Does Piracy Harm Sales?

By Simon Grey, on October 8th, 2012

That’s the question asked by Michael Smith.  He doesn’t do a very good job answering:

My colleague, Rahul Telang, and I recently finished a paper reviewing the academic research on the impact of piracy on sales. Our review finds that, when viewed as a whole, the academic literature strongly suggests that piracy harms media sales: the vast majority of academic papers — particularly those published in peer-reviewed academic journals — find evidence of harm from piracy. This conclusion is consistent with reviews of the academic literature by Stan Liebowitz in 2006 and by Felix Oberholzer-Gee and Koleman Strumpf in 2009, but includes more recent studies — and we believe these recent papers make the case of harm from piracy even stronger than what the literature suggested just a few years ago. [Emphasis added.]

Since the main complaint about music piracy is that it harms the artists, three quick questions come immediately to mind.  First, why is the concern about media sales relevant when most artists don’t find media sales to be all that profitable?  Second, what effect does piracy have on ticket and merchandise sales?  Third, what effect do official YouTube music video releases have on media sales?
The first question is important because it highlights the fact those who are most concerned about piracy are usually either useful idiots or corporate shills.  Since I hate corporations (they are a fundamental market distortion), and since most music corporations are busy ripping off the artists they claim to be acting in the best interest of, I see no reason to defend them or their interests.  Incidentally, that means that media sales aren’t really that big of a deal since most artists make a pittance from music sales.
The second question is important in light of the fact that there are more active music artists than ever before.  If piracy makes music so unprofitable, why do more and more people release music?  Answer:  either profitability is so easy to achieve that the effect of piracy is negligible, or piracy doesn’t have a net negative effect on profitability.  Or, to ask it another way:  are artists relying other methods of getting revenue?  My bet is that the price points are different now, which renders concerns about piracy obsolete.
The third question is important because it offers a control for the studies.  Watching officially released music videos on YouTube or other legitimate video hosting sites is the most obvious alternative to piracy because by watching music videos online, one avoids purchasing music while still being able to consume it.  Thus, if sanctioned YouTube videos are shown to cannibalize media sales, then we can conclude one of two things:  either record labels are run by complete and total morons (a distinct possibility) or even the record labels understand that digital media is simply a form of advertising for the more lucrative aspects of the music industry, like tickets an merchandise.
Really, when you think about it, anti-piracy laws only exist to ensure that record label owners have another way to rip people off.



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Market Distortion in the News Industry

By Simon Grey, on December 7th, 2011

Newspapers have been unable to monetise the internet as an income stream. This is in part because the BBC website offers so much content for free (i.e licence fee-payer funded) that it heavily distorts the market and mitigates against charging for content. The BBC itself has been forced to recognise this and plans to scale back its website by 20% to allow ‘room’ for competition. Local radio stations also suffer hugely from crowding-out by BBC local radio. Similarly, local paper circulation and revenues have been damaged by the council ‘freesheets’ that Eric Pickles was meant to dispose of.

Government-funded news organizations are problematic not only because they have a strong tendency to kill off the competition, but because they often function as a propaganda arm of the government itself. Americans, of course, have a tendency to complain about how the fourth estate is in the pocket of Big Government, but it is the British for whom this is perhaps literally true. As such, the British run the (very large) risk of having the BBC be nothing more than a propaganda machine, assuming it isn’t already.


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Newspapers Evaporating At Tremendous Speeds

By Trace Mayer, on March 31st, 2009

ANOTHER ONE BITES THE DUST

There are tremendous changes underway in the journalism industry of epic importance that effect your personal liberty and finances.  I do mention some of my competitors so obviously this article is biased.  Newspapers are like blogs except expensive, dirty and a less efficient form of information manufacturing.  It is difficult for them to ‘go viral’ and annoyingly hard to access while traveling through the backwoods of South America.

The Associated Press reports that the 146-year-old Seattle Post-Intelligencer will end its physical newspaper circulation on Tuesday 17 March 2009 and transition to a web only operation.  In February the P-I website had about 1.8M unique visitors and the print circulation was about 117,000.  Managing Editor David McCumber thinks the P-I will need to trim down from 181 employees to 40 with 20 in the newsroom and 20 selling ads.

OUT WITH THE OLD

Old media such as magazines, book publishers and especially newspapers are facing tremendous financial headwinds.  The New York Times has been borrowing to pay the dividend while gross and net incomes decline resulting in their share price falling 80% in the last year.  In the last year stockholder equity has been cut in half and net tangible assets have imploded from $166M to ($209M).  The New York Times intend to implement 5% wage cuts for most employees.

