The Future of Music (Biz), Part II

Okay, final set of 'mystery' questions (and answers); as I said before, I'll explain more where these came from soon.

From an economist’s perspective, is filesharing/piracy hurting artists, or just labels (or is it hurting anyone)?

Does it hurt artists? I'd say that the benefits likely outweigh the harm. Neil Gaiman has argued - as quite a number of artists have come to do - that obscurity is a far greater danger to artists than the piracy of their work, and I'm inclined to agree. An artist's greatest assets are the loyal fans, the ones that will buy your albums (even when they clearly don't have to), come to every show they can make, and try to tell as many people about you as possible. These are the people who will truly make it possible for an artist to make a comfortable living. If five pirated songs or albums gets you even one of these, it's a net win. I'm not saying it doesn't stink to lose sales of your music, but if it gets you someone who then buys every successive thing you put out and will be a guaranteed ticket every time you visit their town? Hard to argue with that.

Does it hurt labels? Yes and no. There are a number of reports and studies that more sales are being made as a result of artist discovery through filesharing, so if anything they are bringing in more money. This fits with what Gaiman describes. If this is resulting in adding loyal fans at the expense of 'casual' fans (I'll apply this label as someone who only buys a single track on iTunes that gets played on the radio, or doesn't get interested enough to warrant going to shows or buying merchandise), the label can also expect and look forward to follow-on sales and income from other revenue sources.

On the other hand, this won't continue if they insist on pushing back against piracy in a way that insults or harms the customer - or the artists, for that matter. Many of us remember Sony's rootkit debacle. Many of us have a good laugh at the "You wouldn't steal..." PSA ads before we see a movie in the theater... A MOVIE WE JUST PAID FOR! We're also seeing more artists - even highly successful ones like Nine Inch Nails and Radiohead - proving that independence can actually work fairly well. If the customers become increasingly frustrated with the actions of the labels and want to engage with the artist they love directly, and the artist becomes increasingly frustrated by the restrictive, profit-hungry attitudes of the label and want to engage with the fans directly, labels are going to feel the sting as they get eliminated as a middleman.

What are the efficiency breakthroughs that we have yet to discover, who’s going to figure out how to profit from this shakeup?

This is a tough one; the Internet has already allowed huge advances in efficiency. The ability to distribute, find and purchase content on the web is lightening fasts and cost virtually nothing. Features like Eventual Demand now make it so that an artist can know exactly where it's worth going and what size of venue they will need; no more wasted trips and half-empty venues.  Sites like Kickstarter can take the risk out of capital-heavy investments like recording and touring.

The one place I think there might be a need is a way to pull in all the information in this new landscape. There's a lot going on that isn't being tracked, money that's not being counted. As a result it can be harder for new businesses to start up and take part in this climate when it's difficult to generate numbers for a business case.

Other than that, I can't think of anything specific; if I had, I'd probably be tearing around the house right now, attempting to find the quickest means to perform a brain dump of this fantastic, profitable idea.

How can we rethink antiquated intellectual property laws in a way that continues to “promote the progress of science and useful arts?

This is a question I often ponder. As much as I rail against what the current state of copyright and intellectual property protection has become, I can't deny that artists should be the ones who decide what rights they give and what rights they reserve, and that those rights for both parties need to be protected.

I think one real big problem in the current system is the all-or-nothing approach that the law and organizations around intellectual property are set upon. You either reserve all rights, or you give up all rights rights.  The some-rights-reserved model, such as the Creative Commons licenses, is something they don't want to touch; in fact, once you've released something under CC-license for non-commercial purposes, you'll often have a hard time finding a collection organization such as SOCAN or ACAP that would deal with you if you want to license it for commercial purposes. On a positive note, there has been some evidence that CC-licenses are at least being properly, legally recognized.

In the end, it ultimately comes down to protecting the value to the rights holder without that protection serving to eliminate any value it has to the public, which is what we're seeing now. If the true value in an information economy is familiarity and availability rather than scarcity, then perhaps the laws need to focus on how to make sure intellectual property is properly attributed rather than making sure it isn't distributed.