“Total album sales in the United States, including CDs and full-album downloads, were 428 million, a 14 percent drop from 2007, according to data from Nielsen SoundScan. Since the industry’s peak in 2000, album sales have declined 45 percent, although digital music purchases continue to grow at a rapid rate.”[1]
The present day situation regarding “sound-file sharing” has received a gloomy explanation over the past 8 years. Unlike the threat of illegally copied cassette tapes or compact disks in the past, online sharing is peaking and the illegal sharing of mp3 files to cut average record sales in half. Although most workers in the music industry describe the switch of income from record sales to tours, merchandise and publishing as a “quickly changing business;” these “changes” along with a recently plunging economy continues to have an effect on every end of the business – not just the record labels. Without sales of CD’s, the recording studios must charge less to compete with what are now standard home-based recording software and there- fore hire less musicians to work. Publishers now have less big hit songs from which to gain revenue and must continually fight for the stagnant values of royalty rates to rise. Signed musicians deal with from the cross-collateralization while unsigned musicians cannot afford to continue their careers due to record labels reluctance to sign new artists, a more competitive online wash of bands on myspace, and the higher cost of living. In return, musical instrument and sheet music retailers sell less product due to poorer or no discouraged customers; music education suffers from lesser interaction with instruments in schools despite plunging federal and state funds for music in public schools. A good publisher must be not only aware, but included in the changes that the music industry holds due to issues such as file sharing.
Many feel as though the changes that the industry is suffering from is opening new doors to new ideas that could find other ways to sell music or keep copyrights from being infringed by the masses. While digital sales slowly start to measure up to the previous standard in sales many writers of the subject contemplate possible remedies for the industry’s slump.
In What They'll Never Tell You About the Music Business, Peter M. Thall provides and extensive list of the issues that the impact of file-sharing and the industry’s present situation has caused (it is really EXTENSIVE):
“There is a war going on, and you may be surprised when the combatants are identified. Here are some of the important issues involved:
- First and foremost, of course, CD burning and illegal song swapping, and the ever-increasing sophistication of the software that facilitates the co-opting of music for personal use
- The need for database protection
- Piracy
- Cut-rate retail prices
- Deregulation and consolidation of radio and television ownership
- The continuing consolidation of the major players in the entertainment industry
- The paucity of “new music” in major media, which goes hand in hand with the record companies dependence on the “super artist”
- A growing trend among hardware manufacturers to give away “content” to sell their gadgets
- The growth of satellite radio, with its attendant opportunities and challenges
- The incredible cost of A&R and motion picture and television production
- The location and relocation of servers to offshore countries where no copyright laws apply
- The continued chipping away, by the U.S. Congress, at copyright (e.g., the ill-named Fairness in Music Licensing Law)
- The claim, by internet users that they have first amendment protection
- Nonexistent or insufficient harmonization of rights clearance procedures worldwide
- Insistence of most-favored nation provisions, forcing prices to rise to the highest quoted license fee, but limiting the price paid for the most valuable songs to the price paid to the least valuable
- The need to establish acceptable and reasonable rate for permanent download, limited download; on-demand streaming; subscription services, etc.
- Mechanical rate issues: per-copy or percentage? More or fewer compulsory licenses, for an array of uses?
- Expansion of the tariff on digital audio tapes to analog tapes and blank CDs and DVDs
- Resolution of the conflict between support of intellectual property rights vs. the fear of dampening developing technology…”[2]
This list is pretty comprehensive and puts a lot of pressure on legislators to figure out statutory rates in reference to digitally transmitted media. It is true that the slow federal governing process largely affects the industry when it comes to royalties and provisions of copyright law, however most of the law is, and has always been, decided by judges on a case-by-case basis. Sadly, this means that the court will only take as long as the lawyers and business affairs departments of international conglomerate corporations hash out their discrepancies about what they think the rates should be, and turn the lawsuit into something that must be explained to a judge a year after the problem was first posed; and by that time technology has already moved on to create a bigger backlog of payments. Simply blaming a slow government and big business lawyers is not the answer.
The Copyright Royalty Board (CRB) is part of the legislative branch of U.S. Government. The board consists of three judges appointed by the Library of Congress that decide any government action in dealing with copyright provisions and determine the statutory rates the publishers and artists receive for sales of intellectual works and it is up to the industry to try and convince this board of three people to change the laws that might govern their yearly pay.
