freeeconomy

The Case Against Free

[UPDATE, April 10]: This piece has generated so much discussion, Elmo Keep wrote a companion piece: ‘Combating The Cost Of The Free Economy‘.

“Information wants to be free.” How rich we’d all be if we had a dollar for every time we’d come across that phrase on the Internet!

The problem is that that’s only half of it: “Information wants to be free. Information also wants to be expensive. That tension will not go away,” is the full quote.

In his excellent book, Freeloading, Chris Ruen articulately argues a case for how the free digital economy is white-anting creative industries. Be that websites with business models predicated on not paying contributors, streaming music services which actively underpay artists, or our disinclination to pay for things at all when we can steal them for free. This is all rapidly approaching a crisis point where entire industries will function completely on free labor, or cease to exist altogether. And we as consumers are totally culpable. We’re the ones who are choosing to attribute no value to what people create.

Far from heralding some kind of techno-utopia where the playing field would be leveled for everyone (although it looked that way for a while), the free culture movement ended up putting extraordinary amounts of power into the hands of the few: the new boss is the same as the old boss. The companies who grew fat off the serving of this content were the ones that were enormous already, like Apple and Google. Many more hoping to be made in their image cropped up, “disrupting” (see: destroying, Spotify) traditional industries. And the enormity of those established companies allowed them to set terms far more punitive than the record labels they have all but replaced. All for merely hosting content, not for creating or funding the creation of anything.

This is not a better world for new artists and producers. It’s worse.

Let’s go back.

0 + 0 = 0

The basic tenet of the Free Economy is that you can’t compete with free. As the Internet made it so easy to replicate information (in the form of culture: music, films, television, books) endlessly, it forced the value of everything that could be copied down to zero. Ruen argues in Freeloading that even to refer to cultural artifacts as  “information” was the first step in the devaluing of them. This was a kind of Darwinian reduction of what is a very complex and expensive process (creation) to mere bytes of data (information), which made it very easy for us to then rationalise to ourselves when we weren’t paying for something. It’s only ones and zeroes, endlessly copied (even though flagrantly breaking copyright law), after all. Who is it hurting?

Well, everyone.

Analyse This

Our ability to rationalise our behaviour is one of our most powerful psychological tools. On the Internet, it now comes paired with one of our most difficult to resist impulses: to be gratified, instantly. These things together, balled up in anonymity, have conspired to create a behaviour that is extremely hard for us to overcome: If no one will ever see me taking this thing for free that I want right now, why would I ever not take it?

This is a moral nightmare. It didn’t used to be possible to just take what you wanted: that was called stealing and you would be punished. But now it’s a cultural norm to be a petty thief in your everyday life. And this is where the biggest rationalisation of them all comes into it: Everyone else is doing it, so why would I be hurting anyone?

Why don’t you try it for yourself: when the new season of Game of Thrones starts, don’t torrent it. Get a pay TV subscription (you can get one on Xbox for $19 per month.) Or an iTunes season pass. These options will put you one single day behind the US. You don’t want to do either of those things? Why? Subscription television was never free, just like it says on the box. What would you say to someone who worked on the show that you love so much that you won’t pay for it?

Would you say to them, “Thank you so much, I love your show! It’s worth zero dollars to me, though. And so is your time”? You might think  that through pirating the show you are somehow admonishing local networks for not fast-tracking their content to meet your immediate need, but actually you’re just being an overly entitled asshole. It’s what we have all become. We’re infantilised, like babies who need their every desire met this very instant or shit will get real.

To Play With The Big Boys You Have To Be Big

Myths become law on the Internet with swift brutality. For example: I posted a link on Twitter to this story at the Verge, which quotes Thom Yorke as saying that, with the benefit of hindsight, he regrets the pay-as-you-want model Radiohead pioneered with In Rainbows, because it taught people that music was worth little or nothing. He is also unhappy to have fed the bottom lines of tech companies. And he isn’t alone in revising his stance. Trent Reznor was about as supportive of the free model as an artist could be, and he too is now of the opinion that giving away your work for free will mean that it then has no value to anyone. (This seems a fairly obvious correlation.)

This story was greeted with replies from people eager to point out that paying artists direct is the best way to compensate them, holding up Amanda Palmer and Louis C.K. as examples. This idea that you can fund someone directly has really taken root in people’s minds, as if it were a long-term sustainable model (it can work for the percentage of people whose project is successful, but asking for funding repeatedly, for small artists, will likely produce diminishing returns). However, they fail to make the connection that not only are these artists exceptions to the rule, but that, much like Radiohead and Nine Inch Nails, their careers were built on the back of the financial support system provided by major labels and network positions. It was only their ensuing huge profiles that allowed them to shun the big companies who had initially fostered their talents and invested in their careers. While it might be true to say that torrenting U2 records won’t hurt their career because they are of such massive stature, like downloading Game of Thrones won’t hurt HBO, it being true doesn’t make it ethical. The producers don’t want you to do it. And that logic certainly doesn’t work when applied to new and emerging artists embarking on careers today.

“The next band who deserves it is never going to get the chance that we did,” Gene Simmons of KISS told me in a recent interview. And this is someone who called bullshit on In Rainbows at the time. “We work hard, this is what we do for a living and it’s not for free. I will be damned if some kid living in his mother’s basement is going to decide whether or not I should be able to charge for what I do.”

And that is really the thing about piracy: it’s not up to us to decide that an artist’s work is worth nothing, whether they’re Amanda Palmer, KISS, Metallica, U2, Radiohead or Bed Wettin’ Bad Boys. If they decide they want to give it away, that’s one thing. For us to make the choice for them is to say: I do not care about what went into making this art that I am now enjoying. When we do that, we are living in a morally bankrupt society.

