Canadian Govt. Finds Files Sharers Buy More CDs

By Richard Menta 11/2/07

In February 2000 I wrote about an observation I had where a brief acquaintance of mine, who was an avid Napster user, was purchasing more CDs as a result of file sharing. This was the first article to explore the theory that users utilized Napster, which was only a few months old at this point, to sample music for potential purchase. Like radio, file sharing had the ability to promote artists, something we now take as common fact.

Since then there have been dozens of formal studies that supported the theory that active file shareres buy more CDs as well as a few - usually paid for by the record industry - that debunked it as myth. Interestingly, one 2002 study by Edison Research that claimed to support the record industry's take on file sharing actually supported the opposite conclusion after I dug into the data a bit.

Coming to the end of the decade the habits of file sharers are still being measured and the results continue to point to the simple fact that those who trade buy more records. This latest report comes from Michael Geist who writes about a study just completed by Industry Canada titled "The Impact of Music Downloads and P2P File-Sharing on the Purchase of Music: A Study For Industry Canada".

The research followed the habits of 2,000 Candians and, as Geist points out, there were two key points:

  1. When assessing the P2P downloading population, there was "a strong positive relationship between P2P file sharing and CD purchasing. That is, among Canadians actually engaged in it, P2P file sharing increases CD purchases." The study estimates that one additional P2P download per month increases music purchasing by 0.44 CDs per year.
  2. When viewed in the aggreggate (ie. the entire Canadian population), there is no direct relationship between P2P file sharing and CD purchases in Canada. According to the study authors, "the analysis of the entire Canadian population does not uncover either a positive or negative relationship between the number of files downloaded from P2P networks and CDs purchased. That is, we find no direct evidence to suggest that the net effect of P2P file sharing on CD purchasing is either positive or negative for Canada as a whole."

So if file sharing is so good for record sales how come CD sales are down sharply? Well, first off it is "major label" CD sales which are down. CD sales from independent labels are up, reflecting the broadening of consumer tastes as they sample more music. Add to this former major label artists like Radiohead and Trent Reznor who now distribute records on their own. Second, records as a whole are facing increased competition from the movie, TV and gaming industries for your dollar, though this research found that heavy users of these media buy all media heavy, including CDs.

Finally, there is the issue of consumer badwill, generated by the major label's inability to leverage to their favor the changes in technology that made music distribution a near zero cost. The major labels have a severe public relations issue that has pissed off so many consumers the damage may be irreparable.

One of the smaller points the reports made was that people who own MP3 players are less likely to buy CDs, signifying a consumer shift to digital media. Right now iTunes claims 85% of the paid digital market, but even here the major labels have an acrimonius relationship. In my personal opinion a price drop, not price raise, would help that situation as would the abandonment of DRM, which would restore trust in all other services not named iTunes and build competition. Amazon is already working in that direction.

No doubt the CRIA, Canada's major label lobby, will attempt to debunk the results to push upcoming copyright legislation in that country to their favor. That doesn't change the fact that the problems the industry faces goes deeper.

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Other MP3 stories:
iPod Killers: 30 New Players for the Holidays


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