This is a quote from Dependent Records. This post is outdated, posted in December 2006, and the company apparently decided not to follow on its proposed intent, namely to quit. However it is a rather nice example of music downloads actually affecting record labels and bands too. Might be worth a read.
Dependant records appears to be a record label focussing on industrial music, with names like Mind.in.a.Box and Seabound. In my experience, the market share for this music is smaller than for example Jennifer Lopez or Madonna, I'm not claiming that the same holds for big labels that produce those, although I wouldn't be surprised if they do. Also, I won't claim that music isn't pricey (it hurts my wallet just to think about it) but I must admit that the article did show me some parts that make up the price, that I hadn't considered before.
The original text (as I found it, since the actual text appeared in print) can be found at: http://www.dependent.de/de/booklet_en.php
The bold faced areas are as they appeared in the original text; no editing has been done by me, apart from taking out the images and their associated subtexts. The text is indented, by the way, I continue below with my own analysis unindented.
The End of an Era
This text originally appeared in the Dependence Vol. 2 CD booklet.
In Summer 2007, Dependent Records will close its doors for good. After we release the currently planned albums from Mind.In.A.Box, Rotersand, AutoAggression and Fractured, along with another Septic compilation, the label will cease to be active. And to put a nasty rumor to rest: we're not broke. But after a long period of frustration, we've decided this is what we must do.
The following pages will explain why.
First, we should mention that this essay is directed less at those who will are reading it - those vanishing few who still believe that music is worth paying for - than for those who are not.
This is not about money, and it never was. It's about being encouraged to continue to release music. Anyone who wants to start a halfway professional label without ending up at the unemployment office a few months later must inevitably come to terms with some financial realities, such as determining how much money and advertising can be put into any given project and when to reign in the budget. (There are always a few wiseguys who will tell you that fiscal responsibility and the idealism of an independent label are incompatible notions. Let's just say those people have clearly never tried to run a record label.) I think we've done pretty well in the last seven years; we haven't squandered loads of money and we've released some pretty good records. But money was always tight, and in the future it's only going to get tighter, because even if we were to continue to produce quality CDs, the rate with which they will be purchased legally will continue to decline. Each album released would represent an ever-increasing financial risk.
The Russian pirate site Mp3xx.ru (name changed by editor) provides an instructive example. Not only does this portal provide free downloads of every album in the electro scene, it allows users to see how many times individual labels' releases have been downloaded. While worldwide sales of Seabound's "Double-Crosser" hovered around 2500 copies after the first two or three weeks of its release, the same album was downloaded from Mp3xx.ru over 5000 times in just seven days. And this is via just one of dozens of pirate networks like Kazaa, Bit Torrent, Morpheus, Shareazade, etc. Illegal downloads of Dependent albums outnumber legal purchase by a factor of three or even five to one.
A popular claim often seen on Internet fora maintains that the P2P culture weakens the majors and bolsters the independent labels. This is, we can assure you, 100% bullshit. Even if there are listeners who download first and buy later, they are clearly in the dwindling minority. The same could be said of those who patronize legal download alternatives like iTunes, Musicload, and Grenzwellen. Many people seem to believe that music on the Internet is "free", because it is readily available to everyone. But "freedom" isn't about everyone doing whatever they want; it's about having the ability - and responsibility - to make your own decisions. When everyone does whatever they want, the result generally isn't freedom, but anarchy.
It makes no difference to us whether we sell records in the form of physical CDs or as digital downloads, but the production and distribution of music is an expensive proposition regardless of whether or not physical product is involved. We have to service DJs and magazines, help our artists with recording and design costs, provide tour support, and connect artists with agents and concert promoters. This all costs money, but these activities are not our primary concern. Our primary concern is to find and polish a few select gems, drawn from a vast wasteland of often atrocious music, that we believe stand above the rest and are deserving of a wider audience. We spend months - sometimes up to a year - working with our artists, helping them to fine-tune and polish their releases to be as fully realized as possible. This type of coaching can turn an above-average demo into a fantastic debut which is a more diverse, professional product than the original recordings. At the end of the day, it is the audience who benefits from all of these finishing touches, inasmuch as they result in better music. So if someone tries to tell you that record labels have become redundant in the age of the Internet, rest assured that they have no idea what they're talking about, as most of them clearly have no clue what kind of work goes into producing a record. If you're still not convinced, we suggest you spend a few hours looking for decent demos on MySpace to disabuse yourself of the notion that good music grows on trees, and to see for yourself how finding and developing new artists constitutes the lion's share of a record label's activities - not pressing CDs, which accounts for only around 5% of our workload. Our primary mission is to make the best music possible and to ensure it stands out from the rest.
In this day and age, record labels deal less with CDs than with the "rights" to an artist's recordings. Whether these be realized in the form of CDs, vinyl, MiniDiscs or MP3s is immaterial. What is important is that the commercial exchange of these rights becomes exceedingly difficult when the materials are simultaneously available for free on the Internet - or in any event, when a few million morons seem to believe that to be the case. Incidentally, we are far from the only label suffering as a result.
