The Impact of Piracy

So this summer the topic of music piracy came up in discussion with a coworker. Now I know this is a topic that has been done to death, but between the SOPA/PIPA debates in the US (and our own, much quieter, legislation here in Canada) and several other articles I’ve read of late, I felt it was a topic worth looking at.

My coworkers argument for his illegal downloading was that buying albums online or in stores translated into such a small amout of revenue being paid out to an artist that you weren’t really supporting them much at all. He also argued that the only way to really support an artist financially was to see them live in concert.

So is this true? Is buying an album from HMV, iTunes, Zunior or your local record store really a fruitless means of supporting your favourite band? Well, this article from Information Is Beautiful seems to support this argument. According to their research, an artist makes $0.94 per $9.99 album and $0.09 per $0.99 track downloaded from iTunes, and between $0.30 and $1.00 per retail album sold, depending on their royalty agreement. That means an artist would need to sell 1,229 albums or 12,399 tracks on iTunes per month to be making minimum wage in the United States ($1,160).

Doesn’t seem like your purchase makes a lot of difference, does it? Let’s look at more numbers. iTunes sales account for approximately 70% of all digital music purchases in the U.S. (Music Industry Blog) and have remained steady around that value for several years. Digital music sales also surpassed their physical compatriots for the first time in 2011, accounting for 50.3% or 1.27 billion sales (AUX.tv). What mix of songs versus albums these sales account for is unclear. For the sake of simplicity let’s assume it’s all single tracks. That would mean iTunes saw 889 million sales, accounting for just over $80 million in revenue for artists. Not bad but not great given the number of artists hosted on Apple’s digital music service.

So it would seem like there’s some truth to this argument. If iTunes is the dominant source of sales and they’re only generating $80 million per year for artists then you could justify your illegal downloads, attesting that you’re not really hurting an artist’s bottom line. Truthfully, an individual download doesn’t hurt that much. The problem is that only 16.5% of all digital downloads are legal (The Daily Swarm). If there were 1.27 billion tracks sold by digital services last year that means nearly 6.5 billion more were downloaded illegally. If all those had been bought from iTunes instead it would mean another $585 million in revenues for artists.

Can you do better by seeing an artist live? Maybe if you buy their record from the merch table. But how often do you go to shows each year? How often does an artist play a venue nearby when you’re available to see them? If they aren’t local, there’s the hidden costs associated with touring (fuel, food, lodgings, vehicle rental, etc.) For many bands just starting out, venues really aren’t willing to shell out a decent wage for a show and/or expect the group to bring in a crowd of their own. (Here‘s an excellent article on the follies of these plans for you to read.) These are especially difficult prospects to face, especially when you’re just starting out.

So think about this the next time you start a torrent. Where does the money come from to pay the people who worked to make that album a reality? Is $10 really too much to pay to help that musician cover their rent this month (The Globe and Mail)?

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12 Comments Add yours

  1. Andy Janes says:

    Starting to blog, are you? Off to a good start!

  2. Eric Adams says:

    I believe on Bandcamp that all the profits made go towards the artists, and you can buy the albums, singles, eps, all the goodies, even merch I believe, on there in any format they make…. There are also free and pay what you feel downloads!

    1. Bandcamp charges a 15% revenue share on all sales through the site. It’s an excellent option, for certaint.

      I didn’t discuss it in the article as I was trying to determine the bare minimum volume of revenue lost to piracy. There is also a not-insignificant amount earned from online streaming sites like Spotify and Rhapsody, although their payout is a minute fraction of what an artist earns by selling through iTunes. The details are in the infographics from The Daily Swarm and Information is Beautiful I linked in the article.

  3. Kathy G says:

    Fascinating read. Thanks for the links to the other articles as well. I love the Julie Doiron one.

    I admit, I had a similar mindset to your coworker when I first heard of this whole downloading music bit. I don’t know if I feel as bad for the big fish out there who are millionaires many times over, but for more indie artists who rely on grants and other revenue sources and tour endlessly, they’d feel the pain the worst.

