Yes, Actually, Music Can Be Free
from the if-you-know-a-little-economics,-that-is dept
A few folks have submitted links to a blog post by Mark Mulligan, who is a VP and Director of Research for Forrester. In the post, Mulligan talks about why music can’t be free, noting:
Another argument being aired is that the music industry should stop being so hung up on trying to get paid online, indeed one story even referred to “the Music Industry’s obsession with copyright”. That’s like saying “the car industry’s obsession with cars”. Copyright is the oxygen of the music industry. Without it there is no industry. Sure there may be cases for changing some industry practices but copyright remains the essence of making money from music.
Music cannot just be ‘for free’ anymore than cars or houses can ‘just be for free’. If people aren’t paid they don’t make the product. Sure music will still exist, but you’ll swap nicely programmed download stores and well stocked high street stores for buskers and millions upon millions of artist pages, all clamouring for your attention. Perhaps that sounds appealing? The problem is, most of them would sound a fraction as good as they would if they’d been able to give up their day jobs and been given proper equipment, studio time, mentoring and artist development support. And even those that would still manage to sound ok, would struggle to find their way to your PC or mobile screen as they wouldn’t have any marketing support to help them get there.
Mulligan’s post is actually in response to the various stories about France’s SPPF suing a bunch of file sharing apps. However, it’s a bit worrisome that a “research director” at one of the biggest research firms seems to have done so little research on the situation. While Mulligan’s post is longer, let’s just go through these two paragraphs and explain where Mulligan went wrong.
First of all, copyright is not, has not been and never will be the “oxygen of the music industry.” The oxygen of the music industry would be fans, and if you treat your fans as criminals, you can be pretty sure that eventually they cut off that oxygen. Copyright may be an oxygen tank that artificially pumps oxygen into a sick and infirm patient, but it’s hardly relevant to a healthy and robust system based on business models that take into account basic economics.
Next up is the claim that “music cannot be ‘for free’ anymore than cars or houses can ‘just be for free.'” You would think that someone working as VP and research director of the second largest analyst firm would at least understand a little basic economics — including the economics of scarce goods vs. infinite, or non-rivalrous, non-excludable goods. Apparently, not. So, Mulligan is simply wrong here. Yes, music absolutely can be free. Music, by itself, is quite different, fundamentally, than a car or a house, because those are scarce goods. If one person has a particular house, another person cannot. Yet, with music, everyone can have a copy of the same song. And, as we learned in basic economics, price is the intersection of supply and demand, and when supply is infinite, those curves meet at a price of zero. Alternatively, you can attack the same problem from another angle, which again was taught in basic economics: in a competitive market, price gets driven to marginal cost. The marginal cost of making a copy of a song is, once again, zero. Music can and should be priced at $0. That’s just basic economics. To claim it “cannot be” without addressing such fundamental economics is troubling.
Even more troubling is that beyond even the “theoretical” aspects of the above paragraph, is the widespread proof that music absolutely can be free — and that musicians can do quite well when it is free. Yet, instead of recognizing that, Mulligan trots out the tired and widely debunked line that “If people aren’t paid they don’t make the product.” See what he did there? It’s common among folks who are entering into such discussions for the first time. They say (a) music can’t be free because (b) if people don’t get paid, they don’t make money. The problem with this statement is that he makes a huge leap that if (a) then (b). If music is free, musicians don’t get paid. The problem is, that’s false. We’ve spent over a decade chronicling various business models where people use free something to get paid for something else.
And, of course, this is hardly a “new” or “revolutionary” business model. It’s the way the world has worked for ages. The pizza shop down the street from me offers a free soda with two slices of pizza. Yet, according to Mulligan’s professional opinion on business models, the pizza shop should go out of business. After all, it’s giving away a product for free, thus it’s not getting paid. The problem with Mulligan’s analysis — which one would hope is not indicative of Forrester’s quality of work — is that he seems to have focused so narrowly on the market, that he doesn’t know what the market actually is. He seems to think that the entirety of the market is selling music — rather than using the music to sell plenty of other things. Musicians can sell a variety of scarcities, such as concert tickets, merchandise, access to the band, the ability to create new music and many other things.
The rest of Mulligan’s argument simply builds on the spurious assertion that musicians wouldn’t make any money without copyright. Considering that his underlying assumption is false, the rest of the paragraph makes little to no sense, especially in light of the reality of the music industry — which is musicians can (and already do) make more money from focusing on selling scarcities.
Yes, we’ve all seen these arguments in the past — but they’re usually put forth by someone who hasn’t thought through these issues, and has simply jumped into one of these debates without taking the time to understand the actual market fundamentals. Yet, here’s a case where a top exec and director of research at one of the world’s largest analyst firms is making these same very basic rookie mistakes. If your firm happens to be relying on Forrester for advice on such matters, perhaps it’s time to consider an alternative.
Filed Under: business models, economics, free, mark mulligan, music
Companies: forrester
Comments on “Yes, Actually, Music Can Be Free”
Mulligan: FAIL
“Music cannot just be ‘for free’ anymore than cars or houses can ‘just be for free’.”
As soon as I read that comparison of music to cars, I knew his argument wouldn’t be worth reading. For reasons you already pointed out, Mike, music != cars.
Well Said
“if people don’t get paid, they don’t make money” doesn’t apply to this situation.
“if people don’t get paid, they don’t make AS MUCH money” is more fitting for the music industry. Shaping the industry and using copyright laws to funnel more money into their pockets is not capitalistic, it is greed.
Re: Well Said
Actually those who allow free copying have ended up making much more money (see: Trent Reznor, Radiohead et al). It’s not greed, it’s a combination of fear of change, fear of loss of control and blind ignorance.
A Distinction Between Music and Copies Please
If you are in the business of Selling Music Recordings then you need to know how to sell music rather than copies – because copyright is no longer effective as a monopoly, only as a means of punishment.
Punish your audience or make music for them?
It’s a bit of a no brainer isn’t it?
Re: A Distinction Between Music and Copies Please
I guess that’s why they aren’t getting it, you have to have some amount of brains to understand even an no-brainer.
Re: Re: A Distinction Between Music and Copies Please
One could hypothesize that they have ANTI-brains 😛
Re: Re: Re: A Distinction Between Music and Copies Please
ROLFLMAO
Interesting...
“Music cannot just be ‘for free’ anymore than cars or houses can ‘just be for free’.”
This statement reminds me of an insight I heard when watching a stand-up routine (can’t remember who…). The comedian was talking about the little anti-piracy trailer the MPAA started running in the beginning of DVDs. He said something to the effect of, “These trailers say ‘You wouldn’t steal a car, so why would you steal a DVD.’ To which I say, no, I wouldn’t steal a car, but if my friend said to me ‘Hey man, I just got this new car, you want me to burn you a copy?’ I’m all for it!”
I found that quite interesting.
Re: Interesting...
Awesome 😀 Pity you can’t remember who it was….
I agree, but...
If you have an infinite good and learn to sell it…then that’s MOOOOORE money! And really, who doesn’t want to do that? I mean…why not apply the scarce good theory to an infinite good and sue any one who treats it otherwise?
Re: I agree, but...
“I mean…why not apply the scarce good theory to an infinite good and sue any one who treats it otherwise?”
The RIAA and MPAA already do that.
Mulligan needs to take a course in Economics.
There is a very big difference between music and a car.
Cost to make a copy. When the cost to make one is very low per unit than it is much easier to make more. Also when the music is produced you can make infinite copies with almost zero cost.
Let's leave Forrester out of this
Mark is a Jupiter guy. I’m sure he will be straightened out soon enough. Plus it was a blog post; there is no way on God’s green earth it would have passed muster as actual research.
Re: Let's leave Forrester out of this
Mark is a Jupiter guy.
Jupiter is owned by Forrester, no?
Plus it was a blog post; there is no way on God’s green earth it would have passed muster as actual research.
A blog post on the company site, where he is representing Forrester, right?
“Copyright is the oxygen of the music industry”
This is the most hysterical statement in the article. What this statement really says is “Copyright is the PRODUCT of the music industry”. He’s asserting the music industry’s primary product is Copyright. Even more amusing is he narrowly defines the music industry as ‘producing recorded music.’ I guess the instrument makers, roadies, managers and the rest of the lesser ilk are part of some other industry.
So all you musicians out there, you don’t make music. You aren’t entertainers, you aren’t performance artists, you are simple Copyright mills for the record labels.
The problem with a lot of these people is that they don’t recognise that music has *always* been free. It was free before recorded music existed, unless you paid extra to see professionals to play in a particular environment. Few people pay directly for the vast majority of music they listen to, be it in a club, bar, on TV or on the radio. Online sharing is no different – most people will listen for free, as they have always done.
The question is how you make the product valuable enough for people to want to pay for something that they can get in another form for free. live gigs, extra content, merchandise, etc. is the way this has always been done. Nothing new is happening just because it’s easier for the average person to share a digital file than a physical object, only the people who depended on said physical object are suffering.
See the problem with comparing the pizza shop and music is that at the pizza shop you have to BUY two slices of pizza, but with music you can download it with no strings attached. Why do I even bother? This means your comparsion as apt as the car comparsion.