Supply and Demand: It Costs Money To Make Money

free economy 2-01

Another great rationalisation myth is people thinking that buying tickets and t-shirts somehow makes up for the loss of revenue from record sales. Here are some hard figures for you:

  • The record industry just posted its first gain in revenue for 13 years. A whopping 0.3% increase. This doesn’t mean everything is now great, it just means that the industry is not actively losing money for the first time in 13 years.
  • People are spending roughly half what they were on music 13 years ago: overall sales are at US$16b, down from $28b in 1998.

Yes, but! People have always pirated music! Taping songs off the radio! Please, tell me more about your friend in the ‘90s who was able to tape 40GB of music in the bat of an eye.

Making music is an expensive undertaking. So is making a film, or a television show, or producing a book. For now, let’s stick with music. Recording costs can be high (or they can be low, if that’s your vibe); several hundred dollars a day for studio time, a producer’s time, paying musicians, plus manufacturing and distribution costs, with everyone’s cut taken at each of those stages. This can total tens of thousands of dollars, or much more, or much less*. Touring can also be massively expensive (promotion, fuel, time off work, insurance, plane travel, accommodation, just for the basics), and t-shirts do not make themselves for free. In Australia, the average income for a professional contemporary musician is between seven and twelve thousand dollars per annum.

This is why record labels (and publishing houses, and television networks) exist: they invest in artists as they have the capital to support this enormous financial structure, and they hope to make a return on their investment. They are taking bets. If people are spending half what they did on music, labels are investing half what they were in artists. And they are certainly going to invest in sure bets (U2) over new, untested artists.

It’s also a myth that digitally serving content is somehow low cost, or cost-free. It isn’t. Apple will take a third of anything you make. That’s after you’ve digitised your content, engaged a certified reseller, had artwork made, taken out advertising to let people know they can now buy it, and then had them buy it at low cost. There is just much less money being generated in this model. People have been conditioned to pay less (or nothing) for digital content – poor forethought as digital content has now eclipsed physical in units sold. And now streaming models are making an even worse offer to artists.

Spotify offers the option to pay nothing, and be served ads. Or, pay a small fee and have unlimited music for one year, with no ads. If the casual music listener can be persuaded to part with $70 a year, and that is the total amount they spend on music in that year, then it will require 228,571,428 subscribers to generate the current annual global income from record sales (the service currently reports it has 20 million users, of which only four million are paying.) And that would only be the case if Spotify passed on 100% of its profits, which is does not. Spotify is still operating at a loss, and has paid out so far just $500 million to labels. The problems with this model are two-fold: the consistent devaluing of music, which pushes prices down across the market; and the miniscule amounts of money that artists actually end up with through the service. Spotify exists purely for itself, to turn itself in time into a profit-making enterprise. The people it hopes to enrich are its investors, shareholders and company directors, not artists or record labels.

“The question of when we’ll show a profit actually feels irrelevant,” said Spotify president Daniel Ek in April 2012. “Our focus is entirely on growth. It is priority one, two, three, four, and five.” Ek is now the UK’s tenth richest man. Spotify is speculatively valued at US$3 billion. Spotify announced two weeks ago that it (and Pandora) wants to pay artists even less.

You can’t compete with free.

Who Do We Want Our Artists To Be?

What is the difference between the writer who can’t sustain a career because of publishers who are unwilling to pay them because the next person will do it for free, and the musician who can’t afford to play in their band because taking time off work to play some shows makes their vocation unsustainable? Or the graphic designer expected to give away their work for little or nothing to build their reputation, and the photographer trying to compete with amateurs who give away their work? Or the newspaper unable to serve its community because people are so used to expecting online news for free, despite the knowledge of how expensive journalism is to produce?

In all of these scenarios, it means that eventually (soon? Perhaps you’d like to pay $25k to put out your book?) only people who can afford years making little or no money, or sustaining a loss, will be able to buy into these vocations.

Which isn’t to say that these industries haven’t always been overly potted with scions of privilege: they have. But the barriers to entry for people who were not to the manor born didn’t used to be so high. The Internet and its promise to democratise everything ended up working in reverse: it reinforced the power of the few who were already powerful. It made it more difficult, not less, to break through and sustain a career. The foundations that held up traditional industries have been rapidly eaten away, but it doesn’t mean there aren’t gatekeepers; there are just new ones holding on to the reins of power even more tightly than their predecessors. Do we really want only the rich to be our artists, writers, musicians and journalists?

Information wants to be expensive. Culture is expensive. Locally, for example, it costs more than $260,000 on average for one hour of Australian television drama, and more than $700,000 to produce one hour of Australian documentary film.

How can art’s aesthetic, political, philosophical or social value ever be awarded a dollar amount? It can’t. But it’s certainly worth much more than nothing.

Elmo Keep is a writer. She also works as a digital media producer, for clients including Channels Seven, Nine, Ten, the ABC, Foxtel and many other producers.
Illustrations by Matt Roden
* Thank you to the several Australian musicians and arts body administrators who shared their financials for this section of this piece.

  • adamatsya

    Well said and very thought provoking. I paid 9p for In Rainbows when it came out as pay what you want. I think I’ll go buy another full price copy from them directly to make up for it.

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  • Guest

    Here, here’

  • Luke Telford

    I agree that piracy is morally indefensible, but suspect that it won’t be as big a deal once we can actually watch the TV we pay for as soon as it’s broadcast overseas. The technology is obviously there – why won’t they sell it to us? I’d happily pay.

    Also, Elmo, I’m really curious to hear what you think of people who pirate before buying, and the (possibly spurious) idea that pirates are ‘x’ times more likely to buy what they’re pilfering…

    • Elmo Keep

      Hi Luke,

      This can be tricky for us, because there are some things that we legitimately cannot buy through any legal means here (30 Rock S07, for example) if we want to watch it when it comes out in the States. But that doesn’t stop you from using a VPN to access Amazon, where almost everything is available to buy. You then come up against your feelings as they pertain to Amazon: for me, I think they are dangerously anticompetitive and terrible for smaller retailers and producers. But I want at least some of my money to get to the people who make the shows I watch, so for now I have little choice. When it comes to DVD here, I will be buying it then too.

