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From:
John von Seggern
To:
, under the radar ,
Cc:
Christopher Zorn
Date:
Tue, 25 Jun 2002 08:19:36 +0800
Subject:
Re: [idm] Time to Pirate (was: Decision on Web radio reached)
Msg-Id:
<008201c21bdd$fd302b30$1899fea9@COMPAQDJ>
Mbox:
idm.0206.gz
quoted 3 lines I would really like to see some definitive figures on how services like> I would really like to see some definitive figures on how services like > audiogalaxy affect record sales other than the canonical "profits actually > increased during napster usage" argument that has been given for a while
now. The latest and most comprehensive study of the effects of file-sharing was conducted by Jupiter Media Metrix last summer, and they just released a report of their findings last month. According to Jupiter, file-sharing tends to polarize listeners, with some buying more music and some buying less. The finding that file-sharing leads to increased music purchasing overall, though, is pretty reliable, it's been replicated a number of times by a number of different research firms. I am currently working on a new study together with some people at CalTech aiming to look at this situation in more detail, but we're not going to have results back from that for a few more months at least. I recently wrote a report summarizing recent research on this topic...excerpted highlights follow below, URL references to the original reports are at the bottom. John von Seggern Digital Cutup Lounge/University of California-Riverside http://www.digitalcutuplounge.com ----------------------------------- MUSIC FILE-SHARING AND CONSUMER SPENDING: THE CONTROVERSY CONTINUES John von Seggern johnvon@digitalcutuplounge.com Music file-sharing on the Internet via websites and networks such as the notorious Napster has become an extremely controversial topic in recent years. Since May 1999, when Napster began introducing millions of Internet users to the pleasures of trading music via a peer-to-peer network, music file-sharing has become ubiquitous online. 42% of the respondents in a June 2001 study of online behavior among American Internet users conducted by Jupiter Media Metrix indicated that they had downloaded music from the Internet. There has been a great deal of public argument over the effects of this phenomenon. The recording industry views Napster-style file-sharing unambiguously as stealing and have tried to enforce its view by filing lawsuits against Napster and other similar online services. Napster itself has been effectively put out of business by legal action since July 2001, and a number of other lawsuits against most of the other major file-sharing services are currently pending. Among listeners, however, there is little agreement on whether or not file-sharing is the equivalent of theft, with many contending that they are actually led to purchase more music in physical form such as CDs because of their music downloading. Many polls and surveys of online behavior have attempted to learn more about music fans' actual online behavior in the past few years, but with ambiguous and conflicting results. Some studies, notably those commissioned by the recording industry as represented by the RIAA (the Recording Industry Association of America) or the IFPI (the International Federation of Phonographic Industries), have found that music file-sharing contributes directly to decreased purchases of music by consumers because it allows them to easily obtain the same music free of charge from the Internet. For example, a recent statement from the market research unit of the IFPI released on 16 Apr 2002 places the blame for a reported 5% overall decline in global sales of recorded music in 2001 squarely on Internet file-sharing and other forms of high-tech music piracy: Three of the world's top five markets - the US, Japan and Germany - attribute a significant part of their sharp drop in recorded music sales in 2001 to the proliferation of free music and piracy. The effect was felt on CD sales, in most of the markets of North America, Europe, Latin America and Asia. The pressure from mass copying was aggravated in many markets by the global economic downturn, particular in the last quarter of the year. Surveys in the most affected countries, notably the US and Germany, show that mass copying and internet piracy is directly replacing sales of CDs. In the US, nearly 70% of people who downloaded music burned the songs on to a CD-R disc, while 35% of people downloading more than 20 songs per month said they now buy less music as a result. Although I do not have access to the full IFPI report on which this statement is based (Recording Industry in Numbers 2001), even a cursory glance through this article ought to give us grounds to doubt its conclusions. To take only the last point in the passage above as an example, the IFPI claims that 35% of those surveyed who reported downloading more than 20 songs a month also reported buying less music as a result. What is omitted here, however, is any mention of how the other 65% of the respondents answered this question. If 35% of these "heavy downloaders" reported buying less music, than it logically follows that the other 65% must either have maintained their music spending at the same level or increased it. In addition, we are given no information about the magnitude of the reported changes in spending in