Well, does having music available for download from the Internet hurt music sales, or not? Here are two studies that purport to answer that question
Before you read on, remember that these studies are done in the context of a real issue in a litigious society. The Recording Industry of America has filed a lawsuit against a company called Napster. Napster distributes free software that makes it easy to find and to download compressed music files, generically called MP3 files. The association contends that its members are losing sales because folks are downloading the music and not buying it.
Napster isn't alone on its side of the issue. There, there's another association. This one is The Digital Media Association. They represent all kinds of companies like Napster that deal in, well, Digital Media.
Actually, there are lots of folks of all kinds of political persuasions and socioeconomic situations on both sides of this issue.
There are folks trying to share stuff online without going through Napster. They're doing things off email discussions and newsgroups, as well as using other music-sharing technologies. ). If Napster disappears into a dark hole someplace there are several other technologies and sites ready to take its place. And with two of them at least, Gnutella and Freenet, there won't be any centralized entity to sue.
Artists come out on both sides of this thing. The band Metallica (a favorite of mine) and the rapper Dr. Dre (not a favorite) both had lawsuits against Napster. Other artists, like David Bowie, Chuckie D and others have seen the Net as a way to go directly to their fans. The artist formerly known as the artist formerly known as Prince cut a recent deal with the record folks that gave him control of his original recordings so that online distribution is possible directly. So the big record companies are fighting at least some of the artists who create content for them.
And there are sites that take up the cause of the anti-Napster forces for all kinds of reasons. Some do so because they believe that free music sharing over the net is theft and they're against theft. Another viewpoint was shared in the New York Times by a fellow named Michael Fix. Michael's wife, Stehpanie, is a singer and songwriter. " We wish there was a fair system for artists to share their work online. It's not so much about compensation for us, but it is about permission. It should be up to the artist."
But back to those associations and their studies.
The Recording Industry Association claims that music CD sales in stores near colleges with fast Internet connections have both bucked national trends and fallen since 1997. They see this as evidence that the high-speed connections are being used to download music from the Net; and, that as a result, the students aren't buying CDs and other music media.
Now weâll switch to the other side. The Digital Media Association offers up a survey conducted by the market research firm, Yankelovich Partners, where 66% of all consumers say that listening to a song Online has, at least once, prompted them to later buy a CD or cassette featuring the song.
The first lesson here is the old one that there are, "lies, damn lies, and statistics.% Or, in this case we might say, "Surveys.% Each of these groups is plotting out statistical "proofä that their position is a valid one. The question is which proof is stronger? The Digital Media survey seems to address the problem directly while the recording industry uses inference.
Still, it seems to me that the Recording Industry has a case here. Let's start by looking at the Yankelovich survey. While Yankelovich is a reputable firm, this survey is clearly designed to make a point. First of all, it is a survey. It doesn't look at any actual behavior, instead it asks folks about what they did and why. That makes it very easy to phrase your questions in ways that get answers you might like.
To see how that works, let's turn some of their findings around. Based on what they've told us, two thirds of consumers say that they have never once been prompted to buy a CD or cassette featuring a song they downloaded off the Net. And the other two thirds? Well, they've only had to "fessä up to being prompted once. It doesn't seem like a lot to me, and it seems like the question is seriously loaded up.
Remember that there are twenty-three million visits to music download sites each month. That figure is growing by about 20% a month, too. That means that a large number of folks simply don't see anything wrong with downloading music and listening to it and aren't even tempted to go buy the music they've heard. The Digital Music Association says that, "Internet music is creating new markets.% Even their own survey seems to say otherwise. That survey tells us that a third of the people who stream??? music, in other words listen to it off the Net, said it makes it more likely to purchase CDs in stores; but 61% said it didn't affect their buying habits at all.
What about the Recording Industry Survey? Well, to begin with, it isn't a survey. Instead, it's a look at some statistical data. Let's look at it ourselves.
The data is provided by a company called Sound Scan. They track retail record store activity. Here's what they found.
Between the first quarter of 1997 and the first quarter of the year 2000, CD sales to the general public have risen by almost to 20%. If we look at stores within a mile of a college campus, we find that sales have not increased as much but haven't decreased either. It's when we get to the top forty wired colleges (as selected by an Internet publication) that we find something interesting. At those schools, stores within a mile had declining CD sales by almost 13%.
Why look at the top wired schools? That's because standard dial-up connections and other slower routes to the Internet have often been an effective barrier to downloading. It just takes too damn long to download a song. But if you're on a connection that's really fast, such as the wired colleges provide for free or a low fee to their students, then it gets pretty easy.
It seems to me that the recording industry has a pretty good case. But, in the interest of good reporting, I figured that I'd go out and talk to an actual person on the street, or in this case, on the Net. I spoke to a young man I know who has access to a high-speed connection, and too is quite a music lover.