Gannett, which offers 85 newspapers including USA Today, has fared worse with both revenue and net income falling for the past three years and the share price evaporating from $30 to about $2.50.  They have likewise seen their net tangible assets decline from ($1.75B) to ($2.4B).  But their net income performance is even more dire going from $1.1B in 2007 to ($6.6B).  The Indianapolis Newspaper Guild reports that Gannett is considering 15% wage cuts.

McGraw-Hill, which adopted digital platforms and products earlier, has fared slightly better with their stock falling only 50%.  Nevertheless, they face intense pressure on their revenues and net income.  In 2008 the stock of publicly traded newspaper companies declined 83%.  At least McGraw-Hill had positive net income but their net tangible assets are declining.

The formerly venerable magazine Newsweek, owned by the Washington Post Co., has a rapidly evaporating subscriber base.  As the International Herald Tribune reported, “Thirteen months ago, Newsweek lowered its rate base, the circulation promised to advertisers, to 2.6 million from 3.1 million, and Tom Ascheim, Newsweek CEO, said that would drop to 1.9 million in July, and to 1.5 million in January 2010.”  While the Washington Post Co. has been increasing revenues its net income has fallen by 75% since 2006 and the stock has plunged from 800 to 350.

Even book publishing companies like Pearson PLC, which owns the Financial Times and Penguin Books, is facing steadily declining net income.  Rupert Murdoch’s venerable media behemoth, News Corporation which owns MySpace and Fox, is down over the last year from $20 to about $7.

IN WITH THE NEW

News is a good or service and those both consuming and producing it must derive utility or it will cease.  The Internet is full; not the hard drives but people’s attention.  Information has two costs for the consumer:  time and money. I take no-one’s time or attention for granted.  RunToGold occupies at least thousands of hours per day of people’s attention.  The articles are written with precision, conciseness, and produced when there is actionable information instead of a deadline.  Unlike television with commercials that interrupt, annoy and disrespectful of the consumer’s time and attention the advertising on RunToGold does not interrupt your ability to consume the valuable free information and most importantly is done with your permission.

Blogs such as Seeking Alpha or Citizen Economists are more economical than either magazines or newspapers.  Creative destruction is taking place in the journalism industry at a rapid pace.  It baffles me that people are no longer willing to pay money to learn about Anna Nicole Smith only to have it interrupted by some totally irrelevant and often times inappropriate commercial about treating certain bodily functions with a pill when they could read for free about the problematic ETFs GLD and SLV or Silver In Backwardation for Five Weeks (now nine weeks but climbed out for the first time on March 27).  I guess people are passionate about different topics.

As Minyanville recalled, “One thing we’ve learned while trying to build a financial media platform at Minyanville: Advertisers don’t like it when you say negative things about them.  Several months ago, Washington Mutual pulled an advertising campaign from us after we published a story saying the former banking giant was dangerously close to tipping over the edge and collapsing. Then, they tipped over the edge and collapsed.”

Tom Ascheim said, “If you can’t get people to pay for what they love, we’re all out of business.”  I and millions of other bloggers disagree.  Many, if not most, bloggers generate news and content in unlimited niches as a hobby or for fun.  Generally blog enterprises operate at a loss or are barely profitable.  Without an editor to silence or at least muffle the criticisms when one launches repeated volleys, like the Single Digit Midgets, Problems with the GLD and SLV ETFs, Financial Professionals Infected With Financial Insanity Virus, etc. at potential mainstream advertisers it does not bode well for gross revenue.

While many blogs lack formal editors it may be only grammar and not content that is found lacking as editors censor material issues along with dangling participles.  Why has GATA been almost completely ignored for over a decade by the financial press, newspapers and other heavily censored media?  Consequently, why believe or trust them?

I think a significant portion of the rise in gold’s price over the last decade has been a direct consequence of the rise in the amount of truth in the public zeitgeist.  With real gold there is no way to lie; gold is either in physical possession or not.  Consequently, gold loves truth and fiat currency loves lies.

FREEDOM OF SPEECH

In Kazakhstan Currency Goes Poof I reported even Putin’s amazement with the degree of censorship.  ”I was in Beijing at the time.  I looked through the world electronic media.  Complete silence.  As if absolutely nothing is going on.  It was as if somebody ordered everyone to keep their mouth shut. To those who organized all this; I can only say congratulations.  Congratulations.  You did an excellent job.  The only problem:  your results were poor and this will always be the case because the work you do is unfair and immoral.  In the long run immoral policies always lose.”

But this type of censorship behavior is not new.  Decades ago President John F. Kennedy expressed outrage regarding this topic.  Now the truth is coming to light at a rapid pace causing the evaporation of the derivative illusion and everyone seems to be either upset or completely stunned.

The press is one of the few businesses given specific absolute protection under the First Amendment of the United States Constitution.  ”Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof, or abridging the freedom of speech, or of the press; or of the right of people peaceable to assemble, and to petition the Government for the redress of grievances.”

