OK, Computer: File Sharing, the Music Industry, and Why We Need the Pirate Party
The Pirate Party believes the state and big business are in the process of protecting stale and inefficient models of business for their own monetary benefit by limiting our right to share information. The Pirate Party suggests that they are achieving this goal through the amendment of intellectual property legislation. In the dawn of the digital era, the Pirate Party advocates that governments and multinational corporations are using intellectual property to: crack down on file sharing which limits the ability to share knowledge and information; increase the terms and length of copyright to raise profits; and build code into music files which limits their ability to be shared (Pirate Party, 2009). There are a number of ‘copyright industries’ that are affected by these issues, none more so than the music industry. Its relationship with file sharing is topical and makes an excellent case study to address the impact big business has had on intellectual property and the need for the Pirate Party’s legislative input. The essay will then examine the central issues raised by illegal file sharing. In particular, the future for record companies in an environment that increasingly demands flexibility, and whether the Pirate Party’s proposal is a viable solution to the music industry’s problems.
Mark Hillegas believes the theme in some of modern literature’s great works – Zamyatin’s We, Huxley’s Brave New World, and Orwell’s Nineteen Eighty-Four – demonstrates a growing fear that science and technology could be used to limit freedom (Hilegas, 1967, pp. 3). He writes [somewhat dramatically] in The Future as Nightmare that these works “describe nightmare states where men are conditioned to obedience, freedom is eliminated, and individuality crushed…where science and technology are employed, not to enrich human life, but to maintain the state’s surveillance and control of its slave citizens” (Hilegas, 1967, pp. 3). For the Pirate Party it is a fear that is fast becoming a reality. They believe the internet, together with intellectual property laws, are being used by the state and big business to limit freedom around the globe. The Pirate Party suggests that intellectual property is being used to: crack down on file sharing which limits the ability to share knowledge and information; increase the terms and length of copyright to raise profits; and build code into music files which limits their ability to be shared (Pirate Party, 2009). While it is easy to dismiss as a conspiracy, there are a number of ‘copyright industries’ which have a vested interest in curtailing certain freedoms, none more so than the music industry. This ‘vested interest’ is manifesting in scores of lawsuits, such as the recent lawsuit concerning Joel Tenenbaum, a Boston University student, who was ordered to pay four record labels a combined $675,000 in damages for downloading and sharing 30 songs online (Lavoie, 2009). The topical nature of music industry’s relationship with file sharing makes it an excellent case study to address the impact big business has had on intellectual property and the need for the Pirate Party’s legislative input. The paper will then move on to examine the central issues raised by illegal file sharing and whether the Pirate Party’s proposal is a viable solution to the music industry’s problems.
The Pirate... What?
The Pirate Party [or Piratpartiet] is a political party and lobbying organization that began in Sweden in 2006 (Pirate Party, 2009). The Party has branches worldwide, and while it is gaining publicity in countries like Australia and North America, it has particular influence in Europe. The Party won a seat in the European Parliament after it gained significant traction in the Swedish federal elections with 7.1% of the vote in July of 2009 (Moses, 2009). The win appears to have had a flow on effect. In September, the Party won 2% of the vote in the German elections, with at least 13% of first-time male votes. However, it was short of the 5% required to gain a seat in the German Parliament (Moses, 2009). This sudden spike in popularity followed a global legislative trend against file sharing, and the sentencing of four Swedes to a year in jail for running the web site The Pirate Bay. The Pirate Bay operated out of Sweden and was one of several mega-websites that provide easy access to ‘torrents’, which allow person-to-person [P2P] file sharing (Dvorak, 2006). While file sharing has been declared a breach of copyright and illegal, The Pirate Bay was not as easy to outlaw because it is a type of middleman – a website that does not host illegal material but lists and identifies where the material can be downloaded from the internet (Dvorak, 2006). Nevertheless, international pressure has seen the creators prosecuted and Swedish authorities have essentially terminated the website by threatening to shut down any Internet Service Providers [ISPs] who host it (Dvorak, 2006).
