Piracy And Its Effect On The Music Industry: New Solution

Introduction

Technological advancements have revolutionised the way in which people of the twenty-first century work, learn, communicate and spend their leisure time. This is particularly true in the domain of music, where technology has become a presence, if not a requirement, in music creation, production, promotion and consumption. Such expansions have allowed for ease of access, sharing and copying of music for recreational purposes without costs. The unauthorised copying and sharing of music content protected under the copyright law is defined as piracy. Illegal file distribution has become an increasingly problematic issue for the music industry within the last decade, particularly with the launch of software such as Napster. Napster is an online ‘peer-to-peer’ (P2P) file sharing network that allows its users to effortlessly share and access music without the need for payment. Since its introduction, the music industry has suffered tremendous monetary loss. For consumers, the advantage of being able to easily access music without payment can make one oblivious or neglectful of the negative consequences that piracy can have on both the music industry and economy. The following piece aims to discuss the implications of P2P file sharing networks, explore ways in which society can combat piracy and provide alternatives to music sharing.

Piracy

The 6-year span between 1990 and 1996 saw a peak in sales within the music industry, with revenue increasing by 15.3 billion dollars (reference). Following this period however, sales began to plummet considerably due to the introduction of Napster. Although software allowing for illegal downloading and sharing of files existed prior, Napster specifically facilitates the sharing of audio files. The ability of users to access and share illegal music allowed for its rapid success (reference). Napster had a staggering 70 million users at its peak and was considered to be the largest P2P site of its time.

Napster slowly began to have an enormous impact on the music industry as pirating became more popular. From the year 1993 to 2000, the music industry’s revenue increased by 10% per year, however after the launch of Napster, the revenue reduced by 16% just between 2000 to 2003 (Rob & Waldfogel, 2006). Slowly, consumers were being deterred from physical copies of CD albums. This was because they were provided with an easier alternative to access the exact same music. By having downloading platforms, it was able to save both time and money as it could be done instantly within their own home and piracy soon became a norm within society.

Members of the music industry felt that the use of Napster was stealing profits from artists and music companies. Soon, a lawsuit from The Recording Industry Association of America (RIAA) was filed against them for “enabling others to facilitate copying, downloading, uploading, transmitting or distributing plaintiffs copyrighted musical compositions and sound records without permissions of the rights owner” – (A&M Records, Inc. v. Napster, Inc., [239 F.3d 1004. 9th Cir], 2001). Due to the legal charges filed against them, Napster’s success slowly came to an end. This was not the end of piracy. As illegal downloading was brought to light, it paved a pathway for new innovations. Platforms such as Limewire that already existed when Napster shut down became popular drastically whilst many other platforms such as The Pirate Bay were being launched. Once again, these popular softwares had a major effect on piracy rates. It was found that 60-70% of the 3.6 billion files downloaded illegally each month in 2002 were music filed (Zentner, 2006). Similar to Napster, both Limewire and The Pirate Bay went through lawsuits that resulted in heavy penalties.

After consecutive shut downs of P2P file sharing services, piracy statistics were showing a gradual decline. This decline did not sustain as new methods to download illegally were being created, once again, forcing the music industry to encompass another battle for profits and legal rights. ‘Steam ripping’ arouse which involves extracting music and videos from stream-ripping websites such as YouTube or Soundcloud (O’Neill, 2019). This was done by copying and pasting the URL into a converter website which provides you a link to download the music. The Global music-industry body the IFPI reported that the most popular form of copyright infringement in 2019 was stream-ripping, with 27% of people using this method (Dredge, 2019).

Piracy And Its Effect On The Music Industry & The Economy

People who conform to the use of illegal downloading don’t often realise the greater impacts that their actions have. In 2007, it was reported that music theft caused a loss of $2.7 billion annually in earnings in sound recording industries, and consequently the US government lost $422 million in tax revenues (Siwek, 1994).

This detrimental decline in the economy subsequently had an impact on the workforce within the music industry. The production of music does not just involve the artist and producers; it involves music writers, marketing assistance, the production crew including photographers, film producers and many more. Music production is time consuming and requires the output of large sums of money. As a result of music piracy, there is a big loss in profits, putting these workers at risk of pay reductions or worse, become redundant. It was found that music piracy lead to the loss of approximately 71,000 jobs (Siwek, 1994). Additionally, the artist themselves lose revenue. When an album is produced, artists often receive an up-front payment along with a royalty between 5-13 percent of what the album is going to be marketed for (Zentner, 2006). The reduction in album sales leads to a lower royalty income so artists will consequently receive a lower up-front payment as record labels will predict the album to produce less revenue. In total, the U.S economy lost a huge $12.5 billion of revenue due to music theft (Siwek, 1994).

