Spotify says they’re saving the music industry from piracy.
But what if piracy was eradicated, what would happen then?
That’s the focus of a massive study and initiative now churning inside Universal Music Group, the largest music label in the world but a company still hemorrhaging from piracy-related issues after more than a decade. According to a pair of sources familiar with the comprehensive study, global consulting firm Bain & Company conducted the research and delivered the final report, while top brass at UMG parent Vivendi SA largely spearheaded the effort.
In one scenario, Bain found that if piracy and free content ended tomorrow, recording sales would multiply 17 times within three years.
The post-eradication scenario would look like this: during the initial year, consumers would be highly resistant to paying, considering a long-standing expectation of free. But Bain predicted that as the ‘new world order’ started to settle, that resistance would gradually move towards greater payments in the form of premium Spotify subscriptions, increased vinyl purchases, and even download and CD buys. “The first year is when everyone will be complaining, and refuse to buy,” one source told Digital Music News. “But then it’s like everything else, where you pay because you have to. Then, you start to see the recovery, then the big increase.”
Sound impossible? Enter what sources called ‘Piracy D-Day,’ a future point envisioned by Vivendi/UMG brass when piracy is more seriously attacked and eventually eradicated. At that point, you’d see massive cutbacks of free and ‘freemium’ content on sites like Spotify.
That massive invasion against piracy would involve a mix of domain name removals (a-la-Grooveshark), heavy deep-packet inspections and content blocking by ISPs, stepped-up legal actions against sites and individuals, and far heavier involvement among influential politicians in both the US and Europe. “Politicians, just like the artists, have always been scared to speak against piracy because they feared the backlash,” the first source continued.
“With current [cross-Atlantic] trade discussions, we’re seeing that change, and Hollywood is helping that.”
All of which brings us around the world once more, to the recent raids against Kim Dotcom in New Zealand. “The music industry is nothing in size, they have no power in Washington, they’re not as smart and just care about their salaries. But Hollywood is different: they have Obama coming to visit, and you wouldn’t see things like Kim Dotcom getting raided without them.”
“They don’t want to lose their industry.”
And, neither does Vivendi, a company extremely unhappy with the current “state of free” across sites like YouTube, SoundCloud, and Spotify. And, for that matter, the current management at UMG, including CEO Lucien Grainge, whose inability to control free content could cost him his job by the end of the year.
But top figures at Vivendi, including multi-billionaire Vincent Bolloré, are still betting long on music content, according to sources. That would explain the quick dismissal of an $8.5 billion UMG acquisition offer from Japanese Softbank. Not to mention a more recent tender from John C. Malone’s Liberty Media Group. “They see this piracy problem as solvable, and reversible,” a second source relayed.
“Then, you have the multiplier effect, maybe 17 times, maybe 25 times over.”
That viewpoint is also shared by Russian mega-billionaire Len Blavatnik. His chips include a $100 million+ plus bet on streaming service Deezer, not to mention a multi-billion dollar ownership play on that other major label, Warner Music Group. “There’s a reason these investments are happening,” the source continued.
People would buy if they couldn’t steal without consequences.
Nobody can live without music.
Fact.
Settle down. There are other factors that affect people spending money on things (music). How about the quality of the product that is sold?
I, and many people I know, still purchase physical product.
I, and many people I know, have the financial means to purchase physical product.
I, and many people I know, have not purchased product in a long time due to the product not being desired.
This study assumes that the recording industry’s renevue would be areund ten times that of it’s best year ever. How ridiculous is that?
Interesting. Are you correcting for inflation in those calculations?
Also we must estimate the apparently greater demand for music now, in that music seems to be listened to fare more than ever before (at least so it seems).
Are you keeping mind that today’s music is terrible?
lol how old are you?
Are you trying to discriminate against me based upon age? How old or young I am doesn’t play into this.
Admit it, today’s music is not very good. It isn’t that hard to do really, and the statement can be justified easily.
“The music industry is … not as smart and just care about their salaries.”
That’s about the only thing that makes any sense in this article.
Totally agree.
I’ve always mentioned $100B music industry as a target which makes me a pipe dream BS man.
Reality is we can have $200B music business if we interlock all streamers and radio with music and lyric ID services like Google, Shazam or Soundhound currently giving away all the goods to over two billion freeloaders.
Someone at Universal has proper data(17x 14B = $238B) but they still don’t see that Apple boys on Ek’s business plan are prophets of free blindly building $15 music grave yard.