either direction; because of these omissions, it is impossible to draw any firm causal link between the behavior reported by the IFPI and the overall decline in global music sales in 2001. Indeed, independent researchers who have examined this issue have reached very different conclusions than the IFPI. In a study released on 25 Feb 2002, a private Internet research firm, Ipsos-Reid, concluded that music fans who download music from the Internet (whether legally or illegally) are actually more likely to purchase recorded music: .evidence shows that downloaders do not stop buying prerecorded compact discs when they discover downloading. In fact, 81% of downloaders report their CD purchases have stayed the same or even increased since they initially began downloading music from the Internet. Jupiter Media Metrix, another Internet research firm, has also done a number of studies about music file-sharing and reached similar conclusions. Jupiter 's most recent analysis, based on a national survey specifically focused on online music originally done in June 2001, concludes that music file-sharing actually has a polarizing effect on users, with some music downloaders reporting an increase in music spending while others reported a decrease. On balance however, Jupiter's analysts report that file-sharing leads to an increase in overall spending on music, a conclusion which directly contradicts the IFPI's claim that it is file-sharing and other forms of piracy which caused the 5% drop in global retail music sales in 2001. I quote extensively from Jupiter's results here as this study is the most in-depth survey on the topic which I have found in the literature: In the summer of 2000, Jupiter released research demonstrating that Napster, the pioneering file sharing network, seemed to have a salutary effect on music purchasing by consumers. Despite this and similar findings by other researchers, the recording industry has continued to scapegoat file sharing, even as record sales have fallen over the past year. Jupiter reexamined effects of file sharing and other potentially theft-enabling technologies on music spending, based on a survey of online music fans (i.e., users over the age of 18 who had visited a music site in the prior year) that was conducted in June of 2001-the year covered by the IFPI's report. By cross-tabulating a question concerning shopping habits with separate questions about technology ownership and usage, Jupiter ascertained that technologies such as file sharing, broadband, and CD-writable drives influenced consumers' music spending habits-in both directions. In essence, such technologies polarize the market. File sharing, for instance, had a net-positive impact on music spending-while experienced file sharers were 75 percent more likely than the average online music fan to report an increase in spending, they were only 27 percent more likely than the average online music fan to report a decrease. However, CD-writable drives and broadband were both net-zero technologies-they were equally likely to cause increases and decreases in music spending among online music fans with either/both of those technologies. All three technologies in conjunction represented a net- positive. While online music fans with all three technologies were 95 percent more likely than the average online music fan to report an increase in music spending, they were only 65 percent more likely than the average online music fan to report a decrease. Jupiter's analysis here paints a much more complex and ambiguous picture of the effects of music file-sharing than does the report released by the IFPI, acknowledging that file-sharing can have both positive and negative effects on consumer music spending. Taken as a whole, this study provides the most detailed evidence yet that music file-sharing leads to net increases rather than decreases in consumer spending on music, and Jupiter's analysts dismiss the 5% drop in global music sales in 2001 reported by the IFPI as being caused by other underlying factors such as the normal cyclicity of the music market, an overall drop in consumer spending related to the general economic slowdown in 2001, increasing competition from other entertainment product categories such as games and DVDs, the increasing reliance of the music industry on a small number of titles for the majority of sales, and the end of the initial CD growth period in which many consumers repurchased music on CD which they already owned in other formats. REFERENCES International Federation of Phonographic Industries. "Global Music Sales Down 5% In 2001." 16 Apr 2002. 1 Jun 2002 <http://www.ifpi.org>. Ipsos-Reid. "2002 Survey of Downloading Behaviors." 25 Feb 2002. 28 May 2002 <http://www.ipsos- reid.com/media/dsp_displaypr_us.cfm?id_to_view=1439>. Jupiter Media Metrix. Client website. 31 May 2002 <http://www.jup.com>. NOTE: a representative of JMM gave me free temporary access to their database while I was working on this project. This website cannot normally be accessed by the general public; Jupiter is a private firm in the business of supplying information to paying corporate customers. Jupiter Media Metrix. Corporate website. 31 May 2002 <http://www.jmm.com>. --------------------------------------------------------------------- To unsubscribe, e-mail: idm-unsubscribe@hyperreal.org For additional commands, e-mail: idm-help@hyperreal.org