The Origins of Internet Piracy and the Failures of the Music Corporations of America

Having read through the articles pertaining to internet piracy, copy write laws, and the music industry, it is apparent that the issue is not illegal downloading. The issue isn’t even the rights of the consumer versus the rights of the copy write holder. The issue is as follows: the music corporations of America are clinging to an out-dated business model that is doomed to fail if they do not adapt, diversify, and give consumers what they want, which is to purchase high quality downloads of music off the internet for a reasonable price, and they want it in bulk.

Really, the problem should have been obvious when the Napster website first made the big media headlines. In the wake of the “dot com” boom, more and more people began to discover what the internet had to offer. One of the things to come along was the ability to obtain music from websites via downloading. The corporate executives should have seen the music download revolution coming, but they didn’t. They were blinded by record profits at the height of the CD phenomena. They sat at their desks and watched the money pour in. Consumers weren’t about to twiddle their thumbs waiting for the big labels to set up legal download sites. When Napster appeared, consumers jumped at the chance to download their favorite music onto the computer hard drive for free. Digital downloading had become the new way to listen to and obtain music.

When the initial vacuum was created between consumer demand of digital music and supply of legal downloads, it was inevitable that the void would be filled somehow. Simple logic of supply and demand tells us this. RIAA CEO’s such as Mitch Bainwol knows there is a problem with the industry set up. Bainwol recognizes that music sales are “down 20 percent from 1999 when the program Napster first made online music sharing widespread.” (Eder 2) However, rather than focus on building a new business model or diversifying on the old business model of CD sales, entertainment companies have been throwing legislations and high-profile legal suits in the faces of potential customers. For example Geoffrey Fattah states that, “Suits previously have been filed across the country against 14 year olds, even an, 8 year old accused of downloading ‘gangsta’ rap. News reports estimate the industry has sued more than 18,000 people.” (Fattah 1) With numbers this high, it is obvious that the music corporations are focusing very hard at throwing the constitution at their potential customers rather than diversifying their business model which could satisfy both the wants of the consumers and the needs of the corporations.

Now it is true that the music industry is slowly adapting to the new age of online music downloading. For example, the Washington Internet Daily states that, “Formats and business models are ‘exploding’. Five years ago there were fewer than 10 music distribution formats, but now there are hundreds, including a’ la carte services such as iTunes, subscription offerings, ad-supported models, direct-to-fans sales, and brand partnership opportunities.” (Washington Internet Daily 2) Yes, the industry is indeed adapting, but why then does piracy continue to plague the music corporations? Let’s look at Apple company’s popular iPod product for a clue.

Steve Jobs is the marketing genius behind Apple Company, and in the past year he unveiled the newest version of iPod which he boasted could hold up to 40,000 songs. Judging by the marketing message, it is obvious that Steve Jobs recognizes the consumers desire to download music in high quantities. iPod is currently only compatible with iTunes and the iStore. (Fox 2) Say that an iPod owner wanted to fill up the new 40,000 song iPod with all songs purchased from iTunes store. At the current price of $1.00 U.S. per song, you can see the problem in the marketing strategy. Can Apple seriously expect a person to spend $40,000 filling up their iPod? Saying that an iPod can hold $40,000 worth of music is just ridiculous. One reason that customers chose Nabster over CD purchases is because the price of a CD is simply higher than people are willing to pay. Since digital music eliminates many costs of production that normally come with the CD market, there is no excuse to continue to charge $1.00 per song. For the people who want to purchase several songs legally (trying to fill up that fancy new iPods) there should be no reason that people can’t buy digital songs in bulk for 10 cents to 20 cents per song.

Besides overcharging for digital music, corporations have failed to recognize the promotional power that cheap or free music can have. The best known example is the band Radiohead. There latest album “In Rainbows” was first made available for download by the band themselves online. Fans could pay as little as one cent or be as generous as they pleased. The success of the CD sales was huge. The band even stated that they encouraged peer to peer sharing because that would provide the band with more exposure. It’s free advertising for them! Not only did Radiohead generate good sales online, but they got the attention of many fans as Radiohead prepared to go on tour with the new album. Music corporations should take heed to what Radiohead has done. Radiohead effectively used cheap online downloading to promote their music, make money at the same time, and generate the hype and exposure necessary to make a very successful concert tour. Most importantly, Radiohead thanked their fans for enjoying their music. The band did not sue or patronize their fan base fore liking their music. Corporations try to use big headline scare tactics to prevent piracy. However, lawsuits are costly, take time, and develop bad P.R. for the companies. The music corporations would better spend money on finding ways to tap into the large consumer demand that is in the U.S. for music downloading.

One of the things contributing to this problem is that Music company's still want to make as much money as they were when they were selling records, and that simply is not going to happen. Of course people aren't going to spend a dollar per song when they can just use bittorrent to get an entire CD, or the entire discography of a band. Piracy will always be rampant, there really is nothing that they can do.

What would be a more viable option is $10 would buy you a block of 50 downloads, and those downloads would have to be at least 320 Kbps quality, or 256 Kbps AAC.