Re: Re:
See the problem with comparing the pizza shop and music is that at the pizza shop you have to BUY two slices of pizza, but with music you can download it with no strings attached.
Ok, well, I’ve got plenty of other examples if that one doesn’t suit your fancy. The point was simply showing that *free* is a part of almost every business model in some way. It wasn’t to make an exact analogy.
But how about this one: BMW gives away *FREE* entertainment with its commercials, and they really expect only a very small percentage of folks to go and buy their (scarce) cars.
Same thing with music.
Re: Re: Re:
BMW has tangible finite goods to sell. What do musicians have?
Let us say BMW charged you for watching their ads. How much would you be willing to pay? My guess 0. On the other hand people are ready to pay for just the music.
I am in support of maintaining status quo. Now “free” music is available with some inconvenience forcing billions of technically inept folks to pay create music (that I can download for free!).
Re: Re: Re: Re:
BMW has tangible finite goods to sell. What do musicians have?
Don’t confuse scarce with tangible. There are plenty of intangible scarce goods. Musicians have their time, their talent, their presence, access, concert seats, etc… plenty of scarce goods to sell.
Let us say BMW charged you for watching their ads. How much would you be willing to pay? My guess 0. On the other hand people are ready to pay for just the music.
Some are. A dwindling number. And that will only get smaller and smaller as more musicians make more money giving away their music. So why do you want to be betting on that model.
I am in support of maintaining status quo
There is no status quo.
Re: Re: Re:2 Re:
Of course there is Status Quo – long may they rock!
Re: Re: Re: Re:
Another point about downloading music and intangible scarcities:
If music is free, there’s still room to sell MP3s where you’re not selling an infinite good. If you have a large library of accurately tagged, high quality audio files that download fast(er than P2P networks), then charging for those MP3s might be a good idea. You’re charging for the convenience and the bandwidth, both of which are scarce.
Sure, the same product can be obtained for free elsewhere, but fixing ID3 tags and filename and dealing with inaccurate P2P searches is a hassle that’s worth something to avoid.
Re: Re: Re:
you can’t really compare music to pizza shops and BMW. Why? well its because everybody already knows what a pizza and a BMW car is. Both already have an image in people’s minds. BMW’s ads are free because they need to show people their new cars. Pizza shops give free items to entice people to eat their pizzas. Both BMW and Pizza shops don’t have to go through “branding” anymore because people already KNOW what BMW’s are and how pizza tastes like; all they have to do is to remind and entice people to buy their products. If you’re a NEW music artist, you cannot really sell your concerts to anyone without FIRST Making an image or “branding” of yourself. Public Image, branding, and musical appeal makes people want to buy concert tickets. Without all of these ingredients, people won’t buy concert tickets even if you give your music for free. Sure, people will download FREE music anytime, but without PROPER marketing strategies to build your image to the public then your FREE music won’t make you MONEY – free music without an Image WILL not sell concert tickets or anything else. THIS “Image” IS what recording companies spend alot of money on. this is why they want us to BUY the artist’s music and not download for free. think about it, If you already spent alot of money building a public image or brand and NO ONE buys your items because people can get it for free, would you continue to spend money on your items? Probably not. as far as music is concerned, do you think the recording companies would spend more money to promote and finance the artist’s concerts and make other items about his music if they already LOST money and couldn’t generate revenue or recover costs because of FREE music downloads? I guess this is WHY they want US to legitimately BUY the artist’s music. we cannot really expect Recording companies or music producers to give out music for FREE since they already “coughed up” loads of cash upfront in order to promote and build the astist’s image. they sell music in order to recover their upfront costs and to continue to promote the artists image in order sell concert tickets and other items. it’s basic economics. BMW doesn’t need to build their “Branding”. We already know BMW. Pizza shops also don’t need to build any followers because people who can download music on the internet and those that BUY legal copies of music probably know how pizza taste like and would buy it because of that. so, in conclusion, FREE music, illegal downloads, WOULD hurt the artists and musicians because record companies would have a hard time supporting these music artists if they can’t recover the upfront marketing and production costs, spent on building the artist’s image, by selling music CDs.
One Thing Right?
Mike, I’m glad you posted both of those paragraphs, yet you neglected to address one good point that Mark made: “And even those that would still manage to sound ok, would struggle to find their way to your PC or mobile screen as they wouldn’t have any marketing support to help them get there.”
I do agree that ‘digital music’ can be free, but it can also be sold as well. Free music isn’t as easy to get for everyone. I can only imagine trying to explain how to use p2p to my mother for example…
iTunes and other digital music suppliers do provide a scarce service – convenience. They do make it easy to find, rate, review and download good music. They are adding value, which can and is paid for by the customers.
On the other hand, they provide no marketing support. That is a value to musicians and needs to be addressed before all music can be free.
Yes, musicians can give their music away for free and most have no problem doing so, but they also need it to become popular in order to create income from other sources of value added content. Until enough people get the music that like it, you have no support to keep making more good music.
Giving away 100,000 tracks is NOT EASY to do without marketing. Established musicians can afford to blitz marketing everywhere. New musicians usually cannot.
You don’t make any money from the free tracks, but you do open up the door to gain financial support through other means – that’s the easy part.
Copyright fights are not going to go away until the issue of providing marketing support to the poor and new musicians is solved.
Suggesting touring and performing live shows as the solution is not the answer for everyone and can also be a costly expense many musicians cannot afford initially…
Re: One Thing Right?
Mike, I’m glad you posted both of those paragraphs, yet you neglected to address one good point that Mark made: “And even those that would still manage to sound ok, would struggle to find their way to your PC or mobile screen as they wouldn’t have any marketing support to help them get there.”
Actually, I’ve addressed it in great detail in the past. The whole idea that they won’t have marketing support is based on the idea that they won’t make any money to pay for marketing support. Since we’ve shown that they can and will make money, they can also pay for marketing support.
So, no, there’s no issue here.
On the other hand, they provide no marketing support. That is a value to musicians and needs to be addressed before all music can be free.
As we’ve said, that’s where record labels can help:
http://www.techdirt.com/articles/20080318/173833576.shtml
Re: One Thing Right?
here’s some support:
http://www.flickr.com/photos/iancrogers/sets/72157608959402635/show/
certainly not THE way forward, but A way forward, and indicative of the thinking and initiatives out there by artists and those who support artists.
Re: One Thing Right?
I think your argument is backwards, Rick.
Economics is not about solving problems for struggling musicians. If musicians are not creative enough to find a way to sell their product and make a profit, they have no natural right to be paid. If I tried to sell air to folks, even if I had a killer marketing campaign I’d still go out of business.
The goal is not giving away 100,000 tracks of music and hoping that it magically puts money in your hands. The goal is to use the music to enhance the value of something else you have to sell.
This is not about the morality of copying or copyright. Its about how you can lower your costs and grow your market at the same time.
Gatekeepers
The attitude expressed by Mulligan in the second quoted paragraph is so arrogant and egotistical, it just blows me away. It’s what’s wrong with the music industry.
“Sure music will still exist, but you’ll swap nicely programmed download stores and well stocked high street stores for buskers and millions upon millions of artist pages, all clamouring for your attention. Perhaps that sounds appealing?”
Actually yes. Because if someone waved a magic wand and the music industry disappeared today, the chaos he described would last a while, but it wouldn’t take too long before a much better solution would come about. Personally, I think the market would settle on on iTunes-like platform where people could upload their music to be filtered/ranked/tagged by its users and paid for in ways chosed by the artists. There you go, Mr. Mulligan. “Problem” solved.
“The problem is, most of them would sound a fraction as good as they would if they’d been able to give up their day jobs and been given proper equipment, studio time, mentoring and artist development support. And even those that would still manage to sound ok, would struggle to find their way to your PC or mobile screen as they wouldn’t have any marketing support to help them get there.”
The gall of Mulligan — there’s no better word for it — is astounding. He thinks that the same industry which gives us an endless stream of pop music dreck is a good example of a gatekeeper for the world’s music? Bah!
Re: Gatekeepers
He’s also operating on the assumption the quality recorded music can only be produced in expensive, label-owned studios. That may have been true 10-15 years ago but nowadays the recording technology is much more accessible. You can attain near-studio sound recording quality and sophisticated sound mixing technology at a fraction of what is used to cost. The barriers to entry into the recording business are driven down every year. Artists no longer have to pay tens of thousands of dollars to record a couple of tracks. You can cut a song in a garage studio, mix it on a PC then distribute for nearly free on the web.
Maybe you have based your free business models on the false premise that music is an infinite good
Maybe the rest of the world isn’t the ones who are wrong?
There are few people who are more often in the wrong than those who cannot endure to be so. – Francois De La Rochefoucauld
Re: Maybe you have based your free business models on the false premise that music is an infinite good
Maybe you have based your free business models on the false premise that music is an infinite good
It’s not a false premise. It’s not even debatable. It’s factual: digital copies of music are non-rivalrous and non-excludable.
Re: Re: Maybe you have based your free business models on the false premise that music is an infinite good
Hate to break it to you Mike, but copies are actually rivalrous and excludable. 😉
Rivalry: You can’t use my copy whilst I’m using it.
