Do you find it easy to be moderate about things? It’s taken me a long time to learn about moderation, about knowing how to leaven and temper my passion with patience. For most of my life I’ve been an extremist, either full-on about something or not at all engaged. As a result, particularly of late, I’ve had to take time to learn one thing: If you feel really passionate about something, take the time to step back and look at things from the opposite perspective.
Now the Digital Economy Bill is something I feel passionate about, which is why, as we approach Tuesday 6th April 2010, I’ve been writing a post a day on the subject for the past few days. The Bill covers a litany of subjects; the particular bit that bothers me is to do with the treatment of downloaders, the what, the why, the who, the how, the whole shooting match. As far as I’m concerned, I feel that the premise is wrong (illegal downloading does not take place at the levels claimed); the people are wrong (the Bill is being pushed through by unelected people who have clear bias in favour of “rightsholders”); the process is wrong (such an important Bill should not be finagled through parliament without proper debate) and the punishment is wrong (as BT CEO Ian Livingston pointed out recently, a fine is more appropriate for the crime, it’s easier to administer and it does not affect others in the household).
Notwithstanding all that, let me try and look at this issue from the perspective of the “rightsholder”. In fact let me go further, let me look at it from the viewpoint of the rightsholder after the Bill, in its current state, has become law. Ostensibly as happy as a creature of the porcine persuasion in an environ of excrement.
What could possibly go wrong? Let me count the ways:
1. People stop downloading all digital music, not just “illegal” music
Retaliation: The music industry, particularly through organisations like BPI and IFPI ,has spent a long time telling its customers what rotten people they are. In the latest report issued by Ofcom, the country had around 17.3 consumer and small business broadband lines; which suggests that a very high proportion of digital music customers acted illegally. Irritated by the change in law and by being treated like criminals, people may just give up and stop downloading music altogether, legal as well as illegal.
Fraud: Given the level of internet fraud going around, people may not want to take the risk of losing their broadband connection by buying music in good faith from a pretend-legal site. When they buy anything else, they tend to get their money back from the credit card company. When buying music, even in good faith, they run the risk of losing their broadband connections. So they stop buying music online altogether.
Streaming: Man’s ability to record and replay music is itself less than 150 years old. Newer than the postage stamp, newer than the locomotive, newer than the Grand National, newer than the FA Cup. By British standards, recorded music is a mere stripling, a callow youth. Man’s ability to own the recorded music and retain it for personal enjoyment is even newer, it hasn’t been there that long. And it may not be in vogue for long either: there is a growing body of evidence that the Millenials prefer streamed music to owned music. My own habits have changed. I still buy vinyl, but in dribs and drabs. I still buy CDs, but also in dribs and drabs. For the most part, I use services like Spotify.
So whether it’s frustration or fear or a change of habit, people may use this opportunity to stop downloading altogether. Since digital music sales are reported to be booming, the industry runs the risk of killing the baby goose before it really has a chance to lay any golden eggs.
2. People stop downloading music illegally, but there is no materially positive impact on revenues
Download levels estimated wrongly: The Mandelson 7 million figure turns out to be hogwash. [And, like Churchill, I shall resist the temptation to say I told you so]. So even though everyone behaves legally when it comes to downloads, the market uplift just isn’t there. [ I am so tempted to ask that, in the event of the law being passed unchanged, the music industry is asked to put down 15% of the loss figures it has claimed into escrow in advance, to pay ISPs for the cost of implementing the technical solutions].
High price elasticity of demand: The pirated downloads might have been real, but there is greater price elasticity of demand than was anticipated by the industry. Rolex watches sell for thousands of pounds. Rolex ripoffs sell for tens of pounds. No one in Rolex honestly believes that the customer who paid a tenner for a ripoff was a real contender for paying five hundred times that for the real thing.
The end of try-before-you-buy dampens sales: There is evidence that people who download music are also the ones who buy digital music. After all, they must have the connections, the access and the equipment in the first place. By being denied the chance to try the music out, they may not buy at the levels they used to. So any uplift in digital revenues via the change in law is compensated and balanced by a drop in the revenues that used to be there.
It is one thing to lay out a whole series of “facts” in order to browbeat busy politicians to do something; it is another altogether to expect that those “facts” become real in the process. In this respect, the Digital Economy Bill may turn out to be a case of shutting the stable door after the piglet has bolted.
3. People stop buying from established labels and channels and move to new, independent channels that offer them what they want
In a fascinating study entitled The State of Music Online: Ten Years After Napster, the Pew Research Center makes the following, telling, observation:
While the music industry has been on the front lines of the battle to convert freeloaders into paying customers, their efforts have been watched closely by other digitized industries — newspapers, book publishing and Hollywood among them — who are hoping to staunch their own bleeding before it’s too late. And if the music market is any indication of how consumer expectations will evolve elsewhere, the demands for free content will extend far beyond the mere cost of the product.
