Is Piracy Really Killing The Music Industry? No!

[Kanada Kev]

Good article and interesting reading the comments:

http://torrentfreak.com/is-piracy-really-killing-the-music-industry-no-100418/

Is Piracy Really Killing The Music Industry? No!

Written by Ernesto on April 18, 2010

For more than a decade the music industry has claimed that digital piracy is the main cause for the gradual decline in revenues. However, looking at the sales data of the music industry itself shows that the disappointing income might be better explained by a third factor that is systematically ignored.

After music cassettes were introduced in the mid-70s the number of sales saw a gradual increase, until the late 80s when the CD took over in popularity. Cassettes were eventually phased out as CD sales continued to skyrocket. In music industry vocabulary one could argue that CDs killed cassettes.

Interestingly enough, this format shift was nothing new for the music industry. The exact same pattern also applied to the LP/cassette battle, with cassettes eventually taking over from LPs in the early 80s. Now, three decades after cassettes started to dominate the music business, the CD is losing ground.

This time around there is a new enemy in town, digital piracy. For nearly a decade the U.S. music industry has seen a decline in sales of physical CDs and all this time it has put the blame on digital piracy. By doing so, the labels conveniently ignore the most drastic format shift music has ever seen – the digital revolution.

With the growing popularity of the Internet, computers and most importantly MP3-players, music fans have started to trade in their CDs for MP3s and other digital files. Initially, the public had to convert CDs themselves, but in 2003 the iTunes store opened, selling over a million tracks in the first week.

With this shift from physical to digital, another important change hit the industry, one that may in part explain why the labels’ revenues in the U.S. continued to decline. With the introduction of paid downloads, consumers no longer had to buy a full album if they were only interested in two or three songs. This new freedom for consumers has dramatically changed the music sales landscape.

According to statistics taken from the RIAA shipment database, between 2004 and 2008 the number of single tracks sold in the U.S. increased by 669 percent while the number of album sales dropped 42 percent. Consequently, the income of the big labels suffered since single track sales are less profitable than full albums. As can be seen in the chart below, the number of music ‘units’ sold continues to grow rapidly nonetheless.

Music ‘units’ shipped in the United States

So where does piracy fit into this picture? Truth is, we just don’t know.

File-sharing is obviously a by-product of the digital revolution in music, but its effect on revenues has been much overstated. In every annual report that comes out, the music industry blames piracy for its troubles, even though digital sales are booming and even though these are directly competing with piracy.

We believe that the format shift from physical to digital music, and the change in buying habits that came along with it, may explain the decline in revenue more than piracy can. To back this up we’ve compared the labels’ revenues in two countries on opposite ends of the digital / physical rift, the U.S. and Germany.

Although piracy is rampant in both of these countries, the local music consumption habits are very different according to data published by IFPI. In Germany physical CDs are still very popular, with digital sales representing less than 25% of all music ‘units’ sold. In the U.S. on the other hand, digital outsells physical with 70% of all sales.

If the theory that the shift towards digital music is negatively impacting revenues holds up, then the German record labels should do much better. Indeed, between 2004 and 2008 the net revenue (in dollars) of the U.S record companies fell more than 30%, compared to less than 5% in Germany.

If the data above is not convincing enough, there is also another unexplained anomaly in the sales data.

If digital piracy is such a problem one would expect that it will mostly hurt digital sales, but these are booming instead. Many younger people don’t even own a CD-player anymore, yet the music industry sees digital piracy as the main reason for the decline in physical sales. Strange, because digital piracy would be most likely to cannibalize digital sales. This anomaly also refutes the excuse that the U.S industry could be hit more by piracy than the German.

So what does the music industry have to say about this all? TorrentFreak asked the RIAA to comment on our findings and they released the following statement.

“We’ve always said there are multiple reasons for the decline of the industry during the past ten years: Competition for the entertainment dollar. Diversification of music consumption and access. But we also think people being able to steal music online is the primary reason. Not the only, but the primary.â€

We obviously have to differ with the RIAA here. The digital revolution in music has changed the entire industry by altering the consumption habits of music fans. Although piracy could also be a factor, the data we’ve seen thus far suggests that it plays only a minor role, if it has any effect at all.

[phishtaper]

ah, the CD single ... the ugly girl who never gets asked to dance ...

[Northern Wish]

I think its incredibly myopic of any of us to believe that technology has not impacted music sales.

Maybe not to the degree the RIAA says so, but in my own experience its happens daily....

[Schwa.]

Yar!

[d_rawk]

I think its incredibly myopic of any of us to believe that technology has not impacted music sales.

For sure it has -- the question needs to be: in what manner has it made that impact, to what degree has it made that impact, and of what consequence.