So if we completely change history, human behavior, and technology the music industry makes more money. I don’t see why we don’t implement this tomorrow.
As recent events show – from the Supreme Court’s recent decisions, to the NYC smoking ban – history can change very rapidly indeed.
It’s about time for such a “D-Day” for piracy. Why has it taken 15 years? Why is it still not happening?
Is public opinion really so against the concept and value of intellectual property?
Or is it only the extremely biased media filters (Google, FaceBook, Wikipedia, etc) that make it seem so?
“Is public opinion really so against the concept and value of intellectual property?”
If I have a cassette of a recording, can I trade it in for the CD version at no charge? Why not? Didn’t I already pay for that intellectual property?
Not sure I follow your point…
Theoretically, such a trade-in program could be implemented, but why should it be at no cost?
At least the cost of manufacturing, materials, distribution, etc. would reasonably be charged.
My point was just that the value of intellectual property can be complex. And the public may see things differently than the recording industry.
Agreed.
All the more reason that legislation is of critical importance, to balance the desires of the public (essentially, everything at the highest quality and at a price of $0) against the needs and interests and motivations of creators and rights-holders.
A fair question, in principle. Ideally, it might be argued that you should be able to get a replacement at a discounted price to allow for your ‘purchase’ of the intellectual property. (Not zero, since manufacture and distribution costs, and any sales taxes, need to be covered.) But I’m not sure that the argument is valid. If you have paid to see a movie once, do you think you should get a discount if you want to see it again? Surely not. Access is priced on the assumption that you are ‘buying’ one viewing at a time, and if you demanded more, the price would be higher. In the case of a music recording (or a book, etc), the price which the seller asks for, and which you accept, assumes a certain normal range of usage. If in fact you still still want to use it beyond that range, you should expect to pay again if the recording has worn out. The deal you accept at the time of the original purchase ‘buys’ you the normal range of usage but no more. There is also the practical consideration that if people were able to replace used items with new ones at a substantial discount, there would be a secondary market undercutting the price charged to ‘new’ purchasers. (Which is what in fact has happened in the market for CDs, since people can buy used copies which are effectively as good as new.)
As I have argued elsewhere, in an honest world there would be no need for IP laws, since the interests of creators and their ‘users’ could be reconciled through the ordinary law of contract. The practical need for IP law comes in because not everyone is honest, and some of them would break their contractual obligations in a way that would be impossible to remedy through the law of contract alone.
Should I be able to make a copy of my intellectual property that will last, effectively, forever?
Anon: “So if we completely change history, human behavior, and technology the music industry makes more money. ”
Worse. Universal needs to eradicate an idea, the idea of free music, and the memory of the 15 year period when music was free. Universal needs to stop people from thinking about what is possible.
How about we don’t post articles detailing the consequences of ridiculous what-if scenarios and then try to pass it off as news?
17x does seem quite a stretch, and I would want to see the assumptions behind that scenario.
On the other hand, in the absence of piracy, it seems reasonable to suppose that global spending on recorded music would be higher, in real terms, than at its previous peak around 2000, because:
– world population has increased by about 15%
– real incomes have increased, especially in developing markets like China
– technology (downloads, streaming, internet radio), have made the ‘product’ much more easily and widely accessible.
I don’t think it is unreasonable to suggest that in developed countries the average spending per head on recorded music might be as much as a dollar per day, if people had no ‘free’ alternative. That is about 6 times its current level, and maybe ten times its 2000 level, in real terms.
But, as Mrs Beeton probably didn’t say, first catch your hare.
Sorry, I got the 2000 comparison the wrong way round: real spending per head in 2000 was much higher than now, so a 6x increase on the 2015 level would be maybe 4x the 2000 level in real terms – I haven’t checked the exact inflation adjustment necessary.
It does seem reasonable but it ignores everything else that has happened or would have happened. Perfect IP protection would push people towards free sources that much faster. All one has to do it look at how much original content is already currently produced on sites such as youtube,twitch or soundcloud.
Or consider radio – that is free to the end user and recording radio on cassettes is a legitimate,legal activity. If not for the digital file-sharing revolution, modern digital versions of cassettes would surely have proliferated – and UMG would be telling us how much more money they would be making if only there were better protections in place.
Does this study count YouTube/free streaming as piracy?
Yes. Renting is stealing.
If you mean streaming of user uploaded content – probably.
