Online piracy 'devastates' music

[Bombardier]

The impact of online piracy on the US music business has been "devastating", says the head of the Recording Industry Association of America, Cary Sherman.

He told a conference in London that a 31% decline in music sales between 1999 and 2002 was primarily due to piracy.

"More music is being consumed than at any time in history, it's just that less of it is being paid for," he said.

The industry is fighting back by licensing download services and taking legal action against music pirates.

The RIAA is also backing a large-scale "educational campaign" including public service adverts and targeting the university student market, a major area of piracy.

Mr Sherman was speaking at this week's Financial Times New Media and Broadcasting Conference in London.

Film file-sharing

Escalating online sales in the US suggest that lawsuits targeting pirates are having an impact on peer-to-peer file-sharing of copyrighted material.

Although legitimate online sales are up sharply, they still represent only a fraction of what is being exchanged via the net.

Rob Sisco, president of Nielsen Music, said lawsuits by the RIAA have rekindled sales, not by striking fear in music pirates but by educating users.

The US film industry is also threatened by rampant internet piracy.

This has been made worse by the increased availability of broadband and the imminent removal of technical barriers to moving and storing massive amounts of content, said Dara MacGreevy of the Motion Picture Association of America.

In 2003, Hollywood lost $3.5bn from hard goods piracy alone, while internet piracy losses are harder to quantify, he added.

But despite piracy fears, analysts believe the future of the music industry lies in online digital downloads.

Since the files can be easily transported and stored on a range of devices, they have transformed the way people consume music.

Chris Gorog, head of the Napster music download service, believes ventures like his will be highly profitable in the long-term.

He told the FT conference of his plans to expand from the US into Europe this year, with the UK as the first entry point.

By 2008, one-third of music sales in the US and nearly 20% in Europe will come in the form of downloads and streaming music over the internet, building a multi-billion dollar business, according to a recent study by consultancy Forrester Research.

http://news.bbc.co.uk/2/hi/technology/3532891.stm

[Bombardier]

I really doubt music is "devistated" by file swapping.

What's is really "devistating" the music industry, is acts such as Justin, Britney, or Christina who can't sing, but use their physical appearance to try and sell CDs.

Also, endless compilation CDs like "The Super Greatest Hits 4" and "Now, That's What I Call Crap, Vol. 3"... are useless.

The RIAA should be learning (or will hopefully learn someday) that music fans online have woken up and trade actual "good" music for the most part.

Yes, mainstream music is still on P2P but fans themselves are deciding what music they like, not some payed-off 'payola'ed radio station run by Clear Channel Communication$.

[DudeAsInCool]

The record industry has only themselves to blame. They didnt change with the technology or keep up with the kids. There's no doubt in my mind that online swapping has affected them - what else accounts for all the record store closings, job losses and consolidation within the industry. Bad music and a bad economy are factors, too. They better wake up soon or they will go the way of the horse and buggy.

[Meehowski]

The record industry has only themselves to blame. They didnt change with the technology or keep up with the kids. There's no doubt in my mind that online swapping has affected them - what else accounts for all the record store closings, job losses and consolidation within the industry. Bad music and a bad economy are factors, too. They better wake up soon or they will go the way of the horse and buggy.

Agreed........Q.E.D.

[-medusa-]

..... There's no doubt in my mind that online swapping has affected them - what else accounts for all the record store closings, job losses and consolidation within the industry....

Don't underestimate or over simplify what the RIAA ultimately wants....

Accounting for the change should be simple. Delivering content electronically (downloading music, software or any other product for that matter) reduces costs. The bottom line.... gross profit increases. The lawsuits are an effort to bring the controversy before the Supreme Court and Congress. The issue is control as the industry quietly positions a move into online sales...and they want it all.

Why haven’t maximum fines been imposed on those charged to date? They have demonstrated little concern for customer taste, wants, or opinions, which discredits RIAA statements regarding settlements. Imposition of the maximum penalty would have instantaneous effects in the p2p world. Deep pockets can focus on longer-term goals. As a very smart friend of mine says, "Follow the gold, you’ll find all the answers".

Complain loudly about decrease in sales blaming the p2p market rather than poor product or the economy (potential for alienating congressional votes). Blame the p2p market for causing retail store closings voiding the contracts the industry has with them—note: voided early without monetary penalty to the industry and more than likely dismissed in the stores declaration of bankruptcy.

As a crude analysis: reduce the cost of employees, floor space in retail stores, transportation, warehousing, pre/post store delivery, packaging (a per item cost-multiplier by millions), labor (the largest expense), promotion, advertising, and many intangibles. These are a few of the costs that are/would be eliminated by delivering content via electronic means. The savings are enormous; the immediate exponential profit is staggering but real.

Alienating a customer base with inflated prices for merchandise, poor product, heavy handed legal tactics, violation of privacy rights via legitimate/illegitimate methods, and otherwise throwing enough 'confetti' into the air to cloud the issue is a great tactic but isn't realistic. Violating the laws of success in business is a blueprint for disaster.