The technology of radio impacted music sales as well, to be sure. The ability to tape singles directly off of the radio onto cassette, and later the ability to burn commercial CDs onto blanks, is how we ended up with the private copying levy to compensate for 'lost' sales.

I suspect that we all download music and I also suspect that the RIAA overstates its case. So damn hard to figure out what is really happening with so many competing interests.

I can think of a number of people who couldn't be bothered to try to figure out how to download music via torrents or file sharing networks but who have stepped up their music consumption - and emptied their wallets - because of the ease of use of itunes and such. I wonder where one meets the other.

[Jaimoe]

I am one that can't be bothered to learn how to use torrents via file sharing networks. But then again, I like shopping for and buying CDs. And I don't endorse letting folks burn my CDs, unless they are big bands or artists that a friend might never listen to. I fucking hate it when I buy some new music and one particular friend of mine comes sniffing around my CD collection looking for some free music. Fuck that shit. I'm not a fucking library.

[hamilton]

I am one that can't be bothered to learn how to use torrents via file sharing networks. But then again, I like shopping for and buying CDs. And I don't endorse letting folks burn my CDs, unless they are big bands or artists that a friend might never listen to. I fucking hate it when I buy some new music and one particular friend of mine comes sniffing around my CD collection looking for some free music. Fuck that shit. I'm not a fucking library.

I also enjoy the shopping, to be honest. I know how to use torrents, but I like having a physical collection. I like covers, and liner notes. I realize that this makes me geeky, and I realize that sooner or later the physical format will dry up completely. But I hope mp3s don't rule the day - I want to see FLAC files being made the standard (or something even better than FLAC, if and when it comes along).

[Jaimoe]

Yes Hamilton, me too.

I also like leaving my place from time to time and shopping for books in a real live bookstore. Online book shopping is offered mainly through mega stores, ones with an agenda.

[Hal Johnson]

I'll just be honest. I don't download because I can't figure out the torrent nonsense. But at the same time, I can't bring myself to spend cash money on CD's like a sucker, when everyone else is getting them for free!

[Jaimoe]

I'll just be honest. I don't download because I can't figure out the torrent nonsense. But at the same time, I can't bring myself to spend cash money on CD's like a sucker, when everyone else is getting them for free!

I know lots of "suckers" still buying CDs, especially at concerts. Indie bands make a nice percentage of their pocket money while on tour selling their swag at shows. I bought the Von Bondies latest CD from Jason Stollsteimer himself before their show last year; I always bought nero swag and I usually like to pick up LPs at whatever smaller show I happen to be at (Cuff the Duke, Swell Season etc...) since the dough goes directly to the band. I think it's wrong for me to buy a CD from a working band and then burn off copies for friends.

[Jakis]

Don't buy cds anymore but buy lots of vinyl.

[ollie]

I bought the Von Bondies latest CD from Jason Stollsteimer himself before their show last year...

Me too. After I told him I had already downloaded it.

Great fucking show.

[AD]

I download a lot of music, go to a lot of shows and festivals, buy a lot of merch and sleep just fine.

[edger]

I'm still a dinosaur...due in large part to my shotty internet connection...

I like having the discs in hand too though.

[deranger]

I buy a bit, steal a lot (torrents are amazing), go to a lot of shows and generally try to promote the music I like. I still have very serious misgivings about piracy, yet I dive right in whenever I think of something I want. The availability of so much amazing music at my fingers (and subsequently my ipod) is too hard to pass up. But I do support with real money the bands I like and listen to (mostly) so hopefully it balances.

[SaggyBalls]

I think it's wrong for me to buy a CD from a working band and then burn off copies for friends.

To each their own. I freely share files from my hard drive if I take it anywhere and am open to trading discs, but prefer to make/take DVDs and then need to make my own CDs, as if I never buy the album but want it and can buy it at a show or a store I'm more likely to do so. If I wouldn't WANT the CD then why buy it?

Someday I'll be buying more vinyl.

[Hal Johnson]

Music ‘units’ shipped in the United States

Looking at the graph again, while "units sold" is up quite a bit, the majority of those "units" are downloaded singles, which cost, what a buck or two? Obviously this hurts the music industry that used to sell entire albums for $14-$20 a pop.

Why spend a bunch of money getting a band into the studio when people are just going to buy a single and download the album for free?

The way I see it is that the music, television and movie industry needs to be providing the internet connection so they can actually capitalise off of their productions. If you think about it, we pay $50 a month for cable and we have a schedule of TV shows to choose from. We pay 40-70$ a month for an internet connection that provides us with any movie, show, or song we can possibly imagine. BEll and Roger's make all the money (in Canada, they're the biggest right?) while the people actually producing those movies, television shows and music are losing out.