      If Foxtel doesn’t negotiate the rights to Louis C.K.’s HBO special, then I’ll be downloading that too because I am as impatient as the next fan. I won’t be able to buy it direct from his website until September, and when it’s September, I will. Why it isn’t available there right away is because there are exclusivity contracts in place with HBO.

      It’s not as simple as it looks for our networks to fast-track content as it disrupts the negotiations on which their business model is built: there is a lot of value in first broadcast rights, which are exclusive to the network who secures them and includes streaming rights. Should this change? Obviously, yes, if our television industry wants to avoid what happened to the music industry, it needs to address a growing and impatient online audience. But traditional industries are lumbering and slow by their nature, they are huge and have many stakeholders, and changing the fundamentals of their business takes time.

      The Internet however is swift and beholden to no one. But the bigger problem is the lack of value attached to digital content, no matter what it is. There is nowhere near the value in online ad revenue as there is in television advertising (because initially the Internet was viewed as secondary and few people predicted its current primacy). This is the same issue facing online news. It’s the same problem the music industry would have it if suddenly jacked iTunes prices to make up for lack of revenue; no one would agree to pay because they don’t see the value in ephemeral bytes of data, even if they are shortly to be the dominant format of all culture we consume. We have been taught they are worthless. This is especially stupid when you think of someone like Cory Doctorow who spent years loudly telling writers they should give away copies of their digital books for free because they’d sell more hard copies that way (again, the Amanda Palmer model of already being huge to be able to do that): what will he tell those same readers about the sudden inflated value of digital books when they are the only books that are being produced?

      The “pirates consume more” argument is a convenient one for free culture advocates to make which is unfortunately not borne out by evidence: the fact is revenues are massively down across all the industries mentioned above (except gaming, which has very successfully made piracy almost impossible), because they had to compete with free. This allowed third party tech companies to come up with low-price alternatives which reaped in the money for *them*, while they contributed nothing to the generation of the content they sell. They are the ultimate parasitic business model: Spotify is the worst. DON’T GIVE THEM YOUR MONEY. It’s great for discovery; use a free account to find new music and then buy it from the artist.

      Culture doesn’t exist in a vacuum free of commerce, unless you are talking about outsider artists who were never interested in engaging in the capitalist system in the first place, but this isn’t a piece about those artists, it’s about mass culture.

      I can’t recommend Chris Ruen’s book enough for a really in-depth analysis of all this!

      • Luke Telford

        Definitely going to read it now, thanks for the extensive response! I can better see an important point of yours, now, too – we really need to learn to value digital content for what it is.

        Whenever I read anything about this stuff, though, I’m reminded of a fellow called Jacques Attali, who wrote a book called Noise. In that book, he gleefully points out that we’re programmed to want to consume hours and hours of music. In order to obtain this music, we traditionally had to work hours that prevented us from appreciating our purchases fully, or at all. He reckons what’s happened to the music industry makes perfect sense – it’s removing the conflict from our insatiable desire for all of the stuff. I doubt your average music fanatic actually has time to listen to everything they download… again, we need to learn to value the quality of what we hear over its quantity or the immediacy of our access to it.

        I definitely spend at least twice as much on music now than I did 13 years ago, and take a similar attitude to content as you do. I don’t understand people who won’t pay for the things they like if they’re ‘free’ online. I trust that distribution models will soon change to account for those who’d happily pay rather than pirate if they could get the content the way they want it – I’m just not sure if that’s going to be an industry or consumer-driven shift. /ranty afterthought

  • http://www.facebook.com/profile.php?id=775752462 Rowdy Mason

    You’ve neglected Jaron Lanier in this piece, he’s possibly the most interesting thinker on this subject, IMO. He’s not just a critic of the free model, he has lots to say about the ‘wisdom of the crowd’ myth.

    One could say you are using Luddite arguments here. It’s a shame the word is such a perjorative, they were artists grappling with exactly the same issue, technology destroying a way of life and culture. Sheet music destroyed an entire industry of composers, radio killed local entertainers; the internet is now eroding creative middle-class jobs like designers, photographers & writers. That’s what happens when you increase the reach of communication. Economists will tell you not to worry because other ways of earining income will make up for it, but that says nothing about the quality these new ways of living will bestow, (compare skilled artisans vs factory workers) but it might have beneficial net effects to society (cheaper goods, higher standard of living for the poorest, access to the music of great composers, etc).

    Being a musician, or an author or any type of artist or entertainer has been a difficult and risky proposition for generations. These occupations exist in another category of income than salaried jobs, it’s a winner take all environment, income is scalable to success, the winners take all and it’s not a meritocatic system (Gangnam Style, anybody?), as Nassim Taleb points out in The Black Swan, sheer luck is needed along with talent. All of the huge bands (like Kiss & U2) of the 20th century sucked in all the money, leaving scraps for the other players in the field because it was possible to market them to many nations, now with the internet the market is bigger, cultural transmission is faster, so we will have fewer, more extreme winners. Unstoppable process?

    I think pinning the blame on the difficulty for artists and entertainers to earn a living on piracy is a bit much (especially when you stretch it to include journalists, writers, designers etc), simply having access to art and entertainment on a global scale erodes it on the local, whether it is being paid for or not.

    • Elmo Keep

      Rowan! No arguing that these were always vocations (and there were always “vocational” for only the few) that yielded big results for only the big players. But, my issue is with companies like Spotify who are actively devaluing content by a), arguing that they shouldn’t have to pay for the content without which they’d have no business model, and b) making it hard for anyone to charge what digital content is actually worth by pushing prices down.

      Piracy created the problem of “free.” When there is a free alternative, people baulk at paying. News outlets that erect paywalls are fled by users who don’t want to pay for news. This is a transaction that doesn’t take into account that news is extremely expensive to produce and so should be paid for.