Excludability: Until you’ve paid for my copy you can’t use my copy.
Sufferers of copy-blindness believe that two indistinguishable copies represent the same good, in which case it is understandable to believe the collapsed good is non-rivalrous, and non-excludable.
One has to come to the conclusion that in the case of digital works, rivalry and excludability are more conceptually elusive than the simpler concepts they might be used to help explain.
A copy is a copy. Music is music.
Re: Re: Re: Maybe you have based your free business models on the false premise that music is an infinite good
That’s an artificial legal distinction, not a physical one. I can indeed use a copy or your music while you use it, it just may not be legal under copyright law to do so (leaving aside fair use and other exclusions for the moment).
However, the point is not that either copyright or piracy is morally or legally right or wrong. It is that as a musician it may be more detrimental to my business to enforce my copyright rather than allow it to be distributed freely to build up demand for more scarce/higher profit items I have to sell.
Re: Re: Re:2 Maybe you have based your free business models on the false premise that music is an infinite good
Scott, it’s not a legal distinction but a natural one.
You can’t use my CD whilst it’s on my shelf.
You may well have an indistinguishably similar CD on your shelf, but these aren’t the same copies, they’re simply indistinguishably similar.
This remains the case even when copyright is abolished – as it should be, because it is morally wrong.
Considerations of rivalry or excludability are red herrings. The real issue is suspending the people’s cultural liberty to share and build upon published intellectual works.
If I lend you one of my CDs, from where does a third party get the power to prosecute you should you make a copy?
That power isn’t granted by nature, but by the mercantile privilege of copyright created to both control and reward printing press owners in 1710 (UK) and 1790 (US).
not speaking the same language
“You would think that someone working as VP and research director of the second largest analyst firm would at least understand a little basic economics…”
Let’s be fair. Some of your conclusions are good, but some of your arguments are flawed. In the interests of sound argument, consider:
“Music, by itself, is quite different, fundamentally, than a car or a house, because those are scarce goods. If one person has a particular house, another person cannot. Yet, with music, everyone can have a copy of the same song.”
Yes, a song is fundamentally different from a house. But a song is not quite the same as a copy of a song. You’re talking about the negligible cost of copying a music file, as if that’s all there is. He’s talking about the immense effort and rare talent of writing good music, as if that’s all there is. Ignoring another viewpoint is not the same as refuting it.
“And, as we learned in basic economics, price is the intersection of supply and demand, and when supply is infinite, those curves meet at a price of zero… Music can and should be priced at $0.”
Theory and evidence agree that without interference (e.g. lawsuits) the price of copies of music is $0 (economics tries to describe how things are, not how they should be). That by itself does not mean that a musician can make a living in such a society, nor that much good music will be written there. (Also I think the “law of supply and demand” is just a crude approximation to the behavior of double-auctions of tangible, linear-value goods in a continuously distributed population, but then what do I know, I never took basic economics.)
“The pizza shop down the street from me offers a free soda with two slices of pizza. Yet, according to Mulligan’s professional opinion on business models, the pizza shop should go out of business.”
A specious example. The “free” soda isn’t free, since I have to pay the shop to get it.
Selling copies of songs was a lucrative business for, what, a century? This is no longer possible (or won’t be for long). He’s wrong when he says it will be the end of music, and you’re wrong when you say that it will make no difference. It will transform the music industry, making it less lucrative at least for a while. If they could have made as much money not selling copies as selling copies, they would have done so long ago.
Re: not speaking the same language
Yes, a song is fundamentally different from a house. But a song is not quite the same as a copy of a song. You’re talking about the negligible cost of copying a music file, as if that’s all there is. He’s talking about the immense effort and rare talent of writing good music, as if that’s all there is. Ignoring another viewpoint is not the same as refuting it.
I have not ignored it. I have explained in the past (and MENTIONED IN THIS POST) that the *creation* of music is a scarce good. I have no problem with people selling that.
But that’s not what he’s discussing. He’s discussing selling the copies, and saying you have to charge for that. He’s wrong.
That by itself does not mean that a musician can make a living in such a society, nor that much good music will be written there.
The whole of human economic history has shown otherwise. A more efficient market is a larger market, and (thank you Coase!) in such a market, if there’s demand, business models will be created to pay for what’s demanded.
A specious example. The “free” soda isn’t free, since I have to pay the shop to get it.
Again, the point was using free to sell something else.
I could have just as easily used an example (as I did elsewhere) of BMW’s commercials — given out free to help sell cars. Or, the ice cream shop that gives you a spoonful for free.
Selling copies of songs was a lucrative business for, what, a century? This is no longer possible (or won’t be for long). He’s wrong when he says it will be the end of music, and you’re wrong when you say that it will make no difference. It will transform the music industry, making it less lucrative at least for a while. If they could have made as much money not selling copies as selling copies, they would have done so long ago.
Considering the numerous examples of musicians making more money by embracing this, combined with economic history showing larger markets due to more efficiencies, I’m afraid the burden should be on you to explain why the industry will be less lucrative.
Re: Re: not speaking the same language
“I have not ignored [Mulligan’s viewpoint]. I have explained in the past (and MENTIONED IN THIS POST) that the *creation* of music is a scarce good.”
I must admit I missed that the first time through; you mentioned it once, but still maintained that music is not a scarce good, as if it could be divorced from its creation. (And what you’ve explained in the past isn’t really relevant.)
“But that’s not what he’s discussing. He’s discussing selling the copies, and saying you have to charge for that. He’s wrong.”
Quoting Mark Mulligan:
“The problem is, most of them would sound a fraction as good as they would if they’d been able to give up their day jobs and been given proper equipment, studio time, mentoring and artist development support.”
It sounds to me as if he’s discussing something other than selling the copies. It sounds to me as if he’s discussing artistic creation.
“”That by itself does not mean that a musician can make a iving in such a society, nor that much good music will be written there.””
“The whole of human economic history has shown otherwise.”
(Pardon my clumsy nested quotes, I don’t know a better way to do it with wrapped text.)
Note my use of the words “by itself”. Your conculsion may be correct, I’m just pointing out that your argument is unsound. (Maybe we’re not speaking the same language…)
“The point [of the free soda example] was using free to sell something else.”
Yes, I know what the point was. And yes, I know that another example may be good. This example is bad.
“Considering the numerous examples of musicians making more money by embracing this, combined with economic history showing larger markets due to more efficiencies, I’m afraid the burden should be on you to explain why the industry will be less lucrative.”
All right, I’ll give it a try. I’ve been impressed by the examples you’ve found of musicians doing well by giving away their music, but they seem to be pretty current, now that file sharing is common. “Embracing free” certainly occurred to people in the 60’s, so why didn’t it catch on then? Why weren’t LP’s and other media being sold for cost from then on, if that really was a more profitable way to operate? (I’m not talking about the occasional promotional album, I’m talking about the industry standard.) The new ease of copying simply means that there is one less thing that can be sold at a profit, and it’s something that clearly made a lot of money as a salable good.
Re: Re: Re: not speaking the same language
“The problem is, most of them would sound a fraction as good as they would if they’d been able to give up their day jobs and been given proper equipment, studio time, mentoring and artist development support.”
It sounds to me as if he’s discussing something other than selling the copies. It sounds to me as if he’s discussing artistic creation.
But his whole point is that there isn’t any money for the creation of music. That’s wrong. The point is there’s plenty of money for the creation of music, and many musicians are recognizing that (Jill Sobule and Marillion are both music acts who got fans to pay up for the creation of the music in exchange for extra benefits, such as access).
So his premise is incorrect. He’s assuming that if you don’t make money from selling music directly you don’t make music, and thus people will make worse sounding music. That’s wrong. There’s still money, and that money can go into the creation of new music.
Not to mention, of course, that digital technologies are making it *much* cheaper to create high quality music. About half an hour ago, a friend of mine was demonstrating to me some software he bought for $500 that basically creates a $250,000 studio setup on his computer. Damn.
Note my use of the words “by itself”. Your conculsion may be correct, I’m just pointing out that your argument is unsound.
Which part of my argument was “unsound”?
Yes, I know what the point was. And yes, I know that another example may be good. This example is bad.
Ok. We disagree. The point showed exactly what I wanted to show: which is that you can bundle free with non-free and make plenty of money. That point was made.
All right, I’ll give it a try. I’ve been impressed by the examples you’ve found of musicians doing well by giving away their music, but they seem to be pretty current, now that file sharing is common. “Embracing free” certainly occurred to people in the 60’s, so why didn’t it catch on then?
The rise of the internet and digital music has been a huge factor. As I noted in response to another comment, it’s really the *digital copy* that’s infinite (non-excludable, non-rivalrous). That wasn’t true and wasn’t available in the 60s.
Why weren’t LP’s and other media being sold for cost from then on, if that really was a more profitable way to operate? (I’m not talking about the occasional promotional album, I’m talking about the industry standard.)
It’s just the nature of whether or not you have an efficient market mechanism. In the 60s and 70s the lack of a digital platform like the internet meant that record labels had a monopoly or oligopoly on distribution, allowing them to accrue monopoly rents.