Something aint right in that equation.

Edited April 20, 2010 by Guest

[SaggyBalls]

Looking at the graph again, while "units sold" is up quite a bit, the majority of those "units" are downloaded singles, which cost, what a buck or two? Obviously this hurts the music industry that used to sell entire albums for $14-$20 a pop.

1 song on itunes...$1

10 songs on itunes...$10

16 songs on itunes...$16

16 songs on an album...$10-20

What do you call the 'music industry'...everyone that somehow profits from a hard copy sale?

It's NOT obvious, as in a record deal it's most often up to the bands to pay for their album production from the advance on their royalties.

The bands make about $1 (sometimes more) from one album sold in a store at full price.

Why spend a bunch of money getting a band into the studio when people are just going to buy a single and download the album for free?

They still have to record the tracks, Hal.

The way I see it is that the music, television and movie industry needs to be providing the internet connection so they can actually capitalise off of their productions.

So you suggest that the feed be controlled and watered down with overproduced, overpromoted industry garbage or just that they get into the ISP business.?

What do you think the 'music, television, and movie' industry is? The companies or the artistic/tech talent?

For the most part, the talent is hired for projects to produce content.

Who do you expect to pay their mortgage while they take their union to a totally different place?

If you think about it, we pay $50 a month for cable and we have a schedule of TV shows to choose from.

Their schedule. (mostly) interrupted by commercials.

We pay 40-70$ a month for an internet connection that provides us with any movie, show, or song we can possibly imagine. BEll and Roger's make all the money (in Canada, they're the biggest right?) while the people actually producing those movies, television shows and music are losing out.

Actually, Shaw is getting pretty big too...StarChoice and Cable...and often more than $70 a month for the big packages that still fail to live up to their worth.

How are the people producing content losing out? They're still producing content.

Something aint right in that equation.

I would like to suggest a shift in perspective: It is so easy to look at the change as a big problem, but any of these changes and challenges are occurring while the times are moving along. We're sold on the 'crisis' from the same place we were years ago...on our sofas, in our theatre seats, stuck in rush hour, at our desks. Well everybody else is moving along in their battle, it's crucial that we do as well - if we ever expect to have a clue about what's happening.

The spread of the internet has just splintered interests and our time. Instead of having the same 4 radio stations to listen to that we could rely on for great tunes, they've all jumped around the dial and formats. Meanwhile, we don't really want to hear those same songs and might want to watch or listen to an interview or comedy...where do we get that? Internet? Satellite radio? Netflix?

What if we now want to spend a few hours more a week playing a game or with an online drum machine...instead watching that movie or listening to those records we'd have otherwise gone to buy? What about local sports?

Times and interests, though we might not really want them to, are decidedly changing.

All sorts of things are gaining in popularity. What's becoming LESS popular? Hard copy print media? Margarine? Barack Obama? Tea(bags)?

I say that our old ways of consuming are becoming unpopular. Putting more time and intention into consuming records and movies seems to be a thing of the past.

Looking at the internet as something that cheats people out of their living is an outdated perspective. It doesn't work anymore. There are more companies of every sort making more money than ever VIA the internet. More people are doing things themselves. So what if the big companies aren't holding a strong stranglehold on an oligarchy?

Now...the other side of the equation is that anybody can buy a home studio that sounds incredible...it's up to them to learn how to do that properly.

With people putting money into not only a home studio but other aspects of living, there are *likely* fewer dollars to go to the 'real' professionals - the guys that do these new DIY things as their profession.

Fewer big records being produced means fewer big studios have fewer cheques to pay the same number of bills.

Is that unfortunate for those people? Certainly.

Have they had time to anticipate this and plan to, say, learn how to master albums (make a dull mix come alive, something that few people can do and is the key to a pro sounding album)?

I realize that is only one example, but there are countless smaller film productions that pay union wages and they all need lighting, sound, grips, etc. Commercial production? Still roaring.

While there are more websites and new media avenues, these all need content...so where big music is losing, smaller independent producers are winning...at least getting more (yet smaller) gigs.

The reality is that there are more people trying to make a living and everybody's trying to spend less money. Less money out means that there's less money to spread around in the end. Mix that with businesses trying to pay their employees less and less as the days pass, it's very convenient to find a scapegoat.

Until people everywhere can demand the full value of their time and work, we're going to have to deal with this silly discussion regularly.

We're so obsessed with getting stuff for less, we've focused our efforts to that instead of demanding abundance/higher pay across the board.

The countries that seem to favour people making more money and having less time off tend to have the strongest music industries per capita (Sweden? Germany?). When Music/the Arts is seen as an export, then we will find that more initiatives will take place to support and foster creative work.