      To stop looking at digital content as somehow ephemeral and worthless is a huge challenge, especially for a generation of people grown on myths like “sheet music killed composers.” That’s not a comparative argument. The sheer speed and volume at which anything can be endlessly copied for free has created an environment that we have never been in before.

      Lanier regrets many of the early architectures that he helped contribute to the web, including the ones that are allowing for the crowd to do things like steal whatever they want, en masse. When creators are compensated by the ‘exposure’ offered by free, he says, “Culture is to become precisely nothing but advertising”.

  • Alec

    Hey EK, I like your article. I’m interested in your take on Mubi – http://au.mubi.com/ – and how they fit in to this. Have you looked in to it at all?

  • Phil

    Spotify is actually incredible for artists, because it means that if you produce lasting music that people continue to listen to, you’ll continue to get paid, every single time someone listens to a song. The problem is, they don’t currently get paid very much (about 0.5 cents per stream). But that’s 70% of Spotify’s revenue (and Spotify are yet to make a profit), so it’s not like Spotify are rolling in money while the artists can’t afford baked beans to put on their toast.

    But the fact is, unlimited streaming is the way music is going. Music is so easily distributed that it’s impossible to stamp out piracy, and kids who grew up with Napster/Kazaa and now torrents have never had to pay for music. That’s a mentality you’re never going to break.

    So Spotify (or an equivalent) has to make more money, so more can be given to artists. How many customers would they lose if they doubled their subscription price? They wouldn’t lose me (hell, if you could give me an essentially complete music catalogue (a la iTunes) I would pay $50 a month for that. But I think I’m in the minority.) $10 is the sweet spot, I think, and I’m sure Spotify has market research which says the same thing.

    The other thing is, labels love Spotify – they think it’s fantastic, and can’t wait to do distribution deals. The only people who don’t like it are some bands who get freaked out when they hear ‘half a cent per stream’. There were some very vocal hold outs – Metallica, Tool, Coldplay, Adele – at the moment only Tool remains (and you can’t buy their music on iTunes either).

    When you’re looking at music revenues, you can’t look at ‘money per unit sold vs the past’, you have to look at total revenue. Sure, it’s unlikely that a 15 track album costing $20 (assuming 100% of that goes back to artists, when I believe it’s more like 5%) will make $20 from Spotify listens per person (you’d need to listen to the album 200 times to do that). But people listen to music on Spotify that they wouldn’t have bought otherwise – if I couldn’t pirate music I might have bought one album a week. As it is, I listen to about 5 per day, and every single listen generates bands money. Not much money, sure, but money nonetheless.

    What I expect to see is that live touring becomes the primary revenue source for bands. I would also therefore expect record contracts to begin to include a percentage of live revenue and merch (if they don’t already). I don’t think record labels are a group of evil bastards out to ruin music for everyone – they front considerable recording, marketing and distribution costs for often unknown bands – there’s a risk and they need to make a profit off the successful ones, but I think it’s also good that bands don’t have to use a label if they don’t want to. In the past you had to listen to local music, or to what was played on commercial radio (placement paid for by labels) because that was your only option – now there are other distribution methods available for bands who can grow a fanbase online, or who exist in a niche genre.

    Those are my thoughts on music piracy. Movies are doing alright because they have a ‘unique experience’ of seeing it in a theatre, that can’t be replicated by piracy, plus generally the first 3 months of pirated releases are shot in a theatre with a handycam so no one wants to watch that anyway. But I don’t know about TV. I’m as guilty as anyone with TV shows, and the torrent experience is better in every way to the purchasing/free-to-air viewing experience. I think a Netflix-esque service which for a fee allowed streaming of shows in HD as soon as they aired in the US for, say, $25 a month would make a crack into the market, but if it happens we’re still at least 5 years away from it. Plus, TV shows are expensive. When an hour of good TV costs $2 Million to produce, can $25 a month for all-you-can-eat TV really be a reasonable solution? Plus it’d absolutely kill Foxtel, so you know they’d be fighting against it.

    >The record industry just posted its first gain in revenue for 13 years. A
    whopping 0.3% increase. This doesn’t mean everything is now great, it
    just means that the industry is not actively losing money for the first time in 13 years.

    As an aside, that’s not what that means at all.

    • Elmo Keep

      “Music is so easily distributed that it’s impossible to stamp out piracy, and kids who grew up with Napster/Kazaa and now torrents have never had to pay for music. That’s a mentality you’re never going to break.” That’s what I’m arguing. That changing people’s perception about the value of music is what we should be striving for before the industry is bled dry by parasites like Spotify. You don’t have to steal music, or use a freemium rip-off service like Spotify, you can pay full market price through legal means. Unless you don’t want to, in which case, cool for you!

      “It’s not like Spotify are rolling in money while the artists can’t afford baked beans to put on their toast.” Actually, they are. To the tune of $3b of speculative worth, and their CEO being the UK’s tenth richest man, as a direct result of his job as CEO of Spotify.

      “As an aside, that’s not what that means at all.” Cool aside. For every year between 1998 and 2011, record industry profits tanked. For the first time in 13 years, they went up in 2012, 0.3% from the previous year. So, as an aside, please explain what those figures actually mean.

      “What I expect to see is that live touring becomes the primary revenue source for bands.” That’s great! And where do you propose that the money to fund this touring will come from? Spotify perhaps? That’s right, they pay artists as little as is currently legally possible.

      “Spotify is actually incredible for artists, because it means that if you produce lasting music that people continue to listen to, you’ll continue to get paid, every single time someone listens to a song.” Do you mean like on the radio? That’s why broadcasters pay a lot of money to recording industry associations for the right to play musician’s recordings on air and then play ads between them. These are called royalties. 55,000 plays on Spotify for one artist paid them out US$3. THREE AMERICAN DOLLARS.

      Foxtel on Xbox currently offers the streaming Netflix-like service you are talking about. It doesn’t have quite the selection that US sites do, but it’s pretty extensive and includes fast-tracking of all new HBO show to the following day. It’s not five years away, it’s available now.

