My mind has been a bit fried lately, so it's time for some prepackaged (yet wholesome and entertaining) material! I was actually intending to blog this anyway, and what better time than the present?

I had a very interesting discussion with Owen Courreges of the Owen Courreges blog (hey, I guess not everyone has initials that make a devestatingly punny blog name). There are links to the original posts, but it is not necessary for the sake of the conversation for you to read them. It may provide helpful context, though. I will follow up the emails with some final thoughts.

The backstory:

RAW writes something a long time ago:

More than the law, though, there is an ethical implication to all of this. It is their moral right to charge what they want and disseminate their works as they so desire. It is our moral wrong to subvert that buy downloading and burning CD's that we would otherwise buy. Most claim not to do this -- and many don't -- but many do. They know they do.
...
However (am I on the fourth hand now?), even non-hack-artists need to eat. If they don't have to spend their days working at IBM, the consumers win because they can write and perform more. Recently I have read many proposed ways that record companies could capitalize on the Internet, get increased listenership AND make money.
In the end, that's what it's going to come down to. We have to spend money. We have to be willing to spend money. We need to let go of the idea that art should inherently be free and anyone who charges for it is some sort of criminal. Even if (in the case of the RIAA) we really don't like who is charging us for it.

RAW writes something recently:

It turns out that [file-swappers] may unknowingly already have [demonstrated good faith]. As most people are aware, mp3 quality is traditionally lower than on the original CD. Why is this the case? Because the file-swappers chose for it to me. Somewhere early on, 128kbs (kilobytes per second of music) became the standard for ripping mp3s. If the original rippers had been looking to replace CDs, they likely would have tried to rip the music at the near-CD-quality 192kbs. If the purpose of this was to circumvent the record companies and get music for free or at very reduced cost, why would we not have ripped the songs at full quality?
...
Because that's not the goal. it never was. People knew full well they were burning at a quality loss at 128kps and chose to do so anyway. It saved HD space and the trouble of having to get a second HD just to hold the music. People who really care about quality are going to buy the CDs because they want the best possible copy. People who don't care that much are the types that in yesteryear would have just made tape copies of their friends' CDs, so the record companies aren't losing them either. There are cases where people will not buy a CD for one song like they might have before, but there are also cases of people becoming exposed to music they otherwise never would have. It's possible that in the end mp3's and CD-burning is hurting the industry, but that is partly due to a series of antagonistic moves by the record companies.

Owen blogs back:

With all respect to Whitlock, this is a flimsy rationalization, like so many I've heard before. First of all, his argument is speculative - who is to say the MP3 using public would use the low quality music files? It seems more likely to me that they would simply rely on file sharing much as they do now rather than accept inferior subsitutes.
...
I could think up other analogies, but the point should remain clear - file sharing, although popular, is still piracy. If you do it, you doing something illegal and unethical. It may not be the crime of the century, but it's still wrong. File swappers can continue to do it if they wish, but I don't want to hear anymore weak justifications. They don't work.

RAW comments on Owen's blog:

I will continue to do it because I discover new music through it and, in the end, buy CDs because of it. There are those pure rationalizers who have stopped buying CDs (because they "refuse" to support record companies or whatnot) and one of my earliest posts was a condemnation of that mindset.

Letters To and Fro

Owen

I left a comment to your reaction on my piracy post, which I was unaware of until today. There are a lot of bad apples in the file-swapping community, but our actions simply do not suggest that our ultimate goal was to circumvent the record industry. Otherwise they would have been ripped at full quality. Convenience is the primary factor. I buy more CD's now than I ever did before and have the same criterion that I used to (if it has 4 worthwhile songs, I want it). The difference is that I've been introduced to more artists than ever before. Illegal, sure, but not unethical in my view as long as I am continuing to financially support the artists I enjoy. Others, of course don't, and that ought to be condemned. I attacked the whole "art should be free" sentiment in one of my earliest posts.

RAW

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Alex,

I think I understand your position better now, but I still think it has one flaw. You seem to use file sharing to preview new music, and if you hear something you like, you purchase it. You don't just keep the MP3 on your computer and use that as your personal stereo, or burn off an copy and put it in your CD deck. As a result, you purchase more CDs than before. I'll grant you that falls under the "illegal but not unethical" view quite easily.

However, I think most file sharers do, to varying degrees, use MP3s to listen to copyrighted songs repeatedly without buying the albums. That doesn't mean they don't buy CDs at all, or that they're even buying fewer CDs, it just indicates that their interest in file sharing moves well beyond previewing new artists. They want to enjoy the music for free. The quality may be lower, sure, but it isn't the-cost-of-a-CD lower for most people. "Free" has a greater lure than "slightly higher quality."

