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Illegal Downloading and the Long Tail |
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There is a point that is often missed when record labels and the RIAA talk about the power of illegal downloads to suck profits out of the music industry. The typical argument is pretty simplistic, and it goes something like this:
Back in the old days, people used to purchase the music they wanted to listen to. When Napster and other peer-to-peer downloading networks arrived, people no longer had to pay for what they could download for free. Thus, with people buying less music, record labels make less money, and the music industry as a whole loses out because there is less money to pay artists, thus there are less artists, thus there is less music. The RIAA, the music industry's trade group, says illegal downloading is responsible for the recent loss of profits:
When 23 percent of surveyed music consumers say they are not buying more music because they are downloading or copying their music for free, we cannot ignore the impact on the marketplace.
However, I'm not quite convinced that illegal downloading affects the record industry's core profit centers as much as they like to think it does.
The record industry makes its money on hits. According to some, 90% of records put out by the industry fail to make a profit. So, those records that are real hits, say selling over 1 million copies, are the ones that are really driving the profits of record companies. But people download much more than just the hits, and so the illegal downloading phenomenon might not be cannibalizing as much of the record industry's profits as it might lead you to believe.
Last year, about 5 billion songs were downloaded illegally through peer-to-peer networks. I've attempted to roughly calculate how many of those were hit songs. According to PeerMind, a website that tracks peer-to-peer download numbers, the total number of downloads for the top 10 downloaded songs averages at about 8 million per week, or 416 million per year. That means that hit song downloads account for only about 8% of all music downloaded in a year. Hit songs, while being the profit center of the record industry, clearly only accounts for a small portion of peer-to-peer traffic.
So what else are people downloading? Well, in my experience, people download a wide variety of different songs. You might pick up that one song that's been stuck in your head for a week, or download the track that your mother used to sing around the house in 1979. You might download a song written by a local band you heard the other night, or a song from 10 years ago your friend just reminded you about. You might download a live concert, or a remix. People might download all sorts of songs, and none of them might be current hits. Peer-to-peer music sharing exhibits intense long tail characteristics, in that most of the activity is not focused on a few big hits, but spread out along the rest of the collective music catalogue. Instead of millions of people downloading one song, millions of people are each downloading millions of different songs. Eventually, those small, spread out numbers add up to the big download figures we see above.
I don't think the long tail effect of illegal downloads is necessarily bad for the music industry. How many of you would go out and buy an album just for that one song your mother used to sing back in 1979? I think it is a fair assumption to say that without peer-to-peer downloading, most people would just go without the little bits of music they were looking for. I don't think too many would be out running to the record stores, cash in hand, just for a few old tracks. I remain unconvinced that the record industry is losing a lot of money on these long tail downloads. If they make their money off of their hits, why get all up in arms about the downloads taking place downstream of the major artists. Clearly, downloading of major hits hasn't helped record sales (or maybe it has, that's a discussion for another time), but as most of the activity is concentrated away from the major artists, why does the record industry maintain that all illegal downloads are a threat?
Illegal downloading on the long tail might actually help record companies in the long run. If you sample a long-forgotten artist and really like the work, you might be tempted to actually buy a record. In fact, some studies have concluded just that, alleging that people who share music files spend four and a half times more on legal music than their non-downloading peers. The long tail downloading phenomenon can and should be seen by record labels as an innovative and comprehensive promotional tool. People can easily sample music across a vast catalogue of recordings, far more than you can find in any record store, and they can easily get turned onto new favorites in the process. Instead of suing customers for downloading what looks like to be mostly unprofitable tracks, why don't record labels concentrate on turning those long tail browsers into paying customers. I'm pretty sure that can be accomplished without lawsuits.
You're missing one main point:
The record companies don't just want to make money of the 50th percentile of the curve; they want to make money off all of the long tail… and collectively, a well managed library can make money from the long tail, so you're wrong there too.
"Back in the old days, people used to purchase the music they wanted to listen to."
