Downloading Is Correlated With CD Purchases
from the correlation-is-not-causation dept
There's a new study out (via Michael Geist) about the relationship between peer-to-peer downloading and CD purchases in Canada. The authors found a positive relationship between downloading and CD purchasing. That is, those who downloaded more music also tended to purchase more CDs. It's important to keep in mind that correlation does not prove causation. In particular, I suspect that much of what we're observing here is simply the fact that people have varying levels of interest in music, and those who are more interested in music are likely to both download more songs and purchase more CDs. So these results by no means prove that peer-to-peer file-sharing isn't hurting the recording industry. On the other hand, it certainly belies the recording industry's simplistic claim that no one will buy their music if it's available for free on peer-to-peer sites. Clearly, there are a lot of music fans in Canada who have access to peer-to-peer networks and choose to pay money for CDs anyway. That might be because they want the extras that come with the physical CD, because they feel good about supporting their favorite band, or because they expect the audio files on the CD to be higher quality than the music they find online. Whatever the reasons, the recording industry should be figuring out how to capitalize on them, by coming up with new products that offer perks you can't get from a peer-to-peer network.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: business models, cds, correlation, downloading, music, p2p, recording industry
Reader Comments
Subscribe: RSS
View by: Time | Thread
Come on guys
It amazes me the record companies have not figured the true problem. If they chase consumers away then who is left to buy their CD. I honestly refuse to buy any hard copy of musical media since the start of RIAA's crusade. I will buy some music online if i really want it. But I have Sirius Satellite Radio, which eliminates all my need for hard media. I realize they still get their dues.
If I could I would like to starve them to death. They are just another pompous committee looking to line their pockets.
-Hey guys how can we make money without doing much work. Lets sue all these people who are downloading songs! We can even have a great excuse. We can tell everyone we are doing it for starving artists!-
-Months later:
Oh shit, they can fight back WTF?!?!?!?!?! We need to be serious!-
-Several failed cases later:
We got monies! Lets spend it on getting new attorneys who can sue a 5 year old and not flinch.-
and so on.
Can't it just end?
[ link to this | view in chronology ]
Suprise, Surprise!
[ link to this | view in chronology ]
Take the 80Gb iPod: at an average of 5Mb and $1 per song it would cost more than $15,000 to fill it up. And yet 80Gb iPods have sold very well. There's obviously a demand to be able to carry around music in this quantity. Unfortunately, very few consumers can afford it, even if you spread out the expense over a few years.
What this shows is that if record companies lower prices, consumers will probably not reduce their spending. Instead, they'll likely increase the number of units purchased. In other words, dropping prices would not reduce revenue. It's also important to note that because digital music has a negligible marginal cost it won't reduce profit either.
This represents a huge opportunity for record companies. Lowering prices would not reduce profits, but it could significantly increase them. Even though individual consumers won't spend any more money in the new price model than they did in the past, record companies can now reach many new consumers.
The new consumers can come from many groups: Poorer groups, perhaps in developing countries, who before didn't have the budget to even really enter the market. People who didn't see music as good value for the dollar when they could just turn on the radio or other alternative. Older people who don't want to buy a new copy of an old album and are still listening to their old tapes or LPs. People disgusted with the cost of CDs. People who used to use file-sharing networks or gray-market services like AllOfMp3. These are all people who before would have given the record company zero revenue who now may become good paying customers.
[ link to this | view in chronology ]
Here's my take
If they were 50c/song I suspect that I would purchase 5+ songs/month = $30/year.
At AoMP3 prices - a quarter per song, or so - it gets so cheap that piracy and file-sharing are no longer viable options for most of us - it is cheaper to purchase than have to look for the song online. At that level songs effectively become disposable and the cost of a purchase does not even register. How much would I spend? Don't know, but I suspect that it would easily pass $50/yr and probably top $100/year.
If they get rid of DRM. But that is another story.
The Content business are learning all the wrong lessons here - they should not view AoMP3 and its ilk as a challenge to their business model. They should view them as its future.
[ link to this | view in chronology ]
Well I be dammed....
[ link to this | view in chronology ]
Problem with CD's
Its really only cars and stereo's were buying a CD would male sense
[ link to this | view in chronology ]
Re: Problem with CD's
I won't settle for anything less than CD quality when spending money due to the fact that I listen via nearfield studio monitors while at the computer and notice a difference between lossless/cd-audio and mp3s...
