Comment: "Oy Tenenbaum! RIAA wins $675,000, or $22,500 per song" by Ben Shefner at Ars Technica; "The New Economics of Music: File-Sharing and Double Moral Hazard" by Umair Haque at Bubble Generation; "New Danger Mouse CD Released As A Blank CD-R Due To Legal Fight With EMI" by Tech Dirt
I'll start with a paradox: while the costs of distributing information are dropping, asymptotically, to zero, the value embedded within the information (its "meaning") persists.1
This paradox of low costs and high value plays a large and unstated role in our debates about music piracy. Sure, data distribution costs have dropped so low that we might as well round down to zero -- and economic theory predicts that prices will drop to marginal cost -- but has the "value" of music dropped that low (to zero), and if not, why shouldn't we be paying for it? While it might cost us almost nothing today to store and transmit the data stuff of (say) the Don Giovanni opera, the value that the opera inflicts on our soul has not changed much, if at all, for nearly two hundred years.2
So pricing is difficult. It's definitely true that distribution costs affects the value of music -- but it's not clear in which direction, up or down. As the digital shelf space reaches towards infinity, the supply of music available to us increases. This of course lowers, marginally, the value of any one song relative to all the others. Yet at the same time, as the self space expands, so does the chances that you'll find music that you really like. And so does the chances that the market will compete upward and outward, improving quality. Thus with increased supply, the value of each song declines, but the value of the set of available songs itself rises. And, further down the line, I'd argue, the more access to music we have, the more we can produce it, for information is both an output and an input: more music means more creativity, creative resynthesis, mushups, GirlTalk and DangerMouse. Value rises.
My point is that it's not altogether clear that the easy distribution of music lowers its value to us, and for that reason, I see no clear economic or "market morality" case for why we should all be getting our music for free, even if we can. To the contrary, I'd say there are a lot of good reasons why we should be paying for music. We need to create "incentives" for music production, sure; But more than that, I'd like to live in a society that values art -- the creation of art -- at least as much as it does trading derivatives or other forms of bean counting.
Most everyone seems to understand this intuitively. Americans are very used to exchanging money for value, and to suspend that enterprise when it comes to music feels odd, and immoral.
But if we accept this premise, then we've got to look at piracy as something other than just a breach of the law -- we've got to think of it as an economic transaction, as exchanging costs -- costs of our time, of risk to our computers, of ristk to our consciences -- for value. Apparently, a large amount of people are more willing to bear those costs and the prices assigned by the recording industy. And this is my point: Piracy is an essential statement about the value of the music.
To understand this, think about the music industry according to Haque's contract theory: listeners (the principles) contract out the the function of finding good artists and producing good music (the product) to the recording industry (the agents) for the purpose of performing a function that they cannot perform. In exchange for this service, the industry charges a premium on top of the retail price of the music
The crux of the piracy issue, I believe, is that the recording industry has failed in its function as an agent between listener and music. People don't want to pay for services unrendered.
As the music market has gotten more competitive -- with new bands getting new access to fans -- the recording industry has failed to compete. I has buckled down with a business model based on fixing prices and pumping out generically commercial music. By doing this, the industry has prevented the sort of rich, dynamic feedback on price and quality that's necessary to compete in lively markets.
Piracy has to be understood as a response to an industy that has neglected its core business function of creating value for its consumers. The industy has been too busy pumping out hot dog music -- "thick, pink, synthetic, inert" -- and suing its consumers (!) to bother with finding and creating art.
These are my opinions. Apparently, the RIAA is totally unaware that Joel Tenebaum's actions might be directly related to their own actions. And furthermore, they seems totally unaware that in an age of unlimited shelf space, of social media and of instantaneous search, their monopoly on the function of agent between musician and listener may soon break down -- that we'll see music distribution models that cut the recording industry out of the loop entirely. And that a growing group of good musicians already have.
So yes, we should pay artists for the music they create. But not more than we actually value it. And the money should go to those who are creating the value, not subtracting from it.
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[1] The famous Stewart Brand about information "wanting to be free" actually has two parts. "On the one hand information wants to be expensive, because it's so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other." back
[2] It really is a mystery why music affects us the way it does, why certain tones arrayed in certain ways, elicit so much joy. I'll note tangentially that I heard Steve Pinker describe our affinity for music as a product of our language capacities; he said that so long as we can talk and think in word syllables, we cannot help but be "supernormally stimulated" by music...this suggest that the "value" of music is more a biological fact than an economic one. back
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