Wednesday, February 27, 2013

Music Industry Data: Sales Up, Piracy Down... But It's Not Because Of Any 'Anti-Piracy' Efforts

from the let's-walk-this-through dept

A few folks have sent over variations on two different reports concerning the music industry, with some suggesting that this is "proof" that the recording industry's "war on piracy" has been effective on two fronts: increasing sales and reducing piracy. Of course, for many years, we've questioned whether or not reducing piracy actually increases sales, so we looked closely at the numbers and they don't seem to say what some people think they're saying. The Hollywood Reporter has a good summary of both reports. One comes from IFPI, celebrating that "global recorded music revenue" rose 0.3% in 2012. That is, obviously, a tiny increase, but it is an increase. Of course, as we've noted, "recorded" music revenue is merely one piece of the wider music industry ecosystem -- and that entire ecosystem has been growing for quite some time.

The second report comes from one of the industry's favorite researchers, NPD, claiming a massive decline in music file sharing (based on consumer surveys). I've found NPD's data to be suspect in the past, but let's just assume this is true. Then, can we reach the conclusion that the industry's anti-piracy efforts both worked and that it led to increased sales?

Actually... no. Not even close. We can see this pretty clearly just by looking beyond the recorded music market, to the wider file sharing space. Various reports have made it clear that widespread file sharing (mostly of infringing content) has continued to grow quite rapidly during the same time period. Sandvine reports (pdf) that BitTorrent traffic increased 40% over the same basic time frame. Or, zero in on a different market beyond music. How about software? The BSA's annual report continues to show increases in "piracy."

What does that say? Well, if wider anti-piracy campaigns were effective, we wouldn't just be seeing a decline in music infringement. We'd see similar declines across the board. But the overall space and some other, similar, markets are showing increases in infringing content spreading.

That leads us to the much more reasonable hypothesis: the reason that music piracy is down and revenue is up is because the industry has finally started allowing more innovation into the market. Not surprisingly, this is exactly what we've been arguing for years. If you let the tech industry create useful new services that better provide the public with what they want, you get services and products that people are willing to pay for. And when that happens, infringement decreases, because the legitimate and authorized services are better than infringing. It's why music infringement fell off a cliff in Sweden when Spotify launched there, despite also being the home of The Pirate Bay. Notably, when music infringement plummeted in Sweden, other types of infringement did not similarly drop.

In other words, for all the complaints about these new services, and the many, many attempts to hold them back or neuter them, letting new services grow and thrive seems to be the best "anti-piracy" measure that the record labels could have used. And yet it still thinks it needs to focus on punishing fans and limiting services.

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