The Hittman Chronicle

Several years ago a friend of mine said, "You've got to hear this tape, you'll love it," and played the song "If I had $1,000,000." He was right - I thought it was great and had him play it again, twice.

A week later he gave me the homemade tape, which had been given to him by a friend. He didn't need it any more because he had bought the CD. This was a blatant violation of copyright law, and I can't begin to tell you how much that bothered me, because I'm not that good a liar. I played it quite a bit and eventually ended up buying the CD. I also bought several other Barenaked Ladies CDs, and then bought a couple more that I gave as gifts. (The recipients have also become big fans.) The friend who played that tape for me now owns legal copies of all of their albums. That one illegal tape has resulted in at least a dozen sales.

The recording industry has had their undies in a bunch over illegal copying ever since tape recorders have been available. They succeeded in conning congress into passing legislation that crippled digital audio tape before it could become popular, but now they're finding themselves powerless to control the rapid spread of MP3 files over the Internet. The RIAA has lost every lawsuit they've initiated against the format and those distributing it, but that hasn't discouraged them. Perhaps they're hoping to pull a Scientology and bankrupt their opponents with legal fees. They'd better hope they fail.

In 1998, when MP3s started getting popular, the record industry announced sales of twelve billion dollars, and claimed that illegal copying cost them three hundred million dollars a year. Remember how upset everyone was to learn they only made twelve billion dollars instead of twelve billion, three hundred million dollars? Poor, poor record companies. But the fact is most of those loses should have been considered long term investments.

Anyone who doubts that copying increases the bottom line of distributors should consider the history of VCRs. Twenty years ago bigwigs in the movie industry tried suing VCR manufactures. They demanded to have the recording ability removed, or to limit tapes to one replay by erasing a tape as it played. They fought all the way up the Supreme Court, where they lost. Now even films that bombed at the box office can show profits when tens of thousands of video stores buy copies. Old movies, once forgotten, are now profit centers. And big, successful films often make more in video sales then they did in movie theaters. Studios should be very, very grateful they lost their case.

Such shortsightedness and stupidity are nothing new. In the forties the musicians union passed a rule forbidding members to make records. Union officials were afraid that once all the songs were recorded no one would hire musicians for anything, ever again. Imagine where the industry would be right now if musicians had complied.

This is a bootlegged graphic

In the late sixties Grateful Dead fans started collecting and trading muddy, low-quality concert tapes they made by smuggling recorders into shows. If a record company weasel had been asked to solve the problem, his solution would have involved body cavity searches of everyone entering and exiting the concert. Although some of the fans might have enjoyed it, it would have ruined the concert experience for most of them, and The Dead wouldn't have been nearly as successful. The Dead's solution to the probem was setting up patch bays so their fans could make crisp, high-quality bootlegs. Their fans responded by making them the most successful touring band in the history of the world.

Did the millions of bootleg tapes in circulation hurt record sales? Not in the least. Every one of their commercial releases was immediately snapped up by their fans. And they had (and still have) a lot of fans. Bootleg tapes weren't the only factor, but they contributed significantly to their popularity.

Dude, you got any MP3s in there?

Perhaps we should have a bit more sympathy for the recording industry. We shouldn't hate them just because they've been royally screwing 94.3% of the acts they've signed since the invention of the phonograph. ("Mr. Edison? Hi. We really like your recording of 'Mary Had A Little Lamb.' Do you have a moment?") They do provide services musicians can't afford themselves. Big success requires airplay and availability in stores all around the country, or even around the world. It takes an enormous amount of money to provide the advertising, promotion, distribution, drugs, and contacts necessary to turn a song into a hit.

(Oops, did I say drugs? Sorry, they don't do that any more. Honest. That was a big scandal from the past, and they've learned their lesson, and wouldn't even think of bribing DJs for airtime. Any record company executive will be happy to swear to that on a stack of old Rolling Stone magazines. And if you can't trust a record company executive, who can you trust?)

The recording industry never provided music. Their job has always been providing distribution. It's a difficult and tricky job, which is why they get so much more per unit sale than the musicians who created the music. The Internet, for the first time, presents a very credible threat to their distribution channel. Not yet, and not for quite a while, but it's coming. They can see it, and they're scared.

Musicians see it too. Small runs of professionally produced CDs are available for a wholesale cost of about three bucks each. When a musician sells one for fifteen dollars all the profit goes directly into his pocket. Even wholesaling it for six or seven dollars brings in far more than the typical record company royalties of $.80 - $1.25 per unit. Sign up with a major label, sell 100,000 copies, and you are a horrible flop. Make your own CD, sell a few thousand copies on your own, and you've made some serious money.

Right now the only musicians making much money from Internet distribution are those who already achieved fame under the wing of the recording industry. We haven't seen anyone hit the charts directly from the Internet, and we're not likely to, at least not for quite a while. Anyone who begins to attract attention via the Internet will be eager to sign up with a record company to get the distribution and exposure he needs to achieve stardom. Way back in the old days (three or four years ago) musicians started out in bars and clubs, built up a following, and did their damnedest to get a contract with a major label. The only difference now is that some will try to replace the bar circuit with the Internet. We'll have to wait to see if any of them are successful.

In the meantime, the recording industry, despite their cries of "wolf, wolf" are doing just fine. Their sales were up 5% last year, while their cost of goods continues to drop. Their lawyers having a great time threatening every teenage wanker with MP3s on his web site, attacking manufacturers of MP3 playback devices, suing people who aid in the distribution of them (and anyone else they can think of) in an attempt to eliminate bootleg copies of anything from the face of the earth. They better not try too hard. Success will have a strong negative impact on the industry's bottom line. As long as the lawyers keep failing, the recording industry can be assured their enormous profits will keep pouring in.


March, 2000


© 2000 Dave Hitt

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