SF Gate Blunders Facts about Recording Industry and Piracy

It is with great disappointment that we see such a respected publication as the SF Gate (website for the venerable San Francisco Chronicle) would run a post sourced from Investopedia and ValueClick (an internet advertising sales company) that could have been paid for by the tech lobby.

The entire premise of the post is the kind of highly selective reasoning that can only be explained by bias so extreme as to overlook the obvious. And it looks suspiciously like the disinformation lead sheet cooked up by the “don’t be evil” Computer and Communications Industry Association (CCIA) earlier this spring. The CCIA is a group that makes the RIAA and the MPAA look like Mary Poppins.

The full link to the SF Gate post,  “3 Reasons Why Piracy Isn’t Crippling The Recording Industry” is below. Let’s get started.


In late March, the International Federation of the Phonographic Industry (IFPI) released its annual estimates on recorded music industry trends. It detailed that global revenues fell 3% to $16.6 billion. For most industries, negative growth would be seen as extremely disappointing, but the demise of recorded music from stores through the sale of compact discs (CDs) has been on a decline that has lasted the better part of a decade. Overall, the annual declines continue to be less severe and indicate that piracy is no longer crippling the industry as a whole.

Well, they’re actually stating the opposite of the post’s headline.  Sales are in fact actually still down. But somehow being down only 3% from the prior year is not “crippling” despite the fact that recorded music sales in the USA have declined by nearly 60% since 1999.  As the New York Times correctly points out, the decline is due to the completely obvious proliferation of illegal online piracy.

Back to Investopedia’s lead sheet:

Online Music Continues to Grow

The saving grace in recent years has been the growth in online music revenue from legitimate sources. Pirated music from the Internet has steadily declined as appealing offerings from reputable (and legal) companies have become available. IFPI estimated that global digital revenues grew 8% to $5.23 billion, or nearly a third of total industry revenues. Apple’s iTunes has been a huge driver to online music, but new sources including streaming sites such as Pandora and subscription models including Spotify continue to burst onto the scene.

First, online piracy has continued to grow and there’s no attribution to where this contrary claim has come from, so the SF Gate’s assertion appears to be complete fiction.  See this chart by The New York Times from February 4, 2012.

This is followed by yet another fascinating and intentionally misleading claim. Digital music sales may be increasing, but not enough to off set the overall decline in the pie year over year, much less a decade of losses. Further more, Pandora and Spotify represent a fractional percentage of revenue. The overall revenues have been dropping steadily for over a decade dropping from $14.6 Billion in 1999 to $6.3 Billion in 2009, a net loss of $8.3 billion dollars a year in a decade as reported by CNN.

It’s interesting how the tech industry loves to move the goal posts of the argument. There are now so many varied and interesting ways to consume music legally, and yet piracy is still increasing. The argument of “no options” for consumption simply falls flat in the face of Itunes, Amazon Mp3, Spotify, Rhapsody, Pandora and many, many others.

Now comes the miscounting part of the shell game:

Concert Revenue Increased

Though not officially a part of the recorded music industry pie [but they’re going to count it anyway], bands have learned [shocker–who knew?] that hitting the road can be quite lucrative and goes a long way in replacing lost CD sales. Industry trade firm [isn’t an industry firm and a trade firm kind of the same thing?] Pollstar estimated that the 100 largest tours in North America reported $2.3 billion in ticket revenues during 2011, up 6.3% from the previous year. The concert space had a tumultuous couple of years following the credit crisis, but has been a relatively steady and growing source of income for leading bands. The statistics detailed 3.7% international growth of the top 50 acts to just over $3 billion.

Investopedia states, concert revenue is not the recording industry–but don’t let that stop them. This like saying autosales are doing fine because cable subscriptions are up. But it doesn’t really matter because this selective use of stats overlooks the larger picture that concert ticket sales are dropping and have been for at least five years according Digital Music News who reports a 10.4% drop in global attendance since 2007.

And this brings us to the “greedy musician” meme–pretty brassy from venture capitalist wannabes at Investopedia:

Greed Isn’t Good

The growth of revenue-based online music sources could end up leveling the playing field for the industry, which could help boost total competitiveness [when?  2050?]. Last year, U2 reported nearly $232 million in revenue from touring across the world. Clearly, no one single band really needs to make that much, and the top bands garner a larger proportion of touring and recorded music sales.

Online music makes it possible for smaller bands to reach a wider audience, and also puts into play more obscure or older music that retail stores and concert promoters used to ignore. The concept also applies to movies, books and other media.

This is really funny, “Clearly no single band really needs to make that much.” Really? Does Google really need to have $50 billion in cash reserves? Aren’t venture capitalists in the 1% of the 1%?  The hypocrisy of the double standard is amazing.

So Greed isn’t Good unless you are Google or a tech company illegally exploiting artists for profit? Welcome to the “Exploitation Economy.” So it’s greed if artists are successful despite all odds, even when 95% of their work is being consumed illegally, as facilitated by the tech industry and Google?Furthermore, let’s remember Google’s YouTube was built on an a model of intentional and deliberate illegal exploitation of artists work.

As for the benefits to smaller artists, they might want to double check that as well, according to Ted Cohen and Tom Silverman from a talk at Midem, the benefits to unsigned and DIY artists are nearly negligible on an individual basis.

The Bottom Line

Several years ago, the music industry aggressively pursued consumers that downloaded pirated and other illegal music to their computers. It has finally discovered that creating legitimate, more competitive and appealing services, may have incentivized consumers to again start paying for their music. However, it will never be possible to replicate seeing a band live and in person. Finally, growing emerging markets are creating a new class of consumer that should continue to help the recorded industry climb out of its multi-year funk.

What in the world is he talking about?   “Finally, growing emerging markets are creating a new class of consumer that should continue to help the recorded industry climb out of its multi-year funk.”  What does that even mean?

The real bottom line is the desperation of the tech industry to continue to rationalize and justify its 13 year war on artists as it gets harder and harder to do so in the face of more and more empirical data that the livelihoods of artists have been catastrophically affected. In fact just this month Salon reported a 45.3% drop in “Musical groups and Arists” from Aug 2002 through Aug 2011 according to The Bureau Of Labor Statistics. This sounds actually pretty crippling to us.

One final thought is that as Investopedia states, “it will never be possible to replicate seeing a band live and in person.”   This very statement is an admission by these tech industry advocates that they have failed to innovate any substantive revenue streams for artists online. Touring and merchandise throw musicians back at least seventy years, prior to the ability to sell sound recordings.

There is nothing innovative by illegally exploiting artists to profit corporate interest–an income transfer program at best. The SF Gate, Investopedia and ValueClick only show the shocking arrogance and ignorance of those collaborating in the destruction of professional creatives’ careers.

see also: Musicians For An Ethical Internet



3 thoughts on “SF Gate Blunders Facts about Recording Industry and Piracy

  1. I had a similar reaction. The article reads as if the source was paid to write it. San Fran has always been a great music town. Techie’s take note and show your respect.

    will buckley, founder, FarePlay.org

  2. Great article, excellent! As a musician in college learning about the industry you could not have said things any better. These things are true, the masses need to know what is going on. All the facts are not out there and if they were people’s ideas would change real quickly. Keep up the good work!

  3. Thank you, David, for your (relatively) calm, always rational, and always reasoned commentary. Daily, I am reminded of two things: “Through the Looking Glass,” and/or the intrepid chef on the Three Stooges saying, “This house has sure gone crazy” while continuing to try to do his job even as the house around him descends into entropic chaos. Crazy indeed.

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