Following on from my earlier rant post about why it’s hard to make money as an artist, I was inspired by yet another insightful mini-article at ArsTechnica. The premise of the article (based on an LA Times article that requires registration to view) is that the US FBI is reluctant to prosecute P2P copyright violators. Specifically, author Charles Jade finishes with the following paragraph:

One wonders if the tide is turning at last, though it's not the end to copyright infringement or smoking cannabis that is the likely outcome of law enforcement efforts. Orin Kerr, a law professor at George Washington University, states a simple truth. "The gap here is [that] it's socially acceptable to download files, but it can also be a crime," Kerr said. However, as the number of people who commit a socially acceptable crime grows the impetus to enforce the law decreases, then efforts to decriminalize, or at least pragmatically address the issue, increase. The only question is how extreme the laws punishing an act can be made by a powerful minority before the majority decides the issue for good.

This led me to wonder why people are so easy on copyright violators? Ignoring the cost issue, which varies from country to country, I have arrogantly decided to break the answer down to the following three major factors:

1. Internet copyright violations are seen as "victimless crime", because you can make a perfect copy of something an infinite number of times without having any effect on the original copy
2. The majority of popular artists are such distant, abstract marketing creations that we barely relate to them as other humans (they are outside our Monkeysphere), therefore the guilt we might feel ripping off a friend or acquaintance whom we respect just isn't there
3. The celebrity system encourages consumers to believe that artists are rolling in money. Sometimes this is true, sometimes it is a marketing myth. The impression, however, is that they won't miss the income from a handful of CDs.

The way I see it, as long as people are able to play music, it is going to be ripped from the delivery medium and posted in the clear on the Internet via some form of P2P file sharing. The only practical way to discourage this is to create a relationship between the artist and the consumer. This could be via blogs, gigs, personal messages or whatever. Anything that brings truth and reality to the artist’s persona, so that if you hear about someone ripping off that artist’s songs for free without giving anything back, you actually care.

And here is why the RIAA will never achieve this without a complete rethink of their strategy.

Currently, the greatest profits are generated in the music industry by pushing a handful of huge artists to the greatest number of people possible. These are your Whitney Houstons, Britneys, Madonnas, U2s. This is because the cost of recording, which is still pretty high, is amortised across millions of CDs each of which has a 90% profit margin verses manufacturing cost. The studios have an unthinkably large investment in very finely tuned marketing machinery based around this concept. It’s all about big names - big producers, big artists and big stadiums. Getting those dozen or so megastars in front of the maximum number of people at once and then handing them a big paycheck.

You may have heard of the Long Tail concept. It talks about how most of Amazon’s revenue (and revenue from anything on-demand manufactured or electronically delivered commodity) is made on items that fall below the traditional unit threshold for profitability. The RIAA’s members know all about the Long Tail concept, and they are currently applying it to great effect with their vast and immensely valuable back-catalogue, which they can distribute almost for free online via iTunes et al without any promotion, recording, manufacturing or touring costs.

I’m sure this is how Apple originally pitched iTunes to the studios - 100% profit on their whole, slow-moving back catalogue.

Where major studios are in real trouble is with new artists. People don’t give a crap about Britney and her cohorts and will pirate them til the cows come home without feeling a scrap of guilt. The fact that the studios push these small numbers of new artists so far and wide doesn’t help them much, because the most popular a file is in the P2P network the easier and quicker it is to download.

So the challenge for big labels is to leverage the Long Tail concept with new artists. Find a cost-effective way to promote new artists all over the world to audiences that are actually going to care about them and want to provide them with a living wage. If they don’t manage to do that, and continue with their strategy of attempting to sue their own customers into bankrupcy, then they may find themselves obsolete and irrelevant even sooner.