply and demand is... but you have never heard of economies of scale."
No, I'm high up in marketing for a major vendor of PC peripherals. As a result, I have to know this stuff pretty well.
I'll try to keep this as simple as possible, but supply and demand is typically a curve, not a flat line. A flat line would be an example of "perfect elasticity," as I mentioned in my original post.
In short, when you're setting up pricing, the curve might show you that a 50% drop in price might only increase sales by 25% (if it were perfectly elastic, a product that cost half as much would sell 2X as many copies, and a product that cost twice as much would sell half as many units. But perfect elasticity rarely happens. For any market that's of sufficient size, you can bet that the big players have hired the appropriately smart people to do the work to understand what the curve looks like. In my particular corner of the world, I already know that selling my product at $89 rather than $99 might reduce the product's net margin by 20%, but it won't increase sales enough to make it as profitable as if I'd left it at $99. So, I don't do it. Understand?
"You think $5 CDs would be a loss?? Maybe if the music business is more bloated than I thought. I can make CDs for less than $3... so the cost of production is not the issue."
I don't think it's an issue of the music industry being bloated... that's not for me to say, but I do understand the realities of selling stuff in retail. First, keep in mind that a CD is sold to a distributor, who adds five points, before selling it to a reseller (retail store). Retailers like Amazon might add 10 or 15 points; brick and mortar retailers might add more. So, if your manufacturing cost is $3.00, you can pretty much rule out setting a retail price of $5.
It's also important to understand the difference between net margin and gross margin. As you've correctly pointed out, the manufacturing cost isn't the big one. If you're selling PC equipment, you also have:
"You may be right about the current rate bringing in the most money, but you are seriously deluded if you think that /.ers buy the dung that you are heaping."
Well, you're right, in a way. I don't think that most people reading this believe that I'm correct. Slashdotters tend to be experts in server administration and coding and stuff like that; they're not in sales or marketing. I have tremendous respect for the folks who are experts in these areas, but spend a few days on Slashdot and you'll see that it's not reciprocal. There's also the phenomenon on Slashdot that I like to call "I know a little about one thing, so that makes me an expert on a lot of things." It goes with the territory.
"Also, according to the numbers The music industry has been pulling in less money lately. Maybe a valid case could be made that CDs are overpriced."
Oh, they've definitely been overpriced. CD prices have been in freefall over the past few years.
"I guarantee that the music industry DOES care if he buys a CD. BMG does not make its money by being exclusive. That's a horrible comparison."
Perhaps I didn't explain it well enough. If they can be more profitable by setting the price points that will cause some segment of the audience to opt out of buying the product, they'll do it. It all gets back to that supply/demand curve.
"OK, let's try one more time. How about price fixing? Now, that's better."
I guess it's time again to explain how the labels were price fixing, and why they got nailed, and why it wasn't such a good thing for lots of people. I take it that you're of the understanding that it relates to the fact that CDs all tend to cost about the same, but that's not correct. Sorry.
Here's what happened:
The net result is that Tower Records went into bankrupcty and has been sold several times. Wal-Mart and Best Buy continue to sell CDs as loss leaders, and are contributing to the extinction of the independent record store. Music has become more homogenized, and CD prices didn't go down as a result of the settlement.
This is good news for you if you happen to like the music that Wal-Mart and Best Buy sell, or if you subscribe to the "what's good for Wal-Mart is good for America" philosophy. It's not so good for you if the local Wal-Mart or Best Buy have helped your local indie record shop close its doors.
And, of course, MAP programs continue to this day in lots and lots of industries. The moral here is not to try doing MAPs if there's the chance that this will piss off Wal-Mart or Best Buy.
"Technically, if she doesn't sell it, then no, it's fair use."
This is one of those things that every Slashdotter "knows," but is not true.
Smartass remarks aside, it's highly unlikely that you'd ever see the inside of a courtroom for giving a few copies to your girlfriend. But this does not qualify it for "fair use." Fair use is a doctrine, a set of guidelines -- a test -- for determining whether an act of copying is permitted. It covers things like "teaching," "news reporting" and "criticism" but "sharing copies among friends" is noticably not listed as an example. Slashbots like to make statements like "but I'm teaching my girlfriend about the music by giving her copies." Whether this is a smart thing to say is, as the math texts put it, an exercise left for the reader.
More information is here.
"Tell me again why a DVD is less than a CD?"
Okay, once again: supply and demand.
