codicil to the mp3 debate

I found this great paper here on the subject: “Will MP3 downloads Annihilate the Record Industry? The Evidence so Far”. It’s by a Stan J. Liebowitz, School of Management, University of Texas at Dallas, who is not so far as I am aware a sublow fan posting on the woebot thread, but lets give him some ear time nevertheless. Here’s some nuggets:

“Although the decline in singles has been a long time in the making, there is little doubt that 1998 marked a major acceleration of that trend. The bottom began to fall out of the single?s market a year before Napster came into existence.”

{Album sales} increased by a factor of 2.5 {1973 to 2002}, from 400 million to approximately one billion units. Yearly sales of albums per capita (defined over the population between ages 10 and 60) increased almost as much, from 2.7 albums in 1973 to over 5 during much of the 1990s. Since the population (as defined) only increased by 37% over this period, total and per capita measures cannot greatly differ.”

“The second feature of interest is the nonlinearity of the plot. There are at least four dips in sales prior to the current dip which is underway. These dips occurred in 1978-82, 1984-86, 1991, and 1994-97 with the current dip having begun after 1999. The fact that sales are currently falling, by itself, would not appear to be a cause for alarm, since this has happened several times in the past, only to be followed by further sales increases.”

“During the period of growth of cassettes, however, there was also a large increase in the sales of prerecorded albums. Clearly, the existence of cassette recorder/players seems to have had a positive overall impact on record producers, although we can not say that the growth might not have been more robust had the recording (copying) potential of cassettes been removed.”

“Changes in videogame software sales and changes in the sale of albums {seem to be related}. If we limit ourselves to the period before 2000, before any impacts of MP3 downloads, there is a positive correlation of .16, which indicates that the two move together and not separately. This relationship also fails to support the claim that videogames are particularly close substitutes for CDs.”

… This seems to derail one of my arguments!

“I believe that the movement in the market to but a single recording format, and the maturation of the portable and automobile markets imply that sales would at least have leveled off, with or without MP3s. Whether they would have fallen is less clear, but since purchases of dual recording formats would no longer have been necessary, there is some possibility of a decline in sales.”

“The decline in album sales per capita since 1999, as illustrated in Table 4, is 1.41 units, but the decline in the album subcategory of ?cassettes? is .50, leading to a decline in albums, net of cassettes, of .91 units. A three year decline totaling .91 albums per person excluding cassettes, would still be the largest and steepest on record, but not extraordinarily so. Since there are no other potential causes of this decline that held up under examination, we must conclude that MP3 downloads are harming the industry.

Matt’s mea culpa is justified! But hang on…

“If the analysis in this paper is correct, MP3 downloads are causing significant harm to the record industry. It is not clear, however, whether such downloading in our current legal environment will cause a mortal blow to the industry. I suspect that the worst damage to the industry is behind us, but we will know soon enough as new data are made available.”

So, make of that what you will. But I would caution you not to take this paper as a stick with which to beat the mp3 bloggers. Here’s another nugget from here, which is where I found the first paper:

“In 1982 the International Federation for the Phonographic Industry (IFPI) – the record industry advocacy group – estimated piracy at 11% of the total market in North America, 21% in Latin America, 30% in Africa and 66% in Asia. In 2000 it estimated (PDF) that 36% of the disks and cassettes sold across the globe were pirated – around 1.8 billion items.”

In other words, the clear and present danger to the record industry is commercial piracy. And the Liebovitz paper indicates that the level of mp3-driven falls in record sales are nowhere near this level of over one third of discs sold. He can tell there’s probably some negative impact on the industry which can be directly attributable to mp3s and not the other factors I discussed previously. But he can’t tell if that negative impact is particularly severe, and he certainly doesn’t think mp3s are responsible for the whole decline:

“What, then, is the impact of MP3 downloading? Given the enormity of the whole MP3 download enterprise it should be easy to recognize its impact on album sales if its impact is large. What do I mean by ?large?? If each MP3 song substituted for a purchased song, as has often been claimed by the record industry in the case of blank tapes, we would clearly have a large impact. If each two MP3s substituted for one purchased song, that would be large. Even if each four MP3s substituted for one purchased song, that too should probably be considered a impact large. If, on the other hand, each hundred MP3s substituted for one purchased song, that would not, in my opinion, qualify as a ?large? impact and it would be most difficult to measure, given all the factors influencing the sales of albums.”

