Why Most Artists Profit from Piracy
Written by Ernesto on December 18, 2006Piracy 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:
We will try to explain these two seemingly contradicting facts, and list three factors that may help us understand what’s going on…
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. The same pattern was found by Pedersen (2006, see graph), who analyzed the change in royalties paid by the Nordisk Copyright Bureau between 2001 and 2005.
But why do these artists sell more? Well, there are a couple of possible explanations.
LPs, CDs, DVDs and MP3s
The increased album sales in the late 90’s may very well have been caused, at least in part, by the shift from cassettes and LPs to CDs (and not just piracy!). CD players were getting more and more popular and a lot of people were exchanging their LP collections for CD collections. After 2000, CDs were not that special anymore, and the number of albums sold normalized (see graph below). It’s also likely that the decline in CD sales was influenced by the increased popularity of DVDs and MP3s.
This argument is also mentioned in a research paper by Hong (2004):
The results indicate that transition from LPs to CDs might describe the increase in music sales during the 1990’s.
And in a report from Pedersen (2006):
the period 1995-2000 represents a truly unique situation in the modern history of Danish record sales and 10 million units sold in 2004 is more likely a return to regular conditions than a sign of crisis.
This graph plots the number of albums sold in Denmark, and shows that the decline in sales after 2000 is not that special, but the uprise in the late 90’s is (Source: Pedersen, 2006).
The Internet is changing the way people experience music
Like we mentioned before, the Internet opened up a ton of possibilities for people to discover new artists and music. Not only illegal downloads, but also legal downloads, or paid downloads with the possibility to preview songs make it easier to discover new artists.
Social communities, and music services like Last.fm and Pandora also play a big role in the evolution of our music experience. Before the Internet, people had only a few possibilities to discover new music. Friends, radio stations and record stores are three of them, where the last two are in part sponsored by the marketing campaigns of the music industry. Today people are less dependent on what the music industry is campaigning for.
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 are 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 heva all kinds of alternative ways to discover new music.
In conclusion 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.
And that’s a good thing…
Sources:
Previously: geoTorrent.org Distributes Free Satellite Imagery
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78 Responses (Add yours or TrackBack)
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[quote comment="30627"] a bunch of stuff [/quote]
Most of which I agree with, and probably to a degree more than other responses.
But for me, if I can get even 3 real fans out of every 10 that steal my music, then why not. Even if those 3 fans don’t end up paying $10 or whatever I sell my music for, 3 real fans, that share your music, go to your shows, talk you up, blog about you etc. is worth far more to me than the $30 dollars I would have gained from them first buying the CD and then becoming fans. Maybe they just couldn’t afford it.
My POV is that it eliminates the barrier to try something - no cost, no risk. The assumption is that all those people stealing your music would have bought it otherwise and that’s simply not the case.
Artists should start looking at free music, legally or illegally obtained, as the filter that identifies true fans from the masses and then find ways to target those people.
A few facts that not a single one of you stated
1. How many people in filesharing have very good reason to be pissed at the recordcompanies? Do you really think that this is all kids sharing here. Most of the adults that are using filesharing have spent thousands of dollars over the years on records, that the recordcompanies push on them. Often you will hear two or three songs that may sound good and/or are catchy. Then you go out and buy it to find what? Not a single other good song on the album except those two or three songs.
And why is that? Preselected good looking not worth shit artists, that the (oh so good) recordcompanies feel they can decieve the consumer with. Oh and lets not forget that the two or three good songs are probably covers of something you allready own. Or something premade by someone else (who’s a good artist), that didn’t have quite the right look for the guys in charge.
2. You talk about legit online subscriptions and downloads. Have you ever really listened to the difference in the quality between those and CD quality?
Why the hell should I (or anyone else) pay full price or more for some crappy version of something I may like, and let’s not forget, that in the process I get my rigths torn away by some kind of DRM protection, that restricts my personal use of those tracks.
I’ll buy music online when there is no DRM and I get lossless. At this rate, that will probably by the time I’m 80 and don’t have any money to spend on music.
Until the recordindustry cleans up their act, I say GO BITTORRENT
If only all had this point of view, then the consumer would have forced his rights back ages ago. But no now the dear industry just start buying more and more of BitTorrent instead of actually doing some good.
I still by CDs BTW (After sampling every single song)
Screw the MAFIAA
[quote comment="30623"][quote comment="30617"]
And although the data are debatable, there’s a lot of truth in there as well. The RIAA is paid to lobby for the music industry, I stand at the other side of the fence.. for free!
