Techdirt. Stories filed under "revenue"

Music Industry Data: Sales Up, Piracy Down... But It's Not Because Of Any 'Anti-Piracy' Efforts

Mike Masnick — Wed, 27 Feb 2013 11:11:00 PST

A few folks have sent over variations on two different reports concerning the music industry, with some suggesting that this is "proof" that the recording industry's "war on piracy" has been effective on two fronts: increasing sales and reducing piracy. Of course, for many years, we've questioned whether or not reducing piracy actually increases sales, so we looked closely at the numbers and they don't seem to say what some people think they're saying. The Hollywood Reporter has a good summary of both reports. One comes from IFPI, celebrating that "global recorded music revenue" rose 0.3% in 2012. That is, obviously, a tiny increase, but it is an increase. Of course, as we've noted, "recorded" music revenue is merely one piece of the wider music industry ecosystem -- and that entire ecosystem has been growing for quite some time.

The second report comes from one of the industry's favorite researchers, NPD, claiming a massive decline in music file sharing (based on consumer surveys). I've found NPD's data to be suspect in the past, but let's just assume this is true. Then, can we reach the conclusion that the industry's anti-piracy efforts both worked and that it led to increased sales?

Actually... no. Not even close. We can see this pretty clearly just by looking beyond the recorded music market, to the wider file sharing space. Various reports have made it clear that widespread file sharing (mostly of infringing content) has continued to grow quite rapidly during the same time period. Sandvine reports (pdf) that BitTorrent traffic increased 40% over the same basic time frame. Or, zero in on a different market beyond music. How about software? The BSA's annual report continues to show increases in "piracy."

What does that say? Well, if wider anti-piracy campaigns were effective, we wouldn't just be seeing a decline in music infringement. We'd see similar declines across the board. But the overall space and some other, similar, markets are showing increases in infringing content spreading.

That leads us to the much more reasonable hypothesis: the reason that music piracy is down and revenue is up is because the industry has finally started allowing more innovation into the market. Not surprisingly, this is exactly what we've been arguing for years. If you let the tech industry create useful new services that better provide the public with what they want, you get services and products that people are willing to pay for. And when that happens, infringement decreases, because the legitimate and authorized services are better than infringing. It's why music infringement fell off a cliff in Sweden when Spotify launched there, despite also being the home of The Pirate Bay. Notably, when music infringement plummeted in Sweden, other types of infringement did not similarly drop.

In other words, for all the complaints about these new services, and the many, many attempts to hold them back or neuter them, letting new services grow and thrive seems to be the best "anti-piracy" measure that the record labels could have used. And yet it still thinks it needs to focus on punishing fans and limiting services.

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Indie Musician Zoe Keating Defines Transparency; Breaks Down Exactly How She Makes A Living

Tim Cushing — Fri, 10 Aug 2012 09:33:30 PDT

We're used to hearing broad statements about the income of major labels, mostly about how little it is and why that needs to be "fixed." We've also shown how any disclosure about income from the labels is less than a one-way street (more of a cul-de-sac filled with vacant lots) when it comes to their own artists. When it comes to making a living by making music, it often seems that beyond very public Kickstarter campaigns, not many people actually know how much money is flowing to artists and from where.

Zoe Keating, who's been featured on Techdirt before, mainly due to run-ins with ASCAP and Universal, has opted to go fully transparent. She's uploaded a Google Doc, breaking down every source of income in detail. Hypebot breaks down the breakdown:

Clearly, the best way to support Zoe (and other independent artists like her) is to purchases directly from the artist. Just by taking a look at the pie chart, it is evident that the vast majority (nearly 97%) of her recorded music revenue comes from fans purchasing her music as opposed to streaming it. Less than $300 came from Spotify, while more than $45,000 came from iTunes.

“Music sales have been a consistent 60-70% of my total income,” Zoe told Hypebot. “The rest comes from concert fees and film/commercial licensing.”

Perhaps an unsurprising number, it nonetheless is a great reminder of why connecting with your fans is so important. If you can make that connection, it makes selling infinite items that much easier. As is pointed out by Hypebot, Spotify accounted for only $300 of Keating's income. This could be construed as being precisely what's wrong with Spotify, but Keating's take on this low number doesn't reflect that:

“The income of a non-mainstream artist like me is a patchwork quilt and streaming is currently one tiny square in that quilt,” Zoe said in her Google Doc.

She also doesn't seem to be concerned, as others are, that Spotify and other streaming services will supplant tracks sales and reduce her income.

Streaming is not yet a replacement for digital sales, and to conflate the two is a mistake. I do not see streaming as a threat to my income, just like I've never regarded file sharing as a threat but as a convenient way to hear music. If people really like my music, I still believe they'll support it somewhere, somehow.

This isn't to say she doesn't have any reservations about the streaming service. In her Google Doc notes, she points out that, at this point, she feels artists should view it more as "a discovery service rather than a source of income." This could change, though, if Spotify makes a few alterations. First of all, Keating would like to see it open its availability:

I've said multiple times what my issue with Spotify is: fairness. I care about making the playing field level for all recording artists: signed or unsigned. Let it be a meritocracy.

At this point, Keating is still unable to get one of her albums ("Into the Trees") onto Spotify due to the lack of a digital distributor who won't take a cut of her iTunes sales. In order to get her music on Spotify, she has had to run her albums through an aggregator (CDBaby, TuneCore, etc.) in order to make them available. As it stands now, her latest solo album isn't generating any Spotify income.

She also feels Spotify could turn itself into a better platform for musicians:

I wish Spotify would do more to facilitate the connection between listeners and artists - i.e. show that the artists is playing nearby, or add links to buy music. It's early days, so maybe this will happen eventually.

