Does the recording industry profit from piracy in any way?

September 18, 2010 11:48 AM

Are there ways in which record companies (e.g., Sony, Universal Music Group, Warner Bros) actually profit from piracy?

A lawyer friend of mine, who is involved in a case involving music piracy, asked me this question.

They offered the example of Sony selling MP3 players and CD/DVD burners.

Another example was Sony advertising on websites that contain links to pirated films.

Are there any other examples of the recording industry profiting from or supporting piracy?

posted by toftflin to law & government (26 answers total)

In theory, people who pirate music do not, necessarily, have friends who do so as well. Said friends may, however, enjoy the (pirated) music they hear and go and buy the albums for themselves. Had they not heard the pirated music, they never would have bought the album. It's a bit more complicated than that (e.g.: are they spending money they would have spent on a different album or buying both, would at least two people have to buy albums to make up for a single pirate, etc.) but the essence of the argument is that piracy may be considered an advertising cost rather than a full-on loss.
posted by griphus at 11:52 AM on September 18, 2010

Piracy can arguably expose more people to more music. Some of those people may elect to make purchases based on that exposure.
posted by Cool Papa Bell at 11:53 AM on September 18, 2010 [1 favorite]

Are there ways in which record companies (e.g., Sony, Universal Music Group, Warner Bros) actually profit from piracy?

All of the examples given so far --- by the op and the responders --- are plausible but hypothetical ways that music companies could possibly profit from piracy.

toftflin, is that what you're looking for? Or are you looking for actual evidence that some music company has profited through piracy in some way?
posted by alms at 11:59 AM on September 18, 2010

Concrete examples would be ideal.

IANAL, but I think the idea is that if they profit from piracy you can then accuse these companies of hypocrisy when they sue you for copyright infringement.
posted by toftflin at 12:07 PM on September 18, 2010

Beyond the "theoretically, if you look at it this way, it could be hypothesised that they might possibly make a bit of money this way" ... No, they don't make any money from piracy.

Sure, they might get some legal settlements, or some other revenue, along the way ... but on the whole record companies are significantly worse off due to piracy.
posted by jannw at 12:09 PM on September 18, 2010

On the other hand, you could say that piracy is as built-in to the system as anything else the industry doesn't adapt to fast enough (format changes, newer forms of advertisement) and that their worse-off state is of their own making. Looking at it that way, their lawsuits are profits, staving them off against their own inability to evolve to the times.
posted by griphus at 12:16 PM on September 18, 2010

I wonder, if you follow a record company or film company up it's corporate chain, how far before you come to a telecommunications company that is (according to the rights holders themselves) making money off of increased Internet usage driven by piracy?
posted by benzo8 at 12:16 PM on September 18, 2010

Piracy can have the same effect as can handing out a sample in the grocery store. If you try something and like it, you may go buy it--and more of the same. Almost every music purchase I've ever made has been the result of finding something, liking it, and going out to buy it (and sometimes buying multiple albums).

There are many different free-to-the-user ways to check something out: on the radio, on TV, on youtube, etc. Piracy happens too, but isn't the terror the MPAA and RIAA make it out to be. Certainly, some people do take things and not pay for them. Sure. But if you look at profit margins from the mid-90's on, they're *high*. Until the last couple of years, when there hasn't been as much money anywhere, the MPAA and RIAA were raking in money while crying about how the end user was ripping them off.

There are artists who *give away* their music on their websites...and also sell CD's or MP3's. Why should they bother? Because people often buy stuff once they determine they like it.

(By the way, hypocrisy may be annoying, but it's not illegal.)
posted by galadriel at 12:18 PM on September 18, 2010

Another example was Sony advertising on websites that contain links to pirated films.

I think you have it backwards. This sounds like an example of the recording money giving money to those who engage in piracy, not the other way around.
posted by dhammond at 12:20 PM on September 18, 2010

dhammond: That was an example of the recording industry supporting piracy I guess...
posted by toftflin at 12:27 PM on September 18, 2010

If piracy makes the song or artist more popular, than yes.

There will be more sales of synchronization licenses (rights to use the song in ads, movies, etc.), which benefits the label directly.

If the label or its corporate parent has a piece of the song publishing (as it often does), than increased radio and club play will enhance publishing royalties.

If the label has a 360 deal (as some do, and more are trying to do) with the artist, than the label will share in improved touring and merchandise revenues, and sometimes even pieces of the artist's ancillary income from endorsements, acting, etc.
posted by MattD at 12:31 PM on September 18, 2010 [1 favorite]

Concrete example from the world of hip-hop music: labels and artists leak stuff to mixtape djs (e.g. DJ Drama) as a marketing tool, in order to create buzz and gain street cred and whatnot (and, often in the artists' case, as a way to make some quick cash).
posted by box at 12:36 PM on September 18, 2010

These are some very good examples, thanks everyone.

