“Comes with music” will fail

This week’s edition of the Economist newspaper features an article on “Comes with music” (CWM), the latest addition to the legion of subscription-based “solutions” to the file-sharing “problem”. Under CWM, mobile phone makers purchase 12 month subscriptions to online-music catalogues and bundle them with handsets. The idea is that end users will not mind paying for music if the cost is hidden inside the price of something more tangible. CWM is touted as a win-win-win model: handset makers get an extra feature to entice customers, end users get “free” music, and record companies get to make a profit. The Economist describes CWM as “potentially a big step forward”. I think it is a half-baked idea which is doomed to failure.

The first reason is the restricted nature of the service. Major record companies are a lot like alcohol addicts: although they know as well as anyone how much it hurts them, they just can’t compel themselves to give up a bad habit. So it is no surprise that the tracks available on CWM are strait-jacketed with Digital Rights Managment (DRM), the asinine technology which attempts to restrict users from moving or playing music files in anything but the most strictly prescribed way. Of course, even if the DRM method Nokia is using remains uncracked, nobody is going to put up with the restrictions or pay to have them lifted when they can just download the music from a P2P file-sharing network, unrestricted and free. At best, all DRM will achieve is to encourage users to use CWM when convenient – when they want a certain song, right now, on their mobile handset – and carry on downloading the bulk of their music the normal, illegal way. On top of this, the twelve month expiry limit is simply irrelevant to a generation for whom downloading is the norm. If the users even notice that CWM has expired, they will hardly care.

The second reason is that, of course, CWM is not free. The handset maker has to pay at least one record company for the subscription, and that cost ultimately must get passed on to the consumer. Nokia may choose to cross-subsidise the service with profits from other handsets, or cut other features from CWM handsets, or whatever. Regardless, handsets with CWM will be at a competitive disadvantage against handsets without CWM. This is only an intuition, but I strongly doubt that the addition of CWM will sway consumers purchasing decisions more than an infinitesimal amount. It simply isn’t a shiny, attractive feature when file-sharing is so easy and familiar, and when mobile carriers and ISPs are already pushing so many other DRM-stunted, mutually incompatible digital music services, subscription and otherwise. The Economist article even suggested that the “unlimited” downloads will in fact be capped by a “fair use” limit, which will tarnish CWM’s image yet further. Unless Nokia can find a way to make CWM sexy – a very tall order – or to absorb the cost, CWM handsets will not be competitive.

The final and most basic reason is that the music industry has left it far too late to supply an alternative to file-sharing. My generation grew up with Napster, Limewire and BitTorrent the way our parents grew up with television, air conditioning and jumbo jets. For us, file-sharing is not a way to get music, it’s the way. A technologically disinclined friend recently bought a new laptop and asked me what software he should put on it. I suggested, among other things, OpenOffice. He recoiled: even though OO’s user interface is a near clone of MS Office, and OO is entirely free, he would rather find a pirated copy of MS Office than deal with a slightly unfamiliar interface. He also turned down my suggestion of Vuze as his file-sharing client; he had been using Limewire for years and didn’t want to learn a new system. There are a lot of people like my friend out there, and a lot more who are open to new technologies but who just like file-sharing better. Why would they bother adopting a restricted, closed-catalogue, closed-medium system when they could just keep on downloading like they always have? Boosters of CWM must remember that it is competing against a file-sharing networks which are free, ubiquitous, near perfectly stocked and completely familiar. It’s hard to imagine a better music delivery system, much less one that would turn a profit.

I don’t know how musicians are going to make a living as music sales continue to plummet, but CWM is not part of the solution. My strong intuition is that anything which requires users to pay for music (or any digital content) is a lost cause, and profits will have to come through adjunct channels. However, I’m skeptical that donations, concert tickets, merchandise sales or advertising will entirely cover the gap. It will be fascinating to see what solutions the market comes up with. At least we can be assured that great music can be given away sustainably.

Image credit: “stereo geisha white“, by chotda, under a Creative Commons Attribution-Noncommercial-No Derivative Works 2.0 Generic license.

Dramatis personae: what the US election looks like from the other side of the world

A lot of Australians get their news through American and international media. This is still a minority, however; most of us don’t go further than the government run ABC or one of the local free to air television networks. Without further ado: the key characters in the US election, as presented by our local media.

