I imagine that if I only got my news via/., I'd be under the assumption that movie studios, law enforcement, et. al. target individual sharers exclusively and don't go after the large-scale distributors. Slashdot tends to cover the stories of suing file traders with much more regularity than they cover stories of shutting down DVD factories in China (presumably because Slashdot readers have more empathy for the former), so your confusion is understandable.
The reality is that law enforcement and copyright holders, just like you and me, can indeed walk and chew gum at the same time.
This false assumption is common in all walks of life. If you've ever wondered out loud why the cops aren't out busting the drug dealers and drug smugglers, etc. instead of writing you that ticket for failing to come to a complete stop, the answer is that law enforcement is indeed busting drug dealers and gun smugglers. They are fully capable of doing this, despite the fact that the officer happens to be writing you a ticket at that precise moment.
You are, of course, correct. GM and Daimler-Chrysler are fierce competitors; perhaps even more so now that Chrysler/Dodge designers have access to the Mercedes parts bin. Today you can find Distronic in Mercedes-branded cars; perhaps in a few years it will be in Chrysler-branded minivans. All that GM can do for the time being is take diversionary tactics by talking about what they'll have several years down the road.
"Why don't you RTFA before posting. The cruise control designed by GM can actually steer. Nah, it would be too much to ask."
I don't think that point was lost on the grandparent. I don't think it's a coincidence that GM has made this announcement so quickly on the heels of Mercedes shipping vehicles with the new version of Distronic. GM is applying a little diversion here... "big deal... in a few years, we'll have a car that can STEER, too!".
Not a bad move on GM's part given that Mercedes is so far ahead of them.
"That's the thing that fervent, DRM supports just don't seem to understand. If you can hear it, you can record it."
I'm sure they understand this just fine. They understand that it is impossible to make something absolutely copy-proof, so they settle for "sufficiently difficult."
If you're not sure what I mean, consider the auto security business or even the home security business. It's impossible to make a cost-effective auto security system that will thwart the thief who has sufficient training and who has sufficient desire to take your car. However, 99% of car thieves don't fall into this category, so a decent security system is usually good enough.
Slashdotters often think that because they have the motivation and the skills to jump through hoops to defeat DRM, then the public at large must also have this same motivation and skill. But, let's face it: when it comes to things technical, Slashdot readers are often up above the 90th percentile.
"so why didn't they write the press release in english?"
Just in case you're not making a joke... it's in Japanese because it was written by Japanese people, for Japanese people. This is a Japanese market product.
While it often seems nowadays that English is the universal language and everybody speaks it, travel enough and you'll find people who don't. If, just to throw some numbers out, 50% of Japanese people speak English but 100% of them speak Japanese, the prudent thing is to use the native language.
"Consider though, that the people you are calling pirates may have a legitimate reason to dislike the term and find it insulting. Imagine how most of the world would react if you started calling them 'gay' when they start acting cheerful."
I guess some more clarification is in order. Here in the US, "pirate" has never held much stigma among the people who actually do the pirating. About five years ago, when P2P apps put music piracy into the mainstream and it was no longer largely the domain of the Slashdot crowd, a new "don't call it piracy, call it copyright infringement" movement took form in an effort to make it more socially acceptable. It was, as you've inferred, started by folks new to piracy, who were offended by the title. That's certainly their prerogative, but it is quite simply revisionist history to claim that piracy isn't a perfectly accurate word.
"And as soon as you can provide a reference to confirm your '400 years' theory, you may get some support for it."
I defer to somebody who has the OED lying around. I used to think the meaning was about 200 years old, then somebody provided a cite the other day for a ~ 300 year old reference from the OED, and then somebody ELSE came up with a 400 year old reference! I wish I'd kept that link. Either way, the OED is a great resource for these sorts of etymological questions, and the definition is very, very old.
"The point is that throwing around emotionally loaded words like 'piracy' and 'theft' is insulting to some."
Apparently so. The bottom line is this: if you're a songwriter and you rely on royalty payments to pay the rent, if you've suddenly found that you're not making ends meet because a new generation has discovered the glorious concept that Information Wants to be Free, it makes not one whit of difference to you or your landlord if the kids helping themselves to your work in lieu of paying for it are calling it "piracy," "copyright infringement," or some word in that African language with the clicking sound. If somebody's costing me money while simultaneously trying to sanitize their actions, I'll kick their ass right proper, regardless of the efforts they've taken to rationalize it.
"Cassettes are actively being produced and sold at lower cost than CDs -- and only the most steadfast idiot would continue to do so if it required losing money. Assuming that record companies aren't actively trying to lose money, the only conclusion one can possibly draw is that record companies are perfectly capable of chopping 20% to 40% off the price of CDs while still turning a profit."
