Wednesday, March 23, 2005
FW: [LawfulUse] The False Mathematics of the RIAA
Subject: The False Mathematics of the RIAA
The feedback on the P2P downloading debate has been terrific; Let me
add a few additional bullet points into our repertoire of arguments:
The False Mathematics of the RIAA
First, let's consider what actual P2P losses are to the industry.
They are much more difficult to calculate than the RIAA would have
you believe. Why? First, downloaders pull songs they would never buy;
I have Outkast's "Hey Ya" somewhere; I consider it a goofy novelty
song, and the only reason I have it is that someone else sync'ed it
to a Peanuts animation (everyone on stage dancing to Schroder's
piano). It was an amusing but unauthorized use, which I downloaded,
smiled at, and never saw again.
Oh ya: The CD that song came from -- OutKast's 2003's release,
Speakerboxxx/The Love Below -- sold 10-million plus copies.
Lost sales? Hardly.
Consider the biggest of all downloaders -- mostly-broke college
students. They have a computer their parents bought them, and the
campus gives them a big, fat pipe. They get access to music they
would never have bought, resulting in future post-college sales. But
the one-to-one lost sales argument is transparently false.
Next, let's consider what the damages to the industry are. Consider
the issues of substitution: What would it cost to purchase an
"unlimited amount" of digitally distributed music? The answer is
found in the Napster-to-Go model:
"The Napster to Go model . . . shows that the RIAAs claims of a
lost sale for every download to be demonstrably false. If you can
download an unlimited number of songs via napster and play them for
as long as you continue to subscribe, then the maximum loss the RIAA
suffers from a single downloader cannot exceed $15/month no matter
how many songs a person downloads." -- via boingboing
Over the course of 10 years, that represents total gross losses of
$1,800, of which Napster keeps between 15 and 20%. Net loss: $1,500
dollars.
But wait, there's more: The Rhapsody Music Subscription from Real
Networks charges only $10 per month. That's $120 per year. Over a
decade, the net loss downloaders present to the industry by not
signing up for Rhapsody are: lost revenue of $1,200 (gross). In
other words, the total net industry losses are ~$1,000 per decade.
Hardly as apocalyptic as portrayed.
By approving the Napster/Rhapsody subscription models, the music
industry has unwittingly created a viable legal defense, at least
when it comes to damages portion of their litigation, for defendants
in a RIAA P2P litigation. The claims of losses in the $100,000 or
even $10,000 are silly -- as long as this $1,000 net loss per decade
option exists.
Of course, that doesn't consider studies (such as the one from
Harvard/UNC CHapel Hill) that shows P2P drives CD and concert ticket
sales. I only buy music that I hear and like. Since that hardly
happens via the radio anymore, P2P is my most common source of new
music (that, and Apple adverts).
Further, the industry's disingenous claims that its the artists are
getting ripped off by downloaders are rather misleading. (Putting
aside the industry's own long and storied history of ripping off
their artists for another day).
A recent NYT article reveals that most musicians make their bread and
butter not by selling CDs, but by touring and performing:
"According to a new list of the 50 top-earning pop stars
published in Rolling Stone, over the hill is the new golden pasture.
Half the top 10 headliners are older than 50, and two are over 60.
Only one act, Linkin Park, has members under 30.
The annual list, which entails some guesswork, reverses the
common perception of pop music. Not only is it not the province of
youth; it's also not the province of CD sales, hit songs and smutty
videos.
While sexy young stars take their turn strutting on the Billboard
charts or MTV - or on the cover of Rolling Stone - the real pop
pantheon, it seems, is an older group, no longer producing new hits,
but re-enacting songs that are older than many of today's pop idols."
This has serious financial repurcussions for the business model the
industry is presently wed to. And the list of artists who are making
the big bucks reveals industry mismanagement has led to mostly
ignoring the key economic demographic driver of our century: The baby
boomers.
Here's a little secret the RIAA would rather not have you know:
Musicians make most of their money performing and touring -- not
selling CDs or downloads. Rolling Stone has a detailed analysis of
the top 50 acts . . . here's a top 10 list to whet your appetite:
2004 Music Money Makers
1. Prince $56.5 MILLION
2. Madonna $54.9 MILLION
3. Metallica $43.1 MILLION
4. Elton John $42.9 MILLION
5. Jimmy Buffett $36.5 MILLION
6. Rod Stewart $34.6 MILLION
7. Shania Twain $33.2 MILLION
8. Phil Collins $33.2 MILLION
9. Linkin Park $33.1 MILLION
10. Simon and Garfunkel $31.3 MILLION
Note that 9 of the top 10 grossing performers aren't the hot new
thing -- they are the better known rock classics -- which the labels
have mostly also been paying little attention to for so many years.
The industry can scapegoat P2P for all their woes, but a closer
analysis of the math demonstrates the claim is illusory.
(Mis)management is the primary sources of the industry problems.
Sources:
Balding Rockers and Big Money
JOHN LELAND
NYT, Sunday, February 13, 2005
Napster-to-Go reviewed, math done
boingboing, Sunday, February 13, 2005
Money Makers
Robert Lafranco
Rolling Stone, Posted Feb 10, 2005
The Effect of File Sharing on Record Sales: An Empirical Analysis
Felix Oberholzer, Harvard Business School
Koleman Strumpf, UNC CHapel Hil
