The RIAA tells us that piracy hurts artists, so we all try to be good little consumers who acquire music legally whenever possible. Who wants to hurt an artist? It’s like hurting a kitten.
Fortunately, in the 21st century there are quite a few ways to acquire music legally. Thanks to iTunes it’s possible to build your music collection while draining your bank account in 99 cent increments.
If you’re “of a certain age”, you probably still buy quite a few CD’s to round out your music collection. And, if you are a serious music collector, you probably buy a fair number of used CD’s. Serious music collectors have to buy used CD’s because new CD’s are priced for people who like to acquire music in small doses.
Now I’m going to tell you something you probably don’t want to hear: Buying used CD’s hurts artists.
In fact, I’d argue that the practice of buying used CD’s actually does more to harm artists than piracy does. Not only is the artist not compensated for the sale of a used CD, but in many cases they’re actually charged for the production and distribution of discs that eventually end up in used music stores and on eBay.
How can this be? Well, it turns out that a fairly high percentage of the products that end up in used music stores originate as promotional discs sent out to reviewers, radio stations, and passed around the industry to build buzz. The cost of producing and distributing these promotional copies is ‘recoupable’ (industry speak meaning the artist pays for each and every promo copy distributed).
So while the consumer may feel better about buying a used CD than downloading a song illegally, the artist loses a sale and gets to pay for the privilege. While consumers buying used product aren’t breaking the law, they’re actually hurting the artist.
Record companies could put a serious dent in the trade of used product, but they choose not to for a variety of reasons:
- The current process of distributing product for promotional purposes is an ingrained way of doing business for record companies. They believe the only way to promote music is to give promotional CD’s away for free (making it all the more ironic that they can’t see the value of piracy).
- Perks are an essential part of music industry culture. If free product were to dry up you can bet that quite a few record label employees would be less thrilled to be working “in the industry” for substandard wages.
- Record companies make a profit on accounting. Recoupable costs are an essential part of the industry’s accounting practices. It turns out there’s money to be made in losing money. That’s the entertainment business in a nutshell.
From this perspective it almost seems like piracy might actually help the artist. At least artists aren’t being charged by their labels for every illegal download (although one wonders how long it might be before record labels actually try to). The affect of these promotional and accounting practices is amplified on smaller artists who are struggling to gain exposure. Which, by the way, is about 95% of the artists signed to major labels.
It doesn’t have to be this way. Unfortunately the alternatives would require the recording industry to change the way it does business, and that’s not likely to happen any time soon.
Record companies could significantly cut their promotional costs (and the corresponding costs charged back to artists) by eliminating free product. Instead, labels should be delivering promotional music digitally. Each label could easily setup a network of servers offering promotional music to journalists, radio stations, concert promoters, and anyone else a label deems to be promo-worthy.
Furthermore, all promotional music should be protected by DRM (yes, I said DRM)! This is one of the few areas where DRM actually makes sense. Instead of using DRM to limit how consumers use content, it should be used to protect the misuse of that content when it is distributed to business associates for promotional purposes.
This approach would essentially eliminate the flood of free product that devalues music and robs artists of legitimate royalties. The downside? Fewer perks for industry insiders and reduced opportunity for creative accounting.
In a perfect world this wouldn’t seem like such a radical idea.