So is piracy bad or good for music? Why the confusion? 5

Two studies out last week (one by Ofcom and one by the EC) appeared to show conflicting results about the effect music piracy has on digital music sales.

The Ofcom report appears to show that people are downloading music illegally to avoid paying for it and would buy if the price was cheap enough. In contrast the EC Report claims that the subject is more complex and that the illegal downloading aspect is possibly a sampling tool prior to purchase.

We all want the second scenario to be true but I don’t think either of these reports are conclusive. The Ofcom report is based on a questionnaire and we all know that people act differently to what they say. Someone who downloads music illegally isn’t likely to say they do it because they can – they are more likely to make up an excuse such as ‘I do it because it is too expensive to buy the real thing’. The EC report is based on actual clickstream data and so we should take that more on face value.

But, alas there’s also a problem with the EC data. They studied the habits of 16,000 internet users over a period of 1 year using clickstream data. A good basis for a survey you’d have thought. My first question was ‘how were these users selected’? At random? I found the appropriate section of the report. The Nielsen data used was a random cross-section of 25,000 individuals which was narrowed down to around 16,000 individuals who used legal, illegal or both kinds of websites. So they are music consuming individuals.

The study showed that on average the use of illegal websites to download music caused an increase in the use of legal music websites. In other words clicks on legal purchase websites would have been 2% lower without the existence of the illegal ones. This isn’t earth shattering is it? All those illegal downloaders listening to tracks. There’s bound to be a few who hear something and want to buy the album. But 2% is a tiny figure. The report is basically saying that illegal downloading is the new radio. I’m still unconvinced that these figures mean anything.

The report rationalises this by stating

“All of these results suggest that the vast majority of the music that is consumed illegally by the individuals in our sample would not have been legally purchased if illegal downloading websites were not available to them.”

Isn’t that like saying looting only happens because there is a riot?

Streaming websites show a 5% causality. In other words clicks on legal purchase websites would have been 5% lower without the existence of the streaming sites.

My big problem with these figures is that the digital percentage of the market is still (contrary to common perception) still a small percentage of the overall market.

The final part of the report conclusion almost seems to preclude the validity of the reports findings when it says:

This result, however, must be interpreted in the context of a still evolving music industry. It is in particular important to note that music consumption in physical format has until recently accounted for the lion’s share of total music revenues. If piracy leads to substantial sales displacement of music in physical format, then its eff ect on the overall music industry revenues may well still be negative.

All the fallout from this report that i have encountered seems to avoid this tiny but hugely significant paragraph.


5 thoughts on “So is piracy bad or good for music? Why the confusion?

  1. Reply Matt Stevens Mar 25,2013 7:15 pm

    “At SXSW last week, two heads of EMI’s international divisions were joined by music industry consultant Mark Mulligan as they revealed the first findings from a three-year long research project. They have interviewed over 1 million music customers from around the world about their listening habits & methods of music discovery. The data was enlightening, and the panelists offered some surprising analysis. In today’s Deep Dive #2, Jason, Hisham and Kyle analyze these findings and discuss what they might mean for the broader music industry”

    Basically most people aren’t living in the future and are still buying CDS :)

  2. Reply Ken Mar 31,2013 9:27 pm

    Interesting that Matt. According to Deezer music downloads are dead by the end of this year. How detached from reality are these people?. Streaming is the new music?

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