Legalize It: Music and File Sharing

Users worldwide were starting their own P2P sites. Now, normally we would expect someone standing on train tracks and staring down a locomotive to eventually move, right? Well, that’s what most insiders expected the music industry to do. Why would they try to halt the use of technology that so many people want to use and for so many different applications? And yet, this is what media conglomerates have tried to do. They continue to manipulate the market to their advantage, to maintain income and to keep the music consumer spending money that, for the most part, the artist never sees. For nearly a century the music industry has created a complicated web of deceit built on a system that has kept artists from gaining any bargaining power. Danny Goldberg, an independent label owner and former major label executive, states in his article Ballad of the Mid-Level Artist that “Every dollar that is spent on every major label artist, new or established, is owed back to the record company. This is called recoupment.

Suppose that a label gives a band $250,000 to record an album. They agree to do so in return for 90% of the sales. The album is recorded, and sells 200,000 copies at $10 each, yielding $2m. The record company takes 90% of this as agreed, leaving the band with $200,000 of their own. This is the situation without recoupment. With recoupment, the label gives the band $250,000 as before. The album again sells 200,000 copies at $10 each, yielding $2m. The record company takes 90% of this as before, leaving the band with $200,000 – but the record company no longer considers the 90% of sales as repayment of the advance. Instead, the band is required to pay the record company back the advance from their own cut, leaving them in $50,000 debt to the record company – even though the record company has gained $1.8m from the sales percentage. So you can see how the artist is at a disadvantage when dealing with a record company.

In the past decade, pressure from parent companies and stockholders to increase profits has driven record executives to control costs and recoup investments. In a tightening market, record companies were less likely to take chances on unknown talent if it was not immediately saleable. As major labels sold more albums, there was added pressure to keep profits up. Major labels took fewer risks on new and different artists, instead signing more of the tried- and-true, tested sounds that have generated revenue in the past. If one artist was able to sell millions, label executives tend to bet that artists with the exact same (or very similar) sound will sell, too. However, the constant rotation of similar acts and sounds eventually takes its toll on the quality of music being released, resulting in consumers becoming less willing to spend $16.99-$18.99 for one hit song.

With recording, distributing and manufacturing costs rapidly decreasing, it is possible for an unknown musician to release his own albums without label support. Buying recording equipment is now as cheap and easy as buying a first guitar; it is becoming part of the culture of being a start-up musician. This will also allow musicians to release their music for free. Music will no longer be the commodity it once was; rather, the value will be reflected in the fans’ regard for the artist. This puts the onus back into the consumers’ hands to choose what they like (which will require active listening, something the public may have gotten out of the habit of doing).

Free music could allow consumers to download directly from the artist’s website therefore creating traffic. Traffic generates the potential for revenue. Revenue goes directly to musicians and does not stop at a record company. Of course this is all just theory. Musicians and listeners truly have an opportunity to take the music back from the conglomerates, advertisers and industry that have created this mess. The days of the bloated Rockstar are fading but a true honest exchange of dialogue and goods between listener and musician can take its place. And that is sustainable.

– Ryan Holiday

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2 Responses

  1. Great essay…it all points back to the fact that bands & musicians will increasingly be making their bread and butter from touring. This is sort of ironic now that more music can be made digitally at home, with drum machines. Nonetheless, there still is a need for the larger companies to finance large-scale tours…something no artists can manage on their own. My main beef with this whole industry is that there is no “middle ground” in terms of profitability. You can either be a local band making $200-500 a night at a bar if you’re lucky, you could be a mid level band like the Disco Biscuits or moe. who make somewhere in the neighborhood of $8,000 a show, and then there’s the mega acts like U2, Phish, DMB who pull in hundreds of thousands a performance. The disparity between $500, 9,000, and 60,000+ is such a scattered monetary diaspora, IMO.

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