Politics & Policy

Can We Save the Music Business?

A new industry report suggests an effective way to combat piracy.

Since the advent of the Web, nearly every industry that sells intellectual property has faced a turning point: the point at which everyone finally concedes that the Internet has put the industry in serious jeopardy. For newspapers, that point came with the recession, which was accompanied by rounds of layoffs and the long-delayed conclusion that online-ad revenue can’t keep most local papers afloat.

For the music industry, that point came last week, in a report on sales figures from the International Federation of the Phonographic Industry. It turns out that online music sales — which, like online ads for newspapers, had long been heralded as the last best hope — are reaching a plateau, and therefore will not grow enough to offset the decline in CD sales. Overall revenue from recorded music has fallen 31 percent since 2004, and more than 50 percent  since 1999.

#ad#Two things are obvious at this point. One, rampant piracy is bad for business — which should have been obvious from the beginning, but which many observers refused to believe. Two, if we want artists — and, by extension, everyone who works with and for artists — to be paid for their creations, we’re going to have to try some new and promising anti-piracy techniques.

At first, many analysts claimed that a decline in music quality, not an increase in piracy, was causing sales to drop, and, indeed, it seemed awfully suspicious that a decline in music purchases coincided with the rise of Limp Bizkit. Some studies purported to show that piracy was harmless or even beneficial. But now that sales have been in freefall for a whole decade — as broadband connections became more popular, as the population became more Internet savvy, and as popular music escaped from its creative slump — this thesis can’t hold water.

People are enjoying the music; they’re just not buying it. They’re not buying it in stores, and they’re not buying it online, either, despite some truly impressive efforts by various Internet businesses. I’m personally a fan of Amazon MP3 and 7digital, which offer great deals on a wide variety of albums, and which are quite convenient to use. iTunes is even more convenient, allowing you to download and pay for music through the same program you use to play it, though its prices are higher. There are also new subscription services that offer music through cell phones for a monthly fee; those who are still clinging to the hope that digital technology will save us from the piracy it enables point to these services as an example.

The bottom line is that when pirated songs are available as an instant download — you no longer need to borrow and copy a friend’s CD, or even have a friend who owns the album you want, for that matter — we’re left with social norms and laws to make people support the music they enjoy. The norms are gone, if they ever existed. Partly this is the music industry’s fault; I remember paying $19 for CDs in the years before Napster, and it later turned out that labels were fixing prices. And partly this is rank selfishness, hidden behind modern teenagers’ widespread belief that it’s a basic human right to enjoy art — the fruits of someone else’s labor — without paying for it.

And what about the laws? Piracy is illegal, and the music industry’s attack dog, the Recording Industry Association of America, filed a flurry of lawsuits against pirates when the problem took off. The group gave up soon thereafter, however, concluding that these efforts were not effective enough to offset the bad PR they brought the music industry. (A business group, the ridiculous argument went, should not sue its “customers.”) The 1998 Digital Millennium Copyright Act, meanwhile, encouraged Internet-service providers (ISPs) to take down infringing material when notified by the copyright holder (in return, they were let off the hook for violations that occurred on their service). This has made piracy more difficult on the margins, but clearly it has not eliminated the problem: To this day, the majority of downloaded music has not been paid for.

#page#But the new report mentions several countries that seem to have found an effective way to combat piracy. (The New York Times has a good summary.) This method is called “graduated response,” and while some ways of implementing it are troubling, it proves that there is a way for the U.S. to enforce copyright law.

In some graduated-response systems, such as the United Kingdom’s, the government deputizes ISPs as copyright cops — this would be the troubling part. Copyright holders monitor infringing services (such as the program BitTorrent), identify violators, and inform the ISPs. The ISPs then warn the violators and cut off Internet service if the violations don’t stop.

#ad#These measures may cut down on piracy, but if there’s one thing the private sector shouldn’t handle, it’s law enforcement. Further, most ISPs won’t enforce copyright laws voluntarily — if they did, customers would simply leave for ISPs that didn’t — so the only way to get this to work is by government force, or at least by giving the ISPs some kind of incentive. In Ireland, one ISP allows violators to escape punishment if they sign up for the company’s music-subscription service.

France, however, has set up an independent agency to handle complaints, send warnings to infringers, and take pirates to court if need be. In one survey, 53 percent of violators said they had stopped or slowed their infringing activities. This is the path the U.S. should follow.

Intellectual-property laws are important because they ensure that the people who create art are paid for their work. Without these protections, the biggest acts may still make plenty of money from touring, but developing artists will find it difficult to support themselves, even if they have music on countless fans’ iPods. Further, the lost revenue hurts everyone whose employment is connected to the industry, and practical effects aside, piracy is immoral and illegal. It’s time to find a workable solution, and we can start with graduated response.

— Robert VerBruggen, an NR associate editor, runs the Phi Beta Cons blog.

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