Downloading illegal copies of music is harming someone on the other end. That is no rocket science and everyone knows. More interesting is to ask why consumers do take advantage of an infrastructure – that they know is illegal, but at the same time available and present to a degree that blurs the awareness of it’s illegal nature? Consumers ever ask themselves, who is this someone, and how much do they actually owe this someone, in terms of money or even more in terms of respecting his or her creative work?
The second dotcom hype within the music industry was mainly based on two assumptions:
First, that online sales will be an enhancement to physical sales for the recording industry, adding to their revenue, and
secondly that DIY business models will generate revenues for the artists directly, as a side chain to their now optional tie to the music industry.
Egalitarian fantasies were soon flooding the web and the consciousness of all parties involved.
Before downloading got such a habit, no one really cared about the music industries highly complicated accounting mode. Ever since, it got on the radar of anyone interested in music and attracted malice from all sides in return. Nobody seems fit to explain how the artist gets his share in the end, and everybody feels great to get one over on this corporate suckers that get the gravy and keep the artist in poverty.
Now there is new numbers in the game.
German Association of Independent Music Businesses (VUT) did a little number crunching:
In a nutshell they show us:
A CD is sold in stores for about 15,-EUR and the artist does get a share of 12% – 17% (depending – e.g. if the artist did compose / write the lyrics himself, the collecting societies pay some money to the artist per sold copy), that is 1,80 – 2,55 EUR per copy, secondary exploitation like Radio Airplay, etc. not included. Of course – depending on how good an artist (or his respective manager) can bargain – this is negotiable and can be adjusted upwards.
Now who is getting the rest of the share?
Taxes, right, 15,97% that equals 2,39EUR. Outlets and distribution do collect some 38% / 5,80EUR, Publishers and Label 24% / 3,50EUR and the rest is on collecting societies, and costs for manufacturing.
That is approx. 2,-EUR for the artist and 13,-EUR for the industry involved. A 15/85% share not very much, but we’ll see.
But how much do the respective links of the revenue chain get out of online sales?
Let’s state 0,99EUR / download for one track.
artist get an average 7% / 0,07EUR per sale, taxes rise to 16% / 0,16 EUR per sale, online shop fees / distribution grab a splendid 24%/ 0,24 EUR per sale, the Publishers and label share 33% / 0,33 EUR per sale and collecting societies and manufacturing / rendering in this case get the rest.
7/93% share actually the artist gets less then half the percentage he would generate by physical sales. If one takes into account the low prices music is sold online, this drops potential revenues for the artist even further.
A short glimpse proves, that mostly the labels and publishers do profit from this situation (24% share from physical sales vs. 33% online revenue share) as well as the artists are the big losers of online sales. If you now bear in mind that handling costs for online media is way lower than physical copies this even ads up to this.
This gives a new spin to the recording industries complaints about them loosing so much money due to illegal downloads. I do not doubt they do, but they enforced this market to what it is now, and at the same time maximized their revenue share in missfavor of the artists and the retail infrastructure.
At the other end of this food chain, the consumers are getting criminalized and the artists suffer lower income from their work.
From the artists perspective the only question can be does illegal file sharing minimize the sales of my physical copies out there or does it help e.g. by promoting my music?
I’d really be interested in some numbers that describe how much music actually was purchased and how much was copied illegally in the pre-.mp3- era. Some reliable numbers if consumers do buy less music, if they do download illegally. And a cross-reference on the effects for the music industry. This has to be the basis for any discussion on dropping revenues and criminal consumers. Any other discussion simply bares any basis.
get the original pdf by VUT here