Away from the streaming front, Keating also addresses those who have suggested she leverage her success and sign with a major label to "extend her reach:"

My financial picture would be worse if I was on a record label. Some people say that if I was on a record label, I'd have a larger reach and therefore would be making more money. To this I'd like to point out that I make instrumental cello music. There is about as much chance of my music becoming mainstream as there is of me being elected President of the USA (hint: not possible, I was born in Canada and there are naked pictures of me at Burning Man). While it is probably true that the right label could help with the reach part, I don't think they could help me enough to offset their cut, and you know what….no label has ever approached me and the ones I've approached said no, so I'm guessing they think the same thing.

There's sure to be more discussions springing from this data and her comments. Having turned herself into a "data point," Keating is now encouraging all artists to do the same. As she points out, if we're ever going to figure out where the music industry's headed, we need to collect as much information as possible from where it is now. Hopefully, Keating's transparency will result in many more "data points" offering up detailed pictures of how they're making money by making music.

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Is It Really Fair To Say That Red Hat Is The First Billion Dollar Open Source Company?

Mike Masnick — Thu, 29 Mar 2012 13:50:56 PDT

Nearly two years ago, we took part in a wider discussion over the question of why there was no billion dollar pure play open source company. Much of the discussion, not surprisingly, focused on Red Hat, seeing as it's the largest of the pure play open source companies, and some had been complaining that it had not yet reached $1 billion in revenue, even as proprietary software players were able to earn much more than that. We highlighted, first, that a direct comparison didn't make any sense, because the business models were so different. The very nature of a company like Red Hat is to shrink the costs one has to pay, such that the market is redefined. Quoting Red Hat's CEO speaking to Glyn Moody:

He said that he did think that Red Hat could get to $5 billion in due course, but that this entailed "replacing $50 billion of revenue" currently enjoyed by other computer companies. What he meant was that to attain that $5 billion of revenue Red Hat would have to displace software that currently costs $50 billion. Selling $50 billion-worth of software -- even if it only costs $5 billion -- is somewhat hard, which is why it will take a while to achieve.

And that's a key point. The markets are very different. But I think there was an even more important point later on in that discussion, which is that it's wrong to think of just "pure play" open source companies as the open source market. It's really the equivalent of defining "the music industry" as solely "the number of CDs sold." That doesn't paint the entire picture at all. Because, as we've seen, as music has become more available (both in authorized and unauthorized means), it's built up the much wider "music industry" in massive ways -- jump-starting huge shifts in the industry.

Similarly, the importance and impact of the "open source market" is not in the companies offering up open source software, but in the companies using open source software to offer amazing things to the world. In other words, I'd argue that companies like IBM, Google and Facebook are clearly "billion dollar open source companies" (actually, much, much more than just a billion) -- because they all use open source software as the key component and key resource in building their business. Just as other parts of the music business used free music to boost their revenue, companies that used open source software built massive new markets and grew their own revenue streams.

Given that, I know there's a lot of folks talking about Red Hat finally actually hitting that $1 billion revenue milestone -- and it is a milestone worth noting. However, I think it's wrong to suggest that Red Hat is therefore the first "billion dollar" open source company. In fact, just as IBM, Facebook and Google really make their money by leveraging open source software to do (and sell) something else, much of Red Hat's revenue really comes in an ancillary manner to the software as well: from selling the service that goes with it. It's great that Red Hat is doing well, and certainly it presents yet another useful data point to argue against those who argue there's no money to be made if your key "product" is free, but I think it's unfair and misleading to claim that it's the first billion dollar open source company.

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Musician Jonathan Coulton: I Value The Internet A Lot More Than The Record Industry

Mike Masnick — Wed, 28 Mar 2012 09:13:44 PDT

We've written plenty about Jonathan Coulton over the years, including two recent stories. The first was his revelation that he grossed about half a million dollars last year -- even with his music being offered under a Creative Commons license such that you could share it. He made a lot of his money because people still pay him for the music just to support him, and also from touring. We also wrote about his thoughtful discussion over what the shutting down of Megaupload meant.

Last month he went on Jerry Brito's Surprisingly Free podcast where he talked more about both of those things, as well as his general thoughts on his career and related issues. Where it got especially interesting was a bit further into the discussion, where he admits that he certainly still has an emotional reaction to finding out someone downloaded his music without paying for it, which makes his relationship with copyright more "complicated." However, he then talks about how important the internet is to him, and how in the long run, if it comes down to the internet or copyright law, he's got to side with the internet:

... where you fall on this issue, a lot of the time, comes down to how much you value things like a "free and open internet." And, for me... if, as a consequence of nurturing this amazing thing, called the internet... if as a consequence of letting that do what it wants, we destroy a number of industries, including the record business, and maybe even including the rock star business, I think that humanity will be better off. I, for one, think that the internet is one of the greatest human achievements, ever. It's an amazing tool and we have only just begun to explore the possibilities. To me, it feels like it's a part of our evolution as a species. I value it as much as I value the Bill of Rights....

He later says (as we've talked about over and over again) that there are all sorts of ways to compete with infringement -- and offering all works at a reasonable price in the formats people want, is a really, really good way to compete and get people to actually buy.

Towards the end, he also points out that the research still hasn't really shown that piracy has harmed artists:

You need to reassess whether or not piracy is actually a problem. A lot of people assume it is... and they could be right. But I don't think we've really determined the answer to that question. And I don't think we can make smart policy decisions until we know the answer to that question. If, in fact, there is some small harm or no harm, then we need to look and see: what do we want to do with this society? Is it better for us to have some small amount of piracy, in exchange for all the other goodies we're going to get if we stop spending so much time and effort trying to squash things.... We make decisions all the time about what we think is morally right and wrong, and more and more people are making decisions that are out of step with the laws. And that's an interesting phenomenon, and we haven't really unraveled what it means yet.

Again, this isn't some "freeloader" as critics often like to label all sorts of folks who make these kinds of arguments. This is a very successful professional musician, whose success hasn't come from the traditional gatekeepers, but from embracing the internet and what it allows, and developing new business models.