So while what you're doing is ethical, I think it's unusual for file sharers to employ such limited use (maybe being a college student gives me this impression). Most file swappers are acting in bad faith, and like software pirates, are just stealing.

Sincerely,
Owen M. Courrèges

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Owen,

I believe that it's immoral to use file-swapping to circumvent purchasing CDs, but I also don't believe that the record companies are acting ethically, even if acting legally (and I'm not convinced they are, but even if so). They put music fans in a difficult position, simultaneously dominating the airwaves and using that control to milk consumers out of every dime they can. While I would chalk this up to the free market, it isn't because the avenues of distribution are inherently limited (radio stations) and controlled by another small set of companies that use their influence to dominate that limited market.

In the end, that means that we are left to choose whether or not to buy a CD based on the three songs off of it that we heard on the radio, maybe two of which we liked (and we can't listen to more because the record companies authorize which songs can be played on the air, so even if the stations wanted to, they often would not be able to). We may or may not be able to listen to the CD at the record store, but even then one run-through is not enough time to be able to absorb the music. So we have to gamble $20 on whether or not it's worth purchasing (as opposed to, for instance, seeing a movie which provides as low as a $2 gamble if you're willing to wait for it to get off the new release rack at the video store). I don't believe that's right and I believe it to be a product of their insular dominance of the market.

So what are our rights as listeners? I don't believe we have the right to free music, but I do believe that we have the right to know what we're buying and make an informed decision about it. Nearly every other form of entertainment provides for that. Not for free (if you want to see a movie before you buy it, you'll pay at least $2), but not at the high price of procuring the entire album. Record companies are resistent to giving listeners any of these rights and up until recently they didn't have to because circumstances never forced them to. They have been using their dominance to unethically force us to pay for things [ie tracks] we don't want in order to purchase what we do. Now file-swappers are using the Internet to unethically avoid paying for music that they take.

Unlike many pro-Napster types, I don't rationalize piracy away. In fact, I see it as a real threat. Just as the record companies use their opportunities against my legitimate interests, those that don't pay the record companies would do the same by choking record company profits and output. I both want record companies to get their money and fans to get their music at reasonable costs.

So with neither extreme operating ethically, what is the answer? The Internet and Napster companies have tipped the balance of power from the record companies to the consumers. Just as the consumers had to bend a little to the will of the record companies' greed, the record companies are going to have to figure out a way to bend a little to the will of the angry fans. I'm not sure this is as hard or drastic as what both sides of the debates think.

The entire file-swapping machinery is built on the mass discontent of fans. If they can placate some of the more fair-minded ones (such as myself) the freeloaders will largely be left out in the cold. That's why I mentioned the 64kbs solution. It would have allowed me to listen to the music and decide if I wanted it. It would have allowed those that want to casually own a copy (which would previously have been acquired by taping it while it's on the radio) to have one, without giving them what others have paid for. Even if the freeloaders are a majority of file-swappers, they would not have nearly as many people to swipe their music from and, quite frankly, it wouldn't be worth the effort to track down a 192kbs file when a 64kbs one is free. The 128kbs standard has stuck because it was the path of least resistence. Freeloaders like the path of least resistence.

Is it unfair that record companies should have to give things away in order to get people to buy what they really want? Maybe, but not much less fair than the arrangement was a few years ago before the balance of power shifted. It would be nice if there was a way that we could buy what we want without having to buy what we don't want. The record companies have not given us anything close to that option. Until they do, I simply can't muster any sympathy for them. In the meantime, I want to be able to know what I'm buying before I buy it and try different kinds of music without having to pay for it up-front or relying on the monolithic radio station to get around to playing it. I don't think that's too much to ask.

So I think we agree more than you thought at first and less than you thought afterwards. I agree that there are a lot of freeloaders with indefensible ethical "philosophies" and I don't agree with what they do. I just disagree with the notion that the system (RIAA trust and radio oligopoly) should be able to force us to buy what we don't want in order to get what we do in the name of intellectual property when there are other issues (legal and ethical) involved.

Alex

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Alex,

The only thing is that I don't see the record companies acting unethically. I don't honestly think they care if a small minority of the file sharing community uses MP3s to preview music; they care about the legions that use MP3s as a replacement for actually buying the music.

