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Yes, Piracy Does Cause Economic Harm January 27, 2013

Posted by Bill Rosenblatt in Economics, Uncategorized.
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Back in 2010, the Government Accountability Office (GAO) published a meta-study of the economic effects of intellectual property infringement (including counterfeit goods as well as copyrighted works).  The GAO concluded that IP infringement is a problem for the economy, but it’s not possible to quantify the extent of the damage — and may never be.  It looked at many existing studies and found bias or methodological problems in every one.

More recently, Michael Smith and Rahul Telang, two professors at Carnegie-Mellon University, published another meta-study that serves as a sort of rejoinder to the GAO study.  This was the subject of Prof. Smith’s talk at the recent Digital Book World (DBW) conference in NYC.

Assessing the Academic Literature Regarding the Impact of Media Piracy on Sales summarizes what has been a growing body of studies on the economic effects of so-called media piracy.  Their conclusion is that piracy does have a negative effect on revenue — if for no other reason than the vast majority of studies come to that conclusion.

Smith’s presentation at DBW listed no less than 29 studies on media piracy that take actual data into account (as opposed to merely theoretical papers such as this one).  Of those, 25 found economic harm from piracy, while 4 didn’t.  When the list is restricted to papers published in peer-reviewed academic journals, the ratio is similar: 12 found harm; 2 didn’t.  Interestingly, almost half of the cited studies were published after the GAO’s 2010 report.

(When Smith and Telang’s paper was originally published last year, many discredited it instantly because the MPAA helped fund the research.  Yet I take the researchers at their word when they say that the funding source had no effect on the outcomes — an assertion bolstered by the paper’s exclusion of the MPAA’s own study from 2006.)

The paper explains why some studies’ methodologies are better than others and discusses shortcomings in some of the studies, such as the Oberholzer-Gee & Strumpf paper from 2007 that showed no harm to sales of music from piracy and therefore has been widely cited among the copyleft.

It’s easy to poke holes in the methodologies of studies that have to rely on real-world data over which the researchers have little or no control.  And as someone who wouldn’t know an “endogenous dependent variable” if one bit me in the face, I find it hard to look at criticisms of these studies’ methodologies and determine which ones to believe.  Yet it’s obvious that any study on piracy must rely on real-world data in order to have any credibility at all.

Decisions about business and policy have to be made based on the best information we have available.  After a certain point, simply poking holes in studies — particularly those whose results you don’t happen to like — isn’t sufficient.

It may indeed, as the GAO suggested, be impossible to measure the economic effects of piracy with a large amount of accuracy.  But if dozens of researchers have tried, all using different methodologies, then their conclusions in the aggregate are the best we’re going to do.  Put another way, it will henceforth be very difficult to dislodge Smith and Telang’s conclusion that piracy does economic harm to content creators.

 

Comments»

1. Nate - January 27, 2013

The problem with an absolutest argument like your premise (aside from the fact it’s based on a paper which studied other papers instead of studying the phenomenon itself) is that the lack of nuance and qualification means your premise is both easy to refute and is based on a straw man argument.

Your title assumes that when JK Rowling refused to allow HP ebooks the harm came from the piracy, not from her decision. This is incorrect.

Your premise also implies the assumption that someone, somewhere said that piracy _never_ causes harm. No one has ever actually said that so your response to it is a straw man argument.

A more accurate phrasing of the reality of digital content would be “Piracy _can_ cause economic harm in certain circumstances”. But of course we already knew that so there is no reason to say it again.

2. James Gardiner - January 27, 2013

Obviously in this new era of the infernally copy-able medium of the internet, piracy is going to have an effect on the old scarcity idea of paying for media.

We cannot undo the internet. So, I find it strange how old incumbents call foul when this is just a new environment in that they either have to change to survive or go away.

The young have had the taste of free media, there is no going back. Even if governments did try to come down on it. Its just impossible to stop.

Anyone who’s business is banking on a crackdown or reduction of piracy is fooling themselves. Its only going to get worse as the general community learns how to do it more and more.

So, this story, to me, is about old timers crying about how it an;t like it use to be.

The headline could also read, content creators cannot make the same return in today’s era of media… That is if you accept the current world and how media is being consumed and distributed, and that locking media down to any degree like it use to be is impossible.

In this environment, there are still profitable models, maybe not as profitable, but they still exist.. I’m not happy about it either as the trend is towards crap content made cheap etc. But I expect this is a generational thing. Consumers will eventually understand they will need to pay something towards quality if they want it. But until quality is in short supply. (Ie studios no longer make quality shows on general TV stations that are dead easy to pirate.. as they cannot get a return as they are pirated with no ads etc.., we will probably not see a change until these are gone..

Its why there is so much traction on the kickstarter projects. As its seen as a workable new model in the new era. (I’m not convinced. it has to many issues, but who can tell)

Then on music, from my understanding, in general.. musicians have come to the conclusion that free distribution is now only considered a publicity machine to make live performances pull in the huge crowds and thus money..

James

Bill Rosenblatt - January 28, 2013

Nate,

Let’s start with basic linguistics; and while we’re at it, let’s talk about strawmen. “Your premise also implies the assumption that someone, somewhere said that piracy _never_ causes harm.” Now that’s a strawman. It implies no such thing. The opposite of “never” is “always.” I did not say “always,” I said “does.”