The internet changed the market and removed that control and that monopoly.
The new ease of copying simply means that there is one less thing that can be sold at a profit, and it’s something that clearly made a lot of money as a salable good.
Technically, what it did was establish a more level playing field that created competition — and, as you know, it’s competition that is the driving force in driving price to marginal cost.
Re: not speaking the same language
It will transform the music industry, making it less lucrative at least for a while.
This is a very interesting point. What will happen – assuming the entertainment industry doesn’t prevail and end up handicapping all digital electronic devices and criminalizing behavior of which they don’t approve – is the end of mega-rich entertainment folk.
There really is no reason why someone like Sylvester Stallone should earn $50M for a movie – that was the result of the formerly artificial scarcity of copies of movies.
Instead of destroying the promise of future technical advances and business models, the entertainment industry is going to have to come to grips with this reality: More people will make more entertainment for smaller individual audiences. These people will, based on their talents, end up splitting the formerly egregious “scarcity” profits amongst themselves, with less left over for dinosaur “moguls” and “superstars”.
free music might work, but give it time
I like the idea of music being free as well. I like that kind of business model. However, from what I remember of my graduate level economics classes was that, in the case of infinite goods, the market forces DRIVE the price to zero, or near its marginal cost. However, no economic theory holds that price IS zero and is sustainable on its own. Nowhere is anyone obligated to charge zero, either (perhaps they will go out of business or make very little money, yes). So, the real issue here is Copyright and its usefulness, or lack thereof.
I would even argue that even though music can be an infinite good, chances are the marginal costs to produce and market it properly would not marginalize to zero. It might be small, but some form of cost is there per ‘unit’ distributed.
I say that the current market forces are bringing about change just like economic theory says it will. Copyright is still the issue, not the proposed idea that music should be free.
I don’t think the analogies are correct at all when it comes to the Pizza place or BMW. In both of those cases, you are saying that the primary product has a price with value-added goods offered at free (a form of bundling). I would ask how many software developers would want to spend time writing code for a software program (with infinite distribution) and giving it away while attempting to make money on selling T-shirts with the software logo on it. I wouldn’t, and that’s a much better analogy. I don’t like the RIAA either, but saying that the entire music industry should offer digital music for free and make money on scarce goods might not be the ideal business model, or it needs some time to really develop.
Re: free music might work, but give it time
You are missing an important point. Yes, a programmer certainly wouldn’t like to give away software to sell T-Shirts because he isn’t in the merchandising business. But he might give away software to sell services/support/expertise on the software. Don’t think that would work? That’s essentially Red Hat’s model. Linux is open source but Red Hat makes money selling service and support for it.
No one is claiming there’s no cost to producing music or writing software. But that first iteration should be thought of as an investment. You leverage that initial investment in an infinite good to sell other products that remain scarce, whether it is support for the software, tickets to a concert, etc.
And keep in mind, just because every subsequent copy has a cost of nearly zero that doesn’t automatically mean no one will ever pay for a copy. There’s value in convenience and ease of access.
Re: Re: free music might work, but give it time
Yes, exactly. The argument that’s always posted (and misinterpreted) here is that infinite good should be leveraged to sell finite goods, not sold as products on their own. With the music industry, the finite goods are merchandise, limited edition CDs, etc., not the music itself. With the movie industry, it’s additional extras, a good theatrical experience, good atmosphere, etc., not the movie itself. With programs, it’s support and an opportunity to suggest new features, not the software itself.
The basic fact is that the vast majority of entertainment (and software) product exists despite the commercial demand. The problem with the modern entertainment industry is that they’re tried to control the demand as well as the supply. Meet the demand and you have no problem. Try to sell the latest hip-hop or American Idol to someone who has no interest in that – and offer them no alternative – and that’s where the industry is coming unstuck.
Re: free music might work, but give it time
Interesting thoughts, Bus Grad. Here’s something I have been playing with for the past few months:
What if all moneys earned within the music industry were collected and then divvy’ed up on a percentage basis to those who get the most radio plays, digital purchases, game royalties, downloads, and the like? Consider all media being available through a common portfolio/catalog concept.
Concerts, and recordings on physical media would be 100% revenue for the bands, as would t-shirts and the like as they are tied to scarce goods and a physical presence for the band.
Additionally, under a common portfolio concept, what if there was a way for a consumer to “become legit” and pay for a named work via web without fear of legal or regulatory retaliation?
Just an idea I want to throw on the wall.
Re: free music might work, but give it time
I like the idea of music being free as well. I like that kind of business model. However, from what I remember of my graduate level economics classes was that, in the case of infinite goods, the market forces DRIVE the price to zero, or near its marginal cost. However, no economic theory holds that price IS zero and is sustainable on its own.
This is correct. It is being driven to zero, rather than having to be zero. But we *are* seeing musicians embrace that and make money — so it will continue to be driven to zero as more bands realize they can make a good living doing that… and then, the competitive forces take over, and it will be nearly impossible to not price at zero. That’s economics.
And, I disagree that there’s no economic theory that says a price of zero is sustainable on its own. There are tons of studies suggesting exactly that, if you properly bundle that infinite good with a scarce good.
I would even argue that even though music can be an infinite good, chances are the marginal costs to produce and market it properly would not marginalize to zero. It might be small, but some form of cost is there per ‘unit’ distributed.
And what is that cost?
I say that the current market forces are bringing about change just like economic theory says it will. Copyright is still the issue, not the proposed idea that music should be free.
Copyright attempts to artificially block the market from reaching that equilibrium. To me, that’s a problem. It’s protectionism.
I don’t think the analogies are correct at all when it comes to the Pizza place or BMW. In both of those cases, you are saying that the primary product has a price with value-added goods offered at free (a form of bundling).
Yes, but as I’ve discussed, I believe EVERY product can be bundled in such a manner:
http://www.techdirt.com/articles/20070315/013313.shtml
I would ask how many software developers would want to spend time writing code for a software program (with infinite distribution) and giving it away while attempting to make money on selling T-shirts with the software logo on it.
Who said anything about selling T-shirts? We said selling valuable scarcities. For software developers there are plenty of such scarcities, though it depends on the product. Name the software and I can list out some scarcities. For example, Google develops software for free, but they sell the “scarcity” of attention in the form of ads. IBM develops a ton of free software, and sell the “scarcity” of professional services. In almost every software arena there are scarcities that can be sold that are quite profitable that have nothing to do with t-shirts.
I don’t like the RIAA either, but saying that the entire music industry should offer digital music for free and make money on scarce goods might not be the ideal business model, or it needs some time to really develop.
Why? We’re already seeing it work. I never understand this complaint. Why do you not think it will work when it’s already working, and the same economics have applied to pretty much every economic market in history?
I like Indie Bands
You know the thing is that he said all you would have is a bunch of band pages, but that is where I find the best music. I find some awesome music and bands that aren’t signed or little known. They make the best music (far better than the big bands) and so the dooms day hypothetical that he thinks will happen would actually be a welcome relief to me. Freedom from all of the crap music being played on the top 20 stations. So yea in a way I hope the guys is right. Give away music and it spells doom to the major labels and the musicians they represent (CRAP!)
Thinking about "Free"
The main issue to me is “free” as in “freedom”, not, as Eben Moglen says, “free” as in “free beer.”
I don’t think many people will actually argue that music should be totally free, as in, no price tag involved. Most people are down with the idea that artists should be able to make a living off their art, and should therefore receive some reward for what they do.
But most people aren’t down with the idea that music should be available only if it’s wrapped up in ridiculous DRM, or that building on existing music is allowed by sampling only if permission is sought from all owners.
Copyright should facilitate the creation of more creative material, not stifle it.
Re: Thinking about "Free"
I don’t think many people will actually argue that music should be totally free, as in, no price tag involved. Most people are down with the idea that artists should be able to make a living off their art, and should therefore receive some reward for what they do.
You’re making the same logical fallacy that Mulligan made. Giving away music DOES NOT mean that you don’t make money.
Creativity and profit
I am a scientist and I get paid through government grants. Although my research has no immediate application government still funds it. Because I am funded through public grant I am obliged to make public all the discoveries I made.
Before the copyright era there were many musicians who created great tunes. They never bothered to protect their work and rather tried spreading use of their work. They were, again, supported by their king. Even now there are institutions like BBC that are funded by public money that support artists and makes sure that their work reaches citizens for free. Is it possible to simulate the same atmosphere in USA?
Bottom line is musicians, just like myself, like to create creative stuff without worrying about marketing nuances and still make a living out of it.
The myth of zero cost music
While I agree with you wholeheartedly on the issue of fans and not the copyright being the oxygen, and the record labels generally not having much of a clue, I have to take contention with this sentiment:
First, semantics: the supply of DIGITAL music is infinite. There is not an infinite supply of CDs or LPs or any other physical media. This in an important distinction, if for no other reason to accurately point out that the infinite supply is a recent phenomenon.
Second: The marginal cost of making a copy of a song is, once again, zero. I agree that it is close to zero. But the marginal cost of making a song, as opposed to copying it, is not zero. The instruments cost money. The studio time cost money. Wherever they were living when they wrote the music costs money. The creators and all the people involved should be able to try to recoup those funds. You’re slamming Mulligan on ignoring basic economics, but you’re confusing distribution costs with production costs.