He decides that the impact isn’t miniscule, but it’s not large — not large enough to account for the decline of record sales:

“Given the enormous number of MP3 downloads (if the numbers can be taken seriously), which are themselves an incomplete portion of the entire MP3 phenomenon, it seems safe to say that the CD equivalent of MP3 downloads is at least equal to the entire sales market for CDs. If MP3s downloads replaced sales at a 1 to 1 ratio, there would be no CD market to speak of. In that case we would be talking about a drop in CDs of 5 units, not .89 units. If MP3 downloads converted at 4:1 the album market would have dropped by 25%. Removing the impact of the decline in cassettes, which seems appropriate, it would appear that the conversion rate at the moment is on the order of 5:1 or 6:1. Not large but not small.”

A sideways view of the mp3 debate

Just a few notes on the recent discussion of the ethics of mp3 hosting, sharing and consumption.

1. The most important point — for me — is that mp3s give me a chance to actually hear stuff that I wouldn’t otherwise get a chance to hear. This is a good thing in my view. DJ mixes in particular is what I go looking for, but mp3 sharing services are also great for actually getting a listen to grime, dancehall, techno so I can know what people are talking about. In other words, I can get to hear music it would otherwise be almost impossible for me to buy — up here in Sheffield anyway. You can’t buy that much grime online either.

2. The second point is that mp3s can sometimes fulfil a different usage occasion for me. Tracks that I want to listen to occasionally, or more likely, once or twice, but don’t particularly want to buy, to own. There’s no micro-payments infrastructure to enable this kind of transaction to occur. iTunes’ quid-a-track pricing policy doesn’t go far enough. I don’t want to winge but it’s not as if we haven’t had long enough to invent this. Back in 1991 we early Internet evangelists were plotting out how business models for online media consumption would work, but we’re just as far away from this as we were 13 years ago. And the only reason it’s not happened is because the major record companies were wedded to a particular business model — shipping large volumes of a small number of acts through a few retail channels. Micropayments were not and are not what they are set up for. So I don’t mind paying 10p or something every time I listen to Clocks by Coldplay, but I don’t want to spend a quid on it.

(Actually I probably will buy the ColdPlay records at some stage just for the convenience, especially when the new baby arrives and we need some soothing. But probably second hand… which again denies the artist, and the record company, their share… )

In other words, stuff I consume as MP3 is fairly likely to be stuff that I won’t buy on CD, because I just don’t want it that much, or otherwise, will be stuff that I would buy if I could (ragga jungle, for example) or will buy in different versions if I can (dancehall). Above all what I’m interested in is NOT merely the original record, but how a DJ uses it. There are never enough DJ mixes available, BTW.

3. The blogz featuring their top tracks of the day are focusing on showing off their taste and building their cultural capital by virtue of their selectivity. They benefit not from someone simply downloading the track they host or reading their words, but from the listener valuing the record. As a marketing professional I can see absolutely no distinction between this activity and market-seeding and sampling activity — which is, believe you me, fucking expensive to run. It is by far the most expensive communication activity there is on a cost per exposure basis. These boys are doing the job for free. This is particularly true of the kind of minor artists that these blogs tend to focus on — in fact they tend to deliberately try to promote the artists. What is in no doubt is that there is a world of difference between this sort of value-added, off-your-own bat, at-my-own-expense marketing and simply sharing a CD of tracks through your SoulSeek folder. If they really want to salve their conscience they should try and include a link to a record label store where you can buy the record. And try and do something with the webpage so people can’t just leach it / link to it as if they were hosting it.

In other words, the mp3-hosting bloggers look to me like they’re offering a good deal, but then I look at these things from an economic and business perspective rather than a moral one. If I was the marketing manager for the artists I’d be trying to cultivate these bloggers. Of course whether or not the artists themselves will even begin to understand the issue is another matter. I think that reducing the quality of the hosted tracks is a bit self-defeating personally but I suppose it’s a matter of taste.

4. The record industry — as in the conventional, major record industry — is in trouble but it’s not because of P2P to any significant degree, so far as I am aware. The record industry has two main problems. One is that in the west there are fewer young people with a lot of different products and services competing for their leisure time. When the Bay City Rollers were going, Space Invaders was just being launched. By 1995, video games turnover was bigger than music and arguably bigger than movies (the argument was nuanced for the Wired cover story). I can’t remember where the numbers are now, but the fact remains that recorded music has gone from being one of the two or three primary items of expenditure in the youth market to being one component among dozens (which is why the ITV chart includes radio airplay).

