The Sky Is Not Rising

Suggestions that everything is fine and getting better are not entirely accurate.

The Copia Institute, headed by long-time anti-copyright campaigner Mike Masnick, has proudly announced the release of their report 'The Sky Is Not Falling', which they claim shows that there is no significant problem with copyright infringement or tech industry abuse today and that the entertainment industries are doing just fine, benefiting from the internet rather than suffering from piracy and markets skewed by the tech industry. But is this the whole story?

There are a few incorrect assertions made in the report, and a larger number of misleading or disingenous ones. I'll cover some of them here, specifically ones relating to the music industry.

But first, I wanted to mention this quote: "there are signs of an incredible abundance of not just creation of new content" . In the world through the eyes of these people, a creative worker is not an 'artist' or even an 'entertainer' - they're a 'content creator'. Their worth is measured only by the value they deliver to the platform that holds the 'content'. By reframing the work of creatives in this way, it conditions users to focus on the services that deliver the work and not the people that actually create it.

This sets a tone that explains the focus on headline growth rates and quantity of output rather than sustainability or fairness. Who cares where the work comes from as long as the platform itself is popular? Why worry about paying artists fairly when work keeps somehow appearing and we can sell ads next to it anyway? This is a very deliberate mindset designed to turn fans into consumers and artists into mere providers of commodities.

Now, onto specific claims.

"There was a dip during the recession that began in late 2008"

This is a strange thing to say given that it sits opposite a graph that directly shows revenues dropping from 2004-2005. There was certainly a bigger drop during the recession but the problem predates that by several years. Copyright infringement hit hard even when disposable incomes were relatively high.

(Vertical lines and text added for clarity) ALT Graph with misleading caption

"Consumers are more than willing to spend on entertainment"

This was never the issue. We know that consumers are willing to spend, but when given some forms of entertainment that necessarily cost money - live shows, cinema/theater visits, online-only video games - and some forms of entertainment that they are able to get for free - pirated films, unauthorised music uploaded to YouTube, cracked offline games - their discretionary spending naturally goes on the former as it is no longer needed for the latter, even though they are still enjoying those works.

The real issue is one of fairness, and of supporting a diverse economy for creative work. Should every musician accept their recorded work is to be given away for free on YouTube? Should every game developer make their game online-only to stand a chance of getting paid customers? Should fans be allowed to believe that creative works are essentially free and that artists magically make money somewhere else? This way of thinking isn't good for anyone.

"The data shows that the vast majority of streaming listeners are signing up for paid services"

I couldn't find a source for this claim in the report. It doesn't seem to be backed up by any data I could find. The most popular music-on-demand service by a long way is YouTube, and their free users outnumber paid users something like 50 to 1. Next up in the Western world is Spotify, where paid users are still a minority. Apple Music is the next big competitor and although it has no free tier as such, not every user is paying as it does offer a free three month trial. It is also significantly smaller than Spotify in global terms. Other competitors such as Deezer and Tidal are much smaller still, and barely make a dent on the figures.

As such, the only way that paid streaming users could outnumber the free users is if we disregard all use of YouTube, which is clearly disingenuous as that is the most popular service by far. So this claim appears to be false.

"PwC’s annual report [..] has shown a pretty consistent upward trend in global revenue"

Indeed it does - since 2011. Before that point were several years of recession, and before that was a decade where music and home video was significantly harmed by piracy, offset by growth in other areas (video games, live performance revenues, film box office, etc). This is not a rising tide lifting all ships, nor is it a sign that things have only ever got better. Like many other parts of the report, it is a headline figure that obscures a lot of harm that is less easy to see.

"In all other areas of the music industry, things were getting significantly better"

The full quote is this: "There was a clear impact on one key aspect of the market: the market for selling recorded copies of music. But in all other areas of the music industry, things were getting significantly better, to the point that the benefits — and revenue opportunities — clearly outweighed the temporary disruption of one aspect of the larger market."

The problem is that these different revenue streams are not comparable nor interchangeable. Musicians are not a homogeneous mass that can simply decide to make money in different ways.

The main example is live shows. The fact that revenue is growing in this sector is used to suggest that musicians can simply choose to play live and make their money that way. But this masks a lot of the detail behind the increase in aggregate live revenues:

  1. Much of this increased revenue is being captured by secondary ticketing agencies. Fans are paying more but the musicians (and venues) are seeing little or none of it.
  2. Touring is expensive with a lot of fixed costs involved, and only top-tier bands are guaranteed to make money from it. Those acts sell out venues and have the luxury of being able to crank up ticket prices beyond inflation, while other bands lose money, or barely break even.
  3. Newer artists often not only get paid nothing to be on shows, but they pay to be there. Tour 'buy-ons' are a big part of the touring scene, not to mention one-off pay-to-play gigs.

