Copyright Math: The $8 Billion iPod

The music industry has constantly bellowed about how much money it's been losing to piracy since 1999 or so, and the numbers they've thrown around have been nothing short of outrageous.

The one I love is that for each download that's legally purchased, 20 more are downloaded illegally. They've somehow determined that the worth of each illegal download is $150,000, which is the initial number that the RIAA used in all it's lawsuits against file sharers until they realized the futility of using that number.

Rob Reid, author and founder of the company that created Rhapsody, had an interesting and humorous take on what he termed "copyright math" in a presentation at a recent TED Conference.

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How Many Music Sales Equal Minimum Wage?

You probably can't read the chart on the left, but it truly is an eye opener. It was created by Stan Schroeder and posted on Mashable yesterday. The chart describes the number of sales of various music product required to make a monthly wage of $1,160, or the minimum wage that you'd likely make at Micky D's.

Let me outline what the chart says. For more detail, see it at Mashable.

To make the minimum wage for one month, or $1,160, you need to sell:

143 self pressed CD's (income $8 each)

155 CD's from cdbaby (income $7.50 each)

1,161 retail CDs with a high-end label royalty rate (income $1 each)

1,229 iTunes album downloads (income $.94 each)

1,562 MP3 downloads via cdbaby (income $.74 each)

2,044 MP3 downloads via cdbaby via iTunes (income $.57 each)

3,871 retail CDs, with a low-end label royalty rate (income $.30 each)

12,399 individual track downloads from iTunes or Amazon (income $.09 each)

849,817 plays per month on Rhapsoday (income $.0022 each)

1,546,667 plays per month on last.fm (income $.005 each)

4,549,020 plays per month on Spotify (income $.00043 each)

This makes working at McDonalds start to look like a wise career choice. Still want to try to make music for a living?

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Follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.

The Ramifications Of A Lower Priced Rhapsody

As you may know, I'm a big proponent (along with a lot of industry pundits) of subscription music. It just makes so much sense for all the parties involved. It's a steady income stream for the artists, publishers and labels, and it's definitely a lot better for the consumer. Why download and fill up your hard drive when you can have every song at your fingertip anytime and anywhere? You can read a lot more about the advantages and disadvantages of subscription on my previous post.

Subscription hasn't hit critical mass yet, but it's used every day by a lot of people world-wide. Spotify is used by over a million subscribers in Europe, and Rhapsody, MOG and Napster together have over a million subscribers in the States.

Now comes word that Rhapsody (who last week was just spun off into a separate company by its owners - Real Networks and MTV) is lowering the price of a subscription from $14.99 to $9.99 a month. Why is this important? Because $9.99 is thought to be the magic price point where consumers feel comfortable paying a monthly fee. Why pay $10 for only 10 songs via download when you can have millions for $10 via subscription?

But Rhapsody was also forced into action. It has about 675,000 subscribers, but that's actually a decrease from last year, and both MOG and Napster offer $5 plans. But the real reason may be to strike before the 800 pound gorilla in the industry (iTunes, of course) introduces their hypbrid-subscription service, where you can put all your music in the cloud (their servers) and easily access what you don't already own. There's been no firm date for it's introduction, but industry insiders firmly believe it'll be sometime this year.

Subscription also holds promise in both the mobile industry (some can't fit all their music on a smartphone), and the possible licensing to various ISPs, which might end up just being an industry pipe dream.

That being said, it's important to stay tuned to the subscription story, since it has major ramifications for musicians and songwriters as well. How so? Most record label and publishing contracts don't account for record label income from subscription yet. There could be a lot of money that makes it into a label's pocket, and not yours.

Follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.

3 Reasons For And Against Digital Music Subscription

It seems like everyone in the music industry now believes that the subscription model will be the ultimate solution for digital music and the inevitable direction that the industry will take. Subscription means that you pay a basic fee like $10 - $15 per month and then are able to access any song you want whenever you want where ever you want.

This view has been held by those inside the industry for a long time, but I really didn't get it until recently. In helping my partner clean up the hard drive on her laptop, we were eliminating everything that was outdated, already backed up, or simply no longer needed. After much work there was still wasn't much drive space reclaimed, so I took a look at her iTunes folder. Sure enough, she had well over 20 gigs of songs! At that moment, I understood that subscription was the future of the business.

Here are the reasons that I believe it will work:

1) It's a lot more cost-effective for the consumer. As industry pundit Ted Cohen states, “For $10 a month, you can get 10 songs on iTunes or 10 million songs on Napster.”

2) Managing a lot of songs takes time and a lot of storage space for the consumer (see my story above).

3) There's potentially a lot of money to go around - much, much more than the business is generating today. The potential buying public in the US alone is 100 million. If only 50% of those subscribed at $10 a month, that's $500 million a month spread around to everyone in the business. The consumer will never be happier and the industry will grow overnight.

Here are the reasons against it:

1) It's hard for people to get over the idea of "renting" music after buying it for almost forever.

2) Most artists are afraid of subscription. Oh, they like the idea of steady income every month, but as of yet there's no way to ensure they'll actually see any of it. Most fear that the labels will take the lions share of the money and the artists will not see their fair share.

3) It's a publishing nightmare. As of now, the artist and publisher split a grand total of .18 cents (less than 1/4 of a cent!) each time a song is streamed. Most publishers claim that they now get statements that may be 5 phonebooks high of reported streams that add up to maybe $12, of which they only get to keep $3. In other words, it costs way, way more to process the paperwork than they're capable of making in it's current form. It's great that you can get the type of granular information about number of plays that publishers always hoped for, but they'll never sign off on subscription until they stop losing money on the deal.

I'm convinced that subscription digital music will eventually take over the business. Already Rhapsody has nearly 800,000 users and Napster has 700,000. The upstart Spotify has over a million subscribers in Europe alone (it's not available in the States yet due to licensing issues, but it's coming in 2010) and is getting rave reviews. But as our friend Ted Cohen says, "If iTunes announced subscription tomorrow, we’d be over the hump."

We keep hearing rumors that might happen, and with Apple's recent purchase of LaLa, they seem to have the infrastructure in place. Stay tuned as the digital space continues to be the most interesting part of the music business.

Portions of this post came from a previously published post on bobbyowsinski.blogspot.com from about 6 months ago, but it's even more relevant now.