When those petitions for redress of grievances are met with further violations then another business given specific absolute protection becomes important.  ”A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear arms shall not be infringed.”

It is common for government officials to perpetuate lies.  For example, Section 132 of the Emergency Economic Stabilization Act of 2008 is titled “Authority to Suspend Mark-To-Market Accounting” and restates the SEC’s authority to suspend the application of FAS 157.  But make no mistake about it:  Both gold and truth will cleave their own way with indivisible justice.

CONCLUSION

Th

The Great Credit Contraction is grinding down the top lines of almost all businesses.  There is no bottom line without a top line.  While the costs with operating a website are generally lower than manufacturing a newspaper I think the Intelligencer will have a difficult time operating profitably with 40 employees.  I wonder if these rapidly evaporating state organs will likewise receive bailout funds?

Do not be like the Intelligencer employees and wait for either a pink slip or bailout.  The newspapers need a more profitable business model or risk complete evaporation.

You can hasten this transition and support the vitally important free press.  For example, begin ignoring the old media with its disrespectful advertising by canceling your newspaper subscriptions and redirecting those funds to your trusted friendly neighborhood bloggers or by purchasing some firearms and lots of ammunition.  After all, if you do not know what The Great Credit Contraction is and how it will affect your lifestyle or wealth then you may want to find out as the institutions and organizations, including governments, continue evaporating.

Disclosures:  Long physical gold and silver with no position in the old media companies and is a direct competitor of NYT, WPO, PSO, GCI, MHP, NWS, for advertising dollars.



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Gas Prices: Print Media’s #1 Enemy

By Mark Mahorney, on July 6th, 2008

At over $4 a gallon, gas is definitely putting the pinch on consumers. Wired writes, “No Mocha For Me, Thanks. I’ve Gotta Buy Gas.” We aren’t sweating the little things; we’re simply cutting them out.

The media is self-centered. It loves to write about itself without regard for whether its audience is interested or not. Lately, everywhere I turn I see “the death of print” articles sniveling over the struggling newspaper and magazine industry. They put the blame squarely on the Internet.

I squarely disagree with this assessment. No doubt some advertising dollars have shifted to the Internet and some readers have shifted their viewing to the Internet. So it’s a contributing factor.

But at the heart of it is gas prices. Consumers are having to divert a few hundred dollars a month to gas. Where does that money come from? It comes out of discretionary income, the money we have left over after paying our bills. It’s the money we spend on mochas, newspapers, magazines, and going out to eat.

One of the first things consumers are going to cut back on is newspapers and magazines. They’re still reading, but instead of paying for paper, they’re turning to the Internet and cutting out the cost of delivery. So the media is out the markup.

But more importantly, advertisers go where the readers are. It’s not that advertisers are preferring to advertise via the Internet necessarily, but rather advertisers are ticks and leaches. They go wherever consumers go. And gasoline prices have driven consumers to the Net.

Will they go back to print when times are better? That depends on how long it takes for the economy to recover. In part, they will become used to getting more of their info via the Net. Technology companies are finally seriously committed to coming out with products that make getting information from the Net easier and more portable. We’re seeing more UMPCs and Netbooks offerings, larger screens on cell phones, and better batteries. And the media is making their content easier to access via feeds.

Eventually, the economy will improve as it always does, but by the time that happens we may have already moved on and left print behind.



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Amazon’s Kindle: Super Useful or Super Flop?

By Joanne Yao, on July 6th, 2008

Instead of sitting down to read the New York Times or the Wall Street Journal, imagine unplugging a paperback-sized Kindle reader from your nightstand and scrolling down to your favorite columnist. No, you can’t flip the pages.

Since Amazon CEO Jeff Bezos’ pet project hit the market, publishers and writers alike have been holding their breath to see how Kindle would morph the book industry. But more than a year later, the actual numbers of units sold remain shrouded in secrecy. The Kindle device is not ranked on Amazon.com like all other products but retains constant #1 status on its own virtual store.

In lieu of Amazon keeping its mouth shut, Citi analyst Mark Mahaney estimates that Kindle has sold about 190,000 units to date – less than the first year sales of the PalmPilot in 1997 and about half of the Apple iPod in 2001. Publisher Simon & Schuster Inc. saw a 40% growth in e-book sales in 2007, while other companies continue to scoff at the idea of enjoying Jane Austen on a machine, albeit a lightweight one that will play you with English ballroom tunes as you read.

Kindle’s success could bring electronic publications such as blogs, short stories, and newspapers into the bedroom – traditionally book territory – without a backwards look.

Do you think Kindle’s perpetually out of stock status and #1 rank are examples of slick reverse engineering or just another sign of the device’s future promise?



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