Third: Though you didn’t say this, I want to head it off at the pass: don’t say they should just go on tour or sell merchandise (i.e. do something *physical* with their digital good), that shouldn’t be a requirement. Think of a guy with a $5k camera rig who wants to sell his photos. He puts them on Flickr so sure, you can get them free. Should have to sell physical posters or have an art gallery showing? Change that metaphor to someone who spent $5k on a song. Why should they be forced to sell a T-shirt?
Last:
Mark Mulligan is not wrong about all of that, there is truth in what he says. Certainly Kevin Smith can max out his credit cards and make Clerks and Darren Aronofsky can make Pi guerrilla style without the proper permits to film in NYC. But you can’t make all art that way, sometimes you have to make an investment with the expectation that you can recoup it.
Re: The myth of zero cost music
Erm… what’s your point? If you read these articles, Mike’s point is that the infinite good (free music) can be used to sell finite goods (limited edition vinyl and CDs among them). The infinite good that’s being shared is the music itself. People will pay extra for the finite good (physical objects and gigs among other things).
“But the marginal cost of making a song, as opposed to copying it, is not zero.”
Again, you’re missing the point. Once the song is created (which has the same cost whether 100 million or 10 people listen to it), it costs virtually nothing to distribute. So why not use it to convince people to buy something instead of charging money for it, which people may not pay?
“Change that metaphor to someone who spent $5k on a song. Why should they be forced to sell a T-shirt? “
Why not? there are literally hundreds of ways for a band to make money, from a TV show appearance to a live gig to selling a T-shirt. Why do you assume that the whole model will fall apart because they reject one of these? Why do you assume they’re entitled to the money in the first place if they refuse to market it in a saleable way?
“But you can’t make all art that way, sometimes you have to make an investment with the expectation that you can recoup it.”
You have a point in the sense that Clerks and Pi are not mainstream movies. But, none of Smith’s not Aronofsky’s movies have been exactly mainstream, and you can argue that the studios have absolutely no idea how to sell them and have wasted millions on trying (The Fountain and Jersey Girl are prime examples). So, in those cases, the art may have been better *without* the idiots from the studios interfering. Besides which, whatever cost is sunk into the creation of a particular art is fintie and fixed. Once that’s done, if the resulting product is digital there’s no ongoing duplication cost so the artist is free to make money back however they wish without further overheads.
Re: The myth of zero cost music
First, semantics: the supply of DIGITAL music is infinite. There is not an infinite supply of CDs or LPs or any other physical media. This in an important distinction, if for no other reason to accurately point out that the infinite supply is a recent phenomenon.
That’s a good and important point. I agree. It’s the rise of digital music files that have enabled this scenario and made the music infinite.
Second: The marginal cost of making a copy of a song is, once again, zero. I agree that it is close to zero.
No, it is zero. All of the costs involved in making a copy are fixed costs.
But the marginal cost of making a song, as opposed to copying it, is not zero. The instruments cost money. The studio time cost money. Wherever they were living when they wrote the music costs money. The creators and all the people involved should be able to try to recoup those funds. You’re slamming Mulligan on ignoring basic economics, but you’re confusing distribution costs with production costs.
No, actually I address this. I said that *making new music* is one of the scarcities I discuss. I have no problem with bands charging for making new music, and in fact I think that’s a good business model (see Jill Sobule or Marillion for examples of bands doing exactly that).
But once the music is created it’s infinite. I am not ignoring the production costs at all, but pointing out (accurately) that production costs are fixed sunk costs once the music is created. Economically speaking, they are meaningless to the price of a copy of a song.
Third: Though you didn’t say this, I want to head it off at the pass: don’t say they should just go on tour or sell merchandise (i.e. do something *physical* with their digital good), that shouldn’t be a requirement.
I didn’t say physical. I said scarce. Scarcities need not be physical (attention, access, creativity are all non-tangible scarcities).
Think of a guy with a $5k camera rig who wants to sell his photos. He puts them on Flickr so sure, you can get them free. Should have to sell physical posters or have an art gallery showing? Change that metaphor to someone who spent $5k on a song. Why should they be forced to sell a T-shirt?
Uh. The market determines what business model makes sense. If the market says you need to sell t-shirts to make money that’s how it works. Your above statement reads to me like “Think about the guy with the $5k computer, who wants people to pay him to sit around all day and email. Should he have to actually do work? Why should he be forced to do what the market requires him to do to earn a salary?”
Mark Mulligan is not wrong about all of that, there is truth in what he says. Certainly Kevin Smith can max out his credit cards and make Clerks and Darren Aronofsky can make Pi guerrilla style without the proper permits to film in NYC. But you can’t make all art that way, sometimes you have to make an investment with the expectation that you can recoup it.
Again, I’m not sure why this is so difficult. Did you miss the part where those who embraced the model have been able to MAKE MORE MONEY doing so. Why do you think there would be less investment when there’s MORE MONEY to be made?
What about video games (and software in general)?
The argument here is that the price charged for a product should be equal to its marginal cost. So, then, the question is, “How do you make money?” From what I’ve heard so far, there are two possibilities: ad-supported or pay-service.
In music, I guess radio (terrestrial broadcast) is the only successful example of this. Listen to music and suffer thru ads between songs. Or, music-as-service: Live performance by the artist in front of a paying crowd.
But, what is the analogy for games? Ad-supported is starting to be used more widely (pre-roll/mid-game/post-game video ads, in-game billboard ads). Video-games-as-service: MMO (pay monthly fee for playing game) or MicroTransaction-based upselling for in-game features and loot. But beyond this, I’m drawing a blank. My question is, “What scarce goods can you sell with (free) software that allow you to turn a profit?”
Re: What about video games (and software in general)?
But, what is the analogy for games? Ad-supported is starting to be used more widely (pre-roll/mid-game/post-game video ads, in-game billboard ads). Video-games-as-service: MMO (pay monthly fee for playing game) or MicroTransaction-based upselling for in-game features and loot. But beyond this, I’m drawing a blank. My question is, “What scarce goods can you sell with (free) software that allow you to turn a profit?”
Depends heavily on the game. In some cases games can be used to sell other things entirely. For example, we’ve talked about having Intel develop a video game that requires high performance computers. If the game is good, it could help drive the sales of newer computers, which in turn helps Intel’s sales of high end chips…
With a little creativity you can think up lots of models.
Re: What about video games (and software in general)?
Software is not content. It’s more akin to a machine in that it has interactive behaviour which can’t be rendered as a linear (recordable) stream. Therefore it’s (still) possible to protect it against copying. You can take a video of a game being played, but that’s different from copying the game program itself.
I like indie bands too... but how long can it last?
As a indie band musician, I have to agree with Mark. Although his comparisons are open to attack, at the end of the day we’re all going to starve. Why? Well, all that music is a product. Yup. A manufactured product. And your on a fools errand to think that by giving away your main product for free, all those side products will pay your way. You’ll never get out of your basement.
First off there are only a few ways to make money as a musician: digital sales, actual CD sales, merch (t-shirts), gigs and royalties. Being supported by your girlfriend doesn’t count.
Merch takes money to produce and almost no one makes money on merch (unless your a big headline act)… okay, there are the odd indie bands that make money, but, it is a capital cost held up in boxes in someone’s basement.
CD sales – I’ll lump this in with merch. Costs cash to produce and yield varies.
Royalties – unless you get airplay, then zero here.
Gigs – gigging is hard – no one goes to live shows, no venues, most bands must play for free or “take the door”… plus if you’re touring, fuel costs, food, etc etc… so for most bands a zero gain – but it is the high of being in a band.
Digital Sales – a great option since the capital cost is zero – just a percentage of each sale. No boxes in basements. And you can release 1 song or 50. No pre-defined album constraints – yeah!
Now money from CD sales, Royalties and Digital Sales cannot be realized until you record something. That means either paying a studio (usually at $25 an hour) or building your own low/high-tech-basement-studio which everyone thinks just magically appears. Well they don’t. Even that takes money: mics, mixing boards, headphones, computer, monitor, speakers, stands, gear, cables… not cheap, but at least once it is paid for there is no/little ongoing costs. At the end is the product, a song, that could produce money for the band through royalties and sales and then more money through merch and gigs.
So common thinking now is that songs (a product) should be free… like come on man, its friggin music. I deserve to have it! So now the artist must pay for all costs from merch sales (those boxes of shirts in the basement which no one buys but also want for free) and gigs (which pay nothing). So you place a page on myspace with the other 400,000 bands and good luck… rock on. So all the people that download for free think the bands will get big by all this attention and get paid big bucks for gigs since a lot of people will come to their shows. hmmm.. well, maybe… sure,
I’m not defending the big labels… I am saying everyone is hurting from free downloads.
Finally, with no disrespect to Trent Reznor, but I doubt he could be Trent Reznor without coming through the system of label support and the product of the all evil “industry”… sure he can now do what he wants since he is the well-known Grammy winning Trent Reznor of NiN previously signed to: Island, TVT, etc… I doubt he would get the same media attention if he was one of the 400,000 bands on myspace.
