I started to have a conversation with Chip last night about the way the different entertainment industries are handling piracy and after I got home, as I was falling to sleep, my brain started elaborating on some of the ideas. Now, this is all speculative and there’s no “hard facts” involved (except one) so you’ll just have to live with my ballpark numbers. This is a long rant so I don’t blame you if you skip over it. You’ve been warned.

Now, in my opinion, each entertainment industry (movies, music, games, etc) is handling piracy in a different way. For this little piece we’re going to be focusing on music. The main claim of the RIAA and it supporting cast is that internet trading/file sharing is the direct cause of CD sales being down. Now, while there are conflicting reports about whether there really is a slump in CD sales I can say almost without a doubt that it isn’t because of file trading. I’ll explain.

Boy Band A is releasing a new album. 15 million people are going to buy it and 1 million people are going to download it. I’m just making these numbers up so just bare with me, and yes, I know that 1 million people wouldn’t D/L Boy Band A’s shitty album but lets just go with it for arguments sake…

Ok, so 15 million people are going to buy it regardless of whether they own a computer or not, whether they’ve heard it or not, etc. These 15 million people are going to buy it regardless and file trading doesn’t enter into it for any of them. They are devoted (and blind) consumers.

Now, lets say that the CD costs $10. That’s $150 million dollars that’s going to go back to the label, band etc. $150 million in profit. We’re not going to factor in cost because I’m not going to try and estimate the cost of production or whatnot. So, ballpark of $150 million. Now, at this point the industry would say that while that’s nice, they’ve “lost” $10 million do to the 1 million that downloaded it instead of buying it. I say bullshit.

In the December issue of CPU there’s mention of a Forrester Research survey that shows that 40% of those who downloaded freely available MP3s then went out and purchased the legit CD. Let’s plug those numbers back in…

We take 40% of the 1 million people (400,000) at $10 a CD and that nets the industry an additional $4 million dollars. Which leaves us with the 60% of people who downloaded the music and didn’t buy it.

The part that confuses me is that the industry calls that a loss. Well, actually, it’s not a loss, it’s just not a gain. A loss would be if you’re losing money on something that you’ve already invested the capital in. For example, Sony and Microsoft originally sold their console game systems at a loss because it cost more than the retail price to produce one of them. The consoles were $350 to make and were selling for $300. Thats a LOSS of $50.

The music industry isn’t losing money per CD, they just aren’t getting as much money as they would like. That’s called business folks. Just because you have a product doesn’t mean people have to buy it. They would be more successful if they took the time to figure out why that 60% didn’t like the CD and tried to fix that. Because they already have a product that A: people are going to buy regardless of file sharing (or even hearing it first) and that B: 40% of the people who originally were NOT going to buy the CD changed their minds, I’d call that a 140% of the market. You not only got 100% of the people who were going to buy it, but 40% of the people that had no previous desire to.

Now, I’m sure people will say, “but what about if the 100% goes down, what if instead of 15 million buying the CD, only 12 million do?”. Isn’t that file sharring’s fault for lowering that number? Umm, no. If computers didn’t exist and file sharing never happened, those same 15 million people who didn’t download the CD in the first place and still bought it ARE STILL GOING TO BUY IT. If they don’t it’s because the CD sucks. Think about it. If Boy Band A was good, they got solid radio play and everyone liked them, you’d still sell records. If they sucked then people would get sick of their songs, turn the radio off and not buy the CD. How is that file sharing’s fault? I don’t get it.

In my opinion the industry should be more concerned with upping that 40% number instead of fighting against it. If you work with the file sharing community, offer better music and more incentives to purchase the CD then you’ll see that number of people who are going to hear it and buy it go up. How about some good music, with addition features on the CD? How about going to a DVD format and throwing a few music videos on there. Stuff that joe-average downloader won’t be getting. Hell, even put the mp3s on the CD for him. That way, he can trade them with his friends and say “hey, if you like this, you should see the videos on the CD, they’re really something. Then you get more people purchasing the legit CDs. Trust me, having expensive CDs with no redeeming musical value isn’t going to help you regardless of whether they’ve been traded or not. Sucky music is just that. How about producing some bands with talent instead of the same rehashed bullshit over and over again.