I don't really agree with this view of the past. In the past, you could listen to the radio. Some stations played junk, but at least a few played interesting things. You could find new bands you were interested in.
Nowadays, ClearChannel owns almost all radio stations in the US and they force standardized play lists, which consist entirely of very poor quality boy band and rapper and country 'hits' whose play time is paid for by the record companies, intent on trying to control the market.
No one with taste listens to broadcast radio any more because it is nothing but lousy sounds and 50% or more loud commercials to shout you into buying junk.
Who needs that.
People are still interested in buying music, but they can no longer find it on the radio. They find it by downloading. Often the bands they find are completely independent.
I've bought over $1500 worth of CDs over the last 12 months, and only a couple albums were on labels anyone has ever heard of.
Commenter #1 is missing a part of the point. Yes, the record companies want to make money off the entirety of the "long tail". They want to make money when the wind changes direction.
The point in the article though, I believe, is that they simply won't be able to do that. They will not be able to develop a technology that allows them that much control.
So they have to come up with the strategy that best matches the current situation. I think the author is right to suggest that allowing for some free downloads in order to make people more engaged with music is a good strategy. The actual strategy employed by recording companies, which is to try and monetize every single music related transaction and threaten lawsuits on everything else is going to alienate their customer base, is doomed to failure.
Good article. Well presented.
As a long time music downloader I've pondered what the impact of my infringing may be and I've come to the conclusion that it is negligible. Why? Because I don't buy music, period. I didn't buy music before the conception of P2P and I wouldn't buy music if it were gone tomorrow, it's just too expensive to justify.
Personally I think the amount of money music producers and artist receive is absolutely ridiculous. Why are artist paid more than people who actually provide essential services? Teachers are paid 35,000-40,000 a year and are responsible for the future of hundreds of students, but a guy who cranks out some sob story in musical form, or a rap about life on the streets is entitled to millions? I don't think so. The music industry has created a false value on music, greed has eclipsed talent.
If the so called protectors of artist interests were to lay down their arms and adapt to the changing climate of intellectual property they could ride the wave of P2P with no ill effects, in other words, sell it for less and more people would be more inclined to buy it. Set a fair market value, instead of criminalizing your user base and forever alienating them.
Bro are serious….? I am going to be bried and I respect your opinion because numerous major labels are blood sucking money hungry douche bags, but what you are saying is complete absurd.
To expensive to buy a cd? Think about what your saying. First, a cd is a product that will last you a life time, something you can look back on and sentimenal value for. Music lasts forever. You moan and groan about how they are to expensive cds are, yet I am sure you won't have any problem going out to buy a t-shirt for the same price if not more that will only last you a year or so. Second, think how much that cd your buying really is…that 10 to 20 dollars is divided up and sent in several directions. The store, the distributor, the band, and the record label for instance all get a piece of that profit, which really isn't much if you think about.
Your main problem is your focusing on mainstream music and major labels, not considering smaller labels and bands. These people are affected by p2p tremendously. Plus, a majority of labels base where bands tours off record sales. On myspace, for instance, look at a bands comment area and you will see ridiclous amounts of comments asking why bands aren't showing up to so n so's town. Well if record sales are extremely low in that one area they wont waste their time if they think no cares about the band or will show up to show.
Side Note: Lol I keep seeing all these websites with tests and studies that prove illegal downlaoding does not affect the music industry and again there are people who don't deserve the money, but it's stupid becuase it does and they are still justifying something that is wrong. Be empathetic and put yourselves in their shoes! How would you feel if you spent a year or so pouring your heart out to make a new cd and then come to find out people are ripping the cd off-line not paying for a cent of your material. I would be pissed and feel cheated.
Again, we all sit here and b*tch, but about something an inexpensive as a cd for christ sakes, but don't have any problem paying anywhere from $20 to $400 to go watch an overpayed athlete hit a baseball or shot a hoop. If anything those are the people you should have a problem with.
