Which would you rather steal: music or computers?

An interesting read from CountingCrows.com. It's a well-written piece by Charlie Gillingham, who plays keyboards and accordion for the band. In the following essay, Gillingham explores how computers and technology in general have affected the recording industry. I hope you get to read through the whole article :) My answer to this blog post's title is at the end.

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A couple of weeks ago a fan asked us this question: "As a band that's been around for more than a decade, how have you seen the internet affect the business of making music?" I'm going to try to answer a closely related question: How has the music business been changed by the fact that people can play, store and share music with their computers? I apologize that this is such a long answer to a short question. I wrote a couple of glib responses and threw them out and then finally decided just to give you all of my thoughts about it.

Before I was lucky enough to play piano for a living I worked in the software business, managing projects at an artificial intelligence company called Aion in the spinal cord of Silicon Valley at 101 University Ave Palo Alto. I've also been in the music business long enough to have some idea how it works. I'm hoping that my unique perspective will allow me to show you a few insights that maybe other people have overlooked. If you get bored with the economics and technology lesson at the top, just skip down. It gets more interesting.


The Music Business Is In Trouble

Let's start with the facts:

(1) People spend less on recorded music than they used to. The average person spends only $22.53 on CDs or records or iTunes out of every $10,000.00 they spend. Back in 1994 they spent $37.21. That's a drop of almost forty percent. The difference comes to around eight billion dollars a year.

(2) There has been heavy consolidation and downsizing in the music business since the middle 90s. Historic labels like Def Jam and Motown have been shut down. A huge number of people were laid off as label after label disappeared.

(3) Retail record stores have been steadily closing their doors for the last ten years, culminating with the demise of Tower Records this last summer.

That should convince you that the record business was seriously wounded by something around the same time that most people started using computers to play and share music. Many different things have been blamed: including downloading, burning and sharing CDs, changes in the retail world, changes in radio, compilation CDs, lot's of other things. No one is sure. But here's something to think about: it would be a hell of a coincidence if computers weren't involved -- the timing is just too perfect.

How Computers Changed Music

In 1991, it cost about $2,000.00 to store 100 songs on a hard drive. By 1996, the price had dropped to $86.50 and people started using Napster and swapping files. By 2001 the price was down to $1.50 and you could put a computer in your pocket (an iPod is really just an inexpensive computer in hip new clothes). Today the cost is just pennies. That's the way the computer business works: things get better incredibly fast. Something is science fiction and then it's possible and then it's easy, all in the course of a few years.

In 1996, exactly the same year that it became cost effective to store music on computers, music spending dipped for several years. When the iPod came out in 2001, CD spending starts to sink as steadily as the Titanic did. The timing is, as I said, perfect.

It was clear from the beginning that people just plain liked storing their music on their computers. People don't really want to have hundreds of CDs in bright plastic jewel boxes. They just want to listen to music. All those CDs clutter up the living room, it's impractical to carry them all in your car and it's impossible to carry them all when you're jogging. As soon as it was possible to use a computer to store music, people started doing it. As soon as it was easy, everybody started doing it.

The music business was very slow to recognize what was happening. Late in the game the RIAA (who speaks for the recording industry) cracked down on people who got their music for free. This seemed cruel and pointless to most people, and worse, it hasn't stopped CD sales from continuing to slip.

I agree with those who have suggested that the real problem was never downloading -- it's borrowing CDs. Only 3% of the music on the average iPod was downloaded -- the other 97% comes from CDs. We can't tell if the CD has been paid for by the same person who owns the iPod. You can load in all of your parent's Beatles records and then burn some of them to a mix CD for your new girlfriend and she can share it and so on. Most people don't even think of this as stealing at all, but it is. You've just stolen about $150.00 worth of music access. The RIAA has spent a lot of effort trying to make sure that the 3% is paid for but they've done nothing about the other 97%: we still sell unprotected CDs and people can copy them all they want and there's no way we can stop it.

Why Apple Is Our Friend

In fact, the only place where no one is stealing music is from the iTunes Store. iTunes has excellent top-to-bottom DRM (digital rights management). You can't steal music from it. When some hacker breaks in, they can download new software into all those iPods and fix it. No one else can do this. (Maybe we should only release our music on iTunes and just chuck the CD altogether. But then the problem would be this: not everyone can afford to buy an iPod. Maybe we could talk Steve Jobs into giving away iPods for free so that we could sell more music, rather than Steve Jobs trying to talk us into giving music away for free so that he can sell more iPods.)

Why Apple is Our Enemy

Which brings up another issue that rarely gets talked about. There is a conflict of interest between computer/software industry and the recording industry [emphasis mine]. They want to make computers indispensable to everyone and music is part of that. The recording industry wants to have enough money to promote new artists and buy big houses. The computer business would prefer that music cost nothing -- it's in their interest, it helps sell computers and software. So we can't expect them to help us get paid unless they are forced to; they don't care if artists get paid or not. Software executives are just as ruthlessly selfish as record executives -- they're in business to make money, too. I don't think it's right to cast the music business as the bad guy here. It's a little more like David and Goliath -- the recording industry is worth a little over 12 billion, whereas the combined personal computing industries are probably worth trillions.

To summarize: Microsoft wants to make money selling you Windows Media Player so you can listen to free music. I want to make money selling you August and Everything After. Consumers would rather keep their money and have everything for free. Are you starting to get it? It's really all about the money. That's it. Don't let anyone tell you different.

