These findings were confirmed this week by a report from the UK music industry group BPI, but only for those who read between the lines.

In their Digital Music Nation report the music group focuses on another comparison, the spending of all file-sharers compared to that of consumers who only buy digital music through legal channels. Their conclusion reads as follows:

“Appearing to debunk the common belief that file-sharers spend more on music than other consumers, Kantar Worldpanel found that the average spend over a 12-month period for professed file-sharers was lower than the spend of consumers who only use legal services.”

Indeed, when all file-sharers are lumped together, they spend 25% less than “legal only” consumers. In a year this comes down to £26.64 versus £33.43. However, this doesn’t mean that the earlier reports were incorrect.

Let’s give an overview of the numbers we can extrapolate from the BPI report.

- Legal only digital music buyers spend an average of £33.43 a year.
- File-sharers, in total, spend an average of £26.64 a year.
- File-sharers, the 44.8% who are not buying, spend an average of £0 a year.
- File-sharers, the 55.2% who are buying, spend an average of £48.26 a year.

The above shows that the file-sharers who also buy music spend 44% more than those who exclusively buy legal. This is in line with previous studies, which according to the RIAA indicates that these file-sharers are more engaged consumers.

TorrentFreak contacted the BPI for a comment, and the music group told us that this comparison is not fair.

“You cannot just wave away the 44.8% of file sharers who are not spending anything on music, despite being music ‘consumers’, and pretend they don’t exist or are not relevant. What happens if only 5% of file sharers are spending on music? Do we disregard everyone else who is freeloading?,” a BPI spokesman said.

“It’s not credible to discount the people who consume music, for free, illegally.”

The BPI absolutely has a point here. However, is it then credible to simply lump all file-sharers together when there are clearly two entirely different subgroups with different spendings?

And what about the legal music “consumers” who buy nothing? What if we added all the non-sharing and non-buying people who use YouTube to listen to music, and add them to the “legal only group”? Then the average spend there would be lower as well.

That said, the data does make clear that there’s a huge group of file-sharers who are freeloaders. Of all Brits, 4,000,000 engage in file-sharing, and 1,768,000 never pay a penny for any of the music they acquire.

In the end a safe conclusion is that about half of all music pirates are cheapskates, and the other half are the music industry’s most engaged customers. But what does that say about file-sharing?

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

At the time we doubted that LimeWire’s demise would have much of an impact on the volume of music piracy, but according to research from the NPD Group we were wrong.

Although there are plenty of alternatives to LimeWire, NPD found that the number of people who downloaded music illicitly using P2P in the last quarter of 2010 has decreased by 43% compared to the year before. The researchers conclude that much of the decline is due to the unavailability of LimeWire, which ceased its operations just a few weeks into quarter 4 of last year.

This data comes from an extensive survey of 5,549 Americans, and translated into the entire population it means that the number of music pirates has decreased from 28 million to 16 million in just a year.

Looking at the market share of the various P2P applications, LimeWire was still in the lead with 32 percent of the music pirates indicating that they’d used it in the few weeks that it was still available. This is down from 56 percent in the year before.

As expected, LimeWire’s shutdown also resulted in a market share up-tick for various other P2P applications. FrostWire appears to be the greatest beneficiary, as it saw a relative increase from 10 percent to 21 percent.

The most popular BitTorrent client uTorrent saw its market share growing from 8 to 12 percent. However, since the total number of music pirates declined so much this actually means that in absolute numbers less people indicated that they used uTorrent to pirate music compared to a year ago.

Taken together NPD’s research suggests that the percentage of music pirates in the U.S. population has fallen drastically, from 16 percent to 9 percent in a year. But the big question is what effect this has had on music industry revenues. Although we don’t necessarily have much faith in the validity of the survey, the RIAA must be delighted with the findings – or are they?

We assume that when they look at their revenues during the last quarter of 2010, the big music labels will fail to see any significant change in their revenues. Why? Well, because music piracy might not have much of an effect on music sales in the first place. But I guess if they can’t use it to their benefit, the RIAA will simply ignore what might be the biggest piracy decline in history.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

Interestingly enough, this format shift was nothing new for the music industry. The exact same pattern also applied to the LP/cassette battle, with cassettes eventually taking over from LPs in the early 80s. Now, three decades after cassettes started to dominate the music business, the CD is losing ground.

This time around there is a new enemy in town, digital piracy. For nearly a decade the U.S. music industry has seen a decline in sales of physical CDs and all this time it has put the blame on digital piracy. By doing so, the labels conveniently ignore the most drastic format shift music has ever seen – the digital revolution.

With the growing popularity of the Internet, computers and most importantly MP3-players, music fans have started to trade in their CDs for MP3s and other digital files. Initially, the public had to convert CDs themselves, but in 2003 the iTunes store opened, selling over a million tracks in the first week.

With this shift from physical to digital, another important change hit the industry, one that may in part explain why the labels’ revenues in the U.S. continued to decline. With the introduction of paid downloads, consumers no longer had to buy a full album if they were only interested in two or three songs. This new freedom for consumers has dramatically changed the music sales landscape.

According to statistics taken from the RIAA shipment database, between 2004 and 2008 the number of single tracks sold in the U.S. increased by 669 percent while the number of album sales dropped 42 percent. Consequently, the income of the big labels suffered since single track sales are less profitable than full albums. As can be seen in the chart below, the number of music ‘units’ sold continues to grow rapidly nonetheless.

