The Music Industry: Downloading reconsidered

Astonishingly, a radio-ready record costs around $250,000 to record these days. I'm not sure how this can be when for $5k you can buy a Protools rig that is 1000 times better than what the Beatles used to record Abbey Road, but let's accept for the sake of argument that that's the way it is (one wonders why it is that way... are modern production values a substitute for good songs and performances? Are we looking for ear candy or music?).

How does a record contract work? The chart below shows the distribution of earnings for various levels of record sales, assuming a 500k advance to the band (recoupable out of the band's share of royalties), out of which the band must spend 250k to make the record. The royalties at $10/CD (wholesale) are split 85/15 between the record company and the band. This is a simplified picture: normally the record's producer would get a few percentage points as well (which would come out of the band's share), and the record company would incur additional costs (music videos, tour start-up costs), all of which would be recoupable as well.



The 85/15 split is meant to compensate the record company for their risk of potential losses. If the album goes platinum (a million copies), the record company does very well indeed... the band, not so much. In practice, given all the other recoupable record company expenditures, it is very unlikely that the band will see any money at all for the album beyond their advance, unless it is a truly colossal hit. But there are several thousand albums released per year in the U.S., and only about 30 of them go platinum. Most of them don't even earn back their advance, and disappear into the discount bins as money-losers for the record company.

Naturally, an established "big name" band is not going to accept an 85/15 split, as such a band is very likely to sell several hundred thousand copies even with an "off" record. The downside risk to the record label is near zero, and the split is adjusted accordingly.

What does all this have to do with downloading? First of all, the insistence of the record companies that they are just "defending the artists" by fighting downloading rings extremely hollow... they are defending *themselves*. Most artists earn the bulk of their income from touring and merchandise sales, where they get a much higher share of the proceeds. Only a handful of superstar recording acts are harmed by downloading - the rest are in the flat part of the blue curve and couldn't care less if their songs are downloaded or not - in fact they probably benefit from the increased exposure.

So, if downloading only hurts the big evil record companies, should we all start downloading with light hearts and clear consciences? I'm not sure. I'm beginning to think about the service that a record company still provides in an Internet world. We don't need them to manufacture and distribute a shiny disc for us anymore (and we don't need to pay Apple a 35 cent cut of a 99 cent song to ship us a few megabytes when bandwidth and disc space are too cheap to meter), but we DO (perhaps) need record companies for *filtering*. I live in a major city, and on any given weekend there are 100 bands plying their trade. The job of the record companies is to prowl these sweaty clubs, looking for the "good" bands and signing them to record contracts, fronting the money they need to make a professional-sounding record, and thereby increase the odds that this band will come to my attention. Even if I disregard all record company advertising, don't own a radio, and rely on word-of-mouth from my musically sophisicated peers to make musical discoveries, the chance that *they* will have heard of the band in the first place is greatly increased by the intervention of the record company. Is that worth something to me?

The reward the record companies get for this service are the windfall profits they get when they manage to hit it big with a new artist, and it is exactly those profits that are most threatened by downloading. No wonder they're pissed.

There are so many other interesting economic issues here, but that's enough for now.

Laughed Behind: Tribulation Farce

I've just spent far too much of my Sunday reading a savagely funny dissection of the geopolitical naivety, lack of imagination, errors of continuity and logic, and sheer Bad Writing of the first novel of the "Left Behind" series.

http://slacktivist.typepad.com/slacktivist/left_behind/index.html

If you don't know it, "Left Behind" is a 12-book series by Jeffrey Jenkins and Timothy LaHaye about the Rapture, the event many Christians believe will take place (any day now) in which all of them - plus all children - everywhere in the world, will immediately *disappear*, being whisked directly to Heaven by God. Thereafter, a World Government is formed, the anti-Christ comes, and various extremely unpleasant events happen - all of which make those Left Behind wish strongly that they were somewhere else. The theme of the Left Behind books is: "you intellectuals, you laughed at us. Well, we told you so!"

This would all be rather silly, and of no importance, if it were not for a few observations:
1. Many who believe in the Rapture take features of the modern world like European monetary union, 9/11, the war in Iraq to be harbingers of the imminence of the Rapture. (The first and most important event, I'm told, is the founding of the state of Israel).
2. It is plain that many who believe in the Rapture *want* it to happen - they can't wait for it, in fact. This affects how they think and it affects how they vote.
3. The Left Behind series has sold something like 50 million copies. There are *millions* of people who believe this stuff. Even in the darkest depths of liberal Canada, I've met people who believe this stuff. In Democratic areas of the U.S. (such as Seattle, where I worked for a time) they are numerous indeed - and in the more religious areas of the U.S. they are apparently a veritable plague. *Somebody* is buying these 50 million books.

I will let Fred Clark, who is a much better writer than I am, reiterate the point:

This eagerness, this enthusiasm for apocalypse, is theologically malodorous, but it is also politically dangerous. Here again are L&J and
their 50 million readers cheering for entropy, celebrating calamity, wars and
rumors of war as the confirmation of their desires, and railing against
peace and progress as setbacks to this consumation for which they devoutly
wish. They believe that things must fall apart and the center must not hold,
because even now the beast is slouching toward Jerusalem.

They want this to happen. And, whenever they can, they vote for it.

Fred's review (as a series of blog posts over the past two years) reads as though he put more effort into it than the authors of the book he is reviewing did. It is hilarious and highly recommended.