None of the studies cited in Smith & Telang’s paper — nor any other study I’m aware of — has said that piracy “always” harms sales. If you’re talking about the assertion that a pirated copy always means a lost sale, no one in this discussion seriously believes that anymore (if they ever did). On the other hand, if I had a dollar for every time I have seen a statement of the form “piracy helps sales” from anyone, I wouldn’t have to do this for a living anymore. (Oh, wait a minute…) In fact, you were at my conference last December; you may have seen Jim Burger, a respected authority on digital copyright, say something along the lines of “Piracy is marketing for content.” Statements like this are all over the place, all the time. Just spend a minute looking at TechDirt or TorrentFreak.

Now let’s talk about how you’re missing the point. The point is to establish a baseline for dialog. Not all smokers get lung cancer, yet we say “smoking causes lung cancer.” That’s despite the tobacco industry’s concerted efforts to maintain ambiguity about this through obfuscation and poking holes in study methodologies. What I am suggesting is that it’s time to do something analogous here. Of course it’s possible to poke holes in the methodologies of these studies. But by now enough of them have been done, and their results are so generally conclusive, that anyone who pokes holes in them just to maintain ambiguity should just stop it. Let’s agree that piracy harms sales; we can then have the debate we need to have, which is what to do about it.

Finally, your comment about JK Rowling and Harry Potter: “Your title assumes that when JK Rowling refused to allow HP ebooks the harm came from the piracy, not from her decision. This is incorrect.” Ah, another strawman. It assumes no such thing. Yet I’m not sure what you mean by “harm” here. If you’re referring to the appearance of pirated Harry Potter e-books before the launch of Pottermore, then that has little to do with what I’m saying. Of course it’s true that if people withhold legal products then illegal ones will be created. My view is that Rowling hesitated on e-books at least in part because she didn’t want to hand the market over to Amazon. Her strategy with Pottermore certainly bears this out.

3. Annie O. - February 2, 2013

Mr. Rosenblatt,

What’s the ratio of downloads to lost sales? Is it a hundred acts of sharing for every sale? Or how about twenty? Now, what is a song worth, a dollar? So twenty people got a dollar’s worth of value at the expense of only one musician (or some middleman?) losing a dollar. Sound like value generation to me!

By the way, how much are YOU getting paid for writing this?

Bill Rosenblatt - February 2, 2013

Annie,

Your statement makes no sense. Using your 20-1 example, it is not the case that “twenty people got a dollar’s worth of value at the expense of only one musician (or some middleman?) losing a dollar.” Instead it would be the case that 20 people get a dollar’s worth of value but the musician (or middleman) only get one dollar, not “losing a dollar” out of the 20 she would have gotten without file-sharing.

Now having said that, if you read the Smith & Telang paper, you’ll find answers to your first question. They measure it by sales displacement percentage. Under your 20-1 example, piracy reduces revenue to artists (and middlemen) by 95%. The studies they reviewed show a range of 5-50% depending on what type of content, how it’s measured, which countries, etc. If you take a simple average of the 7 studies with those figures, you get about 25%.

Oh, by the way, to answer your second question: zero.

4. Annie O' - February 3, 2013

Zero?!? Now, according to your argument this enterprise of yours is unsustainable, you have no motive to continue. If you truly believe what you have argued, you should erect a pay wall in front of your articles and charge readers a dollar. Instead of, say, 1000 readers, you might only have 10, but they would be 10 paying readers, and by your standards your enterprise would at last have some value. As it stands now, by those standards, your efforts have no value.

Bill Rosenblatt - February 3, 2013

Annie,

You asked “how much are YOU getting paid for writing this?” The answer is zero; no one pays me to write this.

You didn’t ask “Why did you write this?” If you look here, you’ll find the answer to that.

5. Trichordist Editor - February 4, 2013

Reblogged this on The Trichordist and commented:
…it will henceforth be very difficult to dislodge Smith and Telang’s conclusion that piracy does economic harm to content creators…

6. Yes, Piracy Does Cause Economic Harm « Copyright and Technology « Stuff-ups - February 4, 2013

[...] Yes, Piracy Does Cause Economic Harm « Copyright and Technology. [...]

7. Mark SPLINTER - February 4, 2013

Annie, how much are YOU paid? You could, you know, stop.

8. Stefan Herwig - February 4, 2013

I find it highly interesting that the public circulation of the studies that come to the conclusion, that there is little or no harm from Piracy does by far outperform the circulation of the studies that do.come to the opposite result.

It shows how unbalanced the coverage in this topic is, so, thank you Bill, for pointing this out.

Stefan

9. overviper - February 4, 2013

Haven’t we been through this conversation a few thousand times? The conversation should not be about whether or not piracy causes lost revenues…it does. We all know that. OK…now what? The conversation SHOULD be about trying to find a method of making money from electronic media that doesn’t 1) trample all over the Constitution, 2) is easy for everyone to use, and 3) has a vast array of content to choose from. IMHO iTunes is a pretty decent example of something that seems to work. Of course people complain about it…well…come up with something better. Somebody will. It’s too obvious that there’s a need for it.

The only way to stop piracy is to be ever more Draconian in your approach. If anyone is making the effort to pay attention, whatever rights we hold under the Constitution are being eroded ever more quickly and every day…the 4th amendment is a joke already, the 1st is not far behind if you bothered to notice that the police confiscated press passes during the Occupy movement. We are opening a very dangerous box when we allow corporations to dictate policy to government in the name “lost revenues” and “level playing field” and “public safety” and all the other buzz-words they use to justify ways to move your money into their pockets.

They have already done this if you can recall the “tax” on blank media…soon they will propose a “tax” on internet usage or they will narrow bandwidth or they will come with some other method because “some” people are downloading illegally and they must protect their profits at all costs. It’s already happening…AT&T is my DSL provider and they have gotten slower every year…

This conversation is way past piracy in my opinion. The conversation should be about the future of this country and if we are really going to become a nation of sheep.

