net.wars: Music night

by Wendy M Grossman | posted on 24 January 2010

Most corporate annual reports seek to paint a glowing picture of the business's doings for the previous year. By law they have to disclose anything really unfortunate – financial losses, management malfeasance, a change in the regulatory landscape. Which can cause problems of "too much honesty" for the music business.

Wendy M Grossman

The International Federation of the Phonographic Industry was caught in this bind, when writing its Digital Music Report 2010 (PDF) (or see the press release).

  • Paint too glowing a picture of the music business, and politicians might conclude no further legislation is needed to bolster the sector.
  • Paint too gloomy a picture, and ministers might conclude that this is a lost cause, and better to let dying business models die
  • So IFPI's annual report veers between complaining about "competing in a rigged market" (by which they mean a market in which file-sharing exists) and stressing the popularity of music and the burgeoning success of legally sanctioned services.

    Yay, Spotify! Yay, Sky Songs! Yay, iTunes! You would have to be the most curmudgeonly of commentators to point out that none of these are services begun by music companies; they are services begun by others that music companies have been grudgingly persuaded to make deals with.

    I say grudgingly; naturally, I was not present at contract negotiations. Perhaps the vivid picture of extreme foot-dragging portrayed in Steve Levy's The Perfect Thing is wrong; perhaps the music companies were hopping up and down like Easter bunnies in their eagerness to have their product included. If they were, I'd argue that the existence of free file-sharing drove them to it.

    Without file-sharing there would very probably be no paid subscription services now; the music industry would still be selling everyone CDs and insisting that this was the consumer's choice.

    The basic numbers showed that song downloads increased by 10 percent – but total revenue including CDs fell by 12 percent in the first half of 2009. The top song download: Lady Gaga's "Poker Face".

    All this is fair enough – an industry's gotta eat! – and it's just possible to read it without becoming unreasonable. And then you hit this gem: 

    Illegal file-sharing has also had a very significant, and sometimes disastrous, impact on investment in artists and local repertoire.
    With their revenues eroded by piracy, music companies have far less to plough back into local artist development. Much has been made of the idea that growing live music revenues can compensate for the fall-off in recorded music sales, but this is, in reality, a myth. Live performance earnings are generally more to the benefit of veteran, established acts, while it is the younger developing acts, without lucrative careers, who do not have the chance to develop their reputation through recorded music sales.

    So: digital music is ramping up (mostly through the efforts of non-music industry companies and investors). Investment in local acts and new musicians is down. And overall sales are down. And we're blaming file-sharing? How about blaming at least the last year or so of declining revenues on the recession? How about blaming bean counters at record companies who see a higher profit margin in selling yet more copies of back catalogue tried-and-tested, pure-profit standards like Frank Sinatra and Elvis Presley than in taking risks on new music?

    At some point, won't everyone have all the copies of the Beatles albums they can possibly use? Er, excuse me, "consume". (The report has a disturbing tendency to talk about "consuming" music; I don't think people have the same relationship with music that they do with food. I'd also question IFPI's whine about live music revenues: all young artists start by playing live gigs, that's how they learn; radio play gets audiences in; live gigs and radio play sell albums, which help sell live gigs in a virtuous circle, but that's a topic for another day.)

    It is a truth rarely acknowledged that all new artists – and all old artists producing new work – are competing with the accumulated back catalogue of the past decades and centuries.

    IFPI of course also warns that TV, book publishing, and all other media are about to suffer the same fate as music. The not-so-subtle underlying message: this is why we must implement ferocious anti-file-sharing measures in the Digital Economy Bill, amendments to which, I'm sure coincidentally, were discussed in committee this week, with more to come next Tuesday, January 26.

    But this isn't true, or not exactly. As a Dutch report on file-sharing (original in Dutch) pointed out last year, file-sharing, which it noted goes hand-in-hand with buying, does not have the same impact on all sectors. People listen to music over and over again; they watch TV shows fewer but still multiple times; if they don't reread books they do at least often refer back to them; they see most movies only once.

    If you want to say that file-sharing displaces sales, which is debatable, then clearly music is the least under threat. If you want to say that file-sharing displaces traditional radio listening, well, I'm with you there. But IFPI does not make that argument.

    Still, some progress has been made. Look what IFPI says here, on page 4 in the executive summary right up front: "Recent innovations in the à-la-carte sector include… the rollout of DRM-free downloads internationally."

    Wha-hey! That's what we told them people wanted five years ago. Maybe five years from now they'll be writing how file-sharing helps promote artists who, otherwise, would never find an audience because no one would ever hear their work?

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    Wendy M. Grossman’s Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, follow on Twitter or send email to netwars(at) skeptic.demon.co.uk (but please turn off HTML).