Has Piracy Ever Killed An Industry?

Posted by | Jan. 18, 2011 | 8,804 views

Throughout the decades we’ve all heard that battle cry that piracy is killing the music business. But is it really? Since mix-tapes music fans have continually copied music illegally and the industry is still alive today. The film and TV industry cried wolf with the onset of the video age, and there industry is thriving like never before. Instead of blaming the messenger, i.e. that consumers want to own their music no matter what device or service they need to play it on – once they have paid for it. The recorded music industry should be taking an inward look at its own practices where it can easily be claimed that numerous record labels rip-off artists in a morally bankrupt manner.

Furthermore, the ex-Director of Research at industry body the IPFI, Keith Joppling has clearly stated that he knows of no study ever undertaken whilst under his watch that unequivocally points to illegal file-sharing as being the main cause for declining recorded music sales. Let’s also be very clear that it is independent labels that get caught in the crossfire, despite the fact their deals are a lot more “fair and equitable” than major label record deals.

Whilst yes, physical sales have been declining on the recorded music side, publishing income has been increasing year on year and so has live touring income for artists. The truth of the matter is that this is no different for artist’s from any other decade. Despite records making money for labels, artists are told they have not recouped, even when the label has recouped numerous times over on the sales of that same artists music. So whilst an artist may NOT be recouped, a label may have made $2 million gross on the album release.

There is no industry in the world that would even dream of getting away with the following scenario that the music business has gotten away with for decades.

A label advances an artist say $200000 to record an album. Whilst the label wholesales the finished record, to music retailers at say $10 per record, the artist is only paid around a 10% royalty (after producer and packaging deductions – yes it usually starts off at 16 – 18%, but then artist have pay producer points out of their cut, and then their are lots of other deductions labels charge against the artists royalty) so $1.00 per sale. But the artist only starts to see their payment once they have paid back their $200000 advance via their $1.00 per record unit sale. The label refers to this as recoupment.

So in essence a record label only has to sell 20,000 records to recoup its initial advance of $200,000, whilst the artist needs to sell 200,000 records before as an artist they begin to see a cent. By this stage the record label has already made 2 million dollars gross from the 200,000 record sales (whilst the artist has not made a cent). If the above is not a form of piracy – then TMV asks what is? It gets worse. Even after an artist has recouped the advance for the label, the record label still owns the artist’s music.

A simple analogy depicts it better. You borrow money from a bank to purchase a home, you pay back the loan you own the house. In the music business as an artist you are given a high interest loan (advance), whereby even if you pay it back via what in any other industry would be regarded as illegal terms – the record label still owns your house (i.e. your music).

Now lets be clear here, TMV does not support piracy or the illegal copying of copyrighted content in any manner whatsoever. However, the recorded music business does need to look inwards first and clear up what are quite clearly unethical business practices! If labels want to be taken seriously when screaming blue murder about file sharing sites by government and music punters alike, then it’s about time the recorded music industry also began providing BALANCED recording agreements – along with timely and accurate accounting procedures.

Piracy has been around for numerous decades, and the music business is as vibrant as ever. The only people feeling the pain are recorded music labels. Artists have rarely seen a pay-cheque from any recorded music sales anyway, so artist’s pain has not increased in any quantifiable way.

On a final note start paying “fair and just royalties” to artists and open up licensing so if a consumer pays once they have every right to use the track on which ever hardware and/or software device they so choose and you have a win-win situation for all concerned. How much piracy have the labels stopped by preventing Spotify from launching in the US? TMV hope the labels are listening….

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Posted by on Jan 18 2011. Filed under Digital, featured, Labels. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

8 Comments for “Has Piracy Ever Killed An Industry?”

  1. ???

    Paul: Why don’t you provide evidence yourself? Or are you too lazy?