I buy a great deal of CDs that I haven't previewed, but it's no different from buying video games. I can try a demo, but that doesn't have the entire game. I can rent it, but that costs almost five dollars (file swapping costs nothing), and the option isn't available for PC games. In the end, when I buy the game, I'm taking a big gamble, far bigger than with a CD. So music piracy isn't significantly different from computer piracy. It might be nice for consumers to copy games - as is done commonly on university networks. It may also be that consumers are put in a difficult position, that they cannot preview the games. Yet software companies have no ethical obligation to insure that you can preview their product to your satisfaction. You can read reviews, you can play a demo (analagous to listening to songs on the radio), or you can ask around. You just can't play the entire game, or even a substantial amount of it, before deciding.

Accordingly, I think consumers are behaving in a manner far greedier than corporations. They expect a use of intellectual property to which they are not legally or ethically entitled. Software piracy has killed many systems. I used to own an Atari ST, which had a cult following during the late 1980's and early 90's. But piracy went out of control and killed the platform, which though technologically inferior to the IBM, could have survived for years longer. The cost of games skyrocketed and quality shot down. People weren't copying games to preview them, but to own them.

So unless the music companies have truely acted unethically, and thus far the evidence shows they haven't (at least not moreso than the gaming industry, which has similar limitations), then I still believe the burden for any problems rests with the consumers, who are violating property rights. You aren't going so far as to completely rationalize file swapping, but I don't believe the "pox on both your houses" mantra works in this case. You are imposing an ethical obligation on the record companies that shouldn't exist, and has never existed, with intellectual property rights.

I don't believe this has anything to do with the miscontent of fans (except the fact, I'll admit, that fans don't like parting with their money). It's about a new techology that allows for piracy. If people can get something for nothing, they often will. The record companies are probably acting impractically, because the new technology is there and unavoidable, but I just don't see consumers as having a "right to preview the entire product" with intellectual property. It would set a dangerous precedent to awknowledge one.

Sincerely,
Owen M. Courrèges

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Owen,

At the end you say that there should not be an acknowledged right to preview an entire product prior to purchasing it, and on a legal level I agree with that. I don't think that file-swapping should be legal. The impositions placed on Napster were legally sound and should remain so. AudioGalaxy, on the other hand, had a better and more ethical model (when served notice, they pretty successfully shut out copyrighted music) but it didn't matter one iota to the record companies.

I don't believe that their motives are as sound as you seem to. Their actions demonstrate that they want to limit any and all use of their music to milk every dime they can out of consumers. They want people who own a CD to buy a seperate tape if they wanted to listen to the music in their car.They oppose ripping CDs that you own so that you can listen to it on your computer. They are attempting to force dining establishments from playing the radio because they have not bought the rights to the music they intend merely for the background. In Canada, they collect a royalty for every blank tape sold. They pay radio stations to play the song, chalk it up to promotions, charge the artist for it, and then collect royalties from the station every time the song is played. They are collecting money from everyone at every step of the process. They have a right to be compensated for their creations, but it isn't an unlimited one. Their ability to make these demands is largely a product of their self-perpetuating dominance of the market.

It's not that dissimular from what the movie industry's track record. They opposed VCR's ability to record. They presently have copy-protection on VCRs that prevent many DVDs and tapes from being copied. On TV-VCR combos, that makes it so some people cannot watch DVDs that they own on their own DVD players without buying extra devices and undergoing inconvenience. It also prevents people from being able to make copies of their own movies so that they can watch them where they have a VCR but not a DVD (which is legally protected under fair-use).

You can argue that they are taking all these measures to prevent illegal copying, but they've nonetheless succeeded in crossing the line from protective to confrontational. When I was young, I bought blank audio tapes to record radio shows with my best friend. I had to pay extra money for a DVD player that was copy-protection disabled so that I didn't have to buy a new TV or flipswitch in order to watch DVDs that I gave the movie industry. If I want to buy the newest Charlie Pride CD I can't rip it to mp3 and listen to it on my desktop anymore. I won't even be able to play it some places straight from the CD.

They're become downright paranoid. I can't blame the pirates for it because they oppose some of these things before they are even abused. VCR's, for instance, never cost the movie studios their shirts. We're guilty until proven innocent. It's not ethical to punish everyone for the sins of some, unless it's practical and necessary. Shutting down Napster may have been practical, but releasing CD's that only play in some places to eliminate an epidemic that they can't and that does not demonstrate a serious dent in sales* is neither practical nor necessary. If someone owns 10,000 mp3s and has bought 300 CDs, are they damaging the industry more than someone who owns 50 CDs and doesn't download mp3s?

