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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As somebody who is into music that is what some would consider to be “underground” i cannot thank music downloading services enough for helping me find all of the music i listen to today. I personally agree with this article fully and from a person standpoint, can back up the claim that at least in my case, my downloading of music has helped artists. Basically, i never would have found any of the music i like without downloading, which means i wouldnt listen to music because everything on the radio is pretty awful. However, through discovering new artists through downloading, i can now give them money by going to see their shows, buying merchendise like shirts or posters, buying other releases that i havent pirated, and of course, shaking their hand and thanking them for making my ears smile.
Another factor quite important in explaining the decline in CD sales after the boom period of the late ’90s is the emergence of DVDs, which led many people to change in their old VHS movies and build larger collections than they ever had before. There are only so many dollars out there for entertainment.
More generally, the phenomenon of the past decade has been too clear: peoples’ tastes have been more sophisticated. Big breweries are suffering declining sales as microbrews take a larger share of the market. High end chocolates and cheeses have emerged as genuine forces in the marketplace. Wine and specialty liquors have exploded in interest. People were never as homogenous as they may have appeared in the ’50s and ’60s, when everyone had to listen to Elvis and the Beatles or whoever was the latest thing available in record stores and on the radio. People are far more diverse than corporate America finds convenient for marketing purposes.
Technology has undoubtedly driven or enabled much of this, the ability to be who you want to be. Not only can I go to digital radio or the internet to hear virtually any style of music I want (not just generic pop/rock), I am now listening to self-produced acts that are amazingly good and can compete with any major label for the time I spend listening to music. And when I’m in the mood for Celtic fusion art rock, or whatever, things that are inherently niche markets, I can do that. It used to be that I could only pick up that stuff once a year at the annual Scottish festival in town. Now it’s all available on-line, just pennies a track, with free listens on Myspace.
Arthur C. Clarke used to note, the impact of technology is overestimated in the short term and underestimated in the long term. In the long term, no matter what they do to try to police piracy, corporate music has a market problem, made possible by the spread of technology–not just at a few studios, but with garage set-ups that can make any creative person, and their unique/niche flavors of music, sound like a million bucks. They no longer possess the sole means of producing and distributing the sound of music. And people everywhere are better off for it.
Actually, Mike, I do go to bookstores and read entire books there, and if they’re good and I want to reread them, I buy them. Sometimes months later. And if the best thing about them is their blurb, I don’t. So I can buy more good books because I’m not wasting my money on bad ones. I read fast - but you can do exactly the same thing easily in a library. Why is it that publishers aren’t up in arms about those?
I do the same thing with music. My favorite genre is _extremely_ niche (filk - science fiction folk songs). I can find quite a bit made available by the artists online (filkarchive.org, for one); I also get some from filesharing. I’ve found quite a few of my favorite artists because someone had some of their songs in a share folder along with songs/artists I knew.
I buy their CDs (or tapes) when I can, usually from the (small) publisher or direct from the artist. But a lot of the songs on various fileshares are out of print or never were published, so the sharing is the only way to hear and learn these songs.
There are people who get noticeable income from filking - not many, but a few. And even fewer who make a living off music, though usually not just filk - they’re usually primarily marketed (self-marketed) as folksingers. The Internet, in many different modes, has been an absolute boon to these people - anyone who wants to can hear their music and buy it if they like it. And tell friends, and go to concerts…word of mouth is the best marketing there is.
The “music industry”’s attempt to hijack that and make whoever they’re pushing this month “cool” is now failing, thanks to the Internet, and I’m delighted. There still needs to be a better way for listeners to directly support artists they like - there have been a couple micropayments-to-artists sites started, but they all collapsed as far as I know. But artists - real artists, who sing/play/write songs because they can and they want to, not the overhyped product of the “music industry” - are still going and will still go on long after the “industry” has collapsed.
Does anyone else think that the term “music industry” is the whole problem in a nutshell? Art shouldn’t be an industry.
Very good analysis.
A point i think is indeed important in this situation, is the freedom filesharing of music gives the users - one can download albums to find out whether it is worth buying or not, and then buy what IS.
This is exactly what i do, and i believe there are several others sharing my point of view. Another aspect is the fact that you still have the same amount of money as before, but the differance is that you can spend it the way YOU want, not the way you are influenced by media to do, and as you say, this gives benifit to those smaller artists unable to buy commercials on TV. YOU can decide what artists you want to support, or in other words, what artists that deserve your money.
In the end i just have to thank you, Ernesto, for sharing this, but please post this on other forums, or send it into a newspaper in order to bring the message through to those not-pro-filesharers!
Cheers, Teodor
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting!
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
torrents are the way to go. screw the music industry and screw metallica too for whining so much that Napster got shut down. I don’t have a problem giving $ to the artists but hate giving it to record companys
heres the video
http://www.youtube.com/watch?v=aCkX0KcNwrI
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