The History - Intellectual Property and the Music Industry
The popularity and plight of The Pirate Bay highlights a growing dissatisfaction with intellectual property laws [IP] and a desire for more free content [two key areas the Pirate Party represents in the political arena]. IP is a legal field that encompasses such creations as music, literature, art works, inventions; and the symbols, names, images and designs used in commerce. The Butterworths Concise Australian Legal Dictionary defines intellectual property as “A group of legislative and common law rights affording protection to creative and intellectual effort and include laws on copyright, design, patent, circuit layouts, plant varieties, confidential information, trademark and business reputation” (Pearson, 2007, pp. 341). At its most basic, intellectual property represents an individual moral issue. It requires individuals to consider the extent to which they can borrow someone else’s creative work without owing them some sort of moral debt or credit for their idea (Pearson, 2007). On another level, however, intellectual property has more in common with real property law. Any ‘borrowing’ or ‘use’ of property may constitute as theft or ‘free-riding’ (Pearson, 2007). Breaching intellectual property laws could also mean a significant loss of income to a group or individual. It then becomes a monetary issue where severe legal consequences apply. Breach of these laws can lead to courts enforcing major compensation for losses or even jail time.
Hence, governments, courts and commentators increasingly treat intellectual property as a type of real property (Lemley, 2005). The primary legislative focus is on Garrett Hardin’s concept ‘the tragedy of the commons’. He uses the analogy of a common property that farmers are allowed to use for grazing to illustrate his ‘tragedy’. Hardin explains that when farmers are permitted to use publicly owned land to graze their cattle, they tend to ‘overgraze’ because they have no incentive to take care of it. After a period of time it imposes costs on the farmers, as the land is no longer fit for grazing (Hardin, 1968). It also discourages the investment of time and money into improving the land because it may lead to one farmer spending money without any return or substantial benefit (Lemley, 2005). Therefore, the lesson from the economics of property rights appears clear – avoid common property and confer strong rights to intellectual property owners. This will allow owners to stringently manage the inventions they have already made, encouraging them to invest in identifying, developing and commercializing new inventions. Consequently, the trend in legislation around the world has been to protect copyright holders. The number of innovations that are copyrightable has increased; it is easier to qualify for copyright protection; owners have broader rights to control uses of their works; and harsher penalties apply for breaches (Lemley, 2005, pp. 14).
The push for new and rigorous intellectual property rights is due in a large part to the spread of multinational corporations. Reebee Garofalo suggests the ‘merger mania’ that began in the music industry during the late 1960s and continues to the present day illustrates why intellectual property law has evolved so strongly over the past 30 years. Artists and audiences may have considered the 1960s as a period of political awakening, but for the music industry it was an era of commercial expansion and corporate consolidation: capitalism had become hip (Sanjek & Sanjek, 1996). It saw the emergence of massive conglomerates that were a hybrid of music labels, film studios, TV networks and electronic companies. The amalgamation of Warner-Reprise, Elektra-Asylum, and Atlantic to form the Warner Communications empire is such an example (Garofalo, 2000). These entertainment conglomerates could achieve cross-media marketing through the various film studios and TV networks under their ‘corporate umbrella’, opening as “many revenue streams as possible” (Garofalo, 2000, pp. 343). A blueprint began to emerge where music videos on MTV were connected to Hollywood films. Then as the movie drew audiences it helped to sell the record. Advertising also became an excellent source of revenue. The Beatles’ song ‘Revolution’ was used to sell sneakers while Bob Dylan’s ‘The Times They Are A’Changin’ attempted to invigorate the image of an accounting firm (Garofalo, 2000). The conglomerates needed intellectual property to expand in order to collect profits at every stage and generate greater revenues from fewer products (Garofalo, 2000).