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Valve's Comprehensive Strategy Shows How To Go From Fee To Free... And Increase Revenue Twelve-fold

Mike Masnick — Tue, 13 Mar 2012 12:07:52 PDT

We've writen about Valve's approach to the market many times before. The company believes strongly that "piracy" is a service problem not a legal problem. It knows that it can easily compete with piracy by offering a better service, something that it regularly succeeds in doing. However, On The Media calls our attention to an absolutely fantastic case study found on Gamasutra, not (directly) about how Valve competed with infringement, but how it turned Team Fortress 2 from a fee-based game to a free-to-play game and increased revenue twelve-fold.

Of course, over the years, we've covered other online games going from fee-based to free and making more money for it, inspiring more and more other games to do the same. But what's most interesting here is the level of detail. In the case of TF2, it's clearly not about "give it away and pray," but a careful strategy that really does seem focused on connecting with fans and being awesome while giving fans a good reason to buy.

For example, the team at Valve connected with fans in a really cool way. It put out "teaser trailers" with product updates, and then scoured feedback to come up with ideas that fans might like in the game:

[Valve's Joe] Ludwig showed TF2's Sniper-focused update as an example. Each content update started with a teaser trailer that hinted at several possible new items or features, and Valve developers would monitor the community reaction in the forums to determine which aspects caught the players' attention. "We found people in the forums talking about how cool it would be if the Pyro could light the sniper's arrows on fire. To be honest, we hadn't considered it, but we were able to implement it by the time the update shipped," Ludwig said.

In another instance, players picked up on a blueprint displayed in passing within the teaser trailer for the Engineer-focused update of a mechanical hand item. Ludwig explained that "[The players] didn't realize it, but they were indirectly voting on the content of the update. When the update shipped, it included that robot hand."

Separately, Valve was very careful and deliberate about how they "went free" and moved to offering in-game purchases. Recognizing that there's an unfortunate incentive to then make in-game purchases make the actual gameplay worse (such as by making it "pay to win") the team made very strategic choices about how they would have in-game purchases, such that they were never required to play the game how you wanted:

Once Valve rolled out the in-game item system, it needed to get the players used to the idea of paying for them. "This wasn't a change we made lightly, but it was something we had to do to get our game into the free-to-play business model," Ludwig said.

"They had never paid for an item in TF2 at any point in the past, and we weren't sure how willing they'd be to pay now."

Ludwig outlined the players' possible objections to the item store, the first of which was TF2 turning into a "pay-to-win" game:

"We dealt with the pay to win concern in a few ways. The first was to make items involve tradeoffs, so there's no clear winner between two items. But by far the biggest thing we did to change this perception was to make all the items that change the game free. You can get them from item drops, or from the crafting system. It might be a little easier to buy them in the store, but you can get them without paying. The only items we sell exclusive to the store are cosmetic or items optional to gameplay."

In other words, this was entirely designed around the idea of giving people a good reason to buy rather than a negative reason that makes them feel forced to buy. Too many companies (hello most newspaper paywalls!) seem to think that "forcing" people to pay is a "reason to buy." It's not. It may get some people to pay, but it pisses off lots of people. Valve carefully structured its business model here to make people want to buy.

But the real key here is just how much this effort increased revenue. Many people have assumed that taking a fee-based game and going free-to-play is really an "end of life" strategy to try to squeeze the last remnants of revenue out of a game, but Valve is showing it's not that at all. It was a strategic choice to maximize revenue. This is the same point we've made for well over a decade in talking about how to use free as a part of a business model to increase your market. When properly applied (which is not just "give it away and pray"), free becomes a revenue multiplier, and Valve's example of TF2 is really a perfect case study of how to do it right.

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Big Bank CEO Who Makes $23 Million Says Press Should Stop Focusing On Bank Compensation... Because Reporters Are Overpaid?

Mike Masnick — Wed, 29 Feb 2012 12:42:34 PST

JPMorgan Chase CEO Jamie Dimon, who made approximately $23 million last year, apparently doesn't like the press picking on the salaries at big banks like his. So, he's telling them that they're the ones who are overpaid. To be fair, the context is that he's mocking reporters for focusing on the compensation ratio statistic that some have brought up in questioning how much banks pay their employees, by noting that the same ratio -- which he rightfully calls a "stupid ratio" -- doesn't necessarily look good for the newspaper industry either. Of course, most journalists just buzz right by that context and point out how ridiculous it looks for Dimon to complain about how much journalists make, coming from where he's sitting:

Dimon himself took home roughly $23 million in 2011, about the same as the year before, according to Bloomberg. Compare that to newspaper reporters, who earn an average salary of $43,780 according to the Bureau of Labor Statistics, or between $20,000 and $60,000 per year according to Payscale.

For fun, let's just compare a bit more. The average reporter at The New York Times earns about $93,000 per year, according to Glassdoor.com. The New York Times Company reported an operating profit of $56.7 million in 2011.

Dimon's salary not only dwarfs that of us media-folk; he's also making millions more than most of his employees. The average JPMorgan employee made $341,552 last year, according to Bloomberg News.

The key point, here, is really that if you're trying to convince the press to stop focusing on stories about reasonable employee pay, you probably should not then directly state that their pay is "just damned outrageous," while then defending bank employee payments by saying, "We are going to pay competitively.... We need top talent, you cannot run this business on second-rate talent." The implication that the press gets from that -- perhaps on purpose -- is that the media shouldn't pay competitively, doesn't need top talent, and can run its business on second-rate talent. Some might argue that's already the case... but it's unlikely to get those "second-rate" reporters to drop the issue...

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Has The Megaupload Shutdown Been Good For The Entertainment Industry?

Mike Masnick — Wed, 29 Feb 2012 09:41:44 PST

One of our most vocal (yet anonymous) critics posted an off-topic comment on a totally unrelated story mocking us for not having covered the story of how Hollywood has been saved (saved!) thanks to the shutdown of Megaupload. Of course, the reason we hadn't covered the story was because we didn't know about it. He referenced a couple of French news reports, which I hadn't seen until I had some time just now to catch up on some old comments. He could have submitted the stories, but he insisted that it would be a total waste of time because we ignore any story that we disagree with. That's pretty funny, considering many, many of the stories here are ones that challenge our views. And, I'm especially interested in reports of actual data, even if it conflicts with other data we've seen in the past. In fact, I'm especially interested in such stories, because my focus is figuring out what's really happening and understanding what's actually best for culture and society. So data that actually challenges my assumptions is some of the most useful data around.