In an earlier letter, you said "That doesn't mean they don't buy CDs at all, or that they're even buying fewer CDs, it just indicates that their interest in file sharing moves well beyond previewing new artists." Many studies show that they're not buying fewer CDs, but more. Not all they have on their computers, mind you, but more overall because they're discovering new kinds of music. On Napster, there was a function where you could check people's catalogues and download from there (mentality being that if you both like the same artist, maybe you'll also like the other artists they have but you haven't heard before). AudioGalaxy had a "people who download Artist A also have downloaded a lot of B,C, and D" list up top.

Since you're in college, you're likely seeing the worst of it. I know when I was in college my view of file-swapping was much more grim than it is now. College students have the combination of being techno-savvy and having less money than outlets for their cash. What some people are missing though is that when they do have the money, people are more than willing to pay for it. I don't just want a Bleu Edmondson CD. I want the CD with the tracks printed on it and his logo. I want the quadrofold insert so that I can read the lyrics. I want his picture on the back of it. When I was in college I couldn't afford it, but now I can. I don't buy the CDs solely out of obligation, I also buy them because I want them and have the money. I may not be in the majority on that, but I'm not as small a minority as you might think. I go to see a lot of statewide acts at bars. I always download what I can before I see them so that I'm familiar with what they're singing. I have some friends that I often meet there and they do the same thing. We were doing it before we even met each other. Different people have different philosophies. Some people believe that it's okay to keep some mp3s you didn't buy the CD for as long as you will when you get the money or it's just a track or two on a CD you wouldn't purchase even if you didn't have the songs. Some just keep the songs long enough to decide if they are worth purchasing. Others have time limits. In the end, though, people make money so that they can spend it. They go to see movies at the theater and pay $7 when a few months down the line they can rent it for $3. They rent it for $3 when they can wait for it to get off the new release rack and pay $1.50 or see it for free on television.

I personally don't play many video and computer games, so I'm speaking from limited personal experience on it. I did play when I was in high school though, so I'll draw from that. Let's say you get a shareware version of Doom, which I recall being one of three levels in the game. After playing the first level, you know a lot about the rest of it. You know the style of play, what the levels look like, the graphics, and so forth. The only thing that is different is going to be the blueprints. Therefore, you have a pretty good idea of what you're getting if you purchase the rest of the game. On the other hand, let's say in order to purchase Legend of Zelda, you also had to purchase its two sequels. You love LoZ, so can you assume that you will like all three? It would be a pretty faulty assumption because while the character and "universe" is the same, the gameplay between Zelda 1 and 2 is remarkably different. I think that is more comparable to the way CDs work. Artists intentionally put different kinds of songs on their CDs. That's by-and-large a good thing, but it also greatly increases the risks of buying a CD. I once bought a Natalie Imbruglia CD because I liked the song "Torn" so much, only to discover that was the only song on the CD that she didn't personally write; the rest were crap. The difference of which songs make the radio and don't is often substantial (and works both ways, my favorite songs are usually not one of the airplayed).

Another key difference between software and music is that software's primary utility is on the computer. You don't play Triad in the car on your way to work or in the background while you're working. Therefore, once you have it installed on your computer, you have 9.5/10 of it right there. Most people don't read the instructions anyway and throw the box out. Unlike the lower-quality mp3s, you have the product in its entirety. You have exactly what you would get if you went out and bought the program. That is what makes software piracy so much more dangerous than music or movie piracy, and in my mind not all that comparable.

Five companies own the only music 90% of Americans will ever hear. The record companies charge exhorbant amounts for CDs and the people have never really had exposure to alternative material. I watch a lot of local and statewide bands and by-and-large, they charge the same prices ($15) or less ($12) than the record companies for their material (About $15-18). Despite the fact that they sell considerably fewer records, they still make money. Of course, they have considerably less overhead than the major companies do, but they spend their money wisely. Record companies, on the other hand, throw millions at extremely (and obviously) stupid things (Mariah Carey), projects that they don't even try to recuperate their investment on (extravagent music videos), and then foot us with the bill. That's a luxury only monopolies have, and the RIAA trust is virtually one. Meanwhile, what are we supposed to do? I have one friend that refuses to listen to music put out by the big five, but it's not easy to find much else. I have (local bands), but it required a lot more money and time than the average person has. Since there is no real competition, some have resorted to virtual theft**. Like I've repeatedly said, I don't believe it is right to take music without paying for it. On the other hand, it provides a check and balance for the record companies to keep them from doing what they please.

