Monday, 25 June 2012

Piracy is Dead

Piracy is Dead
...or at the very least, why the music industry isn't either.

On this blog I'm no stranger to sweeping titles. Some of the most popular content on here (as Google Analytics has it, anyway) are my two articles "Spotify is Dead (Long Live Spotify)" and "The End of Music?", so it's in the spirit of those pieces that I have decided upon the name for this piece. To counter my own title: no, piracy is not dead, nor is it dying; but its threat to the mainstream music industry may now be truly at an end, and I would argue soon the act of music piracy itself will gradually fade back towards being a niche activity, with a corresponding economic impact. Let's break this down.

I: Piracy as Niche and the Torrenting Music 'Fan'

In the biggest, most self-righteous arguments (and yes, I have been guilty of this many times) about the relative morality of illegal downloading, a 'fact' is often trotted out by pro-downloaders: music fans that illegally torrent are more likely to pay for music more often than the norm. Great, you might say - and I'll put my hands up at this point and state that Chinese whispers aside if anybody can locate a more empirical version of this annoyingly vague truism then I'd be glad to hear it - but is there any evidence of that? Well, the two or three most likely examples are probably Metric, Nine Inch Nails or Radiohead, and I'm not going to bore anyone by going over those case studies again. What I will say is that all three examples rely on not just the act of downloading to build a business model, but that interaction itself being directly between fan and band; that is to say, the band as brand is benefiting from the free download. This 'free, legal' download model was briefly in vogue enough that Sub Pop suggested monetizing t-shirt sales and offering free downloads, and we started a record label based on the concept; but from what we've seen, all the goodwill in the world can't bypass a rough rule of thumb: it takes ten free downloads to get a paid one, and the paid download is often not worth enough to make up the shortfall.

Now, there are several things wrong with my assumptions there, so let's dive in: yes, we don't pay distro costs so actually our 'loss' is minimal; no, there isn't a marginal cost, so we don't 'lose' anything in the strict material or financial sense; yes, we do get increased exposure (presumably) due to people being able to get hold of the release for free. The problem we have is that we're trying to build bands up from scratch and logic dictates that both early evangelists and close friends and family are those the most likely to dig deep to support a young or new band - when that release (as it often is) is released for free, then while the amount of money sacrificed may be small, it has a big potential effect in terms how that could be reinvested. Anyway, I digress.

So, the point to take away from this is that the torrenter is interacting with a torrent site that are experiencing value being added to their brand rather than the band, and that's kind of a shame.

The point that's relevant to my argument is this: these people are a small niche and they do not matter in a commercial sense. Whatever their behaviour might or might not be in practice, 99% of people are not 'true fans' anyway; 99% of people do not 'torrent a lot'; 99% of people will not re-purchase legally. The people that would 'kill the music industry' are the people who buy an album a month, or every six months; the casual fans. If these casual fans turned to torrenting by default, then we'd have problems. They haven't all done so, and since we know that it's only a niche continuing to do so ('true fans' or not), there will continue to be an avenue to monetize music to an audience. If piracy had become the norm then the music industry would die, but neither has come to pass - the problems are more about record labels now being risk averse and pandering more to the mainstream with lowest common denominator music that they can guarantee ROI on through iTunes.

The problem with the alternative free models and a lot of the industry navel-gazing over the past few years is that the 'innovative' artists have already been established, or in the case of Adele and her apps, plugged into a mainstream audience. There aren't many post-Napster indie superstars, and I'll talk about that later.

I would suggest that by bulk pricing - without even breathing a word over range of music - retailers like HMV and the supermarkets are bigger threats to music now.

II: Monetization of Content
Okay, so one of the biggest triggers for this piece is the following situation. Provided by a PR with an MPE for an album I was to review, I found (like many before me) that the PlayMPE system is poorly conceived, patronising and difficult to use. Thus, I took to the internet to find an illegal, DRM-free version so I could listen on my commute and actually have time to write the review. Five minutes searching and an hour of downloading later and I had my album; however, when I clicked to unpack the zip it asked me for a password - pretty standard stuff, so I checked the folder and, lo and behold, there was a ReadMe. Great, I thought, opening that file instead only to be confronted with a url. A little bit pissed off, I copied it and threw it into my browser, only to be taken to a page prompting me to fill in a consumer survey to 'unlock my download'. Oh, ffs. The funny thing is, I've talked to people about this, and it's becoming more and more common. Pirates or people hosting content that's potentially of dubious provenance are trying harder than ever to monetize it, and the bottom line is that if you make it hard or costly to get hold of illegal content, people won't bother.

