A record exec testifying at the Pirate Bay trial recently elicited guffaws from the courtroom when he claimed that every download on BitTorrent costs the record companies a sale.
People laugh at this not just because it’s a greedy and stupid thing to say, but because it’s so baldly, obviously wrong, and so out of touch with the mindsets of his customers, that it creates cognitive dissonance, which we deal with by laughing.
However, the exec isn’t completely wrong. He’s talking about people who know what they’re downloading: they’re fans of a band downloading the new record. The record companies do lose money on that, and it happens a fair amount.
But by assuming that’s the only kind of downloading, he’s missing the other massive facet of downloading, though, which is experimental downloading: people trying something they’ve never heard of before, and wouldn’t have paid for if they couldn’t download it for free.
Here’s an entirely hypothetical example: say I hear about a self-titled album by a band called The Pains of Being Pure at Heart from Pitchfork.com, and I download it. If BitTorrent didn’t exist, I would not buy it, I simply wouldn’t be able to listen at all. However, if I do listen to it, I might very well buy this band’s next album, go to their shows, etc. The band and the label might get money from me thanks to downloading, without downloading they definitely would not get a penny from me.
In this way downloading helps listeners find new music, and definitely helps bands widen their audience. As Neil Gaiman says, most artists suffer more from being ignored than from being pirated.
From the record companies’ perspective, this makes downloads, to a certain extent, function like loss leaders. Loss leaders are generally retail items that stores advertise and sell for a loss, in order to get customers into their store and thinking about their brand.
Downloading, despite what this exec says, does not cost record companies money the way loss leaders do. It just doesn’t make them any money, although there’s no doubt that it raises awareness of new bands and expands fan bases. While it might look like losing money to an accountant with a focus on the bottom line, it’s a legitimate sales technique.
The problem record companies have with this, I think, is that they can’t control it. If it was their idea, and their plan—and more importantly, if they knew they could shut off the tap at any point—I think they’d find it a lot more agreeable.
I don’t think they can afford to do nothing about downloading, the stigma surrounding it is one of the forces keeping it in check. So how’s this for a compromise: you keep running your ads calling us criminals, but you stop taking people to court.
You’re on the right track here, but I think you miss the larger picture by dwelling on the details.
Established artists lose cash when fans download rather than purchase and lesser-known bands get more exposure by the same route. This much is certain. But the actual costs to the “recording” industry of producing a record are remarkably low, especially with advances in home audio technology.
Where then does the money go? It goes into advertising and promoting the band… which is what services like bittorrent do anyway, for free. As a result, the record companies would still be scared even if bittorrent boosted record sales, because the availability of a free marketing mechanism eliminates the raison d’etre of the recording company in the first. Why should I sign with a record label that will take three quarters of sales if I can sell fewer records online, but reap one hundred percent of the profits?
This is the elephant in the room for the recording industry, the incurable disease they refuse to acknowledge – no one needs them to say who should be popular anymore.
That’s a great point. I’m not convinced that BitTorrent alone would be able to lift a band to U2-like superstardom, but I definitely agree that record companies are fearing for their lives.
Sean believes that every time a new album gets leaked, like It’s Blitz! just did, the band is the one leaking it, to stir up excitement for their tour.
I earnestly hope that record companies and, in fact, most major media companies either go under, or drastically revamp their distribution models, because the old ways are, thankfully, over with.