The Ethics or Morality of Music Swapping

The Ethics or Morality of Music Swapping

Originally Written 24-Apr-2003

As you no doubt have heard by now, music swapping (generally in the form of MP3 files) is a commonplace occurrence carried on with no more compunction than pocketing change found in a payphone coin return slot.

Popular opinion on the ethics or morality of music sharing ranges from "it's wrong, it's stealing, and no one should do it" to "All music should be free, baby!" with most people weighing in somewhere between these extremes.

Legally, music sharing (by way of wholesale file swapping on the internet) is illegal. But what's illegal isn't necessarily immoral. Much as I hate to admit, shutting down Napster was probably the correct thing to do from a legal perspective. But from a moral one? That's not so clear. Why? Well, everyone I suppose can proffer their own rationalization for music swapping. Since this is my site, I'm offering mine here.

The record companies have most definitely benefited from my love of music and willingness to purchase same since I've been old enough to be trusted with money and possess the ability to travel to a neighborhood record store (on a bicycle as a 10 year old). And it's been a l-o-n-g time since I was 10 years old. Suffice it to say that I've purchased music in every popular format except for 78s. 33 1/3 RPM LPs, 45s, 8-Track, Cassette, and finally CD.

I purchased a fair number of those works in multiple formats as well -- especially LP, Cassette, and CD -- as each format gained and lost popularity. Even today, we are faced with yet two new formats: DVD-Audio and SACD. One of these will probably win out and become the new standard and popular format in the coming years, potentially necessitating a changed-format repurchase once again.

The record companies, IMHO, have lost all claim to credibility and sympathy long before internet music swapping took hold. Motown screwed plenty of artists in the 50's and 60's with predatory contract terms, leaving many of those artists with little more than they started with. Other record companies aren't much better. But that's an entirely different subject.....

The early days of CD

Back in the very early 80's when CDs started appearing, they cost an average $15 each. (If you think $15 is a lot now, imagine how much $15 was twenty years ago when you could buy a brand new car for $5,000) Early adopters to CD technology (like me) happily paid the price, for the most part, to hear the music they loved in stunning crystal clear digital clarity. Anyone over the age of 30 to 35 (like me) probably had a sizeable LP collection. My LP collection ran into the 100s, at a cost of about $7.00 each. Many of us largely duplicated our collections on CD, at considerable cost. Not only did we fork out 2x over the cost of an LP for each CD, but the resale value of our albums tanked!

When CDs first appeared, the high price could actually be justified. Mastering a CD cost a bundle and a CD pressing facility cost millions to construct. The ROI would take years. Well years have passed -- over twenty of 'em. Those early CD pressing facilities have long since paid for themselves, been replaced, and the replacements paid for themselves. And newer pressing facilities are dirt cheap to construct compared to those early ones. They're much more prolific with higher yield percentages as well.

But have you seen CD prices fall? Not a chance. Where then, exactly, is all that money going? It's not going to the artists, that's for sure. Royalties haven't gone up much in the last twenty years. Record company profits soared with CD sales and their executives were deliriously orgasmic over the buckets of money pouring in through the 90's.

The record companies have always held that music is not purchased, but rather licensed. Really? Then why couldn't I show up at a record store toting a box full of LPs and trade them in for CDs, paying only a token fee for the new format along with a "media exchange charge" for the store's trouble? After all, I already bought a license to the music when I purchased my LP. How much of that $15 per CD was for licensing vs. purchase of the physical media?

As research shows, very little of that $15 was for the licensed portion of the sale. Artists that weren't household names at the top of the charts earned very little if any royalties from the sale of their work. Even big name artists earned a pretty small percentage. In the 80's, big name stars might - might - make one Dollar per CD sold. One Stinkin Dollar! The royalty payout isn't much (any?) better today. Michael Jackson, arguably one of the 80's biggest stars, made a record-breaking two Dollars per sale of the Thriller LP and CD. That was and is very rare.

Costs of Promotion

Certainly it costs money to promote new artists, many of whom won't become popular enough to offset their own costs. But record companies are loathe spend money on unknowns. The odds of a fledgling artist getting a big record contract are no better than a poor inner-city kid good at basketball has of getting a shot in the NBA. Only one in tens-of-thousands are ever even noticed let alone actively promoted.

Record companies, where possible, would rather manufacture hit groups where they have full artistic control. Look at pop groups like N'Sync and Spice Girls. Think those kids paid their dues working dingy clubs, waiting to be discovered? Yeah, right. Hell, the Spice Girls didn't even play instruments. They were culled from an audition of thousands of young women who answered an open casting call. At least the N'Sync boys could play instruments although they never did as part of the N'Sync gig.

Early Music Copying

Music lovers that had recording equipment made cassette copies of favorite LPs to play in the car or, less often, to share with friends. Making a personal-use copy (of an LP already owned) falls squarely under the fair-use doctrine of copyright law. Making a complete duplicate copy for a friend doesn't -- but few thought of this as "stealing" because we were all buying a gazillion records anyway. Making a cassette copy of an album was enough of a chore that de facto restraint was already in place. We weren't too excited about expending that effort only to give away the tape. Hell, we didn't even copy whole LPs all that often for our own use. We mainly made compilations for use in the car and home.