10. freeloadingthebook - February 4, 2013

Reblogged this on FreeLoading: how our insatiable hunger for free content starves creativity and commented:
This is a useful analysis of the conclusions from various piracy studies by Bill Rosenblatt at the Copyright and Technology blog.

Bill Rosenblatt - February 4, 2013

OK, overpiper, yes, this is the conversation that we ought to be having now. I could quibble with some of your points, but that’s not the objective here.

The trouble is, even though we have indeed been through this conversation way more than “a few thousand times,” many people out there do not believe that piracy causes lost revenues, and they get big platforms such as on the major tech blogs to say so. See my response to Nate Hoffelder’s comment above. Even now, I recently got a retweet of this article on Twitter saying “meh, suspect sources.”

My point here is to say enough is enough, and moreover that it’s irresponsible to poke holes in the studies just to create FUD or justify your own behavior. (If you want to poke holes in studies as an explanation of why your own study is better, that’s great: it’s called contributing to the field.)

– bill.

11. overviper - February 4, 2013

OK, Bill…what exactly is your solution? You seem to be really hung up on the “studies” and not seeing the big picture. I’m a content creator and my choice is to make less money and tell Sony, Warner Bros, Disney, etc. to go take a flying leap. They’re the real thieves in any case, as anyone who has dealt with them will tell you. Try getting paid according to your contract or on time. Do you have any idea what it costs to audit 20th Century Fox? I don’t like to call people names, but you must be either an apologist for the distribution mafia or have never dealt with these people. They have ripped artists off for years, and when a company like Disney can go to Congress and get the copyright law extended for 25 years so that Mickey Mouse doesn’t fall into Public Domain…it’s pretty clear who you’re dealing with.

None of these people are in any way, shape, or form looking out for me or my interests. They never have… they have only used my creativity and my work to line their pockets and then come up with accounting methods that steal from people like myself. If some guy in South America wants to watch my movie for free, I mind it a lot less than the company with a “business affairs” department that grinds me down for cash up front and tells me (with a straight face) I’ll get “back end” money. If they all go out of business, I won’t shed a tear. Something new and possibly better will come along to do their job.

12. Bill Rosenblatt - February 4, 2013

Overpiper,

I don’t disagree with you at all. I’m only “hung up on the ‘studies'” for purposes of this article, not in general. If you want more of my views, read more of my stuff here.

Regarding your point about major film studios: (although this has to do with music, not film) you might be interested to read this: http://thetrichordist.wordpress.com/2012/04/15/meet-the-new-boss-worse-than-the-old-boss-full-post/.

– bill.

13. overviper - February 4, 2013

Bill;
I did catch that piece, and it hits home. I was a musician before I started making movies, and everything I said about movie studios goes triple for record labels, including the part where I hope they go out of business. If you want to talk degrees of crooked, record labels might be at the top (maybe lawyers…not sure…it’s close…but wait, what about record label lawyers? Damn, it’s confusing…) of the list.

My point is that all these entities will continue to hang on as long as they can exploit their libraries or catalogs…and then, Sayonara, baby, it’s time for whatever comes next. I have no doubt that artists will continue to be exploited. It’s the nature of the beast. If we were good businesspeople, we wouldn’t create art. We would be in the oil business…but that doesn’t really interest most of us.

So I view the “now” as a shaking out period. People are going to figure out how to make money from their intellectual property. In all likelihood, it will not involve large entities like studios or record labels or publishers…and that’s OK in my view. The key to all of it is distribution, and the big boys have had that locked up for too long. Now that they’re forcing movie theaters to go to digital projection…in order to save THEMSELVES money (and this is how it goes…they’re opening the door to smaller film makers to show their movies…and then they’ll complain about it)…it shows the kind of shortsightedness that has plagued them from day one. There could have been a nice civilized transfer over to digital content had they started in the 90’s. But they blew it, and now they want to turn the clock back. I say that the Internet changed everything, and for the better. We just don’t have a real handle on it yet.

My hope is that the audience will get sick of the culture of celebrity and start to try to find and appreciate art. This will be a battle for hearts and minds, as what’s left of the Networks, Studios, Labels, etc. will keep trying to shove American Idol and the like down our throats…and we can win this war if we just refuse to pay attention.

Like the dualism that Shiva represents (Creator/Destroyer), there will probably be some pain before we reach a new plateau. Maybe that plateau will only allow really talented people to exist on it instead of the thousands of wanna-be’s who are determined to “make it” at all costs…inflicting upon us bad music, bad movies, and books written at the 4th grade level…because there will just not be enough money or fame in it for them. Wow…what a concept.

“The best lack all conviction, while the worst are filled with passionate intensity…” – from WB Yeats Second Coming…

14. Ophelia Millais - February 4, 2013

Hi, I’m new here.

You said, “Let’s agree that piracy harms sales; we can then have the debate we need to have, which is what to do about it.”

Hmm, perhaps, but whether we need to do something about it is the first debate. The old buggy-whip example can be, uh, trotted out here, although there are more modern and relevant ones if you want them; Airbnb and Uber come to mind. Point is, just because technology is making it easier for competitors to subvert an industry’s legally granted monopoly doesn’t make what they do inherently “unfair” or immoral. Nor is any industry entitled to perpetually enjoy whatever sales levels it has in the past and predicts for the future…notwithstanding the ever-skyward revenues of the music, movie, and software industries in spite of piracy.

