LIAM SCOTT
Arbitrage Magazine

First published in the Arbitrage Magazine
Business News with BITE.

A war is raging in the U.S., one that pits the Recording Industry Association of America (RIAA) against individual file-sharers. Six years in though, the RIAA has spent $64.1 million on legal proceedings, winning only $1.4 million from its offenders.

The result? The RIAA hasn’t even dented the web of peer-to-peer file sharing services that have continued to grow over the last decade, despite superstar recording artists such as Metallica, Dr. Dre and, most recently, Gene Simmons of KISS, speaking in support of the cause.

But while downloading the album of an established, world-famous rock star might not take a bite out of the artists’ wallet, the spread of file sharing has begun to impact artists who do not have the luxury of a private jet or a world tour.

“We were sleeping on the floors of friends-of-friends’s apartments. We had $10 a day for food, no per diem. We were definitely pinching pennies,” says Phil Maloney, drummer for Newfoundland band Hey Rosetta!, of their first tour. “It’s not until the third tour or so that you hope to at least break even.”

For a band that has had their music featured in CBC Radio’s Great Canadian Song Quest, as well as on the hit Canadian TV show Flashpoint, one would think the album sales would be substantial. While that may have been true a generation ago, things are different now. “Albums are a dying form of income,” explains Maloney, a sentiment echoed across the Canadian indie music scene.

Max Kerman, front man of Hamilton quartet The Arkells, says record sales provide “pretty little in the form of money. It’s probably like that for most bands.”

It’s not just the artists taking a financial hit from declining sales. Mike Greatorex of Sonic Entertainment Company says labels are being forced to find other ways to stay afloat as sales crash. “If (Sonic Entertainment) was just a record label, we would have gone out of business years ago,” says Greatorex, noting that Sonic Entertainment’s management of bands is what generates most of the income. Sonic’s label has signed four acts in the past eight years but, ideally, the number of acts signed would be at least twice that.

“(Physical record sales) are a bit of a joke, honestly,” admits Greatorex. “A lot of smaller labels don’t bother with major physical distribution anymore.”

The root of declining record sales? Piracy. Since the inception of peer-to-peer file sharing service Napster, in July of 1999, the music industry has fought for its fair share of the revenue, always one step behind file sharers.

“Our entire career has seen a rise in the popularity of our band and, at the same time, a drop in our album sales,” says Stephen Carroll, lead guitarist and manager of Polaris-nominated Winnipeg indie-rock staples The Weakerthans. The Weakerthans’s first album, Fallow, was released in 1997, when downloading music was all but unheard of. Carroll says the majority of their fans probably downloaded their last album, Live at the Burton Cummings Theatre.

“Demand (for music) hasn’t gone down,” explains Greatorex, “but if the options are buying it versus getting it for free, people will obviously choose free.”

Websites like thepiratebay.org, operated out of Sweden, are the main culprits for harbouring illegal torrents. The Pirate Bay makes most of its revenue from advertising on the website, much to the chagrin of artists.

“I have a real problem with websites that profit from banner ads without giving anything to the artist,” says Winnipeg singer/songwriter James Struthers. “Just because copyright laws are different in your country, it doesn’t give you the right on any level.”

Artists and labels may not agree with file sharing, but there’s no signs of their stance slowing it down. Greatorex used to track down and report illegal torrents of bands on his label, but soon gave up. “It’s impossible, so I stopped doing it,” he says, noting that in the time it took to contact the hosts and demand one be removed, two would pop up elsewhere.

The murky legal and moral ground surrounding piracy is the reason behind its prevalence. Most people, primarily a younger demographic, don’t see it as stealing.

“It’s the net, it’s going to get out there anyway,” says Michelle Zuniga, a nursing student at Ryerson University. She doesn’t see intellectual property as something one can claim ownership of, so it doesn’t count as stealing.

Silver linings

As artists and labels have come to accept the realities of file sharing, silver linings have presented themselves. Aaron Miller of Toronto-based Indie label Arts & Crafts thinks file sharing can benefit artists and labels, if used correctly.

“It’s indirect, but the ability to spread music and disseminate products around the world like that, even illegally, can mean invaluable exposure,” says Miller.

Struthers cites the overseas popularity of some Canadian bands like Broken Social Scene and The Weakerthans, which would never have been possible without the internet.

“Broken Social Scene can tour China because of downloading. Nobody there has actually bought their album,” says Struthers. Last year, Broken Social Scene played shows in Singapore, Taiwan, and Tokyo, a long way from their roots in Toronto. The fact that these places have even heard of Canadian music, to which they are rarely otherwise exposed, is a testament to the power of piracy.