Your conclusion is understandable but may not be accurate. You can play a lot of tricks with margin blending. Producing a CD and a cassette version of the same material involves a lot of shared sunk costs (production costs of the masters, advertising and promotion, and the like); by applying this to the bottom line of of the CD sales (which can be sold for more money), you can work out the numbers so that the only thing you need to pay for from the sale of the cassette version is the cost of the material and the shipping, and you get the advantage of selling it in two formats and increasing your penetration. The downside is that if you sell a CD and cassette version of the same content, your CD is burdened with a lot more of the intangibles and might make you the same or less margin even though the material costs are less and you're selling it for twice as much. That's why I've been droning on about how the difference between net and gross is a killer.
"I don't doubt that you understand the economic realities of the industry that you work in; however, I think you're making some erroneous extrapolations from equipment manufacture and distribution into the Alice-in-Wonderlandesque world of music production."
My numbers may not be accurate (I've indicated where I've made estimates) but the math, the realities, and the tricks are the same regardless of the industry. It's all widgets. And selling widgets isn't as simple as many people think (particularly here on Slashdot, where the complexity of everything except for programming computers is over-trivialized) -- that's why business schools offer post-grad degrees!
"Actually, duplicating some of a CD or cassette tape for a friend or family member has long been accepted as fair-use - ie not requiring authorization from the copyright holder."
That's a popular myth. I used to think so, too, until I did some research. Unfortunately, fair use doctrine doesn't give you much leeway with music beyond listening to it in your private home, or content- or space-shifting for your personal use.
Luckily, such between-friends copying tends to be well under the radar of most copyright holders, so it's one of those tree-falls-in-the-forest things. It's when one puts a track in one's P2P share directory for thousands of "friends" on the Internet that copyright holders tend to take notice.
"Oh my god! The jewel case and paper insert must cost like $10 each to produce. It's a wonder that the RIAA makes any money. The royalties? I believe it's like $2 per CD."
That sounds about right for the royalties. I think the BOM cost for a CD is another two bucks. Keep in mind that record labels sell the CDs into the disti channel for about $8 - $10; anything above that goes to the distis and retailers, who have their own overhead.
The difference between gross margin and net margin is a real bitch. See my earlier post for some other examples of how the gross margin is whittled down. The examples I gave apply to any restail industry, not just music.
"I am not arguing that piracy is ok. But compared to actually stealing something? It's not the same thing. It's even worse when you call it 'piracy', because piracy is a much worse crime still."
Copyright infringement and piracy are synonymous. I think you may be confused by the fact that piracy has multiple meanings, as do the word "bark" and "desert". The meaning to which we are referring is (per "dict piracy" in your Firefox address bar):
The unauthorized use or reproduction of copyrighted or patented material: software piracy.
e.g. we're not talking about running a pirate radio station or taking things from boats. I infer from the.cx in your domain that you're not a native English speaker, so the confusion is understandable.
An interesting bit of trivia is that the use of the word "piracy" to describe unauthorized copying goes back some four hundred years; if that's not older than the word "copyright," then it's at least older than copyright law as we know it.
"but I'm going to assert "complete and utter bullshit,"
Out of line.
"(For example, "The Very Best of Kenny Rogers" on Amazon: $5.95 on tape versus $9.95 on CD). Based on what I've seen, margins on CDs must top 50% -- unless record companies take a significant loss on cassettes."
Yeah, my guess is that the cassette version has been price protected (that is, the record company issued a credit to Amazon to help them sell it down). Not a huge demand for Kenny Rogers cassettes any more. Price protections are likely built into the margin model for record companies; the 20% guesstimate accounts for price protections. The record companies may very well be taking a bath on unsellable cassette inventory, but they make it back on the platinum-selling CDs. The recording industry is a speculative market and the 20% net margin estimate is an end-of-year average, but not typical per-piece net margin, if you know what I mean. You're probably correct that the big-selling CDs might net 50%, but those sales help pay for a lot of failures.
In case you're curious, Amazon makes about 12 - 15 points per sale and disti take about five points, so the net sell-in price (after price protection) was about $4.85. I'd count about $2.00 in royalties for Kenny and crew (he does a lot of covers and doesn't write a lot of his own stuff, so I'm sure there's a lot of mechanicals and compulsories in there) and maybe another buck for shipping and miscellaneous overhead (record company employees do not work for free). So, if the cassette cost them two bucks to make, you're correct that they're taking a loss after the price protection -- hence the sub-20% net margin even while they may make > 50% on some CDs.
FWIW, similar things happen in the computer industry. I manage a line of peripherals that everybody reading this has heard of (and might even own) and my net margins range from 5% to 50%. The average net margin from my brand is somewhere in the middle.
"And what about us poor schmucks who buy blank CDs for purposes other than music piracy?"
It's easy, at least in the US -- avoid the CD-Rs labelled "music" or "audio" and you'll do fine. The only difference is a bit of encoding near the spindle that lets set-top CD burners recognize them. There is no levy in the US on general-purpose data CD-Rs (although I can't say the same for our friends in Canada).
"I don't want my CD-R purchases taxed more just because the RIAA is too stubborn to overhaul its business model."
