Heightened Awareness of Legal Sites Won’t Steer Fans Away From Music Piracy [INTERVIEW]

Recently, I spoke with Joe Cox, who is an economist at of the University of Portsmouth. He recently published a paper titled Seeders, leechers and social norms: Evidence from the market for illicit digital downloading and proclaimed that file-sharers see themselves as the Robin Hoods of the digital age.

In this interview, Cox talks about issues surrounding file-sharing and how fans value the MP3 format.

Hypebot: Do you believe that the current music consumption system accurately reflects music fan behavior?

Joe Cox: One of the principal assumptions behind a significant number of theories in economics is that individuals behave rationally. As such, when presented with the opportunity to obtain a near-perfect digital reproduction of a piece of digital media for free and with very little chance of incurring any legal punishment costs, it seems rational that an individual will choose to illegally download and share files.

Music consumers, just like pretty much any other, want to pay as low a price as possible for what they consume. Taking a larger perspective, social welfare is maximized if the market price of a good is set equal to the marginal cost of production. With digital media, the cost of reproduction is basically zero, so there is a reasonable economic argument that digital media should be made available to consumers for free, or close to it.

The problems occur when music labels and recording artists fail to see fair returns on their creative inputs, which will likely have the consequence of reducing the level of output of the music industry below the social optimum. While the marginal cost of reproducing a music track digitally is close to zero, there are substantial fixed costs of production that must be covered in order for the music industry to make even a fair return on their efforts.

Hence, I would argue that the current mechanisms for the generation of revenue in the creative industries are unsustainable and will need to change if we want to continue producing an appropriate amount of creative output as a society and to ensure that artists receive fair compensation for the use of their creative capital.

Hypebot: Does the lack of sufficient marketing and brand awareness behind legal services generate piracy?

Joe Cox: I don't support the argument that legal download sites would, if better promoted, encourage people away from piracy. I would contend that most digital consumers know, at the very least, about the main parties offering legal downloads (iTunes, Amazon etc.) and yet still choose to download material illegally.

I think the 'lack of awareness' argument is one that is often put out there to disguise the main driving force behind illegal downloading, which is that people always have and always will want something for nothing. That's all part of human nature and technology has made it possible to for this behavior to be indulged that in the consumption of digital media.

Realistically, it comes down to a simple question: why pay $1 for an MP3 track when one can get it for free? I think legal download sites would achieve much more success in tempting people away from illegal sources if the price were to dramatically fall so that it no longer becomes worthwhile trawling through torrent sites or enduring the very small expected punishment cost associated with illegal downloading when you can download the legal version for a trivial amount. In the scheme of things, I don't think that $1 for a single MP3 track is a trivial amount.

Hypebot: Is the record industry forcing scarcity into a market that's now characterized by radical abundance?

Joe Cox: I think to some extent that record labels serve a valued function as intermediaries between artists and consumers. Part of that process is the provision of a filtering mechanism whereby the record labels themselves expend resources searching for new acts and talent and then market them to the average consumer to save them the effort of having to do the same.

So to some extent, the role of the record label has always been concerned with forcing scarcity upon the market. In the modern environment, where there are so few barriers to the recording and dissemination of recorded music, I suppose the market is characterized by a relative abundance of recorded material.

The industry perhaps still has a role to play here in terms of providing an intermediary service, but I would argue that the role itself is changing and perhaps diminishing from that which has been in place for much of the latter part of the 20^th Century.

Hypebot: Are fans rational actors when they attend live shows, but see no value in infinitely copyable MP3s?

Joe Cox: I think that fans are pretty much rational actors in all contexts, or at least their actions are privately rational. Music fans value live shows and they value MP3s. Technology and communication has evolved to allow fans the opportunity to consume MP3s for next to nothing if they choose to download illegally, but that doesn't mean that they don't value what they are downloading.

If there was a way to reliably circumvent security and get into live shows or concerts for free, I'm quite certain that many people would choose to do so. The reason for the difference in behavior is that it's currently far easier to exclude non-payers from live shows than it is with MP3s.