I actually did a music piracy report in my english class. I always found it interesting that, according to my studies, it costs about $4.41 (there may be a small margin of error) to create a CD (each that is.) This includes the price of the CD itself, payment to the record companies, and royalties to the respective bands. What I do not understand however, is we are paying $15.00 per CD due to retail mark-up. No wonder piracy is out of control.

I also did research on the Radiohead experiment. According to Rolling Stones magazine, the band generated a total of $3 million in royalties, $1 million more than the album ‘Hail to the Theif,’ which they had created through Capitol records. This experiment proved a successful way to legally distribute music online.

Some studies have shown that piracy doesn’t affect record sales at all. According to a seventeen week study by Felix Oberholzer-Gee of Harvard Business School , the most heavily downloaded songs showed “no decrease in CD sales.”

I read the topic and still don't understand if something is being asked here.
Anyway, I don't buy music anymore, I just find the songs I want for free. Rarely do they make CDs with the songs I want on them, and some never get properly released anyway.

I don't have a CD player anyway. Owo;

If I download music, it's usually to sample a CD that I intend to buy later down the line, or it's actually unpurchasable, because if it WERE for sale, I would buy it just for the sake of owning it in physical form. Living in a material world, I am a material... man?

Originally Posted by Sage of Earth

If I download music, it's usually to sample a CD that I intend to buy later down the line, or it's actually unpurchasable, because if it WERE for sale, I would buy it just for the sake of owning it in physical form. Living in a material world, I am a material... man?

Is that last line some catchy song reference I should be understanding right now?

^You don't know "Material Girl"? Wow.

Anyway, I agree with your little essay. Probably the biggest problem with the music industry is not only are the labels and RIAA refusing to move forwards, they are actually attempting to move backwards in many cases. DRM-encoded music, though largely gone now, was so regressive it was ridiculous. The proposed idea that I cannot burn a copy of a CD for a friend, or rip one from him or her, or have them send me a copy of a record they legally downloaded, is a proposterous one. I mean, people have been sharing music since they could record vinyl LPs to mixtapes.

I also agree very much with the idea that online retailers need to get better pricing. Although, for my dollar, Amazon seems to be the way to go. Their average price per song is cheaper than the more popular iTunes, it is in the more accessable mp3 format at high bitrates, and on top of that they offer weekly deals where batches of CDs are available from as little as $1.99 a peice. The only issue is that Amazon's service is only open in the States, and they really seem to be taking their sweet time getting it out to the rest of the world. Though I do doubt it is them that is causing it to stall.

I've stopped download albums. Its something I used to do fairly often, and though I would usually buy an album I enjoyed after I downloaded it, or simply delete it if I didn't like it, I've still stopped doing it. I feel like with the option Amazon is giving, its not that unaffordable to buy records from them. But then, they aren't open to Canadians yet, while at the same time I flat-out refuse to pay for a CD in stores if it is over $15. I only want to have to buy a CD from bands I love, I want to be able to have access to those other bands that I enjoy, or simply want to check out, online for a reasonable price.

Originally Posted by Nolan

^You don't know "Material Girl"? Wow.

Anyway, I agree with your little essay. Probably the biggest problem with the music industry is not only are the labels and RIAA refusing to move forwards, they are actually attempting to move backwards in many cases. DRM-encoded music, though largely gone now, was so regressive it was ridiculous. The proposed idea that I cannot burn a copy of a CD for a friend, or rip one from him or her, or have them send me a copy of a record they legally downloaded, is a proposterous one. I mean, people have been sharing music since they could record vinyl LPs to mixtapes.

I also agree very much with the idea that online retailers need to get better pricing. Although, for my dollar, Amazon seems to be the way to go. Their average price per song is cheaper than the more popular iTunes, it is in the more accessable mp3 format at high bitrates, and on top of that they offer weekly deals where batches of CDs are available from as little as $1.99 a peice. The only issue is that Amazon's service is only open in the States, and they really seem to be taking their sweet time getting it out to the rest of the world. Though I do doubt it is them that is causing it to stall.

I've stopped download albums. Its something I used to do fairly often, and though I would usually buy an album I enjoyed after I downloaded it, or simply delete it if I didn't like it, I've still stopped doing it. I feel like with the option Amazon is giving, its not that unaffordable to buy records from them. But then, they aren't open to Canadians yet, while at the same time I flat-out refuse to pay for a CD in stores if it is over $15. I only want to have to buy a CD from bands I love, I want to be able to have access to those other bands that I enjoy, or simply want to check out, online for a reasonable price.

I've probably heard the song before, it's just that my memory isn't working quite well at the moment.

I whole heartedly agree with you, Nolan, about how DRM is a step backwards. We have the ability to duplicate data. If we can build successful, stable business models around that ability, then why ignore that as a solution?

You're far and away wrong about the origins of pirating things from the internet. I remember using an FTP via a Usenet board to find and download the original Civilization game circa 1993 along with other games and files of the same rough period.

Aside from the inaccuracy as to its origins the above is true, but only a small portion of the overall problem.

The two most obvious factors assisting the pirating of software and music are simply the inflation of price in the face of what is perceived (and in many cases is) an inferior product compared to what one could previously expect to get out of a similarly priced purchase. The other is merely the ease of use of computers and increase in familiarity with the basics of their operation.