For example: Sweden has publically run/funded rehearsal and studio spaces. How hard is it for a band to find a jamspace in Southern Ontario?

Instead of cheaper music, more $$$ = opportunity to buy more records.

The same Living standards cost more lately - that's already awful enough. It shouldn't impact on our perspectives as much as it seems to have.

It's time to keep moving.

:chug:

Edited April 20, 2010 by Guest

[Hal Johnson]

Looking at the graph again' date=' while "units sold" is up quite a bit, the majority of those "units" are downloaded singles, which cost, what a buck or two? Obviously this hurts the music industry that used to sell entire albums for $14-$20 a pop.

[/quote']

1 song on itunes...$1

10 songs on itunes...$10

16 songs on itunes...$16

16 songs on an album...$10-20

What do you call the 'music industry'...everyone that somehow profits from a hard copy sale?

It's NOT obvious, as in a record deal it's most often up to the bands to pay for their album production from the advance on their royalties.

The bands make about $1 (sometimes more) from one album sold in a store at full price.

Why spend a bunch of money getting a band into the studio when people are just going to buy a single and download the album for free?

They still have to record the tracks, Hal.

Ummmm...let's see. Suppose you produced eggs and people used to buy entire cartons for $3.00. Now, people only buy single eggs at a time, and from a wide variety of different egg producers. Your business will die because, A) you are not selling enough single eggs to maintain a profit, and it costs too much to produce an entire carton.

Your argument might have a little pull if people were still buying all the tracks from an album, as seperate singles, but their not. They're buying one song from this group and one song from that group, and another song from this group. Therefore it doesn't make any business sense for Geffen to sign a band to huge record deal and go in and record 16 songs when only one of them is going to be bought. You used to have to buy the album and get stuck with the crappy filler tracks, but you don't anymore. Im not against it, I'm just pointing out that the graph is misleading in a huge way.

Damn it, I don't know how to use multiple quotes...

I can't remember what you said exactly about the internet thing, but to me it's crazy that Bell (I use them because it's simple) gets paid a monthly access fee while the people spending the money to produce our entertainment lose out. Don't ya think, just a little?

Edited April 20, 2010 by Guest

[Hal Johnson]

Looking at the graph

So you suggest that the feed be controlled and watered down with overproduced' date=' overpromoted industry garbage or just that they get into the ISP business.?

[/quote']

I do not suggest that, and that would be a huge fear of mine. But that's a good counter argument. I guess my response would be that they wouldn't have to regulate anything, as Bell and Rogers don't have to. Instead, people will pay them to access their products and even pay them again to buy their crappy singles. People would still have access to the world wide net. Or something. :bonghit:

[bradm]

I think we should deal with what piracy is really killing: the shipping industry.

http://en.wikipedia.org/wiki/Piracy#Modern_age

Seaborne piracy against transport vessels remains a significant issue (with estimated worldwide losses of US $13 to $16 billion per year), particularly in the waters between the Red Sea and Indian Ocean, off the Somali coast, and also in the Strait of Malacca and Singapore, which are used by over 50,000 commercial ships a year. A recent surge in piracy off the Somali coast spurred a multi-national effort led by the United States to patrol the waters near the Horn of Africa.

Aloha,

Brad

[Northern Wish]

Music ‘units’ shipped in the United States

Those aren't units sold, but SHIPPED. Big difference. Perhaps over the past 5 years the music industry has gotten wise to waste and have stopped pressing 3x as many cds as are needed.....accounting for part of the decline in units shipped. Less product sitting around on store shelves seems smart if it isn't selling.

While I agree with the notion that torrents etc are a pain sometimes, finding a rar file of an album on mp3 to preview it is easier than ever.

I rarely buy a new cd anymore, using this download and check method- the end result being that I buy maybe one out of 10 I preview and really like.

[phishtaper]

I download a lot of music, go to a lot of shows and festivals, buy a lot of merch and sleep just fine.

same.

often dl before available and then go out and buy it later, hopefully at an upcoming show. a lot of artists probably make more money off us when we go to see them play live than when we buy their cd's in a store.

and i dont really draw any distinction between big artists like dylan or small ones like plants and animals within these discussions. a cd is a cd and a dl is a dl. drawing distinctions is just a way for us to justify our behaviour.

[SaggyBalls]

Hal - people are buying single-serving eggs, but are also buying more cartons of eggs from local small farms.

The people that produce the music still get paid - the artists get a bigger cut from online single sales per track than album record deals.

the other people that PRODUCE still get the cuts they did before.

When you see a producer bitching about piracy, s/he hasn't updated his/her contracts to find other avenues of revenue...dinosaurs don't think they need to evolve, meanwhile birds fill the sky!

[Hal Johnson]

Well, we've been reading different newspapers then.