But even back then record companies were making noise about "illegal copying" -- even personal-use copying! If the record companies had their way, stereo cassette recorders would have been outlawed! They tried, but failed. After all, what possible use does a regular consumer have for a stereo cassette recorder except to make copies of LPs -- all of which, regardless of the purpose, must be illegal? They failed because the courts held that there were legitimate uses as well.

BTW, Hollywood tried to ban VCRs using this same argument. They, too, failed -- only to realize huge profits in the home rental and sales market scant years later. A market that never would have developed had Hollywood prevailed. How ironic that Hollywood's attempt to avoid loss of income due to a perceived threat of piracy would have resulted in a vastly larger future loss had VCRs been outlawed!

Music Copying Gone Mad

Music swapping was happening on the internet long before Shawn Fanning's Napster program appeared. People swapped via web sites, but more often through channels such as FTP and IRC. Why this way? Because MP3s, small as they are, still consumed a lot of space for a large collection. FTP and IRC are both peer-to-peer type protocols, leveraging the local disk space that already contains the music.

Before Napster's arrival, internet music swapping was quite tedious indeed. Enough so that comparatively few people swapped music -- far too few to raise the hackles at the RIAA. Those that did swap generally belonged to loose organizations that facilitated finding one another.

But Napster changed all that. Napster, with it's point-and-click simplicity, brought the issue of internet music swapping front and center and shined a big-ass spotlight on it! It also changed forever how music is produced, marketed, sold, bought, shared, and enjoyed. It changed the music world!

Rationalizations

As I said earlier, everyone has their own rationalization for copying music. My rationalization is that I've spent plenty o jack on music for the last 30 years, a fair percentage of that on duplicate titles because of the numerous format changes. In fact, I believe my rationalization is more justifiable than those of youngsters today. (That's one of the advantages to rationalizations: Yours can be legitimate while others can be bogus :-) None of today's college-age kids (who comprise the largest segment of music swappers by far) have purchased anything other than CDs and so have no claim on the duplicate-purchase-due-to-format-change justification. And the music collections of a fair number of those kids are comprised mostly of copied music. It's probably not a stretch to say that kids today only buy a CD if a shared copy isn't available yet. But does that mean that for every CD that is ripped and shared, a CD purchase wasn't made? Not by a long shot.

Take a hypothetical kid with 1,000 CDs worth of music. He bought 200 CDs and downloaded the other 800. Did he save himself (and cost the recording industry) $12,000 (at $15 each) by not buying those 800 CDs? Hardly. But when the recording industry cries about their losses to illegal copying, they'll claim that entire $12,000 as a loss. The recording industry considers every pirated copy as lost revenue when in reality, only a tiny percentage of that was truly lost. This is one of those rationalizations. "I wouldn't have bought it anyway, so what does it matter?" Say what you will, but if the statement is true -- if the kid would not have otherwise bought the CD, when what does it matter?

So, then you say "That doesn't matter. If the kid didn't buy it, he shouldn't listen to it". That may be -- but that is a discussion involving denied artist compensation. Please don't confuse the RIAA whining about lost recording industry revenue with denied artist compensation, for the reasons I gave above about the artist's share of income.

For me personally, most of my MP3s are ripped from CDs that I purchased. I want to enjoy my music in ways that aren't always practical with CDs. And a fair number of the MP3s that I obtained from others are albums or singles that are out of print and aren't available through retail channels. And, yes, some of them are available through retail channels.

I've heard the tired old argument that says "nobody put a gun to your head and made you buy records". My argument is: What choice do people have? While music isn't physically necessary for the continuance of life, like food and shelter, it is, of course, critically important to a civil and expressive society. The importance of music as nourishment to the soul cannot be underestimated. Why else is copying so rampant? Music represents, probably, the largest entertainment phenomenon there is. And for that to be controlled by the predatory recording industry just ain't right.

Why CD Sales are Declining

The RIAA squarely blames illegal music swapping as the proximate cause of declining CD sales. For the first time ever, CD sales declined in 2001. It declined again in 2002 and probably will show another decline in 2003. To what degree does "illegal" music swapping contribute to this decline? Some, probably. To say otherwise would be foolish. But to what extent is hard to say. There are other demonstrable factors that explain this decline.

For instance...

DVD: DVD sales have skyrocketed in the last 2-3 years. DVD player and media sales have broken all records for speed of consumer acceptance and purchase. Faster than CD. Faster than cell phones. Faster than the internet. Faster than anything. Where did all that money come from to purchase DVDs? A lot of it came from not purchasing CDs! The consumer public has only so many Dollars to spend on entertainment. They must choose between myriad entertainment options: Going to the movies, eating out, buying CDs, buying video games, buying DVDs, etc...

Money spent on a DVD cannot be spent on a CD. And since the consumer public's overall entertainment budget has not grown, then something must give. Something must suffer. What suffered was CD sales.

