STUDY: Artists Earn More in a P2P World

Revenue earned by artists from both concerts and recorded music sales has risen steadily over the past 5 years as revenue earned by labels has declined dramatically, therefore making the case that the only real loser from illegal file-sharing has been the record labels themselves,

Music labels have been the most vocal critic of file-sharing, doing everything they can to discredit the litany of studies proving the beneficial effects of P2P on artists.

One of the more recent was the International Federation of the Phonographic Industry (IFPI) stand against a UK Digital Music Survey which found that two-thirds of those who illegally download music spent an average of £75 ($123 USD) a year on music versus £44 ($72 USD) by those that don’t.

As proof it offered figures that show a steady decline in sales of recorded music.

Therein lies the rub. For according to a study completed by Will Page, the Chief Economist for PRS for Music, a UK-based royalty collecting group, back in July, the decline in sales of recorded music has mirrored a likewise increase in live performance revenue earned by artists.

In other words, as record labels are making less, artists are making more.

In fact, according to a detailed examination of the figures produced by Page it appears that sometime next year for the first time ever the money artists make performing in concert will surpass what the record labels make selling recorded music. In other words, the inmates will arguably  soon run the prison.

It’s a welcome turn of events, for it means that at last artists will be able to receive the bulk of the reward for their hard work and determination instead of record labels, who have a long history of maximizing profits at their expense.

Over the past 5 years artists have also seen a rise in revenue earned from recorded music, again despite the decline in revenue earned from recorded music by labels.

So it seems the real harm of P2P all along has been to record labels and not artists, and the figures come from none other than the music industry itself!

It’s part of the increasing number of studies that have proven the harm to music artists is greatly exaggerated if not nonexistent, and all of  which the music industry tries so hard to discredit.

My personal favorite is the “The Impact of Music Downloads and P2P File-Sharing on the Purchase of Music: A Study For Industry Canada.” Commissioned by Industry Canada, a ministry of the Canadian federal government, back in 2007, it includes some of the most extensive surveying ever done on the music purchasing habits of the Canadian population.

“Our review of existing econometric studies suggests that P2P file-sharing tends to decrease music purchasing,” says the study. “However, we find the opposite, namely that P2P file-sharing tends to increase rather than decrease music purchasing.”

Researchers found that for every 12 illegally downloaded songs using P2P, music purchases increase by 0.44 CDs. Trying to discredit an official Canadian govt study is a pretty tall order, perhaps that’s why they usually do so in general terms and not specifically.

If that wasn’t enough there’s the “Consumer Culture in Times of Crisis.” ConductEd by the BI Norwegian School of Management, the largest business school in Norway and the second largest in all of Europe, the study looked at almost 2,000 online music users over the age of 15, and asked file-sharers to prove their legal music purchases rather then simply rely on their honesty.

It concludes that those who download music illegally also purchase the most number of legal digital downloads. In fact, the study reports that file-sharers actually buy 10 times as much music as they download for free.

“The most surprising thing is that the proportion of paid downloads is so high,” said BI researcherAudun Molde. “The results suggest that they are buying twice as much music as they get for free, and also those who state that they download for free actually are the greatest consumers of paid music online.”

An EMI record label did leap into the fray with this study, lamenting that even though P2P may stimulate music consumption record labels are still, nonetheless losing money.  For him it means one thing, that lost revenue from illegal downloading far surpasses any supposed benefit they allege.

The International Federation of the Phonographic Industry (IFPI) even went to great lengths to discredit the more recent Digital Music survey conducted for Demos, a UK-based think tank.

According to the survey, two-thirds of those who illegally download music spent an average of £75 ($123 USD) a year on music versus £44 ($72 USD) by those that don’t.

It also says they are more “active music buyers,” with 8 in 10 having purchased music, be it physical or digital, is the past 12 months.

Mark Mulligan, one of the study’s authors, said: “The people who file-share are the ones who are interested in music. They use file-sharing as a discovery mechanism. We have a generation of young people who don’t have any concept of music as a paid-for commodity. You need to have it at a price point you won’t notice.” The IFPI, rather than digest the numbers, responded with the usual argument that no matter what anybody says the music industry is still losing money. “The net effect of illegal file-sharing in the UK and elsewhere has been to reduce legitimate sales,” it says. “This is why spending on recorded music has fallen every year since illegal file-sharing began to become widespread.”

This is true, consumer spending on recorded music is down 6% since 2007 alone, but it belies what Page concludes in the first study I mentioned, that total music industry revenues are up 4.7% over the same time period.

The money’s there, for artists especially, it’s just taking different forms as the industry evolves from analog to digital. I’d suggest that the biggest reason why recorded music sales are down is the fact that consumers can cherry pick their selections. A formerly $20 dollar physical album has been reduced to a single 99 cents digital track. That has to be frustrating for the music industry and really has no solution unless you want to raise prices and push people back into illegal file-sharing.

Now if only artists like Lily Allen would take note that artists are making more money in the P2P age after claiming back in September that file-sharing has been a “disaster” for emerging artists.

It’s especially important the UK govt takes note as it contemplates a proposal to disconnect illegal file-sharers from the Internet.