They seem to believe that if they give us an inch, we will take a mile. Some will take the mile and there isn't anything they can do about it. For most of us (enough to keep everyone rich, anyway), their refusal to budge and consider real market solutions have placed us on the opposite side of the line in the sand they've drawn. Right now the biggest threat the record company has is itself. The digitization and portability of music will happen with or without them. The high barriers-to-entry prevent an outside company to really take advantage of it, so the result is virtual theft of their music.

I suggested the 64kbs model as one way they could have circumvented the movement. A band called Reckless Kelly made 1:00 of a few of their songs available on Internet. Because of that, it is virtually impossible to download most of those songs in its full form because everyone has that 1:00 copy. Phil Pritchett has a not-so-well recorded live version of a few of his songs on his website, and therefore if you find that song on a file-swapping application, it's probably that copy of it. That's why I think the 64kbs system would have worked because it would have drowned the well ripped copies from the search engines. There is a good chance it still would. They could try the 1:00 thing that Reckless Kelly did or the alternate live tactic that Phil used. There are a millon ways they could use this to their advantage, but they're too afraid of the technology to even try it. With their stronghold on the airwaves, they have no incentive to. With their reactionary approach to new technologies, they're not going to unless they are pushed.

Unlike the Atari ST, the record companies will survive. If they don't, it will take a lot more than file-swapping to do them in. There are more than enough of us that are happy to give them enough money to keep everyone rich. Punishing us for those that won't is unnecessary, impractical, and unethical.

Alex





Alex,

You make a good case that the recording industry has engaged in certain practices that are unethical (I'll yield the point that they're not entirely blameless), although I'm not sure all your reasoning holds. To begin with, you seem to object a bit too much to record companies trying to get as much money they can out of consumers, when that's what virtually every company does - maximizing profits. The industry also has a fairly hands-off approach to low-level piracy, such as making copies onto different formats of existing music.

However, some of their efforts to curb the truely destructive forms of piracy can get in the way of legitimate listening, as you point out with the new copy-protection. An analogy here, although not a perfect one, would be the old copy-protection for computer games on floppy disks. If you lost a sheet that came with the game containing codes and picures that must be imputed before playing the game, you were left with a few worthless floppy disks (this happened to me a few times, especially on the ST). Copy-protection in the recording industry seems to be slightly more harsh, and they obviously haven't worked the bugs out, but the intent is the same: to prevent mass copying of their music.

You describe this as confrontational, but with the prevalence of piracy, I think it's mostly desparation. They are indeed paranoid, but piracy is costing them and legitimate buyers billions a year. I don't buy the argument that most people are buying more CDs because of file sharing, either. There are far too many variables to calculate for certain, I'll grant, but the truth is that pirates of any stripe are more likely to buy more music, software, or movies than the general public. It's where their interests lie, and they do need something to copy.

Moreover, while the recording industry isn't a charitable organization, or even entirely ethical, I don't think it's a monopolistic monolith either. I really haven't seen any evidence of price gouging among the record producers, especially considering that the average price of a CD is less than $13. It's like the accusations against the oil industry for price fixing - there are plenty of accusations, but I've yet to see any considerable proof. I'll admit they're going too far in some instances. For example, the copy-protected CDs need to be fixed or abolished. I'll also admit the major record companies are far more wasteful than local artists, but most small business enterprises are more thrify than large corporate bureaucracies, and monopoly power has scare little to do with it the vast majority of the time.

As for my earlier computer game analogy, I believe it still holds. While it is true that the demo or shareware versions of some games allow for the consumer to experience the overall gameplay (i.e. Doom), a great many don't. Many provide only a level or two, usually the best in the game. If the difficulty increases or the gameplay shifts at any point in the game, you cannot gauge the game's quality from the demo alone. I can't tell you how many games I've gotten due to impressive demos where the difficulty became impossible after the third level, and the demo had only included the first. There are also games where the gameplay switches from action to stealth a third of the way through, or where it turns out the game is far too short, and was thus a waste of cash. With CDs, you run precisely the same risk. Are the songs on the radio representative of the entire album? Are the magazine and/or online reviews right? What if they conflict? Who to believe?

I suppose I'm no music aficionado, but the difference in music quality between CD and MP3 doesn't quite catch my ear (I have a large collection of LPs and a turntable, to show you how much small differences in quality matter to me). And most people probably don't care about having the album covers of CDs (I don't). So I don't believe the difference in product is substantial enough to invalidate my analogy. Perhaps that is what truely paints my feelings about music piracy - my ire for software piracy and its results. I'm still a bit more down on consumers than the RIAA.

