Recording Industry Could Catch More Flies With Honey, But Keeps Betting On Vinegar

from the chasing-8%-at-the-expense-of-the-other-92%-is-just-more-bad-math dept

As Mike covered earlier, Ofcom, the UK's media regulator, has just released a new report on online piracy containing information it has been gathering for the Intellectual Property Office (IPO) ahead of the Digital Economy Act's eventual rollout. (Surprise! Pirates buy lots of stuff!) Andy Malt, editor of Complete Music Update (CMU) and freelance writer/copywriter for music and tech companies, has a look at the numbers and arrives at the conclusion that they're hardly discouraging.

Of the 5099 people surveyed between May and July this year, 47% weren’t able to distinguish with certainty between legal and illegal services, while only 16% actually admitted to accessing unlicensed content, and only 8% said they relied on illegal sources of music.

When those infringers were asked why they went to unlicensed content sources instead of legitimate sites or services, the most common responses were that the illegal sites were free, convenient and/or quick. Asked what would convince them to stop accessing illegal content, the three most common answers were that they would do so if legal services were cheaper and had all the content they wanted, and if it was clearer what was legal and what was not.

Malt points out that there are several legal services, most of which are inexpensive, including ad-funded streaming services which give listeners access to thousands of tracks for free. ("Inexpensive" is, of course, relative. Ofcom's study shows that music retailers and streaming services would convert a majority of casual infringers by cutting prices 50-70%. resulting in 2-3x the number of purchases.)

Of course, Malt's speaking about music services in the western world. Worldwide, the situation isn't nearly as seamless. And TV/motion pictures are a completely different situation. While there are several services available, the content is much more fractured and more expensive. Most streaming services (Netflix, Amazon, Hulu) suffer from major studios' unwillingness to license their output at reasonable rates, and pricing on digital products isn't all that competitive.

But as for music services in the US, it's mostly good news, even if it took much longer than it needed to get to this point. Still, Malt then goes on to point out an area where these services disappoint, often through no fault of their own:

The missing content point is a stronger argument, providing file-sharers relying on it really are trying to access tracks that artists or labels have failed to make available through legit routes. And this is something the music business really ought to have solved by 2012.

AC/DC joined the digital party just within the past couple of weeks and a handful of other holdouts have chosen to stay CD-only. The list of holdouts for streaming services is much, much longer, however. But while these holdouts may be giving themselves a slight sales boost, they're doing so at the expense of their own industry.

[W]hile artists perhaps should have the power to control where their music is distributed, many of the Spotify resisters are acts who have made their millions already, and really should be thinking about the good of the wider music community. Because every artist shunning the streaming services is providing ammunition to the aforementioned self-confessed infringers.

The world has moved on, music consumption has changed, and the Napster generation are now at an age where they should be becoming the music industry’s biggest customers, but that’s not going to happen if the legit services they are embracing are lacking catalogue.

Here's where these artists make one of the worst assumptions -- that withholding their music from streaming services will result in a corresponding boost in sales. While there may be a few fans who opt to purchase rather than do without, a majority will find other options, none of which involve purchasing the album.

[A]n increasing number of people, when then can’t find an album on their streaming service of choice, will not just fall in line and go buy the record from the three shops that the artist or label has dictated can sell their music.

When I can’t find ‘Red’ by Taylor Swift on Spotify, I don’t think, “Gosh darn it, I’ll just have to go and buy it from Papa John’s pizza parlour“. I think, “Well fuck it, I’ll just not listen to it then, cos I’ve listened to enough sixteen track pop albums lately to know that a good chunk of it will not be very good. Also, Ed Sheeran co-wrote one of the tracks on it”. Meanwhile those others not willing to take the financial risk of being lumbered with a handful of filler tracks will Google ‘Red for free’ and download it off someone else’s hard drive for nothing.