The Magic Land of the Future Where Music Is Free and Software Costs Money

There are people who make some kind of moral argument that recorded music should be free -- that everything on the internet should be a kind of free hippy wiki where we all share and no one uses money and the evil record company Man is banished and all bands are equal and we all get day jobs and live in lofts and make art for love not money. It suggests that no one is morally justified in making money here except the computer business. (The people buy this line tend to be from the computer business.) This is usually accompanied by the gloating observation that this future is inevitable since there's no way we can stop it. The computer industry will absorb the recording business as it once absorbed the typewriter business as a kind of digital manifest destiny ... so embrace it: resistance is futile (as the Borg used to say on Star Trek). This is a dumb argument made by some very smart people.

Standing There to Sell Plastic Ware

I'll say it again: it's about the money. Everyone wants the money -- the record business, the computer business and yes even you, the consumers. I don't think the record executives are even the greediest people in the game, despite what most people think. We're accustomed to thinking of them as vipers and confidence men, but I don't think that's really fair. The ones I have met are mostly just people who love music and want to be close to it. Over and over again, record company executives have put their careers on the line to support artists just because they liked the music. That's why original and challenging artists like Jimi Hendrix or Nirvana were signed, it's why Joni Mitchell and Marvin Gaye got to make records their own way. It's why Neil Young didn't get dropped when he had that dry spell in the 80s. It might be why American pop music has always been so full of change and soul and energy; it wasn't shaped by market forces as much as by the tastes of the record company executives who controlled it. Yes, they had the power to force down our throats any music they chose, but the interesting thing is that they tended to use these powers for good rather than evil. I think this fact would surprise most people.

You might have noticed that around the same time that record sales started to drop, music on the radio began change -- you heard a lot of attractive pop stars or music connected to sex and violence (like some rap or hardcore). I think this might be because dropping record sales forced record executives to concentrate more on the bottom line after the layoffs left everyone in fear of losing their jobs. In this climate it seems to me it would be hard to risk your reputation by spending precious promotion money on anything but a "sure thing." I think they may have had to throw out their famous instincts and look for "products" that "test well" in market surveys. Now pop music is far more subject to market forces than it was and the quality has suffered. So it's possible we have experienced an unexpected tragedy -- the death of American pop music as we knew it back in the day.

We're Going to be Okay

The record business as we knew it is dying, changing and being reborn. It is slowly being dismantled and folded into the computer business, like a dozen other industries before it. Tell the telephone and movie businesses to get ready --- they're next.

Luckily for us, we actually have two businesses, a touring organization and recording organization. The touring company has continued to do better and better and we make most of our income from it. The recording business hasn't done as well. We used to tour to promote records -- now we release records to promote tours.

So here's one thing you can do to help out -- go see as much live music as you possibly can. It won't save the record business but it will keep musicians from having to get day jobs.


References

My statistics on music sales come from http://www.riaa.com/news/marketingdata/purchasing.asp. I've divided these numbers by consumer spending numbers from http://www.bls.gov/cex/csxmulti.htm. This should correct for some of the effect of "a bad economy" -- I'm not counting cases where somebody didn't buy a record because they lost their job or whatever; I'm counting people who had enough money but just didn't spend it. The "8 billion" is derived by calculating what people would have spent if they still spent the same percentage on music.

The extraordinary improvement in computers is governed by something called "Moore's Law." if you're interested, you can read about it at http://en.wikipedia.org/wiki/Moore's_law. The actual numbers I used for hard drive prices are derived from http://www.littletechshoppe.com/ns1625/winchest.html. (I picked the cheapest drive of the year and then figured how much it would cost to store 100 mp3 songs at 5 megabytes each.)

These are studies that show downloading hasn't caused the (whole) down turn in the music business: http://news.com.com/2100-1027_3-5181562.html and http://arstechnica.com/news.ars/post/20070212-8813.html. Note that these don't prove that computers haven't hurt the music business; just that downloading didn't hurt the computer business (much). As I say above, I don't think downloading is the real problem either.

At http://www.azoz.com/music/features/0008.html there is someone who thinks that the problem is that the record business is releasing fewer records. Of course, he has it backwards: the music industry is releasing less records because they don't have the money to promote more records.

The statistics for iPods downloads comes from http://www.apple.com/hotnews/thoughtsonmusic/ where Steve Jobs gives a great rundown of the DRM issue. You should also note that he takes a couple of jabs at the music business, illustrating my point about the conflict of interest.

The size of the recording industry is also from http://www.riaa.com/news/marketingdata/purchasing.asp . I guessed at the size of the computer businesses (sorry!).

The "music should be free" argument is all over the net but the most recent place where I saw it taken for granted was in the Atlantic where Michael Hirschorn writes "[I] accept as an article of faith ... that the existence of digital media means that everything will eventually be available everywhere for price that will approach zero." See http://www.theatlantic.com/doc/200701/hirschorn-radio/2.

The rest of this drivel is strictly my own opinion and doesn't represent what Adam or the rest of the band thinks, or for that matter what our management or Universal Records thinks, either.

- Charlie Gillingham

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As for the title I gave this blog post, I kinda changed it a couple of times but I can't get to make it sound right. I decided on "Which would you rather steal: music or computers?" - computers referring in general to the technology we use to listen to music these days, which includes both hardware (PCs, iPods) and software (P2P file sharing, CD burning).

My answer would be: I'd rather NOT steal.