Content ID notwithstanding, the vast majority of music listened to via YouTube comes from unlicensed sources – and the uploaders themselves tell us so in a vast number of cases. The fact that something is paid to rights holders via Content ID does not invalidate the infringing nature of such uploads, because the Content ID relationship is between the rights holder and YouTube, not the uploader (to say nothing of the fact that the royalty rate on such uploads would be a lot higher if the rights holders were in a position to stop unlicensed uploads).
“The fact that something is paid to rights holders via Content ID”
Most artists don’t have access to Content ID.
*Content ID is not available for indie labels unless they sign YouTube’s Music Key contract.
*Content ID is not available for most indie artists unless they pay companies like Tunecore and Audiam.
*Content ID is not available via Tunecore and Audiam for artists who use sample-based keyboards or sample libraries (that’s just about everybody).
Plus…
*Content ID makes a lot mistakes that result in complicated disputes.
*YouTube pays less for user generated content than for legitimate videos.
*Content ID can only be used to monetize 50% of a music video — the audio part — via companies like TuneCore and Audiam, YouTube keeps the rest.
So there’s only one way to stop YouTube piracy: Takedown notices.
But YouTube makes money from the stolen song as long as it’s available on the service.
And you don’t get a cent.
Reducing piracy would benefit content owners. That’s obvious.
How large the benefit would be doesn’t seem important unless there is an achievable plan to reduce piracy. That’s hard to achieve. REALLY hard.
Talking in terms of eliminating piracy altogether is misleading and probably naive. Unless of course, your real purpose is to bring as much attention to your cause as possible.In that light, what policy changes UMG is advocating seems much more relevant. How does one produce a “piracy D-Day” and who actually has the authority to achieve that?
We seem to be headed down a path that should feel familiar. Remember when “Digital Rights Management” (DRM) was the hot topic?
The technical challenges are relatively easy to understand at a high level. First, there’s always a key of some sort. If the keys fall into the wrong hands, the ability to “manage” or protect that content is lost.
Second, there will always be an opportunity to intercept the audio and video as its fed to the hardware on your computer that displays images on your monitor or plays sound through your speakers. This is how 90% of the DRM stripping applications available on the Internet function. If one is so inclined, you can download a lot of songs during a 90 day free trial and create DRM-free copies from those downloads. Of course, YouTube is open 24/7/365.
DRM Is part of the solution, I should think.
It just needs to be better implemented.
DRM is working fine and accepted on iTunes movie and TV show rentals and purchases. Why not for music?
Piracy has to be stopped — preferably at ISP level — but DRM does not work for music. It’s very simple:
If you can hear it, you can easily make a high-quality (DRM-free) copy.
And you obviously just need one copy…
Its’ not that DRM is “bad”. Yes, Apple has complained about DRM… but those concerns were aimed at reducing their costs and eliminating a technical standard that the major labels forced upon Apple.
But, the point is that DRM won’t eliminate piracy. It merely adds a layer of inconvenience. That inconvenience may motivate some users to switch to legitimate sources. But then again, that “legitimate source” could end up being YouTube. Yeah, and those movies and TV shows can still be found on torrent sites and other darker corners of the internet, too.
Piracy cannot be eliminated. It existed long before the Internet (human factors). The Internet makes it more difficult to control the distribution of content and for technical reasons, that’s unlikely to change. Every door swings two ways. If a legitimate user can listen to a song, then a pirate can abuse that same door to create a DRM-free copy.
Piracy can and should be discouraged. We can diminish its impact by making high quality content available at a reasonable price and be enforcing reasonable copyright laws. Establishing an efficient marketplace is also part of that equation (needs to be open and transparent for all parties).
What I see in the big picture right now is a fight to define what is a “reasonable price”, what are “reasonable copyright laws”, what does an efficient marketplace entail, and who will absorb the largest risks and realize the largest benefits. In typical Silicon Valley style, the focus today is clearly on capturing marketshare.
The labels don’t seem to know how to answer these questions, at least not quickly. They seem more focused on moving listeners away from pirated content repositories at any cost. This is the marketing pitch Spotify provided and the labels didn’t have a better idea. But, they also hedged their bets by making sure that the risks were pushed to Spotify, artists, and songwriters. At least, this is how I explain the label’s decision to support “unlimited, free access”. They were that terrified of the pirates.
Free access has been discussed thoroughly. But unlimited access is just as problematic. How does the value of a song fluctuate based on the listening habits of other people? Every month? In the real world, it doesn’t. In streaming, its the current norm.
I emphasize “current”. When the land grab is done, there will be 3 – 6 major music distributors. Free is already being rolled back. I believe unlimited access will also be rolled back at some point.
