Music Sampling and Buying
I don’t know why I like writing about the music industry so much. I wanted to write a quick response to Marisa’s post, but my response got long so I figured I would post it here and trackback to Marisa, but she doesn’t seem to support trackback, so I guess I’ll just post it here.
I think that Marisa is correct to phrase the question in terms of purchasing habits. Online music may not dissuade her from buying CDs when that is already her habit. She are not the problem. I think the greater concern of the music companies relates to young people who from an early age may have a lot of internet access and not a lot of money to spend on CDs. Many of them have gotten in the habit of simply downloading music and have never bought a CD in their life. In my opinion, that is what the labels are worried about, this idea that music will become something people no longer expect to pay for. And for some reasons, CD sales have been down dramatically over the past few years. Maybe this is because the CDs aren’t very good, but that has never stopped people from buying music in the past. Maybe it is because people are spending times watching DVDs and playing videogames, instead of listening to music. But those trends have been happening for years, and it is unlikely that they would contribute to such a precipitous decline in sales. It is hard to ignore the strong correlation of declining CD sales and the rise of internet music. (In fact, I was in a record store in Durham recently that decided to stop carrying Rock, Pop and Hip-Hop CDs, because they only customers that were reliably buying music any more were the older Jazz and Classical consumers.)
The interesting thing is that over the years labels have been much more interested in letting users sample music online, whether that is in the form of letting them download selected tracks, stream an entire album, or listen to 30-second samples on iTunes. Of course, these are all types of sampling that they can control enough to make sure it is not a substitute for the album. But given that the industry was afraid of anything digital a few years ago; it does represent progress.
Yes, the draconian restrictions on internet radio were a poor idea. This probably represented the intense fear of labels that internet radio stations would be a backdoor for piracy (like tuning into a station that constantly plays ‘Dark Side of the Moon’), as well as record companies need not to undermine the traditional radio they know how to control. This, or course, indicates that the political clout belongs to the major labels selling Backstreet Boys CDs, but that is hardly surprising.
The sampling argument is actually an interesting one. A frequent claim that you hear is that “File sharing is good, because I can sample an entire album and only buy it if I really know I am going to like it, so I don’t end up with a shelf full of CDs that I never listen to”. While this seems logical, it has some interesting economic implications. Suppose that in the pre-Napster days people would buy a CD based on a strong single or review in Spin, and only really love a third of the CDs they acquired. Today they can use sampling to focus in on those good CDs. Even though the consumer will be just as happy, they will spend two-thirds less on CDs, and the record companies costs will only decline by a marginal amount. Record companies are already merging and cutting jobs to control their losses over declining sales, so they could not ignore this continued change in behavior. One could imagine a few possible responses.
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They can increase the prices of CDs to compensate for the decline in sales. This is probably the most logical option. Consumers once has partial knowledge of the contents of a CD, and record companies were forced to decrease their price to compensate for this information asymmetry. (For example, if I spent $15 on a CD that I had a one-in-three chance of liking, then I should be willing to spend $45 on a CD that I already know I love.) But this would undermine the incentive of consumers to buy CDs after sampling them online, as well as drive away consumers who do not engage in file-trading. So it is probably impractical.
They could invest in far fewer new artists, recognizing that in order to recoup their investment they will need the number of people who love a CD today to equal the number who had passing interest in it ten years ago. This seems logical but undesirable, as the ability to sample music results in there being less music to choose form.
They could get McSweeny’s to lay out the liner notes, which would be so cool that people wouldn’t mind buying CDs they don’t like. This would be really cool, but somehow I can’t see Universal music putting their fate in the hands of a man named Eggers.
None of these seem very palatable. Maybe the ability to sample will lead people to buy the same number of CDs and just pick better ones, but that doesn’t really alleviate the situation. First of all, people aren’t going to have more time to listen to music, so it seems unlikely that they will need that much. Secondly, in order to compete for such selective consumers, record companies will still need to provide a wider selection of material, which is expensive to produce. (As much as I would love to believe that the world will learn to share my taste for amateurish bands recording of 4-tracks, that seems unlikely.)
The record companies are certainly reacting to music downloading out of fear, which is not unusual when an industry is threatened by technological change. However, this may be more rational than it seems, because in this case the threat of the technology is not to radically improve the industry, but rather to destroy it.
April 18th, 2004 at 10:11 pm
Sorry about the lack of TrackBack…
I think a major part of the problem is that no one appears to actually know why CD sales are down. I’m not convinced that it’s a function of our nation’s youth failing to develop a CD-buying habit, really. When I said that my habits were pretty much unchanged, I really meant that I continue to buy very, very few CDs.
While perhaps I was conditioned by a youth spent making tapes from the radio, I’m more inclined to think that the problem is partly that I don’t know about a lot of music that I’d like to own but don’t, and partly that CDs are really fucking expensive, given what they are. If they were cheaper, I’d certainly own more - witness that many of my CDs were purchased used, rather than new. I’m not willing to take a chance on an unknown when I could get a nice dinner out (sans wine) for a similar amount of cash.
April 19th, 2004 at 2:56 pm
Food for thought: http://www.theonion.com/onion3618/kid_rock_starves.html
I don’t think the RIAA is unjustified in being afraid of downloading–I know a couple people who simply refuse to buy music because they can get it all for free.
