Q: Isn't downloading music on the internet free promotion for the artist? I mean, if I download a few songs from Some Band, and I like those songs, I'll probably just go ahead and buy Some Band's album. It's not like I'm going to spend eight hours downloading the whole CD. I use tools like Napster mainly to hear new stuff, and to get live stuff and B-sides that I couldn't find in any record store.
A: Regardless of that logic, it's still the RIAA's position that you are in violation of copyright laws. The Recording Industry Association of America supports the right of its members to say "F**k The Police", as long as the police enforce all applicable copyright laws in the process, and the copyright owner isn't (financially) injured (and preferably makes money).
Q: Oh. By downloading music, I'm potentially hurting the copyright owner. That means the artist, right?
A: Wrong.
"The rights to the sound recording are usually owned by the record company that produces, manufactures and distributes it."
Q: Wow. With all this piracy, the the record companies' sales figures must be plummeting.
A: Wrong.
"February 18, 2000 -- Closing in on $15 billion, the market for recorded music, measured by what manufacturers ship to retail and non-retail channels, continued its upward trend in 1999 enjoying moderate growth. According to the Recording Industry Association of America, manufacturers saw a 3.2% net unit increase in audio and video product shipped to domestic markets (from 1.12 billion units in '98 to 1.16 billion units in '99). The corresponding dollar value of those shipments at suggested list price increased 6.3% from $13.7 billion in '98 to $14.6 billion last year."
Q: But the artist is the one who makes most of the money off the CD sales, right?
A: Wrong.
"Then come marketing and promotion costs -- perhaps the most expensive part of the music business today... Labels make investments in artists by paying for both the production and the promotion of the album, and promotion is very expensive."
Q: Okay, so the artist's pay isn't a very big part of CD costs. But record companies need to charge that much, cause of promotion costs. It's not as if the record companies just decided to keep raising prices, trying to see how much they could get away with charging us.
A: Wrong.
From 1996: "A law firm in Tennessee has filed a lawsuit this week contending that the six biggest names in the record industry conspired to keep the price of compact discs artificially high... David Stewart, chair of the marketing department at the University of Southern California, says companies will actually test our willingness to pay."
Stewart: "...So, you know, at a very low price you might find that lots of people will buy, but there's not much profit margin at that price. You take it up a bit, there's a bit more profit margin; people are still not resistant. Take it up a little higher, you begin to get some resistance, but the people who sort of drop out at that price are more than offset by the additional profit margin. And so ultimately, you can find sort of the pricing sweet spot that you then use and put on the product."
Furthermore, from 2000:
"After accusing music companies of illegally inflating prices for compact discs, the Federal Trade Commission has landed a settlement with five recording industry giants. Those companies have agreed to a seven-year ban on deals that restrict stores from advertising discounted CD's. Marketplace's Rachael Myrow has the story."
Myrow: "Time Warner, Sony, BMG Entertainment, EMI Group, and Universal Music together rule the CD business. And according to the FTC, those companies have been collectively punishing retailers who undercut their prices. Any retailer that dared to advertise prices below a set minimum for a given title risked losing tens of thousands of dollars in advertising money from the music companies. FTC Chairman Robert Pitofsky says CD prices that were dropping down to $10 in the early 90's quickly popped back up as the strategy took hold."