The question is not loss of revenues due to p2p or other means of file sharing. How would an astute CB, CEO, CFO etc handle such an opportunity to cut expenses while increasing profit margins and multiplying sales exponentially? Better question: how have other industries recently responded? Analysis, setup, implementation, and tune to success. The industry is not led by incompetents but by bright, quite often brilliant, hard-working individuals who set long term goals for breakfast!

Years have passed while the industry raked in huge profits. Rather than pass economies of scale on to the consumer even slightly by reducing prices the industry responded by increasing prices. They did because they could without a loss of revenue; there was no competition. The music industry for all intents and purposes is a monopoly/oligopoly; but, music cd's, vinyl, movies are a luxury item not a need. The silent vote by consumers to spend disposable income on other luxury items continues to be ignored. Consumers have long complained to the industry. The industry listened but ignored the demands of their clientele---ultimately you.

Yes, file sharing may cause a drop in sales but is it more than would be experienced in a long term boycott, or flat out rejection of the product? No. Who knows...why should anyone care from a competitive and capitalistic approach? The response from the industry has been a legal one continuing to move the issue to the Supreme Court and Congress. It is doubtful the lobbyists or law firms are complaining or seek a quick resolution.

Simple implementation of a competitive response to Napster, Audiogalaxy and Kazaa should, would, and could have returned unimaginable profits. Side effects of such a response: immediate favor with old and new customers, expanding market share, and garnering incalculable goodwill. Immediate expansion of market share is a fantasy rather than a reality in most cases but exits in this case. Typical focus for any industry or business is on retaining market share. The underlying premise is that there would have been no legal threat to customers, for obvious reasons, and customers would have flooded their websites. The industry’s profit would have surpassed any experienced to date.

What is important enough to forego such profits?

Obviously consumers are buying music and profits for both major and independent labels continue. Competition drives the market but we are looking at an industry that has little need to expend the effort to compete if they can bring the issue to the Courts and influence Congress to pass a few more favorable laws. A waste of capital and time for everyone. The risk of public backlash in this case is high enough to warrant readdressing such goals.

The industry currently has the potential to turn the tide and experience all the benefits mentioned above. The monetary return far surpasses the initial expense. There are few opportunities to become a phoenix in life let alone in industry, especially from blunders such as those being made by the RIAA, but it is indeed possible.

Miss by a mile or an inch, it's still a miss; to date it appears that the industry has missed the boat. Missing the boat means left behind standing on the shore watching progress and opportunity (equate to $$$$) sail away.

[DudeAsInCool]

Now that's the best putdown of the RIAA I have ever heard. Its an understatement to say they blew it, and that they continue to blow it. But as the most powerful attorney in Hollywood told me, "It's hard to compete with a free model." Frankly, I think technology caught them off guard and they still havent figured out what the hell to do to this day

[Kooperman]

The RIAA, composed of the record companies, has only itself to blame for their problems as -medusa-'s fine post states. Rather than treat the artists and the consumers fairly, which would have still amounted to boucoups profits for them,

they chose to stiff both their sources of product and the targets for the product. Because of technology the artists and the consumers are moving on...when the RIAA inevitably wises up and responds with a new method of operation they're going to find that the artists are realizing that they can make a new business model work for them, one that doesn't include the RIAA. And the RIAA is also going to find that the consumers have also found ways to acquire music that doesn't involve dealing with them. Consumers will pay for music they love at fair prices...something the RIAA never offered.

[-medusa-]

Now that's the best putdown of the RIAA I have ever heard. Its an understatement to say they blew it, and that they continue to blow it. But as the most powerful attorney in Hollywood told me, "It's hard to compete with a free model." Frankly, I think technology caught them off guard and they still havent figured out what the hell to do to this day

right...I forgot that this is the same industry that for years (over)packaged cd's in long boxes so that they would fit in vinyl display bins rather than change them to fit the jewel case and showcase more product in the same space!

A free model that has the inherent risk of lawsuit attached when countered with a

reasonably priced

zero risk model will usually lose. As a general rule I doubt there are many that enjoy putting on such high risks as the full legal penalties allowed the RIAA. Most people like to stay between the lines.

Though there will always be exceptions...right koop?

Caught off guard maybe, but they migrated to the ostrich family and may get unpleasant surprises!

They are spending far more on legal fees than they would in implementation to sell, at a reasonable price, to a market that is obviously clamoring for their product. Obviously money is not the problem, nor the sales volume, nor the loss of sales. Does make a body wonder why they are walking away leaving pure profit on the table.

[DudeAsInCool]

Because they are paranoid and greedy, and no one stays at one job long enugh to care, cause they are always on guard for the new job - so no ones running the ship

[slum_goddess]

excellent post, medusa. one thing about the lawsuits: they're strictly a bully tactic and exactly what title 17 of the copyright law provides, the right of copyright holders to sue for infringement. & i believe the reason maximum fines haven't been imposed is nobody can pay them.

haven't been around the last few days so i don't know if this was addressed but CNet news said audible magic has new tech that 'claims to be able to automatically identify copyrighted songs on networks like Kazaa and to block illegal downloads.'

[slum_goddess]

sorry, just woke up and reread this topic and sub-title...yeah, according to the RIAA. boo fuckin' hoo, i weep for them all.