We'll put it aside for a second that the large majority of the levy on audio CD-Rs goes to artists and musicians (an important point to understand for anybody who kneels at the altar of "artists good, record companies bad"). But can you elaborate on the business model to which you're referring? If you're referring to the "charge money for goods and services" model, it's undergone significant changes in the past ten years. CD prices have dropped almost 50%, and they've finally embraced online distribution, which is growing at a logarithmic rate. They're using the "carrot and stick" approach: sure, they're lowering prices and taking advantage of the demand for downloadable music, but they'll also sue people if they think it will ultimately help their bottom line. Likewise, if they get a small percentage of the levy charged on digital recording devices and media, it's all good. Just as in your household budget, more money is always better.
This is an approach taken by many businesses. For instance, if you ran a retail store, you'd consider running sales and selling high quality merchandise and doing advertising -- you're not relegated to picking just one strategy, and neither are record companies.
Nice summary. Another one of my favorite excuses is "artists who want to be paid for their work aren't artists... they're businesspeople!". Yet another is observations about Shakespeare, Mozart, etc. that reveal a grossly inadequate understanding of how commerce has worked for, well, pretty much the last two thousand years.
"When asked how to deal with the issue, they said that they were going to make music more affordable, so that it cost less time and money than the time and effort to pirate it."
Although you were being sarcastic, that is indeed major part of their strategy (and more here). The record labels can indeed walk and chew gum at the same time, and they've acknowledged using -- in their own words -- a "carrot and stick" approach. This certainly makes sense -- if you owned a retail store and you noticed that you were losing a lot of money to theft, you'd certainly look into lowering your prices to reduce the impulse to shoplift, but you'd install that security system and prosecute shoplifters, too.
FWIW, in 1995, a new CD cost about $18. That would be about $22.50 in today's money -- meaning that CD prices have dropped by almost half in constant dollars.
"I know I'd buy more music (cd, mp3 or ?) if it was reasonably priced. $1 dollar/mp3 and $12.99 or more for a CD?? I'm sure they have some justification for the pricing, but... obviously something's amiss."
Amazingly enough, at $12.99 per CD, record companies typically net significantly less than 20% at the end of the year. If you were to plot the net margins of all the companies from which you buy goods and services, CDs would be on the far left of the graph. Choosing to pay or not pay for CDs is one thing, but it's not accurate to state that CD prices are "unreasonable" if one also happily buys food at the supermarket, clothing at the mall, PCs (including parts and accessories), and countless other items from industries that typically enjoy net margins well in excess on what the record industry relies on.
The "but I only pay $0.25 for CD-Rs, so $13 for a CD is an outrage! Bok bok bok!" kids are missing the deadly difference between gross margin and net margin. The $13 you pay for a CD covers all the operating costs (salary, overhead including shrinkage, advertising) of the retailer, as well as the distributor (5% right there, if disty margins are the same in the record industry as they are in the computer peripheral business), and must cover the cost of shipping, returns (an educated guess is that it's about 10% in the record industry), price protections (probably another 10%), co-op advertising (another 5% - 10%), the salary of everybody at the record company and studio who worked on it in some way, royalties for the composers and songwriters, and of course the COGS, which are about 25% of the sell-in price to disti. This is why even at low-overhead indy record labels, a CD must sell about 10K pieces before it breaks even (that number is said to be 100K for the big RIAA companies).
In short, simple bromides like "CD prices should be more reasonably priced" won't cut it. I've no doubt that you and others would like them to be cheaper (I wish lots of things were cheaper) but a sub-20 point net margin is certainly reasonable in our economy.
As for online music sales... Apple has sold 50 million tracks, and the online music industry is growing logarithmically. It may be hard to convince them that their product is not "reasonably priced." The biggest mistake we can make is thinking the enemy is stupid. You can bet that Apple and the record companies have done the requisite surveys and research on elasticity and demand to know that $1.00 is the right price to charge, and that charging $0.90 or $0.80 will not result in higher net revenues. I know I sure wouldn't buy more if they were a dime cheaper -- I don't lose any sleep over a buck a track. I'll take your word for it that you would, but Apple's research appears to indicate that there more consumers like me than you.
"OK, quote some laws then, because that opinion looks a lot like bullshit to me."
You're losing your way by -- as many, many Slashdotters do -- ignoring colloquial use and making the assumption that a law book is the only valid source here. This argument falls down when you think of all the other colloquialisms that are out there: for example, no lawbook will contain the phrase "kiddy porn" but we all know what it means.
English is a great, big, colorful language. We have "stolen kisses," "stealing your thunder," "theft of service" (as in cable or satellite TV), "stealing third base" (a baseball term), to "steal the show", to "steal away", "that item was a real steal" (as in bargain) and countless other examples that would set the "something must be permanently deprived!" Slashdot crowd into a frantic buzz.
If you're using Firefox, you can type "dict steal" into the address bar for more information.
" Doesn't it seem odd for a company to express concern over getting sued?"
Not to those of us who've read plenty of SEC filings in our day. The short answer is that if you're a publicly traded company, you have to disclose your risks and liabilities, or you run the risk of being sued by your shareholders.
"Seems close to an admission of guilt to me."
