Friday, 27 April 2012

Artistic income generation in a digital world

In my posting of 21 April I likened the current digital versus hard copy information revolution to the move from hand written copies to printing. One of the key issues that arose in the earlier revolution was the threat to jobs and prevailing economics – and exactly the same is true of the modern day situation. This post continues with that theme and suggests some ways in which a new economics might emerge.

The copyright model

Information can be anything from books and other written works, to music and film. And almost uniquely information is protected in law (in many countries) in a way that other things are not. For example, as soon as I write something original, it automatically becomes subject to copyright (and I’m the copyright owner) – I don’t even have to state that it’s copyright. Music and film are covered in a similar fashion. But other things aren’t! For example, if I invent a great new type of chocolate bar, my recipe for that isn’t copyright because a recipe is seen to be a list of instructions. So there’s nothing to stop other people copying my recipe. This extends to other areas such as design (buildings, cars, clothes) and so on. Instead of copyright these domains rely on trademarks. So whilst others can produce chocolate bars exactly like mine, they can’t call them (exactly) the same, hence Cadbury’s Dairy Milk™ and  Hershey’s™ Milk Chocolate are names I cannot copy. In this domain the trade mark (brand) is what sells the product. People prefer Cadbury’s Dairy Milk™ to Fred Blogg’s Choccy Bar because they know and recognise the former and equate it with quality.

The world of copyright is different. No one else can (legally) copy my music and pass it off as theirs just by giving it a different name.

Copyright economics

In very simplistic terms (I’m a simple person) the current economics around information are as follows:

Producers -> Distributors -> Consumers

The producer creates the original content, be it writing, music, film. He/she then makes a living from this by selling that, and because it’s copyrighted, every copy of it that’s created has to be with the originator’s permission. And normally the originator charges a fee for that. So when you buy a CD, you own the plastic disk, the CD jewel case and the CD booklet, but the music that is encoded onto the CD is licensed: you are granted permission to listen to the music whenever and wherever you want, but not to copy it and certainly not to give away or sell those copies or to make money from playing the music CD.

Because it’s actually quite hard for the originator to make the CDs (or books, or DVDs, etc.) they normally pay someone to do this for them: a publisher (Penguin, Sony, etc.). These people normally also handle distribution and marketing as well, so either the originator pays them to do this, or – more usually – they share in the profits from the sales. Usually the publisher takes a bigger cut than the producer because they are taking a greater risk. If the product doesn’t sell, then the costs of producing are lost and the publisher has to bear that cost. Also within the circle of distributors is the point of sale. Distributors don’t usually sell direct, it’s the HMVs and Waterstones who do that. And naturally they get their cut as well – along the same lines as described above. There are others involved in this distribution chain as well, but for simplicity I’ll stop there.

Finally there is the consumer. What makes the consumer want to pay for the producer’s output? Fundamentally, it’s because there is something about that output that enriches the consumer’s life. Reading a good book, listing to great music, being enthralled by the latest movie. And if they like that output they will begin to form a relationship with the producer (all be it indirect) – they will look out for new works by that person and but those too.

In the old world of books and vinyl and video tape, this model worked well for the producers and the distributors because it was extremely difficult to make copies. Imagine the hassle, not to mention the cost, of photocopying the average book (200 pages or more). Making copies of records was a bit easier once cassette tapes came on the scene, and video tape copying was also relatively simple if you had a dual tape machine (quite costly). But generally the copies would be inferior because the media were analogue, and making copies of analogue generally leads to deterioration. So consumers were (more or less) content because there was no realistic alternative.

The digital revolution

So what’s changed? Basically, things are now digital. Books, music, film. And making copies of digital media is easier, cheaper and higher fidelity (there is no loss of quality unless you specifically choose it – e.g. you can copy music in the original format or compress it as mp3. The latter is of lesser quality, but that’s a choice.

And with this change, the views of consumers have begun to change. Partly this is because the barriers to copying have broken down, and partly it’s resentment that the old model is increasingly seen as greedy and corrupt. Why should I pay (almost) the same for a music album that I download as I would for the CD? Example: Little Broken Hearts by Norah Jones (due for release 30 April 2012) costs £8.99 from Amazon as a CD or or £7.49 as an mp3 download. Not only are there no costs for the distributor in terms of materials (CDs, jewel cases, etc.) but the costs of distribution, storage and shipping are greatly reduced as well. Perhaps if the Sonys and EMIs of the world had been less greedy and passed on more of the reduced costs to consumers, there would not have been quite the sea change that there has been.

So the model is breaking down because the barriers that held it in place have disappeared: just as the barriers that held the scribal industry came down and that industry eventually died, so the current model will inevitably fail.

The distributors will probably eventually find some other way of making money, but what about the producers. If people are not prepared to pay for music, etc. how do they make a living?

A new model for producers?

I think there are several answers to this dilemma (and they are not mutually exclusive).

The first is to rely on commercial sponsorship in order to support the production process. This isn’t new – think athletes with their branding deals. Some producers have already started to do this (Coca Cola ads sung by well known singers), but it’s by no means mainstream yet. It’s a major mind shift, that’s for sure. So I think we can expect see more of this in the future.

The next one is to rely on related income streams: live shows for musicians, for example. Touring is expensive and hard work, but it can be made to pay and several musicians do this very successfully. In fact many get more of a buzz from performing live shows than from creating new material. The same model applies to other producers as well: authors doing book signings and readings, for instance.
Thirdly, there is the generation of income through associated items. Tee-shirts, signed photos, games, etc. Often this is linked to sponsorship. Again this isn’t new, and many artists already very successfully use this as a means of generating income: I wonder how much income JK Rowling gets from the Harry Potter computer games?

Finally, there is philanthropic sponsorship. This is a very old model. Musicians like Tchaikovsky were supported by their sponsors: rich people who were happy to subsidise their protégés’ work. Nowadays there is an interesting twist on this emerging – rather than having one very rich sponsor (and thus possibly being dependent on them, which has its problems) – the producer can have many smaller supporters. Kickstarter is a great example of this: you sign up on the website and they advertise your project. People can choose to contribute to it from amounts as small as a few dollars to thousands. A typical Kickstarter project – needing say $20,000 to produce a new album – could have several hundred small supporters. In return for their support, the supporters get special rewards, but usually the monetary value of these is quite small, and the main reward is the feeling that arises from having helped to enable an artist you like to produce their new work.

Similar to this is NoiseTrade. Here artists give away music samplers or even whole albums for free. However people are encouraged to “leave a tip” – this can range from $1 to as much as you want. This isn’t for new work – in fact it’s usually for back catalogue material. It’s a great way of getting people to listen to your music. If they like it, they will hopefully come back and leave a tip, but more importantly, they will hopefully look out for new material and be prepared to buy that. (Amazon also gives away some mp3 files, but there isn’t a concerted effort to profile or link to the artist in the way that NoiseTrade provides).
Personally I would like to see much more of the last two forms of generating income come about – not only is it a great fusion of the freedom of digital, but it also helps solve the very problem that digital has created for artistic creators, and ti helps create that feeling of relationship between artist and consumer that consumers so love.

As for the middlemen – the distributors – let them find their own ways out of the dilemma. With a little more largesse in the first place they might not have been so trapped as they are now!

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