The eminent globalisation of these companies meant they were essentially worldwide manufacturing and distribution networks capable of marketing artists across the globe (Garofalo, 2000). Epic Records was under American ownership when Michael Jackson recorded Thriller in 1983. By the time he was set to release Dangerous the label was a division of the Japanese owned Sony-CBS. The rapid expansion into developing markets such as Asia, Africa and Latin America meant more sales, but crossing transnational borders made it difficult to ensure that artists were being adequately compensated for the use of their music (Garofalo, 2000). In 1982 it was estimated that piracy held 11% of the total market in the US, 21% in Latin America, 30% in Africa, and 66% in Asia (Garofalo, 2000). The music industry responded by treating music as an ‘export industry’ forcing copyright issues to be built into trade agreements such as the North American Free Trade Area [NAFTA], the Single European Market program, and the international General Agreement on Tariffs and Trade (Garofalo, 2000). The multinationals also blamed the introduction of blank cassettes and CDs for piracy rates. This resulted in levies on blank tapes and CDs, and legislation like the U.S. Audio Home Recording Act of 1992 that imposes charges on audio recording devices and media (Garofalo, 2000).
Big Money, Big Costs, Big Inefficiencies – Why We Need the Pirate Party
The Pirate Party and other commentators believe these developments in intellectual property law have pushed the music industry toward a manufacturer-centric environment (Pirate Party, 2009). This type of industry operates under a traditional model, “in which patents, copyrights, and other protections prevent imitators from free riding on their innovation investments…the user’s only role is to have needs” (Von Hippel, 2005). The traditional model has its foundations in the economics of property rights. To solve the ‘tragedy of the commons’, property law specifies that all externalities should be internalised – each cost and benefit should be returned directly to the owner (Lemley, 2005). Consequently, the conglomerates like to ensure that all the money spent on building and promoting an artist like Michael Jackson is not lost through ‘overgrazing’ (Lemley, 2005). The major effect this has had on the music industry is the propagation of high fixed and marginal costs. Fixed costs involve such things as the recording process, production, artwork, distribution, and advertising. The marginal cost is the expense of reproducing each copy of an Extended Play [EP] or Long Play [LP] on a physical storage unit such as a compact disc [CD] or vinyl (Benkler, 2006). This scenario forces artists to sign a record deal, as it makes it very difficult for individuals to reach sizeable audiences on their own. In order for a non-market product to compete with the mainstream equivalent it has little choice but to market itself through television, radio, and film to be able to distribute on an international scale (Benkler, 2006).
Technology and the Pirate Party – a Force of Change
No benevolent force is likely to develop a completely open, diverse and liberal music industry. Nevertheless, the introduction of the internet has led some to believe that it will challenge the system built by the conglomerates. The belief is that the internet has the ability to lower the cost of music, increase competition, and break the monopolistic hold that multinationals enjoy over the industry (Benkler, 2006). For over 150 years new technologies have tended to concentrate and commercialise the exchange of information, a reality which began with the commercialisation of newspapers, “high-volume mechanical presses and the telegraph combined with new business practices, changed newspapers from small-circulation local efforts into mass media” (Benkler, 2006, pp. 20). However, the internet appears to have the opposite effect. It provides the necessary tools for populations around the globe to compete against the mainstream with their own high quality non-market products. It can deliver accessible professional grade programs for recording and producing music to home computers, which can cut the need for expensive recording studios. The internet also offers an alternate way of reaching audiences, which bypasses the expense of creating awareness through conventional means such as television, radio and film. Furthermore, the internet has succeeded in reducing marginal costs to practically zero (Benkler, 2006). Music can now be electronically stored [mp3] and reproduced instantaneously, eliminating the need for a CD or Vinyl.