So where does piracy fit into this picture? Truth is, we just don’t know.

File-sharing is obviously a by-product of the digital revolution in music, but its effect on revenues has been much overstated. In every annual report that comes out, the music industry blames piracy for its troubles, even though digital sales are booming and even though these are directly competing with piracy.

We believe that the format shift from physical to digital music, and the change in buying habits that came along with it, may explain the decline in revenue more than piracy can. To back this up we’ve compared the labels’ revenues in two countries on opposite ends of the digital / physical rift, the U.S. and Germany.

Although piracy is rampant in both of these countries, the local music consumption habits are very different according to data published by IFPI. In Germany physical CDs are still very popular, with digital sales representing less than 25% of all music ‘units’ sold. In the U.S. on the other hand, digital outsells physical with 70% of all sales.

If the theory that the shift towards digital music is negatively impacting revenues holds up, then the German record labels should do much better. Indeed, between 2004 and 2008 the net revenue (in dollars) of the U.S record companies fell more than 30%, compared to less than 5% in Germany.

If the data above is not convincing enough, there is also another unexplained anomaly in the sales data.

If digital piracy is such a problem one would expect that it will mostly hurt digital sales, but these are booming instead. Many younger people don’t even own a CD-player anymore, yet the music industry sees digital piracy as the main reason for the decline in physical sales. Strange, because digital piracy would be most likely to cannibalize digital sales. This anomaly also refutes the excuse that the U.S industry could be hit more by piracy than the German.

So what does the music industry have to say about this all? TorrentFreak asked the RIAA to comment on our findings and they released the following statement.

“We’ve always said there are multiple reasons for the decline of the industry during the past ten years: Competition for the entertainment dollar. Diversification of music consumption and access. But we also think people being able to steal music online is the primary reason. Not the only, but the primary.”

We obviously have to differ with the RIAA here. The digital revolution in music has changed the entire industry by altering the consumption habits of music fans. Although piracy could also be a factor, the data we’ve seen thus far suggests that it plays only a minor role, if it has any effect at all.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

The researchers surveyed a few hundred undergraduate students who were asked if they would buy the single “Right Round” from rapper Flo Rida for X amount of money. The price tag for the song was based on the last two digits of their social security number, ranging from 0 to 98 cents. The regular 99 cent price was excluded.

The students further had to indicate the likelihood of being faced by a lawsuit from the RIAA and what the expected settlement costs would be. On top of this, they were asked to fill out a morality questionnaire along with questions regarding their download behavior, all anonymously.

With this data in hand the researchers were able to draw some interesting conclusions.

First of all, they found that the students who were said to have pirated their latest track, were willing to pay less for the “Right Round” song. For every $0.01 students were willing to pay more, the likelihood decreased that their last song was pirated by 0.3%.

Even though the researchers claim that this means that pirates are cheapskates, it could also mean that pirates don’t like the song “Right Round” from rapper Flo Rida that much. Perhaps they have different music tastes?

Taste aside, the researchers conclude that dropping the price of a single track to $0.63 would decrease piracy by 50%.

Besides the pricing issue, the study also showed that pirates (compared to non-pirates) think the chance of getting sued by the RIAA is relatively small, and that the settlement fees are lower. The usual conclusion from this data would be that pirates are well informed since their guesses were closer to the real answer, but the researchers twist it somewhat different.

“If the goal of the RIAA was solely to deter piracy, it should not have abandoned its policy of suing the people it caught pirating digital music,” they write, referring to RIAA’s promises to stop mass-lawsuits against copyright infringers.

The latest insight from the study is that those who indicated that they had pirated their latest addition to their music library scored lower on the morality ‘proxy’ scale. However, the researchers note that the mean and modal respondents score very high on morality, which basically means that pirates are more normal (morality wise) than those who pay for music.

To summarize, the study makes it look like pirates are immoral cheapskates, but all it really suggests is that the music industry should lower the price of downloads if they want to sell more music and increase their net profit.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

Interpret, a market research firm focused on entertainment, media and technology has just published the results of a massive survey on illegal music downloads, covering 64 million people. Of this group 24 million respondents (36%) admitted that they had downloaded music illegally in the past three months.

An impressive figure to say the least, indicating that the RIAA, BPI and IFPI will seriously have to reconsider their current handling of the ‘piracy’ problem. Spending millions of dollars on developing new business models instead of paying lawyers might be a good start. Interpret’s findings may be helpful in this.

The goal of the report was to find out if people who download from BitTorrent and other file-sharing networks are also paying to download music. And indeed, it turns out that some ‘pirates’ are also paying for downloads through iTunes or other web stores.

The results show that 9 percent of music pirates have bought a full album online in the past three months. Downloading individual songs is even more popular in this group, with 16 percent indicating that they paid to download an individual song recently.

What struck us at TorrentFreak was that nearly half (49%) of all music pirates said that downloading music should be cheaper than buying a disc. This means that 51% are fine with the current price point of legal downloads. This is an odd finding to say the least.

Unfortunately, Interpret’s report doesn’t provide any comparative data, so we can’t say anything about how the group of music pirates does compared to the rest of the public. However, it wouldn’t surprise us if on average this group is spending more on music than the average customer.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.