Does anyone here really believe that we will end all piracy, ever? There will always be someone somewhere who will be able to distribute music for free and get around any detection algorithm that is created to prevent it, and there will always be people who will take advantage of that to get something for nothing.
Anything that can be streamed in any way, even legally, can be saved to a file to be played over and over, with or without wifi. How are we supposed to stop that?
I think this article is being incredibly over-optimistic. They shutdown Grooveshark, and suddenly we’re supposed to believe they can shutdown any site, any time, anywhere. Don’t count on it.
We have not stopped murder completely either, but does that mean we should not try?
This is preposterous.I thight this might have some kind of serious sociological study correlating anti-piracy measures to sales and there is nothing. It appears they’ve just made the bald-assertion that piracy equals an exactly equavalent sale. That is obviously not the case. If all piracy stopped, no one would argue that it would generte zero sales. However, some piracy also generates sales through awareness. So there is some loss to the sytem as well. A large portion of downloading is beleived to occurr only because it is free. Income is not fungible.. standard economics. Ergo a 17 fold increase is bullshit.
SO…. UNIVERSAL…. SPEND / INVEST $1,000,000 (BILLION) to change things instead of just paying people to moan on your behalf. STOP PISSING IN YOUR PANTS TO KEEP WARM JUST TO SATISFY A FEW SHAREHOLDERS FOR ONE NIGHT
and it would be 10000 times higher if it was affordable
I think what this fails to realise is if piracy was completely eradicated, people won’t have any more to spend on entertainment than they currently do. Sure there may be more sales, but only if the stuff was cheaper. I’m just not magically going to have anywhere from $20-200 a week more money that I will only spend on entertainment if this happened.
Anyone remember this study from way back…?:
http://www.newscientist.com/article/dn4831-net-music-piracy-does-not-harm-record-sales.html#.VZVMCrd0yUk
That was Harvard/UNC – this here is industry-sponsored.
Would love to hear your thoughts.
As a creative I am blown away by so many of the comments here. Seriously….BLOWN AWAY!!!! This attitude of “self entitlement” is absolutely unacceptable. I’ve heard people complaining about today’s music and how it sucks but they also continue to complain about not being able to download from streaming services for FREE or even for having to pay a very small fee to download. It just doesn’t add up. One comment was that “piracy can’t be completely eradicated because he and others don’t have more money to spend on entertainment?” It’s like this AND quite simple…there are many things that I can’t afford so I don’t do it or I don’t buy it. There are people that want new cars but they don’t steal one. ONE of MANY examples. It doesn’t get much cheaper than a 99 cent download other than FREE, so to the ones complaining about it being affordable…your statements are absurd. Does anyone stop to consider that those songs are written by songwriters/composers that make their living this way? THIS is THEIR career. WHY is it that being a music professional is the only job in the world that some people think SHOULDN’T get paid for? I ask every single person that has a blatant disregard for creators and THEIR works…”When you go to your job, whatever that may be, DO YOU EXPECT TO GET PAID FOR IT?” Answer: YES, YOU MOST CERTAINLY DO. NEWSFLASH (although I’m having a very difficult time in even having to say this) WE DO TOO. It’s absolutely insane for anyone to think that writers/artists are GREEDY for wanting to get paid for their works. PLEASE NOTE: It is absolutely insane for anyone to think that they deserve ANY music (from whatever source) for FREE or or that infringement of copyright of ANY kind EVER is ok. It is NOT. My children learned that at a very early age, as did I. This is the very problem with the society that we live in today. Again, ENTITLEMENT. We are here to make a living just like every other employed individual on the planet.
We will end piracy completely? Probably not but I do hope that we all stop and think about the creators and the musicians and that everyone makes the right choice. Some won’t care about that but in my heart I believe that many do. It is not until one of these very people considers a career in music but can’t make a living in do so that he will fully understand. How sad is it that it must get to that point before someone comes to understand all of this?
THANK YOU to the ones that do choose to support music and refuse to buy into this whole FREE MUSIC or BARGAINING BS!!!! We should all respect the creators for without them there would be no music. Lastly, If we don’t get back to doing things the right way, and how it was done for years in purchasing music, instead of stealing it, there will be no music at all. WAKE UP PEOPLE!!!!!! It’s appalling, it’s offensive and it is pathetic.
Sharing freely in online sites like YouTube, SoundCloud and Spotify should not come under piracy because it involves some amount of money. All this online do give some amount data for analytics, which is important for music companies, because it will help them in marketing and targeting audiences.
Rafe
pdfsecurity.org