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Latest Music Piracy Study Overstates Effect of P2P
Blackbeard writes "A new study from pro-business think tank Institute for Policy Innovation claims that music piracy accounts for $12.5 billion in lost output to the US economy. That includes 71,060 lost jobs and $422 million in lost tax revenues... if the figures are accurate. Ars Technica's write-up points out a number of flaws in the IPI's reasoning. 'The study makes for some alarming reading, but it suffers from a few significant flaws. First and foremost, it appears to fall into the "illicit downloads = lost sales" fallacy, the view that each song obtained over a P2P network is a lost purchase.' There's more: 'The IPI study also assesses the increased demand for music if piracy didn't exist and assumes the market would remain as "intensely competitive" as it is today. The problem is that music fans are largely disenchanted with the market. By and large, music fans think that music is too expensive, and that much of what is available isn't very good.'"
"A new study from pro-business think tank Institute for Policy Innovation claims that music piracy accounts for $12.5 billion in lost output to the US economy."
On the other hand, music piracy accounted for $12.5 billion in gained income to the listeners.
I think the point about the general lack of quality in the music marketplace is right on. Most albums have one or two good songs, so you end up paying $7+ per song that you actually want. My urge to pirate music was drastically lessened when online stores (iTunes was the first one I came across but I don't know if they actually pioneered this or not) started allowing me to buy the specific songs I wanted by themselves. I'm happy to pay 99 cents for a good song. If all the songs on the albums were good then I would buy all the songs and they would make that much more money from me.
My other account has a 3-digit UID.
If unrealized gains were losses, then any product that didn't sell as well as it might would have "lost sales"
Hint: you have to have something before you can lose it.
If I have nothing to hide, don't search me
Wouldn't this study require the demand for music to be "perfectly inelastic"?
;)) and the demand wouldn't change because they've already published papers claiming that people downloading free music instead of paying were not doing it because of any price considerations.
i.e. if demand for a full-price version of some music is the same (in their model) as demand for a zero-price version of the music, then they're modelling the demand as being the same no matter what the price.
If that were so (and the wiki pages on economics suggest it's not possible) then it would suggest that you could sell music CDs for $10K each (recognise this theory from anyone's legal filings?
The summary (and the artiicle, for all I know) is not quite right when it says:
He's just fallen foul of Fingals First Law [*] of chart music - the widely observed principle that the charts always turn to complete rubbish within 5 years of quitting full time education. The cool kids will always be listening to something completely different from what we listened to, and we'll just think the new stuff isn't like music used to be, in the good old days. In turn the cool kids will grow up, and find that the music they like has been superseded.
The point is, it's older fans who think that much of what's available now is rubbish. There is a constant supply of new fans ready to be programmed with the new stuff.
Of course, not all of them will buy the new stuff, but that's another issue - and the posters above have covered that pretty well!
[*] I just made that law up right there! Don't expect to find it in the textbooks till next week at least. We're only at Internet 2.0, you know.
Paul "Say no to feeping creaturism"
>>There must be some effect here. I know plenty of people who don't buy any music at all, but
.02
>>certainly would if they couldn't download it for nothing. Obviously the 1 to 1 correspondence
>>between downloading and lost sales isn't useful, but does anybody know of any reasonable estimates
>>of what the loss actually is? Or even how you'd calculate it?
I'm not sure that is possible. I have purchased hundreds and hundreds of music CD's over the years. I have quit. After hearing what the RIAA was doing, I could no longer support such a company. How can you quantify that affect? I do admit that I've purchased some un-signed (indy?) artists CD's. I have a co-worker that in un-signed and I have his. I have one from a group in NYC and another from a signed but non RIAA member. In the last 3 years..
But I've quit buying music like I previously did. And no, I don't download it from P2P networks either. What I've done is switched to XM Radio. I have two subscriptions. I now understand the RIAA gets a cut of my subscription. I don't like that as I mostly listen to Fox News, XM Comedy, and other stations like that.
I don't support the RIAA or DRM but I have never really bought into the whole "allowing piracy increases net sales" ideology. Firstly, I doubt it will increase the number albums sold. Why would you buy the album.. if you already have all the songs? It doesn't make any sense. Secondly, if we are to believe that downloading music for free increases a band's exposure, then there should be a corresponging increase in concert attendance and merchandise sales. I'll leave it up to someone to find the actual numbers, but I'm fairly certain concert attendance has been falling.
In the end I see downloading music illegally as something that neither hurts nor helps the music buisness. Sure it may hurt some sales, it might create some sales, but a HUGE, OVERWHELMING, majority of people would never pay for most the songs they download, at least in the current system. I know I wouldn't. Consumers will always choose what costs them the least (actual cost + convience - (risk of getting caught)), rarely do people buy based on ideology. The music industry understood this and could either change its buisness model or start making it hard for people to download (flooding networks with fake songs) and issuing lawsuits. The latter was easier for them, hence it is where we are at today. Is it working? No.
Maybe not directly, but definitely indirectly. For example, I'm a huge Pink Floyd fan. I started getting into them around 1990, which was the end of an extremely frustrating musical era with all the crap that was churned out in the 1980's. I had gotten so disgusted with music that I honestly never listened to the radio. A buddy of mine had The Wall, though, and I was hooked. He gave me a copy of his tape, and over the years since, I've bought almost every Pink Floyd album there is, except some of the crappy early ones with Syd Barrett. I've also seen them twice in concert.
Another example. When I was in college, like most college students, I was dirt poor. I've always liked Billy Joel, and another buddy of mine invested his disposable income in a CD player (still pretty new at the time) and almost all of Billy Joel's CDs. Of course, I couldn't afford all that, so I bought a bunch of blank cassettes and he made copies for me. Fast forward a few years, and I now am the proud owner of all of Billy Joel's albums, and I've seen him twice in concert, too. (If you're ever lucky enough to get the chance to see either Pink Floyd or Billy Joel in concert, incidentally, go.)
Another example. Just today, a friend of mine was listening to a Lazlo Bane CD I bought. (They're the guys who did the theme to the television show Scrubs, and their stuff is very good.) He had never even heard of the group before. At best, most people I run across are familiar with the theme to Scrubs ("I'm no Superman..."), but they'd never buy a whole Lazlo Bane CD because of that little snippet of song you hear on Thursday nights. I'll be honest, I seriously doubt he's going to rush out and buy a Lazlo Bane CD or go to a concert. But at least now he knows who they are, and if someone mentions Scrubs, he'll probably say something like, "Oh yeah, the theme was done by Lazlo Bane. I've listened to their CD and thought it was pretty good," and thus the "buzz" of the Bane has been bumped up by a bit.
I could keep going, but you get the idea. The collective effect of all of this is that CDs do sell better. Artists and bands do become more famous. Concerts do get attended that otherwise wouldn't have.
Plus, that's also neglecting the money that artists and bands make through increased exposure that have little to do with CD sales and concerts directly, such as through endorsement deals, magazine articles and interviews, non-CD merchandise, etc.