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Part of it is that (before the internet) if you wanted a song you had to buy the album, so the music industry began a steady switch to a business model where they produced a "theme" song for an album and then they played that song to death on the radio. Gradually, albums just became an excuse to charge $# and there's really only 1 maybe 2 songs on the album that anyone wants and the rest of the songs are just crap. It worked until people realized they could just get the song they wanted and leave the rest of the collection in the trash where it belonged.

And so the music industry blames piracy for its own stupidity. They aren't losing money because people want their product for free. They're losing money because their product isn't worth the silicon its stored on.

With downloads in digital the laws of supply and demand break down as you can effectively distribute a copy to as many people as you like so long as the bandwidth is available.

Perhaps this where industry reticence comes from.

Sonophos wrote:With downloads in digital the laws of supply and demand break down as you can effectively distribute a copy to as many people as you like so long as the bandwidth is available.

I totally disagree with this statement. Increasing supply is just as expensive as ever. It's not the cost of distributing the media that has been the burden, it's producing and marketing the material itself that is the cost driver.

The relative cost of marketing has stayed the same if not fallen as advertising costs have fallen.

Are you honestly telling me that running 5-10GB on a data centre is as costly as a DVD/Blu Ray production line?

Grakmar wrote:

Sonophos wrote:With downloads in digital the laws of supply and demand break down as you can effectively distribute a copy to as many people as you like so long as the bandwidth is available.

I totally disagree with this statement. Increasing supply is just as expensive as ever. It's not the cost of distributing the media that has been the burden, it's producing and marketing the material itself that is the cost driver.

That's true. It turns out too that digital distribution isn't free.

Business costs are lower than traditional media such as discs but not by nearly the margin people think.

At the same time, users place a lower premium on digital content and will not pay as much for it. (Another source of motivation to copying.)

Grakmar wrote: Increasing supply is just as expensive as ever.

Especially in regards to digital downloads, this statement is patently false. The cost to produce a song, and create an .MP3, FLAC or whatever format you prefer is the same, true, but once you charge someone to simply download the .MP3 instead of charging them for a physical CD you have to burn, your supply costs have gone down considerably, especially as more and more people buy the song that you no longer have to print on individual media.

Sonophos wrote:The relative cost of marketing has stayed the same if not fallen as advertising costs have fallen.

Are you honestly telling me that running 5-10GB on a data centre is as costly as a DVD/Blu Ray production line?

Digital selling is not just a matter of having a data centre (which aren't free). The back office functions such as account validation and transaction charges add up too.

I still can't see how digital distribution costs can come anywhere close to physical media.

Back office functions exist in both models; Labour costs are lower as you don't need as many staff; transaction costs exist in all commerce by nature.

Data centres aren't free but the unit cost of running them is far lower than running production lines, warehouses, distribution networks and shops; all with their attendant staffing costs.

Sonophos wrote:I still can't see how digital distribution costs can come anywhere close to physical media.

Back office functions exist in both models; Labour costs are lower as you don't need as many staff; transaction costs exist in all commerce by nature.

Data centres aren't free but the unit cost of running them is far lower than running production lines, warehouses, distribution networks and shops; all with their attendant staffing costs.

Lower cost, yes, but it's not to the point where "the laws of supply and demand break down".

Sonophos wrote:With downloads in digital the laws of supply and demand break down as you can effectively distribute a copy to as many people as you like so long as the bandwidth is available.

Actually this jsut means that the laws of supply and demand are more accurate to economic theory than before.

A large number of producers provides a better distribution of supply and demand than a small number of producers because the small number of producers reduces competition, which increases the individual producer's power over the market. And now artists can be their own producer with relative ease, thus reducing the big producers' power over the market.

That's what they're really upset about-- losing control.

Point taken.

It would perhaps be more accurate to say that the previous rules do not apply. Price can no longer be inflated by limiting supply unless you have exclusive access passes for streaming sites I suppose.

I concede the point but it does not take much thought to build a model where control is regained it just cuts out the distributors and a whole load of infrastructure.

LordofHats wrote:Part of it is that (before the internet) if you wanted a song you had to buy the album, so the music industry began a steady switch to a business model where they produced a "theme" song for an album and then they played that song to death on the radio. Gradually, albums just became an excuse to charge $# and there's really only 1 maybe 2 songs on the album that anyone wants and the rest of the songs are just crap. It worked until people realized they could just get the song they wanted and leave the rest of the collection in the trash where it belonged.

And so the music industry blames piracy for its own stupidity. They aren't losing money because people want their product for free. They're losing money because their product isn't worth the silicon its stored on.

You don't need to blame piracy for this, it is observed with legal downloads too. It used to be that you had to buy the whole album to get a few tracks that you wanted. With Apple, and other online music retailers you can buy the album piecemeal. And people are doing just that, buying a few tracks for a few quid and leaving the rest. Instead of spending a lot more and getting a lod of other tracks bundled in they don't want. Ultimately the record company get less for the album, because people spend less to get what they want from it. Furthermore, such is the power of the online retailers that they can take a massive cut and pass even less on to the record company.

