Everything we do, we do because of experience.

When, as babies, we touch something hot and burn our hands, we learn to be careful not to touch things that may be hot. When we do something bad and get punished, it is natural to not want to be punished again, so we avoid doing the “bad” thing.

On the other hand, we find that sometimes the things that we “experience” may not seem to be bad at all. It may be that someone else just doesn’t want us to do things, so they tell us not to, and threaten us with punishment…

This can get very convoluted and lead to a lot of wrong conclusions about some things that we are familiar with.

Let’s start with the obvious – Drinking alcohol.

Back in the early days of the last century in the US they had something called “prohibition”. Prohibition was the banning of the sale of alcohol. Human beings have been finding ways to get high for a long, long time. The German tribes, who were the only tribe that was never conquered by the Romans, used to party on down after the battle, getting totally ratfaced from the home brew that they made, which was probably the long lost forefather of the modern Lowenbrau.

Of course the Romans like their tipple of wine. I am not sure when the Russians invented a way of distilling clear spirit, but the Irish and the Scots probably invented their process about the same time. The Chinese, Japanese and Koreans all have their own special unique national alcoholic drink too. So for the Americans to think that they could outlaw drinking was a pretty bold move. Drinking to get high, and drinking to excess, are all part of the human condition. Maybe we don’t get drunk to celebrate battling Caesar in a battle for the Black Forest any more, but we certainly like to drink.

So when they prohibited the sale of alcohol what happened? The manufacturing went underground. People took the point of view that the law was wrong and they all knew better. Speakeasies sprang into being, just as sly grog shops came into being in the early days of the Australian colonies to enable people to consume rum and beer and whatever else was going to get them off.

And the people who sold the illicit liquor got wealthy. A few of them may have gone to jail, but for the most part people got rich. Not just the perpetrators of the crime, mind you, because what the stroke of the pen did was to bring into being an ecosystem of alcohol distribution in which everyone involved got rich – except the state.

The people growing the raw materials had a market albeit small. The people manufacturing the copper tubing and other parephenalia for the still found a market for their inventiveness – again small. The people using the stills to manufacture and distribute the spirits certainly had a market and theirs was pretty profitable, although much more risky. Those officials whether they were policemen, judges, lawyers, who were not averse to picking up a backhander for looking in the wrong direction, certainly did well, as corrupt officials always have done well. But the people who made the most money were the ones that knew who to bribe, how much to pay them, and could convince everyone else in the ecosystem to keep their mouths shut in order to keep the gravy train moving.

There was a lot of money made during the period of prohibition in the US. The only ones that didn’t make money were the people who obeyed the law, which was a bad law anyway, and the government because it couldn’t tax something that was illegal.

Now along similar lines we have the tobacco industry. Sam history pretty much. People have been smoking one weed or another for many hundreds of years. Different tribes have smoked different products – some of them narcotic and some not.

Tobacco may have been able to not suffer prohibition at the same time as alcohol because it was clearly not a narcotic. On the other hand heroin was marketed by Bayer from 1898 to 1910 as a cough suppressant. And cocaine was sold over the counter until 1914 in the US.

They may have become illegal round that time, but 100 years later and they are still being sold on a street corner near you. The only thing that has changed is that now they travel through the illegal system rather than the legal one.

And very similar people benefit from the ecosystem that springs up around continuing demand.

And let’s face it, the people who benefit from the manufacture of drugs must be pretty happy with the status quo. From the people that manufacture and distribute to the people that protect the distribution chain all the way through to the bankers that move the money round the world – there is an implicit if not explicit reason to leave things the way they are. Let’s face it, if drugs were legal, and you could buy them at the local bottle shop along with an eighth of vodka, the government statistician would know exactly how much is being consumed and would be able to put a ruler over the whole system and extract a ton of cash. The margins would go way down for the illicit manufacturer and the crooked officials in the ecosystem would have to wave bye bye to the black cash that puts another story on the house, and the kids through private school.

So now let’s look at the music business.

We know (because it has been reported anecdotally so often) that certainly in the US, the music business has used payola to get some music onto some influential radio stations for years.