An interesting element: careful "scholars" of the book of Revelation have noted that the allegorical tale therein seems to refer to Europe (the ten headed monster, a la the 10 members of the EU - although it's actually over twenty now), Russia (Gog and Magog, apparently), Israel (explicitly by name)... but there seems to be a player left out. The world's sole superpower, the home of most of the True Believers of this stuff, seems not to be referred to in Revelations. Is the United States supposed to lose power and influence before this stuff comes to pass? The way George Bush governs the country - by seeming deliberately to want to destroy America's economic position, military capabilities, and international standing - I almost wonder if his secret motivation is not to speed the Rapture along.

A post in honor of "World Aids Day"

I've read that the Bush administration (and other conservative groups) are very interested in promoting "abstinence only" education programs, instead of condom use. On one hand, conservatives are correct when they point out that "waiting until you're married" is a 100% defence against AIDS, and a pretty good defence against pregnancy out of wedlock (which most accidental pregnancies are). But just how well do conservatives expect "just say no" to work? Do they expect to be able to stand against the human sex drive?

Here's how an economist might analyze the problem of AIDS education.

The number of AIDS cases per year is, let's say, A = pC(NT + (1-N)F)
Where A is the number of new AIDS cases.
C is the number of casual sex encounters
p is the proportion of casual sex encounters where one person has AIDS and the other does not.
N is the percentage of these encounters where no condoms are used.
T is the transmission rate of AIDS if you don't have a condom.
F is the failure rate of Condoms. (ie the conditional probability you will AIDS from a casual sex encounter even WITH a condom).

This equation is very simplified (I haven't tried to capture how risky a particular casual sex act is, for example), but it's good enough for my purposes.

Liberals look at the above equation and are interested in only one thing: reducing the amount of suffering caused by AIDS. The "objective function" of the liberals is min(A).... the fewer AIDS cases the better. The number of casual sex encounters itself is not important.

There are various approaches to that goal. T and F are pretty much fixed, so not much you can do about those. If you want to reduce A, you can try to reduce C, or you can try to reduce N. (or try to do both, obviously).

Now, liberals think that C (the number of casual sex encounters) is pretty inelastic. Wagging a finger and saying "just say no" is unlikely to have much effect against the power of millions of years of human sexual evolution. So, since F is pretty low, liberals are usually strongly in favour of condom-based sex education. They don't care about C, they just want to get N as low as possible.

However, conservatives view the problem differently. They say that they believe the right approach to reducing A is by reducing C. But why would they be opposed to reducing N at the same time? They feel that promoting condom use works against their goal of reducing C, that you can't say "abstinence is best.... oh and by the way, here are some condoms." Conservatives feel that people are like children, or maybe like a flock of sheep that need to be guided by the wise shepard, whereas liberals feel that adults are, well, adults, and can make up their own mind on these matters if they have all the facts.

I think what the conservatives are after is a cultural shift. They imagine that there was a time in Western Civilization where "that sort of thing just wasn't done" (ie, nobody had casual sex or even wanted to), and they want to go back to that time.

Leaving for the sexual historians the question of whether there ever was such a time, it seems to me that trying to engineer a wholesale cultural shift against casual sex is much, much more difficult (and less likely to succeed) than a campaign to persuade everybody to use a condoms.

In other words, I think the liberal approach is more likely to be effective in reducing AIDS.

However, I think conservatives are more interested in the above mentioned cultural shift AS A GOAL IN ITSELF than they are in reducing AIDS. AIDS, to conservatives, is a secondary phenomenon of lesser importance. To some conservatives it might be of no importance at all. Jerry Falwell came right out and said as much back in the 1980's: AIDS is God's punishment for immoral behaviour. In fact, if abstinence only programs were to reduce casual sex and condom use, but *increase* AIDS as a result (because condom use dropped by more than casual sex did) I believe that would be OK with most conservatives.

It seems to me that conservatives are more worried about "immorality" than they are about human happiness.

"Defense of marriage" - or defense of homophobia?

What exactly are "defenders of traditional marriage" protecting marriage from? As far as I know, not a single advocate of gay marriages has suggested the end of traditional man/woman marriages. Here in Canada, gay marriage is legal and as far as I know, all the men/woman couples who were married before..... are *still* married! Think about it.... gay marriage is legal in most Canadian provinces and the sky hasn't fallen yet. So what's the problem with gay marriage? Why the panic among devotees of traditional marriage?

So if gay marriage isn't a threat to marriage, what is it a threat to? As far as I can tell, it's only a threat to socially accepted homophobia, and that's what the self-styled "Defenders of traditional marriage" are really concerned about. They don't like homosexuality and they like society's growing acceptance of it even less. Gay marriage is yet another signal of that growing acceptance, and that makes it something to be opposed.

(Of course, homophobes never call it "homophobia". They style themselves as defenders of decency, morality, and the family, or some such rubbish. Of course, what gay adults do in their bedrooms is no more indecent or immoral than what millions of straight adults do every day, and gay people pose no threat to anyone's family. But some skulls are a little too thick to receive these ideas.)

I wonder: how many supporters of the recent anti-gay marriage proposals in the US secretly knew (and were proud) that they were voting for homophobia? And how many of them were otherwise decent people who were bamboozled into thinking they were saving an institution of marriage that didn't need saving?

A great article about "the faith-based presidency".

Ron Suskind has written an excellent article in the NYT about the president. The article examines the source of the preternatural certainty and self-confidence displayed by Bush, even as he runs the United States into the ground militarily, diplomatically, and economically. The source of that confidence, says Suskind, is faith. Faith is often considered a virtue and a source of power and influence in the world, but it has a dark side: facing uncomfortable facts and asking hard questions should be avoided, as this can only serve to undermine one's faith.

"Whether or not faith is a good way to run the country," Suskind writes, " it's a great way to run a campaign."