Following up on my previous post — Ario wrote this piece, and it’s worth reading. The thinking is clear and organized, and it represents a genuine insider perspective on the recording industry.
What I want to address is the concept of “lost sales” — the revenue that the recording industry claims piracy has taken from them. My position is that these numbers are phantom figures.
Does that mean I don’t believe in sales forecasting? Not at all. I run a business built on sales projections. The problem isn’t the method — it’s where the baseline comes from.
Macro and Micro
A quick detour into basic systems theory. Within any system there are Macro and Micro levels. The Macro encompasses the social, legal, political, economic, and technological environment. The Micro sits inside it: industries, companies, and individuals.
Everything a company does is shaped by what happens at the Macro level. At industry scale the effect is significant. When a country is at war, most of its domestic industries stop. A non-war-related industry trying to project sales during wartime is working with irrelevant data.
Irrelevant Sales Projections
Where does the “lost sales” figure come from, when the social environment has shifted toward file sharing because that’s simply what the technology enables? Any sales projection becomes invalid because people have changed. They prefer to share files. Many stakeholders want to reframe this as a technology or political problem, but it’s fundamentally a social one.
My read: the “lost sales” and “opportunity cost” figures the recording industry uses to claim piracy has damaged album revenue are projections built on a world that no longer exists — a hypothesis that was never actually tested against reality. And if those same numbers are being used to lobby the government to crack down on “pirates,” that means policy is being shaped by figures with no relevant foundation.
There’s a certain irony here. During my time working with major labels in Indonesia — roughly 2003 to 2006 — I was constantly told to follow “market taste.” Now the market has shifted, and the industry doesn’t want to follow.
So Now What?
As Ario says, it’s easier to build a new industry grounded in how people actually behave in the digital era. But what about the existing industry?
Around 2004, Jan Djuhana — A&R Director at Sony BMG Indonesia at the time — told me that young people were already choosing to top up their phone credit instead of buying CDs. The digital era was already happening, and it was accelerating.
I’m fairly certain the recording industry won’t die, in the same way the sheet music industry didn’t die when recording took over — it just became smaller in proportion. What’s happening is a large-scale ratio shift. But looking back and imagining a world without piracy feels like the wrong question at this point. The real challenge is how to grow during this period of change, quickly and cost-effectively.
Agreed with Ario: this is an unsolved problem. But it has to be solved. We can solve this, can’t we?