File-Sharing No Threat to Music SalesA study by two American university researchers [pdf] has come to the conclusion that "... file sharing has only had a limited effect on record sales." They also found that file sharing had a differential impact across sales categories - high selling albums, for example, actually benefit from file sharing. The study, by Felix Oberholzer (Harvard Business School), and Koleman Strumph (UNC Chapel Hill) undermines many of the claims that have been put forward by the music industry (namely the RIAA in the USA, and RIANZ here in NZ) as to the financial effects file-sharing have had on their business. Indeed, statistics just released in Australia actually show that, in that country at least, album sales have been growing significantly since 1998, when the first mainstream p2p client (napster) hit the internet. "In that year," reports the Sydney Morning Herald, "Australian record companies sold 39.6 million CD albums. Five years later the figure had gone up to 50.5 million. That makes it hard to argue that downloading and CD copying has been killing sales."

Too right. The SMH article also highlights the spin that the record companies put on the figures to fit their 'doom-and-gloom' picture. Over the last year, for example, singles sales went down by 16.5 per cent - an 'obvious' indicator that individual song downloads are eating into that market, at least. But no, this statistic "...neglects to mention the record companies are not releasing as many singles as they used to. Sales of singles do not make much money. Singles are these days pretty much released for promotional purposes - to get radio play and drum up interest in an album. In the US, singles have virtually disappeared from sale." The same is probably true in New Zealand, where, for example, the only New Zealand #1 song of 2002 - Fur Patrol's 'Lydia' - got to the top of the singles charts without actually being available to be bought in shops.

On the flipside, the RIAA in the USA is still arguing that profits are down, as a direct result of file-sharing. It's true that profits are down: from $13.2 billion in 2000 to $11.2 billion in 2003. One might point out that the USA was going through an economic recession during this period, that a couple of the bigger companies dropped (some might say 'made fair') their wholesale CD prices to 'combat piracy', and that, a lot of the time, the music being released by the major labels was just complete crap and not worth buying. This latter argument is backed up by this article, which reports of an increase in kids getting into their parents' record collections and 'classic rock' as a way of finding some decent music. "Before I listened to classic rock, there was nothing I really liked," says Kristin Clarke - an eighth-grader. "Every new band has one good song and the rest of the CD is garbage. On old rock albums, every song is great. I'm always hitting the repeat button." Kids are savvy, eh? For this reason, AC/DC's Back in Black, Queen's Greatest Hits, Pink Floyd's Dark Side of the Moon, as well as most of the back-catalogue of The Beatles, Bob Dylan, Rolling Stones and Led Zeppelin, are all consistently good sellers, year after year. This is a lesson that seems to have been forgotten by all the major record companies: decent albums by established artists can sell truckloads over many years, and at a decent price (most of the 'classic' records I spot in the stores tend to be priced around the nearly decent price of $20-$25, as opposed to the rip-off $35 that most new releases go for, or the $5-$10 bargain bin price for last year's Vengaboys album). For the last decade or so it's all been throwaway disposable pop - massive marketing behind a weak product that sells millions but will be forgotten within weeks by the people who were sucked into buying it.

Obviously, until p2p came along, this scheme worked fine for the record companies - you didn't know an album (with that great single you'd heard on the radio) was crap until you got home, gave it a couple of listens, and realised that most of the album was just filler - essentially $35 for a single or two, and a dozen (crappy) b-sides. File-sharing has allowed consumers to truly try before they buy (none of this standing at a listening station at the noisy record store, getting a 15 seconds snip of each song before having to decide whether it's worth your while or not). And as a result .. well .. album sales are up! Maybe all that file-sharing has just allowed people to more accurately decide what albums they actually want to spend their hard-earned cash on.

[On a tangent: I had a discussion with some of my mate's the other night about 'classic albums' (specifically UK artists) that had come out in the last 20 years. The only one we could agree on was the Stone Rose's debut album. Debated hotly were Primal Scream's Screamadelica, Radiohead (The Bends and/or OK Computer), Coldplay's A Rush of Blood to the Head, and, um, that was about it. There must be more, surely - something that kids in 30 years will get as much of a musical/emotional kick from as kids today are from the Beatles albums, Dark Side of the Moon, Back in Black. Suggestions in the comments box please.]

Back here in NZ, record companies are up in arms about the impending amendment to the Copyright Act that will allow for format-shifting of music you already own from (for example) CD onto your iPod or a cassette tape, an act that is presently (insanely) illegal.

"At the end of the day, you're sending a message that it's okay to copy, and that is going to kill our business," says Michael Glading, managing director of Sony NZ.

OK, for starters 'At the end of the day' is a cliche that I think should be restricted to sports stars who have taken one too many hits to the head at the bottom of the ruck, instead of being spouted by senior executives working in multi-national corporations. Secondly, the study quoted above points out that there is insignificant impact from file-sharing of songs that people don't already own. How allowing people to copy stuff they have bought for their own personal use is going to kill the business is an effect that I somehow fail to see.
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