Sunday, March 9, 2008

Illegal downloading, etc.

I'm not sure if someone else has done this as a blog yet or not, but I was just thinking about how much of an impact illegal downloading must be having on the entertainment industry so I decided to do a little research. A recent study has found that movie piracy and internet downloading costs major studios over $6.1 Billion per year. The entire economy loses about $20.5 billion per year including losses for theaters, renters and retailers, advertisers, lawyers, casts and crews, and other service workers.
I am not here to condemn all internet downloads. It is ridiculous to ask teenagers, and many adults alike, to pay twenty dollars for the remastered Thriller album, when they can easily access it at an online site for free. Why would a broke college student want to pay $8 to see Juno in the theater when they can find it online and watch it without even having to download harmful software?
iTunes had the right idea, allowing consumers to purchase just a few songs off of a CD at a reasonable price in a guilt-free manner. However, if a Milli Vanilli album is only $5 at a retail store and a Justin Timberlake CD is $15, why should each song be worth the same 99 cents? (This point doesn't have much to do with the grand idea, but its still interesting)

Anyway, piracy only causes the industry to lose more money, which causes the prices to go up, leading to a vicious cycle of loss for industries. According to the law of demand, however, if the demand for movie tickets decreases, the price and quantity of movie tickets will also decrease. Does this mean there will be less movie showings available, but they will cost less?

Does anyone have any ideas as to how this cycle can be diminished or any predicted effects of continued internet piracy?


savannahc said...

i've been waiting all evening for your post missy. and strange that you wrote about this, because i almost did too!

Although illegal downloading does, obviously, take money away from the industry and the artist, in certain cases it can serve to help them. There are many times when a person downloads music that they wouldn't buy or steals some from a friends ipod that they would normally never listen to. Then these people become fans and pay to go to the concerts of this artist, which is where the artist themselves tend to make the most money (because they don't get very much of the cd profits).

JoelleBender said...

Your point about the laws of demand is really interesting, thought provoking almost. :)
I know that if movie tickets were cheaper I would definitely go and see more movies, and I think a lot of teens with little money to throw into things like movies would think the same way. I know that one rule can't work for everything, but is there some way to determine what it will and won't for sure work for?

And to play devil's advocate....maybe the law of demand is true because if tickets are cheaper (assuming the amount of people who actually see the movie in theaters as opposed to illegally online stays the same)then the entertainment industry won't be getting as much money. This means that they won't have as much to put into making movies, resulting in lower quality movies (like that wonderful Australian one with the blow-up doll for a dead body) which will then deter people from wanting to see new movies, thus the decrease in quantity. There you go, that's obviously how simple it is.

Tanvirkamal said...

I agree more with savannah on the subject, the artists are the talented ones, they should be making a little more money. I do buy some cd from retail outlets once in a while, but its nothing like the service iTunes offers which is absolutely wonderful.

From my eyes I see it that if the downloading stops and uploading stops, won't the industry just jack up prices to rape the consumer of as much money as they can? I mean thats what is happening with gas correct? if there is no other alternative, the result is a vertical line, good luck trying to get the record companies out of that one.

Abby W said...

The extra say 35 cents that you are paying for the crappy song is probably worth the convenience of buying the song at home, without postage or other costs. Plus, you don't have to hunt through the cd selection at multiple stores and/or waste gas money trying to find it. It also may be tricky trying to assign individual values for each song. consistent prices are comforting and save someone's time.

melody. said...

the problem is, tony, that jacking up the price on music will only go so far. Americans are so dependent on gas, that we pretty much take whatever gas price is handed to us. Music, on the other hand, doesn't have such an inelastic demand. If worse comes to worse, everyone can deal with their old 80's tapes.

magila said...

I have no idea how to fix this cycle. I think until the government finds some way to control all forms of illegal downloading, people are going to do it.

I actually think CD prices have kind of gone down or stayed the same in the past ten years or so due in part to illegal downloading. When I first started buying CD's, I remember they cost me about 12 dollars, and I could probably buy most for the price today. The music industry knows people have easy access to free music, so if they jack up the prices, people will be more likely to go the illegal route.

KM said...

okay...okay...I have to. You know I do. It's killing me.

It's not costing them a penny. It's DWL. No money flew out of their pockets for downloaded songs. It's lost revenue - lost producer surplus. Deadweight loss.

Whew. I feel so much better now.