Research Models on Prediction of the Indie Music Industry-3.
Waldfogel’s 2010 paper is one of the first to attempt to try revaluating the effect of music file sharing in the “iTunes era.” With the emergence of legal digital distribution, consumers now have the ability to buy, rather than steal, individual songs, with added benefits such as cover art and guaranteed high quality files. I have discussed tis in detail in my blog Research Models on Prediction of the Indie Music Industry-2. In this series of blogs, I have been sharing with you the effects of internet on the indie music industry. Clearly there is extensive literature examining the effects of file sharing, and more broadly, increased and improved Internet access, on record sales. This only covers half of the story, though. As Liebowitz briefly mentions, the drastic decrease in record sales of the early 2000s was met by a previously unmatched boom in revenue from live indie music. Perhaps because of the larger size of the recording industry and media attention and legal action involved with their sales displacement, the trend within live indie music has been largely overlooked. There are several articles that discuss the viability and potential of this growing portion of the industry. This limited academic literature may help introduce the discussion of live entertainment in the Internet era.
The invention of internet has had many direct and indirect effects on the indie music industry – both good and bad. This article is a part of a larger article about the evolution of the indie music industry. You can read more about this in my blog Indie Music Industry. I will follow up with a new article about indirect effects of internet on the music industry. If you have been following my previous articles on music copyrights and royalties, by now you should have a good understanding of the fundamentals. It might be wise to re-read those articles, or bookmark them to grab back whenever you encounter a subject that I have written about!
A 2005 paper by Curien and Moreau considers a new business model for the indie music industry based on live performance, which would structurally adjust to the effects of piracy rather than engaging in futile legal battles against it. They argue that the record companies’ lawsuits have failed to effectively slow down file sharing, citing that they continued to increase by 10% in the second half of 2004. Curien and Moreau establish that sales for live performances and “ancillary products” will increase with the diffusion of an indie artist’s music. In this sense, file sharing has undeniably made this diffusion easier and more widespread than it has ever been. They bring up a crucial point regarding the welfare effect of piracy by pointing out that contractual agreements in the recording industry disproportionately benefit the labels over the artists. RIAA’s success in shutting down Napster did not stop countless other sites from utilizing the new technology. As discussed in my blog Indie Artists and Record Labels, initially, it was relatively easy to legally quell and trace the file sharing piracy methods, however, when an undergraduate student at Northeastern University, Shawn Fanning, launched Napster, it made tracing piracy difficult because the system hosted files from millions of individuals and did not store music on its server. After Napster shut operations in June 2002, after losing the copyright infringement suit by RIAA, other sites started using its technology, after removing the main legal vulnerability that hurt Napster, by working on decentralized servers in peer-to-peer file sharing.
Just as Curien and Moreau realize most of the profits from pre-recorded music sales, record companies take the biggest hit as a result of file sharing. Artists, on the other hand, actually benefit for the most part as they share in a larger portion of profits from live entertainment and additional “ancillary” products, which are boosted by further distribution and availability of their music, whether legal or illegal. Using this logic, it follows that the music industry could benefit, and compensate for losses in sales, by finding a way to incorporate these sectors as part of their business plan. Curien and Moreau recommend that record labels either restructure contracts to include live entertainment or attempt a “downstream vertical integration, especially towards the concert industry”. This analysis captures the shift in profits from the labels to artists, maybe one that was long overdue in a structure that has historically underpaid musicians.
In my next blog I am going to write more about the impact of internet on indie music business as a whole. Please share your experiences and I will add them to my future blogs.
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