Did file-sharing cause recording industry collapse?

[Cupe]

Economists say no..

For the last decade, the movie and music industries have engaged in a relentless struggle against Internet file sharing. One prominent theater of this global conflict has been the UK, which last year saw the passage of the Digital Economy Act. The law, if fully implemented, could allow Internet Service Providers to disconnect "persistent infringers" of the UK's copyright rules from the 'Net.

The zeal with which Hollywood and the recording industry have pursued this ISP-as-cop approach around the world has prompted some ISPs to cry foul. "The notion of disconnection without judicial oversight violates the presumption of innocence," warned the Australian DSL service iiNet in a recent position piece . "As the penalty for possibly minor economic loss (at the individual infringer level) removal of Internet access is, therefore, both inappropriate and disproportionate."

But even though the DEA is up for judicial review at the behest of the UK's top telcos, the impetus for similar laws continues unabated. That's because the content industry may lose a particular battle (eg, trying to force iiNet to punish file swappers), but it has won a key aspect of the war: the argument that file sharing has hobbled the music and movie business, hurt artists, and cost jobs is the master narrative of file sharing—the center of most government debates about the practice.

Now comes a paper from the London School of Economics that tries to do more than just challenge the DEA. It argues that everything Big Content says about file sharing is wrong. In fact, it suggests that file sharing is the future, and that revenue downturns can largely be explained by other forces.

"The music industry is performing better than is being claimed and declining sales can be explained by other factors in addition to illegal filesharing," say Bart Cammaerts and Bingchun Meng of LSE's Department of Media Studies. "The negative framing of the debate about file-sharing and copyright protection threatens to stifle the very same creative industry the Act aims to stimulate."

Downward economic pressure

There's no question that recorded music sales have declined over the last decade—down from over $26 billion in 2000 to under $16 billion last year. But the relentless focus on P2P sharing ignores other factors, these scholars contend. The most important of these is the gradual weakening of the consumer economy over the last decade, particularly over the last two years of global recession. And it's going to get worse.

"Downward pressure on leisure expenditure is likely to continue to increase due to rising costs of living and unemployment and drastic rises in the costs of (public) services," says the report.

Having less money for entertainment has played a huge role in the decline of items like CDs. A 2004 US Consumer Expenditure Survey showed that even spending on CDs by people who had no computer (and were therefore unlikely to download and use BitTorrent) dropped by over 40 percent from 1999 through 2004.

"Household budgets for entertainment are relatively inelastic as competition for spending on culture and entertainment increases and there are shifts in household expenditure as well," the LSE study notes.

And if file-sharing wasn't the major cause of the revenue downturn, stepping up copyright enforcement is unlikely to return the industry to those heady days.

And while it is true that many consumers have turned to illegal file sharing in bad economic times, a 2007 Journal of Political Economy study found that most downloaders would not buy that content, even if they couldn't share it.

"Downloads have an effect on sales that is statistically indistinguishable from zero," the authors flatly concluded then. "Our estimates are inconsistent with claims that file sharing is the primary reason for the decline in music sales during our study period."

But a later 2010 meta-study by the same authors concluded that piracy did, in fact, account for a bit of the decline in music sales—around 20 percent. The other 80 percent could be chalked up to the sale of digital singles rather than whole albums and the rise of other media options like video games.

The new business model

Content industry analyses of the file sharing phenomenon tend to downplay key sources of income for musicians, the LSE report charges, most notably revenue from live concert performances. In 2009, for the first time, earnings from live music events outstripped music sales in the UK. The music recording industry was worth £1.36 billion (about $2.21 billion); the live music scene was estimated around around £1.54 billion. Ticket sales rose by 5.8 percent, "secondary ticketing revenues" shot up 15 percent, and receipts for related services at concerts came to £1.54 million. (This didn't help the music labels much because few profited from better live music sales; that is starting to change.)

Legal file sharing also grew by nine percent globally in 2009, along with an eight percent increase in performance rights revenue. "Growing from a small base, the value of the global market for digital music increased by 1,000% in the period 2004 to 2010, and by 2010 represented US$4.6 billion," the LSE paper observes.

So what is emerging is an increasingly "ephemeral" global music culture based not upon the purchasing of discrete physical packages of music, but on the discovery and subsequent promotion of musicians through file sharing. The big winner in this model is not the digital music file seller, but the touring band, whose music is easily discoverable on the 'Net. As with so much of the rest of the emerging world economy, the shift is away from buying things and towards purchasing services—in this case tickets to concerts and related activities.

"Some artists and music labels are making full use of filesharing and the participatory culture it sustains rather than rejecting it," Cammaerts and Meng note. "In the process, these artists and music labels are developing useful alternative models for revenue generation."

Not-so-marginal activities

The authors of the study acknowledge that these alternative models are not going to impress SONY and EMI. "Compared to the value of the mainstream music market, dominated by the 'big four', these are relatively marginal activities," they observe.

But they may become less marginal very soon. With world mobile data traffic set to explode by a factor of 26 by 2015, and with most people in the Middle East, Sub-Saharan Africa, and South/Southeast Asia expected to link to the mobile 'Net before they get electricity, file sharing could be poised for a second great leap forward, whether Big Content approves of it or not.