      • Phil

        >To the tune of $3b of speculative worth, and their CEO being the UK’s
        tenth richest man, as a direct result of his job as CEO of Spotify.

        Speculative worth means absolutely nothing. Groupon was valued at $13 billion, after an IPO where people have to put their money where their mouthes are, it’s worth at $1.4bn. Facebook’s IPO had a market cap of $100bn, it’s now at 60bn.

        Personal wealth means nothing. Daniel Ek has had a bunch of successful positions including several aquisitions of companies he founded. Plus, good CEOs are expensive, and he has experience. If anyone could do it, they could be paid less. The fact is, Spotify has never turned a profit, and that is the only relevant statistic.

        >So, as an aside, please explain what those figures actually mean.

        It means exactly what it suggested. Revenue went up by 0.3%, which is correlate to profitability, but certainly not equivalent. A drop in revenue also definitely doesn’t mean a loss. I don’t doubt that labels are hurting, and I recognised that for some artists they perform a valuable service. They’re in the business of risk taking, and they’re very good at managing risk, which is why they managed to have a revenue increase at all in a world where music is worth nothing.

        >And where do you propose that the money to fund this touring will come from?

        Typically it comes from ticket sales, and if your ticket sales aren’t good enough you cancel the tour. I mean come on. There’s a whole industry of promoters (see Soundwave’s lovably abusive promoter AJ) who front the cash for tours at a set payment for artists. The risk is handled by them, and if it’s not profitable for artists to come, they just won’t bother (see: why my home town is missing out on Tool and Opeth tours when every other capital city gets them).

        >Foxtel on Xbox currently offers the streaming Netflix-like service you are talking about.

        It doesn’t, it offers an aspect of what I was talking about. There’s still a time delay on releases (if they’re released at all), they’re still lower quality than what can be pirated, and it still has ads, when I have to pay a fee for it!

        • Elmo Keep

          Poor Facebook, with its mere $60b.

          Daniel Ek was nowhere near as rich as he is now before he joined Spotify, so to say that no one is making money from it is untrue. Have a look at their Sydney offices someday. They are actively pushing the value of music down, because their business model is predicated on fairly paying everyone (especially themselves! Do you think anyone is working there for free?) *except* the musicians without whose music there would be no Spotify. Funny they didn’t factor in paying for the product they are on-selling and yet they hope to sell the company some day to someone who will pay X billion dollars for it.

          Again, to cover touring, you need to either be at the size where you can share that potential loss with the promoter, have a label back your endeavour, or be able to cover the costs independently. This skews the field in favour of artists who are already established. For everyone else, the market is being cannibalised to the point where it isn’t viable.

          Yes, the industry is hurting, by having its profits almost halved since Napster emerged. Which is probably just a coincidence.

          Looking on Xbox now, you can get in HD, brand new Girls, Walking Dead, Justified, Sons of Anarchy, and I watched Boardwalk Empire through it the following day after it aired in the US. They will also be fast-tracking Breaking Bad. There are no ads.

        • http://www.facebook.com/christopher.kemp Christopher Kemp

          Incidentally, the idea that touring is some vast, untapped market is misguided. Musicians have ALWAYS toured – and there is a whole different set of economics surrounding touring that has to be taken into account as well. You have to pay for accommodations, meals, travel expenses, fuel & cartage, crew’s salary & expenses, as well as maintaining your living situation at home.

          Oh, and that promoter that you mentioned – yeah, they get a significant cut for their initial outlay…and, for every story of a band getting the shaft from their record company there is at least a dozen stories of getting shafted by a concert promoter.

          Furthermore, there’s a limit to how many shows even the most dedicated music fan is going to go to – even if they were not in constant competition from TV, movies, & all the other things competing for peoples’ free time and entertainment money.

  • Ruhfus

    Elmo, your position resembles that of the Luddites in the 19th century.
    Technology was always going to disrupt the way we record, distribute and listen
    to music.

    The business model of selling albums for $30 a pop was only ever going to be a very short
    lived affair. Those were to golden years – they are over now. There will probably be some twee hipster revival of recording to vinyl in the year 2525… if man is still alive. Artists need to come up with new ways to make a living from their craft (they actually already are).

    The record companies and studios need to take some of the blame here. They knew the
    internet revolution was going to disrupt their business model, but they didn’t do anything. They sat on their butts and scratched their heads for a decade. They can’t cry foul now that someone else did what they should have done in the beginning (make it easily accessible for us to pay for it).

    Don’t steal music.

    • http://www.facebook.com/christopher.kemp Christopher Kemp

      While it’s true that the record companies dragged their butts for way too long, ignoring the internet, we now have iTunes, Amazon, and numerous direct-purchase options available. I can buy an album in less time that it would take me to go get in my car – so this is no longer any sort of justification for not paying fair market value for music.

  • Kirsten Tranter

    Elmo, thanks for this awesome piece – reminded me of David Lowery’s arguments http://www.theawl.com/2012/06/david-lowery-chat

    – which are basically about the ideological disconnect that makes people feel fine about spending lots of money on hardware like ipods & computers, but also expect to pay nothing for the stuff (the “information”) they access with that expensive hardware.
    The situation is bad for writers too, as you point out – we’re not only asked to write for nothing with alarming regularity but when pay is offered it is unbelievably bad.

  • callmekbro

    Thank you so much for bringing up the Spotify Sydney offices, their world-travelling staff, extremely plush surrounds and constant Instagramming of ping pong tables purchased, boutique beer brewed for them, staff afternoons overlooking Bondi etc – – all the while their non-disclosure agreements with record labels prevent anyone from even KNOWING what percentage of royalty makes it to the artist and we’re supposed to thank them for their great services to musicians and music lovers. No thanks!

  • Matt

    Every single day entire pressings of records (hundreds/thousands of units) are selling out after having only been on sale for a matter of minutes/hours/days/weeks, and there are frequently examples of bands who are funding said releases (as well as other things such as tours or merch) through the profits made by selling their music through bandcamp (you just need to look at the bandcamp homepage to see the several transactions flying through every second).