Unfortunately, the stories don't actually have any data. The first one is totally anecdotal, concerning a guy who now goes to the movie rental store to rent (physical) movies since the shutdown of Megaupload, and the second one is about claims from TV stations that their websites are getting more traffic since the shutdown of Megaupload. Both are anecdotal, not data based, and really just seem to scream out the obvious: man, does the entertainment industry do a horrible job giving consumers what they want. If Megaupload's website was offering a better experience than the TV networks' own offerings... they should be firing their web designers and starting again. As for the guy renting videos... we'll see how long that lasts.

The same commenter then left a comment with some bullet point claims. He doesn't source them, so I have no idea how accurate they are, but they seem to indicate the same point in that second article. In the few weeks after Megaupload got shut down, TV station websites got more traffic. Again, this seems to simply show how bad a job they must have been doing in the past to attract viewers to their own websites. It also means that as soon as something better comes along (and it will), people will split. Ignoring that the market is telling you something is no way to build a long-term business.

Of course, we've also seen significant other data from firms that have access to a much wider view of internet traffic, which suggested that Megaupload traffic pretty quickly shifted to other, similar sites. Of course, some of those sites have since shut down or changed models, but anyone who thinks that more such sites aren't springing up (with some keeping a lower profile) simply hasn't been paying much attention to how the internet works.

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Katy Perry Shows How The Problem With The Major Labels Is Economics, Not Piracy

Mike Masnick — Mon, 20 Feb 2012 05:38:23 PST

A few weeks back, the folks at Planet Money tried to break down the economics of Katy Perry's massively successful album with its five hit singles. Specifically, they wanted to figure out how much money her label made from such a big success. What comes out is a step-by-step description of the massive inefficiencies of the major label recording system. There are things like paying producers $100,000 per song they produce on the album. Then there's all the payola... er "special promotions" to get the songs played on radio so much. In the end, Planet Money calculates that Perry's label, EMI, probably made somewhere around $8 million in profit from Perry's music sales in the US. That's not topline revenue, but bottomline profit. That's not bad per se, but for an album with five hit singles and which was clearly one of the most successful albums in 2011, you begin to see why the labels are struggling.

But, of course, Perry, herself isn't struggling. As the full podcast by Planet Money notes, Perry has been able to avoid getting sucked into a "360" deal where the label gets to take some of all the revenue she earns. They just get the record sales. Perry, in the meantime, is estimated to have made $44 million in 2011 -- a large chunk of that coming from her tour, which alone grossed over $50 million.

What you begin to realize as you see more and more stories like this is, once again, the "problem" has nothing to do with the "music industry" failing... or even that musicians aren't able to make money any more. It's all about the bad economics of the record labels. They set themselves up to fail this way, focusing solely on that one slice of the pie, and not moving very quickly to adapt when the market shifts. Instead, they seem to have kept up the inefficiencies associated with making such a "hit" album, without figuring out a way to profit from the results. Of course, for artists like Perry, things are great. She's able to make a ton of money, most of which doesn't first have to filter through the label...

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Jonathan Coulton Destroys The Rationale Behind The Megaupload Seizure With A Single Tweet; Follows Up With Epic Blog Post

Tim Cushing — Mon, 23 Jan 2012 15:46:53 PST

With Megaupload seized by the feds and everyone else even slightly involved seized by Anonymous, man-without-a-label Jonathan Coulton stepped into the breach and tweeted what we all only wish we were thinking:

(If you can't read it, Coulton said: "Any other musicians notice that ever since they shut down MegaUpload, the money has just been POURING in?")

And that's the crux of it, isn't it? The DOJ claims that Megaupload's infringement has cost copyright holders a half-billion dollars over an unspecified timeframe. And now that it's been shuttered, the money should start pouring in. But, of course, it won't. So, what then? First off, as Coulton points out, there's bound to be collateral damage.

Along with all the illegal stuff happening on MegaUpload was some amount of completely legal stuff. People used MegaUpload to send large files around. Some number of those files were personal files owned by the people sending them. I have no idea what the ratio was, and probably it would be impossible to figure that out with any certainty, but let's stipulate that it was a very large percentage of illegal activity, and only a very tiny percentage of the users were there for anything other than downloading content that they didn't buy. Still, today that tiny percentage had something taken away from them, without warning, maybe just a service they liked using, but maybe a piece of digital media that belonged to them - if they uploaded something and didn't keep a copy, that thing is now gone. Them's the breaks I guess, but in evaluating whether this shutdown was a net positive for us humans, you have to take that into account.

Even some of the illegal usage was likely the kind of activity that approaches what I consider to be victimless piracy: people downloading stuff they already bought but lost, people downloading stuff they missed on TV and couldn't find on Netflix or iTunes, people downloading stuff they didn't like and regretted watching or hearing and never would have bought anyway, people downloading a Jonathan Coulton album (oh let's say, Artificial Heart, the new Jonathan Coulton album, which is an awesome Jonathan Coulton album called Artificial Heart) and loving it so much that in a year they decide to buy a ticket to a Jonathan Coulton show and walk up to the merch table and hand me $20. I know not everyone will think all of those things are victimless crimes, and even I can admit that some of them maybe kinda sorta have victims, but my point is that you can't easily say that every illegal download is a lost sale, because it's a lot more complicated than that. So when you evaluate the "damage" that a site like MegaUpload is causing, you have to think about these things too. The grand jury indictment against them says they've caused $500 million in damages to copyright owners. Given the complexity of actual usage on a site like MegaUpload, how can they possibly know that?