I own a radio, I'm defiantly obstructing profit growth for the record companies. I own a computer, I download every digital file that I can possibly find, also cutting into their profits. I own an mp3 player, with a radio on it; is this double-dipping?
This whole thing is just because they can't turn back now, they might as well make themselves look the fool.
consider this…
much of the hit pop music produced by major labels contains various bits and pieces from old forgotten music. until now, this music was lost with time due to records wearing out, 8 track players replaced by cassette players, the transition to cds, etc. now with digital technology i can keep my music collection forever hypothetically, meaning that if i consistently listen to my library, the major new pop offerings will fail to hold my interest, thus changing the top 40 format completely, likely increasing turnover rates. increased turnover rates=increased production costs=reduced bottom line.
AND THAT'S THE BOTTOM LINE.
As an engineer, I just wish I could come up with a way to allow communications for any purpose that would render the RIAA or any official powerless to intercept it or know who the participants that sent or received it are. That would truly make a difference in our quality of life. The number of officious jackasses who want to control humanity is unnecessarily large, and they all think they have a mandate to control our politics or our information interchanges. From the RIAA, to the tax man, the headslamming imam the intent is simple…Control! Those who enable them are the lowest of the lower forms of life.
i can see your point. but my dad, being in the music industry has notices mass changes. the number of recording studios in Toronto has dropped significantly compared to the 80's. This may not effect all the solo artists, but mainly the average working man in the recording industry. we all know that usually a famous star will still sell his/her records, but its the smaller people behind making the record behind the scenes that are suffering.
One thing I've noticed is that the drop in CD sales may not be due directly to P2P filesharing, but rather due to retaliatory boycott action by the millions of angry filesharers sick of the persecution and lawsuits. In hundreds of forums, blogs and news sites, I see the same message: "Boycott the xxAA! Don't buy CD's." If enough people act on this, it WILL have a deleterious effect on sales, which ironically gives the xxAAs an excuse to blame it on piracy instead.
I'd really like to see a Nielsen survey on this, asking consumers the question "Are you boycotting major-label CD purchases in retaliation against record-label lawsuits?" or similar. I think we'd find that the drop in sales roughly correlates to the increase in boycotts.
Well presented and very correct.
Some comments to comments:
#4: Actually average artists (my brother is in a locally popular hardcore band) make about 1 - 10 % of any CD/Media sales. The real meat and cheese money artists make is from doing shows. The Recording Industry really is just milking artists of their talent and controlling what kind of music an artist produces so they can get as much cash as they can out of an artist. The only thing the Recording Industry does is advertise a band. Hence why my brother and his band have already decided never to sign any label. They may never get huge, but at least they won't be RIAA's bitch.
#8: Your dad is apart of the very monster that turns good artists into trash artists because they are expected to sound the same album after album so they can milk them for every little sound until everyone finds them repulsive. Your dad's job is B.S. if he actually does anything for the music community he makes it worse. And regular music fans are noticing. Luckily though your dad's boss's boss's boss is throwing lawsuits left and right to try to keep control of the market to insure your dad continues to be apart of the beast that kills artists. Maybe your dad should change jobs and do something that innovates the music industry. Otherwise he's going to get a pink slip anyways. Because I'm calling the music industry's bluff that they do ANYTHING for music at all.
I boycott the RIAA by purchasing great DRM-free downloads from the Russian web sites like Legalsounds.com and JustMusicStore.com. Eleven cents a track is THE fair price, not 99 cents. Songboom.com has a great directory, reviews, and discussions about the Russki download sites, all the information that the RIAA doesn't want you to know.
American greed and stupidity is destroying the music business, not music lovers. It has already ruined radio in the USA.
All im sayin is illegal downloading is now apart of this world, might be illegal but fuck it, marijuanas illegal too, but do more of the percent of people in this world smoke weed?? of course so no one will stop it its the nature of electronics or more specific, the INTERNET ha (Got the Internet Goin Nuts!!!!!)