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New study concludes file sharing does not hurt sales

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By Dennis Lloyd

Publisher, iLounge
Published: Monday, April 5, 2004
News Categories: Digital Media

The draft of a new study by Felix Oberholzer-Gee of the Harvard Business School and Koleman S. Strumpf of the University of North Carolina at Chapel Hill concludes that file sharing is not hurting record sales.

“The problem with the industry view, Professors Oberholzer-Gee and Strumpf say, is that it is not supported by solid evidence. Previous studies have failed because they tend to depend on surveys, and the authors contend that surveys of illegal activity are not trustworthy. “Those who agree to have their Internet behavior discussed or monitored are unlikely to be representative of all Internet users,” the authors wrote.

Instead, they analyzed the direct data of music downloaders over a 17-week period in the fall of 2002, and compared that activity with actual music purchases during that time. Using complex mathematical formulas, they determined that spikes in downloading had almost no discernible effect on sales. Even under their worst-case example, “it would take 5,000 downloads to reduce the sales of an album by one copy,” they wrote. “After annualizing, this would imply a yearly sales loss of two million albums, which is virtually rounding error” given that 803 million records were sold in 2002. Sales dropped by 139 million albums from 2000 to 2002.”

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Comments

1

There is no exuse for p2p file sharing with the advent of iTunes and other pay-to-play sites.

However, the notion of declining CD sales as a result of file sharing was an absurd ruse made up by fat cat music execs trying desperately to cling to their hammerlock on the market.

As many have noted, the decline in CD sales has mainly been a result of excessive CD prices (remember the music companies who were recently prosecuted for price fixing?) and due to the fact that music companies have mostly issued bad music.

Rather than looking at themselves for answers, the RIAA took the easy road and tried to pin the blame of file sharing, all the while refusing to negotiate digital music rights with online music sellers and refusing to accept the obvious new business model that developed right under their noses.

Posted by Obadiah on April 5, 2004 at 9:57 AM (PDT)

2

Funny throughtout my whole lifetime (19 years) I’ve only purchased 3 CD’s the rest is thanks to P2P (Napster, Posion, Bittorrent, etc.). If more people were comptuer savvy I’m pretty sure there would be a rapid decline in music sales.

Posted by AZ on April 5, 2004 at 10:07 AM (PDT)

3

Yeah I really don’t think the RIAA understood why they’re music sales declined.  I always take for example the Foreigner Greatest Hits (don’t laugh) CD I bought a little less than a year ago.  For 18 songs I paid $21 plus tax.  Now I know on something such as iTunes, that’s only 3 dollars over price.  What I can’t understand is how a 30 year old band can still charge such a high price.  It is interesting to note that the same store had Yes CDs for 5 dollars. 

In the words of Tom Brokaw, this is the “fleecing of America.”

Posted by Christophe167 on April 5, 2004 at 11:48 AM (PDT)

4

Feh. iTunes and its ilk charge far too much for sub-par quality recordings. If I am going to eschew liner notes, eliminate the distribution supply chain, and settle for muddy lossy compressions, I prefer to pay a lot less for my tracks than $1 a song!

AllOfMP3.com

0.01$ per 1Mb or $14.95 per month unlimited downloads.

You can set your own preference for MP3s, WMA, AAC, or Oggs, and select your own quality setting from ~128Kbps up to ~320 Kbps.

Posted by Bah on April 5, 2004 at 12:12 PM (PDT)

5

To christophe167 -

NOW you know what is so wrong about the music industry and record companies. Foreigner themselves aren’t charging you $21 - THE RECORD COMPANY IS!! (or, should I say, the publishing comany - such as BMI).

Foreigner is lucky if they see 1% of that sale.

Posted by Chris on April 5, 2004 at 1:23 PM (PDT)

6

Bah (or anybody)

Can you shed some more light on allofmp3.com? As a UK user I’m frustrated at not having access to digital downloads so how come iTunes allegedly has legal issues yet these guys don’t. I’m not interested in file-sharing but I can’t glean enough info from the web-site to convince me to commit.

Help!

Ta v.much.

Posted by bobsyerunkle on April 5, 2004 at 1:39 PM (PDT)

7

Russian companies can offer such low prices because Russian copyright protection is so weak that the Russian license holder RIAA equivalents are happy to settle for fractions of a penny.

From allofmp3.com:

“All the materials in the MediaServices projects are available for distribution through Internet according to license # LS-3М-03-79 of the Russian Multimedia and Internet Society. Under the license terms, MediaServices pays license fees for all the materials subject to the Law of the Russian Federation “On Copyright and Related Rights”. All the materials are available solely for personal use and must not be used for further distribution, resale or broadcasting.”

I guess just like pharma drugs and labour, Westerners end up paying above the world market average for music.

Posted by Russians on April 5, 2004 at 2:35 PM (PDT)

8

File sharing is a great thing. Its a great way to preview a new album or new artist. I have only bought 3 CD’s In my lifetime, but probably wouldn’t have if I hadn’t heard some of thier songs first on the net. There is also MIxtapes and Remixes that are easily found on the file sharing net works that you can’t find anywhere else. The RIAA is just looking to make a little money. Well Actually they just take a lot of money from little kids. They are a frickin joke.

