EU Piracy Report – Ramifications For The Music Business
The European Commission has released a report on the effect of digital music piracy on digital music consumption. It seems to have generated a giant backlash from the vested interests of the Major Labels including the IFPI, their representative body, and certain digital music services including Spotify.
TMV have now read the report and our view is that the report is on the money (pun intended) and accurate when compared to the propaganda put out by the IFPI and its members. Do not get us wrong; illegal file sharing is stealing in our view, and does lead to less money for artists. However, numerous other reports not controlled by the industry have also come up with similar conclusions to this particular study.
What is of immense interest is the fact that the report details that illegal file sharers are likely to consume more paid for music content than their brethren who do not frequent piracy sites. The author’s state in the report that “the figures show that legal consumers (individuals that never clicked on an illegal music website during 2011) are, on average, active 2.5 months a year, while [illegal] downloaders are active almost 6 months a year. Most interestingly, [illegal] downloaders are also more active than legals both in terms of legal downloading (10% more clicks) and legal streaming (40% more clicks), as shown by their mean values of clicks. A positive relationship between legal and illegal consumption of digital music therefore emerges from this simple comparison of means.”
On the flipside the metrics used for measurement of the study may not be perfect – yet what other metrics would be suitable to use in measuring across such a large number of territories, users, legal and illegal digital music services? TMV challenge the IFPI to deliver an unbiased study utilising similar metrics.
The fact that Spotify has come out against the report is of no surprise to TMV as the major labels have a vested interest in the service via equity ownership. From day one the streaming service has come out stating it was a saviour against piracy in the sense that at least Spotify competes with piracy and successfully delivers revenue. What did the music business expect Spotify to say? Of course it would come out negatively against a report detailing that illegal downloaders actually purchase more music than non-file-sharers.
However, the real issue in TMV’s view is that instead of shooting the messenger its time the industry comes to the table with an open mind and uses this information to make it’s self stronger and generate more revenue for the industry as a whole. Piracy has been around for decades if not centuries and it has not succeeded in killing any industry whatsoever.
Yes structural change has occurred as stealing content has become many times easier and there can be no doubt that this has led to less revenue for rights owners. Piracy has also most certainly devalued music in the eyes of the consumer, yet so have the industry themselves – by fighting against where music consumers both illegal and legal were driving the business. Perhaps if digital had been embraced with easy access back in 2000 the industry would not be in the position it is today.
However, it is all too easy to discuss hindsight, TMV prefer to focus on the here and now. So examining this reports conclusions it is clear that the industry has been working to win over illegal downloaders enabling the massive expansion in streaming services, which offer music for free to consumers – so rights holders are getting paid.
Perhaps music was overvalued in the first place, in terms of the value consumers placed on it and were prepared to pay for it? Music is available and listened to by more people than ever before in its history, so the real issue here and now is to figure out how to further monetise that.
More importantly, there can be no argument that Google has played a massive part in helping piracy to thrive. Whether that was intentional or not is a moot point. The fact is you can type in any artist name and you links will have links to pirate site’s outnumbering those to legal sites. The recent campaign to shame brands who’s advertising supports illegal file sharing sites is a worthy cause which TMV supports. It would be helpful if Google gave all of the revenue it earns from SEM directly related to pirate sites back to the industry so rights holders and ultimately artists actually got paid from pirate sources. Hitting the pirates in the money pocket is exactly the right way to bring them to the negotiating table. Why do we want to negotiate with such people – because the user data is of immense value to brands and music rights holders themselves.
There is no doubt Google would be singing a different tune if the music business managed to access its search algorithms and placed them on sites where the music industry made money from advertising which was generated by the immense traffic allowing people to download these Google search algorithms for free. Food for thought folks…
The fact is piracy has been around for centuries in many forms and will never disappear. If this EU Commission report details that music consumers who illegally download content actually spend more on content and specifically music content than non-pirates – then work out how to increase revenue from that illegal use. Brands listen to what the data is telling them, so why can’t the music industry do the same?
Trying to eradicate piracy is as dumb as the “war on drugs” and equally destined for massive failure. A much more realistic opportunity is trying to work out how to increase the legal consumption of these pirate site users even further. The demand is clearly there and it is not going to go away – just as it is the same with drugs. They obviously love music albeit their support of piracy is misguided – turn these users into assets not enemies. By all means seek out and bring to justice those serial offenders who refuse to come to the table and negotiate – but do not expect to win music consumers over as fans from it.
Give abusers an olive branch first before you whack them with a stick … if it works for Getty Images, than why not the music business?
On a final note you can download the report here and make up your own mind. Please do feel free to leave your comments below as this is an important debate folks.