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Bye, bye, Miss American Pie (chart)
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International By Trajce Cvetkovski - posted Tuesday, 4 April 2006 Sign Up for free e-mail updates!
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New release CD singles are all but dead, and CD albums are dying. Yet the sale of
Technology chartable albums (the "Top 40" especially) forms the bulk of revenue in the pop music
Authors industry. The exclusive club of a few multinational major recording companies (majors)
are very worried. They control most (80 per cent) of the revenue in this highly
concentrated, well-organised mode of pop cultural production. But since 1998, the
majors have posted unprecedented losses in profits from chart sales generally.

Why the sudden disruption to a well-established and extremely advanced form of

commercial exploitation? And what does this great rock 'n' roll fire sale mean for the
heavy weights of the music industry?

Eight years ago, albums retailed for up to $30.95. The small club of audience-targeting
majors (Sony-BMG, EMI, Universal and Warner) were laughing all the way to the bank
because, on average, CDs cost as little as one dollar to manufacture. The industry was
valued at nearly $100 billion internationally.

The music business has a number of advantages in comparison to other modes of

capitalist production. Generally speaking, there are such small interaction costs attached
to producing pop music products and yet they have so much surplus value as they are
capable of perpetual exploitation (via the copyrights attached to them). Rummage
through your record collection and you will probably discover you have the same song
recorded on more than one format. For all its sex, drugs and rock 'n' roll, the music
business is really quite clever.

In this well-established environment, sycophantic, music-obsessed, "pocket money"

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punks (teenagers) used to rock up to HMV, Sanity and other major stores to buy up big
not-for-profit on the latest, over-priced CDs. This passion for music consumption has meant,
publication historically, that music is the most popular form of en masse, "first-line" culture
and relies on consumption for young people (products purchased primarily before another competing
the generosity product, for example video or magazines). The pop music circus has been omnipotent in
of its sponsors, the minds of young ones. And the majors have masterfully maintained such consistent
editors and and spectacular returns throughout the 20th century.
contributors. If
you would like
But currently, chart CDs retail for as little as $20.95. On average, the price of Top 40
to help,
contact us.
albums appears to be dropping at a rate of more than one dollar a year. (Who knows, in
___________ the year 2018, albums may have a zero sale sum dollar value.) Yet, paradoxically, there
is a direct correlation between the downward spiral of prices and a downturn in
Syndicate traditional music consumption. This truly is a peculiar trend because, if anything, album
sales should be increasing.

So why is the music industry in Australia, or in the rest of the Western world for that
matter, in a "spin"? The majors' representatives would have us believe the answer to that
question is based on a combination of unfavourable legislative change and emerging
technologies which have caused a diminution in the value of music products.

They are partly right in identifying the obvious challenges; but they appear to have
failed to recognise that the significance of other important pop cultural developments,
such as a genuine lack of consumer interest (or perhaps boredom) in CDs as primary
cultural products. This has largely stemmed from emerging but competing pop products
(DVDs, music DVDs, ringtones, computer games, SMS services, and this list of cultural
pleasures goes on).

Through an intriguing mix of illegitimate and legitimate technological challenges, and

in conjunction with legislative reform and pop cultural developments, the Australian
music scene has demonstrated how, internationally, a fistful of industry media moguls
has had its closed-shop cage rattled.

So what happened eight years ago, when the current trends became apparent? First, in
Australia, there were significant amendments to the Copyright Act 1968 that allowed for
the parallel importation of locally licenced products. For example, a retailer was now
free to purchase from Sony Indonesia rather than Sony Australia. Due to the
significantly different economies of scale between the two regions, the price differences
at the wholesale dealer price were stark.

Not surprisingly, strenuous lobbying by the majors' "keepers" followed, alleging the
death of the industry due to a flood of inferior and possibly pirated copies. Resistance to
change and acrimonious litigation appear to be fundamental tenets espoused by the
majors.

Nevertheless, these legislative measures have been instrumental in setting new pricing
standards. It might be fair to conclude, therefore, that imported CDs are capable of
driving prices down, but ironically, cheap imports are seldom sourced by major
retailers. That is, stores continue to order domestically manufactured albums from the
majors. Legislative reform in Australia assisted in this process but the majors cannot
blame parallel importation per se. Similarly, the legislature should not take the credit for
the price drop. So what else happened some eight years ago?

Computer and Internet technologies have also been blamed for the drop in revenue, and
the majors insist music piracy ("burning") is the core problem. Combined with Internet
downloads, and Peer-to-Peer (P2P) file sharing ("ripping"), the industry's politico-legal
representatives estimate music piracy now costs the industry in excess of $US5 billion.
To some extent the representatives are correct (I do not know of too many people who
have not dabbled in illegal music consumption).