The record companies could simply refuse to deal with Apple and others, but they just can't afford it because they'll get no advertising. As is the case with the book industry; they are mercy to the aggressive demands of Amazon and supermarkets, but they just can't afford to exclude these retailers such is the state of the market today.

Really they need to change their approach completely and adapt to the modern marketplace, because the threat comes from legal distributors as well as piracy.

In fact , it's probably greater from legal distributors as most people when given the option will likely choose the legal method if they know one method is legal and another is illegal.

biccat wrote:Here's one methodology.

Predictably, the ESA methodology is extremely vague.

While it is widely known that statistics that can be manipulated, what isn't widely known is that there entire companies dedicated to the production of what I call "rhetorical statistics". In essence, statistics that are meant to direct opinion, rather than describe actual conditions.

Out of curiosity, were the heads of megaupload American citizens?
If not, then how the hell did the FBI nab them in New Zealand?

CthuluIsSpy wrote:Out of curiosity, were the heads of megaupload American citizens?
If not, then how the hell did the FBI nab them in New Zealand?

Probably government consent.

We have an extradition treaty with Middle Earth.

Monster Rain wrote:We have an extradition treaty with Middle Earth.

yeah, because gerorge w. bush set out to destroy the ring.

remilia_scarlet wrote:

Monster Rain wrote:We have an extradition treaty with Middle Earth.

yeah, because gerorge w. bush set out to destroy the ring.

Wait, Bush isn't Suaron? Or was that Cheney?

Frazzled wrote:
Wait, Bush isn't Suaron? Or was that Cheney?

Bush is Gandalf.

Cheney is Saruman.

And Al Gore is Treebeard.

He would have to be to be old enoughto invent the internet.

Sonophos wrote:I still can't see how digital distribution costs can come anywhere close to physical media.

Back office functions exist in both models; Labour costs are lower as you don't need as many staff; transaction costs exist in all commerce by nature.

Data centres aren't free but the unit cost of running them is far lower than running production lines, warehouses, distribution networks and shops; all with their attendant staffing costs.

I work in the European HQ of the lead division of a very large international corporation which has deep involvement in media such as film, music and video games.

I can't give you precise figures due to commercial confidentiality but the raw cost of putting a physical disc on a shelf is not much more than the raw cost of putting a disc worth of data on someone's hard drive.

In either case, the cost of creating and promoting the product vastly outweighs the distribution costs.

Digital distribution avoids some of the cost of running a shop, but the digital merchandise is perceived by users as being less valuable and therefore commands a lower price than physical media.

In the case of pirate media, the pirate and distributor pay nothing for creation or marketing, and nothing for account management, royalties, taxes, etc. Their only cost is data storage and bandwidth, which is subsidised by advertising on pirate distribution friendly sites.

An honest, realistic business does not work like that.

An interesting video by youtube user TheAmazingAtheist on the topic (mostly):


Annoying that SOPA/PIPA was just an unnesassary pretext.

Sounds a bit like a conspiracy, but still

Kilkrazy wrote:

Sonophos wrote:I still can't see how digital distribution costs can come anywhere close to physical media.

Back office functions exist in both models; Labour costs are lower as you don't need as many staff; transaction costs exist in all commerce by nature.

Data centres aren't free but the unit cost of running them is far lower than running production lines, warehouses, distribution networks and shops; all with their attendant staffing costs.

I work in the European HQ of the lead division of a very large international corporation which has deep involvement in media such as film, music and video games.

I can't give you precise figures due to commercial confidentiality but the raw cost of putting a physical disc on a shelf is not much more than the raw cost of putting a disc worth of data on someone's hard drive.

In either case, the cost of creating and promoting the product vastly outweighs the distribution costs.

While I agree with you, I would add that it's a matter of scale - for an act like us, without a large record company (with a commensurate distribution/manufacturing network) behind us, the costs of physical production and distribution far outweigh the costs of producing the content. This makes digital distribution the only viable option. It's also meant that we were able to reach far more people than would otherwise have been the case - we would have found it very difficult to sell physical CDs in the USA, Canada, Australia, Russia and China etc. for example.

Basically for small independent bands, digital distribution is the way to go.

The music industry does not like having many small independent bands. It likes one or two big bands per genre. Less competition = more profit for he big companies.

For free music I listen to the radio and a lot of the sites that anonymous "hacked" are back up. Personally I'm in support of lulzec in the world of internet wars.

halonachos wrote:For free music I listen to the radio

I remember a survey a while ago where they asked people who had MP3 players how much they would pay or the songs they had stored. Most people said they would not pay for their song collection, or would pay £5-10 for 1000's of songs.

To me music isn't worth buying - there are so many radio stations (both on the air and online) that you can get pretty much any band or genre direct to your ear without having to pirate or pay. The only music I have ever really bought is a couple of CD's for my wife to play in the car.

I have payed for all of my music...
Seems to have worked out fairly well so far.