Undercover Economist

Music for love not money

There seems no objective justification for the idea that good music has simply dried up since file-sharing took off

“A digital vampire” – not the title of this season’s bestselling young adult novel, but an ageing rock star’s description of Apple’s online store, iTunes. In his recent John Peel lecture, the guitarist for The Who, Pete Townshend, railed against “the Aluminums” (Apple, I gather) and suggested changes to their business model that would be more supportive of musicians. He also wondered whether the modern, digitally distributed music industry could support the kind of careful listening and risk taking that the late DJ John Peel exemplified.

A reasonable response to Mr Townshend is that he could have picked more obvious targets – notably file-sharing sites and software, which facilitate outright piracy. (He did offer one sharp observation on the subject: “The word ‘sharing’ surely means giving away something you have earned, or made, or paid for?”)

It is beyond doubt that the traditional music industry is dying: high street record shops are closing their doors or stocking alternative products, and music sales have fallen by about 40 per cent during the past decade.

Digital music sales through retailers such as iTunes are manifestly failing to plug the gap from sales of physical CDs, but that is not the fault of the Aluminums.

Yet a more interesting question is how much this matters. According to Joel Waldfogel of the University of Minnesota, three-quarters of pirated music would never have been purchased anyway. In such cases the consumer gains but the producer does not lose. Alas, for the major record labels – and, perhaps, for the artists too – the one-in-four acts of piracy that do reduce sales seem to be quite enough to corrode the industry’s business model.

But, says Waldfogel, “consumers don’t care about the well-being of the recording industry. We care about the existence of good new products.” Is piracy damaging these new releases? Conventional wisdom used to be that piracy consumes itself: by damming the flow of money it causes a creative drought. Few people want to give up their day job to create music for no financial reward.

But is this true? In a new working paper, Waldfogel manfully attempts to estimate the continued flow of high-quality new music since the emergence, at the turn of the millennium, of Napster, the daddy of all file sharing services. There is no perfect way to do this, of course.

One technique is to look at lists compiled by critics of the best albums. Another approach is to look at radio air-play. Radio stations tend to be biased towards playing two things: recent music, and music that listeners are likely to enjoy. In a golden age of music one might expect radio stations to play a lot of recent releases; in a weaker creative period one would expect radio stations to play more vintage stuff. A third approach looks at albums which continue to sell well a long time after their release.

Waldfogel tries all three, and produces some intuitively sensible results: the late 1960s were the pinnacle of the past 50 years, while the 1980s were dark days indeed. Judged by the critics, the post-Napster years were unremarkable, and no worse than the 1990s. Judged by airplay data, the past decade has seen something of a renaissance in quality music. Certainly there seems no objective justification for the idea that good music has simply dried up since file-sharing took off.

Quite why this should be is a puzzle, but Waldfogel suspects it has something to do with the ease with which any band can produce and distribute music – a fact reflected in the growth of independent record labels. The money may be drying up, but the beat goes on.

Also published at ft.com.