No downloading, no Spotify, no innovation

Music revenue is on the rise exactly because of the internet

Record labels are abandoning legal music downloading service Spotify. The Dutch government wants to make it a punishable offence to download from anywhere else. This works counter-productively.

The previous weekend, 234 record labels announced they would no longer be offering their artists’ music on Spotify, because (legal) streaming services would supposedly discourage consumers from buying music. And the ban on downloading that State Secretary Teeven (Security and Justice, with the VVD party) wants to introduce — a repressive measure that would render what millions of Dutch citizens do unlawful — would that encourage expanding the range on offer? What is the industry’s problem, anyway? Not too long ago, when the possibility of listening to music still wholly relied on vinyl records spinning on turntables, life wasn’t complicated where copyrights were concerned. The record industry sold the music and passed on part of the earnings to the creators and artists. But then, disaster struck: users started copying music, using cassette tapes, video tapes, CD’s, DVD’s and the internet. The film and record companies saw their revenue drop. But according to an investigation by market research company eMarketer, during the past five years, the revenue of the music industry as a whole increased again from 60.7 billion to 66.4 billion dollars.

Data from the Dutch Central Bureau of Statistics indicate that more money is being spent on concerts than ever: in 1992 this was € 29 per household, in 2011 it’s three times as much. Lowlands has been sold out every time for years on end now, and the album ‘In Rainbows’ by the British band Radiohead, which was released in 2008 for free downloading on a ‘pay what you want’ basis, brought in six million dollars in voluntary donations. Internet users cannot be accused of stinginess.

Music artists can use the revenue-driving and cost-efficient trade possibilities of the internet to reach the majority of the consumer populace of the world and draw attention to their new releases or upcoming concerts. The most popular artists believe in the effectiveness of the internet too, as evidenced by teenage idol Justin Bieber and his fourteen million Twitter followers. Why would they be in favour of a ban on downloading?

The drop in revenue from CD and DVD sales is nevertheless easily explained. All the music stores made of physical bricks that have closed down in recent years have been replaced by just two online alternatives: iTunes and Spotify, which are limiting both in usage and in available content. For that matter, in the Netherlands there are more online stores that sell bricks than ones that sell music, and if you want to buy a film online, you’re usually out of luck altogether. It’s understandable that consumers would look for alternatives.

It’s the ones who benefit from current copyrights, the film and record companies with partly legally imposed collective copyrights management organisations, who asked for this ineffective and undesirable ban on downloading. Not only film makers and music artists are at the mercy of these éminences grises; so are entrepreneurs who want to market music and films online. Innovative online developments are not embraced, but are instead declared ‘piracy’ and sued to death. Never mind looking for a cooperative agreement to develop viable business models. Soon it’ll be individual internet users who are called to court. Stichting Brein, the enforcing arm of the entertainment industry in the Netherlands, will become our internet police.

Online distribution of films and music is already lagging behind by decades. Teeven’s argument that a ban on downloading would be necessary to enable innovation in this area makes absolutely no sense. Such a ban would end the innovation that’s currently happening. The fact that large companies can benefit from this online innovation as well is proven by the marked increase in cinema visits, in spite of or maybe even thanks to mass downloading of films. Last year’s cinema visits were higher than they had been since 1978, the year when Grease and Saturday Night Fever were released.

Now that 234 record labels have announced they will no longer distribute their content through Spotify, even existing innovations are at risk. The ban on downloading will eventually be used to scare individual internet users back into the old CD and DVD boxes. Back to the future.

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