2. Usos y legislación de los paraísos fiscales
2.3 Puntos en contra de los paraísos fiscales
2.3.5 Posición de ATTAC
Current use of digital downloads and the roaring popularity of the file-sharing systems such as Napster has indicated that consumers indeed want free music. As we discussed earlier, this distribution channel is growing almost entirely free of charge.
In the US only $1m was paid for digital downloads in 1999, despite the surging traffic in online music sites. The fact that music is not being paid for certainly looks fatal to the industry’s current business model.
The Pro-Napster camp – which is usually anti-record labels – has thrown in a challenge, which questions the entire livelihood of this industry. Why do owners of content have to charge for it? Couldn’t music be distributed freely to whoever requests for it? Couldn’t the music industry extract revenues in some other manner? After all, artist receives only a fraction of the price of the CD, £1 for a typical CD priced at £12, which would suggest that the losses would hurt all the middlemen in the industry more than the artists. Some have said that the entire music industry supply chain is thievery (“why pay for the fat guy with a ponytail and a Lexus”). Most users find free music files too good to turn down, and it is hard to persuade them to pay for the same downloads they can get for free (easily) from Napster. Yes, most users probably know it is illegal but they do it anyway.
After all, free music has been available for consumers for years; on the radio. The broadcast model is based on drawing crowds, and monetising the content by means of advertising and sponsorship. Similarly on TV, the broadcast model lets viewers watch
“Friends” for free but in reality it is paid through advertising and sponsorship. In a way the broadcast model allows for a much tighter connection with the customer: by having to summon music from a particular source, the customer will have to return. Whereas when a consumer buys a CD s/he disconnects immediately and never has to return (the CD never wears out). Also, the broadcast model has an opportunity to draw very large audiences.
Similar to the broadcast model, digital downloads could act as a gatekeeper to crowds, with revenues coming from advertising. In other words, to consumers music feels as if it is free of charge, but in reality they are paying with their eyeballs, their time and their attention. A clever system that enables digital e-tailers to monetise free downloads is Everad, which wraps advertising into downloads (as the file is downloaded, an ad is shown) and also allows for sharing of these ad revenues with the artist and the distributor.
Another free music model was the Grateful Dead –model, the legendary band which gave out its music free of charge in several formats, for example by allowing fans to tape its concerts. The band derived revenues from merchandising and concert tickets sales alone, and sales of records are only a small part of the total revenue stream.
Grateful Dead has been touring for almost 30 years, demonstrating that for artists this can be an alternative revenue source.
Therefore, we ask whether the future model in the music industry could shift the value from the record labels to the individual artist, in a same way that the sports industry is currently structured. Take Tiger Woods, the gold hero: although he receives prize money for winning tournaments, majority of his revenues come from the various sponsorship deals with Nike, American Express and others. Essentially, Tiger Woods is performing for free, instead the revenue model is sponsorship and merchandising.
People want free music
Could music be distributed for free?
It can be done on the radio
Music could be used to attract crowds
One reason why free and pirated digital downloads via file-sharing platforms have proliferated is the enormous selection they offer; it is extremely likely that the song you want to download is available from some other Napster user. In a way the music industry is driving this behaviour by failing to distribute its entire catalogue efficiently: back catalogue sales consist less than 40% of all record sales in high-street stores. Although Napster has been promoted as a community by the fringes of the music industry, in our view the “community” feature in Napster is very limited. What has attracted users has been the abundance of free music.
The problem with free music is that it is unlikely that advertising and sponsorship revenues alone would support the music industry in its current form. Sure, while digital downloads are still representing a marginal share of the industry’s revenues their impact for professionals’ livelihoods remains small, however as this channel becomes more dominant, this is going to change. Artists have to be paid, otherwise quality music will not be produced. We strongly believe that copyright owners need to be rewarded and music’s value should be preserved, simply to protect the quality of the content and the consumer experience. However, that does not automatically exclude file-sharing applications such as Napster.
In Napster the programme, the recording industry might have at its disposal the rudiments of a programme that can deliver precisely what major labels need to convey via the Net. Secretly, many record industry insiders see file sharing as the holy grail, the killer application that will revolutionise how music is marketed. File sharing has enabled music gain exposure in a way that has never been possible before. After all, we should not forget that word of mouth is still probably the most influential method of music promotion, even surpassing radio exposure. Chart 43 below highlights this, detailing results of a recent survey on what compels consumers to visit web sites. We think Napster the programme should not be made illegal, however in using the programme music should be paid for.
Figure 43: What compels you to visit a web site?
Source: PC Data
Our views were shared by Bertelsmann, the German media company and parent of Bertelsmann Music Group, which announced on 31st October that it had signed an alliance with Napster. The two companies will develop a paid membership service that will be separate from Napster’s free 38m member-strong file swapping service. We
0 10 20 30 40 50 60
Radio ad TV ad Magazine/newspaper ad Online ad Mentioned in magazine/newspaper article Word of mouth More efficient
distribution of catalogue could mitigate the problem
Copyright owners need to be paid
File-sharing can revolutionise how music is marketed
Bertelsmann Napster alliance
Bertelsmann’s catalogue, while at the same time swapping files for free in the old Napster environment. In the deal, Bertelsmann will gain access to Napster’s huge user base as well as access to valuable expertise in P2P technology. We think this is an important indication that P2P applications will become a major channel in this sector going forward.
Note that the paid membership in the Bertelsmann deal will not replace free Napster, which means that the copyright case is still hanging over Napster’s head, and that the threat to music industry is still alive. In addition, as the alliance is still in plans only, we have only a vague idea on how the new service would look like. We think the deal is very positive for Napster, as it gives the start-up a lifeline in case the court decide on record companies’ favour, forcing Napster to close down its service.
We also expect new Napster-like applications to emerge but this time with a charge structure, whether it is per download, a subscription fee or an advertising model.
However, online ad revenues remain limited, and we are sceptical about long-term opportunities for distributors relying on ad revenues alone.
One possibility is to attach Napster or a Napster-like system to an ISP, and bill users monthly with their ISP subscription. This way file sharing will still “feel free”, while at the same time providing the content owners with a justified payment for their work.
MP3.com has solved the problem by paying the artists it houses on the site for each download, however for customers the downloads are free. MP3.com spends around
$1m per month in artist payments, and generates revenues primarily from advertisting.
The quote below by Richard Parsons, President of Time Warner, describes vividly the view shared by many in the music industry.
“This is a very profound moment historically. This isn't just about a bunch of kids stealing music. It's about an assault on everything that constitutes the cultural expression of our society. If we fail to protect and preserve our intellectual property system, the culture will atrophy. And corporations won't be the only ones hurt. Artists will have no incentive to create. Worst-case scenario: The country will end up in a sort of cultural Dark Ages
.”
Richard Parsons, President, Time Warner
-Key Thoughts:
Napster throws a challenge to the record industry: could music be given out for free with revenues coming from other sources?
Free music is available on the radio, with the business model based on drawing crowds which then generate advertising revenues.
We think artists should be paid for their creative work, as advertising revenues will not be able to sustain the industry, including paying for the production of new music.
However, Napster the programme might turn out to be a formidable marketing tool for the record industry, should there be a way to apply charges for the service. The alliance with Bertelsmann is a sign of things to come.Free Napster lives
New Napsters will emerge