Sincerely,
Owen M. Courrèges

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Owen,

I don't object to the record companies trying to make money. That's they're job. However, I do have problems with the way that they use their self-perpetuating dominance to extract money from everyone. They don't operate in a free-market system so I don't believe it's right to act like they do and abuse artists and other companies because they are prevalent for reasons other than the quality/price of their product. It's wrong in the way predatory pricing is: using their unfair advantage unfairly.

Their "hands-off" approach to low-level piracy is something they are forced into. As I mentioned they opposed nearly every method that this low-level piracy uses to the extent that they would punish legitimate copiers as well. Copying a CD to tape is legally protected, they have no choice but to respect it. Not that they haven't tried to undermine it, though.

I remember the old code-card for SimCity. I hated that. At the same time, though, it was a reasonable response to what was a devastating epidemic. However, if you notice very few of them do it anymore. I believe that there are a couple reasons for that. First of all, the software market was an array of smaller companies that lived and died by their applications. Secondly, they proved counterproductive. Once a couple companies stopped doing it, people showed a strong preference for their products. Then CDs became prevalent and that provided a new way of doing it since CDs couldn't be copied. Now that CDs are easily copiable, they have not returned to their old ways because the companies are considerably more large and can take bigger losses to piracy. Their livelihood no longer depends on it and it would do more harm than good for everyone involved.

That's where one of my big problems with the record industry comes in to play. They are acting as though their life is in danger and therefore the ends necessarily justify the means. People on the pro-swapping side of the debate aren't helping because many of them talk about how the record companies will "have to" give away their music or they will go out of business. I've heard the same argument for Microsoft regarding open-sourcing. I don't buy it there, either.

One of the things I've thought long and hard about (for a novel idea I'm working on) is what would be the worst that can happen if file-swapping becomes an overwhelming epidemic. None of the conclusions I came to involved them shutting down and the airwaves suddenly being without music. They are simply too dominant to ever really go away. Whatever hurts them will also hurt would-be rivals and if the entire industry were to collapse (which it wouldn't), they would probably be the only five entities left standing. My
primary worry would be the smaller record labels going under, but the small labels are owned by the big ones. The smaller labels are regional and will likely stay afloat the same way that independent artists do.

What would happen, though, is that the big record companies would become smaller. They wouldn't be able to throw millions upon millions of dollars music videos that don't bring in revenue. They would have to depend more on free publicity by radio stations rather than million-dollar marketing campaigns. They would be more dependent on who listens to their music rather than trying to tell us who to listen to. They would have to become more flexible. These are things they should be doing anyway -- and would be
doing, except that they don't have to because of their dominance of the market. The worst-case scenario is that they do not change their methods of operation a single iota and lose to someone who adapt to it. In the absolute worst-case scenario, they won't be driven out of business but they will lose their invulnerability, which quite frankly they shouldn't have anyway (no business should). The record companies aren't fighting for their lives, they're fighting to maintain their invincibility to the market factors that most industries are
susceptible to. Either they know that and are just being greedy or they don't know that and are being dangerously paranoid. If it's the former, I don't feel much sympathy because they don't have their dominance (and invulnerability) by having an exceptional product so it's not entirely legitimate. If it's the latter, they are the biggest danger to themselves by overreacting themselves into oblivion. They're increasingly leading themselves wide open to criticism by legitimate customers who want to be able to listen to and watch what they buy. They can make the freeloaders as angry as they want and it won't matter. When they start making their customers angry, they may well be affecting their own pocketbooks.

You don't believe that swapping has lead to an increase in CD purchasing. You're right that there are a number of variables and therefore we will never really know. If we continue to disagree on this point, we are generally unlikely to reach any sort of consensus. however, since I used to be skeptical about it to I'll try to explain how free downloading leads to an increase in CD purchasing using my personal experience, which I doubt is unique.

First, of course, there was Napster. When I would hear about an artist coming to Houston, I would go and download their material to see if I wanted to see them play and whether or not I liked their music. When I would see that I'm downloading from the same person for different artists, I would look at their catalog and see what else they had. Then I would download that. So, by downloading Dub Miller and Mark David Manders, I found Owen Temple, Jason Boland, and Roger Creager. I ended up purchasing seven of their CD's. That is seven CD's that I would not have found and purchased if it hadn't been for fileswapping. Through Jason Boland I discovered Cross Canadian Ragweed and Great Divide, who sing some of the same songs (something I wouldn't have known if I hadn't searched through Napster).