The internet’s ability to lower costs reaches further still. The internet has also enabled consumers to ‘download’ music for free (McCourt & Burkart, 2003). This ability to bypass the intellectual property rights of creators has existed in some form or another since the commercialisation of the internet in 1995 (Spitz & Hunter, 2005). Yet, it was the introduction of file sharing network Napster in 1999 that posed the greatest threat to the traditional economics of the music industry (McCourt & Burkart, 2003). Napster permitted anyone to reproduce and distribute digital content [music, videos, software, etc.] at zero marginal cost over a peer-to-peer network that was highly decentralised (Spitz & Hunter, 2005). A decentralized network refers to the architecture of Napster’s software – when a computer with the Napster program is installed and connects to the internet, it is configured to be both a server and receiver. Not only are users able to search and access the file lists of anyone else using Napster, they are also able to upload their own files to share. Essentially, a Napster user is connected to an online database compiled by some 6.7 million peers [the estimated number of users at Napster’s peak] (McCourt & Burkart, 2003). The Napster phenomenon also created a vast number of imitators such as Kazaa, Limewire, and eMule. These applications allow users to build massive private libraries of music for a minute fraction of the market cost.
The Pirate Party’s primary focus is to protect individuals [such as Tenenbaum] from ‘big brother’ type treatment, and to ensure the internet continues to offer the opportunity for new models of business and distribution to thrive and compete in the music industry. The Party aims to do this by amending intellectual property legislation so it strikes a balance between the “promotion of both the creation and dissemination of culture within the public sphere, and the rights of the author to derive both recognition and compensation for the creative process” (Pirate Party, 2009). The Party believes this can be achieved by copyright that allows the sharing of work for non-commercial purposes and protecting the work if it is to be exploited for commercial gain (Pirate Party, 2009). In this circumstance, an album or a song downloaded from somewhere like Napster or The Pirate Bay would not be ‘piracy’ as long as ownership of the work is for private consumption or to share with others for the same purpose. In an instance where the work is to be included in an advertisement or an individual wants to cover a song for financial gain, it would then be up to the owner of the intellectual property as to what sort of recognition and compensation is due.
The push for liberal copyright and the progression of free culture is not a concept that began with the Pirate Party. The Creative Commons, established in Massachusetts in 2001, is a non-profit organization that aims to build a layer of reasonable copyright law and since its induction has ported its licenses into 50 international jurisdictions (Creative Commons, 2009). Creative Commons work by providing a set of free licenses that people can attach to their content, describing how others are able to use and build upon their work. For example, “The creator can choose a license that permits any use, so long as attribution is given. They can choose a license that permits only noncommercial use. They can choose a license that permits any use so long as the same freedoms are given to other uses. Or any use so long as no derivative use is made. Or any use at all within developing nations. Or any sampling use, so long as full copies are not made. Or, any educational use” (Lessig, 2004, pp. 283). The Creative Commons hope their laws will demonstrate the importance of the public domain [sharing] to creativity while providing basic intellectual property protection. The essential difference between Creative Commons and traditional property rights is the former encourages others to share and build on an idea, while the latter is designed to keep everyone out. It is understood that these licenses promote a free and highly efficient exchange of information which will ultimately enable users to ‘stand on the shoulders of giants’ (Benkler, 2006). The idea is that individuals will be able to stand on a platform of information and influences that will be ‘higher’ than ever before, which should lead to better and faster innovation [or better quality music] (Benkler, 2006).
The Creative Commons demonstrates how free culture, technology, and intellectual property can complement one another. However, it is an alternative rather than a means for creating a competitive music industry. This is primarily because the Creative Commons does not have the ability to amend legislation. Yet, if the Pirate Party can gain more seats in governments worldwide it will be able to contest intellectual property laws and represent the percentage of the population who desire change. Amendments were made to copyright laws in Australian Federal Parliament, for example, which allowed 34 international entertainment companies to pursue a case against iiNet [an Australian Internet Service Provider or ISP]. The lawsuit aims to limit the capacity to file share and the internet’s ability to promote competition (Colley, 2009). The situation harks back to the US congress’s 1998 Digital Millennium Copyright Act, which contained measures giving US internet firms immunity from copyright suits arising from the use of their networks (Colley, 2009). In 2006, with the support of the Australian Internet Industry, Australian copyright laws moved to match US legislation so they could comply with the US Free Trade Agreement. This meant Australian ISPs were not liable as long as they “adopt and reasonably implement a policy that provides for termination, in appropriate circumstances, of the accounts of repeat infringers” (Colley, 2009). It was believed this clause would encourage ISPs to ban users involved in piracy but it was essentially ignored. iiNET chief Michael Malone argues that the ISP's service agreements did not provide it with sufficient contractual rights to take action against customers who infringe copyright (Colley, 2009).