It is actually the job of the (German) federal government to insure that musicians and record labels have a platform on which to operate. That platform is known as intellectual property law. Intellectual property law dictates that the owner of the intellectual property - in this case, the musicians who write and record the music, as well as the record labels who release and administer it - has the exclusive right to decide what they want to do with it. They can give a song away for free on the Internet, they can press it on compact disc and store it forever in their basement - that's their decision. With the advent of CD burners, P2P networks, and sites like Mp3xx.ru, the intellectual property law has lost much of its practical power, and the law is in need of considerable revision. Mp3xx.ru has been around for over two years, and its right to existence cannot be legislated from Germany. The Russian webmasters could give a damn if some German indie label is giving up the ghost; their site is financed through advertising, couple with the fact that the goods they are providing are stolen, enables them to make a reasonably good living. After multiple attempts, the federal government has so far failed to modify the 30 year old intellectual property law to insure that it offers those working in today's music industry a reasonable way to make a living. If the law provided even a glimmer of hope that the situation for labels and musicians would improve, then we would keep on fighting. But the outlook for the next few years is bleak.
In the end, we are not closing our doors because of the existence of pirate websites, but because there are simply too many people who enjoy our bands and their songs who do not wish to pay for them, despite the fact that we reduced the sale price of our albums considerably two years ago. Consider this example: if 60% of the audience at a concert gained entry with forged tickets, the promoter, the band, the concert agency, and the venue would all be broke in a matter of weeks. We have lived for years now with the reality that much of our music is stolen, not purchased, and we have frankly had enough of it. A label releases music so that the public may pass judgment on it, but the label also expects to be compensated for its efforts based on the public's reception to the material. It's easy to become bitter when you notice that you're being made a fool of by the majority of your listeners. We do not lack good new bands, or passion for music, but rather the motivation to release CDs given the current market conditions. The same goes for many of our artists, who can only stand by, shaking their heads in disbelief, as they watch the music into which they have invested months or years of their lives being ripped and copied for free; as a result, many artists are ceasing to release new albums. Perhaps our decision and this essay will help to convince the public that the Internet, MySpace, Bit Torrent, and Mp3xx.ru cannot truly replace the quality control services provided by a record label. Rarely do truly brilliant bands simply spring forth from the earth fully formed, just as one tends to not find Chanel suits at a flea market.
We would like to extend our thanks and apologies to all of our artists, most of whom are already aware of our decision, as well to everyone who has spent their hard-earned money on our releases instead of simply downloading them or burning them from friends. We respect you all the more because we know you could have more easily taken the low road. If it's any comfort, know that without your support, we likely would have come to this decision much earlier, and the positive feeback was a continuing motivation. Thank you all so much! We hope we can count on your support for these last few months. If you have comments, feedback, suggestions, or opinions, please joins us in our online forum at www.dependent.de. Please feel free to distribute this statement further, as there are still bands and labels who have not yet lost their motivation and are fighting to remain active.
So, any conclusions? Well, downloading causes people lost sales, which (arguably) implies profit loss, but I guess deep within ourselves, we know that ofcourse. On the other hand, being able to download music for free is not in itself a bad thing, I think. It's a very useful tool to decide if you like music, especially if the legal download channels, offering 'previews' only let you hear the first 10 seconds of a song, which in most cases is way too little to get a proper idea of the actual music.
However, downloading music and then not buying the CD is probably a bad thing, since it does in some ways hurt the artists and the producing companies (and without them, we'd not get the next CD).
This point is generally what people in favour of free downloads offer as reason why free downloads are not bad. They say that people who don't like the music wouldn't have bought the CD anyway, which is probably true. They also argue that people who do like the CD, would realize that by not buying that CD, they would hurt the business process involved, causing the music to disappear. However, they assume people will actually realize this. But what would be my incentive to get that CD? I'm short on money, I don't need that CD right now, since I have the MP3's and finding a shop that has this music in store can actually be hard, requiring me to look around (I'm not familiar with Eindhoven's music stores, but my home-town Gorinchem, contained only a small Free Record Shop, as far as I know, which doesn't do much outside the popular labels). So there's a fundamental flaw in their reasoning: they assume a perfect world.
A perfect world doesn't exist. For proof, look at how communism failed: making everything owned by everyone just makes people attempt to do less, since they can just live off the fruits of their neighbours work (the vegetables in next-doors garden belong to the people, so they belong to me, so why would I expend time and effort to grow my own, when I can just walk in and get them when the season is right?). Not that I like capitalism so much, it's got many flaws of its own, but it appears to me to work better than communism. Free downloads are comparable to communism, even though I hate the comparison, since communism is such a loaded term these days, even though the cold war is over. Free downloads provide the music for free, which implies that the fruits of the labor of the artist and the record company are the fruits of everyone.
However, downloading music for free, means that the artist will not receive compensation. And no money for the artist means no food, no living, and the need for a job. And how much time for a band do you have when you have a job? Unless you are very good at making time, none. And via this, we can derive the conclusion that downloading your favourite music for free means that you discourage the creation of that music.
(However, the reverse does not hold: downloading the music that you wouldn't buy will not discourage that music from having been made. You wouldn't have bought that music anyway, so not buying it, but downloading it instead will not discourage that music from being made.)
This is actually a big problem and I'm unable to derive any more conclusions. What's your take on this?