    There still are–and always will be–fuckloads of people who enjoy following bands and buying records.

    The thing is that the casual music fan no longer needs to fork out $10-40 for a copy of a CD of which they probably only want to listen to one or two songs a handful of times. For these people paying 0.003 cents to listen to a song while text messaging their friend is probably a fairly accurate representation of what it is worth to them, and they probably never would have purchased the $10-40 CD anyway. It seems all sorts of fucked up to make claims about peoples morals just because they don’t wish to donate money to fund other peoples hobbies.

    • http://www.facebook.com/christopher.kemp Christopher Kemp

      Those figures are Pretty extreme – I never paid $40 for any CD, for one thing. But, 0.003 cents as an alternative?? That’s ridiculous! You don’t have to buy the whole CD anymore – you only want one song, then buy the one song for $1 – that’s almost half the price of a cup of coffee, which you’re only going to use once & then piss away. Surely that’s reasonable for even the most casual listener.

      By the way – you’re not subsidizing someone’s hobby by buying their music. You’re supporting small business.

      • Matt

        $40 CDs were a pretty common thing at one point. Most of the time they were “imports” (remember those albums that featured slightly different artwork and an obi strip that record stores would sell for double the price of the normal version?), “special editions” (which were just albums that included an extra disc featuring a couple of live tracks), or those CDs in that expanded long john packaging (which were just an attempt from record stores/labels to make shop lifting harder), but there was definitely a period in the 90s where you would find a lot of normal albums priced at $30+ on the regular.

        I agree with you that $1 per song is a very fair price (even though the going rate on iTunes Australia is $2.20, no?), and it’s great when people see the value in music enough to want to pay for it, but don’t kid yourself into thinking that this issue is anything more than personal preference. It’s fucking wrong to shame people into feeling like they have to financially support bands/artists they like. If people want to buy a record, that’s great. But if somebody wants to listen to an mp3 of a song they dig a bunch of times and not pay anything, that’s cool too.

        • http://www.facebook.com/donna.barrows1 Donna Nota-Barrows

          It is wrong to download for free an artists work. It is stealing.Artists Work for hard to produce their product. How would you feel if you showed up for work and your boss told you the consumers were now going to take what you produce for free therefor he was no longer going to pay you unless someone paid for and item. You hadto work for free the rest of the time.

          • http://twitter.com/DaveAThornhill David Thornhill

            You mean like straight commission? Where salespeople do not receive a salary but rather are paid a percentage of the sales they make?
            Granted most are not burdened with as the same high levels of shrinkage as musicians or producers (theoretically) are.

      • Ellen

        The 0.003 cents isn’t the cost of a CD or a song that you’ll keep, it’s what Pandora or Spotify pays the artist every time you listen to a song. Every single time. While if I buy a song for $1, I might listen to it hundreds or thousands of times and it’s all bundled into that dollar. I subscribe to Pandora, and I use it just like I would have used a radio in the 90s. But my $40 a year goes toward no ads, and also the ability to tell Pandora I hate a song and a limited ability to skip songs. But I can only skip 6 songs in an hour, so just like listening to the radio, sometimes I’m waiting through a song I really don’t like so I can hear the next song (granted, less often, which is why I pay for it instead of listening to the radio). I don’t think Pandora and Spotify’s payments are that bad, we’re just used to seeing prices for music that we would own, not on a subscription model, which is naturally going to be much cheaper per listen than buying a song.

    • black_obelisk

      .

  • http://twitter.com/willegitimate Will Dawson

    Great article Elmo. I agree with a lot of what’s said here, but I’m not so sure that Spotify is as much as a parasite on the industry as you say it is. From what I’ve read it seems that it’s the major record labels that have Spotify in a bind – they are all shareholders in the company and demand huge percentages of revenue, making it very difficult for it to be profitable. This is an interesting article that explains some of the demands record labels have of Spotify, et al: http://gigaom.com/2011/12/11/why-spotify-can-never-be-profitable-the-secret-demands-of-record-labels/

    I agree that what artists get from Spotify isn’t sustainable but I just don’t think the entire blame can be put on the company itself for being money hungry.

  • 10kfreemen

    I’ve always wondered what percentage of Spotify subscribers listen to music they’ve already bought in the past (on CD, tape or any other format). Royalties might generally be low, but in times like these streaming something you own is easier than finding it in a box. I can’t help but feel every time people talk about Spotify royalties people assume it’s an either or, not an as well situation. I often listen to old albums I’ve bought (royalties on albums from ten years ago should surely be considered a bonus) and even new albums I’ve bought because it is easier to negotiate on my phone or computer… Then again, I could be a crazy minority.

    • Toni

      I agree with Spotify. I use a combination of spotify and soundcloud to find songs that I like by artists that are similar to my favourites but I had never heard of. When I like the song I search for it on itunes and buy it.

      In the case of soundcloud, sometimes I shazam the song in a mix and it gives me the option to buy it on itunes.

      I also have several friends with great internet reception who subscribe to spotify. In my case, data on my phone is limited and not the fastest unless im hooked into Wifi, which is why I prefer to buy the songs on itunes to listen to offline.

      I also have a bunch of albums (such as the back catalogue of radiohead) which i have physically purchased from jb hifi on several occasions but continuously lose the discs or damage them. With spotify I can listen to these albums without having to purchase them for the 15th time.

      I believe in content protection and supporting the artists through purchasing their music and going to their shows, but spotify helps me discover artists I hadn’t heard of previously and in turn, creates an itunes album sale from me.

  • Meedia

    The most interesting point in your article (which is why the entertainment industry is in this position) should have been expanded on:

    “Which isn’t to say that these industries haven’t always been overly potted with scions of privilege: they have.”

