Welcome to the Age of Technology

We live in the age of technology, a world where you no longer have to be constricted to wires and waiting in line. Commercial free radio streaming live via satellite, four inch thick televisions that are built to hang above your fireplace, telephones that include navigation and cable television that are less than eight millimeters thick. These are only a few products that are being marketed to the average consumer in America. We also live in a world where you can sit at your computer and order virtually anything from automobiles to groceries. The Ipod has arguably become the most popular tech device to reach consumers since the internet. No longer do you have to carry a CD case when you can have twenty thousand songs in the palm of your hand. Along with the ipod's popularity came the vast collection of music offered in Apple's virtual music store. Itunes has sold more than one billion songs at prices of $.99 for a single song or $9.95 for an entire album. These sales are responsible for an estimated six percent of Apple's annual revenue. With more than one billion songs sold on itunes, one question is: how much do the artists make off each $.99 download, better yet how much does illegal downloading really cost the artists. These questions and more are discussed in this blog.

Last year the estimated total downloads both illegally and legally reached an all time high of over six billion songs. With millions maybe even billions of people pirating music everyday how can you ever hope to stop the problem. Can you stop it? Apple is a huge force in the fight against piracy, and the reason is their software Itunes. Itunes offers a catalog of over four millions songs, sixty five thousand free podcasts, two hundred televisions shows, and is now featuring movies and games. When talking to college students about the ever so popular music store words like easy, convenient, cool, quick, and amazing all came up. I had a chance to discuss itunes with a few artists and words like revolutionary, exciting, and ground breaking all came up. When asking the artists if they knew how much of the $.99 download actually went to them, they all replied with a simple "no." Through research I have found many numbers on how much money the artists really make off of each song download, and some of my findings are truly scary. I have found in some cases that the same formula used by labels for compact disc sale is also being used for online downloading. When compact discs are sold the price includes costs record labels have traditionally used to reduce royalties such as the CD itself, the plastic or cardboard album, and the distribution costs just to name a few. Online selling cuts down on a lot of the costs associated with the release of an album, you have no distribution, no need for the plastic CD, and the casing for the album. The only thing needed to put your music online in the itunes store is the music file, this should cut down on costs right? In a recent class action suit filed against Sony records that could include as many as 2,500 Sony recording artists, all claiming they have received less than a nickel of every song download on itunes. "The suit alleges that Sony Music handles each download as a sale of physical media, paying only 85 percent of sales due to breakage of product, and deducts another 20 percent for container/packaging charges associated with the digital downloads. Finally, Sony Music is reducing its payments by another 50 percent for an audiofile deduction, which results in a payment to recording artists of roughly 4.5 cents per digital download." (macnn.com 4/28/06) This is the first suit to be brought against a record company for legal downloading off itunes, but it is rumored there will be more lawsuits filed against other record companies. The average paid to artists from record labels is said to be about thirty cents. An Alternative to the label is new companies such as Higgs Communication. Digital distribution deals by independent companies such as Higgs Communications are growing increasingly more popular in this digital age. Higgs Communications offers artists sixty three cents per ninety nine cent download, that’s fifty eight and a half cent higher profit than major label Sony Music is giving their artists. For example let’s say that I am releasing an album and have signed a distribution deal with Higgs Communication. My album will feature twelve songs at ninety nine cents per song, and let’s also say that the user was to buy each song individually. The total cost of the album for the user would be $11.88, and the profit for me would be $7.56. If I was to sell one million albums on this Higgs Communication distribution deal that would leave me with $7,560,000. If I was to release my album through Sony Music my total profit per album would be a mere fifty four cents, that’s $540,000. These numbers however do not reflect marketing and promotion. Sony Music would defiantly put more money into marketing than the almost non existent marketing plan in which Higgs Communication has to offer.

Record labels are trying new business models, this year Universal and EMI have joined forces in helping to start an Itunes rival. Their music store Spiralfrog will feature every song in its catalog free of charge. Based on performance vs. mechanical royalties, an advertisement model somewhat similar to that of terrestrial radio. Artists will be paid for every download, and they will receive money based on advertisement revenue. The exact amount artists will be paid has not been released yet, but it is rumored that the amount will be slightly higher than what itunes artists make. Free downloading has proved to be the most popular, as it accounts for more than 3/4 of all music download from the internet. When polling college students eight out of ten currently have a program similar to kazaa or limewire on their computer, which is used for illegally downloading music. (Limewire is currently being sued by the RIAA for copyright infringement.) Will Spiralfrog help the music industry by combating the piracy of music by offering advertisement embedded music files? When I asked students if they would use Spiralfrog, they replied with a yes, but were discouraged by the advertisements.

Over the last few years illegal piracy has become a huge part of the internet. Many artists’ albums can be found online weeks, even months before they are initially released. I sat down for an interview with Seth Davin of popular Minneapolis band Dropping Daylight, whom is signed to a recording contract on Octone! Records a company owned by Sony Music. In the interview I asked him about bootlegging and downloading both illegally and legally.

Q: How do you feel about downloading? A: I don’t care if you buying the album at Wal-Mart or on Itunes, or if you downloading it on Kazaa. I leave my friends and family to go on tour, so people can hear my music. I feel that my music is something that should be shared with people; I play it for people to hear. Q: How do you feel about illegal downloading? A: You don't get charged to go online and view a picture of the Mona Lisa, that was Leonardo da Vinci's piece of art, how can an artist get mad if someone is taking their time to listen to you. Q: How would you feel if your album was leaked on to the internet two weeks before it was released? A: It would bother me, only because I would worry that people were not getting the finished product, you only get one first impression.

Seth’s comment about the Mona Lisa surprised me. What is the difference between intellectual property rights, is it a different mentality between painters and musicians, or is it that this is just a different situation all together? I think that artists should get paid, their art is their job, its how they make a living, and I think that musicians deserve more than four and a half cents per song. As a music business student, I am excited to see the changes that will be made to online downloading, this one question will add many new job positions, and will change the industry for sure.

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ivylander says:

This certainly shreds the music industry argument that illegal downloading rips off the artists. Amazing that they would be so disingenuous....

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