Piracy isn’t the solution, but the fact is that things need to change, and the music industry will have to “adapt”.[/quote]
what a load of BS. your “side of the fence” does not make a distinction between the music industry crisis and the artist/musician crisis. Two very different issues that get blatantly entangled so often it’s nearly criminal. The music industry moguls are flipping because their castle and stranglehold is in shambles and their consumerism empire is falling appart. The magnates are losing money by the truckload and they went on a suing spree, everybody hates them, OK. beating a dead horse there.
that’s got nothing to do with the fact that EVERY musician is losing potential revenue in one way or another nowadays that any one is able to use bitTorrent to download a WHOLE DISCOGRAPHY in a handful of clicks. Easy, painless, anonymous, convenient, and free of charge. if my job is to be a musician and the service I offer is being obtained without any retribution, well, what a f**king disapointment. You may like my independent music but you are no less a prick for what you do. And this has little to do with the middle-man industry changing its ways, “adapting” as you hypocritically say.
CDs are ripped, booklets are scanned, DVDs get decoded and seeded. Next thing you know, kids are filming gigs on their cellphones and recording on their iPods. There’s no stopping it. The music industry may be tumbling to its grave but so is the musician career itself. I rather see you try and make sense of that phenomenon than read that shizz about ‘piracy breathing live into the music scene’.
that was a reply to Roberto, not Rork.
[quote comment="31045"][quote comment="30623"][quote comment="30617"]
And although the data are debatable, there’s a lot of truth in there as well. The RIAA is paid to lobby for the music industry, I stand at the other side of the fence.. for free!
Piracy isn’t the solution, but the fact is that things need to change, and the music industry will have to “adapt”.[/quote]
what a load of BS. your “side of the fence” does not make a distinction between the music industry crisis and the artist/musician crisis. Two very different issues that get blatantly entangled so often it’s nearly criminal. The music industry moguls are flipping because their castle and stranglehold is in shambles and their consumerism empire is falling appart. The magnates are losing money by the truckload and they went on a suing spree, everybody hates them, OK. beating a dead horse there.
that’s got nothing to do with the fact that EVERY musician is losing potential revenue in one way or another nowadays that any one is able to use bitTorrent to download a WHOLE DISCOGRAPHY in a handful of clicks. Easy, painless, anonymous, convenient, and free of charge. if my job is to be a musician and the service I offer is being obtained without any retribution, well, what a f**king disapointment. You may like my independent music but you are no less a prick for what you do. And this has little to do with the middle-man industry changing its ways, “adapting” as you hypocritically say.
CDs are ripped, booklets are scanned, DVDs get decoded and seeded. Next thing you know, kids are filming gigs on their cellphones and recording on their iPods. There’s no stopping it. The music industry may be tumbling to its grave but so is the musician career itself. I rather see you try and make sense of that phenomenon than read that shizz about ‘piracy breathing live into the music scene’.[/quote]
maybe you’re right, probably not. fact is, as you say, there’s no stopping it. filesharing will grow because it’s now part of common culture. artists will have to adopt progressive strategies if they want (depend on) monetary remuneration. e.g. building a fan-base (arctic monkeys), donation system (invest in musicians you want to listen to), merchandise, live concerts .. sooner or later alternative ways of reconciliation will evolve.
careers are not ruined, there’s just a shift in time when revenue starts. if you’re talented you’ll get a piece of the cake.
I agree with Xtripit. I’m not spending $$$ until I’m sure I’m going to like what I buy. Crap from “legal subscription” services are DRMed up the wazoo, lossy as hell and sound terrible, and are worth squat. I’d pay 25 cents for those “samplers” maybe, not a buck.
Chris clearly has no idea what he’s talking about. You don’t need to be a college student with too much time on your hands to know where to get songs. File “trading”, my ass. Nobody TRADES these songs, I don’t spend a dime nor have to offer something else in return (”trade”) to get what I want.
rork’s whinging is off base too. Every download is not a “lost sale”. Obviously according to your thinking book stores shouldn’t let customers open anything before buying. Pfft. I’ve got a band with an indie label myself, what aquietrevolution said is the actual reality:
[quote comment="30873"]
But for me, if I can get even 3 real fans out of every 10 that steal my music, then why not. Even if those 3 fans don’t end up paying $10 or whatever I sell my music for, 3 real fans, that share your music, go to your shows, talk you up, blog about you etc. is worth far more to me than the $30 dollars I would have gained from them first buying the CD and then becoming fans. Maybe they just couldn’t afford it.
My POV is that it eliminates the barrier to try something - no cost, no risk. The assumption is that all those people stealing your music would have bought it otherwise and that’s simply not the case.