Maybe we should first agree that anti-piracy efforts don’t help sales. Demonizing file-sharers, file lockers, YouTube, search engines, and the unregulated Internet didn’t help sales. Litigation didn’t help sales. “Education” didn’t help sales. Threatening to cut off people’s Internet didn’t help sales.

What helped sales was dropping DRM and letting Amazon and Apple and dozens of other vendors sell licensed MP3s. What helped sales was partnering with streaming music and video services. What helped sales was expanding licensing programs. What helped sales was making it easier to buy than to pirate. What helped sales was getting radio stations to play nothing but moneymaking tunes. What helped sales was realizing that piracy is not the problem, it’s business-as-usual that’s the problem.

And somehow I just don’t believe that a sudden stop in piracy would boost revenues by 5 to 50%. People’s entertainment budgets are fixed. They buy what they can afford, and some of them pirate too. Stopping piracy isn’t going to give those people more spending money; at best, it will shift the money around. What good is boosting movie and music sales if it cuts in to video game and book sales?

Even if curbing piracy would boost revenue, what effect would that have on pricing? Are the prices artificially low in order to compete with piracy, or are they artificially high to make up for lost sales? Either way, the result will not be lowering of prices, we both know that. And if there’s nothing in it for the consumer, why should they want to “do something” about piracy?

Bill Rosenblatt - February 5, 2013

Hi, Welcome.

Yes, it’s true that “nothing” is a possible answer to my question “what should be done about it.” Various people have suggested that we’re in a period of transition and that it’s too early to tell what the long term effects on creativity and culture will be. One could argue that various things that the media industry and Congress have done were premature.

But that’s just it: the problem is that we’re pretty much forced to cast this as a debate over revenue and the size of industries or companies, instead of as a debate over the original intent of copyright. We use revenue as a proxy for the success of creative output, and it might be the best we have, but it leaves something to be desired. The media industry offers revenue as a proxy; the other side offers evidence of things like the sheer number of videos posted on YouTube or photos on Flickr.

Books like Jaron Lanier’s You Are Not a Gadget and Chris Ruen’s Freeloading attempt to argue in terms of creativity and culture instead of pure revenue. You should look at their arguments. In other countries (in fact, all industrialized countries except the U.S.) they have culture ministries to argue the cultural/creative point of view.

Now having said that, let me quarrel with several of the points you raise:

  • “Maybe we should first agree that anti-piracy efforts don’t help sales.” No, I’ve seen plenty of statistics to show that some of them do. (Whether they help enough, compared to what they cost, is a different question, and here we don’t know the answer.)
  • “Threatening to cut off people’s Internet didn’t help sales.” Yes, it did – according to one of the studies cited in the Smith & Telang paper, if you look at HADOPI in France: “publicity surrounding the HADOPI law caused a 20-25% increase in French music sales relative to the control group countries.”
  • “What helped sales was dropping DRM and letting Amazon and Apple and dozens of other vendors sell licensed MP3s.” Nope, no evidence to tie lack of DRM to increased sales of digital music. Sales of downloads have steadily increased but not in a way that’s necessarily attributable to dropping DRM.
  • “I just don’t believe that a sudden stop in piracy would boost revenues by 5 to 50%. People’s entertainment budgets are fixed.” Agree with the second sentence but not the first. The problem is that consumer expenditures have shifted from content to things like ISP services and gadgets. This is somewhat of a separate issue from piracy but it’s related. Outside of the US there are levies on consumer electronics and blank media to help remedy this, but I’m not a fan of that type of solution because it’s a “blunt instrument” approach.
  • “Are the prices artificially low in order to compete with piracy, or are they artificially high to make up for lost sales?” That is a good question, but I’d argue the former. The point of copyright is to make it so that creators can charge “artificially high” prices relative to the cost of goods sold (which nowadays is zero), because they have upfront costs in creating the content in the first place.
15. overviper - February 5, 2013

Let’s go right to the US Constitution…where it says…Congress shall have the power: “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries…”

In my mind, one of the key words here is “Limited”. A patent is 17 years…why is a copyright “Life of the author plus 75 years?”. This just seems silly, as obviously the author does not benefit from this, but typically only some corporate entity who has managed to finagle the ownership of those copyrights. They may have paid for them, many times they do not…they just steal them. I have scored several movies. Most often, I was forced to give up the publishing rights to my music in order to get the job. Those rights are inherently held by the creator. When they license an Elvis song for the film, they don’t ask for the publishing rights…they would be laughed at. Why do they demand them from the composer? Simply because they can.

The people who are mostly demanding that piracy be shut down are not the people who are creating anything. They are only interested in power and money. They are not artists…they are parasites living off of what artists create. They have deep pockets and have spent lots of money on trying to convince us that we are somehow taking shoes from children’s feet if we file-share. Their main problem is that no one believes them anymore. If you’re in the business, you know how greedy they are. We all know about 360 deals and what a rip-off Ticketmaster is. If you are trying to make money from your art, your real enemy is not file-sharers or downloaders…it’s the slew of people who have their hand out at every step of the way, trying to cut themselves a slice of your pie.

I actually think that there is something to be said for a levy on blank media or consumer electronics. It is kind of a “blunt instrument” approach, but for me…the real question is who will administer that money and how will it get divvied up? Will it go right into artists pockets or will the distribution mafia get to rake off the biggest piece once again? This is one possible path going forward, but I’m insistent on wanting to get the old guard out of the way so that the future of the arts can be secure. With the internet, we no longer need them in order to distribute our work…so why do they get to have 1) a seat at the new table, 2) have so much say (or any say at all) as to how laws are passed that will impact artists in the future, and 3) an impact on future careers of content creators when they have proven themselves to be irrelevant?