    These industries firstly lacked the foresight to see what was happening, then refused to change and adapt, then as others have said here sat on their hands, then threatened with legal might, all the while hoping to hold back the tide and refusing to learn any lessons from history.

    • Matt

      Not only this, but these industries only got to the bloated size they are by being extremely unfair and disrespectful to both the fans and the artists alike…The Problem With Music, anybody? http://www.negativland.com/news/?page_id=17

      The fact that they’re claiming that everybody should “respect the artists” and “play fair” now that the script has been flipped feels like some kind of cruel joke.

  • Jenny Noyes

    great article, lots to think about… my feelings on this subject are pretty confused and conflicted, and I can’t help but feel like the horse has bolted and the media consumption landscape has changed irrevocably. whether it’s worse or better is kind of irrelevant, I don’t see us going back to how it was before. consuming patterns are different now, overwhelmingly so. I agree that it’s pricing would-be producers out of entry, but I also feel like being able to pay for all the “required reading/viewing” even just to be able to participate in the conversations around tv, film and music these days is a luxury that few can truly afford, especially if we’re talking $30 an album, $20 to see a film at the cinema and so on. So what can we do, really, aside from look for new and better ways to support emerging artists at a grassroots level and be choosy about where to invest our small disposable incomes?

    • http://www.facebook.com/hanwolff Hannah Wolff

      I completely agree, I think most people are confused and
      conflicted about it in one way or another. Even when you try to take the moral
      high ground and actually pay for the stuff you want to consume …. The nagging “Oh
      but its freeeeeee online” devil on your shoulder is a difficult bugger to drown
      out…and usually the devil we succumb to.

      The way we now consume media has completely changed…well duh.
      Our first thought is no longer to go down to the local record store if you ever
      get lonely and as Kate Hudson so naively suggests “visit your friends,” rather it’s to sit on your couch while one giant
      party unfolds back at yours sans effort,
      mess, set up and of course cost. Our default is now to assume that
      music, tv, films, whatever should be/ could be and are free…. How do you change
      that? And BEYOND that how do you convince people it’s WORTH changing? Paraphrasing
      here, our ability to rationalise our behaviour paired with our desire to be
      instantly gratified I think, has also seen a general lull in the quality of the
      product we’re used to consuming, I stress consuming not producing. Yes I know
      there are a few of us that sit at home and trawl to find the best possible
      version of whatever it is we’re looking to download, but GENERALLY we’re ok for
      that little buffering circle interrupt our streamed American TV program… it’s
      free, it’s here and it’ll do right? We’re ok to forgo image quality on that
      download or even sound quality because yet again it’ll do. It’s like the duct tape
      of the digital world. So now exists this weird tension in which people want
      free stuff (good). People want free stuff now (of course). Free stuff now is possible for a small price paid
      in quality (that’s ok it’s free)… and then you – being everyone involved in the
      production of the high cost free stuff – turn around want to me to pay for something that
      I think is only just “good enough?” I think we’ve willing forgotten the value
      of quality… because remembering means remembering quality is something you pay
      for.

  • http://twitter.com/dfmzz dzzzz

    Interesting article – however, I’m not sure I agree with your conclusions entirely. “Do we really only want our rich to be musicians etc”. Actually the rich already have all these jobs already, when you take a more global view.Who in the developing world gets recording contracts, gets their art work in galleries and so forth, actually gets access to the internet capable of pirating music? You must mean rich relative to the society in which one lives. But, still enjoyed that (though typo alert *free labour, surely?)

  • JMeyer47

    Actually the premise of this article of “Information wants to be free” and the “full context” of the full quote is misleading. The actually origin of the quote is from Stewart Brad in the 60’s and then was readopted for the Freemium movement by Chris Anderson (who is glaringly overlooked in this piece) which predates Chris Ruen’s by a few years at least.

    Roger Clarke’s outdated website – used as part of the thesis – is the perfect metaphor for many of the opinions stated in this piece.

    Nobody is forcing anybody to adopt the free or pay-what-you-want model. But to slam it all together because the rules have changed and people have to work actually *harder* for their fat record company paychecks is pretty immature.

    Also, record revenues dipped because of, yes, piracy, but also because digital downloads are a reasonable $10 for an album and not the inflated $16- $25 for a CD at retail. Simply, the record industry gouged customers for years and they are serving their 13 year penance.

  • http://twitter.com/ZombieRockParty Zombie Rock Party

    Sorry RIAA no longer gets to play cultural gatekeeper. The cost to record, produce and distribute an album has gone down significantly. Now any “amature” artist can afford to self publish music with an ease that would make any band from the 70’s choke with envy.

    And speaking of bands from the 70’s, you quote Gene Simmons? This guy is as out of touch with reality as you can get. I certainly wouldn’t expect a guy who’s fortune was made by some record executives figuring out how to package and sell “rebellion” to kids to welcome change.

    Gone are the days of buying a $20 album and finding only 1 decent song on it. I would say the ratio is about right. When the record industry is making about 1/10 of what it was, that should account for the number of albums they produced with 1 or 2 good songs out of 15.

    Actually I do pay for all the music I download. I pay by the effort it takes me to click download. Now before you think that it’s ridiculous remember, I have to find that music and click a bunch of times, and sometimes that is simply more effort than I’m willing to spend on some polished trash the recording industry wishes it could sell me.

    • http://twitter.com/aliterative Alice R Fraser

      I am sure the clicking you do completely compensates the person who spent 10 years learning to play an instrument, compose a piece and produce it for your consumption.

      Artists just want to make art, that’s why they don’t deserve to be paid. They can do art in their spare time, surely. Faulkner had a day job, didn’t he?

      Freedom of information is not freedom of property.