So, there's that. An allegedly huge provider of "lost sales" taken down, along with other non-infringing material. Does anyone really think the DOJ is going to bother sorting out what's legitimate and what isn't? I wouldn't hold my breath. And to what end? Supposedly, this is a step towards returning the MPAA and RIAA fortunes to their all-time highs. But when Megaupload's takedown fails to convert into sales, then what?

No one (not even Coulton) truly expects the seizure of a single storage locker, even a mammoth one like Megaupload, to make an appreciable difference in future sales of music and movies. More sites will have to be seized, sites like Mediafire, Rapidshare, Divshare, Hulkshare, Filesonic, etc. Many of these sites host a ton of perfectly legal, non-infringing media. Look around Bandcamp for a bit and you'll run across links to these sites (Mediafire seems to be a favorite) posted by artists for their fans to make use of. Hulkshare hosts hundreds of mixtapes, uploaded by the artists themselves and promoted at sites like Datpiff.

And as each of these sites tumble without a noticeable change in sales, the march will continue on towards other sites that might be hosting infringing material. How long will it take before the rightsholders ask to peek at the contents of your cloud services? Are they going to ask, like so many commenters here, that you produce receipts for everything you have stored?

Even though the White House shot down the current incarnation of SOPA, it still made this statement:

Let us be clear-online piracy is a real problem that harms the American economy, and threatens jobs for significant numbers of middle class workers and hurts some of our nation's most creative and innovative companies and entrepreneurs. It harms everyone from struggling artists to production crews, and from startup social media companies to large movie studios. While we are strongly committed to the vigorous enforcement of intellectual property rights, existing tools are not strong enough to root out the worst online pirates beyond our borders.

But how big is this "piracy problem?" And how much does it actually "harm" the American economy? The way Coulton sees it, there's no reason to believe this "problem" is crying out for a legislative solution:

Is it really as dire as all that? It's an emergency is it? Tim (O'Reilly) points out that he and a lot of other content creators have been happily coexisting with piracy all this time, and I'm certainly one of them. Make good stuff, then make it easy for people to buy it. There's your anti-piracy plan. The big content companies are TERRIBLE at doing both of these things, so it's no wonder they're not doing so well in the current environment. And right now everyone's fighting to control distribution channels, which is why I can't watch Star Wars on Netflix or iTunes. It's fine if you want to have that fight, but don't yell and scream about how you're losing business to piracy when your stuff isn't even available in the box I have on top of my TV. A lot of us have figured out how to do this.

So if you can stand me sounding a little crazy, listen: where is the proof that piracy causes economic harm to anyone? Looking at the music business, yes profits have gone down ever since Napster, but has anyone effectively demonstrated the causal link between that and piracy? There are many alternate theories (people buying songs and not whole albums, music sucking more, niches and indie acts becoming more viable, etc.). The Swiss government did a study and determined that unauthorized downloading (which 1/3 of their citizens do) does not create any loss in revenue for the entertainment industry.

When the money fails to pour in, no one will be surprised but the content industry. And they'll be surprised and angry. Equating casual infringement with lost sales has always been a terrible assumption, but without this key bit of theoretical math, the RIAA/MPAA would be unable to make hysterical claims about job losses, overseas robber barons and Megaupload absconding with a half-billion of their cash. The problem is: the public doesn't see it this way.

We are constantly demonstrating through our actions what we believe to be the norms for acquiring and consuming content. Right now a lot of us think that it's OK to download stuff through illegal sites under certain circumstances, and a lot of us think it's totally fine to use those things to make videos and put them on YouTube even though YouTube profits from it. That's not ME saying that, that's US saying that - we're a nation of pirates and infringers. Based on our behavior, you would not be wrong to deduce that some of us think funny videos on YouTube are more important than honoring intellectual property rights. This kind of thing has happened before. Entire industries rise and fall as the world changes and our priorities shift. Sorry.

I believe in copyright. I benefit from it. I don't want it to go away. I love that we have laws and people to enforce them. But if I had to give up one thing, if I had to choose between copyright and the wild west, semi-lawless, innovation-fest that is the internet? I'll take the internet every time.

Amen to that.

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Last Chance For Musicians To Contribute To The Artist Revenue Streams Project

Mike Masnick — Thu, 20 Oct 2011 22:24:37 PDT

Earlier this year, we noted that the Future of Music Coalition was putting together a fascinating project to try to catalog all the different ways that artists are really making money today and to dig into the details of what that means for artists. It's a wonderful project and I'm excited to see the results. The project is almost over and I wanted to do a quick post making sure that any musicians (US-only, I'm afraid) don't miss out on their chance to take part. The FMC folks have put up a post over at Step2 explaining the details (and, yes, FMC is a sponsor of Step2) if you want to understand what this is all about. Or you can just go straight to the survey. Just do it before October 28th.

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Minecraft's Developer Making $350,000 $100,000 Per Day [Updated]

Mike Masnick — Tue, 5 Oct 2010 10:47:00 PDT

We've been writing a few stories about Minecraft lately, kicking off with a discussion about how developer Markus Persson doesn't worry about "piracy," because he feels it's better to focus on giving people a reason to buy than caring about what others are doing. More recently, there was a big discussion around the simple coolness of a guy in Minecraft building a working computer within the game itself. Both were neat stories.

Now Jay sends in some news that continues to build on the legend of Minecraft, pointing to a story claiming that Persson is making $350,000 per day (see the update below). With alpha software, and without going after "pirates" who are supposedly destroying the industry. Yeah. Apparently, he's selling a copy every 3 seconds. And he's done all this with no distribution. No retail deals. Just creating a really good game, getting people interested in it, not treating them like criminals, and giving them a reason to buy.

Whatever happened to "pirates" killing the gaming market, huh?

Update: There's some discussion in the comments about this, and I hadn't realized that Persson posts sales stats publicly. From that, it looks like the $350k per day claim was a bit exaggerated -- though, there was one such day. It looks like a more typical day is closer to $100,000. Still seems like a pretty damn good success story.

