The Internet has caused many changes in many industries. For example, eBay allows millions of auctions to be held worldwide simultaneously for anyone who wishes to bid where as the older method only allowed as many auctions as the auctioneers could handle. However, when the time came for the recording industries to update their business model, they did not take the Internet seriously. Instead of adapting to the new media like they did with cassettes and CDs, many of the larger companies ruined digital downloads by adapting a method of protection that causes many problems with portable devices and privacy, and raises prices. Because of their poor distribution method, it has caused many to turn to piracy. Now they find themselves in constant legal action because their model is based on direct revenue. John Branca, a lawyer representing popular mainstream bands, said "Artist managers and lawyers have been wondering for months when their artists will see money from the copyright settlements and how it will be accounted for" (Lauria, 2008). In their suing frenzy they have apparently forgot about the important people.
In this paper, I am not advocating piracy, I am writing about a music revolution. The music industry has used statistics to show that piracy is causing a huge loss in profit. Piracy is possibly a part of the loss, but there are some things to consider. In 2002 the economy took a dive and the cost of music CDs rose until 2004. After 2004, the cost of the CD went down 1 cent each year until 2006. Since the crash, the music industry has never been able to make as much money as they did in 2001. In 1999 the RIAA reported over 30,000 albums were released, and in late 2007 Time reported around 12,000 albums are released per year (RIAA) (Tyrangiel, 2007). As time goes on the record labels continue to push their singers into a formula so they can sell less music. The music industry needs to create a new business model that meets the necessities of the artists and the consumers if it wishes to succeed on the Internet.
Digital music has no one specific medium, instead it can be placed on DVDs, CDs, mp3 players, etc. Digital rights management is a way of encrypting files. This is used in conjunction with many monthly music services, certain recording label's CDs, and online downloads. The RIAA is an organization of record labels that "work to protect intellectual property rights worldwide and the First Amendment rights of artists; conduct consumer, industry and technical research; and monitor and review state and federal laws, regulations and policies" (RIAA). The RIAA is getting college campuses to use filters, or software that monitors internet usage, on their network to stop file sharing. Music 2.0 is a revolution to how music is distributed.
Digital downloads are the new rage but have not yet caught up to CD sales. The reasons attributing to this are the high cost of music, the profit for record labels, and the services offered. Rolling Stone released statistics provided by a research company which breaks down the cost of a CD for the "typical major-label release". If the CD costs $15.99, $1.60 goes to the artist, $2.40 is for marketing and promotion, $4.61 is for label overhead and profit, $4.69 is for retail overhead and profit, and $1.70 goes to packaging, manufacturing, and distribution, $0.17 for musicians' unions and $0.82 for publishing royalties (Cohen, 2004). There is a problem when two people in the mix are taking over $9 of the sale, and the artist is getting only a $1.60. Even after the price of CDs has come down the industry has not changed its business model which means the artist is probably making less than they were before. Currently music is too expensive and bands and consumers are not being treated fairly by record labels who believe their consumers are thieves and pirates. The creation of a new model for music distribution would lower piracy and the cost of music and distribution.
Artists are always competing to be the best to show that their musical talent is greater than anyone else’s. This was the case until the record labels got involved. Now the artists are pawns for the record label's competition in sales and formula perfection. Music is too expensive for what we are getting. "In the U.S. alone, the music industry employs some 50,000 people—and very few of them are rich rock stars" (Music United, 1). In 2006 the U.S music industry made over 11 billion dollars (RIAA, 2006). Very simple division allows us to see that if we split 11 billion dollars by 50,000 people their average yearly salaries would be $220,000. Because the record companies are paying radio stations to play their songs the average person never sees the $220,000 a year. Songs get popular because the industry is paying for their placement, not because the radio stations actually think it is a great song. There is a better way to distribute music without the huge cost, we are the solution.
There are two major types of online music services. The first service requires the consumer to pay for the song and it is his or hers to keep, and the other is a month to month service that allows one to "rent" songs until one stops paying. Currently both of these services have huge flaws. One of the biggest flaws is that we have to purchase certain devices for the rented songs to play on, and in some cases, even the songs that we paid for. This, plus the cost makes us want to run away from these services and return to buying CDs and putting them onto our computer, defeating the point of internet distribution.
In February, Yahoo's premium music service that allowed people to "rent" music was shut down, only for a limited time will users currently on the service be allowed to keep the $5.99 to $8.99 price of membership. Continuing users will have to start using Rhapsody which costs $12.99 (Riley, 2008). Anyone who chooses to go to another service loses all the music they have downloaded from the service.