It is simply an acknowledgement that they are (a) doing stuff that is pissing off Apple, and that (b) Apple is sue-happy.
"But publicly decrying Cnet news they're setting a precedent. They're saying, write something we don't like, and we'll stop talking to you."
Not true in the slightest. Having worked for a few well-known silicon valley companies, I've lost track of the times we've done this. If we thought that a magazine or other news source is being unfair to us, we stopped talking to them. If we thought they were being fair, but otherwise didn't like what they had to say, we'd stop talking to them. If we didn't think they were worth our time, we wouldn't talk to them in the first place. This is hardly limited to the high tech industry. Ferrari stopped loaning cars to Car and Driver years ago. C&D has mentioned this and gotten in their digs against Ferrari. The world keeps turning.
This is apparently the first time that you have encountered this -- and that's fine. But keep in mind that whether you are an individual, or you run a ten-person company, or a billion dollar company: whom you choose to speak to is entirely, absolutely your prerogative.
"...but I'd like to see if the $5M is actual cash, or an equivalent amount of Microsoft product. "
The article linked from the summary makes it straightforward. They got a cash judgement from Scott Richter; any cash they're able to get from him (minus the $1MM stated to cover legal fees) will be donated.
This isn't always the case. AOL recently won a judgement against a spammer who had no cash, so AOL was awarded the spammer's Hummer H2 and some gold. They are planning a sweepstakes to give these to lucky AOL users -- although, of course, "lucky AOL user" is a contradiction in terms.
"Also, which agenicies will get the money to fight crime? Will it be traditional law enforcement, or will it be a group like the Business Software Alliance?"
It's going to law enforcement agencies and the state of New York. The BSA is a private organization, and not a law enforcement agency.
" I think the GP points out rightly that it isn't 'charity' when the intention is not noble... read PR."
It's safe to say that most charitable donations are not 100% noble.
Those of you whose income have made the standard dection a tiny dot in your rear view mirror know exactly what I'm talking about. Those of you who have no incentive to donate to charity may continue to question the motives of those of us who do.
"Also, 5mn is a miniscule microscopic portion of the amount MS spends in R&D anyways, so it's doubtful this money is gonna help fight crime or spam. Or improve the IT skills of the average New Yorker."
$5MM is $5MM. Microsoft's annual R&D expenditure has absolutely no bearing on how effectively New York will spend the money.
"Microsoft is giving money away that doesn't belong to them in the first place."
The legal system in the USA is set up so that, generally speaking, if somebody has caused you harm, you can take them to court. Richter has cost Microsoft money by pounding their Hotmail servers with spam, so they've collected their due.
Likewise, if you run a webmail service and you can show that Scott Richter's spamming has cost you money, you can sue him, too.
I think your questions are mostly answered here. I found that link by going to the CPCC web site and poking around a bit. That page covers the processes for sampling airplay and sales, and distributing the cash. Ultimately they assume that people rip music in the same ratios that they buy it (which has some merit; the most popular tracks on the P2P services tend to match what's on the Billboard Top Ten), but the huge, glaring inequity is that only Canadian artists are currently eligible to get the moola.
If you have any other questions, you'll probably find them elsewhere on that site -- good luck.
"These levies go to the Canadian Recording Industry Association (CRIA) because they lobbied the government -- and are still actively influencing the Heritage Minister -- to try and convince them that implied theft of Canadian content should go back to the association that represents them."
The CRIA (through its member record companies) indirectly gets a minority of the funds.
As has been pointed out elsewhere, the levy is collected by the CPCC. They distribute the money to songwriters, music publishers, recording artists, and record companies. Specifically, 66% goes to songwriters/composers/publishers, 18.9% goes to performers, and 15.1% goes to record companies. This breakdown is similar to the levy collected in the US on music CD-Rs -- it's primarily for the benefit of artists, with record companies getting the small slice of the pie. None goes directly to the CRIA.
"So here is basically what has happened. The American recording industry has opened a wing in Canada, slapped on a Canadian flag, claimed to represent Canadian musicians, pressured government into forcing levvies for implied theft and then stolen that money."
The primary beneficiaries have been Canadian musicians and performers. The musician and performers' unions were just as complicit in lobbying for the levy. This is an important fact to understand for anybody who kneels at the shrine of "artists good, record companies bad."
"Classifying BFC as a documentary bastardizes the work of authentic documentaries that attempt to provide an objective presentation of a subject's facts."
I saw that "documentaries must be objective" meme pop up shortly after BFC was released. I think it was uttered by a lot of right-wingers who were trying to be disingenuous (the "say it enough times and it becomes true" tactic), but I'll take it as a given that you actually believe it.
If that's the case, do you recall where you heard this? Was it something you read after the release of BFC?
Slashdot Mirror
I imagine that if I only got my news via /., I'd be under the assumption that movie studios, law enforcement, et. al. target individual sharers exclusively and don't go after the large-scale distributors. Slashdot tends to cover the stories of suing file traders with much more regularity than they cover stories of shutting down DVD factories in China (presumably because Slashdot readers have more empathy for the former), so your confusion is understandable.