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Yet Another Study Shows Musicians Making More Money

Mike Masnick — Wed, 15 Sep 2010 09:11:00 PDT

We've made the argument repeatedly that saying unauthorized file sharing is hurting the music business lacks evidence. Instead, what we've seen, over and over again, is that more money is pouring into the music business, more music is being produced and (most importantly) that more musicians who embrace this new world are doing better than they would have otherwise. Now, we've pointed to research in the UK, Sweden and the US that have all shown aggregate growth for the music business, with some of the numbers suggesting more money going directly to musicians, rather than gatekeepers.

The latest study, highlighted by TorrentFreak takes a similar look at the Norwegian music market to show very similar findings and (of course) that musicians are, indeed, benefiting: Like the UK and Swedish studies, this study, covering Norway, found that the aggregate amount going to the industry is up slightly (4% in real terms), mostly thanks to live shows more than making up for the decline in music sales (it's important to note that these researchers appear to have modeled their research on both the UK and Swedish studies, and made only slight changes, which they explain (and justify) in the report. The key finding is that musicians appear to be making significantly more these days than in the past:

Total artist revenues have gone from NOK 208 million in 1999 to NOK 545 million in 2009, which is an increase of about 162%. Excluding state subsidization, the income from 1999 to 2009 has increased with NOK 229 million, or 147%....

According to this, Norwegian artists have seen an increase in all four of their income sources during the past eleven years. This goes contrary to the common belief that artists have seen a decline in income because of the digitalization of the industry.

The loss of record sales because of consequences of the digitalization of the industry has not affected the Norwegian artists in the same brutal way as it has the record companies. Artists earn in general 20% or less from record sales, and a decrease in record sales would most likely be compensated by an increase in one or more of the other three income sources.

Now, it's worth pointing out -- as I learned when I attended Nordic Music Week last year -- that the Norwegian music industry is heavily subsidized by the government, which is one of the four revenue streams discussed above. However, that only represents about 30% of artist revenue in 2009. The largest single component -- again similar to what we've seen elsewhere -- is live revenue, which continues to grow. Even if you exclude state subsidies, the report found that Norwegian artists doubled their income in the past 11 years:

Adjusted for inflation, total artist revenue has gone from NOK 255 million in 1999 to NOK 545 million in 2009, an increase of about NOK 290 million or 114%. Excluding state subsidizations, the increase has changed from NOK 192 million to NOK 386 million, which is an increase of NOK 194 million or 101% This goes to show that the artists themselves, as a group, have seen tremendous more growth than the industry as a whole.

And, yes, there are more musicians out there to split the pie, but the growth rate in the industry has increased more quickly than the growth in musicians.

Since the total number of artists in 1999 and 2009 are available to the authors, it is possible to calculate an average income from music for artists in Norway. With 3200 artists in 1999 the average income from music would be about NOK 65 000. With 4100 artists in 2009 the average income from music is about NOK 133 000, creating an increase of NOK 68 000 or 105%. Adjusted for inflation the income has increased with from about NOK 80 000 to NOK 133 000, an increase of NOK 53 000, an increase of 66%.

Overall, the results, like those in Sweden and the UK, seem to clearly debunk the repeated claims from recording industry folks (and some musicians) that artists are somehow suffering under this new setup. Now, there may absolutely be cases where artists who fail to adapt are struggling, and there's no doubt that some labels that failed to adapt are struggling -- but there's increasingly little evidence that the overall music industry or artists as a whole are suffering. All of the evidence seems to suggest that it's not file sharing that's a problem at all. More money is going into the music business. The only problems are from those in the industry too stubborn or too clueless to adapt to capture the money that's flowing in.

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Parents Television Council Demands Details Of Comcast's Porn Revenue

Mike Masnick — Wed, 30 Jun 2010 00:40:29 PDT

I still think those opposed to the Comcast/NBC Universal merger are overreacting, but I have to admit the most amusing effort to deal with the merger may come from the Parents Television Council, the group famous for flooding the FCC with complaints every time it hears about something it doesn't believe belongs on TV. Apparently, PTC is now demanding that Comcast reveal how much money it makes from porn. Honestly, I'm wondering if it got the idea from a recent episode of 30 Rock, which has been using the "fictional" ongoing merger between NBC (in the show) and Kabletown to mock the proposed real-life merger. In one episode, a Kabletown exec claims that the entire business is funded on porn, and execs don't have to do anything, because the money just rolls in.

"Comcast is one of the most far-reaching distributors of pornography in the communities it serves, raising serious questions about whether the company meets the character and public interest obligations required," said PTC President Tim Winter.

Interesting. I didn't realize that "character" was part of how the FCC reviewed mergers. Good luck with that one, PTC.

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Avatar Sees Theater Attendance Bump After DVD Release

Mike Masnick — Mon, 26 Apr 2010 11:20:00 PDT

Earlier this year, we noted that with Avatar still being popular in theaters, it looked as though the DVD release would occur while the movie was still available in a bunch of theaters, and wondered what if it would actually boost sales at the box office. For years, of course, movie theaters owners have whined that they can't possibly compete against home theaters, and have boycotted movies that tried to do a "day and date" release, where they offer the DVDs at the same time the movie is in the theater. This seems to ignore the fact that the theatrical experience is about the social experience of going out -- which is not the same as staying in to watch a movie at home (no matter how good your home theater system is). But most theater owners don't seem to believe this, and insist that if DVDs are out at the same time as the movie is in the theater, it will harm box office sales.

Avatar seems to suggest that's not true.

btrussell points us to the news of the record-breaking sales of Avatar DVDs this weekend. His point, in submitting it, is noting that the sales were so strong even though the movie has been widely downloadable and widely downloaded for months. So, despite the claims that file sharing is destroying the DVD market, it looks like people are still quite willing to buy.

But a more interesting point is the impact on the box office. Last weekend, April 16 - 18th, Avatar averaged $2,006 at the box office per theater. On April 22nd, the DVD was released. This past weekend (April 23 - 25th)? Avatar averaged $2,257 at the box office per theater. That's an increase of 12.5% over the week. That doesn't seem to fit with the theater owners' claims, now, does it?