It’s more their fairly poor short-term plan of seemingly trying to defensively dismantle digital music that bugs me. If they gave me the impression that they were at all trying to find ways to *use* and *work with* the new technology instead of fighting it tooth & nail, I’d be much happier.
Anyway, I figure the only way I can see out of this “RIAA vs. mp3″ mess is for someone within the RIAA to come up with a copy-protected technology that offers something very desirable to the listener that mp3 cannot. What tha is, Lord only knows.
April 19th, 2004 at 5:35 pm
First of all: right on to most of the post. Seems a good assessment.
I have a quibble, though, with this:
It is hard to ignore the strong correlation of declining CD sales and the rise of internet music.
Actually, the correlation is pretty weak. While CD sales were declining during the growth of Napster, IIRC, the decline was gradual while Napster’s growth was explosive, and there was no uptick in sales to correlate with the massive decline in downloading after Napster was suddenly shut down. I haven’t seen any evidence that the ups and downs of downloading have corresponded with the ups and downs of the CD market since then.
We can explain that in various ways (e.g. “after Napster, many people expected music to be free and stopped buying it, even if that meant having no music at all”); however, “correlation” means something very specific and very strong, and I don’t think that it’s the correct word here.
I do think that downloading could spell death for the music industry as we know it in the future, and they are quite right to be worried. I’m just skeptical that it’s the cause of their current woes, and flatly disbelieve the claim of direct correlation.
My own suspicion is that, in the present and recent past, CD-Rs are hurting the industry much more than downloading.
April 20th, 2004 at 3:09 pm
These are good thoughts (and I have always enjoyed that particular Onion article). A few more:
I’ll grant that it is hard to understand why CD sales decline. I also agree with Paul that we are seeing a general rise in consumers’ ability to make perfect digital copies of music, of which internet music is a small part. I probably lump these phenomena together in my mind. However, the world ‘correlation’ is really not that strong. In fact, the biggest problem with talking about correlations is how little they tell you, which is roughly than that one factor tends to move in the same (or the opposite) direction as another more than half the time. So we can also correlate lower CD sales to having a president named Bush and having movies about Jesus capture public interest. Regardless, I have enough anecdotal evidence of people who have happily given up paying for music to believe that this correlation is indicative of an underlying relationship.
Marissa highlights the fact that without the benefit of a CD burner, she managed to bootleg music as a child. Indeed, this behavior is not new. However, taping songs from the radio is time-consuming and results in a poor copy of a song, which is why adults usually donÂ’t want to spend their time doing it. Although digital music represents a similar behavior, its ease and quality makes copying much more pervasive. In fact, copyability is at the core of what it means for information to be digital.
I guess my feelings about music sharing have changed a bit over the past four years. Most of my sympathy used to rest above the music industry. They wanted to shut down any use of digital music, including services which are essentially fair use (my.mp3.com) and services that had substantial noninfringing uses (Napster, the Rio). Also, the free services were hard to use and tended to produce poor recordings of songs, so the only convenience was that you didnÂ’t need to go to a CD store and rip your own songs. I believed that users most wanted a way to acquire music digitally, and the record companies were afraid of embracing any piece of technology that would improve their customerÂ’s lives.
Since then, the record companies have slowly but consistently moved to a model where users can by music online and by track, capturing many of the convenience benefits of digital music. The quality of sharing services has improved tremendously, and a number of new services have been introduced to support different kinds of file-sharing. Those who want to share concerts use FurtherNet, those who want to share Linux distributions and giant rips of Lord of the Rings use BitTorrent, etc. And the services which have attracted the most interest are those which let users download copywritten music without paying for it. While these services have the same legal right to exist as virtual child pornography, I am aghast at the demand for both. The EFF has gone from defending our right to own a portable MP3 player to asserting that the music industry has no recourse against people who engage in theft on a massive scale. And the internet has become full of self-righteous music revolutionaries who believe that by stealing from major labels they are going to lead us into a music utopia, with lengthy manifestos from downhillbattle.org. And while I am not convinced that the music companies have come up with the right way of adapting their business for the internet age, they have earned my sympathy along the way.
May 2nd, 2004 at 12:14 am
Hmmm. As an aside, when I tried to follow the Onion link, I discovered the all-new (at least to me) “Onion Premium”. I’m not sure they’re going to be too sucessful with that…
May 2nd, 2004 at 1:12 pm
So we can also correlate lower CD sales to having a president named Bush and having movies about Jesus capture public interest.
You’re right, correlation is not causality…but my point is that, in exactly this sense, the correlation between online bootlegging and declining sales is weak. The two correlate well only if we take a very large running average.
Regardless, I have enough anecdotal evidence of people who have happily given up paying for music to believe that this correlation is indicative of an underlying relationship.
The underlying relationship is probably real, but the correlation is imaginary — at least so far. That will doubtless not be the case in the near future.
May 18th, 2004 at 1:37 pm
I saw this linked in another blog - the claim is that the decline in “sales” reported by the RIAA is actually a decline in CDs shipped, not sold.
http://www.kensei-news.com/bizdev/publish/factoids_us/article_23374.shtml
That doesn’t speak to the intuition that downloads should hurt sales, of course. I think we all lack data on that question, though.