According to SoundScan, the top 10 albums in 2009 sold a total of 21 million copies, and the top 10 tracks totaled 36 million paid downloads.  But the top 10 albums in 1999 totaled 55 million in sales.  Even with digital track sales factored in, those top sellers fell by more than 50%.  In the last 10 years, the major record labels’ direct employment in the United States fell from about 25,000 people in 1999 to less than 10,000 today – a drastic reduction of over 60% in people who enable the creation and development of new music.

In the music industry, it takes the investment of many peoples’ money, effort, and time to create the songs and albums we all get to choose from and enjoy.  Since most acts never even reach the breakeven point in sales, music labels need to operate like venture capitalists and count on the successes to subsidize the continued development of many artists and releases that may never break out of the red.  And it’s easy to ignore the harm being done when you’re only stealing one copy.

Stealing music is wrong. This is undeniable, but there is something about what the RIAA say – it’s easy for a punter to ignore the criminality of nicking one album at a time ‘just to hear it’, and so the solution to the problem has to be slightly more nuanced than cutting off the consumer’s internet connection, or suing individuals for vast damages in high profile cases. Legal, profitable channels of consumption have got to compete directly with the illegal, risky, but free-to-consume-unless-you-get-caught methods like filesharing and illegal streaming.

Picking on individuals makes the recording industry look like the aggressor rather than the victim, which they are not; they’re just trying to safeguard their sources of income, and their jobs. It’s hard to think of Edgar Bronfman’s kids going hungry, or Puff Daddy having to sell his jet to make the mortgage payments, but there are real people doing good work whose livelihoods are on the line. That said, progress is inevitable (see the video at the tail of the post), and the music industry has got to roll with the punches and capitalise on the massive innovation that’s happening in the digital sector if it is to thrive as it has in the past.

Another thing to consider is how much this piracy actually costs the industry. If the pirates couldn’t get hold of the music easily and for free, would they bother getting hold of it at all? Does the money not spent on records all get spent on eyepatches, stuffed parrots and WOW subscriptions, or does some of it come back to the music industry in other ways? Concert revenues are certainly up over the last few years, and some artists are making money against the trend of decline by using clever and non-traditional marketing methods, selling cool physical products, and using new outlets like Spotify and eMusic (to whom RouteNote will happily distribute your music, by the way) to boost waning physical revenues. Is it better then, for the industry to put a death-grip on sometime pirates who may also be gig-goers and box-set-buyers, and look backwards at the fantastic success they had with physical formats, or to look forward to an era when everything is digital and try to maximise it’s readiness and thus it’s profitability? Perhaps we’ll see things go full circle, and recorded music sales will tail off completely as we all go back to being regular concert goers, just like in the 1800′s…

Related Articles

• Upload Tool Launched! – December 1, 2009
• Would Lady Gaga rather be Pirated than Spotted? – November 24, 2009
• ISP Bundled Music Services – It’s Not Smart To Be Dumb – March 11, 2010
• Digital Distributor RouteNote Signs 3 New Online Music Stores – Deezer, Napster, Thumbplay – January 29, 2010
• Bid To Buy The Orchard Raised To $2 By eMusic Owners – January 15, 2010

Commenting on the report earlier this week the BPI’s Geoff Taylor said “It’s increasingly clear that it isn’t smart to be a ‘dumb pipe’.  This report shows that the revenue potential of digital music services alone makes sound economic sense for ISPs.”

Fair enough. But take note that Universal Music Group sponsored the report, the same UMG that are desperately worried about the collapse of their revenues, and the same UMG that are invested in Spotify, a music service that could very easily sell premium subscriptions bundled with an ISP package. This is by all indications a great idea, and would go a long way to helping the ISP community appease big music – who are accusing it if not of complicity then at least negligence in the article of stopping access to copyright infringing sites and torrent trackers like the infamous Pirate Bay – but an awareness of possible bias might encourage conservatism when looking at Ovum’s estimated numbers. There are a lot of solutions vying for the fast growing digital music dollar, it’s a market in which we’re currently diversity and innovation, and a big move like the one the BPI are advocating could seal the future of music online.

Related Articles

• Spotify Growing Fast – Product and Territory Expansion Slated – March 19, 2010
• Spotify Plan US Launch In Autumn – March 29, 2010
• MOG Gains New Investors – February 27, 2010
• Spotify and 7Digital Partner To Offer Direct Download Links – March 30, 2009
• Tesco To Launch a Digital Music Locker Service – June 16, 2010

According to a report today, Lady Gaga’s track “Poker Face” was one of the most popular tracks during a five month period on Spotify and was played more than a million times. So how much money does she get paid by STIM (the Swedish Performing Rights Society) for this massive achievement?

SEK 1150 – that’s around $167 or roughly 113 Euros.

But that’s not quite the whole story… The performing rights contribution splits out to $0.000167 a play, but so what? Lady G (or more likely her record label) will also be being paid directly by Spotify with a flat fee per play (a couple of pennies per track) and a chunk of the service’s ad revenue. Lady Gaga’s direct revenues from that many streams will be in the five figure $USD range, and the performing rights system probably does more to support their own bureaucratic infrastructure than it contributes towards paying her a sensible wage. It would be interesting to know exactly what proportion of their receipts is paid to artists, and what is spent on running the society, as well as why the PRS collects a fee for every track played on services like Spotify, even those of tracks by non-PRS-members.

Lily Allen has previously complained on Twitter “@citricsquid did you know the major own hold massive stakes in Spotify, and earn advertising revenue at yet another loss to the artist” that she’s not seeing any of the revenue from her Spotify plays, but this is likely to be because the majors have all bought shares in Spotify, and are both giving them an easy ride on the music licensing fees and taking their own substantial cut of anything that comes back. Lily Allen would do well to have a little faith in Spotify, given her well publicised feelings against file sharing.

Of course, this diminished revenue wouldn’t be a problem if she’d signed her music up for digital distribution to with someone like RouteNote, who get the full per track rate, and only take 10% on the back end.

That said, the decision of the majors to support Spotify and other streaming services is a pragmatic one; if it is really the case that freemium services are reducing piracy and providing a way for labels to ‘monetize’ their catalogues online then it makes sense for the majors to be in on the ground floor and take advantage of future success, especially since they’re looking such ghastly financials [pg. 33 for the headlines] in the face. Right, now that’s sorted we can all go back to wondering whether or not the Lady is a trap…

Related Articles

• Home Taping and the Music Industry Pie – March 16, 2010
• Hands Out Of Pocket – Warner Prepares Bid For EMI Publishing – March 22, 2010
• Guvera Announce US Launch Date – February 23, 2010
• High Profile Artists Accept File Sharing – January 25, 2010
• Digital Piracy Round 2 – Appropriate Damages – January 7, 2010