Former Record Label Exec Ethan Kaplan: Duh, Of Course More File Sharing Leads To More Sales

from the your-product-isn't-diamonds-mined-from-a-secret-mythical-land dept

We recently posted an interesting study talking about how greater file sharing of leaked albums had a specific (if small) causal impact that resulted in higher sales. I thought it was an interesting area of research, though one where a lot more work needs to be done. Following that, however, there was an interesting exchange on Twitter, mainly by former Warner Music exec Ethan Kaplan, who didn’t seem to think the concept was controversial at all — and instead that it was obvious. As he stated:

Let me simplify this answer: YES IT LEADS TO MORE SALES. DEMAND = DEMAND W/ $$$$$$ IF PRODUCT GOOD.

He then expanded on that idea (edited slightly to de-Twitterize):

Simplified further: MUSIC BUSINESS (RECORDED): your product isn’t diamonds mined from a secret mythical land.

And beyond broadband/napster/whatever, what hurt you the most is PEOPLE FIGURED THAT OUT. Cynicism caught up with you.

You can see the complete exchange on Storify (embedded below) as per Ethan’s command. Ethan, as always, is a perceptive observer (and never afraid to share his opinions) of one of the key reasons why the recording (not music) industry has had so much difficulty over the past few years. The industry was focused on something that they pretended was scarce when it was not — misunderstanding the supply curve. Add to that, the fact that they misunderstood how file sharing represented pent up demand, and they astoundingly got both sides of the supply-demand curve wrong. It’s hard to build a successful business when you do that.

Of course, all of this makes me wonder how Ethan lasted in his role at Warner for as long as he did. It must feel good to be free… Though, I stand by my assertion from 2008, that if Warner had put Ethan in charge, that company would be doing a lot better today.

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Companies: warner music

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Comments on “Former Record Label Exec Ethan Kaplan: Duh, Of Course More File Sharing Leads To More Sales”

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46 Comments
Keroberos (profile) says:

Re: Meh.

If that banal, pedestrian dreck is the absolute best that the labels can produce…

This has been what the recording industry has been doing since day one. In fact almost all mass media does this. Mass media has always been more about generating profit then generating quality. What’s more scary is what that banal, pedestrian dreck says about the average media consumer then the industries producing it. If dreck is what sells and makes them a profit, what’s wrong with them capitalizing on it?

…because nothing on that show was worth stealing.

A true comment for most mass media today. I haven’t seen much of anything lately that I considered worth stealing.

John Fenderson (profile) says:

Re: Re: Meh.

In fact almost all mass media does this.

Yes, by necessity.

You don’t gain the largest marketshare by being excellent. You gain it by being the least offensive you can be. Any product for the masses has that as the primary design goal, from fast food to movies.

This is why the death of the major movie/recording houses would be a wonderful thing for our culture: it would reduce the influence of the vanilla, bland, mass-media stuff and increase the influence of truly creative works that certain wouldn’t appeal to anywhere near everybody.

Lowestofthekeys (profile) says:

http://www.blackrimglasses.com/2010/07/26/moving-up-moving-in/

I liked this line from Ethan’s blog:

ndustries need a push from the outside, and that can usually be a positive if there are people to push back, work with it, and innovate. I was brought in to do that. Innovate, push back, work with technology in a very difficult time.

Poor guy, maybe he just sick and tired of trying to force the company to innovate.

Laird Popkin (profile) says:

It's not that simple

While I certainly agree that leaking an album could create buzz which could then sell more legit copies, that’s not the only dynamic going on. There’s lots of evidence that piracy of already popular albums hurts sales; there are plenty of sales charts where you can see sales ramping up, then the album appears on file sharing networks, and sales drop dramatically. To some degree it depends on the kinds of fans that a band has – some fans will buy the album even if it’s on the file sharing networks, to support the band, or to get a clean copy with cover art, etc., – some fans won’t. If your fans are 90% people who would prefer to buy legit, then any buzz is good. If 90% of your fans would prefer to download for free, then buzz just drives downloads, not legit sales. So if you look at the data, some bands are popular file sharing downloads and also sell really well, and some bands are popular file sharing downloads but don’t sell well at all.

Of course, any buzz sells concert tickets, T-shirts, fan club memberships, etc., so it’s all good for the band. But typically the label only makes money on CD/download sales, so as much as “piracy” reduces CD sales it hurts their only revenue stream, while for the bands, selling fewer CDs but selling more concert tickets is a great tradeoff. Leads to interesting discussions.