Re: I like indie bands too... but how long can it last?
If you were truly an indie musician, you’re realise that there’s only a very slim chance of making money from CD sales alone. Since most of the money made, even in the “traditional” market was from gigs and merchandise, why would you resist the idea that this becomes the only way? Unless you can’t attract people to your gigs, in which case you have other problems…
Re: I like indie bands too... but how long can it last?
As an independent musician myself, I cannot help but notice that your reaction, while extremely rational is built on the very fallacial premises that Mike (the article writer…for clarification) is constantly trying to debunk. While your argument makes plenty of sense, it is based off a few assumptions in the first place. (1)The first assumption that you make is that music is created for the PURPOSE of making money. (2) The second assumption follows the first. You assume that by virtue of your musicianship, you deserve/should/ought (whatever) to receive reimbursement for your music. (3) You also assume that this reimbursement should, therefore, come in the form of money (or the equivalent thereof that allows you to provide a living for yourself). (4) Secondly, you also assume that the life of a musician should necessarily be completely devoted to music.
Being a musician myself, it’s easy to see why you would make these assumptions…a lot of my friends fall into this trap I feel also.
(1)The first assumption you make is that all music is created as part of a business. If you can’t see the error in this, then, my guess is that you probably never learned much about your history of music either…yes…a good number of musicians DID make a living in some way out of their music, but the vast majority of musicians throughout history did not, and some of the most influential were never successful in their own lifetimes.
(2) Assuming that we are now only looking at the portion of musicians who enter music to MAKE MONEY, we now run across the assumption that many musicians make (in fact, many people period make) – the idea that they DESERVE money. Tell me this, if you hired me to wash your windows and I didn’t fulfill my end of the contract (did a crappy job…i.e. they weren’t clean), do I really deserve my pay? While not a perfect analogy…my point is that your willingness to pay me is affected by how I perform my wage-garnering task. In the music industry, the audience “pays” the performer/musician/music-writer for the entertainment provided. If you do a crappy job, the audience may pay you the first time (i.e. go to a concert or buy a cd), but they are not as likely to pay you again (from my analogy, you would probably fire me for my window-cleaning job).
(3) The third assumption you make, that you should be reimbursed with money is a finer line to tread. This one is harder to put into plain speech, so if anyone else who sees where I’m coming from on this can help me out, I would appreciate it. Basically, the idea is that you can be reimbursed for your music making talents in many different ways: money, fans, fame, the opportunity to perform again (most people just assume that they SHOULD perform again…have any of you ever watched American Idol???!? Not everyone can make it…that’s reality. Not even everyone that’s incredibly talented makes it in real life).
(4) This one is closely related to number 3…There are thousands of people out there in the world who work 2-3 crappy jobs just to get by in life. Since when do you DESERVE to only need to work one job yourself to live? Sometimes life is hard. Get over it. I have a nice cushy job that I work 9-5 for five days a week. I just graduated from college last May. But I grew up on the streets. I had to bust my butt to get to this level in life. As much as I might want to be a professional musician, it might not work out for me. I’m not saying that you shouldn’t try. I just had hard circumstances. But thinking that you DESERVE my money is not going to make me one of your fans…and if I’m not your fan, you won’t be getting my money no matter how ridiculously talented you are.
Until the babies in today’s culture learn to grow up and actually EARN the money their money with hard work and stop crying when the wind doesn’t blow their way, they are going to miss the opportunities that pass them by…and be left crying about pirating in their wake.
They would get paid
They would get paid more money if the RIAA would stop taking so much money from them to fund their fat wallets.
not free
“The pizza shop down the street from me offers a free soda with two slices of pizza. Yet, according to Mulligan’s professional opinion on business models, the pizza shop should go out of business. After all, it’s giving away a product for free, thus it’s not getting paid. “
Wow… I completely disagree with your analogy here. First, the soda is NOT free, you bought two slices of pizza… the cost of the soda was factored into the price of the ‘za. Second, unless your in some sort of alternate universe, you cannot simply materialize (download) the food.. nor can you copy it for all your friends (free soda or not). Each one of you must buy that food. Third, and I think your missing a big point. It was easy to package the soda with the pizza since you must WALK to the store and physically get the product. And once there, you cannot get the soda without paying for the pizza. So how does a musician package something (T-shirt, CD) with a free song with a) all the downloading and b) inconvenience… i.e. why buy one free song and have to go through the pain of online ordering a shirt
A better analogy would have been bonus tracks on CD’s to entice purchases… but that is now flawed since the bonus tracks are downloaded for free.
Re: yes free
mike wrote:
Precisely! And the cost of creating the non-scarce recordings that are being given away free is factored into the price of the scarce goods that the fans are willing to pay for. QED!
There are no Free Lunches
The use of the word “Free” might need to be re-examined, and the word “promotional” used instead. Or define “free” as that it has a zero applied price, which is different than saying it has no consumer cost. Just a comment from someone with a Procurement job.
But the rational of your used arguments is sound, the music industry Business Model is outdated. But there are two fractions or two parties here (1) the musicians or the producers or providers of the content. (2) The recording companies or the packagers and promoters of the content. What it really boils down to, is that (1) used to need (2) because (2) had a monopoly on recording and promoting and selling to the fans, and taking the Lion’s share of the revenue. By contrast Google’s business model is also a “provider of content”, but do they sell that content to the consumers at an applied price? The recording companies are no longer providing any “value”, to the consumers, or to most musicians, and copyright is their last monopoly bastion.
Technology has changed that monopoly Business Model, the musicians don’t need the Recording Companies to reach the fans with their music, and the fans don’t need the Recording Companies to record music for them. So where does that leave the status quo Business Model? Who will be going to the government next for a “bail out” because of crappy business management?
umm... like what?
“Precisely! And the cost of creating the non-scarce recordings that are being given away free is factored into the price of the scarce goods that the fans are willing to pay for. QED!”
– bonus songs – um, just download ’em
– rare video… um, just downloaed ’em
– cool packaging… died with the album
Like I said, cool non-digital stuff to be packaged with the free song is a difficult to package, sell, distribute, etc.. and is not so easily obtainable.
Sorry, but I love all these silver bullet solutions… hey just package in some more cool stuff and your off and running… sheesh…
Tour pizza/soda scenario is like everyone ordering the pizza/soda combo, getting it delivered (for free) and then just taking the free soda and not paying for the pizza.
Re: umm... like what?
– cool packaging… died with the album
Living in a neighbourhood full of teens with posters/covers/pics plastered over their walls, I would disagree with that statement.
err...
“If you were truly an indie musician, you’re realise that there’s only a very slim chance of making money from CD sales alone. Since most of the money made, even in the “traditional” market was from gigs and merchandise, why would you resist the idea that this becomes the only way? Unless you can’t attract people to your gigs, in which case you have other problems…”
Cheap attempt at a slag/dig… anyway… CD sales and now digitial sales were always a means to make money as a indie band… CD’s were merch… and merch was sold… so you cut out revenue. Sure if someone paid for a gig, then bought a shirt, hey why not toss in a free CD… but you got two other sales (gig/t-shirt). Plus, like the pizza/soda scenario, the person is there… much easier to sell face-to-face.
Obvisouly there are a lot of people you think getting something for free (not as a promo or add-on to another purchased item) is their god given right and screw those musicians/artists. Justify it any way you like.
wow
not sure if i should even comment on this. i do enjoy reading your writings but this particular rant about music being free – is simply not close to being wise. the amount of money it takes to record a quality album worthy of the sales (not reflective of the value of the band – two very different factors… if you had any experience in recording studios you would know this) requires a price point above zero.
music should not be free. the list of reasons is too long to explain – but if a thing costs 500k to produce, giving it free simply doesn’t resolve the economics. having been a professional recording engineer and a studio musician for the better part of a decade – i can tell you that there are factors you’re not including.
i’ll keep reading your scribblings tho. i dig your view points on many, many things. this one however, is off the mark.
peace yo-
anton
Re: wow
not sure if i should even comment on this. i do enjoy reading your writings but this particular rant about music being free – is simply not close to being wise. the amount of money it takes to record a quality album worthy of the sales (not reflective of the value of the band – two very different factors… if you had any experience in recording studios you would know this) requires a price point above zero.
Is this REALLY that hard to comprehend? At NO POINT did I say it does not cost a lot of money to record. In fact, I thought I said quite clearly that the creation of new music is a scarce good that costs money. PLEASE try reading before you claim I said something I did not.
But when you are selling a COPY of the music, your basic economics says that it’s only the marginal cost that matters towards pricing pressure. The cost of production is MEANINGLESS in pricing the copy.
Sure, I wish it were different, but that’s just economics. Don’t blame me for telling you how the world actually works.
music should not be free. the list of reasons is too long to explain – but if a thing costs 500k to produce, giving it free simply doesn’t resolve the economics. having been a professional recording engineer and a studio musician for the better part of a decade – i can tell you that there are factors you’re not including.
Seriously. How many times do I need to explain the economics and point to examples of musicians who EARN MORE MONEY by following a business model that embraces free, before folks like yourself will whine about how much money it takes to record an album.
