The risk-free munching is what digital music is all about.

by Cory Doctorow

Cory Doctorow, a Canadian journalist and co-editor of the quirky blog Boing Boing, is a supporter of the Creative Commons non-profit organisation, which seeks to increase the variety of creative works that are available for others to use, share, and legally build upon. He also advocates for the liberalisation of copyright laws. Doctorow and others are still writing a tonne on the impending doom that awaits Intellectual Property in general and the music industry in particular.

The music industry, which is a straightforward sector compared to the automotive or energy sectors, will serve as the portal example for this article’s examination of the disaster facing U.S. industry. However, we might learn certain lessons from this example’s simplicity that are relevant to all business sectors.

Michael Arrington writes in his piece “The Inevitable March of Recorded Music Towards Free” that music CD sales are still declining precipitously. Radiohead, which is no longer under the control of their label, Capitol Records, put their new digital album up for sale on the Internet for whatever price people want to pay for it. Artists like Prince and Nine Inch Nails are disobeying their labels and either giving away music or telling their fans to steal it. Arrington reminds us that, unless effective artificial barriers to production can be put in place, “simple economic theory dictates that the price of music [must] fall to zero as more ‘competitors'” (in this case, listeners who copy) enter the market. This is something that many others have emphasised recently.

There are almost no economic or legal hurdles to stop the price of recorded music from decreasing to $0 unless sovereign countries that ratify the Universal Copyright Convention take dramatic measures, like the proposed mandatory music tax to support the business. Artists and labels will likely turn their attention back to other money sources as a result, which they will do. These specifically include limited edition physical copies of their music, merchandising, and live performances.

Author Stephen J. Dubner claims “The Rolling Stones’ professional, businesslike attitude to touring is the group’s most astute characteristic under Jagger’s direction. Record sales and tour earnings are the two primary revenue sources in pop music’s economy. Record sales are a) erratic; and b) distributed among numerous parties. The revenues, which can include not only ticket sales but also corporate sponsorship, t-shirt sales, etc., can be astounding if you understand how to tour well. By adding additional dates, you can effectively control your income, whereas it can be challenging to manage how many records you sell.” (Freakonomics Blog, “Mick Jagger, Profit Maximizer,” July 26, 2007).

We turn to the statistics most trusted by the industry to get a handle on the issues caused by digital media in the music business. This information is obtained from Neilsen SoundScan, which runs a system for gathering data and monitoring sales. The official way to monitor music and music video product sales across North America is provided by SoundScan, which is most pertinent to the subject of this column. The business gathers data on a weekly basis and makes it accessible to subscribers from all parts of the music industry every Wednesday. Executives from record labels, publishing houses, music stores, independent promoters, producers and distributors of motion pictures, as well as firms that manage artists, are among them. This position basically makes SoundScan the official source of sales records in the music industry since it supplies the sales data that Billboard, the top trade publication, uses to create its music charts.

Who knows? Neilsen Soundscan reports “Music continues to be the soundtrack of our daily lives in a fragmented media landscape where technology is changing consumer behaviours. 93% of Americans listen to music, and they do so for more than 25 hours per week, according to Music 360 2014, Nielsen’s third annual in-depth research of the tastes, habits, and preferences of U.S. music listeners.”

The most popular type of entertainment in America is music. 75% of poll participants said they actively choose to listen to music over other forms of media entertainment in 2014. Every hour of the day, music is a part of our life. One-fourth of all music consumption occurs while driving or riding in a car. 15% more of our weekly music listening time occurs at work or when doing chores.

Over the past five years, it has become expected that CD sales are dropping while download listening and sales are up. According to Bob Runett of Poynter Online “The love affair between music lovers and their cell phones is intensifying, so start waving the cigarette lighters and swaying from side to side. In five years, sales of phones with music capability will make up 54% of all handset sales worldwide, predicts strategy consulting firm Strategy Analytics Inc. The study advises that we continue to monitor the development of cellular music decks (CMDs), which are audiophile-grade devices that prioritise music over visuals.” 25 November 2014: “A Few Notes About Music and Convergence”

Nearly ten years ago, Stephen J. Dubner did a good job of summarising the situation. “Ironically, record labels may have been unwittingly compelled by new technology (digital music) to abandon the status quo (publishing albums) and go back to the past (selling singles). I occasionally believe that the record business’ initial decision to reject the pop single was its biggest error. Customers were compelled to purchase albums in order to obtain the one or two songs they adored; but, how many albums can you say you genuinely adore, or even enjoy 50% of the tracks—ten? twenty? But now that the public have spoken, they want just one song at a time, in digital format, and preferably at no cost.” ( “What Does the Future Hold for the Music Business? an audience for Freakonomics, “September 20th, 2007

Like many of us, Dr. Sase has released esoterica since the 1960s as a musician, producer, engineer, and proprietor of an independent label. I occasionally made a respectable life from my music, but I also honed my skills as an economist and obtained a degree in that discipline. I therefore make my observations from the dual viewpoint of an economist and a musician.