Originally Posted by morval

I've probably heard the song before, it's just that my memory isn't working quite well at the moment.

Madonna, dude! Back when Madonna was actually relevant, even.

Originally Posted by Maxwell Smart, Ph. D.

You're far and away wrong about the origins of pirating things from the internet. I remember using an FTP via a Usenet board to find and download the original Civilization game circa 1993 along with other games and files of the same rough period.

True, piracy using the internet has been around far longer than proposed, but it is arguable that it wasn't a widespread issue until Napster came out. People had been using FTP and Usenet for ages before, but I wouldn't say the majority did. Part of that has to do with accessability of those within themselves, but it also has to do with the fact that most people weren't wired until at least the late 90s, or possibly later.

The two most obvious factors assisting the pirating of software and music are simply the inflation of price in the face of what is perceived (and in many cases is) an inferior product compared to what one could previously expect to get out of a similarly priced purchase. The other is merely the ease of use of computers and increase in familiarity with the basics of their operation.

Indeed. Though I also wouldn't underrated the fact that people are going are going to have a hard time going back to paying for something that they could very easily get for free (something pseudo-touched on by yourself). Especially for some younger people who have actually grown up in a period where downloading music for free is the norm, not the exception.

Originally Posted by Maxwell Smart, Ph. D.

You're far and away wrong about the origins of pirating things from the internet. I remember using an FTP via a Usenet board to find and download the original Civilization game circa 1993 along with other games and files of the same rough period.

Aside from the inaccuracy as to its origins the above is true, but only a small portion of the overall problem.

The two most obvious factors assisting the pirating of software and music are simply the inflation of price in the face of what is perceived (and in many cases is) an inferior product compared to what one could previously expect to get out of a similarly priced purchase. The other is merely the ease of use of computers and increase in familiarity with the basics of their operation.

lol, I wanted to name the thread "The Origins of Internet, Music-Piracy and the Failures of the Music Corporations of America"

but i ran out of spaces....lol.

Anyways as you state, Napster is far from the "origin" of internet piracy but it's when I perceive it as having become a mainstream issue.

I made the title more sensational on purpose so that people would be more inclined to take the time to read something for more than 2 minutes. lol.

Indeed. Though I also wouldn't underrated the fact that people are going are going to have a hard time going back to paying for something that they could very easily get for free (something pseudo-touched on by yourself). Especially for some younger people who have actually grown up in a period where downloading music for free is the norm, not the exception.

True. I didn't get into that terribly far in my post. But, I'm not so certain that there is a large impact on overall sales of artists who have their music downloaded. The quality may be a better factor to determine that. I know i'm not alone in going out and buying a CD if I feel the music itself is good enough to warrant forking over a few bucks (the band probably deserves it - they made a good product - but they don't deserve it on a blind buy) to help keep the band floating and making more good music. From what I've read on the subject it may have a positive impact on sales for some people. The problem is that a large number of the major record companies back anything they think they can shove onto the radio and achieve large sales. By and large they've ceased to sell music as much as selling a brand. Consequently, the actual quality and difference in sound from one modern band to another has dropped significantly. Certainly your point stands regardless of this simply by virtue of downloading's modern ease.

Anyways as you state, Napster is far from the "origin" of internet piracy but it's when I perceive it as having become a mainstream issue.

The point of the mainstreaming of internet piracy is accurate, insofar as we're discussing music. It makes a reasonable point of departure.

Originally Posted by Maxwell Smart, Ph. D.

True. I didn't get into that terribly far in my post. But, I'm not so certain that there is a large impact on overall sales of artists who have their music downloaded. The quality may be a better factor to determine that. I know i'm not alone in going out and buying a CD if I feel the music itself is good enough to warrant forking over a few bucks (the band probably deserves it - they made a good product - but they don't deserve it on a blind buy) to help keep the band floating and making more good music. From what I've read on the subject it may have a positive impact on sales for some people. The problem is that a large number of the major record companies back anything they think they can shove onto the radio and achieve large sales. By and large they've ceased to sell music as much as selling a brand. Consequently, the actual quality and difference in sound from one modern band to another has dropped significantly. Certainly your point stands regardless of this simply by virtue of downloading's modern ease.

It is true that record labels love to push flavour of the week bands, and love to sign as many of them as possible. The new trend of dance-power pop seems to be the currently popular trend, along with Timbaland style hip-hop and R&B. These bands that get pushed so heavily are the ones that are selling 500k still. Most other bands are selling 100-300k, I believe, as of about a year and a half ago.

And it is true that if you look at record sales over the past twenty years or so, they have indeed decreased with the advent of online music piracy, but its a somewhat skewed statistic. For one, yes, less artists are selling a milliong records, less albums are going platinum. But at the same time you have more bands than ever period, and more of them are selling in 100k range. The problem is that while that diversity is very much a positive, most major labels only see success in terms of monetary gains, rather than that diversity of music.

Further, while soundscan is certainly showing a decrease in album sales, there's no reliable system in place to add online sales to that. It isn't a far stretch to say that while physical sales are decreasing, online ones are increasing.