Then Napster went down and I couldn't find artists anymore, so I didn't have a way to search for new artists and my CD buying became limited to those artists I already knew. Then along came AudioGalaxy, which had a function up top that would tell you what people who downloaded a particular artist were also downloading. So people who download Bob Schneider also download Matthew Ryan? I wonder what Ryan sounds like. Now I own two Schneider CDs and a Ryan one. People who download Matthew Ryan also download Tim Easton. Now I own two Easton CDs. As time progressed, however, more and more of the artists on AudioGalaxy became Xed out, meaning that the copyright was invoked and therefore their catalogues became unavailable. I still found a number of artists, though. However, they were generally local, unsigned artists whose copyright was never invoked. I follow Victory Gin in California and Ken Bierschbach in Michigan. The record industry's obstinance has actually weened me away from their music because I discovered their unblocked alternatives.

Now AudioGalaxy is goe. The only worthwhile engines are Kazaa, Gnutella, and other decentralized networks. Because they can't officially recognize individual artists, there is no "recommended list" anymore and I haven't purchased a new artist since AG's collapse. So who is really winning here?

You may respond by saying that I am the exception to the rule because I still buy CDs and some people don't. That's true, but as you say "pirates are more likely to buy music anyway." That means that we do purchase CDs. If we were all simply freeloaders why would we ever buy them? Are you suggesting that most of us only buy the ones we can't download? If that were the case, the industry would be doing better right now than they were a couple years ago. A couple years ago the world was at our fingertips and CD sales were good. Since Napster was shut down, sales have gone down considerably. Is it because they shut Napster down? Probably not for the most part, but it's certainly not because of file-swapping, which is much more difficult now than it was while sales were good. They're winning the battle, but losing the war.

As for whether or not the music industry is a monopoly and price-gouging, it depends on your definition of both. It's not a monopoly in that they are five companies, but they have formed the RIAA and become a trust, which largely has the same effect. They file lawsuits and determine prices in unison. They have nothing to fear from one another and are rarely in competition with each other. As for "price-gouging," I believe that the general definition is the arbitrary setting or prices at artificially high levels to a captive consumer in order to maximize profits. Whether or not they explicitly do that is iffy since they aren't currently making a profit. However, they are raising prices to artificially high levels to cover for their massive mismanagement and failing to correct their mistakes.

Why do I say artificially high? That's why I mentioned the thrifty independent artists. The RIAA could use some thriftiness, but since they are invulnerable there are few market incentives for them to do so when they can just raise prices. Of course they're going to be more bloated than the local indies, but at the end of the day it should still be cheaper than a group of about ten people doing the same thing. The indies have to hire out a recording studio, pay producers, and pay a printing studio at contract rates. The big ones, however, own the studio and have the producers on salary. That's how economies of scale work, but they rarely apply to invulnerable entities (government, monopolies, etc). I'm not sure what kinds of CDs you usually buy, but the last time I paid $12 for a CD was when it was at a used store (which, btw, the RIAA tried to sue out of existence. I forgot to mention that one).

Honestly, the difference it quality isn't a big deal with me, either. It is with a lot of my friends, though. The booklet is a big deal for me, though, and not for them. Some people don't have CD burners and purchase the CD so that they can listen to it in their car. Others feel guilty if they don't buy the CD. Some don't have a high-speed connection (which is another thing that makes college students so dangerous) and can only download a couple songs. There are a lot of people with a lot of reasons to buy CDs even when they have some or all of the songs in mp3 format.

I understand about the software thing, but I don't see the two as directly comparable. Software has an extremely high fixed cost, so three people in a garage are not going to be able to make Quake IV. Music on the other hand has a much lower fixed cost, so the music can survive without the record companies in a way that software can't. Whether signed or not, 95% of the artists out there will be recording anyway (as opposed to software, which dies with its company and/or platform). A number of people I enjoy have been
signed and dropped by major labels. Some never plan to be signed. Wholistically speaking, they need us more than we need them and they continue to behave just the opposite, which is why I come down on the side of the consumers more than the RIAA.

Alex

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Alex,

I think we have a few more points of contention, so I just have a few more points to add:

1) I've never seen substantive evidence that the RIAA sets prices. Similar pricing can be attributed to oligopolistic competition, as in the airline and oil and gasoline industries. As for price-gouging, the costs of locally-produced CDs are weak guide to what the costs of major record labels are. The marketing costs, efforts to recruit new artists, retailers' cut, etc, don't even factor into the efforts of a locally-produced CD. Accordingly, I see no reason to believe that record companies are exempted from normal economic factors. They aren't "invulnerable."

