Assignment #3 - Pirating...Ahoy ye Matey!

Amid all of the controversy surrounding music file-sharing on the Internet, nearly half of online youth around the world have downloaded music off the Internet, according to a new study from the global research firm, Ipsos–Reid. Among teens and young adults between the ages of 12 and 24 who have used the Internet in the past 30 days, 47% report having downloaded a music or MP3 file (Source). Now a days it is commonplace to download music online. You can get it anywhere from Napster, to Limewire to iTunes, to DC++ used on many college campuses, including ours.

Piracy is not all that bad for musicians. In fact, research has shown that less popular artists actually profit from piracy. This can be concluded from, and is supported by several studies. Frustrated as they are, the music industry claims that they lose millions a year due to piracy, but is this really the case?

Two facts:
-Album sales are declining.
-75% of all artists profit from filesharing.

We will try to explain these two seemingly contradicting facts, and list three factors that may help us understand what’s going on…
1. Artists sell more albums thanks to piracy

Several studies have shown that most artists actually profit from unauthorized sharing of files. They sell more albums because people have the opportunity to download songs and entire albums for free. A study by Blackburn (2004), a PhD student from Harvard, found that the 75% of the artist actually profit from piracy. Blackburn reports that the most popular artist (top 25%) sell less records. However, the remaining 75% of all artists actually profit from filesharing (Source).

2. But why do these artists sell more? Well, there are a couple of possible explanations.
-Music from highly popular artists is widely available on filesharing networks. If pirates mainly download albums from these artists, they will have more money left to buy albums of less popular artists.
-People have the opportunity to discover new music for free. It is thus easier to find new, and less popular artists. It is likely that people will buy albums from these artists as well if they like what they hear.
-It is not only piracy that makes it easier to discover new artists, social music services like Last.fm and Pandora also contribute to this phenomenon. The rise in income from concerts shows that the interest in music is increasing instead of declining.

3. Wait a minute… the music industry and the RIAA always say that they are losing huge amounts of money because of filesharing. Isn’t this true?

Well, the fact is that there are less albums sold in total compared to some of the years when album sales were booming. However, it is hard to attribute this decline in sales to piracy (alone). From the research that has been done on this topic we can conclude that the effect of piracy on the music industry’s lost income lies somewhere between 0 and 30% (of the decline in sales, not of the sales in total). Pollock (2006) gives a comprehensive overview of these studies and concludes:

The basic result is that online illegal file-sharing probably has some negative impact on traditional sales but the effect is appears to be quite small. The size of this effect is debated, and ranges from 0 to 100% of the sales decline in recent years, but a figure of between 0 and 30% would be a reasonable consensus value (i.e. that file-sharing accounted for 0-30% of the decline in sales not a 0-30% decline in sales). At the same time there is still substantial disagreement in the literature with the most impressive paper to date (Oberholzer and Strumpf 2005) estimating no impact from file-sharing.

One of the things we can be pretty sure of is that the music industry is starting to lose control over their customers. A great deal of their income was generated by overly promoted albums and artists. It is those artists and albums that suffer the most from piracy. It gets harder and harder for the music industry to market artists to the top position of the charts now the customers have all kinds of alternative ways to discover new music.

So back when we were sharing CD's with our friends were we doing something illegal? How is that different from borrowing a CD or MP3 today and burning a copy for yourself? Were we basically stealing? The Recording Industry Association of America (RIAA) thinks so.

Because of the impact that downloading has had on the music industry, the trade group that represents the biggest record companies, the Recording Industry Association of America (RIAA), has begun to bring lawsuits against people who illegally download and swap music files on the Internet. They argue, and the courts agree, that downloading and swapping music illegally is just like stealing a CD from a store, and they want to encourage music lovers to acquire and enjoy their music without breaking the copyright laws (Source).

So what do the artists who are making this music think about it?

For the most part the jury is still out. Some hate the fact that people are getting their albums for free, and sometimes even getting a hold of it earlier then the intended release date and leaking it out to the public, while others think it is a great way to get new and different music out there into the mainstream.

Whatever you view, the odds are that you have downloaded music or that you will download music for free, and it doesn't look like there is any end to it in sight. We could say that music is more alive than ever before, that piracy is a tool to build a fanbase, and that the times when the music industry could dictate what we were listening to are over.