In the decade since Napster’s launch, digital music consumers have demonstrated their interest in five kinds of “free” selling points:
- Cost (zero or approaching zero).
- Portability (to any device).
- Mobility (wireless access to music).
- Choice (access to any song ever recorded).
- Remixability (freedom to remix and mashup music).
All of this makes for a tall order, but if history is any guide, music consumers usually get what they want. And as researchers look back on the first decade of the 21st century, many will no doubt point to the formative impact of file-sharing and peer-to-peer exchange of music on the internet. Napster and other peer-to-peer services “schooled” users in the social practice of downloading, uploading, and sharing digital content, which, in turn, has contributed to increased demand for broadband, greater processing power and mobile media devices. Further, the Napsterization effect extends to non-media areas such as sharing health information, oversight of politicians, access to government data and online dating via free social networking sites.
Remember this is about digital music consumers, not “dirty rotten illegal downloaders and filesharers”. The people who crafted the current version of the Digital Economy Bill appear to have thrown away all the input and consultation to do with the consumer side of the music business and concentrated on the “rightsholders”. [I suppose this should have been expected, since that is the precise problem with a lot of modern copyright law, too one-sided to be useful or progressive]. Consumers want the five things stated above. If they don’t get it from the established digital music industry, they will go somewhere else to get it. Which gives independent labels and new entrants the chance they’re waiting for, to drive a bus through the barndoor of opportunity that’s opening up for them. Artists have the opportunity to set up their own label and distribution capability, like the Grateful Dead did nearly fifty years ago. There are many who are watching and learning from the Dead, from Radiohead, from Nine Inch Nails, and so on.
4. Content is not king: simplicity and convenience rule
There was a very interesting article published by Andrew Savikas in the middle of last year, talking about content being a service business. In it he quotes from Trent Reznor of Nine Inch Nails:
[W]hat you NEED to do is this – give your music away as high-quality DRM-free MP3s. Collect people’s email info in exchange (which means having the infrastructure to do so) and start building your database of potential customers. Then, offer a variety of premium packages for sale and make them limited editions / scarce goods. Base the price and amount available on what you think you can sell. Make the packages special – make them by hand, sign them, make them unique, make them something YOU would want to have as a fan. Make a premium download available that includes high-resolution versions (for sale at a reasonable price) and include the download as something immediately available with any physical purchase. Sell T-shirts. Sell buttons, posters… whatever. [emphasis added]
Reading through what Reznor had to say in his original post, I found another extract telling in the extreme:
The database you are amassing should not be abused, but used to inform people that are interested in what you do when you have something going on – like a few shows, or a tour, or a new record, or a webcast, etc.
Have your MySpace page, but get a site outside MySpace – it’s dying and reads as cheap / generic. Remove all Flash from your website. Remove all stupid intros and load-times. MAKE IT SIMPLE TO NAVIGATE AND EASY TO FIND AND HEAR MUSIC (but don’t autoplay). Constantly update your site with content – pictures, blogs, whatever. Give people a reason to return to your site all the time. Put up a bulletin board and start a community. Engage your fans (with caution!) Make cheap videos. Film yourself talking. Play shows. Make interesting things. Get a Twitter account. Be interesting. Be real. Submit your music to blogs that may be interested. NEVER CHASE TRENDS. Utilize the multitude of tools available to you for very little cost of any – Flickr / YouTube / Vimeo / SoundCloud / Twitter etc.
The key phrase for me is this one: make it simple to navigate and easy to find and hear music.
When I read the Savikas article, one of the points I understood was this: the success of iTunes lay in the quality of the service they offered, the simplicity and convenience, rather than in premium content. In fact, the pricing of digital goods tends to reflect this: prices for songs, albums, films and books tend to be very similar for a given class of digital good, suggesting that the content behaves like a commodity, that the perceived value is in service simplicity. When you take into account recent developments such as Ofcom’s stance on Sky’s exclusive premium content, there is every possibility that there’s going to be downward pressure on the prices of premium digital content.
So let me summarise. I don’t know much about how the world is changing as a result of the internet and the web, as a result of digitisation. What I do know is this: these changes are putting real structural pressure on a number of industries, particularly on the “publishing” industries of music, film, journalism and books. Every participant in the supply chains of those industries is feeling that pressure.
During such a time of flux, the customer becomes even more of a scarcity, even more of an asset. Any action you take which alienates customers, you take at your peril.
In this context, the actions of the music industry at this time, particularly in the context of the Digital Economy Bill, seem foolhardy in the extreme. Foolhardy enough for shareholders and activists to look at the consequences very carefully, and to take legal action against the decision makers.
You know something? If I was one of those people who’d lobbied to put all the garbage in the Digital Economy Bill, I would start praying. Now.
And I would write to my MP and ask that the Bill be withdrawn. Even if I worked for the BPI. Particularly if I worked for the BPI.
Sometimes it pays to Be Careful What You Wish For.