Record Industry crashes, dies

[RavingLunatic]

Oh, and Andronicus, what do you know about Michael Perelman? I just picked up one fo his books from the library after reading about him in the Nation. Haven't read much yet, just wanted to know if you knew anything about him.

[Andrew_TSKS]

I would think that economists should be pointing out all the huge economic gains that filesharing leads to. Consumers are getting music that would normally cost them lots of money--and for which they would probably be willing to pay a lot of money--for free. There's money lost on the other side of the equation, but nothing like the gains that come from the insane amount of downloading going on.

They're not economic gains though.  Measurements of utility have a role in neo-classical economics as predictors of economic behavior, but ultimately what is being taken into account in an economic study is the process of exchange.  So even though you're having a lot more fun listening to a lot more music, it's not an 'economic gain', because there's no transaction involved, the process has been removed from the grasp of the market.  It would be like someone declaring a 100% pie gain because they threw the other half away.  My first metaphor sucked but I like this one.  Mmm pie.

on the other hand, this is the same reason why lars ulrich was full of shit when he said that metallica lost $10 million because that many people downloaded "i disappear".

[alistarr*]

wake me up when they stop pressing vinyl.

[Good Intentions]

Wait wait wait GI where did you find Soft Rock for $12?

Real Groovy. It was in the sale bin.

[Good Intentions]

RL, it's kinda old hat to show that Pareto optimality doesn't describe what it is what we like to think of as an admirable economic approach. Capitalists like to go on about how great Pareto optimality is, but that's because you can prove that capitalism is Pareto optimal. Tsarist Russia was also Pareto optimal, without an acre of fallow ground or a bale of cloth unaccounted for, but not what you and I would consider a fair and equitable society. You couldn't turn over some land to poor farmers without depriving a noble of a summer home. What Pareto optimality describes is a market's exhaustiveness, whether all available resources have been meted out, and not anything about its egalitarianism or moral worth or.

To paraphrase you, Pareto optimality makes sure that after the rich have transferred all the wealth away from the poor, the poor can get none of it back.

[Wally]

but we can try and steal it. Not music though just "it".

[RavingLunatic]

RL, it's kinda old hat to show that Pareto optimality doesn't describe what it is what we like to think of as an admirable economic approach..

Haha, I thought I made it clear that I have no clue who the hell Pareto is.

[titus a.]

Oh, and Andronicus, what do you know about Michael Perelman? I just picked up one fo his books from the library after reading about him in the Nation. Haven't read much yet, just wanted to know if you knew anything about him.

I've heard the name, but don't know anything about him.  He's a heterodox economist, right?  What's the book about?

[RavingLunatic]

Yeah, heterodox. I'm only 20 pages into it, but the book's called Railroading Economics. It sounds like much of it focuses on the destructiveness of markets, how businessmen don't really believe their own rhetoric about how great markets are, how inappropriate pure capitalism is for a modern economy, and how free market economic models have little relevance to today's economy. The different chapters go through different periods of 20th century history.

A quote from the first section after the intro: "As long as the prevailing, conventional economic theory obscures new opportunities and new ways of working and of living, it represents a threat. In this spirit, this book calls for an and of economics and the opening to a new, more rational way of organizing our material life."

[Andrew_TSKS]

i realize this discussion is pretty much over, but i saw something that steve albini wrote on that poker forum thread that i think pertains heavily here, and i'm just gonna quote it entirely because i totally agree with it. so yeah, here goes:

A guy who doesn't want to be associated with the theft of intellectual property sent me a question privately, and I am posting it here on his behalf.

And don't ask me who it is. He's already got sand in his vagina about copyright and I don't want him further irritated.


Quote:
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A friend recently suggested that perhaps bands should just accept that there is a new paradigm. People are going to copy their music, and the way that they're going to make their money is from touring, merchandise, etc. You made a comment that suggested to me that you might agree with this. Care to comment?


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My long experience with bands and musicians has taught me that they understand their place in the world pretty well. They also understand that music is (always has been) free to consume. If you play your radio, it costs nothing to listen. If you walk by an open window while someone is playing an album, it costs nothing. If you stand outside a club and listen, it costs nothing. Music is free. Musicians often sing and play informally (get this!) just for fun.

Records, concert tickets and the use of music in commerce -- those things cost money.

The primary relationship that drives all parts of the music business is the relationship between a band and its audience. Record retailers, labels, producers, managers, lawyers, promoters and other parasitic professionals all subsist on whatever money they can siphon off of this fundamental relationship. Mechanical and broadcast royalties (the royalties supposedly "lost" through file sharing) are the part of this transaction that is least efficient in getting money to the artist because most of it is siphoned-off by the rest of the music industry. Of a $15 sale, the average band stuck on a major label may not receive a single penny, and amortized over the life of a release may receive (after all the other players take their rake) a buck or so.