The reality is that law enforcement and copyright holders, just like you and me, can indeed walk and chew gum at the same time.
This false assumption is common in all walks of life. If you've ever wondered out loud why the cops aren't out busting the drug dealers and drug smugglers, etc. instead of writing you that ticket for failing to come to a complete stop, the answer is that law enforcement is indeed busting drug dealers and gun smugglers. They are fully capable of doing this, despite the fact that the officer happens to be writing you a ticket at that precise moment.
"Chrysler is OWNED BY Mercedes."
You are, of course, correct. GM and Daimler-Chrysler are fierce competitors; perhaps even more so now that Chrysler/Dodge designers have access to the Mercedes parts bin. Today you can find Distronic in Mercedes-branded cars; perhaps in a few years it will be in Chrysler-branded minivans. All that GM can do for the time being is take diversionary tactics by talking about what they'll have several years down the road.
"Why don't you RTFA before posting. The cruise control designed by GM can actually steer. Nah, it would be too much to ask."
I don't think that point was lost on the grandparent. I don't think it's a coincidence that GM has made this announcement so quickly on the heels of Mercedes shipping vehicles with the new version of Distronic. GM is applying a little diversion here... "big deal... in a few years, we'll have a car that can STEER, too!".
Not a bad move on GM's part given that Mercedes is so far ahead of them.
"Apple didn't blunder, but in all likelihood took the correct position that a displayed representation of a heirarchical filesystem was unpatentable."
That doesn't sound like typical Apple behavior -- they can and will use the legal system to their advantage.
Apple owns hundreds of patents for ideas and processes which would seem intuitive to the average Slashdotter. To wit:
Perhaps I am over-simplifying some of these, but this is par for the course whenever Slashdotters discuss particular patents.
"That's the thing that fervent, DRM supports just don't seem to understand. If you can hear it, you can record it."
I'm sure they understand this just fine. They understand that it is impossible to make something absolutely copy-proof, so they settle for "sufficiently difficult."
If you're not sure what I mean, consider the auto security business or even the home security business. It's impossible to make a cost-effective auto security system that will thwart the thief who has sufficient training and who has sufficient desire to take your car. However, 99% of car thieves don't fall into this category, so a decent security system is usually good enough.
Slashdotters often think that because they have the motivation and the skills to jump through hoops to defeat DRM, then the public at large must also have this same motivation and skill. But, let's face it: when it comes to things technical, Slashdot readers are often up above the 90th percentile.
"so why didn't they write the press release in english?"
Just in case you're not making a joke... it's in Japanese because it was written by Japanese people, for Japanese people. This is a Japanese market product.
While it often seems nowadays that English is the universal language and everybody speaks it, travel enough and you'll find people who don't. If, just to throw some numbers out, 50% of Japanese people speak English but 100% of them speak Japanese, the prudent thing is to use the native language.
"Consider though, that the people you are calling pirates may have a legitimate reason to dislike the term and find it insulting. Imagine how most of the world would react if you started calling them 'gay' when they start acting cheerful."
I guess some more clarification is in order. Here in the US, "pirate" has never held much stigma among the people who actually do the pirating. About five years ago, when P2P apps put music piracy into the mainstream and it was no longer largely the domain of the Slashdot crowd, a new "don't call it piracy, call it copyright infringement" movement took form in an effort to make it more socially acceptable. It was, as you've inferred, started by folks new to piracy, who were offended by the title. That's certainly their prerogative, but it is quite simply revisionist history to claim that piracy isn't a perfectly accurate word.
"And as soon as you can provide a reference to confirm your '400 years' theory, you may get some support for it."
I defer to somebody who has the OED lying around. I used to think the meaning was about 200 years old, then somebody provided a cite the other day for a ~ 300 year old reference from the OED, and then somebody ELSE came up with a 400 year old reference! I wish I'd kept that link. Either way, the OED is a great resource for these sorts of etymological questions, and the definition is very, very old.
"The point is that throwing around emotionally loaded words like 'piracy' and 'theft' is insulting to some."
Apparently so. The bottom line is this: if you're a songwriter and you rely on royalty payments to pay the rent, if you've suddenly found that you're not making ends meet because a new generation has discovered the glorious concept that Information Wants to be Free, it makes not one whit of difference to you or your landlord if the kids helping themselves to your work in lieu of paying for it are calling it "piracy," "copyright infringement," or some word in that African language with the clicking sound. If somebody's costing me money while simultaneously trying to sanitize their actions, I'll kick their ass right proper, regardless of the efforts they've taken to rationalize it.
"Cassettes are actively being produced and sold at lower cost than CDs -- and only the most steadfast idiot would continue to do so if it required losing money. Assuming that record companies aren't actively trying to lose money, the only conclusion one can possibly draw is that record companies are perfectly capable of chopping 20% to 40% off the price of CDs while still turning a profit."