The second industry issue is piracy — serious, professional piracy, which mimics the record companies’ traditional modus operandi of pushing copies of the biggest-selling products. In particular, the markets where the youth market is growing fastest tend to have a lot of piracy.

According to the numbers I’ve seen, the measurable impact of filesharing on record sales has been minimal when compared to changing demographics and piracy. That’s not to say it doesn’t exist, but it doesn’t seem to be statistically significant in the overall scheme of things.

It is therefore impossible to sustain an argument about mp3s filesharing hurting the record companies because the economic evidence does not support it.

I’d be interested in any pointers to good research in this area, with proper numbers and academic review please, not just RIAA projections based on paranoia.

And I want to caveat this argument. It is possible that filesharing through the networks, rather thn via the blogz, might hurt independent record labels more than the majors. I’ve heard a few underground labels say they can’t cash in on healthy vinyl sales with a high margin CD compilation because they know their record will be pirated immediately and they won’t sell any. Thank god for vinyl. Just how serious this is I don’t know — I hope indie record fans aren’t pushing their favoured labels out of business.

4. Part of the value of mp3s is that they are digital, easily replicable, and therefore disposable on a personal basis. You can always chuck in the knowledge that you can probably pick ’em up again if you want them.

Compare and contrast with the humble JA seven. Poorly manufactured, slowly eroding to dust, impossible to back up without digitisation, but saturated with the patina of real humanity, precious due to both rarity and specialness, and you paid someone real money for it — most likely someone who is part of the scene. I am not against mp3s and I personally love the convenience (much better than CD — I want a big jukebox connected to my hifi) and I can deal with the sound quality. But I do NOT want OBJECTS to be supplanted by digitisation (leaving aside Terrence Mckenna’s arguments).

Weatherall at Dust Social Club, Sheffield

I’ve tried three times so far to write something cogent about Dust on
Saturday and I just can’t so you’ll have to put up with the usual random

Dust is a techno club. It’s rapidly becoming a bit of an institution, not because it’s big and successful and creating a big coke-addled career for the people doing it, but because it goes out of its way to reject careerist, corporate clubbing codswallop. Instead, we’re talking 200 people in the back room of a pub or working men’s club HAVING IT RIGHT OFF to really classy, funky, deep techno played by mostly underground but extremely good DJs. More importantly, we’re talking about a SCENE — people go there and meet people and connect. This is largely driven by the Little Detroit forum, which the Dust collective runs. A lot of techno fans have gravitated to Little Dteroit and it’s probably one of the three or four leading techno forums in the world, certainly the most influential of those not affiliated with any of the big techno record labels. They tend to meet up at Lost, Haywire parties, Sonar, and now Dust.

Dust’s inspiration, or at least its closest historical parallel, is northern soul: the tagline for Dust is “Northern Electronic Soul”, and the logo features the classic clenched fist emblem. The similarities are obvious. When “real” 6Ts soul was out of the charts, consigned to landfill and ballast, ignored and reviled, there was a die hard scene of real soul fans who found that the more the commercial value of soul withered, the better the records were, the purer the scene, the sweeter the buzz. I think it’s axiomatic that commercial decline or marginalisation tends to create better music. For one thing, the poeple making it know they’re not going to be getting more than a few quid out of it, so their motivation is stronger. Of course this is a pretty elitist phenomenon, but so what; this form of elitism implies no contempt for the masses.

Dust therefore has a buzz, and it’s a real phenomenon, which is catching the attention of people who care about really good parties (and techno). Including Andy Weatherall. I don’t know about the rest of you but I still really rate him. His records (with Radioactive Man) still rock. And I’m interested in looking back to the pre-diaspora state of dance music; hipsters (including pretty much the whole of blogdom) turned their back on techno in favour of jungle. And fair enough. But I never totally lost interest in 4×4 modernism. And getting Weatherall to play a pub on the outskirts of Sheffield to 250 paying punters (no guest list, 250 tickets only…) is an achievement. It means Dust has assembled a scene of some vigour and great preciousness that allows the techno aristocracy to, as they say, return to the source. Weatherall is headlining a 10,000 capacity arena next month in Manchester; but he’s playing a pub in Sheffield because he knows he’s going to get a rare old buzz out of it.