I should note that entrepreneurial independent labels that operate on a profit-sharing model can be an order of magnitude more efficient, and that one of the efficiencies is the lack of promotional outlay required because fan file sharing does the promotion for free

In short, these "lost" royalties are a huge part of the revenue stream of the institutional part of the mainstream music business, but a miniscule part of the income of a band.

Almost universally, bands and musicians are happy anyone is interested in their music enough to become a fan, and they know there are many opportunities to do some business with such a person that may or may not involve selling him a particular record.

They also recognize that a download by someone unwilling to buy a record is not a "lost sale," because that person has made it clear that he is unwilling to buy a record. You haven't lost a sale, you've made a fan for free. Fans eventually want to buy records, concert tickets and other things.

A single sale = a small bet.
A lifetime fan = a huge pot.

here is the link to the page containing the original post.

[RavingLunatic]

Wow, that really does seem OTM, especially the part about promotional outlays.

[Good Intentions]

Except, of course, that bands on majors do hundreds of times better financially than bands off of them. That seems to have been neglected.

[Andrew_TSKS]

that's true for 1 out of every 50 or so major label bands. the other 49 would do better on independents (and actually, that ratio is probably getting worse with all the loss of revenue the majors are experiencing lately). here is another steve albini essay where he explains exactly why that is.

[Good Intentions]

Make a comparison between the earnings of the average major label band vs that of the average indie lable one, and admit that you're living in Lala-land.

Average major lable signee not making it big != people on indie labels being in the clover.

[elpollodiablo]

Are you willing to allow for the possibility that maybe Steve Albini knows a bit more about it than you do?

[Good Intentions]

Sure.

[Andrew_TSKS]

Make a comparison between the earnings of the average major label band vs that of the average indie lable one, and admit that you're living in Lala-land.

most major label bands don't make any money. they actually end up in debt. i've heard of a bunch of bands having to break up because their major label contract put them in debt, and they couldn't record for any other label unless said label paid off their debt. examples: quicksand, redd kross--even urge overkill, who had a big radio hit with "sister havana", didn't sell enough copies of that album and its follow-up to make a profit. now, they broke up because of drug habits, but they would have been fucked anyway.

[Good Intentions]

Whereas most people on indie labels are laughing all the way to the bank?

I look at my music collection, and I see a whole lot of people with day jobs.

[Andrew_TSKS]

that's probably true, but they're probably also in the black where money is concerned. i know that i made a small amount of money from the band i was in. when we did our record on 6 weeks, they paid us with 15% of the pressing, to do what we wanted with. we sold a whole bunch of records at $7 a pop, and that money more than balanced out our production expenses (we paid $200 to record, and eric did the packaging layouts for free on his computer). so yeah, we didn't make enough to quit our day jobs, but we also weren't working our asses off on the band. a friend of mine who plays in a major label band tours 7 months out of the year, can't work a day job, but makes about half the money i do in a year. AND his band owes thousands of dollars to their record company.

[icelander]

Fair enough. What's another industry that has had to face an onslaught like this, other than entertainment? What's another consumer product that technology has enabled its consumers to duplicate, share and trade free of charge?

Digital photography has really damaged film developing business. People can take as many pictures as they want and print them at home (although most people don't and that is a shame since computers can crash, but I guess photoalbums can burn too, but that is more seldom). Many mom-and-pop film developing businesses have closed down but people are stilling taking pictures, in fact, people are taking pictures a lot more, and not just on holidays and special occasions but anytime they want and never having to be thinking about developing the film to see the pictures. And that's just wonderful isn't it. and everybody can "duplicate, share and trade" all they want.

[Andrew_TSKS]

i was also thinking recently about how there may be parallels to be drawn between this situation and that of the american movie business in the late 60s, and then again when vcr's became popular in the early 80s.

[SPACERACE]

hey-o! prince making a move! his new album is straight-up free, and retailers be piiiiiissed.

"It's direct marketing and I don't have to be in the speculation business of the record industry which is going through a lot of tumultuous times right now," he said when asked why he was giving his music away.

A spokesman for the singer told The Mail on Sunday: "Prince's only aim is to get music direct to those who want to hear it."

"Prince feels that charts are just music industry constructions and have little or no relevance to fans or even artists today."

of course, it's prince, and he can afford to do this.

[alistarr*]

wait, i thought it was coming out as a free gift with a sunday paper. no money is being exchanged anywhere over working that one out?

[SPACERACE]

not according to reuters, but who knows. i'm sure it cost money to make, but i'm pretty sure it's "prince's new CD" and it's "free".

[alex]

edit: I think I misunderstood what Reese was saying, so nevermind