    As per this article: I doubt it will change. The root cause of this are shareholders who can’t see beyond the quarterly earnings report in front of them. They may not exactly dictate policy, but they demand profits. And they will destroy companies that do not bend to their whims. Ask an executive what they fear more: A pirate that offers their label’s entire discography, or a shareholder that has a vote on the board of directors who doesn’t care for pirates. Publicly, they may say the former, but all of them really fear the latter.

    And nobody seems to know how to put those greedy fucks on a leash.

  2. Mike S.

    Record sales are so low now. The music business will need a bailout. Taylor Swift had a Number 1 album in the country only pushing 54,000 units. No one is buying music. Why, when you can download it for free. The internet is killing the music business.

    The music industry and the film industry has never been able to prevent free access to their content. That is a FACT. Get over it. Your fans/consumers a want to consumer music in new ways – instead of playing the blame game, DO something about it and come up with a service that provides what consumers want. Is it really that hard? Spotify seems to be providing what fans want…On a positive side if Taylor Swift can chart at No# 1 with 54,00 sales, this opens up the charts to a whole new crew of TRUE, artists not manufactured trollop. That has got to be a positive thing in most people’s books. Ed

  3. David

    The same old propaganda on behalf of the pirates. Invariably they claim they only want to hurt the big bad greedy record companies, and not the artists. Pure hypocrisy, because independent self-financing artists are pirated just as much as the majors, and they don’t have the security of an ‘advance’ to fall back on. For example, there couldn’t be a more independent artist than Zoe Keating, but you can still find her records on many free download sites. Fortunately she also has many fans who are decent enough to think that if they like her music they should pay for it.

    And the other tired old chestnut, that artists make up in live performance what they lose in record sales. This may be true for the likes of Coldplay and U2 (injuries permitting!), but for bands and artists in the middle of the market, playing in concert halls and theaters not arenas, the costs of touring eat up most of the revenue. And the loss of income from records means that more artists are touring more often, which means the market is saturated. Last year even commercial acts like Rihanna were cancelling or postponing tours, and an act as well-known as the Scissor Sisters cancelled a European tour because there was no way to make it commercially viable. And in any case the argument completely ignores the fact that many artists are capable of making good music in the studio but for various reasons are not in a position to tour constantly.

    Sadly you clearly did not read the fact I and we at TMV do NOT support illegal file sharing or copyright infringement in any manner whatsoever. Sadly also your facts are wrong in terms of independent artist’s – many studies have proved that it is primarily the major label artist’s and big HIT artists that suffer the most piracy of their songs. Yes you can find Zoe Keating tracks on illegal free download sites – HOWEVER, I can guarantee you her songs are not downloaded as much as those from large international artists. Yes touring has costs associated with it. But once you reach a certain level profits can be and quite regularly are BIG. The post was clearly saying artists have on a general basis only ever seen any income stream from Publishing and also Live Touring and Merch sales – this has been the case for decades and yes is primarily relative to larger artists. Still does not stop the fact that major label record deals are unfair and just plain WRONG. Which yes does NOT excuse pirates or their like. Ed

  4. “publishing income has been increasing year on year and so has live touring income for artists”.

    Erm, in whose world? In my direct experience guarantees for live music have decreased year on year (despite audiences figures rising for the shows) and unless you’re Coldplay or REM, festival fees have been all but eliminated, and it’s a knife fight to the bottom for publishing money, as the rates go down each year as publishers sell rights cheap to get the last remaining cents left in the business.

    Your heart’s in the right place, just not your facts. I’ve no sympathy for majors, having been signed to one for years but you’re argument is mixed up and incorrect.

    And as for this: “Piracy has been around for numerous decades, and the music business is as vibrant as ever. The only people feeling the pain are recorded music labels”… is utter nonsense. As all the money drains from the industry it’s not just labels who suffer – a generation has been educated that music is free, and that affects us all, especially those of us who only ever wanted to make a modest living out of music we loved making.

    And one final point, check out the royalty payments from Spotify, and tell me how to spend the 0.0012p I make? I would advise speaking to some actual artists who are still trying to do music for a living – again, I appreciate your argument, and it’s a subject that needs dissemination, it’s just that you’re wrong on quite a few of the facts.