Posted by G-Man on April 5, 2004 at 3:57 PM (PDT)

9

http://playfair.sourceforge.net/

The playfair program is quite simple. It takes one of the iTMS Protected AAC Audio Files, decodes it using a key obtained from your iPod or Microsoft Windows system and then writes the new, decoded version to disk as a regular AAC Audio File. It then optionally copies the metadata tags that describe the song, including the cover art, to the new file.

The original version of this program was derived from a Windows-only program called m4p2mp4.

Posted by Play Fair on April 5, 2004 at 4:17 PM (PDT)

10

what you people dont get is that the itms is really a ripoff. You are paying for previiously ripped music that has restrcitions on how many times you burn it and how many computers you put it on.  a song once in a while is ok to buy, but pay 2 or 3 more dollars and get the original at bestbuy with no restrictions and full quality. 

Posted by rob on April 6, 2004 at 3:53 AM (PDT)

11

Playfair,

muddy waters hacking DRM’s. DVDXCopy just got sued for the same stuff. If anybody’s interested i would get it now because it won’t be around much longer.

Rob,
In the terms you put it it is a ripoff. What you’re leaving out is the price you pay for convenience. Instant access and a much greater variety than you’re local music store carries has a premium. Plus, buy a big stack of cdr’s, burn the itunes track, the re-rip it with musicmatch. Restrictions are gone!

Posted by pigpen65 on April 6, 2004 at 5:59 AM (PDT)

12

“muddy waters hacking DRM’s. DVDXCopy just got sued for the same stuff. If anybody’s interested i would get it now because it won’t be around much longer.”

Notice that Playfair only lets you de-crypt files you already own.

So it means that Linux people will be able to buy songs from iTMS and use them on their machines. I applaud that.

It’s hard to sue and shut down open-source.

Posted by Playing Fair on April 6, 2004 at 6:25 AM (PDT)

13

Who are you people who have only purchased three albums in your life, and wtf are you doing with an iPod??

Posted by Red on April 6, 2004 at 10:55 AM (PDT)

14

Record sales suck because records nowadays well…..suck. Not all tbf but lot of them. Why, when I was your age…...raspberry

Anyways, there is one thing that is great about p2p is getting songs from albums long out of production. eg. travelling wilburys, muppet movie soundtrack etc. Lord help you if you want the Grim Fandango OST.

These albums can command up to $100 on eBay. And the artist gets absolute squat from the sale.

Posted by cockroach on April 6, 2004 at 12:51 PM (PDT)

15

iTMS is a joke. I feel sorry for all those people paying 99 cents for a 128 kbps recording. Just shell out a couple bucks and get the cd. Plus you have to back them up and stuff to make sure you don’t accidentally delete it from your computer if you format the drive or something. Personally, if i like an album, i go out and buy the actual cd, that way i’ll have a physical copy of it and a digital copy for only 2 or 3 dollars more than what itunes is charging.

And for all those people who legitimately buy all their music, how do you afford to fill an ipod from itunes?

Posted by eternaldragon on April 6, 2004 at 6:21 PM (PDT)

16

I have to agree with the folks that attribute declining CD sales to a combination of overpriced product and the generally BAD music that has been released over the past several years.  Is it just me, or do all the mainstream rock and pop artists of “today” pretty much sound alike?  Time was when every band had a unique sound, and you KNEW who was playing on the radio just by listening for a few seconds.  And where are the killer guitar players these days?  Most of the guitar work on recent “rock” albums could be easily duplicated by any 12 year old kid with a Squier Strat that knows three barre chords. 

Posted by Winky McFly on April 7, 2004 at 8:18 AM (PDT)

17

I file share and Buy a CD per month, file sharing gets you that song you remember from years ago that you can’t find in the shops anymore.

ps
Simon Cowell from pop idol doesn’t look too hard up does he.

Posted by dean on April 8, 2004 at 2:57 PM (PDT)

18

The 2 people who have only bought 3 cd’s would probably not bought anymore regardless of p2p sharing. Previously they would have taped off mates or bought taped and returned. If anything p2p has encouraged my allready out of hand cd buying. The reason being is that if I here a new artist on the radio, i download a few tracks and if i like it I go and buy a CD. I like to have the actual CD but listen to all my music through my Ipod or on the computer.
I agree with other writers about it being a waste of time downloading legal tracks at about 1 each when most albums can be brought for about 10 if you shop around a bit or buy of the net.
The latest trick by the record companies is these “cd’s” with copyright protection. I have some that will copy with interferencve and some that I cant copy at all. The upshot of this situation is that I cant listen to them except when I get the CD out. Therefore as I have 5000+ tracks I can listen to a lot easier they rarely get played. So what happens when the next album comes out is I probably wont by it because I wont have been listening to them . When they play live I wont go and see them and soon they will be long forgotten. And all because of some fat cat with no foresight.

Posted by matt on April 9, 2004 at 6:50 AM (PDT)

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