I'm Going To Forecast The Death Of The American Recording And Video Industries

Yep. Time to stick my neck out again. By my calculations 2+2=15, and I want to tell you about it.

First off, this has nothing to do with file sharing, nothing at all. And it has nothing to do with my dislike of the industry for their past actions. I’m coming at this from a different direction, one that I don’t believe that the industry has really considered. At least if they have, they don’t seem to have done anything about it.

First, you must have money to buy things. This is a basic economics that even a four-year old can understand. At least my kids could when they were four years old. To have money, you must have a job, which pays you enough money that you can cover housing, food, transport, and other essentials, and then have money left over for luxuries, like internet access and entertainment. For those who don’t think internet access is a luxury, consider this – would you prefer to eat or surf the web? Surfing the web while starving isn’t fun, especially when you run into things like Cooks Source <EVIL GRIN>.

Financially difficult times, like the current Recession, cause people to cut back on spending. If you aren’t working, taking the family to the theater to see the newest Harry Potter movie really isn’t a practical choice. Instead you’ll wait until someone you know buys the DVD, and borrow it. You’d prefer to own your own copy, but if you don’t have the money, well, you don’t buy it. This is a simple extension of why most of the population doesn’t drive Corvettes. A Corvette is a luxury. Watching Harry Potter at the cinema is a luxury. Going to a Neil Young concert is a luxury, listening to Neil Young on Q107 is affordable.

Let’s consider the Republic of Ireland, Eire, or Southern Ireland as us old folks still think of it. The Irish Times, a major Irish newspaper has reported that Ireland is insolvent. To quote the first two paragraphs of the article:

WHEN I wrote in The Irish Times last May showing how the bank guarantee would lead to national insolvency, I did not expect the financial collapse to be anywhere near as swift or as deep as has now occurred. During September, the Irish Republic quietly ceased to exist as an autonomous fiscal entity, and became a ward of the European Central Bank.

It is a testament to the cool and resolute handling of the crisis over the last six months by the Government and Central Bank that markets now put Irish sovereign debt in the same risk group as Ukraine and Pakistan, two notches above the junk level of Argentina, Greece and Venezuela.

I suspect that you didn’t hear of this. The newspapers wasted a lot of ink covering Greece and Iceland, while ignoring Ireland almost completely. Maybe it’s because unlike the Greeks, the Irish haven’t been rioting in the streets. Maybe it’s because unlike in Iceland, the Irish bankers haven’t been charged for criminal acts. The problem is that the Irish State is in deep financial trouble (for further details see the Irish Economy blog).

There was no single issue that caused Ireland’s problems. In fact there were too many issues, including banks that issued mortgages that the mortgagee had no hope of repaying (sound familiar?) The banks knew that they were doing this. In many cases they deliberately forced customers who qualified for lower interest rate mortgages into higher interest rate mortgages so that the bank could make more money. When the recession caused cash flow problems for the customer, it caused problems for the bank. If the customers had have been at the lower rates, a significant number of them would not have had cash flow problems. The banks action quite possibly was criminal. In any case it left many Irish families with little or no discretionary spending money, money that they might have spent on luxuries like concerts.

And then to top it off, the government panicked, and decided on an austerity program. Rather than raise taxes on industry, and use the money for infrastructure projects, they did what industry wanted. Keep the taxes low, and cut spending. When they cut spending, they put people out of work, which meant that tax income dropped, so they cut spending further, which put more people out of work, so tax income dropped further, implementing a classical feedback loop. The country is now effectively insolvent, even though the government has some money left, money which will be gone by early in the new year.

Their next door neighbors, Britain, have now decided to take the same course. Curiously, all the spending cuts affect the poor and the middle class. The Toffs make out just fine, thank you very much.

Now the Americans want to do the same thing. They will do the same thing. And will suffer the same fallout. Massive unemployment, massive underemployment. The entire audience that the RIAA/MPAA companies depend upon for their sales will be in the poorhouse, and unable to afford to buy entertainment. After all, food and housing come first. You can survive without entertainment. Life is more fun with it, but life is impossible without food.

Possibly this is the reason that the Entertainment Distributors have been so interested in pushing ACTA, in the hope that they’ll be able to increase their sales outside of the United States. Other countries are pushing their creative industries too, so competition will be fierce.

Things look desperate for the Entertainment Distributors in the United States. It looks like only a miracle can save them.

Regards

Wayne Borean

Monday November 8, 2010

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3 thoughts on “I'm Going To Forecast The Death Of The American Recording And Video Industries

  1. I knew there was a good reason why I kept all my vinyl and cassettes. Most of that new stuff is unintelligible anyway. (Remember hearing that one from your own parents??)

    And who says internet is a luxury?? Most of the vital resources we require today are easiest to obtain online.

    1. Bob,

      If you have a choice between eating, and having the internet, the internet is a luxury.

      As to the new stuff, have to agree. The quality of most of what the big companies are producing is terrible. But there’s some really neat independent stuff happening. I just hope that the independents can survive the depression that I think is going to hit.

      Wayne

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