OF COURSE it costs money to record an album. That has NOTHING to do with the price of music, though. If the musicians are making MORE MONEY by giving away their music for free, then what does the cost of making the album have to do with anything?
Please. Please. Read before you make claims like this.
Re: Re: wow
i am a musician, an d i will tell you that after listening to your dumb founded ideas that i would gladdly give a cd away to a fan that appriciated my hard work, money and time i have sacrificed, that thousands i have spent, the years i have spent, the people i have hurt, the pressure it takes, the jobs i have lost from music. i love playing music for people that enjoy it and appriciate it. but i would not give you a copy or a free cd because you don’t appriciate it and you think you know what it take but you don’t so the idea that music should be free!…..and traded or copied for free! ” i wouldn’t give you anything” i think you need to go a few years with out the ability to hear so you can learn just how good it is to have music. $500,000+ to make music per album and you think that your economic idea is even respectable. people can get music but just because people get it for free from friends ect. doesn’t mean its fair. i have a family with needs, your saying that i am gonna have to sacrifice that for music more than i am already? you try to write music and do what it takes then come back and read your bullsh!t
Re: wow
but if a thing costs 500k to produce, giving it free simply doesn’t resolve the economics.
If a thing costs 500k to produce, it seems kind of silly to produce it for free (i.e. take on the risk of losing that investment).
Why is it everyone is stuck with the idea that musicians have to work for free and then use bully tactics and artificial barriers to accessing that work in order to earn a buck?
I don’t know of many other professions that work that way…
Cars equals music?
So. I buy a nice car, say a Honda hatchback of some sort. Maybe even second hand
I clean it up, get it tuned, stick on a custom-body kit. Bring it to a guy who does a fantastic custom paint job, all primary metallic colours. Install a great big stereo, maybe some wings. Nitro, sure why not?
I sell it to some guy who just loves what I did and pays me 20% profit.
Result; Honda put me in their bi-annual customer magazine publication and their #1 fan, and maybe sell more cars.
Music:
I take a song, like the beat, sample 5 seconds, extrapolate, customise, whatever, release it, make money…
Result: And Get my a$$ sued off and lose all rights.
Oh yeah, they’re EXACTLY the same thing!
I'm starting to see a pattern here... and so are others.
“We’ve spent over a decade chronicling various business models where people use free something to get paid for something else.”
“offers a free soda with two slices of pizza.”
Mike is not unfamiliar with my battles on the whole concept of “freeconomics”. We’ve gone back and forth and there’s a reason why Mike’s position remains positive while others are negative.
Note the two quotes above. In both examples, it’s quite clear that something else has to pay for that “free” item, which I’ve been arguing since day 1. Mike’s reply has always been the item was free, but now he has admitted it is not free.
The VP’s logic makes sense, to a point. He faltered when he mentioned no revenue means no music, but failed to realize the music always comes first.
I’ve yet to see any recording executive sign someone off the street without first hearing their music, most of which was created FOR FREE by the artist. It is the artist’s hopes that they become “mainstream” to generate millions.
And this is where the industry fails consumers. They instantly associate “copyright” with value, not realizing where the true potential is. Every person puts value on a song depending if they enjoy it. A CD collection of 10 songs may only produce two songs of “value” by the majority of consumers, and the industry takes advantage of this by inflating the cost by assuming all songs by the artist has the same value.
This is why people are paying $0.99 per song (online avg). The industry thinks all these songs carry the same value, and they do not. Some are worth more. Others are worth less, but as with everything else, value decreases in time.
The music industry can not afford to give away music for free because it has nothing else to offer to make up for the “cost” of the song.
Or, I should say future song. If the songs created for free by the artist were put to CD/MP3, then what’s happening is the industry is gambling the artist will do well and create loads of cash, so part of this includes selling music.
From the industry’s standpoint, it makes sense. Now enter Mike’s “freeconomic” model, and they cry foul because it won’t work for them.
Mike has continued to overshadow the ability for people to “instantly” create additional scarce products to offer the free item (regardless of what industry). His (rather stupid) notion that BMW gives us free ads totally ignores the fact the price of a BMW pays for those ads, which makes it more expensive for consumers to buy (which is why you’ll never see BMW with the title of “best selling” in its history).
By it’s very nature, BMW is already a scarce commodity so offering its free ads to us is rather insulting, given they’re only telling us “Look what you can’t have”.
When was the last time you saw BMW give away its cars to sell another scarce product? In fact, when was the last time you saw the MUSIC INDUSTRY give away free stuff in order to sell a scarce commodity?
There’s a HUGE difference between a musician and the music industry. The musician can easily sell scarce products, but the music industry can not.
This is why Mike’s pizza place can offer him a free drink with the purchase of TWO slices of pizza. Want to bet those slices of pizza cover the cost of the soda? (Or maybe that $7 calzone? How about the $3 breadsticks?)
In my lifetime, I have never, ever seen a business give anything away for free that wasn’t made up in the cost elsewhere, driving up an unnecessary increase to consumers.
What I have seen is overpriced value for commodity which simply doesn’t exist the way these people think it does. I don’t believe any Apple product is worth one cent, but others place “infinite” value on their products. But it’s those who place the “infinite” value on the Apple products who continually wonder why Apple products are so expensive when compared to comparable other products.
If anyone here can explain to me why the original Apple iPhone was $700 but the new version is $300 without discussing “value”, go right ahead. (Note: Don’t even think about using “new” technology as your argument. The technology has been around for quite some time. It’s how it was applied that made the phone unique).
People enjoy free and many will take advantage of it, despite not paying a cent for “scarce” products otherwise. Some do it because they’ve felt ripped off for years buying hard media. Others feel it’s not worth buying a collection for just one song. Whatever the reason, free draws people, but not necessarily consumers.
One of the major downsides to the freeconomics model is that success breeds imitation. If “everyone” used the freeconomic model, many will copy the success of a scarce product, instantly removing the status of scarce. We see this everyday for non-freeconomic products (hell, it’s the very damn reason prices drop to marginal costs).
In order to become a successful business, one must first understand 3 points:
1) The “supply & demand” model is wrong. Developing scarcity only instills greed from those who will take the limited offering and sell it for a profit, leaving those who wanted the product holding nothing. Make enough for everyone or don’t make it at all.
2) Value is subject to consumer definition. Never place current value on future products. History has shown over valuing future products tends to bankrupt many.
3) If your goal is to collect very damn dollar you can get your hands on, you’re greedy. Set a limit on what you WANT, then use the extra to invest in other products, businesses, or give back to the community. Greed is sniffed out quickly by consumers, especially in the current global economic crisis.
Giving something away for “free” only works when you, the creator, truly can give the item away for free without trying to make the cost up elsewhere.
If you can’t do this, don’t punish your consumers by making them pay more for something rare which they may not be able to get due to its scarcity.
That’s just bad business.
Re: I'm starting to see a pattern here... and so are others.
This is why people are paying $0.99 per song (online avg). The industry thinks all these songs carry the same value, and they do not. Some are worth more. Others are worth less, but as with everything else, value decreases in time.
No, people are willing to pay $.99 per song for the CONVENIENCE of the service that delivers the song to them. If they could find the music, click a button and have it on my music player using a pirate site, they’d do that.
But the reality is that (a) pirate sites are not as well marketed as, say, iTunes, (b) there is still work (somewhat technical at that too) necessary to get those pirated songs onto their music player, (c) content pirate sites are not as secure or trustworthy, and (d) there is a loyalty factor in purchasing the songs from a “legitimate source”.
Another point: the songs I have purchased from iTunes (or still buying on CD), most are over 20 years old and I’d happily pay the same or more for other albums/songs that are no longer available from the CD pressers and not made available online.
Re: Re: I'm starting to see a pattern here... and so are others.
“No, people are willing to pay $.99 per song for the CONVENIENCE of the service that delivers the song to them. If they could find the music, click a button and have it on my music player using a pirate site, they’d do that.”
I’m sorry, but I’m going to have to disagree with you on this one.
$0.99 is not for convenience. Placing the song available online is the convenience and it costs little to do this. There’s only ONE copy of the song on the internet, so these online stores are charging nearly a dollar for additional copies made by consumers.
Given this information, an unlimited commodity can generate infinite revenue. If 100,000 people download the same song, that’s nearly $100k in the bank for them without having spent anything in reproduction costs. There was only one song, but it produced 100,000 items.
The $0.99 price was dictated by the very music industry Mike discusses. The copyright fees is what drives this price, and both Mike and I agree this is not right.
There is NO REASON why a consumer has to pay nearly $1 for a song. The copyright fees are out of line with “supply and demand” because they should be at 0, or nearly so.
This is extortion by the industry to consumers. The price model reflects those of newly released CDs, and it’s the industry trying to maintain the old business model revenues because they just can’t get past the notion selling music is the only place they can generate revenue.
I’m a staunch believer that copyright laws hurt industry. People taking “ownership” of non-existent collateral pisses me off to no extent.
Seriously, how in the hell can anyone “own” music? It’s sound, created by instruments, that not a single human can own. If you hum the song, you’ve created “copyright infringement”. Did you know that?