These millions of new Netizens are not going to have the money to buy digital music files. They're going to use BitTorrent. That will put more and more pressure on governments to decide whether they want to criminalize a huge portion of humanity, or encourage the market to adapt to the new "ephemeral" models described by this study and others.

Among other proposals these scholars want societies to consider is a "levy on blank media use and consumer recording equipment."

The tithe could be part of the price of an ISP connection—"a kind of 'license to download'. Debate should then re-focus on the alternative means of redistribution of the proceeds from such levies."

Source: arstechnica.com

[Jaz]

But limewire is dead?

[andyman]

The simple answer is yes.

[awesome88]

i'd be interested to see the sales of concert etc. tickets in relation to this graph.

i'm sure there are plenty of people who wouldn't go to see someone if it hadn't have been free to listen to them in the first place.

[lloydc]

  awesome88 said:

i'd be interested to see the sales of concert etc. tickets in relation to this graph.

i'm sure there are plenty of people who wouldn't go to see someone if it hadn't have been free to listen to them in the first place.

this

especially with the rise of the ever popular "festival"

[CBG]

of course it did, what a stupid thing to deny...

[dim]

The music industry, major record labels especially, were only ever banks who had the balls to lend money to musicians.

As no other finanical institue would payroll creative freaks it was taken upon record labels to foot the bill to create a vibrant scene.

The bill used to include: rehearsal time, studio time, tours, product manufacture, distribution, marketing etc.

The big acts (which are either cherry picked talentless pretty faces or hard working deserving superstars who gig and gig and gig to build up their following) are all the record labels are interested in now...

why is this?

...because the risks of taking on unknown or uncertain acts is not economically viable in an industry at risk from the illegal file sharing of product etc.

But: as file sharing technology has progressed and resulted in this situation for the "record industry" music production, recording and distribution methods have similarly progressed to the point that individuals can be known globally without doing a gig or spending much money.

In my view the music has in fact now got the upper hand again. Anyone with a creative spark and the inclination and time to produce their own stuff can do it; for themselves, for their mates, or if they upload to you tube, soundcloud etc for the discerning public.

If interest is high that popular musicain can then sell their product themselves online with no need for investment from anyone.

No one has yet taken this path to its conclusion because everytime someone gets close the major record labels get involved and decide to run with it anyway.

I can see a future where new huge, rich, successful acts are payrolling themselves, with no ties to record labels (thus no contracted requirements to produce the dreaded and difficult "third album" when all members of the band are drug puddles). Only those who follow music will know about these acts. The charts will be the dross they normally are, only more so, as the acts making real DIY quality music will not have their sales recognised by the statisticians who compile the carts.

"pop" the product of dickheads watering down formulaic shite they noticed was poplular to a large enough majority of people may eventually be playing second fiddle to "music" the stuff made by people expressing themselves creatively with no recourse to anyone else, fashion or taste.

hope for the best, prepared for the worst.

[awesome88]

nice one djim.... +rep

[RichoKidd]

Also agree with Djim. And you all can't honsetly tell me you've never stolen/downloaded a track and played it at a gig. I can honestly say, the last 2 years I've spent 500+ on concert tickets, MP3s & CD's. I still be a CD at least once a month

[Cupe]

dennis's copyright senses are tingling

[awesome88]

i hope he comes back.... just to bring the lulz

[Cupe]

the cunt is banned on like 20 different IP ranges and on his original and alias nick

but i bet he's still reg'd and lurking

no doubt

[Ravni]

agree with djim

my biggest pet hate is trying to buy songs that are territory resitricted hence why australia is behind the rest of the world! The large companies deliberately stall releases to australia so they wait for a tour of the artist so they can build hype

these days production equipment is getting more affordable, and there is no need for record companies

so what if record companies die, it doesnt mean there wont be less music around it would probably be better for competition

the wealth would be spread across the industry and not dominated by large record labels.

Love small labels because they focus on quality not cheeze!

[chrismak]

  Ravni said:

my biggest pet hate is trying to buy songs that are territory resitricted hence why australia is behind the rest of the world!

Making it inconvenient to purchase tracks is shooting yourself in the foot . Record labels who apply territory restrictions have no right to whinge when people illegally obtain these tracks.

I've read that you can get around these restrictions by using proxy servers physically located overseas to trick the online music stores into thinking you're from that country.

No territory restricted track has ever been good enough for me to go through the trouble of using a proxy though.

[RichoKidd]

Whos is this DJ Dennis I read so frequently about?

[dim]

good question, i wanna know who dennis is too?

whoever he is i reckon the moderators are so paranoid about him we're all suspects!

[Hobberz]

He is just a guy that has been banned multiple times from multiple DJ forums for being a complete tosser.

You guys should feel privileged that you were not around to see him crap on about his 25 years experience in DJ'ing and how awesome he is, not to mention all the copyright rules and licensing bullshit that he would carry on with. Trust me guys, you are not missing out on much.

[RichoKidd]

Can we make him a meme?

[Cupe]

one already exists lol

but the original is at work