File sharing and the music industry

The idea of sharing has completely evolved in the last few decades. For thousands of years, sharing something with someone meant you had to physically give them something of yours so your friend (or sibling) could enjoy it, too. With computers, though, everything is different: I can share my music without ever giving up my own copy. It's a fantastic system that's allowed my friends and I to show each other obscure bands we would never have known about otherwise. The issue, though, is that this is technically illegal. Music is, after all, copyrighted, and I don't have the legal right to copy an album to a flash drive to show a friend.

Ever since Napster showed up in 1999, peer-to-peer file sharing has skyrocketed. This is great for regular people like you and me, since we now have this weird endless world of free media at our digital fingertips -- it's estimated that 1.2 billion songs were illegally downloaded in 2010.

And the US is number one for downloading. USA! USA!

Naturally, the people who could be making money from all this music aren't happy. The Recording Industry Association of America (RIAA) insists that illegal music downloads have caused $12.5 billion losses to the American economy and the loss of 70,000 jobs. Sounds pretty bad, right? Legal-minded people certainly seem to think so, too, since they've developed a track record of severe punishment for what seems like a minor offense. When LimeWire was taken to court, the legal battle lasted five years and ended in a $105 million settlement. People caught illegally downloading music have been forced to pay up to $22,500 per song when taken to court. (Interesting note about that one: the jury decided on a $675,000 total fine for the defendent -- that's the $22,500 per song part -- and the residing judge thought that a fine that enormous might be unconstitutional, presumably because that's pretty cruel and unusual. He suggested it be lowered to a fine of $67,500 -- $2,250 per song. so much more reasonable -- but the First Circuit Court of Appeals  reinstated the original fine.)  More recently, a major supplier of YouTube videos is being sued because people are uploading videos of unprofessional covers of popular songs.

Better watch out, Pentatonix

This might seem a little much, but pirates are ruining our economy, right?

Aren't they?

Turns out they might not be.

While there are conflicting reports on the effect that illegal music downloads have had, one thing is certain: music sales are just not how artists make money any more. A lot of this is probably because it's really hard to make money selling music in a digital age (and digital music sales are here to stay, piracy or no piracy). Money mostly comes from merchandise and tour tickets which, hopefully unsurprisingly, pirates pay for. This study [PDF warning] notes that filesharing has greatly increased consumption of recorded music and has made music more widely accessible -- definitely a social advantage for the artist, as it makes it much easier to create a fanbase if more people are familiar with your work. There is also evidence that, while sales of recorded music have fallen greatly, concert ticket sales and other sources of revenue have grown in the last several years.

As record sales fell, concert sales grew rapidly

But what's the bottom line? Is piracy ruining America or creating new fans who will be more than willing to pay $40 for a t-shirt at a show? Here's my take: if you were never going to pay for a song in the first place, but someone emailed it to you or you downloaded it for free on a whim, you haven't hurt anyone. The RIAA would never have gotten your money anyway. But maybe now you'll go out and buy the album, or a poster, or an expensive concert ticket. Maybe you won't. They're either exactly where they would have been or better off. The band benefits regardless, since they either get money or exposure (and exposure is how you get people to like you enough that they'll give you money).

Anecdotally, I can say that piracy can definitely lead to an increase in revenue. I heard about a band from a casual mention in the newspaper once. Not wanting to commit money to something I might hate, I downloaded their albums illegally. It turned out that I really liked them and have since seen them in concert at least four times and bought a fair amount of merchandise. This probably adds up to at least $300, when buying their music on iTunes would have cost $60, probably only $25 of which would have made it to the band.

This isn't to say I only ever get music illegally. I actually pay for music. I just don't pay full price. There are plenty of places (many of them shady and Russian) that host legal mp3 and movie downloads for about a dollar per album (maybe four for a huge collection) and about five dollars for a movie, and I'm more than happy to pay that. If media wasn't so expensive, fewer people would resort to illegal means to get it. It's like this song that a friend gave me in high school: "you've overcharged us for music for years, and now we're just trying to find a fair balance." Basically, the RIAA and MPAA have done this to themselves.