Did file-sharing cause recording industry collapse? Economists say no
By Matthew Lasar | Last updated about 11 hours ago
http://arstechnica.com/tech-policy/news/2011/03/is-file-sharing-the-global-future.ars
For the last decade, the movie and music industries have engaged in a
relentless struggle against Internet file sharing. One prominent theater of
this global conflict has been the UK, which last year saw the passage of the
Digital Economy Act. The law, if fully implemented, could allow Internet
Service Providers to disconnect "persistent infringers" of the UK's copyright
rules from the 'Net.
The zeal with which Hollywood and the recording industry have pursued this
ISP-as-cop approach around the world has prompted some ISPs to cry foul. "The
notion of disconnection without judicial oversight violates the presumption of
innocence," warned the Australian DSL service iiNet in a recent position piece
. "As the penalty for possibly minor economic loss (at the individual infringer
level) removal of Internet access is, therefore, both inappropriate and
disproportionate."
But even though the DEA is up for judicial review at the behest of the UK's top
telcos, the impetus for similar laws continues unabated. That's because the
content industry may lose a particular battle (eg, trying to force iiNet to
punish file swappers), but it has won a key aspect of the war: the argument
that file sharing has hobbled the music and movie business, hurt artists, and
cost jobs is the master narrative of file sharing—the center of most government
debates about the practice.
Now comes a paper from the London School of Economics that tries to do more
than just challenge the DEA. It argues that everything Big Content says about
file sharing is wrong. In fact, it suggests that file sharing is the future,
and that revenue downturns can largely be explained by other forces.
"The music industry is performing better than is being claimed and declining
sales can be explained by other factors in addition to illegal filesharing,"
say Bart Cammaerts and Bingchun Meng of LSE's Department of Media Studies. "The
negative framing of the debate about file-sharing and copyright protection
threatens to stifle the very same creative industry the Act aims to stimulate."
Downward economic pressure
There's no question that recorded music sales have declined over the last
decade—down from over $26 billion in 2000 to under $16 billion last year. But
the relentless focus on P2P sharing ignores other factors, these scholars
contend. The most important of these is the gradual weakening of the consumer
economy over the last decade, particularly over the last two years of global
recession. And it's going to get worse.
"Downward pressure on leisure expenditure is likely to continue to increase due
to rising costs of living and unemployment and drastic rises in the costs of
(public) services," says the report.
Having less money for entertainment has played a huge role in the decline of
items like CDs. A 2004 US Consumer Expenditure Survey showed that even spending
on CDs by people who had no computer (and were therefore unlikely to download
and use BitTorrent) dropped by over 40 percent from 1999 through 2004.
"Household budgets for entertainment are relatively inelastic as competition
for spending on culture and entertainment increases and there are shifts in
household expenditure as well," the LSE study notes.
And if file-sharing wasn't the major cause of the revenue downturn, stepping up
copyright enforcement is unlikely to return the industry to those heady days.
And while it is true that many consumers have turned to illegal file sharing in
bad economic times, a 2007 Journal of Political Economy study found that most
downloaders would not buy that content, even if they couldn't share it.
"Downloads have an effect on sales that is statistically indistinguishable from
zero," the authors flatly concluded then. "Our estimates are inconsistent with
claims that file sharing is the primary reason for the decline in music sales
during our study period."
But a later 2010 meta-study by the same authors concluded that piracy did, in
fact, account for a bit of the decline in music sales—around 20 percent. The
other 80 percent could be chalked up to the sale of digital singles rather than
whole albums and the rise of other media options like video games.
The new business model
Content industry analyses of the file sharing phenomenon tend to downplay key
sources of income for musicians, the LSE report charges, most notably revenue
from live concert performances. In 2009, for the first time, earnings from live
music events outstripped music sales in the UK. The music recording industry
was worth £1.36 billion (about $2.21 billion); the live music scene was
estimated around around £1.54 billion. Ticket sales rose by 5.8 percent,
"secondary ticketing revenues" shot up 15 percent, and receipts for related
services at concerts came to £1.54 million. (This didn't help the music labels
much because few profited from better live music sales; that is starting to
change.)
Legal file sharing also grew by nine percent globally in 2009, along with an
eight percent increase in performance rights revenue. "Growing from a small
base, the value of the global market for digital music increased by 1,000% in
the period 2004 to 2010, and by 2010 represented US$4.6 billion," the LSE paper
observes.
So what is emerging is an increasingly "ephemeral" global music culture based
not upon the purchasing of discrete physical packages of music, but on the
discovery and subsequent promotion of musicians through file sharing. The big
winner in this model is not the digital music file seller, but the touring
band, whose music is easily discoverable on the 'Net. As with so much of the
rest of the emerging world economy, the shift is away from buying things and
towards purchasing services—in this case tickets to concerts and related
activities.
"Some artists and music labels are making full use of filesharing and the
participatory culture it sustains rather than rejecting it," Cammaerts and Meng
note. "In the process, these artists and music labels are developing useful
alternative models for revenue generation."
Not-so-marginal activities
The authors of the study acknowledge that these alternative models are not
going to impress SONY and EMI. "Compared to the value of the mainstream music
market, dominated by the 'big four', these are relatively marginal activities,"
they observe.
But they may become less marginal very soon. With world mobile data traffic set
to explode by a factor of 26 by 2015, and with most people in the Middle East,
Sub-Saharan Africa, and South/Southeast Asia expected to link to the mobile
'Net before they get electricity, file sharing could be poised for a second
great leap forward, whether Big Content approves of it or not.
These millions of new Netizens are not going to have the money to buy digital
music files. They're going to use BitTorrent. That will put more and more
pressure on governments to decide whether they want to criminalize a huge
portion of humanity, or encourage the market to adapt to the new "ephemeral"
models described by this study and others.
Among other proposals these scholars want societies to consider is a "levy on
blank media use and consumer recording equipment."
The tithe could be part of the price of an ISP connection—"a kind of 'license
to download'. Debate should then re-focus on the alternative means of
redistribution of the proceeds from such levies."
_______________________________________________
Infowarrior mailing list
[email protected]
https://attrition.org/mailman/listinfo/infowarrior