For the sake of discussion, here is another example that was pointed out to me: Record companies using file sharing statistics for market research.

The article touches on the legal ramifications of the recording industry just using this data, to say nothing of profiting from it.
posted by toftflin at 12:53 PM on September 18, 2010

As far as I know (which is moderately far, but not 100% far) there is no reliably accurate, independent, repeatable data that quantifies "piracy" either before or after the advent of file sharing (I assume that's your meaning, since counterfeit media and copying have been around for longer than the recording industry has). Even if you had that information, you would then have to determine its effect on sales in either a positive or negative way. Try getting truly accurate sales accountings from a record company, even with Soundscan, even for a single recording artist, is not straightforward.

Because of this, I would consider the question unanswerable, and that those who pretend to have an answer are basing it on belief, not data.

Not to mention: add this concept to the above and then try to do the math. If your definition of piracy is one unit pirated instead of sold, you must consider that the amount of times the pirated unit can be copied is infinite. But you must also consider that the original pirate (and all subsequent pirates) may not have desired to purchase the initial unit for cash value in the first place, in which case the sale is not "lost".

Your friend's question cannot be answered. Nor can he accurately demonstrate that anyone has NOT profited in any way.

But if you wanted an anecdotal retort, you could say that many, many people (including me) have heard "pirated" music and marched to the store and bought the CD. If he asks for numbers, laugh.
posted by quarterframer at 1:06 PM on September 18, 2010 [3 favorites]

This isn't "record company", but it is "media company".

A number of TV shows from pay networks (Showtime, in particular) have a habit of ending up on Usenet and the big Bittorrent sites days to weeks before the new TV season starts (so these episodes haven't been on the air yet). Often it's just the first two or three episodes of a 12-16 episode season that are leaked. Of course, the other episodes will also end up online, but not until after they've been aired and a helpful pirate has transcoded them and uploaded them -- the prerelease stuff is different.

This is pure marketing, and Showtime wouldn't do it if they didn't believe it would get them more subscribers. They wouldn't do it this year if it didn't make them money last year.

The timing alone makes it clear that these shows are coming from inside of Showtime. They'll let you download and watch a couple of episodes of Weeds early, in the hopes that you'll like it, tell your friends, and sign up for the channel.
posted by toxic at 1:10 PM on September 18, 2010

Mix tapes and CDs are considered piracy by the RIAA. So are all of those 'videos' on YouTube that are just an album cover and the song playing.

However I have bought hundreds of tracks based on music from mixes friends have made for me and from having those youTube links shared on my social networks. I know for a fact that this unauthorized sharing has exposed my friends to new music that they have also purchased.

So for me and my circle: Yes, there is clear benefit to unauthorized copies.

On the other hand music companies seem to be doing everything they can to keep me from buying the music they have. This drives me to piracy because... seriously, you've got the product, I've got the money, what's the problem?

Here are two examples from my life:
1: Through a friend I know a president of a major Japanese record label. I'm a huge fan of a few Japanese artists and occasionally get promo CDs of my favorites to listen to. However about 2/3 of these CDs have so many DRM restrictions they don't play in my CD player or computer. So now I have the CD but can't listen to the music. I've been given the music by the head of the damn company, doesn't that entitle me to listen to it? So... pirate a copy. And if anyone knocks on my door clamining I'm a pirate I'll show them the CD.

2: I like quite a lot of foreign music and often it's nearly impossible to import their CDs into the US. However a lot of it is available in the local countries iTunes store. But I can't buy it because I'm in the wrong country. Seriously. How stupid is that? Yes there are things you can do with gift cards and fake addresses to get around it, but that's a huge pain and more trouble than it's worth, especially when I can just pirate a copy much more easily. I'm not proud of it, but all you'd need to do is let me buy it!

tl;dr: Piracy lets me find and buy new music. Music company policies push people who want to buy music to piracy.
posted by Ookseer at 1:29 PM on September 18, 2010 [1 favorite]

Thinking on this some more, a record company could in theory use the allure of illicit piracy as a marketing tool, branding something as "underground" and / or illegal, when a free release was in the cards the entire time.

They used to do this with radio all the time, with this or that radio station breaking "embargoes" on singles, which gives the radio station a bump ("we have it first, and we care about our listeners) and the release a bump (wow, if the radio station is taking the risk to break an embargo, this must be good).
posted by Cool Papa Bell at 1:44 PM on September 18, 2010

The early releases toxic describes may not be media producers at all, but rather journalists uploading screener copies. A better example is probably Viacom's uploading its own programming to YouTube at the same time it was suing the company for copyright infringement.
posted by gerryblog at 1:57 PM on September 18, 2010 [1 favorite]

Music sales (almost) world wide are down, and getting lower every week, and yet people are consuming more music.