Your conclusion is understandable but may not be accurate. You can play a lot of tricks with margin blending. Producing a CD and a cassette version of the same material involves a lot of shared sunk costs (production costs of the masters, advertising and promotion, and the like); by applying this to the bottom line of of the CD sales (which can be sold for more money), you can work out the numbers so that the only thing you need to pay for from the sale of the cassette version is the cost of the material and the shipping, and you get the advantage of selling it in two formats and increasing your penetration. The downside is that if you sell a CD and cassette version of the same content, your CD is burdened with a lot more of the intangibles and might make you the same or less margin even though the material costs are less and you're selling it for twice as much. That's why I've been droning on about how the difference between net and gross is a killer.
"I don't doubt that you understand the economic realities of the industry that you work in; however, I think you're making some erroneous extrapolations from equipment manufacture and distribution into the Alice-in-Wonderlandesque world of music production."
My numbers may not be accurate (I've indicated where I've made estimates) but the math, the realities, and the tricks are the same regardless of the industry. It's all widgets. And selling widgets isn't as simple as many people think (particularly here on Slashdot, where the complexity of everything except for programming computers is over-trivialized) -- that's why business schools offer post-grad degrees!
"Actually, duplicating some of a CD or cassette tape for a friend or family member has long been accepted as fair-use - ie not requiring authorization from the copyright holder."
That's a popular myth. I used to think so, too, until I did some research. Unfortunately, fair use doctrine doesn't give you much leeway with music beyond listening to it in your private home, or content- or space-shifting for your personal use.
Luckily, such between-friends copying tends to be well under the radar of most copyright holders, so it's one of those tree-falls-in-the-forest things. It's when one puts a track in one's P2P share directory for thousands of "friends" on the Internet that copyright holders tend to take notice.
"Oh my god! The jewel case and paper insert must cost like $10 each to produce. It's a wonder that the RIAA makes any money. The royalties? I believe it's like $2 per CD."
That sounds about right for the royalties. I think the BOM cost for a CD is another two bucks. Keep in mind that record labels sell the CDs into the disti channel for about $8 - $10; anything above that goes to the distis and retailers, who have their own overhead.
The difference between gross margin and net margin is a real bitch. See my earlier post for some other examples of how the gross margin is whittled down. The examples I gave apply to any restail industry, not just music.
"I am not arguing that piracy is ok. But compared to actually stealing something? It's not the same thing. It's even worse when you call it 'piracy', because piracy is a much worse crime still."
Copyright infringement and piracy are synonymous. I think you may be confused by the fact that piracy has multiple meanings, as do the word "bark" and "desert". The meaning to which we are referring is (per "dict piracy" in your Firefox address bar):
The unauthorized use or reproduction of copyrighted or patented material: software piracy.
e.g. we're not talking about running a pirate radio station or taking things from boats. I infer from the .cx in your domain that you're not a native English speaker, so the confusion is understandable.
An interesting bit of trivia is that the use of the word "piracy" to describe unauthorized copying goes back some four hundred years; if that's not older than the word "copyright," then it's at least older than copyright law as we know it.
I hope this helps.
"but I'm going to assert "complete and utter bullshit,"
Out of line.
"(For example, "The Very Best of Kenny Rogers" on Amazon: $5.95 on tape versus $9.95 on CD). Based on what I've seen, margins on CDs must top 50% -- unless record companies take a significant loss on cassettes."
Yeah, my guess is that the cassette version has been price protected (that is, the record company issued a credit to Amazon to help them sell it down). Not a huge demand for Kenny Rogers cassettes any more. Price protections are likely built into the margin model for record companies; the 20% guesstimate accounts for price protections. The record companies may very well be taking a bath on unsellable cassette inventory, but they make it back on the platinum-selling CDs. The recording industry is a speculative market and the 20% net margin estimate is an end-of-year average, but not typical per-piece net margin, if you know what I mean. You're probably correct that the big-selling CDs might net 50%, but those sales help pay for a lot of failures.
In case you're curious, Amazon makes about 12 - 15 points per sale and disti take about five points, so the net sell-in price (after price protection) was about $4.85. I'd count about $2.00 in royalties for Kenny and crew (he does a lot of covers and doesn't write a lot of his own stuff, so I'm sure there's a lot of mechanicals and compulsories in there) and maybe another buck for shipping and miscellaneous overhead (record company employees do not work for free). So, if the cassette cost them two bucks to make, you're correct that they're taking a loss after the price protection -- hence the sub-20% net margin even while they may make > 50% on some CDs.
FWIW, similar things happen in the computer industry. I manage a line of peripherals that everybody reading this has heard of (and might even own) and my net margins range from 5% to 50%. The average net margin from my brand is somewhere in the middle.
I hope this helps.
"And what about us poor schmucks who buy blank CDs for purposes other than music piracy?"
It's easy, at least in the US -- avoid the CD-Rs labelled "music" or "audio" and you'll do fine. The only difference is a bit of encoding near the spindle that lets set-top CD burners recognize them. There is no levy in the US on general-purpose data CD-Rs (although I can't say the same for our friends in Canada).