So, while some artists may despise the Spotifys and Pandoras of the world, withholding their music cedes ground to infringers and other artists. Even if the bump in sales is bigger at this point in time, that won't always be the case. The law of diminishing returns is going to kick in as a new generation of music fans raised on always-on internet and streaming services is just going to bypass artists that aren't available on the services they use.

He then goes deeper into the numbers, looking at what it takes to convince infringers to utilize legitimate services -- and it's here that the involved industries continue to shoot themselves in the wallet. Yes, there are some people who are never going to use legitimate means and will never pay for music, movies, etc. So, why spend so much time worrying about something you can't fix?

OK, some of the infringers who complained about being confused may be taking the piss again. After all, most people finding content online via a search engine with ‘pirate’ in its name know there’s a very high chance the content they download isn’t legal, even if they plead ignorance. So education probably won’t work with this group. Then again, these are also the people who know how to hide their file-sharing from the three-strikes police, and to circumvent the web-blocks put up in front of The Pirate Bay, so there’s probably not much you can do about them.

But remember, this was only 8% of those surveyed, so I say fuck em. Let’s focus on the 47% who implied that they want to do the right thing, but find the whole thing too confusing. Let’s stop handing over cash to lawyers and technology whizzes who want to go after the 8% and focus on doing some decent education with everyone else. Because if OfCom’s research tells us anything, it’s that the music industry’s current educational initiatives, including the Music Matters programme, which expanded into the US this week, just aren’t working in the slightest.

If you've got approximately 92% of the population to work with, why on earth would you spend your time trying to legislate, sue or otherwise inconvenience the other 8%? The thought process seems to be that only 0% piracy is acceptable and that accepting less is ceding the battle. Taking a hardline against file-sharing will only alienate potential customers. File sharing isn't limited to an "unlawful" fringe. A full 2/3rds of the study's respondents admitted to infringing activity, but if the content industries insist on treating customers as thieves, they're just going to end up with fewer and fewer customers.

The half-assed "educational" programs are a joke as well, with most of the effort going into telling people how file sharing is wrong, rather than playing up the advantages of legitimate services (please -- no more of the "your illegal download is probably a virus" ridiculousness). Or better yet, move that time, money and energy into convincing rights holders to work with existing services to make them better, by adding more content, reducing idiotic, arbitrary restrictions that make no sense with digital goods and negotiating rates that work for everyone involved.

Malt has a couple of excellent points on how to do education right. As he says, the Music Matters campaign is a farce. It fails to do anything resembling "education," preferring to use guilt as negative reinforcement rather than give the undecided a reason to choose legitimate services. Not only that, but the Music Matters mark isn't even displayed by the two largest music services (iTunes and Spotify).

I suppose Music Matters is better that the American record industry wheeling out millionaire pop stars to complain about how file-sharing is depriving them of record sales, but it still feels decidedly mediocre for an industry that, when it comes to selling artists and albums, is actually pretty good at engaging and enthusing consumers. It’s easy for me to sit here and criticise, and I don’t claim to have the answers. But for a start, perhaps instead of forcing ISPs to send out angry letters to those consumers mistakenly downloading unlicensed music files, the labels could start sending thank you letters to those who inadvertently use a legal store.

There's an idea. Thanking your customers for purchasing from you rather than taking alternate routes to the same content. It would make for some great PR and maybe start altering the general image of the average record exec as a grouchy, out-of-touch robber baron with dollar signs for eyes, surrounded by lawyers and starving musicians.

Education can be a good idea, but it needs to be handled with a much defter touch than any of the content industries seem able to manage. Think more carrot, less stick. And try to let bygones be bygones. You can't keep bemoaning the post-Napster climate when you've got a whole new generation of potential customers who are accustomed to streaming services, low prices and instant access across multiple devices. Like it or not, streaming services and single track sales are here to stay. Ad-supported apps may not bring in great money, but that's the new reality. There's no going back, no matter how much legislation you throw at the internet. A continued preference for enforcement over engagement is only going to make things worse.