Combatting Music Piracy with Streaming
Professor John Higney
November 29th 2017
Music piracy has become a looming presence for the industry. With the evolution from cassettes to CD’s and the eventual shift to digital formatting, file sharing has been a large part of music consumerism. In the age of cassettes, piracy was limited, where the majority of music audiences could not benefit from piracy due to the risk associated. Pirating music was easy, not requiring a high level of expertise, and took a short span of time. The quality of the pirated goods was often inferior to the industry standard and thus unfavorable to the individuals attempting to distribute the copyrighted materials. Due to the digitization within the music industry, many factors that once were seen as unprofitable disappeared, as exact copies could be manufactured with ease, a lack of technical knowledge and expenses. This development sparked a rise in piracy, with peer-to-peer (P2P) file sharing websites coming to existence, which eventually started the industries’ war against piracy. Piracy has had a pronounced negative effect on the recording industry, where music labels have lost significant profits to file sharing, stating the losses “lose $300 million per year to pirate recordings; a report prepared for the recording industry predicted that by 2002, an estimated 16 percent of all US music sales, or $985 million, would be lost to on-line piracy”; with key actors such as Sony, Warner Music, and Universal being directly affected by the likes of Napster. As the recording and music business industry continues to battle piracy, closing down websites that permit P2P file sharing is of utmost importance as it disrupts the industry profits. However, in recent years, a new tactic has been introduced with the likes of streaming services such as Spotify and Apple Music, which offer versatility in accessing unlimited music in order to put a stop on piracy and keep copyrighted music a commodity for the millions of consumers. Moreover, this new music medium holds a variety of issues that focus towards the recording industry, where artists lack the benefits that were seen with physical sales. Piracy has had a large effect on shaping the recording industry and the way that the business sector has evolved, affecting consumers and creators in the process.
Research that stems from the recording industry highlights that there has been a large loss of profits from the recording industry due to the evolution of piracy and social media, where early piracy giants such as Napster gained popularity and disrupted the revenue that would have been made through industry copyrights. Moreover, there have been countless legal ramifications that affect piracy, such as inhibiting Internet traffic towards piracy sites. Also, by focusing towards consumer needs, digital marketing has offered streaming as an alternative to piracy and physical sales; functioning on a listen first, buy later strategy. By exploiting digital marketing, users are influenced towards other aspects of the music industries, such as merchandising and tour sales from advertisements. While disrupting the pirating models, streaming also offers avenues to new artists; forming a platform for recognition from consumers. Through the war against piracy, new forms have been created that make music easily accessible and ultimately further other portions of the creative and business industry.
With the evolution and constant pressures of piracy mounting on the recording industry, the need for a counterattack is constantly needed. The recording industry has battled with piracy for decades; first with cassette copying, later with CD ripping, and most recently with mp3 copies circulating the Internet. The transition towards a medium that allows endless opportunities for piracy has wrought havoc on the recording industry, as hosting sites have started to dominate the public sphere. In order to understand piracy, one has to look towards the catalyst of the era. Napster, which was established from 1999-2001, hosted one of the first P2P file sharing sites. It gained notorious popularity due to its user-friendliness, where computer users could download and share music for free without any existing expertise in the field. This company marked the beginning of digital piracy within the music industry. With the emergence of Napster, the public immediately saw the potential of the company as “the Napster user base doubled every five to six weeks, driven by the frustration of inflated compact disc prices and the inability to sample music prior to purchase.” As most users would turn towards pirating due to the inflated prices for music, Napster would become the epicenter for P2P file sharing. Users were more likely to be selective, downloading a single song rather than the album, which “would hurt album sales more than it hurts songs sales.” This rise in users sharing music files would ultimately lower the music industries investments, with “The first reported decline in music shipments occurred in 2001, suggesting the possibility that the influence of these events was beginning to be experienced by the music industry.” Due to the unique way that Napster functioned, with each song uploaded onto a users computer, any other individual could download songs from another person’s music library. “The problem laid in the fact that the files that were being duplicated and shared were protected under copyright law, and the Napster system was replacing potential sales of physical recordings of the same works, leading to copyright infringement”. In 2001, after a lawsuit from the Recording Industry Association of America (RIAA), Napster was dismantled and only allowed to return as a subscription service that would pay royalties to the music industry for downloads or streams its users would share. The RIAA “estimated that the illegal file sharing via Napster by an estimated 20 million people worldwide cost the music industry more than $300 million in sales [over the 2 year life of Napster]” Due to the downfall of Napster, the industry slowly created their own anti-piracy softwares to distribute music digitally. With the creation of iTunes from Apple, and the company’s push towards distributing their own music library service for its users, the recording industry enacted the Digital Rights Management Software (DRM). This software would restrict playback from unauthorized devices by putting “a lock on downloaded music, limiting the share of a purchased song. For songs that have the DRM software encoded onto them, restrictions are placed on the type of music players that can play the song, as well as on the number of computers that the music can be placed on.” However, the DRM design had a major flaw, where the major labels that were requiring iTunes to use DRM would sell their CD’s without any encoding that would prohibit piracy. And shortly after the creation of DRM, “music stores sold fewer than 2 billion songs protected with DRM software, 20 billion songs were sold completely unprotected on CDs by the music companies themselves, accounting for over 90 percent of the music sold.”