• Barack Obama. He’s good looking, and has a very nice speaking voice. His policy is getting troops out of Iraq; if he has other policies they are unimportant but probably all quite nice. Obama most definitely grew up in Indonesia and has a very nice speaking voice. He is black, and we pretend to understand the significance of this to Americans although we really don’t get it. He seems to be genuinely friendly towards Hillary who he defeated in a baroque contest called ‘The Primaries’ which none of us bothers to even pretend to understand. Did I mention he has a very nice speaking voice? My grandmother says he looks like Nelson Mandela, but she says that about anyone of African descent. He is not George Bush.
• Joe Biden. That dude standing next to Obama. They mentioned who he was a few days ago but only because they had to. He seems cool. He is not George Bush.
• Hillary Clinton. She’s a women. Bill, who is also cool, is her husband but it doesn’t seem to have rubbed off. We have no idea what she thinks about Iraq, but assume she’s opposed to it, whatever that means. She is being a good sport about the whole losing to Obama thing but everybody knows she really wishes she’d won. Hillary looks old. She is not George Bush.
• John McCain. McCain is a Republican. Those are the ones who like guns, invading places, and George Bush. He is old and white and looks like every other evil American politician we have seen in the movies. We don’t know what his police are but undoubtedly they involve guns, Iraq and bashing up gays. McCain has no chance of winning and is probably only running to fulfill some legal technicality. Every now and then, somebody will mention that he is actually doing well in the polls. The purpose of these results is to emphasise how crazy Americans are; they have no relation to the actual election. He is probably George Bush.
• Sarah Palin. Hey, who’s that hot librarian? What a weird accent! Is she that lady from Fargo? Her teenaged daughter is pregnant. Meh. She’s not George Bush. Hey, is she a politician or something?
• Joe Lieberman, Rush Limbaugh, Freddie Mac, Nancy Pelosi: These are probably all old white southern senators or something. They are frequently mentioned and seem to be important in some way. George Bush status unknown.

Show Me More Ads!

The only thing better than a free lunch, IMHO, is a free book. In the last six months I’ve made my way through dozens of great ebooks and audiobooks that I got for free, completely legally, because their authors chose to release them under Creative Commons licences. Cory Doctorow claims that he releases his books for free because it drives up sales of his print editions, and I have no doubt that, for him, this is true. As attractive as this sounds, it is not a long term strategy. Releasing high-quality works under CC drives up print sales because it is still a rare enough event that potential readers who would otherwise not have heard of the work become aware of it. Doctorow acknowledges this when he paraphrases Tim O’Reilly: the problem artists face is not piracy, but obscurity. If all artists were to release their media under CC, overall they would get poorer: their works will still be just as obscure, and those handful who are interested in it can just take it for free.

I’m addicted to the Economist’s audiobook edition. At first I tried to obtain it legitimately, but soon discovered that the legit route was an incredibly painful one. Their distributor’s website refused to accept my registration for days, crashed constantly, and generally spread misery. After a few weeks of this, I gave up and started getting the download from bittorrent, painlessly, freely, and illegally. This is file-sharing, and it’s not going away. As long as media can be digitised, they will be shared. Why waste money and effort on something that can be obtained freely and easily?

So giving media away for free won’t work, and people are not going to stop pirating and sharing the non-free stuff. A world in which the only cultural products around are labours of love, or government backed, or donation-supported, would be a world in which the pool of cultural products would be tepid and a good lot smaller. None of the commonly predicted equilibria – musicians living off live concert profits, authors living off donations and hard copy sales – are remotely plausible except for the top percentile of cultural products. Markets are supposed to find the equilibrium that nobody could ever have guessed, but this isn’t a typical public goods problem: how does a market function when there are no realistically enforceable property rights?

Rather than backing bold and implausible schemes, I think the better part of wisdom is to sit back and see what happens, while supporting the partial solution that has worked for many a non-excludable good in the past: advertising. Please, keep writing your books and audiobooks, and please keep releasing them under CC. But make sure you’re still making money for yourselves. I’d rather hear or read a few ads then have you shut down production entirely. And Economist, I have no idea if your audiobook is breaking even in the face of file-sharing. It’s in my best interest for you to remember though: nobody is ever going to stop pirating your audiobook. However, the world would be a worse place if you stopped producing it.