InvestorsHub Logo
Followers 7
Posts 2743
Boards Moderated 0
Alias Born 03/29/2001

Re: berge post# 58552

Friday, 01/16/2004 12:26:45 AM

Friday, January 16, 2004 12:26:45 AM

Post# of 93819
Did Big Music Really Sink the Pirates?
JANUARY 16, 2004 • Editions: N. America / Europe / Asia / Edition Preference

Surveys showing that lawsuits have greatly reduced file-sharing may be seriously flawed. By some measures, swaps are actually escalating


The Recording Industry Association of America's lawsuits against online song swappers are aggressive, but do they work? Two widely cited surveys seemed to show that legal action, which began in September, was chilling file-sharing activity. In December, a phone survey by the Pew Internet Project of 1,358 U.S. Net users found music downloading had dropped by half since May. And in November, comScore Media Metrix, monitoring 120,000 U.S. users, saw big yearly declines at four popular file-sharing services -- KaZaA, Grokster, BearShare, and WinMX. Advertisement

Trouble is, those surveys provide a relatively narrow view of the file-swapping universe. BayTSP, a Silicon Valley watchdog that works for three of the major record labels, tracks the number of songs available for download worldwide. It sees just a 10% drop since July and also notes steady migration from older, virus-ridden programs like KaZaA to hipper peer-to-peer networks such as eDonkey and Bit Torrent -- which were absent from comScore's tally.

And Los Angeles-based researcher BigChampagne, which monitors millions of global file swappers, actually sees a 35% increase in illegal traffic from 2002 to 2003. Given BayTSP's and BigChampagne's broader sample sizes, says John Palfrey, of Harvard Law School's Berkman Center for Internet & Society, "They're going to have more accurate empirical data."

FLEXIBLE ARCHITECTURE. What explains the apparent discrepancies? Many analysts point to Pew's methodology -- phoning U.S. adults, who may be reluctant to self-report an illegal activity. Concedes Pew analyst Mary Madden: "It's quite possible that some people simply didn't want to admit to downloading now."

And comScore analyst Graham Mudd says he would expect different results had the study included overseas users and more services, whose constantly evolving network architecture make detection more difficult. Still, BigChampagne CEO Eric Garland says, "The Pew study underscores the dramatic and definitive effect" of the RIAA campaign. Indeed, the RIAA declined to comment on the surveys but says its own studies show increased public awareness of the lawsuits "and the consequences."

If the perceptions have changed, the reality is that the RIAA's suits have targeted only uploaders of music -- that is, people who make files available for others to copy. No one has yet been sued for simply downloading an MP3 file to his or her PC.

"TALMUDIC QUESTION." And amid the continued resilience of the file-sharing set, the decline in record sales is abating. According to Nielsen SoundScan, in 2003 CD album sales slipped 2% -- a less dramatic drop than the 9% slide the previous year. Also, fourth-quarter 2003 sales picked up 5.6% over 2002. So what does that do to the record industry's long-held argument that online piracy is killing music sales? "That's almost a Talmudic question," muses Michael McGuire, a Gartner G2 analyst.

Some observers, such as BigChampagne's Garland, believe it punctures the myth that downloading a song and buying a CD are mutually exclusive events. "This really is forceful evidence that those are independent variables," he says. In fact, Garland points out that BigChampagne's list of the most-downloaded songs tracks closely to the Billboard charts, which in part rely on sales totals.

Others, such as McGuire, maintain that file-trading is but one of many factors that conspired to dampen music sales. Others include pricing issues, the ubiquity of CD-recording drives on PCs, and fewer new CD releases.

NOT FADE AWAY. What's clear, though, is that until the music industry gets fully behind online music sales, file-swappers will flock to next-generation sites like eDonkey -- which has seen 150% growth in the past year, according to independent tallies by both BayTSP and BigChampagne.

"This stuff is not going to go away," Gartner's McGuire says. "The industry needs to provide a compelling legal alternative." Until that happens, pirates will continue to rule the online music seas.


By Brian Hindo in New York

Join the InvestorsHub Community

Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.