I agree with Ophelia…let’s do nothing…except try to keep the dinosaurs out of the loop and out of our hair. It’s time for them to lay down and die and become petroleum deposits.

16. Bill Rosenblatt - February 5, 2013

Two things.

First, my overall concern with this entire argument (not just here but everywhere) is that there is so much bad feeling about Big Media/MPAA/RIAA — regardless of why or where it came from — that the copyright baby is in danger of being thrown out with the Internet bath water. Yes, the term is too long; yes, astronomical statutory damages are a bad approach to enforcement; etc. But believing that copyright is evil just because some media companies have behaved badly is bad logic, yet that’s what’s out there. It has forced many artists, including lots of indies, to be shier than they should be about asserting their rights in the name of being cool (cf. Lily Allen).

Second, I’m for usage-based compensation if it’s done with a semblance of accuracy. Levies do not accomplish this. Spend some time looking at the levy/collecting society situation in Europe and you’ll see how unfair and dysfunctional it is. The Spotify model is closer to what we should have overall, assuming the numbers can work out fairly.

Technology is available to do this; better technology could be available with some R&D investment. (That is where people like me come in.) Doing this requires online repositories of rights to ensure that royalties are distributed properly. This is a difficult problem but it’s being worked on.

17. overviper - February 5, 2013

I agree…I like copyright in principle. I don’t think it’s evil. But you can’t just shrug off the fact that Big Media, et al have behaved VERY badly. I just think it’s time for them to slink off into the night.

Levies ARE tricky, and certainly in America organizations like ASCAP, BMI are slanted way in favor of songwriters as opposed to actual composers…so there’s some work there to get it figured out, but that being said, there are a couple of models out there (like you point out – Spotify) that are starting to get the idea. Those models will get better over time or other models will come along to replace them.

The one thing not addressed in this thread is the idea of educating the public (or the audience if you prefer) to understand that it is in their own interest to support the artists and content creators they like – even if only at a cheap level. It will allow them a longer lifespan and allow more of their work to be available for the audience to be able to appreciate. I don’t really see that effort being made.

18. Bill Rosenblatt - February 5, 2013

OK, the education/moral argument. See my recent article http://copyrightandtechnology.com/2012/12/17/freeloading-is-killing-music/ which touches on this. It has been tried (and tried and tried and tried).

19. overviper - February 5, 2013

I read the article…it’s good, and on point as far as it goes…but it doesn’t address a couple of things…so let’s just talk about music, which seems to be the thrust of it…
First off, there are never any guarantees when you set out on the journey to master this particular craft. Historically musicians have been looked at by society as somewhat higher than a dog, but lower than a chimney sweep…unless you had the hype machine of whatever age behind you…then you became an entertainer (still pretty low on the societal echelon) or a star…which reversed the point of view somewhat. It is no different today.

When I embarked on my particular journey I survived by playing gigs, and live performance is still the method favored by most musicians for making a living. There is a reason for this…there is no substitute for the excitement of live performance. It cannot be bottled, or recorded, or seen on video…and by the way, I have friends who stream concerts around the world to movie theaters and make a good living doing it…and they will be the first to tell you it is not the same.

When I got a little bit better, I was able to be in bands that had record deals or other types of income from being in a position for the hype machine to exploit us. We still made the bulk of our money from playing live because the deals that we had to sign were not very good deals for us, and if any of us bothered to read royalty statements, we would find it absurd that we made so little money from recording. I’m sure the Rolling Stones have a different story to tell…or Nirvana, or other hugely popular acts. I wasn’t that lucky…or maybe just not that good.

When I moved out of that part of the business into scoring movies and TV…surprise! Guess what? I started to collect monies from Broadcast licensing…after I aged out of that end of it (because they always want the newest, latest guy), I needed to reinvent myself once again as a filmmaker.

This long rant is only to come around to this…

You can still make money playing live – maybe not in New York or LA where you might have to pay to play…but there are venues all across the country that understand that live music brings in customers…
Broadcast revenues are still in place and you can sell songs to TV, Advertising, Films…and collect ASCAP/BMI monies and make a pretty good living.
You can write a really popular song and put it on YouTube and make a big score (Gangnam Style is a good example)
You can get a little better at your craft than being an OK rock guitar player and learn orchestration, harmony, counterpoint, etc and get a job scoring movies and TV and make a pretty good living doing that.

Here’s the catch…

There are a lot more people trying to do the exact same thing on every level of the business, including the corporate end…and at every level it’s more competitive and the sharks are sharkier and the agents and managers are bigger scumbags because the pie is smaller. Do you deserve to be able to make a living from your music if you’ve practiced your ass off and studied hard and put the hours in? In a perfect world…yes, you do…We don’t live in that world. If you take up the craft of music, you better be doing it for the sheer love of it…because in every age, it’s a bitch to figure out how to support yourself from it. And that goes from Mozart down to today. We know about Mozart, but we don’t know about the next 800 guys that were almost as talented. They struggled. They didn’t have any guarantees. They didn’t have ASCAP. They didn’t have one tenth of the avenues to make money as someone today. They had Publishers and they had Patrons…and my guess is that there was just as much bullshit involved with dealing with either one of those as dealing with file-sharing…

But I believe that we need to try to make the public understand that by supporting iTunes, and buying CD’s, and buying Vinyl (making a big comeback), and licensing things from Creative Commons, and paying to sample beats…it is better for them, because they will have more and better music going on into the future. Some people won’t care…they’ll still steal if they can. But some people will get the message and support their favorite artists and buy a tee shirt, or a ticket…or a track. I look at people like Trent Reznor and he’s a guy making it all work because he connects with his fans directly…and they love him for it, and they support him. Some people can figure this out.

