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Music Piracy and the Music Industry

(Disclaimer: In writing this article i=I am not condoning music piracy, however I do wish to expose the façade that for too long now record labels have been hiding...

(Disclaimer: In writing this article i=I am not condoning music piracy, however I do wish to expose the façade that for too long now record labels have been hiding behind.)

In order to write a fair article and really examine the extent that piracy has affected the music industry, it is necessary to first dispel some common myths surrounding the subject.
1. Music piracy causes artists to lose billions of pounds per year

This is a fantastical notion on several accounts. The primary loss of money is to the record labels, those same companies whose profits are in the billions each year, the fact is that for every, single, album and compilation sold the lion’s share of the profit goes to the record labels. This is not to say that there aren’t reasons for this or that there aren’t exceptions but to suggest that the recording artists are the ones to suffer the most is a huge fallacy. Music artists have numerous ways of bolstering their income; (in many cases they wouldn’t be able to survive without other sources of income) the most obvious is live music shows: each show put on by any artist costs anywhere between £2 & £200 per person; of which a percentage goes towards the artists. In addition to this licensing songs for movies, adverts, etc, TV & movie appearances and merchandise are ways in which artists make money these are not calculated when valuing the cost of piracy to the artists. I make this point as I believe that it is likely that piracy has increased the sales of tickets at shows and the volume of merchandise sales have increased, this is confirmed by a recent academic paper that shows that with the advent of file sharing the sales of live music events has dramatically increased. (1)

2. Piracy is killing the music industry

Piracy is not killing the music industry! Whilst the industry is not recession proof it is not by any means dying. As of July 2011 Nielson statistics show that for the last ¼ record sales have increased by 1.6% in the US (this is the first time since the recession that sales have risen). (2) Whilst this is not record breaking news it is at least proof that the industry is far from on its knees.
Internet piracy is now the most common place form of piracy and it is just as prevalent as it has ever been since the meteoric rise of Napster. It is common place amongst the 16 – 24 age range and increasingly popular amongst those in the 25 – 34 age range however the US music industry has just made a profit in the wake of a recession (the USA is the global leader in terms of music sales). If we follow this logically, piracy simply cannot be affecting the music industry on the scale that they claim or profits would not be on the rise in the wake of a global economic recession….?
As can be clearly seen the music industry suffers primarily from a case of self-interest, it is not in their interest to properly and accurately convey all the various streams of revenue that an artist can generate. During the period of 1999 to 2001 when the industry claimed to have suffered immensely from file sharing and in particular Napster and served thousands of lawsuits, they were making a profit. Not only were they making a profit the margins were higher than the previous years (3) leading many to question the authenticity of the claims and look harder at the real causes of the downturn in sales from 2001 to present. (4)

So now that we’ve established that piracy is not the big evil causing hunger, disease and famine, what is it? Piracy undoubtedly causes companies to lose money on music sales; however it is a necessary evil. Piracy has driven down prices, boosted live performance sales, allowed for the exposure of local artists and innovated technology to the extent that if there were no Napster, iTunes would not exist.
The music industry for many years held the belief that digital music was a fad that would pass so they continued their same business models pushing CDs as the technology of the future, increasing the price of the music whilst decreasing the breadth of new releases. This and numerous other factors led to the decline in music sales that is still affecting the industry today. The reluctance to switch to digital music on a widespread basis led to many turning to illegal sites to get the music they wanted, the music available on file sharing sites far exceed that which was easily available in record stores. This is still the case today as record labels have been reluctant to make the transition into digital music sales over the past 10 years, whilst companies have now recognised the need to make the transition it has come late and slowly. This has impacted their bottom lines and so a viable scapegoat needs to be made to distract the world’s media from the truth of the matter; that is that they are in a mess of their own making.

Had companies chosen to push digital music much earlier i.e. way back in 2001 with the collapse of Napster they would undoubtedly be in a much different position, namely that digital sales of music would outshine CDs in volume. Had they chosen this path then they would have been able to innovate new ways of generating profit in that there was a lull in profits due to online pricing and be able to innovate ways in which to make MP3’s a more finically profitable product for them whilst still keeping the prices low to attract custom.
As I stated above, piracy has driven down prices as in order for companies to even begin to compete they had to lower prices in order to attract customers into purchasing legal music. This can only be a good thing from a consumer’s point of view especially considering that music prices were overblown and to some extent still are, just 4 years ago you could be paying up to £20 for a single album on CD now prices are averaging around the £8 an album on CD. However prices for online albums are still ridiculous, i.e. Black Veil Brides: Set the world on fire – CD purchased through Zaavi £8.85 (5) and online through iTunes (UK) £7.99 (6) overall an 86p difference. Considering the fact that the CD is a physical product that is usually printed with some illustration on it and comes in a case, usually with an in-case booklet, taking this into consideration and added to the fact that the sound quality is worse, should the cost of the digital album be much lower? Since with the digital album there is no physical product, no packaging costs and no cover album, the price is over inflated and far from value for money.

In terms of technology I stated that without Napster there would be no iTunes, what I mean by this is simply that without piracy, digital music would not exist. I used Napster as an example as it is the most notable file sharing medium to date and it created the most controversy, getting noticed in the eyes of the media and record labels alike. Prior to Napster there were no ways in which to legally download tracks of your favourite artists, yet there were innumerate ways to do so illegally. Only in 2003 did iTunes release the online store where you could purchase and download music legally, this was without doubt produced to provide an alternative where there was none (as well as create billions in revenue) and was undoubtedly created in response to the continual growth of illegal file sharing, proving that there was interest in digital music formats.

The birth of digital music is not the only technological innovation piracy is responsible for. It is now possible to download MP3’s encoded at a higher bitrate than CDs meaning that the sound quality will be much higher than that of a CD and vastly superior to the standard MP3 purchased from most legal sites including iTunes (there are a few notable exceptions such as NIN who released there last album in several formats including audio lossless), to add insult to injury you can also download audio lossless files which are, as the name would suggest perfect copies, akin to a master copy, losing nothing in the transfer from the original copy to the replica which you receive. To reiterate, you can get perfect copies of your favourite artists’ albums but only illegally!
Piracy is illegal and it legitimately deprives artists of money but it will continue to thrive until the music industry as a whole focuses on the key issues of price, quality and availability. Only once these areas are dramatically improved will pirates have no leg on which to stand and will numbers of illegal downloads dramatically fall.

Words:Khaleel Lalani