Devil's Advocate: Little sympathy for the music industry

The record labels would have you believe they've been victimised by music pirates and downloaders. But Martin Brampton reveals the other side of their story...

Have you been shedding tears for the music industry? These embattled companies have been struggling to secure their rightful revenues against a disgraceful surge in thieving by web surfers. At least that is what they would have us believe.

Yet the whole basis of their argument is flawed. It typically rests on two claims. First, the total amount spent on recorded music has sometimes dropped sharply. Second, surveys indicate that a significant number of people download music via the internet. Both of these claims are true but neither can be taken at face value.

Sharp drops in revenue from recorded music have frequently coincided with a reduction in the number of new releases. At the same time, the revenue per release has usually increased. Record companies maintain that only a small minority of recordings are actually profitable. It seems that the companies have been more careful about what to release. If they are good at picking winners, then total profit can increase, even while gross revenue is reduced.

And the surveys that show large numbers of people are downloading music have rarely asked a further critical question - are the downloads pirate copies or are they downloads of the very large amount of material that is now offered on the internet for free? Clearly these two kinds of download should not be lumped together.

The entertainment industry suffered occasional setbacks long before recording became an issue. When the Hollywood studios relied for too long on the generation of stars that included Clark Gable and Bette Davis, they lost touch with a rising generation. The result was a sharp decline in cinema-going. On what grounds does the music industry assume that declining gross sales are not connected with the material that is on offer?

Another consideration is the behaviour of retailers. Over recent years, the DVD has become a popular item and gives shops better margins than music. Naturally, shelf space has been switched from CD to DVD.

Few people make detailed budget plans for their spending but it is clear that only so much money will be spent on entertainment. There are many different competing choices as to how that cash can be spent. No natural law determines that some particular portion of it must go to the music industry. Indeed, with new alternatives arising all the time, it is perhaps surprising that music sales have held up as well as they have.

Discussing purchases of cheap copies of proprietary software in last week's column, one reader quite correctly pointed out that many of the buyers are simply not in the market for full price versions. If pirated versions are not available, then the low-budget buyers will turn to free or low priced products. The same is almost certainly true of music.

A curious angle on all this is the morality of copying. One might expect to find different attitudes in the Christian music sector, which in the US is larger than classical and jazz put together. Yet research indicates that some buyers feel a moral compulsion to copy the music as widely as possible in pursuit of evangelical aims. Others believe that making free copies for friends is just as important a principle as protecting copyright. In fact, copying in this sector is much the same issue as elsewhere.

Paradoxically, one of the sharpest declines in the sale of recorded music occurred just after the RIAA had the original Napster shut down.

We seem to be left with two issues. One is that we are being presented with a picture that does not reflect reality. The other is that people's behaviour is hard to predict and even harder to control. Perhaps the music industry should talk less about piracy and more about how it can create products that people will want to buy.

Editor's note: Martin is scheduled to give a keynote address on certification in the IT industry at the Software Development Conference 2005 in New Zealand and Australia this March. For more information, visit the conference website.