The boost is felt at home as well as abroad, which leaves artists and labels in a grey area of support.

“If people are digging the record and then come out to the show, that’s great,” says Kerman.

Maloney agrees. He realizes that not all the people wearing Hey Rosetta! T-shirts and coming to their shows have purchased the albums.

“It took them downloading the album to come to our show and buy a shirt in the first place,” he admits.
Marti Sarbit, vocalist for Winnipeg duo Imaginary Cities, says that first and foremost, “music should be accessible.” The problem comes when the spread of the artists’s music is beyond their control.

“It’s the artists’s living, and they’re entitled to it,” says Maloney.

The new normal

The effects of file sharing on Canadian indie labels and artists are unavoidable, and it’s forcing the industry into a sink-or-swim situation. Many labels have taken on management duties as well, to get a piece of revenue from their artists’s merchandise sales and live shows.

“The degree to which a label is affected by (file sharing) does, to some extent, reflect the degree to which they have been able to diversify their revenue. With our licensing, management, publicity and event production wings, we have been able to stay afloat in the face of slumping sales,” Miller says of Arts & Crafts.

Struthers says more labels are signing, “360 deals,” which are essentially record deals in which the label collects money from all revenue streams, such as merchandise, playing shows and music placement. This way, the label does not rely on album sales, which can be unreliable.

Many of the bands have turned towards government grants and private organizations to support their careers. Maloney cites MUSICNL, an organization that provides funding to Newfoundland and Labrador musicians, as one of the main pillars of Hey Rosetta!’s career, saying, “we wouldn’t be a band if it wasn’t for MUSICNL.”

Greatorex says Canadian musicians have far more grants accessible to them than their American counterparts, who have almost no support. Still, he says, “there’s something inherently wrong with an industry that relies to heavily on government funding.”

Royalties from radio and television placement are also sources of income, and this only helps bands or artists that receive substantial radio rotation.

“I guess (radio placement) is a major source of income if you’re Katy Perry or Lady Gaga or something,” says Carroll.

Less money earned from music, coupled with lower cost of production, has created an influx of bands that are forced to play more shows.

“We used to book shows two, three months in advance for a tour. Now we have to book at least six months in some locations,” says Carroll. He fears this will create a, “race to the bottom,” with bands playing more shows for less pay to compete for gigs.

Massive tours are certainly the norm for Hey Rosetta!, who played 85 shows between February and November of 2010, 50 of those between June and October. “That’s pretty much how bands exist now, by playing lots of shows,” explains Maloney.

So what is next for Canadian music? One thing that is certain is piracy is here to stay. “Everybody’s done it at some point,” says Maloney. “I’ve downloaded music for free.”

The problems arise when one considers the prospect of prosecuting something that nearly everybody has a part in. “Ideally, there should be some way to regulate it,” says Imaginary Cities’s other half, Rusty Matyas, but the music industry has yet to find a way of doing so.

Despite the prevalence of file sharing, the future of physical music is not as bleak as one might think.
“There’s something to be said for tangible media,” says Maloney. “The cover art and lyrics make it more personal.”

Matyas says that CDs are dying fast, but “vinyls (sic) are definitely making a comeback.” Carroll says that certain dedicated fans buy vinyl records. He estimates that about 10 per cent of their overall sales are vinyl, and while that number is on a steady rise, it’s done almost nothing to combat the rapidly declining overall sales.

The future is unclear, but a shared sentiment is that the shift of control away from major labels and towards the artists is imminent, as exemplified by Radiohead’s decision to self-release their 2007 studio album In Rainbows through their website and allowed their fans to decide how much they wanted to pay. Since then, other popular acts like Nine Inch Nails have followed suit.

While these releases make an impactful statement on the music industry, the artists in question had already established a massive fan base and considerable wealth, minimizing promotional costs and negating any budgeting worries.

“(Radiohead’s method) is more of a statement than a reliable business model,” says Greatorex. Most smaller bands, especially those just starting out, can’t take the risk of not recouping the money lost making the record.

Struthers says it wouldn’t be far-fetched to see a variant of this model catch on. “Within five to ten years, all the music might be available for free from the artists themselves,” he predicts.
“The music industry is really learning a lot about itself right now,” says The Arkells’s Max Kerman. “They’re still trying to figure out how to connect with people and make up for their losses.”

Arbitrage Magazine:
The Arbitrage Magazine doesn’t just offer student news, it’s a student magazine that produces Business News with BITE. So check out the Arbitrage Magazine for the latest business news, and share our news with your friends!

—
feature image: The Arkells | Flickr by Scott Penner