Guilds, unions and associations such as the Music Publishers Association (MPA represents writers and publishers) and the Recording Industry Association of America (RIAA represents record labels) have rallied against each other for changes in the statutory rate only to come to a stalemate:
“Despite an increasing penny mechanical rate for physical goods (like CDs) roughly every two years over the last 20 years or so, the CRB instead kept the 2006-2007 rate for the next five years (through 2012): the greater of 9.1 cents per track or 1.75 cents per minute of playing time. This is far short of music publishers’ proposal of the greater of 12.5 cents per track or 2.4 cents per minute of playing time for physical products and, for permanent downloads, the greater of 15 cents per track or 2.9 cents per minute of playing time -- to be periodically adjusted to reflect changes in the consumer price index.”[3]
Although the stat rate for physical product is unchanged at 9.1 cents, one real change was the statutory rate for ringtone or “mobile” sales to 24 cents giving much power to the publishers for one of the fastest selling music products in the market. This was at least a step in the direction to change, but there are many more obstacles that lie ahead:
“The judges have not yet formally adopted the settlement reached among publisher, label and digital service groups setting a formula for calculating rates for interactive streams and limited downloads...”[4]
The CRB takes time to decide on government regulations, but negotiated contracts such as policies regarding synchronization rates, business resumes. A growing trend for licensing videos is that a publisher might ask for a penny rate for digital downloads, and a percentage of retail price for all other digital services including streaming, subscription services etc. It is possible that the CRB waits for the industry to decide royalty rates for itself before computing a government regulated system. For those concerned with synch in DVD or Blu-Ray type home video uses, a statutory rate might be in the future of U.S. legislation.
“To stop this widespread thievery, the RIAA periodically issues well-publicized lawsuits against file sharers across the United States. While some people stop sharing music files at home for fear of lawsuits, many others have simply started downloading files at work, shifting the blame to their employers computer networks”[5]
What the future might hold is that programs that harbor illegal downloading will be forced to pay performance and publishing royalties. If radio stations and television stations and video streaming sites like YouTube must ante-up to performing rights organizations, why doesn’t LimeWire or Kazaa? It seems like although the challenge is great, online tracking of file sharing should be required of these programs if they are going to sell advertising space, just as cue-sheets are required of major motion pictures; and it should be up to ASCAP, BMI and SESAC to collect the revenue.
This is also a biased opinion, but it seems that perhaps Metallica’s lawsuit with Napster began this rampage of individual downloader’s being sued for infringement by illegal sharing, and decreased the moral for copyright protection while increasing the public’s knowledge and will to try and get music for free. What it seems they should have done was just to force Napster to begin paying quarterly blanket licenses, as they should all to those selling ad-space from free downloading programs, instead of suing individual citizens to the ground; but now they are stuck waiting for the government to solve their disputes.
Besides government action, possible remedies for file sharing could include a new type of performing rights organization that would track online trading and turn that into revenue for writers and publishers. Even if the new organization could only possibly track a portion of shared files on a portion of websites, perhaps one shared file could cost as much as a single text message, and users could pay on subscription basis. Now is the time for a new monopoly company to step up and become the new ASCAP.
Bands like Radiohead who can afford to give away their music for free, might be able to survive based on performing income and merchandise alone. The one thing that has not changed is the non-stop emergence of musicians who produce themselves (like the Beatles writing and performing-which was a new thing for the fifties) who not only dance and act, but , produce, write, videotape, negotiate contracts, and run their business single-handedly as one premium package.
Speculation will continue as time goes on, many will strive to make money from tours instead of records. The industry is expected to change even more, but the creativity of technological discovery has the potential to fuel the music business with a push in the right direction as opposed to mass flush of intellectual property being given away for free. Sound-file sharing is a problem now, but it could be what keeps the industry alive in the coming decades; people will find other ways to sell their music.
[2] Thall, Peter M. What They'll Never Tell You About The Music Business: The Myths, The Secrets, The Lies (& a Few Truths). Billboard Books, 2006. p316
[3] Butler, Susan. NSAI Celebrates CRB Rulings. Nashville Songwriters Association International 30 Oct. 2008. http://legislative.nashvillesongwriters.com/news.php?viewStory=83
[4] Butler, Susan. NSAI Celebrates CRB Rulings. Nashville Songwriters Association International 30 Oct. 2008. http://legislative.nashvillesongwriters.com/news.php?viewStory=83
[5] Wang , Wally. Steal This File Sharing Book: What They Won't Tell You About File Sharing. No Starch Press, 2004
Superbly written article, if only all bloggers offered the same content as you, the internet would be a far better place..
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