RIAA – Bowblog

A parable of sorts (about the music business, I feel obliged to point out)

The year is 1823. Nathaniel Burrell, sheep farmer, has stumbled upon a method for duplicating sheep. To cut a long story short, after years of essentially random cross-breeding he now can produce new sheep on demand at no cost. A quick twist of the tail of one of his miraculous cross-bred sheep and you’ve got a brand new one, just the like the old one, just standing there, blinking.

Burrell keeps the news to himself and makes a handsome turn selling the newly-minted sheep at the local livestock market but pretty soon people notice the smart new horse and cart in the drive and start to wonder where all the extra sheep in his fields are coming from and then a lad spies the whole process from behind a hedge and soon enough everyone knows you can get free sheep up at Nathaniel’s place.

To begin with it’s just the local miscreants but fairly soon everyone’s up there, day and night, picking up free sheep and herding them back to their own fields or back yards or box rooms. Of course, it’s not long before people figure out that the duplicate sheep have the same ability: quick twist, new sheep. Blimey.

So now everyone’s got their own and they’re busy making more for their friends. Nathaniel is pissed off. As far as he can tell, these people are stealing his stuff. “These sheep are mine!” he yells as the vicar and his wife lead four fluffy new sheep down the lane. “What do you mean, they’re yours? They’re free aren’t they?” “Yes, but they’re mine! They’re my invention, my thing!” “Does it cost you anything when I make a new one?” asks the vicar. “Well, no, but they’re still mine. And besides, I make my living from selling these bloody sheep. Nobody’s buying them now are they? Not now they can just twist-and-go!”

“I see your point, friend, but I think you’re barking up the wrong tree. Sheep are free now. I think you’re just going to have to get used to it.”

There follows a period of disquiet, during which Nathaniel makes a spirited effort to persuade the world that these free sheep are all really his. There are ups and downs. He wins a few small victories – various slow-witted judges are persuaded that the duplicate sheep actually belong to farmer Burrell, some people are even punished, although transportation seems a bit rich for the theft of a sheep that even its legal owner doesn’t actually need and even wise judges sometimes changed their minds.

Farmer Burrell even invests a few hundred guineas in an elaborate and annoying system of padlocks and sticks, which he calls SRM (Sheep Rights Management) which is meant to protect his rights by stopping people from making copies of his sheep. But the system is awkward and some people can’t get it to work at all (and it hurts the sheep) so it’s soon abandoned. Nathaniel’s not really winning the argument and the whole time people are just making more and more copies of his precious sheep.

An economist friend comes round one afternoon: “the problem with your sheep is that they’re not rivalrous any more and they have precious little excludability. They’re basically a public good now.” His friend encourages him to give up on the law suits and the nasty letters and the increasingly desperate efforts to stop people from copying his sheep. He’s just banging his head against a wall. The world has changed.

In the meantime, of course, the price of an ordinary sheep, bought in a market or at the farm gate, has fallen to a fraction of its pre-Nathaniel value and a lot of people have decided there’s no point trying to sell them at all. They’re opening innovative lamb restaurants and sheep-based circuses and generally adding value to their essentially worthless livestock. Some are given away free with another recent invention: the newspaper, some are fluffed up and sold as ‘premium sheep’ for ‘sheep collectors’. Nathaniel is resigned.

After a few years, Nathaniel has given up on making money from selling his sheep and now specialises in a range of sheep-themed experiences: a theme park, a line of clothing, club nights. It’s a blast – and he’s even making some money. And since farmer Jackson came up with a way of copying cows and farmer Finch pigs, the whole space has got a lot more competitive and everyone’s more-or-less forgotten the days when you used to have to pay for your sheep. Pay for your sheep!

Pic by Notcub.

Hilary’s thirteen years war

I tried to date Hilary Rosen’s battle with the demons of high-tech. Perhaps I shouldn’t have been surprised to find this Usenet reference to her 1989 opposition to Digital Audio Tape (DAT) – perhaps the only real victim in recent years of the rights owners’ zeal. DAT was confined to a ‘pro-only’ ghetto after a prolonged battle with the music biz saw the imposition of an early DRM system and an artists’ levy. DAT is long forgotten but, with hindsight, should the rights owners have learnt from developing product for an early digital platform instead of just killing it? Would those lessons have been helpful in responding to the out-of-control misbehaviour of the new generation of digital consumers? That would be a ‘yes’.

A chink of light for file sharing

The FT reports that, in one market at least, file sharing may finally be damaging CD sales. In the US, three years after downloading became widespread and a year after the total number of tracks downloaded first exceeded the number sold, CD sales are down only 5% – the jury is still out. In Germany, though, sales are sharply down (9.2% year-on-year against a European background of increasing sales) and CD burning looks like it’s become a national hobby (a quarter of households has access to a CD burner).

Assuming that the German numbers are real and that cause and effect are established (not a done deal), this is big news for the music industry in its war of attrition with the file sharers. The people of Germany are replacing their CD collections with MP3s – real, mainstream economic substitution is under way. History tells us that once a new media technology becomes popular the terms of engagement must change – from pitched battle to subtler combat and ultimately to accommodation. This has been true for all of the existential threats perceived by rights owners – from the gramophone to radio to minidisc. The people who run media businesses are not stupid and, once the customer has spoken, the damaging legal phase of the battle must end. Product and business innovation must now take over. The labels will quickly adjust to what is becoming a mainstream consumer activity. Although nothing can be taken for granted and you probably shouldn’t bet your last tenner that any viable media businesses will survive the MP3 era, precedent is eloquent. Record labels (and movie studios, for that matter) will survive, adapt and thrive.

No real good could ever have come from this period of conflict. Now that it’s coming to an end, we should see more cool applications ? an ocean of legal content organised and interconnected by the tech upstarts’ clever code ? and more humility from the RIAA. Incidentally, Universal Music just announced an extension to their downloading experiment. They’ll permit their eMusic subscription service to distribute a thousand neglected albums from the label’s back catalogue. This makes sound, undogmatic, commercial sense. Back catalogue was always going to be the starting point for the next wave of digital distribution – returns have withered and investment is long finished so commercial risk is low. It’s directly analogous to the way the movie studios created a new source of revenue by packaging movies as VHS tapes. Is this the beginning of the end of the file sharing wars? It’s a start.

(you may need to be a subscriber to see the FT article).