As for the average cost of CDs, I'd still wager it's around $13. For new albums the average is a bit higher, but I've never bought one for $20 or more. The last two recent releases I purchased were $13 and $14 dollars (Avril Lavigne and Counting Crows). Prices are higher at places like Warehouse Music, but that's largely because they have a massive retail markup, often as much as four dollars more than, say, Best Buy.

2) Copy-protection went the way of the dinosaur for computer games because the size increased with the expansion of CD-ROM. It is still far more difficult to copy computer games (you have to have a CD-R drive and know how to copy all of the files) that it was in the age of floppies. A few games still use it as well - Half-Life had a special code that had to imputed before playing for the first time.

Another reason the old copy-protection codes went away is that new technology was developed. Macrovision's copy-protection technology, present in roughly 80% of major American PC games, tends to ward off a much copying (a great deal of computer piracy now has to occur over computer networks). The music industry is trying to implement something similar, but they're running into problems, as you've pointed out. Efforts to keep out mass copying are preventing legitmate CD users from playing their own music. The technology for music copy-protection, being underdeveloped as it is, is thus inherently more instrusive.

3) While most software developing couldn't survive without development companies, they could concievably endure without the major publishers, and so the analogy still applies roughly to the music industry. And while it is true that music itself would survive even if file-sharing went out of control, the lure of "making it big" would be greatly diminished. In that sense, I still feel the record companies serve an important purpose - they organize everything for major artists, from marketing to music videos. If you like small, local, unknown bands, this doesn't matter as much, but that doesn't describe most listeners.

I can't concieve that massive property rights violations can really be positive. As easy a target as the major record labels are, I don't think they're engaged in half the practices they've been accused of. They're paranoid and taking counterproductive actions (not even trying to adapt to new technologies isn't smart), some that hurt consumers, but they aren't the stuff of 19th century robber barons.

Sincerely,
Owen M. Courrèges

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Owen,

1) Many of the factors you cite that national record companies use ought to pay for themselves in increased sales and not require an increase in price. If they don't pay for themselves, they ought to find more effective means of advertising. Retailers' cut also applies for CDs sold at stores, which a locally produced CD at Cactus Records costs roughly the same or a little cheaper ($1 or 2) than the national releases. Recruiting costs are a consideration, but considering the ratio of artists that want signed and slots that they can sign, they're efforts are probably focused on deciding who to sign rather than seeking talent. That may be costly, but not enough to compensate for the scale differential.

My belief that they are exempt from normal economic factors rides on my earlier argument about their self-perpetuating domination of the airwaves. If you're not signed with one of them, you're not getting on the radio (with occasional exception on small stations). Similarly, we're never likely to hear them. They have a captive audience. A deal like that is so hard to screw up you are practically invulnerable.

I rarely find new releases for under $15. Amazon, the cheapest source around in my experience, old releases bottom out at $13, going up from there. Some complain about $18 prices, but I've not experienced that personally. Which Counting Crows CD did you get? I actually put a couple in my cart today.

2) Learn something new every day. I'm glad Macrovision did something right. They're the ones that do the copy-protection for VCRs and DVDs I was complaining about. I don't consider a first-time code to be true copy-protection on the level that Macrovision and the like is. In any case, I retract most of my suppositions regarding the computer game market.

3) I don't disagree that record companies serve an important purpose. In the novel plot I mentioned before the resulting chaos is much worse than the current system. In the end, though, I don't believe that would happen. If it does, it will be because of the way they handle this mess. Sales were still good when Napster was at its peak. I don't believe they behaved wrongly or stupidly for doing what they did to Napster (because it could have gotten bad in the long run), but they have replaced Napster with nothing. They don't even see a need to give us what many of us want (a chance to preview it) and have to break the law to get and now are trying to take away things we can already do (put it on the computer). But they don't have to. They're invincible. When they finally are threatened, they manage to blame everyone else and try to respond to new technology by negating existing technology.

The problem is that I am suffering for their paranoia and stupidity and overreactions. That makes me so angry and very unsympathetic. As long as they keep it us-vs-them, I'm stuck in the 'them' category. They should be trying to get as many of their customers as possible on their side right now. If that attitude causes their downfall (and I don't think it will, but it's the only thing that could), then they deserve what they get.

Intellectual property rights are defined by the law and the rights-holder. The ways they choose to evoke them can be quite wrong-headed (when they tried to make taping a TV show illegal, for instance), and two wrongs can make it right when nothing else will do so.