It took a bit of effort to get there, not because it was far away — the pub is ten minutes from my house — but because my wife was away on a long weekend in Berlin, so I was already knackered having been looking after our toddler for a few days alone. But I parked him with the childminder overnight with no problem — he even told me to have a nice time. My mate from UK-Dance and house producer Ross was coming up from Derby. He showed up having battled both steel city’s insane road system — it can best be described as “hermetic” — and my almost totally non-functional directions, and I poured cold curry and warm lager down his neck. We cadged a lift from the pub with some mad women in a rickety car with no suspension to speak of and arrived at the venue, which is not “in town”. Well, nowhere in Sheffield is that far from town, but the Earl of Arundel is in a “mixed use” area opposite a builders yard and a boarded up terrace. Marginal. Liminal, even. Perfect for that space-between-worlds vibe which is the Dust trademark: techno’s synaesthesia mixed with Sheffield’s everyday weirdness. The atmosphere was intensified by a low-hanging ripe full moon rising over the Peak District.

Dust had sold out the week before — unheard of in Sheffield in recent times. I’d been to see the club’s main man Martin Dust that afternoon to pick up my tickets and basked in the reflected glow of a man who knew he was about to make Sheffield clubbing history. At the club we were greeted by pounding funky electro seeping out the door and Martin’s cool, happy face. He was resplendent in his flash leather coat, he’s always liked his nifty threads has our Martin. Happily for him he’d found a spot where he could watch the door and the DJ booth, which was just as well cos he was stuck there all night. The Dust residents, Aitcho, Bionika and Ian Orto played the best I’ve heard them, dropping sparkling groovy electro and dirty, high energy house, no looped-up bangers as at all as far as I could tell.

Then Weatherall was on — definitely on time, maybe even early, which was welcome — and dropped loads of electroclash-tinged, inventive 130bpm tracks that were’nt quite techno, or house, or breaks, but somehow squidged the best bits of each into whomping big chunks of beats and hooks. It was great music — really danceable, REALLY noisy, but smart and diverting too. Bit too much electroclash linearity at times for me but the flow was fantastic. Weatherall took things in a tougher techno direction at just the right points, making the sound rock-hard, but never head-banging. Even better was the crowd — it was packed but friendly, no meatheads, everybody going for it and whooping, lots of party atmosphere. One of the things that makes Dust special is that while it’s aimed directly at real techno fans, it’s not an exclusive techno fan-boy zone. There were scarcely any personality-free spotters but loads of party people and loads of women. And the crowd went mad. There are pictures in this thread.

After an hour I needed a break, but when I got back he was dropping the most sublime hard funky acid you can imagine. It was quite heavenly and I had a real techno epihpany; I decided that Weatherall really is God. I spent some time at the DJ booth — something I never do normally — and stood three feet from him, amazed at both his dextrous timing and his minimalism — he was never doing that much but god was it effective. It was just crossfader and FX abuse but he was genuinely making completely new tracks from what he was playing and most importantly it just made you want to scream. He looked superbly cool — minimal rocker style, neat pressed black slacks and shirt, teeny little quiff — nothing like the steretype techno DJ. Somehow he contrived to be unaffected by either the stained spotter clinging to one Technics, or the ludicrously insensitive raver swinging his arms constantly over the other.

But this wasn’t just another pub set through fart-o-matic PA. The sound was excellent, fat and clear and exciting. I suspect this was a lot to do with the laptop-based digital eq. The Dust crew were constantly tweaking the sound — led by a dyed-in-the-wool bearded hippy who stood there radiating warmth to everyone with his little smiles all night. I’ve heard better — the
Fletcher Munson sound system in the second room at UKDX sounded unbelievably liquid when Rich was tweaking it — but it was phenomenal for a small venue.

Eventually fatigue caught up with us but we’d caught most of the set and had a royally good time. Looking back it was so much more than just a great DJ set: it was a landmark, an icon. Music that good played to a crowd that sweet and up for it in a venue that relaxed (there was a police raid that closed the bar and I didn’t even notice) made this one of those really special clubbing moments you treasure in your memory forever. Maximum respect to the Dust crew and especially to Martin for making it happen, against all the odds. Next up is Surgeon on 2nd April… can’t wait.