In recent years many academics have researched the link between Internet piracy and the revenues of the major music labels, with varying results. Some have concluded that there is no adverse impact of piracy on sales, others argue that there’s a moderate negative relation.
While the music industry and many researchers seek answers in the piracy realm, other drastic changes are too often ignored. The availability of free on-demand music through legal services such as YouTube for example.
Researchers from Fairfield University and the University of Colorado have started to fill this gap with a new study. In their working paper the researchers examine the effect of Warner Music’s 2009 YouTube blackout on the record label’s album sales.
At the time, Warner pulled all their music from the video hosting service due to a licensing dispute. The researchers use this event to compare the sales of Warner’s artists listed in the Billboard Album 200, to those from labels that still had their videos on YouTube.
The results are intriguing, to say the least. After controlling for several variables, such as music genre and album specific characteristics, they found that Warner’s top artists sold many more albums during the blackout.
“We showed that the removal of content from YouTube had a causal impact on album sales by upwards of on average 10,000 units per week for top albums,” the paper reads.
According to the researchers, these results indicate that YouTube doesn’t always serve as a promotional tool as many claim, certainly not for the top artists.
“While a great deal has been said about the potential role of these service in promoting and discovering new artists and music, our results cast some doubt on this widely believed notion, at least with regards to top selling albums [...], they write.
The researchers estimate that for the top albums the total in lost sales because of YouTube equals roughly $1 million per year. This is a significant percentage of the label’s total revenue.
It is hard to say, however, that YouTube is hurting overall revenue, as the advertising revenue it receives from Google also brings in a significant sum of money.
The results, which are largely driven by the top selling albums, suggest that there is no promotional effect of YouTube on album sales. In addition, there is no effect on Google searches for the artists in question either. In other words, YouTube doesn’t mainly hurt album sales.
“Our findings suggest that sales displacement effect can be real without a promotional effect. That is, the people listening on YouTube appear to be, to some extent people who would know about this album anyway, but may not buy it because of YouTube,” the researchers conclude.
The findings are interesting for a variety of reasons. Although they don’t prove that YouTube costs the music industry more than it brings in, it clearly shows that there are more factors that can explain people’s shift in music buying habits than piracy alone.