I asked him if he downloaded music from the Net. He said, "Of course.% Then he looked at me like I must be dumb to ask such a question.
I persisted. "Do you ever download a song and then decide to buy a CD with the song on it because you like it?ä He gave me that look that only the young can give people my age. "Why would I want to do that?ä He said, "I can listen to it anytime I want without buying it, and I can burn a CD to take with me in the car.%
I mention this, because I think human nature is what's at work here. The kid doesn't see downloading music from the Net as stealing anything. The Recording Industry of America, because it's their job, would exhort them to consider things differently. I took their approach. I told him about the musicians having their work stolen. I got that look again.
"Okay," the young man said, "Let's look at this logically. Do you know how much those clowns make? They make more in one concert than I make in my whole life. How much are they going to miss one lousy fifteen-dollar CD?ä
I digress for a moment to address the economics of this. The record companies make their money (about $14 billion a year) today because they have a lock on the distribution channel that delivers music, on compact discs, to retail record stores. This keeps profits high, tends to make things tougher for smaller record companies, but leaves you vulnerable when other distribution systems show up. Billboard Magazine tells us that a typical $17 CD gives up about $9.50 of its cost to distribution and retail markup. The record companies make about .60 per CD. What the artists make varies depending on contract.
Artists also make money on residuals and airplay. In other words, they get paid a bit every time their music is played on the radio, or is used in some commercial venture.
I did find one place where the Net got the young man to buy music. It was when he listened to music from a band he hadn't heard of, and really liked it. Then he'd go out and get a CD. He'd get a whole bunch of stuff at once.
There's a key point here that I think is worth looking at. One of the dynamics that hasn't made it into the lawsuit is that many young people think that the people doing music are grotesquely overpaid to begin with. At some level, they're making the judgment that either they need the thirteen bucks more than the record companies and artists, or that since they're being stolen from anyway, there's nothing wrong in stealing a little bit back. Is that just, or ethical? You decide.
No matter what you decide, we're going to have to come up with a solution to this thing. The genie of free music distribution over the net is already out of the bottle. Kids (adults, too, but mostly kids) who've gotten used to downloading just about any song they want for free aren't going to slink quietly away to buy music the way the big record companies want to sell it.
The "solutions" seem to fall into a couple of groups.
There is, this being America in the 21st Century, the "Sue Them Into the Ground" solution. The record companies like this one. Lawyers like it even more. You can see battalions of them spending their free time checking out the intellectual property case law and re-working their resumes. Alas, this will be part of the overall solution with attorneys likely to get far richer than artists.
This is balanced by the "Guerilla Warfare" solution. This is folks like Eric Corey and his merry band of pranksters over at 2600: The Hacker Quarterly. They're out telling folks how to break the encryption that the music folks want to use to protect their property.
There is the "We Can Still Overprice This Thing" solution, too. For an example, check out Sony. It's got about fifty songs from its vast catalog now available for digital download. The price, per song is $2.49, or slightly more than it would be on a CD. Does this make sense to you? Eliminate the distribution cost of a bit more than a buck a song and then charge more?
Then there are the voices of reason. They are, mostly, much lower pitched than the others. Here some suggestions. Here are some things you might look for if some of their suggestions are taken up.
We could allow online distribution of music as a combination of subscription and pay-per-song. The young man I interviewed said he'd be willing to forego a life of piracy if he could get unlimited downloads for a reasonable monthly subscription fee.
What's reasonable? He says about twenty bucks a month. He also offered up the suggestion that the subscription could be by category so that folks who liked say, metal and classical, could pay twenty bucks for the first subscription and ten for additional ones.
And what's reasonable to pay for an individual song? He confessed to not having thought about that one, but his spur-of-the-moment reaction was that a quarter would be right. Note that figure is about one tenth of what Sony's planning to charge.
Another suggestion that found its way to my email box was to develop a system similar to the airplay system. In that, the artist would get a small amount every time someone downloaded his or her work.
You can expect the music industry to follow the newspaper business in some ways. Look for the physical product to have things (special clips, video, interviews) that the online product doesn't have. At the same time the online offerings will be far more extensive than those on disc. Archives, searchable archives, will be a big part of this.
Mix this in with some other experiments, such as artists (such as Todd Rundgren) signing folks up for subscriptions that allow them to receive the artist's music as it's developed and before it goes on CD-based sale. There are also lots of small groups who are exploring ways that the net may be a way for them to make enough to live without having to deal with the record companies at all.
Whatever happens on this, music distribution will look dramatically different in ten years from what we've become used to. But then, why should be music industry be different?
Created: 9/9/00
Reviewed: 2/15/03
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