To compensate for the loss in revenue, artists tend to release more recordings in hope that this would generate more revenue and make up for the loss. However, if the new albums once again fails to produce sufficient revenue, then this creates a chain cycle of continuous loss in revenue and will result in a detrimental figure.

Lastly, people who are looking to enter the music industry or are trying to reach top fame are indirectly affected. When record labels are facing obstacles to generate sufficient income with their current signed known artists then they will not be able to conserve enough funds to exploit their lesser popular artists (Marshall Music, 2017). The difficulty that new artists endure lead them to find alternative methods to promote their music such as uploading their own music and videos on YouTube for free to gain popularity. Additionally, record labels are less likely to also recruit new people. This creates greater competition between people who are searching for stardom.

A New Solution To Piracy

Music piracy still exists in the modern world through stream-ripping and torrent downloading, however its incidence has been greatly reduced. The development of multiple legitimate streaming services such as Pandora, Soundcloud and Spotify has allowed for this decline. Among these, Spotify is the most notable digital audio streaming platform, with an estimated 217 million monthly active users worldwide (https://www.theverge.com/2019/4/29/18522297/spotify-100-million-users-apple-music-podcasting-free-users-advertising-voice-speakers) since its launch in 2008. Spotify allows its users to easily access millions of songs, audiobooks and podcasts uploaded by other users around the world.

Spotify has two membership options – the basic and the premium. The basic is free, however contains some setbacks such as having advertisements in between songs, lower music quality, some song restrictions and requires internet connection. Comparatively, the premium costs $11.99AUD a month, however there are no disruptions and inconveniences with this feature. Although there is a charge to this service, many people are still willing to pay and use Spotify as it allows for quicker and easier access to tunes. Music piracy often takes longer to access songs as it requires time to download and transfer to devices and may even be of low quality.

A study conducted by Faeraas (2013) found that during the year of 2008, approximately 1.2 billion songs were illegally downloaded, however by 2012 this statistic decreased to 210 million. Olsen (2011) further found that between 2010 and 2011, the percentage of individuals who obtained music illegally decreased by 18%. As of 2019, Spotify has 217 million monthly active users worldwide, comprising of 107 million paid subscribers (reference). The dramatic reduction in music piracy over the last decade can be attributed to an increase in the use of streaming platforms such as Spotify. The establishment of legal media platform services are therefore strongly correlated with the reduction of piracy worldwide.

As well as reducing the rate of piracy, Spotify also rewards artists and record labels who utilise the platform to promote their music. Artists are offered ‘royalty fees’, whereby they are remunerated a percentage of Spotify’s revenue generated from users ‘streaming’ the artists’ music. Spotify has claimed to retain 30% of the total revenue whilst 70% is paid in royalties to artists and music industries. It is therefore a platform in which both users and artists can benefit, as users can easily and legally access music whilst artists have a platform to promote and profit from their work.

Although there have been countless efforts to reduce piracy, it is evident that it will always remain a part of the music industry. With the latest advancements in technology and softwares, the introduction of new streaming services can be seen as a suitable solution to reduce music piracy as it benefits both the consumers and the music industry. On the occasion where artists do not receive enough streams on these platforms within a time frame, artists again will have to resort to other ways to increase their revenue. This could be through promoting their album via YouTube where artists receive a small amount of approximately $0.0018 per view on their video or $0.0003 if the artist is under a record label as they have to divide their income with their label. Finally, artists can generate a large amount of revenue by going on tours and performing concerts from the inflation in ticket prices.

Nevertheless, in the upcoming years, the rates of piracy can continue to decrease if stream services become available in all countries around the globe along with taking serious measures to remove stream ripping and P2P sites from the internet.

1. https://www.trademarksandbrandsonline.com/news/music-piracy-drops-in-2019-dominated-by-stream-ripping-report-5544
2. https://www.theguardian.com/music/2018/oct/09/more-than-one-third-global-music-consumers-pirate-music