    Tom

    Well according to PRS, GEMA, BMI and ASCAP, each have been reporting year on year increases in incoming revenue they collect on behalf of artists for a while now – and this is despite an overall decrease in mechanical income they have collected. If your not seeing that increase on a personal level, don’t shoot the messenger. Perhaps you should be discussing it with the society your songs are registered with? Yes TMV have never agreed with the royalty rate being paid out by Spotify. However on that note, ask your collection society why they agreed a special rate for Spotify and Youtube for that matter? Ask them does it have anything to do with the fact Spotify is part owned by the labels and hence there is a serious conflict of interest situation? Its in the labels best interests to ensure lower royalty rate payouts, as they want dividends from the company they own equity in and also a big payout when it sells to facebook or google. On a final note the collection societies are run by the labels even if a supposedly hands length. I will give it this, Spotify has been proven to decrease illegal piracy. So ask yourself, is that a price worth paying for lower royalty payouts? Ed

  5. Jeff Rogers

    I agree with the comment posted about wholesale price. It is wrong. Many discounts are applied to this price as it moves through. As an artist manager when in the past I have done deals with major labels I understand one thing. Not all the artists they sign are going to be successful. Your mortgage analysis is off base. Every mortgage gets paid back or you lose your house. These are not loans they are investments and are better deals than most venture capitalists offer to tech companies. When you release your record with a major you are banking that they are going to have some success with you but you know that if they do not you may be released from the contract leaving what you sold them behind and you will never have to pay back that money.
    The problem that has occurred for the artist (my artists did recoup and make lots of money from sales) is that there is less investment from the majors. This impacts opportunity for musicians and audience to hear them. I don’t know if this is because of piracy but it appears that is a factor. It is also a fact that I don’t think it is remotely a viable option for children to grow up and be musicians for a living. Let’s work on solving the problems as opposed to pointing fingers at legitimate businesses. I noticed that you have an ad on your site. Our you selling the fact that I and others subscribe to your newsletter to make money? How dare you? The truth is I don’t care how you make money but I do like the content you provide to me. Please keep it coming but I would vote that this article is a bit irresponsible and from someone who actually knows either nothing or very little about the music business.

    Actually, my bank loan analogy is spot on. If you do not recoup from your label – they still own your recordings until you pay them back via sales or buy them out. If you do not pay your morgage back you lose your house. The principal is the same. I was discussing the moral basis for major label contract terms in comparison to bank loan contract terms. Not all business ventures are successful. Yes labels take a two way bet and in the process artists are royally screwed. I can tell you right away major label deals are not better than what VC’s will offer you (but you obviously have to have an already established fan base for a VC to take a punt on a artist deal). TMV will continue to point the finger at businesses which screw artists. It is about fair and balanced contracts between artist and label – nothing more and nothing less. Yes labels deserve to make money – so do artist for that matter! Ed

  6. Picky youth

    You’re leaving out the marketing spends that labels shell out on a new release, usually only 50% or so recoupable. About $3-6 per unit, depending on the labels’ belief in the project.

  7. Points taken and I revised the $15 wholesale price down to $10. However, the royalty rate still stands, have spoken to many mangers who have confirmed this is the royalty rate an artist is usually left with after producer points, deductions and a managers commission on income.

    The arguments are not tired and the public and government alike need to address the severely unfair contracts in the recorded music industry. ED

  8. Paul

    A really badly researched and written piece.

    By the way, ‘Lets’ in the way the writer uses it here should have an apostrophe, ‘let’s’ as in ‘Let us’.

    $10 a record WHOLESALE? I’d check that if I were you.

    10% royalty? Again, check it.

    You may have some good points hiding amongst the poor journalism, but your point is dilluted by poor research and regurgitating tired arguments.

    Must try harder.

    No, I don’t work for a label.

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