"I don't want my CD-R purchases taxed more just because the RIAA is too stubborn to overhaul its business model."
We'll put it aside for a second that the large majority of the levy on audio CD-Rs goes to artists and musicians (an important point to understand for anybody who kneels at the altar of "artists good, record companies bad"). But can you elaborate on the business model to which you're referring? If you're referring to the "charge money for goods and services" model, it's undergone significant changes in the past ten years. CD prices have dropped almost 50%, and they've finally embraced online distribution, which is growing at a logarithmic rate. They're using the "carrot and stick" approach: sure, they're lowering prices and taking advantage of the demand for downloadable music, but they'll also sue people if they think it will ultimately help their bottom line. Likewise, if they get a small percentage of the levy charged on digital recording devices and media, it's all good. Just as in your household budget, more money is always better.
This is an approach taken by many businesses. For instance, if you ran a retail store, you'd consider running sales and selling high quality merchandise and doing advertising -- you're not relegated to picking just one strategy, and neither are record companies.
Nice summary. Another one of my favorite excuses is "artists who want to be paid for their work aren't artists... they're businesspeople!". Yet another is observations about Shakespeare, Mozart, etc. that reveal a grossly inadequate understanding of how commerce has worked for, well, pretty much the last two thousand years.
"When asked how to deal with the issue, they said that they were going to make music more affordable, so that it cost less time and money than the time and effort to pirate it."
Although you were being sarcastic, that is indeed major part of their strategy (and more here). The record labels can indeed walk and chew gum at the same time, and they've acknowledged using -- in their own words -- a "carrot and stick" approach. This certainly makes sense -- if you owned a retail store and you noticed that you were losing a lot of money to theft, you'd certainly look into lowering your prices to reduce the impulse to shoplift, but you'd install that security system and prosecute shoplifters, too.
FWIW, in 1995, a new CD cost about $18. That would be about $22.50 in today's money -- meaning that CD prices have dropped by almost half in constant dollars.
"I know I'd buy more music (cd, mp3 or ?) if it was reasonably priced. $1 dollar/mp3 and $12.99 or more for a CD?? I'm sure they have some justification for the pricing, but... obviously something's amiss."
Amazingly enough, at $12.99 per CD, record companies typically net significantly less than 20% at the end of the year. If you were to plot the net margins of all the companies from which you buy goods and services, CDs would be on the far left of the graph. Choosing to pay or not pay for CDs is one thing, but it's not accurate to state that CD prices are "unreasonable" if one also happily buys food at the supermarket, clothing at the mall, PCs (including parts and accessories), and countless other items from industries that typically enjoy net margins well in excess on what the record industry relies on.
The "but I only pay $0.25 for CD-Rs, so $13 for a CD is an outrage! Bok bok bok!" kids are missing the deadly difference between gross margin and net margin. The $13 you pay for a CD covers all the operating costs (salary, overhead including shrinkage, advertising) of the retailer, as well as the distributor (5% right there, if disty margins are the same in the record industry as they are in the computer peripheral business), and must cover the cost of shipping, returns (an educated guess is that it's about 10% in the record industry), price protections (probably another 10%), co-op advertising (another 5% - 10%), the salary of everybody at the record company and studio who worked on it in some way, royalties for the composers and songwriters, and of course the COGS, which are about 25% of the sell-in price to disti. This is why even at low-overhead indy record labels, a CD must sell about 10K pieces before it breaks even (that number is said to be 100K for the big RIAA companies).
In short, simple bromides like "CD prices should be more reasonably priced" won't cut it. I've no doubt that you and others would like them to be cheaper (I wish lots of things were cheaper) but a sub-20 point net margin is certainly reasonable in our economy.
As for online music sales... Apple has sold 50 million tracks, and the online music industry is growing logarithmically. It may be hard to convince them that their product is not "reasonably priced." The biggest mistake we can make is thinking the enemy is stupid. You can bet that Apple and the record companies have done the requisite surveys and research on elasticity and demand to know that $1.00 is the right price to charge, and that charging $0.90 or $0.80 will not result in higher net revenues. I know I sure wouldn't buy more if they were a dime cheaper -- I don't lose any sleep over a buck a track. I'll take your word for it that you would, but Apple's research appears to indicate that there more consumers like me than you.
"OK, quote some laws then, because that opinion looks a lot like bullshit to me."
You're losing your way by -- as many, many Slashdotters do -- ignoring colloquial use and making the assumption that a law book is the only valid source here. This argument falls down when you think of all the other colloquialisms that are out there: for example, no lawbook will contain the phrase "kiddy porn" but we all know what it means.
English is a great, big, colorful language. We have "stolen kisses," "stealing your thunder," "theft of service" (as in cable or satellite TV), "stealing third base" (a baseball term), to "steal the show", to "steal away", "that item was a real steal" (as in bargain) and countless other examples that would set the "something must be permanently deprived!" Slashdot crowd into a frantic buzz.
If you're using Firefox, you can type "dict steal" into the address bar for more information.
" Doesn't it seem odd for a company to express concern over getting sued?"