(Yes, they are ... all those MP3 players have to have something on them)

Sure, someone might occasionally hear a mixtape and buy a CD ... but, on the whole as time is progressing, more music is being consumed, less music is being sold, and less money is being fed into the "music creation machine".

Make no mistake ... piracy is killing record companies, and that must have a knock-on effect to musicians.
posted by jannw at 2:00 PM on September 18, 2010

Think about all the situations where a record label willingly uses its money to fund people being able to access its artists' music for free:

- Radiohead, NIN, and the Smashing Pumpkins have given away whole albums for free on the internet. Many bands let you download a few mp3s from their website.

- It's now the norm for a signed artist to put entire albums on MySpace to be streamed anytime. Streaming isn't the same as downloading, and the sound quality is lower. But I can listen to plenty of Lady Gaga songs, legally, anytime I'm at home with my internet connection (my computer is hooked up to high-quality speakers), on her official MySpace page. That's pretty close to owning the album even though it's a bit more restrictive. It didn't stop me from buying her album -- the other day I paid $13 to get a couple albums' worth of Lady Gaga mp3s through Amazon. My free access didn't stop me from making this payment; indeed, I probably would not have ended up buying her album in an alternate world where I was not able to listen to her songs for free on my computer anytime I want.

- As others have noted, radio and TV have been giving away music for as long as they've existed. Record labels are eager to have their music broadcast through these media as much as possible, even though consumers can easily record the broadcasts to be listened to anytime they want. A hit song will be broadcast so often there might seem to be little motivation to go out and spend $14 on a CD mainly to have access to a couple of those songs, yet people still do this by the millions.

None of this should be understood as condoning the practice of downloading pirated albums. You could make a whole list of significant differences between that practice and the examples I listed. People should buy albums and not download them illegitimately. But that doesn't mean that the illegal practice yields no benefit to record label. It yields the same type of benefit as the examples I've listed. The fact that the benefits may be outweighed by the drawbacks is not a reason to ignore the existence of the benefits.
posted by John Cohen at 2:12 PM on September 18, 2010 [1 favorite]

>>piracy is killing record companies, and that must have a knock-on effect to musicians.>>

The conclusion is flawed. Piracy may kill record companies, but it does not necessarily affect musicians permanently – the reason being that the whole music business will change.

Right now even the "big-4" companies have realized that T-shirts make better money than music. People are consuming music prob. more than ever before (I-pods and similar), there will be markets also in the future as people are interested in new pieces of art. This may mean a temporary slow-down in the sales, but at some point at least some people wanna have good quality music again, which is always costly and cannot be made free.

Still, it may take quite a while to see what will happen in the future, as the record companies try to prevent all the changes in the business as long as possible.

DB
posted by Doggiebreath at 2:46 PM on September 18, 2010

John Cohen: "Think about all the situations where a record label willingly uses its money to fund people being able to access its artists' music for free:

- Radiohead, NIN, and the Smashing Pumpkins have given away whole albums for free on the internet. Many bands let you download a few mp3s from their website"

This shows a distinct lack of understand of how the music industry as a whole, and record companies in particular, function. AskMe isn't the place to go into this, but in short, record companies never use their own money - the money always comes from the artist, even if it's a loan from the record company. The artist ultimately pays for everything (and not in a notional sense - in a very real sense, they are billed from future earnings for development, recording, marketing and touring costs). So the only people who might suffer from giving music away free is the people who wrote it, worked on it and paid for the privilege of doing so, just so you could enjoy it...
posted by benzo8 at 2:10 AM on September 19, 2010

OK, fine, then I should have said: "Think about all the situations where the artist willingly uses their money to fund people being able to access their music for free." Same point, since the artist also has an interest in making as much money as possible.
posted by John Cohen at 5:55 AM on September 19, 2010

So are all of those 'videos' on YouTube that are just an album cover and the song playing.

When you upload one of those videos, YouTube catches it using their content ID system and the record company gets to choose the policy that applies. Options include: block it, add an iTunes link to the song in question, and running ads with it. The latter two are both "profiting from privacy."
posted by smackfu at 6:42 AM on September 20, 2010 [1 favorite]

I forgot to include the link to the TED talk on the subject by someone at YouTube.
posted by smackfu at 6:54 AM on September 20, 2010

Wow, thank you, smackfu, you just made my blog much better! I always avoided linking those videos before, since I thought they were legally sketchy.
posted by John Cohen at 7:01 AM on September 20, 2010