The Economy, Stupid: Since the economy tanked in the spring of 2000, people are spending less on entertainment. This, coupled with increased DVD sales, have put some serious downward pressure on CD sales.  THESE are the big reasons CD sales are flagging, not solely illegal copying.

Recording Industry Hi-jinks

Price Fixing:  The recording industry recently settled a class action lawsuit with the Attorney's General of 43 states over a price fixing scheme that artificially kept recorded music prices jacked up. Class participants each stand to receive $20 in the settlement. Big deal, but at least it proved the record companies were engaged in price fixing.

Copy Protection:  The recording industry recently began testing various copy protection schemes designed to prevent the ripping of CDs into MP3 files. Unfortunately, these schemes often render your CD unplayable in computer CD-ROM drives and even in some older CD players! A recent Natalie Merchant CD released in the UK had to be recalled because of widespread problems just trying to play the CD. Besides the obvious problem of not working in many older CD players, these copy protection schemes prevent legitimate and fair use by preventing users from enjoying purchased music in ways other than CD playback. For instance, suppose you want to rip your purchased CD so you can listen on a tiny MP3 player while exercising. The record companies want to prevent you from do this!

A Personal Observation: DVD vs. CD

The average price for producing a movie in Hollywood is probably in the $40 to $50 million Dollar range. Certainly more is spent on the "big" movies that Hollywood produces. Maybe $100 million or more. A few, like Waterworld and Titanic, cost over $200 million to produce. Plus, releasing a movie to DVD has additional costs beyond that of the theatrical release. The DVD bonus material (all those extras), mastering, and duplication all cost money, too.

Contrast that with the average cost a record company incurs to produce a music CD. Way, way under $1 million for the vast majority of releases. Probably under $250K for a fair percentage. Why then does a DVD sell for about the same as a CD? One reason, of course, is that many movies earn back their production costs (and then some) during it's theatrical release. DVD sales of these movies are then gravy.

But record companies, too, have other licensing channels besides selling CDs. Music is licensed to Hollywood, music is licensed for radio play, and more recently licensed to satellite radio, and musicians tour. All these avenues bring in money to the recording industry. They may not always recover the costs of production, just as theater tickets sales may not always recover a movies' production costs. So you see, both movies and audio releases have license distribution channels other than media sales to consumers.

There's also the idea of perceived value. The perceived value of a DVD is much greater than a CD because you "get a lot more" on a DVD. The content running time itself is easily 3-5 times that of CD and the per-minute production costs are vastly higher. This gives DVD a much higher perceived value to the customer.

I'm no fan of Hollywood's scandalous business practices and alley-cat morality, but they wisely made DVDs cheap to buy. Hell, even if DVDs could be easily duplicated (give it time) I'd probably not do it because a DVD represents a fair value. CDs do not. And I believe that is a big rationalization -- a CD does not represent good value for the money.

Back Catalog

Many older music lovers (like me, but I'm not that old :-) share music to fill in our old favorites, many (most?) of which aren't available any other way. I can speak only for myself here, but I'd gladly to pay the record companies for the ability to download all my favorite albums and singles from years ago. But the recording companies' business models are so outdated and inflexible, they won't provide their back catalog for download even to people willing to pay. Where else can I get an out-of-print CD? Yeah, I've tried eBay.

My Predictions for the Future

I believe record companies will stay around, in some form, for a long time. There will always be popular artists that need the promotional muscle that record companies can offer. But other communal music distribution channels will appear and thrive.

I believe these alternative distribution channels will only increase in prevalence and must be embraced by the recording industry. Any attempt to limit how people choose to listen to and enjoy music will ultimately fail. Just as copy protection on software failed, so will attempts to restrict how people enjoy music.

I believe that we'll eventually see subscription-based websites where music can be downloaded for a fee. Perhaps there will be subscriptions providing a monthly quota of downloads, or a pay-per-download model, or even other paid-downloading systems not thought of yet. Some of these exist today, but are far from mature and offer limited choices.

I predict that websites run by community-minded organizations will appear that offer artists, any artist, the ability to "publish" their works for download in return for a direct royalty payment. ex. You might pay 20 cents for a song, or maybe $1.00 for a CD's worth of songs, for a comparatively unknown artist, perhaps more for a popular artist -- in any event, an artist not signed with a major label. The artist might receive 15 cents per song or 85 cents per CD as a royalty, with the website operators keeping the small remainder to cover the cost of operating the site and some profit. Perhaps even signed artists will have non-exclusive agreements in order to market agreed-upon works through other channels, rather than the all-or-nothing contracts of today. The percentages and details may vary from what I predict, but I believe something like this will become commonplace.

There are efforts to bring just this sort of thing about today, but these efforts are scattered and not well publicized or organized. We are still too mired in the "all music comes from the recording industry" mindset. This will change. Indeed, this is changing now but the movement is still in it's infancy.

The momentum behind non-traditional music distribution is too great. There is simply no way the record companies can put the lid back on the pot. They must adapt to meet what people demand, or they will fail.

I believe the landscape twenty years from now will be very different.