Anonymous Coward says:

Re: Re: It's not that simple

Annnnd, I bet that those same graphs simply show those trends in proximity and do NOTHING to show whether the effect was causal. And more importantly, I bet they do nothing to eliminate any other causes, such as marketing, pricing, competitor releases, economic events that affect customer buying decisions, etc.

Almost Anonymous (profile) says:

Re: Re: It's not that simple

He can’t give an example because it’s bullshit, which is readily provable by analysis of precisely one of his statements:

There’s lots of evidence that piracy of already popular albums hurts sales; there are plenty of sales charts where you can see sales ramping up, then the album appears on file sharing networks, and sales drop dramatically.

We can tell he’s lying because his hypothetical album was already on file sharing networks before it even hit the stores.

Laird, the sales didn’t drop dramatically because of file sharing, since as I noted above, it was already being shared before the first purchase. The sales dropped dramatically because the album sucked.

Lowestofthekeys (profile) says:

Re: It's not that simple

A part of creating buzz and giving your fans an incentive to buy the entire album would be akin to what the Counting Crows did. They released several songs (I thought it was in the tune of 4 different songs) for free from their album, giving a “sample” of what they had to offer.

I like this method, because I can’t tell you how many times I ended up buying an entire album after hearing one or two singles, and believing the rest was just as good when it turned out the rest of the album was terrible.

Michael says:

Re: It's not that simple

If piracy was hurting music sales, explain why back catalogs continue to sell even though the music has been freely available online for well over a decade? The reason contemporary music sales are down is multifold:

–Albums were priced way too high
–They’d sell albums on the strength of one track but the album as a whole would inevitably suck
–People realize just how awful major label music has become
–Nobody listens to the radio nor watches MTV anymore
–The aggressive tactics employed by major labels, the RIAA and others, going after consumers, internet users, bars and clubs, etc., thus causing people to boycott their products
–How many more times can major labels sell material from the middle of the 20th century, anyway?

Michael says:

Re: Re: Re: It's not that simple

Because they’re insane. It just proves how out of touch and desperate they’ve become. They have no quality products on offer, no business strategy compatible with today’s market, just manufactured celebrities. Therefore, they must resort to lawsuits and copyright trolling in order to survive.

Gwiz (profile) says:

Re: It's not that simple

There’s lots of evidence that piracy of already popular albums hurts sales; there are plenty of sales charts where you can see sales ramping up, then the album appears on file sharing networks, and sales drop dramatically.

I’m with Colin on this one. Please give us some citations of this “lots of evidence” you speak of.

I’ve been waiting quite awhile for some solidly verifiable data on this.

Anonymous Coward says:

Re: It's not that simple

I want data to prove what you’re saying.

Can you show/do a study showing the correlation of filesharing and loss of sales that is not biased and produced by a independant part (and please, don’t come with ones – sponsored by RIAA – whose methodology and figures have been debunked as faulty in face of evidence)?

Most torrent trackers and cyberlockers keep statistics on how many time the file was downloaded (though sometimes it’s not public), can you correlate the number of downloads with the decrease in number of sales, potential market saturation, and number of people buying individual tracks instead of the whole album?

If not, your point seems to be guesswork of a uninformed person and therefore moot.

Not an Electronic Rodent says:

Re: Re: It's not that simple

If not, your point seems to be guesswork of a uninformed person and therefore moot.

Well given that the claim was:

there are plenty of sales charts where you can see sales ramping up, then the album appears on file sharing networks, and sales drop dramatically

And that I’d be suprised if it took much longer than hours for the average release to appear on file sharing networks, I’d be inclined to agree with you – kinda hard to see a causal ramp in data if the 2 “releases” are more or less simultaneous.

Anonymous Coward says:

i dont think the recording industry misunderstood the supply curve. i dont think they even ignored it. what they wanted and tried to do was re-draw the curve how it was 20-30 years ago. epic fail with that!!
as for having Ethan in charge would have meant that Warner would be doing better now, that was never going to happen. it would have meant that some clueless 70+ year old prick who was in charge would have had to admit they were doing things wrong!

RD says:

One question

Why cant ANY of these “former record execs” EVER say these things when they are still in charge of things? They always say this stuff YEARS after they have left their positions. If you have such conviction, MAN UP and come out with it when you are actually in a position to do a damn thing about it.

pete says:

music biz

“and they astoundingly got both sides of the supply-demand curve wrong. It’s hard to build a successful business when you do that.”

– the music biz is not a business, it’s a group of friends, family members and same sex preference/religion etc. who, let’s face it, know nothing about business and less about music.

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