So, and this is completely opinion based, the real solution to the RIAAs nightmare is to turn it into a daydream and strive to produce quality stuff that people can’t easily get any other way then by buying their product. But, I can hear you saying “if they copy protect CDs up the ying-yang then they won’t get traded and people will have to buy the CD, isn’t that good?” I suppose, but all it’s doing to stabilizing the 100% market, those people who were going to buy it anyways. Now you’ve lost the 40% that heard it and liked it because they never get to hear it. I’m telling you, lower CD prices, quality products, buyer incentives, all these things in conjunction with file sharing is only going to help widen the fan base for that particular music.

Now, parallels could be easily drawn between the music industry and the movie industry. The movie industry in my opinion is just a greedier version of the music industry. Think about how many times the movie industry gets a kick back compared to the music industry. Movies get shown in theaters, rented, have promotional tie ins with fast food companies and then finally get sold on DVD and/or video. CD’s don’t get rented, or get promoted at Burger King. The movie industry is making money hand over fist. Plus, the “pirated” versions of their product are so insanely inferior that no on in their right mind would ever confuse it with or use it as a replacement for the original. I’ve seen comments that suggest the movie file sharing hurts box office attendance. Not DVD sales mind you but box office attendance. More people are staying in on a friday and downloading a movie rather than going to see it? Are you nuts? Have you ever seen one of those pirated copies of a movie? They suck. If anything had a legit claim it would be that DVD ripping was hurting other DVD sales.

But DVDs are expensive and hard to copy. A recordable DVD is somewhere around $10+, you have to have a DVD burner in the first place which are expensive and then you have to devote hours and hours and massive amount of hard drive space just to copy 1 DVD. For all that time and effort, you’ve still got a more than likely poorly copied $10 version of a $20 DVD. After that we can apply the same ideas for the music industry, more incentives for the consumer. If that 5 DVD box set was $40 then it wouldn’t be cost affective to copy it because it would take $50 worth of DVDs to do it.

There is one exception to all this, the game industry. Now, I’m focusing on the computer game industry since on average computer games are more likely to be copied and traded than console games. The game industry has decided, more of less, not to slap it’s fan/users on the wrist and tell them that file sharing is a bad thing, and I’ll tell you why. File sharing users, those who are really good at it, are the SAME people that are buying these games. The same people that are downloading these games are the same people that will be buying these games. I think it’s a fair assumption to make that they’ve realized that if they aren’t nice to their customers, the customers don’t have to support them. It’s a completely different philosophy than the RIAA and MPAA are putting forth. The record industry cares about one thing, selling CDs. The game industry has to care not only about selling their game, but promoting their game, developing a community for their game and getting more and more people interesting in their game. The whole MOD/Addon community is founded on the premise that if you make a cool game for us, we’ll support you and make cool stuff for your game. No one’s asking a game community to support their game of choice, they do it because they love to and the game companies are extending the life of their game FOR FREE. The equivalent might be to have a rock-star’s fan clue design the CD jackets for the special edition of the CD. How realistic is that? Or the movie industry giving student film makers access to movie props so that they can make sequels or spin offs. Not going to happen.

The game industry and realized the double edged sword in front of them and know if they can’t punish their customers into submission. The other industries have yet to realize that. They’d rather rant up on capital hill about how teenagers are subverting all their products and how horrible this is for they’re profit margins. Have you spoken to a teenager lately. It’s black and white, they’re either a complete consumer whore or they’re as counter-culture as you can get. It’s time for the entertainment industry to realize that by pointing the finger at the kid with green hair that it isn’t going to make them run out and buy their product. How about you stop pointing fingers before you poke someone’s eye out and we start getting mad.