Digitial Music Distribution

Note:I know this post is long, so if you're not interested about the recording industry, skip down to the list below and read how you can ethically consume music.

Major record labels are slowly but inexorably dying. Historically, they played an important part in the production and distribution of an album because the costs were way too high for a band to pay, but these costs have fallen far enough that a band can produce and distribute its own album. Now, they provide the marketing necessary for most bands to make it into the mainstream, and earn their profits from the resulting CD sales and recoup their costs from artists.

A simplified economics model would predict that labels sell zero CDs. The cost of digital music distribution is almost fixed- selling an extra copy basically costs zero compared to all the other money you've spent. Therefore the cheapest way to deliver music is electronically, and this will be the only one that consumers use, so all music will be downloaded rather than bought as CDs. The assumptions of the model aren't true, which is why CDs are still sold, but we're moving towards digital distribution, and in their present state, record labels can't live without CD sales.

The arrangement that record labels have with bands also does not entirely make sense any more. Currently, bands take out a loan from a record company, who produce an album, sell it, send the band on tour, and eventually get paid all their money back. Many bands make enough money to get by and do what they love, but only really famous bands make it rich. However, when you want to sell your house, you don't hire a construction company, you hire a real estate agent. Similarly, a band that wants to break into the mainstream needs a marketing firm, not a record label.

So what should consumers do?Here are the options:

• If you buy a CD, you get a CD, which is nice to have, the label makes a bunch of money, and the artist has some ridiculously small royalty that helps pay back some of the loan it took out.
• If you buy a song off iTunes and it's produced by a major label, 60% of the money goes to the label, 30% goes to Apple, and 10% goes to the artist (it depends on the contract, though.) It's not bad, but Apple makes about 10% profit off of every song, which is more than I think it deserves for running a music store.
• If you become an evil pirate and download ten of an artist's songs, neither the artist nor the label make any money. The artist has to pay off the loan it took out or go bankrupt. By pirating music, you're not only not giving the record label or the artist any money for their work, you're making life harder for the artist. But if you send the artist ten bucks, they get plenty of money to pay back the label with as well and plenty to buy ice cream with.
• If you go see the band in concert, buy a t-shirt and a CD, they get quite a bit of the ticket price and all of the profit from the merchandise. You get an awesome time and a memento, they get to pay off their loan and perform for a bunch of people.

If you agree that record labels are making an unfair amount of profit and that artists deserve more money for their work, then the best option is either to send the artist money or see them in concert. If you buy music off of iTunes, you're helping Apple and the label more than the artist, and if you buy a CD in a store then you're actually hurting the artist. The faster CD sales drop, the sooner we'll reach the point where most money is spent on the artist and marketing, rather than lining the pockets of rich people.

For those who are wondering what I'm doing, when I get a credit card I will:

• Send $15-20 bucks to Radiohead for their latest album, which you can download off of their website.
• Send $20 bucks to Bomb the Music Industry! for three of his free albums that I listened to a lot.
• Pay $10 for the high-quality downloadable version of an album by Brad Sucks.
• Send $10 to Harvey Danger for their free album that I also really enjoyed.
• Consider spending $20-30 at Magnatune, a record label that splits profits and costs evenly with its artists.
• Look at how I can reward all of my favourite bands for the music I've enjoyed over the years.

A Problem of Influence

I'm sure you're all aware that late last month, tens of thousands of Buddhist monks in Myanmar, also known as Burma, took to the streets in protest of the repressive military regime. I imagine that you supported their peaceful, pro-democracy cause, and would like to have helped them in some way. The main ways a country can influence another country are diplomacy, economic sanctions, and military intervention. Unfortunately, Western governments have none of these options open in Burma.

Burma's main allies are its prime economic partners, since it has little need for a military alliance. In 2006, its main trading partners were Thailand and China, so China has the most potential influence in Burma. The U.S. and E.U. have no direct influence because they've already imposed economic sanctions, and military interventions is simply out of the question. The Western countries could try and pressure China into trying to influence Burma, but even China's influence on the military junta is limited. Also, China is still nominally communist, so it will not try to pressure another regime to open dialogue with pro-democracy groups. Therefore, we cannot expect our governments to improve the situation.

On an individual level, we can boycott imports or pressure companies to divest (remove their investments) from a country. For instance, when citizens of Western nations helped end apartheid, South Africa has no other possible trading partners and was pressured to open dialogue with Nelson Mandela's political party. Unfortunately, our trade with Burma is insignificant and already restricted by sanctions, so we can't do anything as individuals.

The reasons for our inability to help the Burmese can be generalized to explain why we have trouble solving serious problems around the world. The Sudanese government, for example, can ignore demands made by the U.N. because its main export is oil to Japan and China. China will oppose any Security Council intervention in Darfur to protect its trade with Sudan, as it is also the main exporter to Sudan. From what I know of Japan, it is fairly isolationist and unlikely to give up a supply of oil, but perhaps it could be pressured into reducing its imports from Sudan.

What lessons should we draw from these situations? First, that economic sanctions should be considered very carefully, because many countries like Iran, Iraq, and Sudan have suffered the cost of the sanction and moved their trade elsewhere, and once strict sanctions are imposed, we can either pressure one of the misbehaving country's new trading partners to have a word with it, or we can invade. Second, through open dialogue and trade we can increase our influence in a country while reducing the relative influence of more neutral countries like China, India, and Japan. Finally, as we've seen in Iraq, Somalia, the Balkans, and other countries around the world, military intervention must be seriously examined and must only be used once all other avenues have been exhausted.