Creative Destruction

May 16, 2007

Avast, Ye Swabs!

Filed under: Economics,Popular Culture — Off Colfax @ 11:26 pm

The music industry’s war against file-sharing has just developed a new front.

Amazon.com (NASDAQ:AMZN) today announced it will launch a digital music store later this year offering millions of songs in the DRM-free MP3 format from more than 12,000 record labels. EMI Music’s digital catalog is the latest addition to the store. Every song and album in the Amazon.com digital music store will be available exclusively in the MP3 format without digital rights management (DRM) software. Amazon’s DRM-free MP3s will free customers to play their music on virtually any of their personal devices — including PCs, Macs(TM), iPods(TM), Zunes(TM), Zens(TM) — and to burn songs to CDs for personal use.

Indeed. Without any Digital Rights Management capabilities, EMI is placing into the hands of the public precisely the same file types as could be found on file-sharing systems all throughout this here little series of tubes. And as there are many of us out here who remember Sony BMG’s fateful (and ultimately unprofitable) decision to force the issue with malware hidden on every CD sold, EMI looks to take the popular front and break against the RIAA-allied pack.

And that alone might be enough to convince some people to buy their music online.

What goes unsaid, but not entirely unpondered, is what this means to the iTunes’ limited-DRM music collection and Napster’s full-DRM files. It has constantly been a watchphrase of the free-market economic theory to let the market decide. With this development, there will soon be the chance for the market to fully and completely engage in the decision process.

Good for Amazon and EMI Music, who are performing the economic equivalent of a boarding action on the high seas while the RIAA coalition is still piping “Sweepers, man your brooms.

[Turn Signal: Fiat Lux]

7 Comments »

  1. This decision is moving in the direction the public wants to go. Buying one copy of a DRM-free song is tantamount to buying multiple copies for every digital device you own. Anyone who ever made a tape of an LP or CD for their car knows about this practice. The recording industry is apparently catching up to and enabling what has already been a widespread practice for some time.

    But from the Dept. of Unintended Consequences comes the distinct possiblity that releasing DRM-free music will effectively stoke demand for file sharing, meaning that folks will acquire copies without paying for the first one. As I said before, one a copy goes out over the intertubes that can essentially proliferate for free, why would listeners decide to pay for a copy? In fact, you’d have to be a chump to buy something when it’s first released. Just wait until you can get it for free from someone else who paid. That’s how the market will most likely ultimately decide.

    Comment by Brutus — May 17, 2007 @ 11:07 am | Reply

  2. But from the Dept. of Unintended Consequences comes the distinct possiblity that releasing DRM-free music will effectively stoke demand for file sharing, meaning that folks will acquire copies without paying for the first one.

    Actually, I think it should reduce demand. Legal DRM-free downloads are a better substitute for illegal downloads than are legal DRM-equipped downloads. So there’s some subset of people who will download files illegally rather than buy DRM-equipped files, but who will pay for legal DRM-free downloads if available.

    What it would increase is supply. But does it really increase supply appreciably beyond the level of supply we already have due to CDs?

    In fact, you’d have to be a chump to buy something when it’s first released. Just wait until you can get it for free from someone else who paid.

    Replace “free” with “half price” and tack “full price” onto the end, and that describes my attitude towards media of any kind. Not that this invalidates your point. I’m just saying.

    Comment by Brandon Berg — May 17, 2007 @ 12:21 pm | Reply

  3. Yes, there most definitely will be some music sharing, but that’s already happening today.

    I think, however, that there will also be an increase in music buying once DRM-free music is more widely available, and that should drive the net net upwards, not downwards, for the IP holders.

    Comment by fiat lux — May 17, 2007 @ 11:24 pm | Reply

  4. In fact, you’d have to be a chump to buy something when it’s first released. Just wait until you can get it for free from someone else who paid.

    This is why books are not economically viable if people can read them for free, right? “You’d have to be a chump to buy any book when it’s first released. Just wait until you can get it for free from the library.”

    There are already musicians who make a living with a business model that includes free downloads of significant amounts of material. Just because the old business model is dying doesn’t mean that new models aren’t emerging.

    Comment by Ampersand — May 21, 2007 @ 1:30 pm | Reply

  5. Ampersand wrote:

    This is why books are not economically viable if people can read them for free, right? “You’d have to be a chump to buy any book when it’s first released. Just wait until you can get it for free from the library.”

    No, the digital version of a book is an unsatisfactory option to most readers, whereas the digital version of a song is frequently preferred by many listeners precisely because of its portability. So the print medium retains its value better than, for example, a CD pressing. Even if a publisher offered for sale a PDF of a book and licensed readers to print out the content, I don’t think you would find too many folks wandering around with a sheaf of loose pages to read.

    And no, borrowing a book from a library is not the same as copying a song from a digital source. The first is fully legal, whereas the second is illegal. They’re not confusingly similar, and I’ve made the point before. I’ll continue to repeat it as necessary since the argument keeps coming up.

    New business models are indeed emerging. Perhaps where I differ is the apparent desire to kill off the old one before new ones develop any maturity.

    Comment by Brutus — May 21, 2007 @ 7:44 pm | Reply

  6. Perhaps where I differ is the apparent desire to kill off the old one before new ones develop any maturity.

    There really will not be much time available for the new business models to develop completely, as the old model is on life-support as it is. This is particularly true for those of us on the outside of the industry. The 20%-to-25% increase in CD prices over the past two years is not necessarily the sign of even a stagnant business model, much less an understanding of basic economic principles.

    When you are in dire financial situations, you increase total sales by cutting prices in addition to lowering costs by cutting overhead. (Or put out quality product which will bring more sales but, alas, I will not expect a miracle to happen on that front.)

    What people are trying to do is bring a new business model into maturity before the old business model collapses under its own dead weight.

    Comment by Off Colfax — May 22, 2007 @ 3:28 am | Reply

  7. And no, borrowing a book from a library is not the same as copying a song from a digital source. The first is fully legal, whereas the second is illegal.

    Earlier, you claimed that people won’t buy things when they can get them for free merely by waiting. (“In fact, you’d have to be a chump to buy something when it’s first released. Just wait until you can get it for free from someone else who paid.”)

    Libraries are a perfect example of how this specific claim you made is wrong. The fact that by waiting a bit, I can get a book from the library for free, doesn’t prevent me from paying for some books to avoid the wait. (Every single Harry Potter book, for example, I’ve bought, usually the same week it comes out.)

    Movies are another example of how the specific claim you made is wrong; most movies are eventually available for free on TV, but people still pay for them in the theaters. Even people who have HBO, and so will eventually get the movies at home for free [*], will pay extra to see them earlier.

    The legal/illegal distinction you make between libraries and digital copies is irrelevant to my argument. That something is legal doesn’t change the fact that you have a choice of buying a copy immediately or waiting until you can get a free copy; and clearly it’s not true that people always choose to wait for the free version rather than buying the immediate version.

    [*] Well, not for free. But for sunk costs, which to many people feels like getting something for free, even though it’s not. For that matter, downloading stuff from the internet isn’t free, strictly speaking, unless the computer and internet connection are free.

    Comment by Ampersand — May 23, 2007 @ 3:03 am | Reply


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