Admittedly, a bunch of theaters stopped showing the movie this past week, probably falsely believing that with the DVD out, it would harm sales. But... the week before, a bunch of theaters added Avatar back into their lineup. If we go back two weeks, we have a much more apples to apples comparison. The weekend of April 9 - 11, Avatar showed in 454 theaters, with an average take of $1,860 per theater for a grand total of $844,651. Yet, again, this past weekend, when the movie was showing in fewer theaters, 421, it brought in both a higher average take per theater at $2,257 and a higher grand total at $950,000. So if we compare those two weeks, with fewer theaters, there was a bump of 21.3% in box office sales after the DVD was released

As we predicted, it sure looks like the DVD release while the movie was still in the theaters actually may have driven more people to the theater, rather than taken them away from the theater.

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Performers See Tiny Revenue From Streaming... But How Much Do They Make From Radio?

Mike Masnick — Thu, 4 Mar 2010 16:02:26 PST

Copycense points us to a Billboard/Reuters article over the fact that music performers are not making very much money from online streaming services. The article is designed to be "shocking," but seems to leave out some rather important facts. For example, in the US, if Billboard did the same calculation, it would find that performers make even less from radio. That's because performers make nothing from radio in the US, because Congress realized a while back that radio is advertising for musicians, and it seems ridiculous to force radio stations to pay musicians to advertise for them. In fact, the repeated stories of record labels illegally paying radio stations via payola showed that the market actually valued things in the other direction.

It seems quite odd that Billboard would leave this out of its analysis, instead, trying to position the streaming revenue as being so low as to be problematic. Yes, the numbers are low, but streaming radio acts as advertising for musicians that let's them make money in lots of other ways.

This is the same discussion we had last week when some people got too focused on the question of whether or not Spotify was making people buy more music. That's not the point. The point is whether or not streaming services make people buy more of anything that helps fund those musicians. Narrowly looking at just whether or not those streaming services pay musicians is really missing the point. It's like asking how much NBC paid BMW to air BMW commercials. The answer is nothing. The money went in the other direction, because that's where the real value was.

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Metallica Sued Napster For This?

Mike Masnick — Mon, 1 Mar 2010 14:01:00 PST

David Levine has a post up looking at Metallica's revenue streams last year. Apparently, the band made the vast majority of its money from concert revenue -- bringing in $22.8 million. It made $1.6 million from album sales. As Levine notes:

Hmmm...think it would make a lot of difference to the world if they lost the $1.6 million from the albums? Without copyright they'd only make $22.8 million from touring...You might almost think it would be worth it to them to give the recorded music away for free to promote their concerts...

Or, hell, give away the tracks and promote other stuff as well. Selling music directly (relying on copyright) is a tiny business compared to the opportunities elsewhere. And, of all the bands out there, Metallica should clearly recognize that.

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More Charts The Record Labels Don't Want You To See: Swedish Musicians Making More Money

Mike Masnick — Mon, 14 Dec 2009 10:44:00 PST

We've already discussed the research on the UK music industry that shows both that live revenue is more than making up the decline in recorded revenue and that musicians themselves are making more revenue than ever before. Some people have suggested that this is a UK-only phenomenon, but a worldwide study found the same thing as well. And, now it looks like the same is being found in Sweden as well -- home of The Pirate Bay, which we keep being told is destroying the industry. Swedish indie record label owner Martin sends in the news on data from the Swedish music industry, which looks quite similar to the UK data. First, it shows that while there was a tiny dip in overall revenue, it's back up to being close to it's high, mostly because of a big growth in live music:
Chart by Daniel Johansson

Basically, recorded revenues dropped. Collections stayed about the same, but live grew. More importantly, though, is the second chart, which shows the revenue for actual musicians. And that's going in one direction: up.
Chart by Daniel Johansson

And yet, The Pirate Bay is destroying the ability to make music, right? Funny that the numbers don't seem to support that at all. Basically, these charts are showing the same thing that those other studies have shown. More music is being created. There is greater "discovery" of new music. There are greater revenue opportunities for musicians, and the only part of the business that appears to be suffering is the part that involves selling plastic discs. Yes, that sucks if your business was based on selling plastic discs, but for those who can adapt and adjust, there is more money than ever before to be made. That sorta goes against the claims that "piracy" is somehow destroying the industry, doesn't it?

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Apples, Oranges And Journalism Revenue Print And Online

Mike Masnick — Wed, 26 Aug 2009 00:47:48 PDT

BullJustin points us to a Columbia Journalism Review article that tries to do some back of the envelope calculations on the difference in per user revenue both print and online. The end result, not at all surprisingly, is that a print reader is "worth" a lot more than an online reader. But, that's totally meaningless. It's a classic innovator's dilemma mistake. Concentrating on the small group of people who will pay me $1,000 and ignoring the massive group who will pay me $5 isn't very smart... especially when the first group is rapidly shrinking and the latter is growing (and that the "value" of each moves in the same direction as the user growth rate). Not to mention the fact that the cost of acquiring a user in both scenarios is entirely different.

But the bigger point is that it's not the users who are paying here, it's the advertisers. Breaking out the revenue on a per user basis is meaningless, because it's not the actual marginal value of the user. Getting one more print subscriber doesn't increase the ad revenue by the amount discussed unless they can actually sell more advertising.

Rather than looking at revenue per user, the real goal should be looking at maximizing revenue, period. And to do that you look at the overall trends of where revenue is growing and where it's shrinking -- not on the average revenue per user. Focusing on ARPU simply makes you ripe for disintermediation from someone who focuses on where the market is heading, rather than how to squeeze the most out of each user.

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Why Won't Local Governments Just Increase The Length Of Yellow Lights?

