Piracy is dead

Unauthorized distribution has already been factored into the music economy. Valuations have been adjusted. The economic impact of filesharing is complete.

When Napster happened, it was a surprise to the music industry. The techies saw it coming but the music people didn’t. This hurt many people with investments in the music business. Highly successful musicians, who are especially loved by the public, took an especially big hit.

Then something normal happened: people adjusted their investments to accomodate the changed environment. Investors sold stock in CD stores and bought stock in guitar stores. The concert business grew. Musicians stopped doing expensive studio recording and put their money into home studios, a move from an ongoing investment in services to a one-time investment in capital. Players redirected their economic efforts from CD sales to merchandise, concerts, advertising, soundtracks and other products which benefitted from the changed environment.

It has now been nine years since Napster. The music industry has been steadily reconfiguring itself, and while the transformation to a new configuration isn’t complete, the valuation of the recording industry has already dropped to take napsterization into account.

Money lost to napsterization is already gone. There is no more to be lost.

If record labels make less money now than before, it’s not a surprise to anyone. Somebody who puts money into a recording business that is affected by napsterization does it with full knowledge of the situation. Therefore, they don’t stand to lose money on it.

It’s like buying a house in an expensive neighborhood and losing money when the neighborhood becomes less popular. If the expensive house loses value as a result of the neighborhood becoming less popular, money is lost. But once that change has happened, the transformation is over. If somebody buys the devalued expensive house at the new market rate and the house stays at the lower value, no money is lost.

Which is to say that unauthorized distribution is having no further impact on the recording industry now that it is simply a basis part of the environment. Piracy is dead.

5 thoughts on “Piracy is dead

  1. heh, this strikes me as an ‘even if…’ argument.

    as in: even if don’t buy any of the early arguments by o’reilly, chris anderson, doctorow, et. al. that sharing of any kind benefits the artists…

  2. Yeah, there’s a lot of that between the lines.

    – Even if I buy that CD purchasing is down because of filesharing rather than it simply being the wrong product in comparison to downloadable files.

    – Even if I buy that downloads aren’t selling because of filesharing rather than because the industry poisoned the well with DRM, horrible software, bad selection, etc.

    – Even if I buy that sharing isn’t more good for artists than bad.

  3. I wonder what megaphone manufacturers did when modern amplification technology came along.

    The point you are making here is a good one. The valuation of music and even film IP assets must include a market reduction for the extent to which modern technology has changed the economics of the situation.

    So many times the debate centers around issues that are nearly past their relevance. The DRM issue still evokes such passionate rage, but the curtain will close on DRM because it fails to work as a matter of technology and of market acceptance. Time begins to show that piracy will arise from people who smuggle out copies from the masters before one even gets to college kids on
    the ‘net.

    The RIAA mass lawsuit binge proved to be about as disastrous a public relations action as could be imagined. Its main impact is for dinner-party anecdotes about how to destroy any good will an industry association might have built up.

    The real estate analogy with music IP is useful.
    Once, the creation of a specialized limited set of artists provided to the consumer through a carefully-controlled distribution-and-radio-hegemony marketing mode was seen as the “highest and best use” for music “property”. Now, the laws of technology zoning have changed. Music still can be “monetized”, but it may be that licensing it to accompany the daily news on Sunday may be a simpler way for the artist than the hassles of a record deal. It may be that recorded music is something best used for licensing.

    It’s clear that whereas the old-time “open house” to sell music was a tightly-controlled radio or concert presence, liberal sharing by the artist is a more likely way to make the “sale”.

    On a different road, far from the madding crowd of commerce, I am intrigued by the idea of a set of ideas like those Scandinavian countries that provide that everyone has an easement which permits them to walk on anyone else’s land. In my vision, people make music a “folkway”, where everyone can share and cross. It’s the creation of these free footpaths that interests me the most.

  4. Another way to look at it: the record industry has always, itself, been a kind of shady industry. Its greatest economic successes has always been an expression of something more (e.g., semi-legal / coerced) than free and fair marketplaces.

    To use your analogy, it’s a house whose value has never been simply a reflection of its quality and neighborhood, but of illicit arrangements that boost its sales / profit.

    Legitimate file sharing and illegal file sharing have hit the record industry for both sides: on one side, the record industry isn’t setup to work directly in free and fair marketplaces; on the other side, the record industry isn’t setup to be a completely illegal enterprise either.

  5. “on one side, the record industry isn’t setup to work directly in free and fair marketplaces; on the other side, the record industry isn’t setup to be a completely illegal enterprise either”

    wow that’s a great assessment – at least it maps to everything I’ve learned about the industry since my first job at ABC records 29 years ago.

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