QotW3: File sharing - Why users should pay and why content creators should lower prices.
The Straits Times, February 3 2007, Review
With today’s broad reach of technology with the Internet, songs are easily available for free. All that is required is the program to download songs and a suitable Internet connection speed to upload/download songs. By simply typing in the song title or the song artist, one could find many different users to download from. As such, many users regularly download songs off the Net for free, much to the dismay of the recording industry.
File sharing is perhaps the most common online activities (Oberholzer-Gee & Strumpf, 2005) where users can upload/download music off the Internet and pass it around through Peer-to-Peer websites such as OpenNap, LimeWire, KaZzA. While this may seem cost effective to most users, the industry has been complaining of failing sales due to file sharing. Claiming that file sharing was the culprit, the recording industry started suing thousands of individuals who share files (Oberholzer-Gee & Strumpf, 2005, p.2). Such an event also happened in Singapore, where seven homes were raided by police as part of a crackdown on the illegal downloading of copyrighted music from the Internet (Ramesh, 2006).
Yet, Oberholzer-Gee & Strumpf (2005) reported that file sharing allows users to learn about music they would not otherwise be exposed to. This learning may promote new sales and from my perspective, is true to a large extent when friends recommend one another songs that they enjoy listening to. Granted, this may not be a legal way to share files but what other methods are there to share music in a legal manner? Furthermore, Litman (2003) suggested that anecdotal evidence indicates that untamed digital sharing turns out to be a more efficient method of distribution than either paid subscription or the sale of conventional copies. Thus, the recording industry should have looked into this avenue as a means of dissemination of music from newer or popular artists, rather than sue those who support them. Distribution via the Internet is one of the most efficient ways to reach a large potential client base, without the need for packaging or a physical space to sell the products. The amount of money saved could then be used to promote their music to the diverse market online.
Furthermore, based on the findings of Oberholzer-Gee & Strumpf (2005), they found that file sharing had only a limited effect on record sales. “Although we find some evidence that top albums sell fewer copies as a result of P2P, the economic impact is small, less than 10% of sales even for the most popular releases” (p.36). In addition to their findings, Rob & Waldfogel (2004) noted that for hit albums, which sold more than 2 million copies since 1999, they find no relationship between downloading and sales. However, an interpretation from both studies suggested that piracy does not affect hit albums but hurts smaller artists (Oberholzer-Gee & Strumpf, 2005, p.6). Such an impact meant that independent musicians should have more privileges over the use of copyright laws as their sales were on the decline from music downloads. Thus, music lovers should pay for their downloads, or risk having newer musicians leave the industry if the latter deems the industry unprofitable.
Why, then, are people unwilling to pay for music despite the lawsuits from the Recording Industry Association of America (RIAA)? One main reason is because the music online is FREE. Despite downloads being illegal:
An April 2004 survey revealed that 88 percent of children between 8 and 18 years of age understood that P2P music downloading is illegal. Unfortunately, the survey also discovered that 56 percent of the children surveyed continue to download music anyway. So while many music fans are aware of the "stick" of lawsuits, they seem relatively unintimidated by it.” (Lohmann, 2004).
Furthermore, in a survey conducted by Rob and Waldfogel (2004) found that albums purchased in the store were valued at $15.91. In contrast, respondents’ willingness to pay for albums they downloaded was only $10.66, a value below the average purchase price of a CD. Hence, people would be more willing to pay had the prices been lower for each album. It may seem that the record industry would earn less if each album was cheaper but it would also mean less users would download for free off the Internet (which would leave them nothing) as the albums are now more affordable.
Another alternative is to purchase music at Apple’s iTunes Music Store (http://www.apple.com/itunes/store/). A song sells for US$0.99 and users can buy as many songs as they like. This was one method where music lovers could legally purchase music without having to worry about RIAA knocking at their doors. Apple was a great success in the eyes of the recording companies. It was the most successful of all the authorized music services and sold a total of 100 million downloads in its first 15 months of operation (Lohmann, 2004). However, Lohmann (2004) also noted, “While the authorized music services are attracting a modest number of customers, it is also clear that they together account for a trivial percentage of the total number of digital music files being downloaded today”. Thus, even if Apple iTunes was a viable alternative to illegal music downloads, there was no way it was able to compete with the combination of all the peer-to-peer (P2P) networks that provided free music.
The next viable solution would be to tap into the large P2P networks and try to make money where the large client base is. Furthermore, the laws of copyright are not involved. Lohmann (2004) noted this simple concept of “voluntary collective licensing”:
The music industry forms one or more collecting society, which in turn offer file-sharing music fans the opportunity to "get legit" in exchange for a reasonable regular payment, say $5 per month. So long as they pay, the fans are free to keep doing what they are going to do anyway -- share the music they love using whatever software they like on whatever computer platform they prefer -- without fear of lawsuits. The money collected gets divided among rights-holders based on the popularity of their music…more freedom to fans to share their favorite music, the deeper the global catalog of available music.
Furthermore, this gives music fans a more pratical plan and a chance to pay for their music, without costing them too much. $5 a month for an infinite amount of songs is a better deal than a $10.66 album where you probably only want two songs or having to pay 99 cents per song could cost a user around 20 dollars for 20 songs in a month.
In conclusion, music lovers should pay for their music, as it is only fair to the musicians, whose careers depend on sales from their supporters. Not paying for their work is almost the same as not paying a lawyer’s legal fees after consultation, which is considered a crime. On the other hand, content creators could come to a compromise to reduce their albums’ prices or engage in voluntary collective licensing. Either way, lowering their prices would leave them in a better state than having billions of users worldwide download their music for free.
References:
Litman, J. (2003). Sharing and Stealing [Electronic Version]. Retrieved February 2, 2007 from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=472141.
Lohmann, F., (2004, September 29). Is Suing Your Customers a Good Idea? [Article posted on Web site Law.com]. Retrieved January 31, 2007, from http://www.law.com/jsp/article.jsp?id=1095434496352
Oberholzer-Gee, F., & Strumpf, K. (2005). The Effect of File Sharing on Record Sales: An Empirical Analysis [Electronic Version]. Retrieved February 2, 2007 from http://www.unc.edu/%7Ecigar/papers/FileSharing_June2005_final.pdf.
Ramesh, S. (2006, October 9). Police raid 7 homes to track down illegal downloading of songs [Article posted on Web site Channel NewsAsia]. Retrieved January 31, 2007, from http://www.channelnewsasia.com/stories/singaporelocalnews/view/234608/1/.html
Rob, R., & Waldfogel, J. (2004). “Piracy on the High C’s: Music Downloading, Sales
Displacement, and Social Welfare in a Sample of College Students.” NBER working paper 10874.
.: This entry was awarded the Special Mention for Week 3! :.
1 comment:
Good tie in with local news... would have been superb if you cited that 3rd Feb ST article you took a picture of. Still, you've explained your case of lowering prices well. Full grades!
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