Economics for music sharing

I've been watching an old PBS series called "Free to Choose" based on Nobel Economist Milton Friedman's philosophy of how things should be in the world. I'll be writing more on the main subject elsewhere, however an interesting thought occurred to me while he was discussing Adam Smith's (he of The Wealth of Nations) description of the "invisible hand" that apparently guides people to make economic choices that benefit society as a whole even when they are apparently making selfish choices that benefit only themselves.

The thought was "doesn't that apply to what people naturally want to do with music, and media files in general?". Didn't the birth of MP3 and file-sharing networks on the whole benefit the music industry? After all its still making mega-billions world wide, the music biz seems to be stronger than ever, and music is in now in more places and at more times of the day than ever in human history? So hasn't people's inherent desire to share music ultimately been good, via some "invisible hand" for society as a whole? It seems so to me.

Furthermore, Friedman in "Free to choose" argues again and again that when there is some restrictive policy enforced by law then people will fight back in every way possible with black markets, and all kinds of other law breaking to circumvent such laws. In terms of the music biz I see a direct correspondence - the music biz has created a hugely restrictive market which has created a huge and pent up desire to circumvent their means to control the market. And thus was file sharing born.

So, I conclude that if one were an advocate of Friedman the situation with music and file sharing networks is a perfect example of how peoples simple, innate economic desire to be free to choose has resulted in a massive desire to overthrow the music industry's vice like grip on the commodity known as music. Furthermore the cracks in the music market opened in response to public file sharing activities have demonstrated a very positive benefit to all - both producers and consumers alike, although few music businesses other than Apple are enlightened enough to say so.

Now, to end my theory with an opportunity for some applied experimentation. The one thing that modern commercial instances of file sharing like Napster lack, is that real nugget that got them started - file sharing. If Napster, iTunes, and the many imitators really want to take over the world all the have to do is re-introduce that original file sharing concept. Since the beauty of sharing is discovery and enjoyment of new experiences which leads to new wants and desires - a key component of spurring economic growth - if I can share, to a limited extent, my newly downloaded Napster tunes with a friend or friends, regardless of whether they are Napster subscribers I believe it will generate a hugely viral win-win situation for all involved.

My friends benefit from my music recommendations. Napster benefits from new introductions to their service. I benefit from friends who are grateful to be introduced to a cool and genuinely useful new service, not to mention the great new music - assuming they like it. And finally, and most importantly the musicians benefit by maximizing the market potential of their music because their music is spread by a massively redundant and dense network of word of mouth referrals. No more reliance on simple, expensive, blunt instrument style narrow bandwidth advertising channels.

Thus it is the logical conclusion that when I pay $10 a month to get all the music I want I should be able to grant some of my friends (obviously not an indefinite number) a limited number or time period of plays for any or all of that content. In the absence of easily circumvented DRM (which I assume is largely a given now, unless you want, and are prepared to go to the inconvenience of imperfect analog copies) I think this will be a huge win-win for the society of music consumers and producers. The simple test of this will be when the sharing rules that are sufficiently liberal enough that people are no longer expending vast amounts of time and effort to circumvent the DRM, we will have achieved the most beneficial and economically efficient system of distributing music.

In such a world it will no longer be necessary for me to say on my blog "I'm listening to this, its really good - trust me and go buy it here" and put a link to Amazon or whatever. I can simply say "click here and listen to it for yourself for the next week, or for X number of times". Then if the person really likes it they will still buy it, and if they don't they wont. No more albums bought that don't get listened to because 90% is crap or the 30 second sample sounded okay but was literally the only good 30 seconds. One-hit-wonder bands will only sell one hit and might be inspired to produce better music, and bands manufactured by the music biz itself will have to compete on the open market where they can't rely solely on superior marketing to push sales, things like quality and market driven production might actually become a major factor in the music business again.

Well, you know me - I'm just a dreamer - but I blame this blog entry entirely on Friedman and I'm thankful for being free to choose to write about it and publish it all for a pittance, such are the economics of web publishing.