    • Caketin Welsh

      You talk of The Recording Industry like it’s some big shiny behemoth grabbing all the money it can see. That might have had some truth to it at the height of CD sales in 2000, but now the majors have crumbled and merged into two big sad old men hurling darts at the wall and hoping some of them hit the board, talking wistfully about the old days. The Recording Industry is majors but also little labels who get by on the smell of an oily rag, guys who live with their parents and 1000 LPs they pressed themselves, bands who do everything on their own because they can’t afford not to. If you don’t want polished turds, seek out the actual good shit and pay $7 for it instead of sneering about how you’re better than The Recording Industry and they barely deserve your hard-earned clicks, let alone your cash.

  • Matt

    Thank you for this article. It is a sound and comprehensive insight into today’s music industry.

  • grace

    Related: I wrote about the plight of freelance writers and journalists just recently, and how the whole business model of journalism has to change: http://gracedobush.wordpress.com/2013/03/08/working-for-free-someones-got-to-get-paid/

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  • eparreiii

    royalties, money, power …

  • jolievie

    I always thought spotify paid the Artists the same as i-tunes,especially when there is a purchase button because for most people it is the ability to put things in playlists for various activities quickly that is the appeal of spotify etc and then if you want the playlist or song on your i-pod you pay but apparently the Artists are making a pittance while the company is establishing itself,I did not know this,I think sticking to i-tunes is the best idea especially for the charts but in retrospect buying direct from the band is probably the best thing to do if you want them to have the money to paid production costs ,touring costs and make a living.Eyes open .Because no profit ,no music in the longterm.I mean I actually want to know exactly how much the Artists get when I purchase an album on i-tunes because they are the ones putting in the work.

  • Marina Bikova

    слишком много читать, лень

  • http://twitter.com/Terriaw Terri Wilhelm

    A moral dilemma indeed! People who pirate music don’t have the ethics to realize that just because you can doesn’t make it okay. I’ve always been a strong proponent of buying my music and any other art I like enough to own. (I’m not a saint, and was one of those people who would tape songs off my boombox back in the day when you couldn’t buy digital music.) Creating art, any type of art, is a lot of hard work and should be rewarded like any other profession. I’m just one small person in this world trying to make a living as a freelancer. I’ve had people ask me if they can use my art for their self-promotion. When I propose creating new art specifically for them, along with a quote, they disappear. I feel the need to check up on them to make sure they didn’t go ahead and use my artwork anyway. In this day and age, using the Internet is the way to go in marketing yourself. But you have to be so careful in protecting yourself so you’re not giving away your work for free. Great article and discussion!

  • Amanis Olmos O Fold

    I agree that the rights and remuneration of all the work, must go directly to the artist, but somehow it is difficult to persivir or live ciar the experience of others and know that some people aseden to the free content or piracy in any way, if there is the possibility that the attention and reward, is addressed to the artist advocate of this, since I’m on the same side.

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  • http://melodiefabriek.com/ Marco Raaphorst

    money is a complicated thing. is that the right compensation for our art? do you really feel 99 cents is okay for a song? in my opinion: no way. “I do not care about what went into making this art that I am now enjoying” – trust me, most people don’t like the stuff they have just heart or read. If it’s a download or a stream. They will not even hit the like button. I guess 1 out of 50 people might like something. Maybe 1 out of a 100 might buy it. Has always been like that. Ever checked the views on some popular videos? Will those people like to pay for that? Probably not. Maybe 50% hates that video.

    if you give something away for free, that’s not the same as saying it’s worthless. love is free. a lot of good things are free.

    if you want to make money you need to be creative. that was always the case. does anyone know how much money Robert Johnson got from those recordings way back? … worthless shit probably. just because of the price…

    • Caketin Welsh

      I think the jury’s still out on whether Robert Johnson got a good deal or not…

  • TrustMeI’mAScientist

    Excellent article. Required reading in my book.

    There’s a new boss in town, and it certainly ain’t “the record companies.” Truth is, exploitation is exploitation, no matter who’s profiting from it — And no matter how consumer-friendly their arguments may appear at first glance.

    We’ve been devaluing the people who do the creative work we love so much for too long now. Fortunately, that tide is beginning to turn. Thanks for helping to shed some light on this, Elmo. It’s important stuff.

  • Toni

    “Spotify pay artists peanuts and care only about pamking profit for their shareholders” (paraphrased). Well, let’s take a look at Spotify’s shareholders and the amount each of they paid for their stocks:

    Shareholders in Spotify on 10/7 2009

    Bolag Andel

    Rosello (Lorentzon) 28,6%

    Instructus (Ek) 23,3%

    Northzone Ventures 11,9%

    Enzymix Systems (F. Hagnö) 5,8%

    Sony BMG 5,8%

    Universal Music 4,8%

    Warner Music 3,8%

    Wellington IV Tech 3,8%

    Creandum II LP 3,5%

    Swiftic (Strigéus) 2,6%

    Creandum II KB 2,4%

    EMI 1,9%

    Merlin 1,0%

    SBH Capital (B. Hagnö) 0,8%

    df

    Riskkapitalbolagens investeringar

    Northzone 8 miljoner euro

    Creandum 4 miljoner euro

    Wellington 6,5 miljoner euro

    Li Ka-shing 20 miljoner euro*

    * enligt Financial Times

    How much the labels paid for their shares.

    Sony BMG – 2 935 euro för 6 procent av aktierna.

    Universal Music – 2 446 euro för 5 procent av aktierna.

    Warner Music – 1 957 euro för 4 procent av aktierna.

    EMI – 980 euro för 2 procent av aktierna.

    Merlin* – 490 euro 1 procent av aktierna.

    http://techcrunch.com/2009/08/07/this-is-quite-possibly-the-spotify-cap-table/

    Just thought i’d throw that tidbit of info in

  • Mike Post

    @JMeyer47:disqus “Simply, the record industry gouged customers for years and they are serving their 13 year penance.”

    Lol, I hear this a lot… so just when is this “penance” going to end, and who is it set by? I quit making music because it’s a deadzone, and a lot of others have too.

    You could argue that record companies steal from artists, I sure used to. How is it any better that everyone is stealing from artists now?

    I support artists, what do you do?

  • mony1