But is File Sharing What it’s Cracked up to be?
The elimination of intellectual property laws that prevent the sharing of music for private consumption would avert lawsuits, such as the Tenenbaum or iiNet case, and protect new models of business and distribution like the Pirate Bay. However, the question remains as to whether the Pirate Party’s goals are worthwhile. There are strong grounds to suggest copyright has created a music industry that is ‘manufacturer-centric’. Yet, are the proposed alternatives an improvement? Richard Barbrook believes for free culture to be effective it requires every user to contribute to the collective knowledge in order for the full benefits to be realized (Barbrook, 1999). Free culture in the form of the ‘torrent’ system, which got the Pirate Bay into trouble, is a complicated process that does not allow every user to contribute. It requires an understanding that torrents are a sort of ‘pointer file’ which contain data describing the file, but does not contain any of the file’s actual content (Norton, 2006). Downloading the file’s content then requires the user to employ the correct software, such as BitTorrent - “a method of peer-to-peer file sharing, which lets users download a large file quickly while simultaneously sharing parts of it in the other direction to help other users” (Lendino, 2009). The software itself is also relatively complex, especially uploading, which can be difficult for the uninitiated. The overall process is alienating for some users, and yet, its complexity is not related to it being illegal, as BitTorrent and other similar programs are perfectly legal, much in the same way as a digital recorder or VCR (Lendino, 2009).
For those more technologically minded, the quality of the information available through free file sharing is also mixed. Although the torrent may be labelled as, say, one of Led Zeppelin’s albums there is no guarantee it is the right description let alone a real copy at all. Many files are purposely mislabelled so users are tricked into downloading a virus or the desired file could come with a Trojan, or other malware, buried in its contents (Norton, 2006). In an effort to discourage unlicensed file sharing, copyright holders have taken to hiring ‘spoofing’ services, such as Overpeer, to place decoy music files on torrent websites so the network becomes plagued with files of unacceptable quality (Garrity, 2003). This can range from files with poor sound or static, to sometimes no sound at all. Furthermore, the way in which BitTorrent and other file sharing software are designed affects the quality of the information on offer. BitTorrent interacts with two different types of users - “clients trying to download the file [known as peers, who will also upload pieces as they become available] and clients that have complete copies of the file available for upload [the seeds]” (Norton, 2006). Seeders are the most important because as long as the complete file is available anyone can ‘leech’ a copy. Yet, each leech from a seed’s computer counts toward that seeder’s upload, which is limited by his or her Internet Service Provider. By going over that limit, the seeder can incur monetary costs from their ISP. Therefore, seeders often remove the file after a short time, which damages the torrent, or they upload files of smaller size and less quality to minimise costs.
Computer and electronics giant, Apple Inc., launched a legal alternative to torrent and file sharing websites on the 9th of January 2001 at the Macworld expo in San Francisco (Apple, 2001). iTunes was billed as the world’s best and easiest to use ‘jukebox’ software that lets users create and manage their own music library (Apple, 2001). Apple explains iTunes as an “entertainment superstore that stays open 24/7…forget rifling through stacks of CDs…iTunes puts your entire music collection a mere click away …find what you’re looking for with a quick search that reveals results as you type” (Apple, 2008). In the eight years since its release it has surpassed Wal-Mart as the leading music retailer in the United States with song downloads in excess of 5 billion. Along the way it has also confirmed its place as the world’s number one online music store (Information Week, 2008). Unlike the torrent system, where the user has to sift through vague descriptions and follow a number of steps to download the song, iTunes minimizes the fuss at a click of a button for US$0.69, US$0.99 or US$1.29 per song (Apple, 2007). The files are retrieved from iTunes’ central server, which boasts a library of over 11 million high quality and virus free songs for customers to choose from.