As many music critics refer to it, the post-future is not all that different from the past. At least three related decision drivers continue to influence how and why people buy music. The three that are most important can be summed up as 1) Content, 2) Durability, and 3) Time-Cost. Let’s get into more detail.

1) Subject

In the early 1960s, when I first began recording music, the market was flooded with “one-hit wonders.” It was the era of DJ radio on AM (amplitude modulation). It was also the era of the 45 RPM record, which often had a filler track on the B Side and the hit song on the A Side. Anyone with a 2-track reel-to-reel could easily “download” the one hit they wanted from their preferred radio station. Few bands offered complete twelve-inch LPs that were filled with largely excellent tracks. I bought Meet the Beatles by those four lads from Liverpool as the first such LP.

The music industry tended to favour “concept” albums and “Greatest Hit” compilations by artists who had previously produced a number of AM successes in the late 1960s. The Beatles, the Stones, the Grateful Dead, Yes, King Crimson, and many other bands recorded albums with quality material during this heyday of vinyl sales. Bottom line: If consumers believe they are getting value for their money, they won’t mind paying for a product.

2) Resilience

When they can borrow a copy and tape record the songs to a reel-to-reel or, subsequently, a compact cassette, why would someone buy a twelve-inch LP? Back then, the solutions were straightforward. First off, having a large album collection was “cool,” especially one that a person of the other gender might peruse in their dorm room. Let’s just say that someone’s album collection might give away information about their likes, potential subculture, and personality. Consequently, an appealing collection offered some social currency. Could this be the cause of vinyl’s recent resurgence?

Actual product durability made up the second factor in the calculation. Self-recorded reel-to-reel and cassette cassettes often had considerable loss of fidelity during the changeover, much like modern downloads. More crucially, the reliability and durability of the media also needed improvement. Around the capston, tape used to flake, break, and tangle thirty to forty years ago. Many of one’s favourite songs could be lost if one didn’t back up their collection to a second-generation tape.

Computer hard discs crash these days. The same durability problems arise without the cost of an additional hard disc and the time required to make the move. Do CDs count? The majority of us who frequently use CD-Rs are aware that, in comparison to a CD that is manufactured commercially and stamped from a metal master, the method used to instantaneously burn an image leaves a product that is more delicate and vulnerable to harm. Will music creators and listeners be as comfortable in the Internet clouds? All we can do is wait and see.

3) Cost-Time

This third component essentially echoes the age-old economic theory that “time is money” and “the tape is running” and may help to explain why younger music fans prefer to download songs either legally or illegally. It reflects the same economics that encouraged people to record their favourite radio singles in the 1960s. The argument’s core idea has to do with how much a person values his or her time. They will evaluate the time spent downloading, backing up, and transferring cuts in terms of what they could be earning during that same time if music enthusiasts work for low hourly wages (or frequently no money at all).

Let’s think about the next illustration. A babysitter making $6 per hour could afford to spend up to two hours ripping music to get the same value, assuming that twelve downloads or an equivalent CD cost $12.00. A experienced tradesperson or someone with a college degree, though, might make $24 or more per hour. More than 30 minutes would be spent at ripping, which would be more valuable. The argument that it takes more time to visit a physical music store is refuted by the fact that one may go on to Amazon or another website in under a minute and possibly get free shipping. As the major market demography matures, the market will inevitably alter. The Baby Boomers of the 1960s and 1970s experienced it, and the present century’s Generations X, Y, and Z will experience it as well.

The consumer will select the form of delivery that best meets his or her bundle of values, which is the conclusion to the entire discussion. Durability, time-cost effectiveness, and quality and amount of the information are all included in this package. These still stand as the lessons that those who create and distribute music must learn in order to thrive. Things change and remain relatively unchanged at the same time.

“When that man comes on the radio while I’m driving, He keeps telling me more and more about some pointless information, I can’t get no, oh no, no, no.” British economist Michael Philip Jagger, London School of Economics

Finally, we acknowledge that some values drive both consumers and enterprises. These values include time cost, substance, and durability. Whether the product or service in question is a piece of tangible, intangible, or intellectual property makes no difference. Making music, creating cars, dispensing legal advice, and teaching economics all operate under the same fundamental principles.

This phenomena was summed up by British economist Adam Smith in his idea of the invisible hand at work in the marketplace 229 years ago. Markets function effectively because every trader aims to maximise their own self-interests. Both parties will cooperate in a transaction as long as they believe that they will be better off after it is completed. No music, automotive, education, or legal services will be exchanged if one (or both) sides do not agree on this perception. In essence, the market is unable to deliver a good result. For more details download lagu mp3