18th November, 2009

Music sharers are music buyers

Recently Australian Industry trade magazine – The Music Network, released a report on claims that Peer to Peer file share users may not be the devil for the music industry as always claimed. While the report is of the UK it is interesting to read the facts in light of the rush to crack down on illegal downloading like the iinet courtcase here. Written by UK Contributor Eamonn Forde, we were lucky enough to be able to publish a copy of the article, but more like these can be found in the weekly trade mag.

File Sharers are Music Buyers Best Customers, claims report.
By Eamonn Forde

A new report by Demos/Ipsos Media claims that UK downloaders are treating P2P as a discovery platform and buy more music than those who do not use illegal sites.  The report also proposes that the music industry has missed out on untold millions by focusing too much on litigation and not enough on converting file-sharers across to legal services.

Demos researcher Peter Bradwell said, “Politicians and music companies need to wake up to the changing nature of music consumption and embrace the demand for new business models that offer lower prices and easier access to music.”

The top line stats from the report were as follows:

  • One-third of those polled had accessed music from illegal sources
  • Those admitting to using P2Ps spend an average of £77 [A$140] a year on legal music
  • Those who do not use P2P send an average of £33 [A$60] less a year on music than P2P users
  • Of those who use P2Ps, some 42% said they did so to try music out before deciding if they want to buy it or not
  • If threatened with a fine or temporary internet disconnection, 61% of respondents said they would stop downloading illegally
  • The optimum price point for a single track download worked out at £0.45 [A$0.82] (as opposed to the average iTunes price of £0.79 [A$1.44])

Of course the users of P2Ps are naturally going to be bigger music fans than the average consumer, so this data is not exactly comparing like with like. But the fact is that they have not abandoned legal services and still buy a lot of music. Similar claims have been made in the past, but the timing of this report – given government crackdowns on ISPs and legislative measures towards disconnections (notably in France) – make it all the more relevant.

ISPs are now playing their part, as are search engines. First Google announced the launch of Music OneBox which links (in the US, initially) music- and lyric-based searches to legal partners including MySpace and Lala. On top of this, ad-funded service Qtrax (which has just launched in Australia) has partnered with Baidu, China’s biggest search engine, to direct music searches to its free and legal platform. Baidu had been the subject of IFPI-led litigation for deep-linking to illegal sites and files, and this partnership is a significant step forward in the most exciting and powerful emerging market in the world, where piracy rates stood at 90% in 2008 (source: IFPI).

Back in 2002/2003, when reports similar to this Ipsos one began to be published, the legal digital market was in its infancy and even iTunes had not launched. Just over half a decade on and the market has shifted dramatically. Legal music offerings are incredibly diverse from simple à la carte services (iTunes, Amazon MP3), subscription services (Napster), download-to-own subscriptions (eMusic), mobile subscriptions (Comes With Music), ad-funded streaming (we7, Spotify, Last.fm, Qtrax), app-based offerings and beyond.

This report coincides with a claim by security software company McAfee that there was a significant spike in the number of torrent sites, following the closure of The Pirate Bay for copyright infringement. McAfee states that many of the files on The Pirate Bay were simply ported across to other torrents but adds that the number of torrents offering music, movies and games increased 300% after its closure. These two developments expose the bittersweet nature of P2P for the copyright industries.

The first, and harshest fact is that as soon as an illegal site is closed down, many more will spring up to replace it. The second fact (and the one that leans most towards optimism) is that younger consumers are treating P2Ps in the same way that their parents would have treated radio or even MTV – as a way to discover and test music. Illegal downloading is not a straight replacement of legal downloading and the challenge for the music industry is how to position itself in the uneasy tension between these two extremes.

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