Despite users having to pay to download files from iTunes, it’s had a prominent impact on music sales, particularly for the single format. Although albums had conventionally sold more units than singles, unit sales for the latter format had dropped in the US market from 116.4 million in 1997 to 8.4 million in 2002 (Music Week, 2008). At the later stage of this period, only a few thousand sales were enough to see a single become the week’s biggest seller and the charts were almost exclusively dependent on ‘airplay sales’ (Music Week, 2008). The turnaround since has been remarkable, with single sales in 2007 totaling a massive 813.1 million units. The boom has been accredited to the introduction of iTunes into the U.S. market. Richard Griffiths of Modest Management believes the boom is a good result for copyright holders, “It’s really positive. It's down to the fact these tracks are available from day one. When people hear them on the radio they can go out and buy them. We've done nearly 6 million of [Leona Lewis’] Bleeding Love worldwide” (Music Week, 2008). Yet, Empire Artist Management director Neale Easterby acknowledges the ability to turn a major hit single into album sales can be more difficult as customers are being asked to spend US$0.99 per song “consumers are still looking for three or four hit singles before they go out and purchase the album” (Music Week, 2008).
People Still Want to Pay, Dammit!
Free culture does have its shortcomings, as shown by the problems with file sharing and the success of iTunes. Its flaws demonstrate that file sharing is still a long way from creating the world’s greatest public music library. iTunes also suggest that individuals still believe the priviledge of owning someone’s music for private consumption has a monetary value. Radiohead, an alternative rock group from the United Kingdom, further reinforce the perceived value of music. The group released their seventh long-play album, In Rainbows, via digital download on the 14th of October 2007 (Mayfield, 2008). In Rainbows was unique from previous digital releases as it was made available to consumers on a pay-what-you-want basis from the website www.inrainbows.com. After choosing In Rainbows for download customers were directed to a ‘checkout’ page on the website where they were asked to specify how much money they intended to pay for the album. Essentially the customer could pay whatever they preferred and had the option of downloading the album for free. The digital version of the album was followed by a physical release to worldwide audiences via XL Recordings on December 31st. The physical release sold for US$13.98 and was housed in a cruciform box containing stickers, which was intended to provide fans with the option of creating their own packaging by re-using an old plastic jewel case (Music Week, 2007). XL recordings also released a vinyl edition that retailed for US$20 and a limited edition box set which included: two CDs [one b-side album], two vinyls, lyrics, an artwork booklet, double gatefold presentation case and hardback slip box. It is now selling for between A$130 and A$160 on eBay (Music Week, 2007).
Radiohead have neglected to release any official statistics that indicate how many people downloaded the album, how many people paid money for it, or how much income the band received from the venture (Music Week, 2008). According to an interview with Radiohead’s lead singer, Thom Yorke, the project appears to have been very successful and has generated more digital income for the band than all of their previous albums combined (Music Week, 2008). However, there are a number of sources that have speculated further on the figures. Days after the release of In Rainbows a site called Gigwise.com, citing an unnamed source ‘close to the band’, claimed that 1.2 million copies had been downloaded. At a similar time, a survey conducted by a British company, Record of the Day, suggested that the average price paid for the album was about US$8 (Hardesty, 2008). Leading U.S. music industry magazine Billboard then rejected the numbers, putting the download figure at close to 400,000 units (Hardesty, 2008). ComScore, an American consumer research company that collects data on the online behavior of some two million people, also weighed into the debate. They estimated that in the first 29 days of October about 1.2 million people visited the In Rainbows website, and although a ‘significant percentage’ of them downloaded the album, ComScore said the average payment was US$2.26 (Hardesty, 2008).