Not to those of us who've read plenty of SEC filings in our day. The short answer is that if you're a publicly traded company, you have to disclose your risks and liabilities, or you run the risk of being sued by your shareholders.
"Seems close to an admission of guilt to me."
It is simply an acknowledgement that they are (a) doing stuff that is pissing off Apple, and that (b) Apple is sue-happy.
"But publicly decrying Cnet news they're setting a precedent. They're saying, write something we don't like, and we'll stop talking to you."
Not true in the slightest. Having worked for a few well-known silicon valley companies, I've lost track of the times we've done this. If we thought that a magazine or other news source is being unfair to us, we stopped talking to them. If we thought they were being fair, but otherwise didn't like what they had to say, we'd stop talking to them. If we didn't think they were worth our time, we wouldn't talk to them in the first place. This is hardly limited to the high tech industry. Ferrari stopped loaning cars to Car and Driver years ago. C&D has mentioned this and gotten in their digs against Ferrari. The world keeps turning.
This is apparently the first time that you have encountered this -- and that's fine. But keep in mind that whether you are an individual, or you run a ten-person company, or a billion dollar company: whom you choose to speak to is entirely, absolutely your prerogative.
" ...but I'd like to see if the $5M is actual cash, or an equivalent amount of Microsoft product. "
The article linked from the summary makes it straightforward. They got a cash judgement from Scott Richter; any cash they're able to get from him (minus the $1MM stated to cover legal fees) will be donated.
This isn't always the case. AOL recently won a judgement against a spammer who had no cash, so AOL was awarded the spammer's Hummer H2 and some gold. They are planning a sweepstakes to give these to lucky AOL users -- although, of course, "lucky AOL user" is a contradiction in terms.
"Also, which agenicies will get the money to fight crime? Will it be traditional law enforcement, or will it be a group like the Business Software Alliance?"
It's going to law enforcement agencies and the state of New York. The BSA is a private organization, and not a law enforcement agency.
" I think the GP points out rightly that it isn't 'charity' when the intention is not noble... read PR."
It's safe to say that most charitable donations are not 100% noble.
Those of you whose income have made the standard dection a tiny dot in your rear view mirror know exactly what I'm talking about. Those of you who have no incentive to donate to charity may continue to question the motives of those of us who do.
"Also, 5mn is a miniscule microscopic portion of the amount MS spends in R&D anyways, so it's doubtful this money is gonna help fight crime or spam. Or improve the IT skills of the average New Yorker."
$5MM is $5MM. Microsoft's annual R&D expenditure has absolutely no bearing on how effectively New York will spend the money.
"Microsoft is giving money away that doesn't belong to them in the first place."
The legal system in the USA is set up so that, generally speaking, if somebody has caused you harm, you can take them to court. Richter has cost Microsoft money by pounding their Hotmail servers with spam, so they've collected their due.
Likewise, if you run a webmail service and you can show that Scott Richter's spamming has cost you money, you can sue him, too.
I hope this clears up your misunderstanding.
I think your questions are mostly answered here. I found that link by going to the CPCC web site and poking around a bit. That page covers the processes for sampling airplay and sales, and distributing the cash. Ultimately they assume that people rip music in the same ratios that they buy it (which has some merit; the most popular tracks on the P2P services tend to match what's on the Billboard Top Ten), but the huge, glaring inequity is that only Canadian artists are currently eligible to get the moola.
If you have any other questions, you'll probably find them elsewhere on that site -- good luck.
"These levies go to the Canadian Recording Industry Association (CRIA) because they lobbied the government -- and are still actively influencing the Heritage Minister -- to try and convince them that implied theft of Canadian content should go back to the association that represents them."
The CRIA (through its member record companies) indirectly gets a minority of the funds.
As has been pointed out elsewhere, the levy is collected by the CPCC. They distribute the money to songwriters, music publishers, recording artists, and record companies. Specifically, 66% goes to songwriters/composers/publishers, 18.9% goes to performers, and 15.1% goes to record companies. This breakdown is similar to the levy collected in the US on music CD-Rs -- it's primarily for the benefit of artists, with record companies getting the small slice of the pie. None goes directly to the CRIA.
"So here is basically what has happened. The American recording industry has opened a wing in Canada, slapped on a Canadian flag, claimed to represent Canadian musicians, pressured government into forcing levvies for implied theft and then stolen that money."
The primary beneficiaries have been Canadian musicians and performers. The musician and performers' unions were just as complicit in lobbying for the levy. This is an important fact to understand for anybody who kneels at the shrine of "artists good, record companies bad."
"Classifying BFC as a documentary bastardizes the work of authentic documentaries that attempt to provide an objective presentation of a subject's facts."
I saw that "documentaries must be objective" meme pop up shortly after BFC was released. I think it was uttered by a lot of right-wingers who were trying to be disingenuous (the "say it enough times and it becomes true" tactic), but I'll take it as a given that you actually believe it.
If that's the case, do you recall where you heard this? Was it something you read after the release of BFC?