The current method is not fair to anybody, including the artists and other businesses. I am not talking about how much the artists get paid this time. IN, an entertainment newspaper, gave Elkins an interview. Elkins is the lead singer and guitarist of Mae, a popular band. The interview reveals that labels are forcing bands to produce music the musicians do not really want to create. Another problem Elkins mentions is that too many people have access to the money that the band has made, and are stuck with the label for a set amount of albums. Elkins wishes to promote his band's own style of music by headlining a charity tour where Mae will play something fans have never heard before. People can donate what they wish, with a five dollar minimum donation. I believe that Elkins' strategy is a piece of the music revolution.
The record companies have also found their hands in other businesses as well. YouTube, a popular video website has to pay record labels a portion of its profits because some of its users choose to upload copy written content, even though YouTube removes these files. "A contingent of prominent artist managers claims that little to none of that money has trickled down to their clients. They are now considering legal action" (Lauria, 2008). Also, in the UK, recordable media such as (CD-r,DVD-r) are taxed additional fees because the recording industries believe that they are used for piracy. (Wilde, Schwerzmann, 2004)
The music industry does not trust their customers and thinks they are all thieves. Because of this, lawsuits, DRM, and filters now exist in abundance. The industry is clinging onto the old business model based around copyrights and revenue instead of people (Wilde, Schwerzmann, 2004). Lawsuits have been pouring in in an attempt to scare the public away from piracy and it does not seem to be an effective method. Millions are still downloading. The RIAA is now invading privacy by forcing internet service providers to give information about a specific customer that the RIAA believes is downloading illegal music.
DRM was created to stop piracy, but in effect, DRM is part of the reason people have resorted to piracy. DRM causes compatibility issues with any player that cannot read the encryption. Apple's DRM music is not compatible with any portable media players other than their own. Microsoft also has a "play for sure" DRM that can only be played on select devices. There are many DRM formats and each have their own devices they play on. If a person already has a portable media player, software media player, or service, they may have to buy an entirely new portable media player or switch services. This, as I said before, causes them to lose all the music they got from the service.
DRM is also a privacy issue because it has to connect to the internet to see if the song is allowed to play on the device or machine, and if your subscription is up. This forces you to maintain a connection to the service you choose to download from, and also limits you to a specific number of machines or devices you can play the music on.
The music industry digs deeper and deeper into our privacy as times goes on and if something does not change they will be on our individual computers. The RIAA is working with colleges to get them to install filters on their networks and claiming it will help speed them up because piracy levels will go down. Filters do exactly the opposite of speeding up the internet. Although they help at slowing down piracy, filters slow down the network by having to scan all the content going through the internet. A filter is like a bouncer at a night club who allows or disallows who they choose to come in. Also, because this bouncer is in place, traffic into the night club drastically slows. "Since April 2003 the RIAA has begun to systematically flood various P2P networks with fake files" (Wilde, Schwerzmann, 2004). This method is only going to add more traffic to the internet by causing the user to download another file.
In an attempt to fend for ourselves in the digital era, many have turned to piracy. Musicunited.org, an affiliate of Riaa.com, provides a plethora of information on music laws, morals, and the effect piracy has on economy. "Would you go into a CD store and steal a CD? It’s the same thing, people going into the computers and logging on and stealing our music. It’s the exact same thing, so why do it?" (Music United, 2). The biggest problem caused by people downloading music is that people do not get paid. With around 50,000 people working in the U.S. music industry as warehouse workers, CD plant workers, technicians, designers, etc, stealing and piracy takes away at what they get paid. The website stresses that it is against U.S. law to reproduce music if one does not “own” it or for friends at all. Another problem with downloading music illegally is that record labels may find it more difficult to find artists that they want to commit money towards. They claim that many people are rationalizing that the people making the songs are rich and that is why they do not care and are downloading the songs.
Although duplication of digital media and stealing a physical CD are not the same, copyright laws protect digital media in such a way that piracy is the equivalent of stealing. “One credible analysis by the Institute for Policy Innovation concludes that global music piracy causes $12.5 billion of economic losses every year, 71,060 U.S. jobs lost, a loss of $2.7 billion in workers' earnings, and a loss of $422 million in tax revenues, $291 million in personal income tax and $131 million in lost corporate income and production taxes" (RIAA). If there are 50,000 people in the U.S. music industry, and over 71,000 U.S. jobs lost a year due to piracy, this shows that there is a serious problem with the way the music industry is structured. We need to restructure the way music is distributed so more people are willing to pay for music instead of resorting to piracy.