So what looks on the surface to be a healthily growing live music economy is more like a tax on upcoming and niche bands, paid to the older and more mainstream acts. Music fans who used to buy CDs or downloads now spend less on the recordings and funnel some of that into live shows - but that money is not going to the same bands! Where an emerging independent band might once have been able to stay afloat through tens of thousands of record sales spread across the world, their overseas fans now enjoy their music for free but spend the money once earmarked for CDs on local concerts - and there, the equivalent 'emerging' bands are typically paying for the privilege to be there. The 'middle class' of musicians is being hollowed out by this process.

Finally, it's important to note that not all recording artists are performing artists. And not all songwriters are performing artists. It's simply not practical for every musician to simply take their act on the road, even if it were guaranteed that they wouldn't lose money doing so.

"The chart clearly shows the transformation of the recorded music industry in progress"

Yes and no. Yes, in that recorded music revenues from anything other than streaming are almost dead and streaming is taking their place. No, in that 'transformation' implies that it is merely a shift in where the money goes rather than in how much. But the IFPI graph they use does not take inflation into account and therefore doesn't adequately represent how much revenue has been diverted from the music industry since 1999. Here is a graph from the RIAA which does show that, and the small upswing in recent years doesn't make much of a dent in the prior decreases.

ALT US recorded music revenues adjusted for inflation

This is US data only, but the principle is the same - measuring in terms of 'US dollars' over time is misleading if the comparison is not made in real terms. When you do make that adjustment, it becomes clear that streaming is only delivering roughly a third the revenue that physical media did in the late 90s, with all combined recorded music revenue still only adding up to about half the 1999 level.

But it gets worse - as the report says, "this current decade already has more releases than the previous one", and "it’s quite clear that people are consuming more and more music". In other words, we're trying to support more artists than ever, but with half the money, even though we have more listeners. This is massively unsustainable.

"In 2018, Spotify started letting musicians upload their music directly, cutting out middlemen"

This is spin to make it sound like modern platforms like Spotify are benevolent services that help free independent creators from the shackles of record labels and reach their fans directly. The truth is, Spotify are "testing the upload beta with a small group of [US-based] artists [who] are being invited by email". So much for the end of gatekeeping - this doesn't sound much different to a traditional record label, except at least a record label would contribute to your recording costs.

There are, of course, some platforms that do offer a legitimately open service, such as Bandcamp. Unsurprisingly, these services tend to focus on selling downloads and make no pretense that such a service can be adequately paid for by an ad-supported tier.

"Another area that has seen tremendous growth is music merchandising."

This problem here is much the same as the one for touring - the overall increase is driven by aggressive expansion by the top-tier acts who benefit from economies of scale and a recognisable brand. Independent acts do not have this luxury, and smaller runs of merch result in tiny profit margins once the costs of printing and artwork are subtracted, not to mention the cost of fulfilment (i.e. typically a band member having to physically package and post individual goods, whereas richer acts can outsource all this).

There is also a natural limit on merchandise spending that does not apply to recorded music. A super-fan might want to own 100 albums (e.g. 5 by each of 20 bands) as each provides unique entertainment. But they're unlikely to want to own 100 t-shirts, as the marginal utility decreases after each one. And while a super-fan might listen to 10 different albums in a day, they're not going to wear 10 different t-shirts. The market for merch cannot grow the way that a market for recorded music can.

The focus on merchandise is also diverting attention from a musician's core competency - time that would otherwise be spent on writing, recording, or performing music is instead spend on the making and marketing of non-music items. The success of musicians ends up being determined more and more by their choice of artwork or how much their fan base enjoys branded merch. This isn't good for music or music fans.

In summary

The report does get a couple of things right - the internet does offer many great opportunities for creative workers, and the quantity of work doesn't seem to be decreasing. However, what it is hiding is the uncomfortable fact that top artists with the resources to adapt have done so, whereas the rest of the industry has been predated by the tech firms, driving down the price of artistic work to unsustainable levels, replacing career artists with hobbyists and self-funding part-timers, and encouraging a race to the bottom on price that draws in users to view more adverts. Meanwhile, a relative handful of famous YouTubers are wheeled out to create the illusion that this is sustainable, creating a smokescreen to stop fans seeing the backdrop of a larger number of creative workers that are out of work as a result of it, all told to "sell t-shirts" or "go on tour" by people who rarely get to see the true costs involved.

As such, it is clearly false to suggest that everything is okay, or that the recent increase in streaming revenues somehow means that things are fair or sustainable. Fans need to know that their money is being increasingly diverted from creators to the platforms, and those creators need to be able to charge a fair price for the works that they provide. The sky is not 'rising' - these are times of mixed fortunes and great inequity, and we must strive to rectify the problem for the benefit of creators and fans alike.