The attempt to get an accurate idea of numbers was further confused by Radiohead’s manager who dismissed the optimistic Gigwise report as “exaggerated’. Other band representatives also described the less flattering ComScore data as “wholly inaccurate” (Hardesty, 2008). Yet, Ken Kovash of Mozilla, the organization that designed the Firefox web browser, suggest ComScore is likely to have underestimated the number of people who visited the site in September by 60% (Hardesty, 2008). Despite all of this conflicting information, a ‘ballpark’ figure of gross earnings by Radiohead can be established. Larry Hardesty believes that if ComScore’s less impressive figures are right, and even if the ‘significant percentage’ of downloaders they discuss means little more than half, then at US$2.26 per download, Radiohead grossed US$1.36 million in the last three weeks of October (Hardesty, 2008). Then there is the £40 deluxe box set to consider, and going by figures quoted from Radiohead, it seems to have sold in the region of 60,000 to 80,000 units. This would earn between US$4.45 million and US$5.4 million, a large percentage of which will be retained by Radiohead as they hold all the licenses to the album (Music Week, 2008). Furthermore, the band have pressed 25,000 vinyl copies; and sent an initial shipment of 400,000 CDs to the United States, 200,000 to Japan, and more than a million worldwide. Bearing in mind that Will Botwin, CEO of ATO Records, suggested “the band has probably gotten more publicity without saying anything than any band in the history of rock’n’roll”, then there is likely to be further demand for physical copies (Sexton, 2008). Even taking into account the most conservative estimates In Rainbows may have generated US$8 million.
How much money Radiohead were able to put in their pockets after paying off costs from In Rainbows is impossible to know. What can be derived from this venture is that new models of business and distribution, which do not use exclusive rights, can thrive on the internet. It also highlights the limitations of exclusive rights in the digital age and gives legitimacy to the Pirate Party’s claim that intellectual property can be manufacturer-centric, inefficient, and unable to ‘move with the times’. The possibilities offered by In Rainbows are why the Pirate Party is important. They need the ability to contest intellectual property rights so the music industry is encouraged to find new models of business that are more efficient than one which spends millions suing ISPs and individuals, while also having to deal with “$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, 2009). The balanced copyright that the Pirate Party speak of on their website should aim to be less about enabling file sharing to create the world’s greatest public music library [which is unrealistic] and more about creating a sustainable music industry.
Actually, Shouldn’t we be Saving the Record Label?
Sustainability involves more than creating a ‘reasonable’ layer of copyright so that free culture and big business can fight to offer the consumer something that’s competitive. It needs to acknowledge the broader economy of the music industry. In other words, the Pirate Party needs to accept that the internet is not the only ‘gatekeeper’ to industry and adjust intellectual property accordingly. When In Rainbows was first announced a number of media commentators said that it would threaten the very fabric of recorded music (Sexton, 2008). Yet, Radiohead recognize the success of the ‘pay-what-you-want’ concept was only possible due to the existence of the property right music industry in the first place, “[Byrne:] And that works for you guys. You have an audience ready…[Yorke:] Well, yeah. The only reason we could even get away with this, the only reason anyone even gives a shit, is the fact that we've gone through the whole mill of the business in the first place. It's not supposed to be a model for anything else. It was simply a response to a situation” (Wired, 2007). Yorke’s comments indicate that record companies had nurtured Radiohead’s reputation through traditional gatekeepers to the point where they had built a large and devoted fan base. The established relationship between the fans and the band meant that people were willing to seek out the album, download it, and pay money for it (Wired, 2007). The band’s manager Bryce Edge states that this online model “couldn’t work for all…record companies still have a big role to play…they provide great services for artists” (Sexton, 2008).