Furthermore, the recording industry has created new tactics in order to further this attempt to disband music piracy completely. By partnering with streaming sites such as Spotify, Google Play Music, and Apple Music, the recording industry is able to entice the users that would otherwise resort to illegal downloads. By allowing users to stream unlimited songs, the industry is taking away any possible rise in piracy as it offers a better choice. Spotify allows its users to access an unlimited library of music for free with the usage of ads during a listening period; however it also gives the users options to subscribe to bypass the ads. Its user friendliness allows the user to be immersed in the listening experience as well as within the social media it connects to, unlike what is found with pirating. Pirated music lacks this idea of connecting with social media and music, where it is strictly individual based, not societal. Spotify offers its users the ability to integrate and share their music, “Spotify allows its users to integrate with their Facebook account, and, once this integration is done, by default all Facebook friends who are also Spotify users become topics that can be followed. A Spotify user can also follow another Spotify user even if they have not integrated their Facebook account by finding each other by sharing music or Playlists.” As the modern age gradually becomes more social media based, this idea of sharing is very beneficial to its users. They are able to create playlists and stay up to date with their friends and the artists they listen to. This lack of connection within pirating sites decreases the possible transferring of users away from streaming sites such as Spotify. The streaming service also allows its users instant gratification in terms of new music or events, with users receiving notifications when a new album is out. The CEO of Spotify has stated the services use against piracy, “Spotify CEO Daniel Ek stated: “Founded in Sweden, the home of The Pirate Bay, we believed that if we could build a service which was better than piracy, then we could convince people to stop illegal file-sharing, and start consuming music legally again.” The main argument behind using a free service such as Spotify is that users do not want to risk prison time or fines in the United States therefore “they are finding the free service to be an alternative to their devious ways of downloading music illegally.” The main argument behind using a free service such as Spotify is that users do not want to risk prison time or fines in the United States therefore “they are finding the free service to be an alternative to their devious ways of downloading music illegally.” A survey was conducted to analyze the effect that streaming services had on music piracy and the results showed that after using a music streaming service, the percentage of users that pirated music had dropped with “almost 75 percent of the subjects reported that they use or download illegal music less, 65 percent of [subjects] reported using the “freemium” ad-based accounts” Apple Music has taken a difference stance against piracy, where their catalogue contains exclusive materials for users before any other streaming software. Apple Music contains radio broadcasts as well as music streaming on-demand, but without a free option. Users must register and pay a monthly fee in order to partake in curating their own playlists and unlocking content. This fee comes with benefits as many in the industry partner with the distribution giant for exclusive releases. Music users are enticed into the Apple Music program by this, where they get exclusive content from their favourite artists before the original release. This can be highlighted by Drake’s release of ‘Views’ as well as countless others such as Chance the Rapper and Frank Ocean, where it was a “two-week streaming exclusive on the service”
By focusing towards consumer needs, digital marketing has offered streaming as an alternative to piracy and physical sales; functioning on a listen first, buy later strategy. By exploiting digital marketing, users are influenced towards other aspects of the music industries, such as merchandising and advertising. While disrupting the pirating models, streaming also offers avenues to new artists; forming a platform for recognition from consumers. Through the age of social media, the ability to stream music allows artists to be marketed around the globe and with great ease; expanding possibilities for record deals, tours, and merchandising.
However, even though the recording industry has methods of combatting piracy, the effects of streaming aren’t completely positive. The introduction of streaming has solely benefited users and the corporate giants and rather than assisting artists, it has created issues in revenue. Lee Marshall states that “both major stars and smaller independent artists publicly criticizing the low levels of royalty payments such services have thus far generated”, within research on the controversies surround Spotify’s treatment of their artist roster. He continues, “musicians argue that on-demand streaming services undermine sales of digital files and physical media and, therefore, they are not a financial model that can sustain their musical careers.” This idea highlights the issues that Spotify creates for the creative industry, where artists rely on physical sales but that is being undermined through the streaming networks present. The industry publically criticizes piracy and campaigns for improved copyright enforcement, they have accepted the adaptation towards consumer habits, while making the creators secondary in this process. The main challenge now sits at incorporating the behaviour of free and accessibility that was seen with piracy into a marketing model that will benefit all aspects of the recording industry.
In the past decade, the digitization and evolution of music from CD to MP3 have pushed the piracy world forward where numerous sites have begun in order to distribute free content to users. However, the industry has initiated tactics in order to combat the upcoming rise of piracy, with the emergence of DRM, lawsuits against offenders as well as creating streaming services that will make users unwilling to pirate the music goods. These tactics have had progress in slowing the piracy community; however they have not completely shutdown the act of piracy but rather have equalled the profit loss by introducing streaming. With the shift towards anti-piracy with the emergence of streaming sites such as Spotify and Apple Music, the recording industry’s primary focus is on its consumers rather than its creative contributors.
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