The idea that it works of course is something that is easy for anyone to believe. The ecosystem that came into being to support it – that is something else. Because to function it of course requires that ingredient that is so beloved by anyone who is on the take – cash.

To get cash that doesn’t go through the books at some place requires some inventive work. The way it used to be done during the days of vinyl (and I suspect that it is the same in the days of the CD) is as follows:

Someone in the record company orders up too many pressings of a record. The record is highly unlikely to sell the amount manufactured, so to keep inventory management optimised an amount of disks are classified as “cut outs”. They are stamped to show that they have been destroyed, but the mark doesn’t hurt the disc, it just damages the cover – often by punching a hole through it in the corner. Hence the term, “cut-out”.

Now the disc has been cut from inventory, it is recorded as having been destroyed. Of course it hasn’t actually lost its ability to do what it did when it was manufactured – that is to reproduce music.

It now has the benefit of not existing – on paper anyway. So now someone comes along in a truck and takes away a stack of discs that don’t exist and takes them to a destination where there is a person waiting with some cash to buy a stack of discs that have some minor damage to the sleeve.

Now you have some cash that has been created. The discs re-join the retail chain somewhere, in street markets and discount stores. There is no requirement to pay any royalties to the artist or to the songwriters because the discs don’t technically exists. And the person who handled the trade now has a bank roll to pay off the people who take care of the radio stations without it appearing anywhere on the company’s books.

Can you see the problem that arises when you have digital distribution, where every download is registered and can be traced? My God, it doesn’t leave any room for error!

That does present somewhat of a problem if you are running a record company and need to generate some off the books cash, doesn’t it?!

But if you took the position of saying, “hey there is this thing called P2P where people distribute music for free without paying any royalties”. Now you have some grey area where you can argue that whatever you sold can be traced but there is all this other stuff that is out there where no royalties have been paid….

And you can go to the politicians and the law makers and you can cry all day long about all your lost revenues and how your business is being screwed by the telcos, and screwed by the geeks and screwed by everyone else….

For the record business P2P is the “great shell game”.

Whichever way they play it they get to win, which is the way that most shell games work.

Let’s look at that for a moment…

So here is the way that the landscape is for the music companies:

1.    They know that all music has to be on line
2.    They know that that means that their entire sales and distribution structure is going to disappear which means a lot of lost jobs
3.    They also know that this will mean that the retailers will shut down – more lost jobs
They don’t care too much about any of those things – just as long as they don’t interfere with profits.

And in there are decision makers who know that unless they keep that gravy train of graft running they will go home to unpaid credit card bills.

So the way that it is working out is this:

1.    They keep on demonizing P2P
2.    That means that they can keep on blaming their lack of unrealistic profitability on someone else. That keeps the shareholders happy while they keep taking the tens of millions in bonuses.
3.    They get to have an external structure that can be used to mask the graft required to keep on pushing records up the chart.

So what we have is an economy within an economy.

In the physical world that we all exist in – that one with national figures – there are numbers that indicate sales, profit, etc. The music companies report into those just like always. (And bear in mind that the overall entertainment sector together with software is the driver of the American Economy and since we all signed off on free trade deals with America, we are bound by their rules).

But in the off-balance sheet, off-books, off-legitimate business world – that one that the national figures doesn’t include – the cash economy, there is a great big vortex of cash that is swirling around and it is so powerful that everyone who wants to get ahead wants to join in it.

The people who feed at that trough require that P2P remains suitably illegal. While it is illegal they can make sure that the sleepy politicians are focused on the left hand while the magician does the business with the right and then “hey presto” magic seems to have taken place.

Make no mistake, the music industry wants P2P to remain illegal because it suits all the people in the ecosystem who are on the take. If they were truly interested in their business moving forward they would embrace the concept of a new distribution system first and figure out how to make money of it later.

So, ladies and gentlemen, this is the bottom line: Nothing is as it seems. Everything is probably the opposite to that which you are being told. The conspiracy is one that is so overt that almost everyone that you know is part of it. It is a conspiracy of alternative ecosystems – the one that is on the level and the one that everyone in the ecosystem knows about and no one acknowledges.