Smith, Sheep and the RIAA

I have progressed beyond the extended discussion in Smith about the value of sheep, tallow and hides in the Wealth of Nations. As a way to get through his labor theory of value Smith goes on an extended discussion of the relative value of commodities under various conditions. It is interesting but only to someone who is very interested in determining the relative value of various hides or gold or silver or tallow at various times and various places. As I was reading this section I was reminded of how long it took me to read all this stuff the first time; my digression is not as long as Smith's but you get the idea.

Smith makes this dandy comment in the book that producers will attempt always to increase their profits and decrease their competition - an apt description of the recording industry and its consistent attempts to interpose their rights over individual purchasers rights.

Remember the Kessler cycle. In the case of the RIAA, the producers are the people who DISTRIBUTE music. (These companies do not write music or play it - they serve a function as a distributor - but they consistently make claims on our pocketbooks by trying to accentuate profits and decrease competitors. What is interesting is how most of the artists see the transaction. I have a good friend in Mexico who with with wife produces Mexican classical music. (There is a rich library of Mexican baroque music.) This guy is a perfectionist. When he sells one of his CDs it has been nurtured over a very long period of time. The CD sells for something in the range of $15 but he gets less than a $1. The work to identify the music, transcribe it, play it and record it all comes out of that buck. My friend does this because of his love for the music - but he will certainly not get rich from all his work. He then gets an RIAA member (probably one of the big four) to create the CD and than distribute it. The distributor costs of producing the CD amount to less than a buck - so profits are pretty large. A lot of those profits have been used to aggressively pursue suits for the violations of the DCMA (maximize profits and reduce competitors). But as Kessler pointed out at some point the established way of doing things begins to change. There is pretty good evidence that the RIAA's tactics are beginning to become less efficacious.

A couple of things are happening. It is now easier to distribute music without the big four companies using electronic distribution. The total price of the songs is cheaper but the opportunity to allow the musician to keep a larger share are very much better. The Right Brothers, whose Bush was Right was a big seller, is an example of that new kind of distribution. At the same time the RIAA's aggressive tactics are beginning to be less effective. That is because courts have begun to recognize the outrageous nature of the the greedy claims made by the Association.

In this case, technology is throwing a wrench in the attempts by these distributors to increase profits for themselves (not certainly for most performers) and decrease competitors.