Artists should start looking at free music, legally or illegally obtained, as the filter that identifies true fans from the masses and then find ways to target those people.[/quote]
EXACTLY. Tape my concerts, share ‘em, download em. The hundreds that download and then move on, they probably wouldn’t have bought them anyway, but at least they get to HEAR me. After they leave, the ones that are left are the real fans, who DO go on to buy my stuff.
“Illegal” filesharing is what keeps bringing more fans into the fold.
What bothers me the most about all of the responses here is that people either put all of the blame on the consumer or the “industry”.
Music is an integral part of our culture and it’s more than just sound that you can play over and over again. It can be an experience, it can teach you things, it can bring people together, etc. And while that’s all well and good, it brings me to my main point. The value of the sound itself has gone down. Sell something that’s more meaningful, like a real message (i.e. Rage Against the Machine) and you will create a loyal fanbase that will value your art.
That being said, the inherent devaluation of the sound itself can be balanced with bundling. Why not add a concert DVD to each album (and maybe you have four different DVDs that go in four different albums with different covers)? Maybe you could actually reward your fans by including tickets in certain packages, ticket discounts, a sweepsstakes to tour with the band, a sweeps to meet the band, exclusive concerts, access to an exclusive website where the band will actually interact with fans, etc. The “industry” needs to make up for lost value.
At the same time, there is a measureable amount of effort that goes into piracy. Why not give it away for free or a discount, and mobilize your true fan base to work for you? The people downloading music are often opinion leaders. A lot of the time, you can pirate an album before it hits store shelves. I know that an album will always need a “release date”, but a lot of the time between the album being finished and the release date has to be designated for promotions. Isn’t that exactly what these opinion leaders will do for you?
It doesn’t matter who’s right and who’s wrong. CD prices (or access to music in general) are obviously too high. Sell them for less or give people a reason to buy them with added value. Just the songs isn’t cutting it.
I love music, but hate this political/economical debate. Simple fact that DRM is a tool to take back control of the Music Industry. DRM makes it hard for the average user to copy and share the music. There is always a way around security but the majority will not be able or too much trouble to do so. Fair Use is also a factor, if i go to a online mp3 store, the sound quality will be lesser and will encourage me to buy the cd from the music industry.
NO I WILL NOT BUY THE CD! I HAVE BEEN BOYCOTTING THE MUSIC INDUSTRY FOR THE LAST 20 YEARS. My absence of buying music from those record co mpanies is my protest. I grew up listening to the crap that was churnned out by talentless musicians who where marketed heavily. Most the CD’s that i have bought in the past are now just junk thrown away. After the media blitz faid away, you hear the music as it is and may decide this is not worth $18. No way i would pay $30 for a CD. I will pay over $100 to see my favorite band live. I would pay for DRM-less, lossless digital audio of my favorite band . But no more price gouging. I will not pay for 3 songs on a CD that are “trendy” for a month and then later realise that they are lacking talent. If a musician is talented, then they should tour and make their money honestly, cutting out the music industry. “Getting Signed” was always the lazy way of making it big for the new rock star. But a majority of them are not around. Why? because they are not real musicians, do not tour, do not write their own music (ie American idol “actors”). Yes, I would pay for a CD, but it is well known that the artists only get about a $1 per CD. It is also Well known that it cost about a $1 per CD. Were is the other $28 bucks going? The record companies who leech off the artists and fans. WE ARE NOT THE PROBLEM, THE MUSIC INDUSTRY AND THE WAY THEY “CREATE” AND PROMOTE THEIR SALES ARE THE PROBLEM. But the little man, who does not have the legal power of the RIAA, are powerless. Except for not buying this overly inflated product. What is the alternative? No music, radio (which is crap), download live concerts which are not copyrighted, trading live music from the fans who “tape it” from the soundboard of the concert. I do not download copyrighted music anymore, not because it is wrong. because i do not want to be sued. but the joke is on them (record companies); Most of the music available is rubbish anyway and i would not listen to it for free! The big business of music is going thru a grass-roots revival and those with the true talent(real musicians) will be ok. File-sharing only hurts the non-talented musician who relies on the music industries complex sound studios to make them sound good. The real musicians will be fine, touring and selling their music on the road to their fans. THE MUSIC INDUSTRY DOES NOT ONLY OVER-INFLATE THE COST OF MUSIC BUT PROMOTES “BAD” MUSIC, WHO THE ARTIST DOES NOT WRITE, PLAY INSTRUMENTS, OR TOUR. The decline of CD sales and the decline of the music industry is a good thing for the quality of music that comes out!
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