The traditional gatekeepers such as television, radio and print still have a role to play in music, as new and upcoming artists have acknowledged. Vampire Weekend, alternative rock band from New York City, is the latest in a number of ‘buzz bands’ that have rocketed to fame using the internet’s rapid means of distribution. Other contemporaries include the Arctic Monkeys and Clap Your Hands And Say Yeah (Greenwald, 2008). Despite having internet audiences at ‘their feet’, none of these bands decided to use the internet as a means of releasing their material independently. In fact, all three have signed traditional record release contracts with major labels – Vampire Weekend are signed to XL Records (Metacritic, 2008). Even with the internet seemingly fulfilling the role of a record company, it seems strange that these new and popular bands have neglected to take up such freedoms at the beginning of their careers. Alexandra Patsavas, music supervisor for Grey's Anatomy, Chuck, and Gossip Girl, believes that although the internet has managed to reduce fixed and marginal costs significantly, bands still require financial backing to get started and establish a fan base, “success might mean a synch on Friday Night Lights…It might mean a Letterman performance or inclusion on a magazine's free CD. There are still gatekeepers, just many of them and smaller gates” (Greenwald, 2008). Patsavas explains that traditional gatekeepers such as radio, television, film, and advertising still serve a function in allowing audiences to discover and enjoy music (Garofalo, 2000). This means that record companies are still a necessary part of the music business, as they have the skills and finances to open ‘gates’ that are outside the reach of the internet.
The model of business for record companies in the digital age seems to revolve around building up an artist until they can stand on their own two feet and ‘do a Radiohead’. The dilemma for record companies is that they are losing popular artists at the expiration of their contracts and have become increasingly dependent on income derived from digital unit sales. If the Pirate Party were to legalise file sharing for private consumption it would continue to strip this income (Sexton, 2008). Furthermore, whatever digital income they can generate is often withheld from the artist, a key reason why Radiohead released In Rainbows on their own, “Well, first and foremost, you don't sign a huge record contract that strips you of all your digital rights, so that when you do sell something on iTunes you get absolutely zero. That would be the first priority. If you're an emerging artist, it must be frightening at the moment” (Wired, 2007). Yorke also indicates that long-term contracts with record companies, based on traditional property rights, are oppressive due to an inability to adapt to any changes within the industry. He believes a conventional release of In Rainbows would not have generated the same digital income, “In terms of digital income, we've made more money out of this record than out of all the other Radiohead albums put together, forever — in terms of anything on the Net. And that's nuts. It's partly due to the fact that EMI wasn't giving us any money for digital sales. All the contracts signed in a certain era have none of that stuff” (Wired, 2007).
A recent venture between record label EMI and Grooveshark offers the type of constructive alternative that could set the trend for sustainability. Grooveshark is a streaming music service that offers advertiser-supported music on demand and, for $3 a month, you can get an ad-free version (Healey, 2009). The service helps you to manage the huge amount of material available online by allowing you to build a virtual collection from songs supplied by Grooveshark users. This collection can be accessed online from a computer or mobile phone anywhere in the world (Healey, 2009). Early criticism of Grooveshark centered on the library, which breached copyright and was limited to those songs uploaded by users. However, EMI Music Publishing recently got onboard, allowing Grooveshark listeners access to their massive catalogue of tunes in return for a slice of advertising and signup revenue (Grooveshark, 2009). The agreement offers the potential for record companies to receive enough compensation to perform their role, while remaining flexible to the demands of the digital age.
There is still a role for record companies to play in the music industry, but their relations with artists need to reflect the changes to this role. A record label’s ability to distribute material and reach audiences on a mass scale was once an integral part of an artist’s success. However, the introduction of the internet means this is no longer a label’s primary function. It is a shift that will reduce income to record companies and could hinder their ability to carry out another important function – building an artist’s career through traditional gatekeepers. Constructing an artist’s profile through various ‘gates’ is still a valuable service which can make a band profitable and popular, and record companies should receive due compensation. The amount of income derived from this service is a careful balancing act that should enable a record company to remain competitive with new ways of sharing information, while also incorporating the demands of the artist. If this balance can be achieved it will go a long way toward creating a sustainable music industry, and the Pirate Party need to ensure that legislation complements this scenario. Free culture has certainly highlighted the inefficiencies of the music industry but it is also a long way from being the ideal solution. We need the Pirate Party to turn its focus away from an idealistic vision of the world’s greatest public music library and work with the music industry for the benefit of artists, fans, and businesses alike.
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