20. Austin - February 7, 2013

In my humble opinion . Overvipe You do not know what you are talking about. Microsoft has its software ripped off, musicians and film makers have their music and movies ripped off by thieves like Kim dot Com… who by the way has a huge house filled with over 10 million dollars worth of art work alone… Kim steals other peoples hard work to make money for himself…. The artist IS outta of money… so is the film company. There are several tech ways to track the thieves to their home address. There are several ways to track and stop pirates here and abroad. No one has the right to steal from another. Rico Act them and drone them. Those are copyrighted works. At least Record companies give an advance to a band/artist so they can pay rent, upgrade their instruments, buy food, buy studio time. Thieves like Kim dot com just steal or promote software(with pop up ads) that help steal other peoples property. It’s easy to make money when you are stealing from other people. Me, I listen to that 30 second song snippet on iTunes, and if I like it I buy it, usually 99 cents to a buck fifty, and help to support the artist. This is the correct and moral and LEGAL thing to do. I do NOT share the file. Hell I worked for my money and do not mind blasting the music around my pool for my guests to listen to it… but I DO NOT make copies to distribute. I think we SHOULD give these cyber crooks to @Richard for him to deal with. Rationalizations about piracy and stealing are total Bull Sheeeet. Besides using peer to peer gives a way for a hacker to get into your system. Like I said, say all you want about record companies, but at least they give cash advances to minor and major acts… it’s in everyone’s interests that this happens. Piracy especially hurts the independent artist who cannot afford to tour. They have families. I have two friends that are with CD Baby and they tell me they find their songs on sites they have no agreement with. It kills their income… it DOES hurt families. Someone is downloading/sharing their music on these pirate sites like Megaupload.Stealing and piracy are just plain wrong. For every 1 major act making money… there at least a hundred bands scrapping by trying to make a living. I perform a monthly inspection on my children’s computers, and they know that if I find peer to peer shareware they will lose their computer and get grounded. They earn an allowance and buy their CD’s at Wally Mart and Target and also purchase songs on iTunes. If you really support musicians and film makers and book authors and people that create wonderful computer programs and apps, support them by purchasing their works at legitimate sites OR CD’s DVD’s BLU RAYS at Wally Mart and Target. Listen Overvipe..I’m sorry you didn’t make a good deal with the record company..you should have had a better attorney. At least you got some money. Kim dot com doesn’t care about you or any other musician/film maker. He ain’t gonna give you an $$$ advance. Fight back. Good music or bad music, the artist should get paid if you download it. Don’t be so friggin elitist with your “counterpoint, music theory”, whatever.. Jail pirates and thieves. France started kicking people off the internet that were found doing the illegal download. Guess what, sales are up after the busts. Fight back.

Overviper - February 15, 2013

Hey Austin…I guess you didn’t read what I said very carefully…but that (in my view) is what this fight has degenerated into. A bunch of people picking one side of the fence to be on and calling everyone on the other side of the fence names. I specifically said that operations like iTunes had it correct and they should be encouraged going forward. But you miss a couple of key things that lead me to believe that you have never had any real experience in the business.
1. The advance that a record label gives you is not GIVEN to you. It is a loan against expenses and future earnings. They are downright nasty about having that loan paid back, and typically it leads to all kinds of accounting shenanigans so the artist loses, but the label sees a better bottom line. Please don’t defend them. If you are a major act, selling huge numbers, you’re making money. You are likely still getting ripped off, but maybe you have the money to pay your own accountant to keep them a little honest.
2. There is no guarantee that you can make a living from being a musician. Nor should there be. Maybe you want the government to “support” artists so that they can “create” while sucking off the system. Other people champion illegal immigrants, minority groups, the poor…all of whom have “special needs” and “deserve” money from the government. Guess who pays for that? I’m not saying (and I hope you actually read this) we should not help people. What I’m saying is that every extra dollar has to come from somewhere, and if artists can’t make it on their own, giving them government money means you’re taking from somewhere else. If people are stealing your work, maybe you should consider not being a musician. It may not be the correct career choice. Maybe it should be your hobby.
3. You can’t put the genie back in the bottle. File-sharing is a fact of life. The clock will not be turned backwards. If you need to blame someone, blame your friends and neighbors. They embraced the Mp3, they embraced digital technology. They can no longer tell the difference between high quality audio and low fidelity. They have traded convenience for sound. They are the one’s trading files with abandon. They no longer feel they should have to pay for music. If you want to start trying to re-educate the public…great. If you want to say that the public should act in a more moral way and see the consequences of their own actions…great. Fact is, people are selfish and will do what they think is best for themselves.
4. If I was a musician starting out today, I would concentrate on two areas. The first would be to make my live show so killer that I could sell tickets in any venue, and the second area would be to try to get my music into films, TV, etc. because broadcast still pays and that system is not broken (well…there are a few things wrong with it, but in general…it’s still OK) and if can get in you can make a living. But I say again, there is no guarantee. If you have a band, and your friends all think you’re great…it may be an indication you have talent, but it has never been an indication that you “deserve” a life in music. You want to blame file-sharing, but what I see is that it’s so much more competitive on every level. There are more people trying to take a bite of only a slightly bigger pie…and you need to master many more skills today.
5. The way that the “industry” tries to protect itself from piracy is a cure worse than the disease. If you ever read what the RIAA and the MPAA have tried to propose as legislation to fight piracy, it is nothing less than Draconian and hugely invasive…shredding any reasonable privacy protections that are already at risk from things like “The Patriot Act”…which basically shreds the 4th Amendment.
6. And get off that “elitist” crap. I’m anything but. You don’t know me or know anything about me. But experience…you know what that means? Empirical evidence of my own 2 eyes…experience has shown me that most of the people who call themselves musicians do not want to do the work. They can write a few songs and dress themselves out so they have a “look”…but in this business you need to earn your way, and pick your way through the minefields of bullshit that can lead you down roads that take you to nowhere.
I applaud you for acting reasonably…I just think that you need to think about what you can expect from everyone else.