Demand in this instance is completely inelastic, and though it's a given people won't tolerate the marginal price increase of even a penny, they also will be loath to deal with the marginal time increase of five minutes dealing with a survey - they'll simply go to Spotify instead. Okay, so 'on air on sale' has basically been abandoned (why? Do the majors not get it, or are they simply trying to sell fewer records?) which means there might be a delay in finding it on iTunes, but you can bet it'll be on Grooveshark. Yes, before you point it out of course Grooveshark is a) illegal and b) doesn't pay fees to artists, but it's either going to have to get with the program or be sued out of existence, so I don't think it's unreasonable to suggest that in a post-Grooveshark world people will either pre-order or, should 'on air on sale' be adopted once more, just stream the record. It will come to be a trade-off between the poles of time and money - and since iTunes continues to do a roaring trade, I'd hazard a guess that for your average consumer, convenience will eventually win out.

III: How I Learned to Stop Worrying and Accept that I am in an Indie Band, or The Fate of Alternative Music
I know lots of people in bands. The problem is this: there have always been lots of bands, but now the playing field is exceptionally level. The barriers to entry for distributing your music on Bandcamp are non-existent, and besides how professional say your website looks or how many 'fans' you have on Facebook (a complete red herring, but never mind), there's no at-a-glance way of telling bands apart in terms of relative success. What it all means is this - in a DIY world of perfect competition, it's really hard to grow to be a large band. I see this as a writer with slightly niche music taste; I know that all the bands I could ever want to hear are out there somewhere, and just because I know they are it suggests the number of bands that are quite alike is also very large. No longer do you have to purchase only Radiohead or Sonic Youth records as a catch-all for alternative because you can't find bands in between. No, whatever you want to hear is out there, and that's both liberating and terrifying. There's an infamous interview with the Guardian where Field Music reveal just how little they earn, and I think that's sort of the norm now. Even for a creative band that have found their niche, found their audience and convinced them to buy a record, there's a glass ceiling that is very hard to break through even with $99 boxsets (cough, Crosses - who can also play on the fanbases of Far and Deftones). The point is, there's not much money to be made unless you can capture the mainstream in some way, and the majors just aren't interested for the most part.

A sub-point in all of this is the proliferation of what is often called the 'micro-label'; closely tied in with both the DIY ethos and the spread of web services like Soundcloud, Bandcamp and Wordpress, many bands have either transformed into tiny labels of their own or grouped into small co-op labels. Individual tastemakers and scenesters have also created labels, and it seems that a slight bump in exposure generated by curation as well as the validation of being 'on a label' mean that bands are still keen to sign. Even up to small indie status many labels expect bands to do their own recordings, but having promotion and distribution paid for is still attractive enough presumably to generate a small but essential ecosystem of labels that people buy into because of the ethos of the small group or individual behind them. Blogs like Beardrock and Echoes and Dust have recently made the transition, but the spiritual forefathers are labels like Big Scary Monsters, Brew, Blood and Biscuits and Sonic Cathedral (among many, many others) that made the jump a little ahead of the pack.

The problem of course that these artists and labels find is that touched upon earlier - that alternative music fans are more likely to be net-literate and download savvy, so that they are hit with the double whammy of low investment or income and low sales as a result of the combination of self-funding or being on a micro-label and low sales. Ouch.

I remember the guys behind UnConvention telling me that they did a workshop where they went into a school and found that kids had actually paid for something like 10% of the total music that they owned. Shocked by this, they went home and looked through their record collections - and realised that as children of the home taping generation, their record collection at that age probably ran to a similar ratio. As a child of the briefest of fads - home CDR burning - I'm sure this is true of some of my friends, but the thing is we weren't ever interested in Maroon 5 albums (it was 2003-5, hence that blast-from-the-past reference), we were interested in alternative albums, and it doesn't take too many people from a cult band like Oceansize or The Beta Band's fanbase to burn instead of buy to make a real impact on their fortunes. Again, like illegal downloading I'd say that tech-savvy alt kids are most likely to be guilty of it, except that in the downloading age the speed (much quicker than a 4x drive anyway) and ease means they can get hold of more. Even if that increase is only one album a month on what we grew up with, that across a large number of people adds up to a huge hit in lost revenue - and damages the bands that can least afford to lose it.

IV: The Obvious Stuff
a) The UK record industry is now back in growth, largely as a result of digital sales.
b) There will always be a market for sentimental, tacky pap (to quote Jack Black in High Fidelity).
c) Streaming revenues are on the increase, and this will benefit major labels et. al - but the withdrawal of many indies from the Spotify platform shows distrust at other levels in the extent to which streaming is a substitute for ownership. This is clearly not good if you want to heavily monetize a fan base of 10,000 as opposed to generate streams from 30 million users.