Archive for June, 2003


Friday, June 27th, 2003

Ronan Chris Murphy is one of the most sought-after record producers in the USA. Known to be a musician’s producer, his credits include King Crimson, Steve Morse, Tony Levin, Terry Bozio, Chucho Valdes and Stevie Stevens. He produced singer songwriter Pete Teo’s upcoming debut solo record ‘Rustic Living For Urbanites’. Options2 invites him to discuss music piracy.

In Options2 – The Edge

The issue of music piracy, or the theft of intellectual property in general, is a difficult one to speak about with moral authority, as there are few among us who have never copied an album onto cassette for a friend or watched a copied videocassette. The ease of which it has been possible to copy music has been taken for granted for generations now, but the scale and rate of growth in piracy need not be argued in moralistic terms but in simple logistic terms. The current trends in music piracy will have severely damaging effects on the development of new talent, product and their related economies. Without some change in this trend it may spell the end of companies and individuals being able to profit from recorded music.

Piracy of audio recordings has its roots in the cassette market and evolved into a CD market with the advent of low cost CD recording media and equipment. This illegal market for physical copies of recorded music proliferated in many parts of Asia, but remained fairly contained and much criticized in most of the Western world for years. The growth of the Internet and the development of ìfile sharingî technologies, which have allowed computer users to make copies of, and distribute recorded music without the consent or control of the copyright holders, have made the plague of piracy a global issue of staggering proportions.

No one could have predicted the impact of an 18 year old college drop out named Shawn Fanning introducing a computer program called Napster, that would allow any computer user with an internet connection to access other user’s files and copy them; the exchange of music files being the most obvious and popular uses. It was June 1, 1999 when Fanning distributed 30 test copies of Napster to friends and asked them not to tell anyone about it. They told; and within days there were over 4,000 users. By the end of 1999, 20 million users were using the service to illegally swap music on the Internet. In 2001, music sales in the US fell 5% and in 2002 fell an additional 9%.

In the beginning, the online exchange of recorded music was quite limited, as the public at large was not familiar with the technology, the amount of time required to copy a recording was excessive, and the audio quality of such transmitted music was low. But Internet access speeds and encoding quality are both rapidly increasing. While the most popular format for exchanging copies of music on line is MP3, a file format that compresses the size and audio quality of recorded music, the growth of high speed Internet access speed will soon pave the way for much higher quality copies.

In the very near future the most popular formats for the exchange of music will be exact clones in both size and quality of the products available in traditional retail outlets. It will be both possible and common for any computer user with a fast Internet connection, a CD burner and a color printer to make exact copies of a commercial CD for less than 5% of the cost of purchasing the same product at a traditional retail outlet or legitimate online vendor.

There are a number of technology related schemes in the works to prevent, or at least hinder, the illegal exchange of recorded music online. These include encryption, digital water-marking and the like, but the unfortunate reality is that any of these schemes can be defeated within minutes with, at worst, only a slight degradation in audio quality imperceptible to most listeners.

People have argued that since the illegal copying of music has existed for decades that the current situation should not be a cause for concern. But never before in history have we seen piracy on such a massive scale. This is so much so that it is not unrealistic to expect that in the near future, illegal distribution of music could cut legitimate sales in half globally. In many parts of the world, physical and online piracy already accounts for over 90% of the music purchased or distributed. As a result, we are already seeing a slowdown in global sales figures. In 2001, for the first time in many years, no album sold in excess of ten million units, and the same was true in 2002 with the exception of ‘The Eminem Show’, Eminem’s fourteen million selling album. The victims of this slump are not necessarily the superstar artists, but the financial infrastructure that their success supports, and the industry’s ability to invest in new artists.

New artist development in music generally happens in one of two ways: either within the framework of a large record label, or independently funded by the artist or personal investors. For the sake of argument, I will consider artists signed to very small labels as part of the latter group. The rise of piracy has adverse affects on both groups.

Large record labels operate on a very large scale, whereas the recording and development of a new artist can easily run into the millions of dollars (USD), and most new projects operate at a deficit and never recoup. The labels are able to operate this way due to the fact that their successes (about 3%) create profits great enough to cover the loses of all the other unsuccessful artists. As we begin to see the erosion of sales for superstar artists, we also see the erosion of labelsí ability or willingness to invest capital in newer artists.

The inability for labels to invest capital into new artists and untested products both closes off opportunity for new artists, and hurts the people and economies that depend upon that investment. This ranges from the record producers and engineers that make the records, the marketing people that promote the recordings, the musical instrument builders that make the equipment played by the musicians, all the way down to the jobs lost to downsizing of secretaries and mail clerks at the record companies. When multi-billion dollar industries begin to deteriorate, the effects are far reaching.

On a much smaller scale, and perhaps more personal level, is the struggle of the independent artist, where the financial figures are much lower (in the thousands instead of the millions). These artists and products are usually self-financed, often from the artistís personal savings or from private investors. As is the case with large label projects, most of these will fail financially, but few of these individuals and private investors have the ability to absorb the losses. An independent project is often defined as a success if it just breaks even and the small amounts of recoupment often determine an artistís ability to continue.

Independent artists and small labels provide a valuable role in the economic and cultural fabrics of communities. Such efforts provide a testing ground for artists that may one day go on to be the great successes on the larger labels, and may also provide a valuable role in the creation and preservation of art, ranging from the avant-garde to the preservation of traditional music forms.

For many small artists and labels the difference between success and failure can be sales of only a few hundred copies of a recording. The problems related to piracy are not restricted to the large superstar artists, but equally affect the small independents.

If piracy continues to erode the legitimate sales of music around the world at the current exponential rate, the music business may not be able to survive. Many experts, including Jack Valenti, head of the Motion Picture Association of America, have predicted that the music industry may be dead within three to four years. When piracy has eliminated the chance for return on investments, there will be no one left to invest in music. My own company recently, after careful consideration, decided not to invest in two Asian music projects. We realized that since they would only have primarily regional appeal, we would lose the majority of our return to piracy. I am only one small case, but two artists have now lost an opportunity, the local studios and vendors that would have participated in the project have lost potential income, and music that I consider important and valuable may never see the light of day.

In all the debates about the pros and cons of illegal distribution of music, if things do not change, we may lose much of music all together, and we may lose a valuable part of our culture and heritage in the process.