Contradicts earlier conclusion that illegal file-sharing has an effect “which is statistically indistinguishable from zero,” but reiterates that there still exists monetary incentives for the creation of new works and that P2P’s weakening of copyright protection has increased the demand for “more expensive complements” like concert tickets. Figure is also still much less than the 100% responsibility ascribed to it by the entertainment industry.
When it comes to studies of the music business the ones regularly conducted by Harvard Business School are, in my opinion, the most fascinating and the most reliable. So when it revises an earlier conclusion that P2P has an effect “which is statistically indistinguishable from zero” to “no more than 20%” on the decline in music sales it’s worth sitting up and taking a closer look, if for no other reason than to be prepared for a music industry “I told you so.”
Researchers Felix Oberholzer-Gee and Koleman Strumpf (now of the University of Kansas) released the results of a new file-sharing study a few weeks ago that concludes that although file-sharing is responsible for a portion of the decline in music sales its effect has “not undermined the incentives of authors to produce new works.”
Aside from a modest 20% culpability (much more modest by the way than the 100% music industry execs would have you believe) they say that file-sharing has increased the demand for what they call “compliments to protected work” like concerts and concert ticket prices which encourage artists to tour more, “ultimately raising their overall income.” These sales, along with merchandising, etc., have added to artists’ income and partially made up for declining music sales.
More importantly, they argue that file-sharing has not “undermined the incentives of authors and entertainment companies to create, market and distribute new works.”
“Data on the supply of new works are consistent with our argument that file-sharing did not discourage authors and publishers,” they write. “The publication of new books rose by 66% over the 2002-2007 period. Since 2000, the annual release of new music albums has more than doubled, and worldwide feature film production is up by more than 30% since 2003.”
This reiterates the conclusion from an earlier study published last year that found “consumer access to recordings has vastly improved since the advent of file-sharing” and that the resulting “weaker copyright protection, it seems, has benefited society.”
They also take aim at the music industry’s assertion that every pirated copy represents a lost sale.
“In a sample of 5,600 consumers who were willing to share their iPod listening statistics, the average player held a collection of over 3,500 songs,” they continue. “A full 64% of these songs had never been played, making it unlikely
that these consumers would have paid much for a good portion of the music they owned.”
Precisely. A good deal of what file-sharers download is content that they would have otherwise not have purchased. I know of people with music libraries that are well over 300GBs. This amount equals around 51,000 songs. If purchased on Apple’s iTunes we’re looking at around a $51,000 tab. It’s safe to say that nobody would ever spend anywhere near that amount of money on music in their lifetime.
What’s really telling about the whole argument is the fact that artists usually make very little from album sales. Even on the increasingly rare occasion that an album does sell well they don’t see a dime until their record label recoups all the costs of producing, distributing, marketing, etc..
Moreover, it is difficult for musicians to earn substantial income from recorded
music sales, regardless of the success of their album. This is in part due to the nature of recorded music contracts. Recording musicians are paid for album sales based on the product of a royalty rate and album sales. The royalty rate is quite low (usually about a dollar or two per album) and musicians are not paid this money until they recoup all expenses, primarily the advance which is typically applied to the cost of recording the album. If an earlier album did not sell well enough to pay for the advance, music companies often deduct the difference from future album payments under a system called cross-collateralization. Putting all this together, even a Gold Album may not provide a musician with an economic windfall.
So for many artists album sales are not as important source of income as is concert ticket sales, merchandising, and other revenue streams that are untouched by their recorded music contracts.
Oberholzer-Gee and Strumpf say that so far the debate about illegal file-sharing has been “overly narrow,” focusing solely on whether or not P2P is harming music sales. They say a better question is whether or not it has “undermined the
incentives to create, market, and distribute entertainment.”
From the reported number of works produced the answer would appear to be “no it has not.”