Mike Masnick — Fri, 17 Apr 2009 18:31:00 PDT

We've seen that, thanks to the economy, states like Maryland and New York are ramping up programs for speed and red light cameras. However, that's not true of all places. Mississippi recently went the other direction and banned such traffic cameras, following a similar backlash in Arizona. A recent Wall Street Journal article takes a look at all of this (including the fact that some of the bigger traffic camera companies are based in Arizona) and raises the key question: why won't local governments just increase the length of yellow lights on traffic signals. That, alone, would save numerous accidents (and lives). Yet, many governments have been doing the exact opposite: putting lives at risk, just to bring in more revenue (often to pay off those private companies that installed the cameras). On top of that, there are still plenty of locations that don't leave any pause between switching lights between cross traffic. Here in California, for example, it's quite rare for there to be any pause between a light turning red in one direction, and the perpendicular traffic light turning green. Studies have shown that a slight pause -- where all directions are red -- decreases the number of accidents as well. And yet... governments focus on using traffic cameras solely to increase revenue.

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Maryland Ramps Up Traffic Cameras... But For Safety Or Revenue?

Mike Masnick — Tue, 7 Apr 2009 02:38:46 PDT

While other states are banning traffic cameras after realizing that they're entirely about revenue, and tend to be less efficient as a way of improving safety, it looks like Maryland is going in the other direction. Tim DiPaula points out that Maryland is planning to increase the use of both speed and traffic light cameras, using the overall "better safety!" claim to get it approved. Of course, the fact that some towns in Maryland that already have such cameras brought in more money from them than the entire town budget seems to also be an important factor.

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What Happens Once MySpace's Deal With Google Ends?

Mike Masnick — Fri, 20 Feb 2009 03:33:00 PST

You may recall, that a few years ago, MySpace (or, rather, News Corp.) signed a $900 million advertising deal with Google. The deal guaranteed at least that much in revenue from Google, even if the ads didn't really earn that much. Basically, Google felt the need to do the deal to keep competitors off of MySpace. However, as people have finally started realizing that advertising on MySpace (or other social networks) isn't working out, it's worth noting that the clock is ticking on the deal. There's still a bit more than a year left on the deal, but Google has been shying away from similar deals, and there's growing evidence that ads on social networking sites just don't pay. The Google deal may have helped keep MySpace afloat for the past few years, but without a replacement things may get trickier.

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'Blogging Won't Make You Money,' Says The Man Who Made Lots Of Money By Blogging

Kevin Donovan — Mon, 9 Feb 2009 06:10:14 PST

It wouldn't be too much of an exaggeration to say technology journalist Dan Lyons has a Schizophrenic relationship with blogging. In 2005, he penned Forbes' laughable cover story called "The Attack of the Blogs," but a couple of years later, he was uncovered as the author of the hilarious Fake Steve Jobs blog. Alas, it seems his love-affair with the medium has faltered. In his most recent column for Newsweek, Lyons has a real surprise for everyone hoping to retire on their Google AdSense income: "while blogs can do many wonderful things, generating huge amounts of money isn't one of them." Taking a look at some recent blogging layoffs and his own paltry advertising income as the anonymous impersonator of Apple's CEO, Lyons concludes that growing rich from blogging is a "fairy tale."

What's missing from Lyons' piece, of course, is the great success he experienced as a direct result of blogging. Not only did he receive a big book deal using the same Fake Steve Jobs character he created for the blog, Lyons has been invited to speak and write widely on the topic. Further, it's doubtful that his high-profile switch from Forbes to Newsweek was anything but augmented by his blogging success. While relying on traditional advertising may not be the most promising business plan - especially given today's market - blogging can and does serve as an integral part of the success Lyons and many others seek.

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Happy Birthday Facebook, Now Show Us The Revenues

Carlo Longino — Fri, 6 Feb 2009 12:41:00 PST

Facebook celebrated its fifth birthday this week, and amid all the navel-gazing about what that means for the internet, one big question still hangs over the site: how will it monetize its popularity? This is an issue that continues to dog the social-networking space, as Om Malik points out that MySpace is struggling to generate revenues as well. These sites' massive amount of traffic and visitors, and the huge amount of time spent there, have traditionally not automatically equated to big advertising revenue, and there's nothing to suggest that's going to change soon, particularly given the slowdown in ad spending. If these sites are depending on advertising for revenues, they've got to come up with something more compelling than simple banner ads, which aren't delivering decent CPM or clickthroughs. While sites like Facebook and MySpace have plenty of life left in them, at some point, they're going to have to deliver an effective way to generate significant revenues.

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Hulu 'To Catch YouTube' -- Great, But So What?

Carlo Longino — Wed, 19 Nov 2008 05:20:19 PST

The FT's got a story saying "YouTube is in danger of being upstaged commercially" by Hulu, the online video site owned NBC and News Corp. It's based on a report saying Hulu will make as much in advertising revenues as YouTube next year, about $180 million, despite having far fewer active users. Two points: first, is this really surprising given the strengths of Hulu's parents at selling advertising around content; second, when did this become a zero-sum game? The article sets up some sort of adversarial relationship between Hulu and YouTube, or between professional and user-submitted content. While perhaps there's some competition for advertising dollars -- as there is between any two parties selling ad space -- the two sites don't have to succeed solely at the other's expense. Despite what the likes of Andrew Keen would have us believe, there's room enough on the web for both professional TV shows and amateur fat cat videos, and the success of one doesn't intrinsically mean the failure of the other.

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SEC Sues Former AOL Execs For Ad Scam

Mike Masnick — Mon, 19 May 2008 18:52:00 PDT

It's somewhat amazing that this case is still going on, but AOL's sneaky ad deals to boost its own revenue are still the target of lawsuits. Back in 2006, we noted that federal prosecutors had decided that it wasn't worth prosecuting the executives involved. However, it appears that the SEC feels differently. It's now sued eight former AOL execs for taking part in the scam -- though, four of them have already settled. If you don't recall, AOL had this nice little trick where it would "swap" ads with other sites, where no money changed hands, but both sides would record revenue. That let them boost revenue (up to a billion dollars for AOL) without any actual revenue coming in. It's a nice little trick... and it's also illegal. Though, it all took place in the 2000/2001 timeframe, so it's not clear why it took the SEC seven years to do something about it.

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