Solutions are not going to be easy for the record industries and may destroy them if they fail to adapt. If the record labels wish to survive, they should lower costs, trust their consumers, and be fair to everyone. In my humble opinion, I think people do not want music to be distributed in this old school method any longer. Instead we should look at a completely new method of distributing music.
I am sure the music industry would like you to believe that its failure would cause a huge amount of lost jobs. However, there will still be many, if not more, jobs available. We will need server technicians, band photographers, album cover designers, bloggers, innovative internet startups, more artists, and people to design and build internet music applications. Also, some people still enjoy CDs, so plant workers can still produce media and software on CDs.
The reason artists had to use record labels in the past is because they did not have enough money to distribute their music far enough or into enough shops and radio stations to get heard by their target audience. Now by utilizing the internet, artists can become successful by broadcasting to the world at a much cheaper cost or even free depending on the method they want to release their music with. If we restructure music, the industry would no longer have to be afraid to commit to artists as they would no longer be in control of who the artists would be. As many websites are based now, media portals would create a true comparison in talent between artists, and allow new artists and music styles to flourish. Also, instead of being forced into a formula, artists could play whatever they wish and keep the rights to all their music. Artists could choose how much they wanted to sell their music for, and if they wish they may give it away for free while still making a profit from internet ads, donations, sponsors, or other creative methods.
Record labels will still have a chance to adapt by taking their profits and creating websites that support large amounts of users. As time goes on they may perhaps allow their artists to move to other music portals and allow them to sing as they wish. Destroying record labels is not my goal. My goal is to allow everyone a chance at fame, good prices, and amazing music. Record labels will destroy themselves if they do not adapt to new methods.
To sum up, the music industry cannot continue the way it is now because it is unfair to almost everyone. The distribution method needs to allow the free flow of digital music by either removing or unifying DRM to work on all devices. Artists should retain their rights to their music and be allowed to produce and sell music how they want. Also, services should insure consumers in some way so we do not lose all our purchased music. We need to fight for our rights as consumers, artists, and companies to allow the uncontrolled flow of music. To free the flow of music we need to stop buying music from record labels until music is music again.
Cohen, W (2004, October, 12). Wal-Mart wants $10 CDs: Biggest record retailer battles record labels over prices. Rolling Stone, Retrieved April 11, 2008, from http://www.rollingstone.com/news/story/6558540/walmart_wants_10_cd
Lauria, P (2008, February, 27). Infringement! Artists say they want their music site dough. New York Post, Retrieved April 11, 2008, from http://www.nypost.com/seven/02272008/business/infringement__99428.htm
Music United, Why you shouldn't do it. Retrieved April 11, 2008, from MusicUnited.org Web site: http://musicunited.org/4_shouldntdoit.html
Music United, What the songwriters and artists have to say. Retrieved April 11, 2008, from MusicUnited.org Web site: http://www.musicunited.org/3_artists.html
Music United, In one month, 243 million files were illegally downloaded from P2P services. Retrieved April 11, 2008, from MusicUnited.org Web site: http://www.musicunited.org/
RIAA, Retrieved April 11, 2008, from RIAA-For Students Doing Reports Web site: http://riaa.com/faq.php
RIAA, (2006). RIAA 2006 Year-End Shipment Statistics. Retrieved April 11, 2008, from 2006 Year-End Shipment Statistics Web site: http://76.74.24.142/6BC7251F-5E09-5359-8EBD-948C37FB6AE8.pdf
Riley, D (2008, February, 3). Yahoo to shut premium music service, redirect users to rhapsody...for now. TechCrunch, Retrieved April 11, 2008, from http://www.techcrunch.com/2008/02/03/yahoo-to-shut-premium-music-services-redirect-users-to-rhapsodyfor-now/
Thatcher, A (2008, April, 3). Periodic label. In Utah This Week, 18.
Tyrangiel, J (2007, October, 1). Radiohead says: Pay what you want. TIME, Retrieved April 11, 2008, from http://www.time.com/time/arts/article/0%2C8599%2C1666973%2C00.html
Wilde, E, & Schwerzmann, J (2004). When Business Models Go Bad: The Music Industry's Future. ICETE, Retrieved April 11, 2008, from http://dret.net/netdret/docs/wilde-music-icete2004.pdf
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