I can see why the laws were created. It prevents people from stealing the works of others and claiming as their own. But the day industries recognize they don’t own ideas, the better life gets for everyone.
I do believe we need to keep track of those who designed the idea, but that’s where it ends. This way, people will know who originated the idea, rather than having to pay for it when these “idea owners” extort large sums of money for using the idea.
Patents work in the same way. Who the hell cares who came up with the patent? If everyone can use it without paying extortion fees, better products would benefit! Never mind the fact most who sue over patent disputes do so when the patent is applied to a product when the original company did nothing with it! What the hell?
I will have to say, I’m one happy camper as I watch the Dow drop like a stone in water.
It’s about time businesses are forced to re-evaluate the way the conduct business.
Let them all fail. We’ve proven before we can rebuild, it’ll just be a bumpy ride until then.
Cars and music
“So. I buy a nice car, say a Honda hatchback of some sort. Maybe even second hand
I clean it up, get it tuned, stick on a custom-body kit. Bring it to a guy who does a fantastic custom paint job, all primary metallic colours. Install a great big stereo, maybe some wings. Nitro, sure why not?
I sell it to some guy who just loves what I did and pays me 20% profit.
Result; Honda put me in their bi-annual customer magazine publication and their #1 fan, and maybe sell more cars.
Music:
I take a song, like the beat, sample 5 seconds, extrapolate, customise, whatever, release it, make money…
Result: And Get my a$$ sued off and lose all rights.
Oh yeah, they’re EXACTLY the same thing!”
The problem is, at some point someone (you or another person) PURCHASED the Honda from Honda. Okay, you added some fancy stuff and moved on… you sold it as Honda+Fancy Stuff. Certainly Honda promotes you as #1 since you a) purchased a Honda… and then marketed Honda+Fancy for free to them.
In your second scenario, no money is paid for usage (so band gets zero after spending money making song and promoting song and all the hard work getting the song into the general populace) and then you get a new free song without acknowlaging the creator in song title, promo, etc. So people may not even know it is sampled… so the sampler goes along for a free ride.
Read My Response
I’ve been reading the comments here with great interest. It’s a topic that divides opinion starkly. I may not agree with everything that is said here but I do genuinely value the debate.
I’ve written a new post today that responds to some of the most popular arguments that have been made here and other blogs over the last couple of days.
Please come over and read and carry on the debate there.
The only thing I ask it please keep the debate clean, without personal insults.
Mark
http://musicindustryblog.wordpress.com/2008/11/21/more-thoughts-on-the-music-as-free-debate/
Re: Read My Response
I’ve written a new post today that responds to some of the most popular arguments that have been made here and other blogs over the last couple of days.
Mark, I’m a bit confused, as it does not appear that you addressed a single substantive argument in our post, explaining why your original post was wrong.
Instead you picked on other arguments. You said that labels still have a place. And I agree. In fact I’ve made exactly that point in the past:
http://www.techdirt.com/articles/20080318/173833576.shtml
But that has nothing to do with whether or not music will be free. You are arguing something different.
You are also wrong, by the way, about Radiohead. You could get the music for free without an administrative charge. But I do agree that Radiohead is not the best example. Trent Reznor, on the other hand, is a good example, which you don’t discuss.
But, honestly, my biggest problem is that you COMPLETELY IGNORE the entire economic discussion we made showing why your comments were wrong.
Also, by the way, it’s fairly common courtesy to actually LINK to the comments you’re responding to.
Re: Re: Read My Response
It’s also fairly common courtesy NOT TO SHOUT (or WRITE IN CAPS, which is the text equivalent) in an amicable debate. You apparently don’t want this to be a friendly discussion.
Re: Re: Re: Read My Response
It’s also fairly common courtesy NOT TO SHOUT (or WRITE IN CAPS, which is the text equivalent) in an amicable debate. You apparently don’t want this to be a friendly discussion.
Willton, you might want to learn a little about what is and is not common courtesy. What is considered rude is using ALL CAPS. Using caps for a few words to emphasize them is perfectly fine.
I absolutely want this to be a friendly discussion but if folks are going to say dumb things, there’s no reason not to call them out on it.
So let’s just not pay for anything that can be created digitally and resold. If you take your logic for music, it certainly can be extended to software. How much “Oxygen” does Microsoft need? Let’s just STEAL everything and see how long MS lasts. Folks, music is software. It takes money to develop. Time is money and home studios (even lowly ones) aren’t free.
OK, how about I get unlimited FREE bandwidth for life? I’m tired of paying ISPs each month. If my music server computers are required to produce music for free, then why can not request the same of my ISP? After all, bandwidth doesn’t really cost anything except a few computers and some electricity. These are the same ingredients it takes to make music these days… a few computers and some electricity.
Oh, ISPs don’t like the idea? Well, why don’t they sell f$*King T-Shirts with their corporate logos to cover their living expenses? Sounds like a great plan to me. Cretin tactics? Not really. Come on guys. Before you start insulting the IQs of those who make arguments that people with brains and talent (musicians) should be paid, try thinking about how YOU get paid. And then go scr*W yourselves.
Have a nice day.
Re: Re:
So let’s just not pay for anything that can be created digitally and resold. If you take your logic for music, it certainly can be extended to software. How much “Oxygen” does Microsoft need? Let’s just STEAL everything and see how long MS lasts. Folks, music is software. It takes money to develop. Time is money and home studios (even lowly ones) aren’t free.
Yes, we’ve discussed how the software business model will change as well. I’m not sure why you think this proves your point. Software is also moving towards free. Google offers its software for free and makes a ton of money selling your attention. IBM offers a ton of software for free and makes a ton of money selling services.
In both cases, they’re using the infinite (software) to make the finite (attention, services) more valuable. That trend will continue.
Microsoft can milk its software cash cow for a while, but why do you think it’s so desperate to get into other business areas?
OK, how about I get unlimited FREE bandwidth for life? I’m tired of paying ISPs each month. If my music server computers are required to produce music for free, then why can not request the same of my ISP? After all, bandwidth doesn’t really cost anything except a few computers and some electricity. These are the same ingredients it takes to make music these days… a few computers and some electricity.
Please understand the difference between scarce and infinite goods. Bandwidth is a scarcity, so, no it doesn’t make sense for it to be free.
If you think you’re proving a point, so far the only one you’ve proved is that you didn’t bother to read or think.
Before you start insulting the IQs of those who make arguments that people with brains and talent (musicians) should be paid, try thinking about how YOU get paid. And then go scr*W yourselves.
Well, that’s nice. Again, which part of the post where we explained that musicians are getting PAID MORE under this model did you miss? I really can’t see how anyone with half a brain can miss that point.
We do need investment to continue the high quality of music but....
What Mulligan says re investment in music being necessary, whether by labels or brands is true, but it is also true that music can be paid for without that cost lying at the consumer’s door – Cue ad-funded services like We7.
Steve Purdham
CEO – We7
http://www.we7.com
what?
your saying that music should be free!!!! i get what your saying but the people that write the music need to be paid for there hard work. musicians aren’t just low lifes with out jobs and families and don’t just sacrifice everything they have such a time, their own money, stress on their family, stress on their job, and the on going critisism that they put up with for years just to give there music away for nothing! if a man can invent the water faucet and charge poeple for something that very well should be free, why shouldn’t a musician write music and expect money for their hard work and creativity? we need to be able to buy the water to? just like you do. the best music is gains when musicians spend most of there time writing to come up with the music people want to hear, it takes time to do that. in other words being a musician is another job, if a musician sat at home a wrote great music all day and made people happy. then that would be his job. but if he didn’t get paid how would he suvive?
If music ever becomes free there will be no more professional music being made.
Good luck
Musicians have sold out, they are not doing better. That whole trend is coming to an end of giving it away for free. All I keep hearing from bands is “we have no money” and it’s worse than ever before and so is the music. Musicians are like doctor’s, they have never been that good at the business side. I keep hearing from more bands – the van won’t start we don’t have the money, our equipment was stolen, we don’t have the money, we need new cables, we don’t have the money. Talk to 12 year olds, they don’t want to pay any more. No one wants to pay and therefore music is worse than ever, bands are poorer than ever and the drop out numbers for bands is so high, the highest it has ever been
music
Music should be free but i have to do a stupid english project on why it should not be free!
Re: music
that is soooo stupid!!!!!!!!!!!!
Music is not free!
I see a lot of intellectual arguments made by NON-MUSICIANS here. So let me give it to you from the artists point of view. When illegal file sharing started, with napster, a lot of true artists gave up on a career in music because it was no longer economically possible. Album sales are essential. For every legal purchase there are about 20 illegal downloads…and it is much worse for artists with an actual record deal. Music companies tried to survive by cutting costs. Talent is no longer sought after, it is produced, just like in a factory. They take someone who they know will sell their soul and be in debt for the rest of their life, and just edit the song to death. If you heard some of these recordings in the original state you would be horrified at the lack of talent. Pretty soon it wont matter, there will be nothing left worth downloading.So how would the techie, blog writing, tight jeans with the load of crap in their pants crew feel if I stole this article? Why not just copy paste the whole thing, put it on my website and then get paid with ads? Is that stealing or just “file” sharing?