    Oddly enough, they’re the ones usually willing to give their music away for free in the first place so they can get their names out there in an attempt to gain more listeners/fans.

    What a tangled web piracy weaves.

    Great blog. Can’t wait to see what you come up with next. 🙂

    1. Thanks for the comment, Kathy. While it’s certainly true that certain artists are making truckloads more money than independent acts like Julie Doiron, I’m curious how much they’re actually earning so I’ve done a little research into that as well. From the AUX.tv article I linked in the post, Adele’s 21 was the top-selling album of 2011 with 5.28 million units sold, 1.017 million of those coming online as of July last year. That would mean a rough estimate of around $5 to 5.5 million in earnings for her. Certainly enough that she can live comfortably for the rest of her days if she invests it wisely.

      That being said though, do we want to establish a double-standard? What’s the cut-off mark for gross earnings to make it okay to pirate their music? And what about the producers, mixers, graphic designers and everyone else that worked on making the album? Certainly they aren’t making much from the sales at all.

      Offering a single or album for free is certainly an excellent way to gain exposure but that should be the artist’s decision. It’s their work, their time and dedication to the craft, so it should be their choice as to what is done with it.

      1. Kathy G says:

        You have a very good point about the other people involved in the recording process.

  4. ubermiguel says:

    Great article, with very important implications for funding the music I love so much.

    “If all those had been bought from iTunes instead it would mean another $585 million in revenues for artists.” That’s a premise that I can’t agree with. I have no doubt many of the downloaders would not pay anything to download the music, but the question is how many would have paid at least something? That’s a hard question to answer.

    On a more general note the “music industry” and artists really can’t count on easily digitized product (i.e.: the actual music) for their income anymore, it’s tilting against windmills The model for income really has to include touring, good merch and value-added physical media, and you’re right, it’s a hard way to make money. I have no doubt in the future “professional musicians” will be extinct.

    1. It’s true that the artists wouldn’t have made all that money if the option of illegal downloading weren’t available but that’s not the entirety of what I’m saying here. There is $585M in illegally acquired music on hard drives around the world. All of those artists work was taken from them without a fair exchange. Could they have made that money? Some of it, certainly. Should they have been given it? Yes.

      What’s worse is that there are those who are actually profiting off of these illegal downloads. I don’t think there is a torrent site on the internet that is free from advertising. Every time somebody downloads a track, the host makes a few cents from the banner, pop-up/under ads and potentially the email they’re selling to spammers.

      For your other point, I’m finding more and more that new artists are expanding on the possible revenue streams. It isn’t uncommon for one or two tracks to be available free in advance of a release. Sometimes they’ll make the whole thing free or ‘pay-what-you-want’. Doing so get people talking about you and that is more important today than it has ever been. It’s especially important for a new artist. How much more likely would a new listener be to take a chance on a new group if they don’t have to pay for it? For me I’ll give anything a chance if I don’t have to pay for it. If I like it, I’m even more likely to buy something later, be it from their website or at a show.

      I don’t agree that professional musicians are going extinct (which is fine. I don’t want or need everybody to agree with me. Disagreement prompts discussion.) The professional musician of the pre-digital era is already gone but those of the modern age are evolving. They’re like print media. Those that adapt to the new environment will survive.

  5. Carrie says:

    Very much enjoyed reading this and your other posts. I have had this same argument with my kids about illegal downloading of music. I had asked that if they were musicians and everyone downloaded their music for free ….would it be different? Would they mind? Would it be a big deal then? They seemed to think a bit differently about it. We take in a lot of live shows, probably more than we should, but take immense pleasure in them and think that the musicians should benefit.
    I have also been the recipient of at least 4 ‘free’ CDs from going to live shows. A few have also offered free downloads on their websites.

    Great post on CBC blog today.

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