21. Christian Horn - February 21, 2013

Is the presentation somewhere available? Including the 29 research paper list?

Bill Rosenblatt - February 21, 2013

Prof. Smith did not publish his presentation except to attendees of the Digital Book World conference. I obtained a copy of it directly from him by emailing him. I would not want to redistribute his paper without his permission, but given that his email address is publicly available on the Carnegie-Mellon University website, I don’t see the harm in providing that: it’s mds@cmu.edu.

There is a slide from his presentation that lists the names and dates of the studies he surveyed; this is available online at http://www.digitalbookworld.com/2013/does-piracy-hurt-digital-content-sales-yes/.

22. Music news update: 2/24/2013 | NYU Media Law Collaborative - February 23, 2013
23. A Zores - March 26, 2013

Your “argument” is, to put it politely, fcuking bullsh!t.

http://www.swinburne.edu.au/chancellery/mediacentre/media-centre/news/2011/03/price-drives-global-media-piracy

Piracy is a result of price gouging by corporations, NOT dishonesty by the consumer. If companies charged fair (and still profitable) prices for movies, music, ebooks, etc., there would be no piracy.

Rightwingnuts love to blather about “voodoo economics”, yet they ignorantly pretend that piracy isn’t voodoo economics. Wrong. People steal because the prices are too high. If movie studios and record companies stopped their theft via high prices, nobody would be “file sharing”.

Bill Rosenblatt - March 26, 2013

Let’s first note that the study you cite was confined to emerging markets, while the studies cited in Smith and Telang’s paper were either US-only or US plus other first world markets such as Europe.

Now then: the solution is to offer content at lower prices in lower-income markets? Oh, wait a minute: the Supreme Court just decided that such products are no longer “gray market” and can legally be imported back into the US. So much for that idea.

24. Overviper - March 29, 2013

Bill…Are you saying that the US is NOT a 3rd world country? Because when I look around, I find a lot of similarities. Or could it be that the public has the sense that they are being ripped off once again by the media companies? You can’t avoid being ripped off every time you fill your tank…except that if we had Natural Gas, Bio-Diesel, and other alternative fuels widely available, we might see real competition in the energy business and the price of gas come down to something reasonable…It seems to me that giant media companies are trying to create the same kinds of monopolies that are omnipresent in so many other places today, and even tho people aren’t really saying anything, I think they’re way pissed off.

25. A Zores - April 9, 2013

Further proving the point that piracy is not the problem, that piracy increases sales, a fact which MPAA and RIAA apologists (read: whores) try to ignore:

http://bgr.com/2013/04/01/hbo-online-piracy-analysis-408449/

]] HBO admits piracy is a ‘compliment’ that doesn’t hurt sales

]] “I probably shouldn’t be saying this, but it is a compliment
]] of sorts,” Lombardo said to Entertainment Weekly. “The
]] demand is there. And it certainly didn’t negatively impact
]] the DVD sales. [Piracy is] something that comes along with
]] having a wildly successful show on a subscription network.”

Piracy lets people see things before buying them, and increases sales. If people don’t know what they’re getting, they won’t buy it. People sure as hell can’t trust “trailers” or “movie reviewers” to tell them which movies are worth seeing.

What people actually do is download movies and watch 10-20 minutes of the movie, then decide whether to pay for it or not after deleting it. People don’t download to steal, they download the same way and for the same reason that people read a chapter of a book in a bookstore: to know whether it’s worth buying. And watching for ten minutes then deleting is as much “stealing” as reading that chapter in a store.

Bill Rosenblatt - April 9, 2013

Interesting. I’d be curious to see the actual evidence that backs up your statement “What people actually do is download movies and watch 10-20 minutes of the movie, then decide whether to pay for it or not after deleting it.”

The statement you cherry-pick from HBO is just pure PR. It’s them rationalizing the fact that they can’t do anything about the problem of HBO GO password sharing… as anyone who read the EW story, and did not take your quote out of context, would understand. You had better believe that if there were a reasonable way for HBO to cut down on password sharing, they’d do it. There are technical means to do this, such as requiring two-factor authentication instead of simply a username/password (e.g. like your online bank access), but that would understandably get users angry.

The reality is that they have to offer a service like HBO GO in order to compete with free and get some benefit rather than none.

26. Piracy: the good, the bad, and the alternatives | Computers and Technology in Today's Society - March 13, 2014

[…] industry is left trying to combat these illegal downloaders, sometimes through extreme means. Many claim that piracy will be the end of the entertainment industry, but even more say that there are […]

27. Dave - August 27, 2014

I’m not in the industry so maybe I’m missing something but… What value do RIAA/MPAA/etc add in this modern, connected world?

Actually getting your music[/film/game] into the hands of people who might want to hear it is insanely easy now. [putting aside, for the moment, being paid to do so]. Advertising? Sure, certainly on TV/Radio/etc but the internet levels that playing field.

