Shocking admission: I’ve downloaded copyrighted music.
Well, I don’t anymore, but have in the past. But, let’s get this straight, the music industry lost me long before CDs cost $18 in a mall. More on that later.
I set out with this post to find definitive numbers showing what I feel to be true: The music industry has lost its buyer base because that base no longer finds a good return on its investment.
I couldn’t do it.
I was inspired by this article, by Felix Oberholzer of Harvard Business School and Koleman Strumpf of UNC Chapel Hill. Their recent work compared U.S. file sharing traffic records to music sales. Their finding: “Even in the most pessimistic specification, five thousand downloads are needed to displace a single album sale.”
So, if Oberholzer and Strumpf are correct, one million people downloading an album might cost a record company 200 unit sales.
Knowing statistics to lie sometimes, I checked around a bit. The Recording Industry Association of America had their own numbers. The paper, titled “CDs: A Better Value than Ever,” reads as if bought and paid for by the RIAA. I had trouble following some of their logic as well.
At the same time, people flaming the industry as greedy find their own statistics. I’m not sure if the numbers on this site bear more credence than those of the RIAA, but their presentation at least makes sense.
The best I can make of these numbers is that, yes, illegal downloading has affected music sales. The affect, however, has been statistically small for unit sales while overall sales have grown dramatically — for a few lucky titles.
Now, back to where the industry lost this lamb. Oberholzer and Strumpf list among their “plausible candidates” for declining sales: “a reduction in music variety stemming from the large consolidation in radio along with the rise of independent promoter fees to gain airplay, and possibly a consumer backlash against record industry tactics.”
I’ve always spent a good portion of my disposable income on music. In that respect, I consider myself one of the consumers the industry should have in its sights. Yet, I feel the industry spends a disproportionate amount of time chasing 14-year-olds.
That means that I have to spend more of my time finding music that pleases my ear. Good artists are hard to find, and consumers often have to overcome a massive marketing deficit to find them.
Bypassing that gap, many artists now market directly to their fans. Rap artists such as Public Enemy and Souls of Mischief are really good at self-promotion. They provide possible models for the future of music distribution. Apple’s iTunes Music Store, the resurrected Napster and similar services offer another (Ed. note: I currently own Apple stock).
One thing is certain, though, music distribution is changing. Rapidly. And the RIAA and consumers need to ready for the change.