I think that many Slashdotters are of the perception that businesses are obligated to set their pricing based on material cost (which, believe it or not, is typically a small portion of the cost of sale). Or, perhaps to be more accurate, they know why a Ferarri costs more than a Honda, and a Honda costs more than an Kia, even though the cost of the components (the metal and plastic that makes up the car) is about the same for all three. They probably also understand why a shirt from Hugo Boss costs more than a shirt from Kenneth Cole, which costs more than a shirt from Sears, even though the material and manufacturing costs are the same for all three. But when Slashdotters observe that the material costs for CDs and DVDs are approximately the same, they hit a mental block and don't quite get the principle of supply and demand that drives pricing in other industries.
If you're not sure how supply and demand affects pricing of DVDs vs. CDs, think for a few moments about how you use a DVD, and how you use a CD. Few DVDs are worth buying for me, because realistically, I'd only watch it once or twice. A DVD has to be pretty cheap in order for me to watch it. On the other hand, I'll listen to a good CD hundreds of times or more. It's all about the enjoyment you get out of the product. You might enjoy wearing that Kenneth Cole shirt rather than the Sears shirt. It fits better, and it's more flattering, or maybe it just makes you feel better. You enjoy driving that Ferarri more than the Kia. So, if the difference is worth it, you'll pay more. Get it?
If I'm not connecting with you, maybe somebody else can explain it better.
"A mass production model that wants $20 for a CD instead of selling a couple million copies at $5 a pop doesn't make sense."
Agreed. CDs haven't been $20 in the US for ages. The average price for a new release is down to $13 or $14. This is supply and demand at work again. Selling a CD for $5 doesn't make much sense, either, as it would likely be negative margin (a retail price of $5 would likely mean that it was sold into disti for about $3, which is likely below the cost of sale).
I think you may also be making the assumption that the CD market has what's called perfect elasticity, in which a $5 CD will sell 3x as many copies as a $15 CD.
"The result is I simply quit buying CD's. How is this profitable?"
One thing that the pros understand, that lay people often haven't learned, is that it's not necessary to get every potential customer to be a success. This is why that Kenneth Cole shirt costs $150, when they could probably sell it for $20 and make a profit. The secret is to find the optimum price point on the supply/demand curve (if a market has perfect elasticity, that curve would be a straight line at a 45 degree angle... but almost no industry is like that). So BMG doesn't sell you many CDs, and Kenneth Cole probably doesn't sell you many shirts, either. My guess is that both of them are fine with this.
"I do see a new type of record company that would be entirely digital... with a lower cost of download, a lower cost of doing business, and higher share of the profits for the artists... the main issue that such a record company would have would be promoting newer talent effectively. This is really the main obstacle, especially with the large infrastructure and highly restrictive contracts currently in place between all the players and the central recording studios."
Agreed. Magnatune covers all of those bases. They keep their costs down by not giving their artists any production assistance. This allows them to adopt a "payment optional" model and their artists get a healthy chunk of the sale. In other words, it's many Slashdotters' idea of the perfect record label.
"To say otherwise would be to admit that they could be selling the downloads at lower cost to the consumer than the equivalent CD."
Sony, like all other companies, has the right to charge what the market will bear. You have this right, too. If you only needed $20K per year to live on but you've managed to snag a job that pays you $50K a year, you're not obliged to "defend" this to anybody.
"It's unfortunate, too, because a reasonable pricing model for online downloads of music could have been arranged where:"
The iTMS has not exactly been a colossal failure. Looks like Apple and the record companies have figured out that $0.99 is a pretty good price to sell music at for the time being.
"However (and not too surprisingly), the labels have decided that any savings that arise should all be kept by themselves."
Lots of people operate in the same way. If you're making $50K at that job and your costs go down (you move into a smaller house, or your girlfriend moves in with you and suddenly you're a DINK), you're not going to give some of your salary back to your employer. That would be just silly.
"Apple is making the Record Labels obsolete."
The iTMS has been a huge success and, whether we like it or not, the record companies are laughing all the way to the bank.
"They didn't produce anything."
Are you sure about? A piece of paper with some song lyrics is not the same as a completed recording that's been engineered, mastered, produced, and promoted.
"...and music publicity should be free (radio/touring)."
I have a pretty good voice and a sheet of paper here with some pretty good lyrics. I would like to get it recorded and produced, and then into heavy rotation on radio stations nationwide. I would also like to start a multi-state tour. I would like to get this all done, as you've put it, for free. Can you give me some suggestions for doing this without outside assistance?
"They just aren't needed any more."