I’ve read many, many articles over the years about the horrendous deals offered to those that actually create the music, often resulting in the artist getting a tiny fraction of the profit from their work.

Previously, that was the only option available so the recording companies could do what they liked. I don’t need to dig out the stories of excess, I’m sure you’ve seen them. All of which means that the companies in question have very poor reputations and garner little to no sympathy from many, myself included. While that’s not strictly relevant to the topic, it does impact the discussion.

Look at some of the truly dumb decisions made over the years… Installing rootkits on PCs via audio CDs, forcing always-online play in games (and then having server problems like Spore), DRM so that despite having bought an Audio book/track I can only play it on one device with some proprietary PoS software that is inferior to the media player I prefer to use, etc, etc, etc.

Trying to make examples of individuals but charging damages in the millions doesn’t scare anyone (after all, it’s a handful of people from millions who break the law so the odds of it being “you” are negligible). It just makes the companies look like petulant bullies who inflate numbers for their own ends.

I suspect I pay more than most for media/games I consume… I’ve got a Netflix subscription (2xstreaming HD), a Spotify premium subscription, more than £2,900 spent on Steam over the years (according to SteamGauge), and a host of other, smaller streaming media services.

I also pirate (not _often_ but that’s irrelevant).

For me the biggest motivation is that the pirated version is often better. Not because the content is any different (sometimes it’s slightly worse) but because it doesn’t have the associated neurotic baggage.

I can torrent something, play it where I like, how I like and when I like.

My Audiobook library (which has been bought legally) is a primse example. I’ve gone and downloaded many of the things I’ve already bought from a torrent site so I can play it in my car without using the Audible player (which is truly awful) or burning a CD. CD! Welcome to the 90s…

You’re never going to get rid of piracy but instead of spending so much time trying to stamp it out, they should be focusing on how to make the legal service as easy to use as the illegal one. Until that’s possible, piracy isn’t going anywhere.

I can only speak for myself but I’d prefer to pay a reasonable [another debate] amount and be able to access what I want, when I want, legally. If that’s not an option, I’ll access what/when I want illegally until the legal option catches up.

A quick aside to show just how tied up in knots all these industries are: http://www.nytimes.com/interactive/2013/02/24/opinion/sunday/ben-schott-movies-billing-blocks.html

How can you hope to innovate when you’re still thinking like that? It seems like everyone is so desperate for their slice of the pie that both the consumer and the artist get screwed and nobody is will to make a change in case they might get less. Instead, they’re just making themselves obsolete and blaming piracy while failing to innovate.

Roll on the day when artists can publish [almost] directly to consumers and get the money they deserve for their work without the middle men…

Bill Rosenblatt - August 27, 2014

Excuse me, but where exactly did I mention the RIAA in the article? Oh, right, nowhere. Where did I mention the MPAA? Once – to show that its own commissioned study wasn’t included in the meta-study I wrote about, possibly to avoid bias.

As for the idea that creative artists can just throw their stuff out there into the great Internet void and get discovered, this is a theory from 10 years ago that has been discredited time and time again ever since. You need marketing more than ever now to rise above the geometrically increasing pack. The one-in-a-zillion YouTube clip that happens to go viral (What Does the Fox Say, etc.) doesn’t count. Go to any of the artists’ rights advocates’ websites and you’ll find tales of annoyance about how much time and effort they have to spend, in the absence of support from record labels, on social media and so on. The Internet doesn’t “level the playing field;” it just changes the players on it. Go read, for example, David Lowery’s “New Boss Worse Than the Old Boss” article.

Seriously, the fact that all of the responses I’ve gotten to this article are of the form “Don’t look over here, look over there instead” makes me believe all the more strongly that I’m right.

28. Overviper - August 27, 2014

I was the one who mentioned the RIAA and the MPAA…and every day they become a little bit more irrelevant. I agree that it’s a huge pain in the ass to market your own music/movies/creative content these days and that it takes a lot more time…How about this going forward: There will be companies coming on line that will do it for you (it’s already starting to happen), just as record labels used to be there to find talent, promote it, and distribute their records.

In the NEW digital age, I predict that the ones who do that job honestly and treat their talent honestly will thrive, and the companies who try to re-institute artist slavery will go down…

29. Bill Rosenblatt - August 27, 2014

I agree that there are companies that will do your social media etc. for you. In fact, my wife runs one of them (for classical music). Some of the services you can get are even free, or close to free. The problem is that none of them will *invest* in your growth as an artist in return for a piece of the action when you get big. That’s the missing piece nowadays, and I’m not sure — especially in the age of Kickstarter and Indiegogo — where or how that gets replaced.

30. Overviper - August 29, 2014

I can remember when A & R was a real job…The best record labels (Atlantic/Stax/Motown/etc.) built artist careers. That’s what’s missing now as it’s all about instant traction, instant hits, instant money. If money people ever start to perceive that more money can be made from longevity, you’ll start to see people investing in it. One can only hope it starts to happen soon…

Stefan herwig - August 29, 2014

“I can remember when A & R was a real job…The best record labels (Atlantic/Stax/Motown/etc.) built artist careers.”

Exactly. And if their business models erodes by piracy (which it is doing for about 15 yeras now) there is less Money for A&R, less money for marketing, less money for artist developement. So the question is: What is cause and what is the effect here?

I work in the usic industry, and I can tell you that the market has changed completely, and both artists and companies are jhruting the same way. (Some) Recording artists can compensate with Merchandising and liveperformances, but not everybody is up to that task.


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