To add final insult to injury, MP3s and related P2P technologies were not devised by the
majors and neither were MP3 players. In the world of music evolution this break in the
chain is very significant. The majors have always dictated the terms in which records
are delivered. They invented vinyls, cassettes and CDs. The devices for these formats
have also either been invented or produced en masse by the majors' sister manufacturing
subsidiaries. The cause for concern is obvious.

To combat the issue of a slump in music consumption, the majors have implemented
four main strategies:

 drop in price of CDs to make them more attractive;

 educate the public that it is wrong to "steal" (intellectual) property;
 anti-piracy protection measures; and
 police and prosecute copyright infringers (minors included).

The merits of these campaigns have been viewed with mixed results, and in any event,
CD prices continue to drop. People continue to consume music at a significantly
discounted or illegal rate.

So why is this "music for free" or "small fee" attitude so unprecedented and now so
ingrained in modern popular culture and everyday life? I found some clues to the
answer while representing an applicant spouse on a de facto property settlement. The
respondent was a 72-year-old man who purported to itemise his MP3 music collection
(which he had also backed up onto CDs) as part of the couple's joint assets pool. He had
valued these downloads at $8,000 (which apparently was at a significantly reduced rate
to what they would ordinarily retail, he opined.).

However, all the songs had been illegally downloaded from the original Napster website
over several months. The absurdity of his proposition to value his illegal "record
collection" highlighted three important issues to me. First, accessing music illegally is a
relatively simple task open to all ages. Second, ignorance or flagrant disregard of
copyright generally is probably quite prominent. Third, however, and equally
significant, is that this person placed a quantifiable value on what these products ought
to cost.

That is, had this man in fact purchased these products from a retailer, he would only
have been prepared to pay a fraction of their retail price. There appears to be a
widespread feeling that the majors have been exploiting consumers for too long. There
is strong consensus between the "young" and "old" on this point (especially since, in the
case of the former, most parents finance pop culture consumption).

It is this third consideration that, by and large, has been ignored by the majors. On this
point, perhaps parents feel so exploited that they turn a blind eye to ripping and burning.
And it is not as if illegal copying is a new phenomenon. I do not know of too many
people who have not dabbled in illegal music consumption. The parents of teenagers
copied cassettes, their older siblings copied CDs and now they compare the size of their
iPods.

Technically it is illegal in Australia and the UK to make even back-up copies yet it was
more or less tolerated by the majors during the reign of the cassette and to some extent
the CD. But when Napster arrived and the first wave of decent Rio MP3 players hit the
high streets in 1998, the issue became about control because these were external
challenges to the status quo.

I believe the spending downturn in CDs will continue not necessarily because of
legislative reform and or the proliferation of burning and ripping per se but because
there is a genuine lack of interest in purchasing CDs as consumers spend money on
these other more "exciting" goods. Consumer lack of interest (and or distraction) in the
delivery of current music products as promoted by the majors is something which has
been continually ignored.

What the majors are not prepared to concede is that CDs have simply become second-
line cultural products. The ritual of rocking up to HMV and obsessively trawling
through stacks of CDs has been substituted for MP3 downloading (ripping) and CD
burning. Music consumption has become just another thing to do and the art of
prioritising for the purchase of the latest chart music is dead. Consequently, if money
can be spent elsewhere on other pleasures, then it will be.

Interestingly after several years of literally doing nothing, the majors have adopted the
Internet in their business model in order to address the issues. It is now quite common to
purchase music files from hundreds of legal websites. However two significant
developments have occurred. First, albums are not necessarily being downloaded, but
rather single songs - and some for as low as 10 cents (a far cry from the current $5 CD
single price tag). Second, despite the proliferation of legal websites, P2P platforms such
as Azureus which use "BitTorrent" software make it all too tempting for young and old
alike to download whole albums illegally.

Illegal and legal technological challenges, combined, have caused traditional music
products to become so diminished in value that it is doubtful whether commodified pop
music as peddled by the majors will ever again become the leading mode of cultural
consumption. More problematic for the majors is that the Internet has permitted new
musical discoveries - truly independent music completely unfettered by the majors'
control and the need for chart music.

If these trends continue, then it would be safe to assume that music products will
become third-line cultural products or probably entirely "de-commodified" (that is, the
consumption of music in any recorded form would always have intrinsic worth, but its
ability to be sold as "units" may not have any commercial potential).

I do not suggest music will ever die. For example, concert attendance could not be
better, and the proliferation of truly independently released music in recent years has
had an almost emancipatory effect on the industry. Rather, the commodification of
chartable pop music will be a thing of the past. Even if the sale of Top 40 chart music
survives, its life will be meaningless in real commercial terms.

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First published in the Brisbane Line, on the Brisbane Institute website, on March 29, 2006.

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About the Author

Dr Trajce Cvetkovski has recently completed a doctoral thesis that examined the impact
of technological change in the music industry. He is a practising barrister and was the
first in-house Counsel for Tiny Computers in England and Wales. He also composes
electronic music and has released for Sony, Sirius Music and Marski Music.