That's great news. Have you considered going into business in helping artists do all of this without a record company? I presume you'd want to work for free, though. It wouldn't be fair for you to take a cut of sales in exchange for your expert assistance, because then you'd be just as bad as the record companies.
"I can't help but think that, as self publishing and self publicizing becomes more doable, that there is no way that the old model of the recording megacorps can continue to hold up."
The "the Internet is going to kill the record companies" meme has been around for almost ten years. It's often based on a presupoosition that the record companies aren't smart enough, or capable of hiring people smart enough, to know how to leverage the Internet. The trouble is, the paid download business still has a positive rate of growth, and there are still a lot more artists and bands who want contracts than can get them. The record companies seem to get this Internet thing just fine. And the record companies see themselves in the business of selling music. Moving from CDs to online is just another format change to them.
The "the record companies are doomed" theory also seems to rely on the assumption that most musicians are bit-heads, and have the skill, time and patience to do their own recording, engineering, producing, distribution, publicity, and marketing -- or, if they don't, then they have ample cash available to hire all these experts.
In short -- I don't think the Internet is the panacea that many see it as. It's also done wonders for the real estate business, but people still hire real estate agents.
If you disagree... do you have an estimate on when the record companies will be obsolete? Do you think it will happen in the next year, or is it more of a five or ten year thing? There are no right or wrong answers, of course... I'm just interested in your estiamte.
"For me something that is mutually beneficial would support both the artists and the consumer; paying for music ain't. I'd rather see no one pay for music and watch the record labels go down in flames (artists can still make money touring), so that when I do want to buy an album I can know that the artist is getting a reasonable cut of the sale."
The "they should just be happy with making money touring" line gets thrown around a lot, but a few weeks ago when Slashdot covered news of concert ticket prices going up because of piracy, Slashdotters replied with a collective call of "bullshit."
I think many Slashdotters honestly and truly think that if an artist makes more than, say, $10,000 a year at their craft, then it's simply not fair. It's the "if you're trying to make money, then you're a businessperson, not an artist" mentality. It's sad that many see technology as a way to put others in their place.
The good news is that it's already possible to opt in to the business model of releasing your own stuff without the benefit of a record label (which means that you're on your own for recording, mixing, producing, and promotion -- tough old beans if you're not an expert in all of these disciplines!), and then try to make your money only by touring. I guess this presupposes that you find touring to be fun or glamorous. There are indeed some bands who do pretty well at touring even though they no longer release CDs -- but it was CD sales that got them to that point.
"Your point isn't valid. ROMS will pay royalties if the artists register with them. Trick is, most US Artists either don't care, or are told not to by their labels/RIAA."
Would you register with them?
Let's say you wrote a little software utility that you sell for ten bucks. Maybe you wrote it with five other people, so you make about a buck fifty a sale. Then you discover that your potential customers are downloading it from a Russian site that is utilizing a loophole in Russian law that allows them to sell software for $0.10 per megabyte.
"No problem," the Russians tell you. That outfit sells your software for a buck. Giving you 10% royalties, you'll make ten cents for each copy of your $10 software that they let their customers download. Just register with us, and we'll be nice and legit and send you that ten cents." Ten cents which, of course, you'd have to divide with the other five people, so you'd make two cents per sale.
Would your response likely be something like "sign me up!", or would it more likely be something that rhymes with "duck shoe" ?
"Wrong! Some buyers are willing to pay $1 a song. The fact that people are still pirating and using grey-market sites like allofmp3.com shows this. Anyone that has taken Econ 101 knows that the supply and demand are not matching up here. "
That's a good basic fundamental for Econ 101, but in the real world, the supplier gets to pick the point on the curve that's optimum for them. That point may not be the point of highest volume, or -- and this is the tough one -- the point of highest profit.
The iTMS is a runaway success by any means. My guess is that Apple is perfectly happy with the volume and growth. Plenty of Slashdotters say things like "If only songs were $0.80 or $0.50, then I'd go legit, but in the meantime I have no choice but to pirate" (you may laugh, but that's a common attitude around here). Frankly, I don't think there's a lot of elasticity between a buck and $0.80, but even if Apple's research shows otherwise, it may not be worth their while in the long term to take pricing to $0.80 at this point.
Music is somewhat of a commodity item (which is why, believe it or not, it's a low-margin industry), but this point can be explained better by looking at luxury goods. Most people would say that Ferarris are too expensive. Ferarri might have higher sales and even higher profitability if they lowered their price points. Yet their prices are only going up, and Ferarri sells every last car it can build.