[ link to this | view in chronology ]
Re: Problem with CD's
And even those markets are coming equipped with MP3 audio jacks, and iPod adapters built in as a standard feature. People love new toys!
[ link to this | view in chronology ]
The Industry
[ link to this | view in chronology ]
Re: The Industry
[ link to this | view in chronology ]
If there wasn't 'Free' Music on the radio - they'd be hard pressed to sell any CD.
How many CD's has anyone bought without hearing some of it first? In my whole life - maybe one.
[ link to this | view in chronology ]
it is called marketing
Downloads should be priced at $0.25/each.
Now that I have your attention...
Peer to peer and digital downloads represent a segment of the total market for music purchases. LP's still are being made. That should tell you something. CD's are still purchased. There are reasons that are obvious. Actually owning the hard copy at full resolution with the art work was important when records first came out. This concept is still important. People like having something in their hands with detailed information I expect.
These disks can still be put on a portable player in another format. Unfortunately, the download industry seems to think that $1/song is a reasonable value? Not sure... when I can buy the hard copy with the art and full resolution recording to do with it what I want for personal use for much less than the $1/song.
Some artists and marketers have figured it out. Take U2 "How to Dismantle an Atomic Bomb". Four versions were released. Online, a budget disk, a disk with more artwork, and a disk with a book. Each should have been priced fairly and were (except the download!). That is called marketing. Knowing your buyer. Who can afford what and what they want.
Let's face it some people are not going to BUY anything. They are not necessarily trying to break the law, but sometimes they cannot afford it. Peer to peer downloads spread the word, the art, and the music. I have plenty of reasons to PURCHASE THE MUSIC as presented above. Why don't the record companies provide more reasons to purchase music (more art, unique covers, etc)? Simple marketing.
Unfortunately, artists have seeming little say. Lawyers and business idiots seems to have more say.
[ link to this | view in chronology ]
yeah
Now amazon offering full albums of Non-DRM music for $7 or $8, I may start downloading. :)
[ link to this | view in chronology ]
and what about thinking green?
I realize we're all still conditioned to expect that we get goodies with our CDs, but at this point in time CDs are only barely up the media evolutionary scale from vinyl. We are so beyond that, but we (and the record industry) are frantically trying to hold on to a technology whose day has come and gone.
Even this article uses "CD Purchases" to mean "sales of music". I say, we disconnect this concept from the outdated format it's currently associated with.
But this would require a forward-thinking industry. So -- how else are consumers supposed to help drive this market into the current century? I guess we could keep downloading till we make our point ...
[ link to this | view in chronology ]
Re: and what about thinking green?
Now I have one of those alternative revenue streams Mike always rants about. I am going to sell CD's with lots of extra packaging. Wrap them with lots of plastic and foam and real mink fur. I will give the music away for free. I will make a killing from all the people who are smart enough to see through this environmental nazi BS and by the extra packaging just because some want to be hippie says they can't.
[ link to this | view in chronology ]
Ack
[ link to this | view in chronology ]
Re: Ack
How can I get my comments to be threaded by default?
http://www.techdirt.com/preferences.php
[ link to this | view in chronology ]
Another band offering a free download
They invite you to download the song for free, and give any money you would have spent (or time, if you'd rather) to Habitat for Humanity.
[ link to this | view in chronology ]
what about that EMP?
[ link to this | view in chronology ]
Re: what about that EMP?
[ link to this | view in chronology ]
Lacking a reason
Namely discovering new artists, I tend to buy cd's I find very good, but all my recent purchases have been of very unknown/indie label bands, bands that without the p2p networks I'd have no idea of existing, such as Satanicpornocultshop.
One thing you have to keep in mind is that the nigh on infinite amounts of music available will also mean that the buying of cd's is more fragmented and spread over a greater number of bands/labels then before, and that includes indie labels or bands that somehow sell their own cd's.
P2P can really aid bands with their sales, though the mainstream not so good music will suffer for it, as people's budgets haven't magically become larger, whilst what they listen has broadened immensly.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
As for the budget thing, as several have pointed out, the amount you're willing to spend on music depends on how much you like music in general combined with how much disposable income you have. So barring a major advance in civilization that raises the overall amount of disposable income, the music industry, collectively, is going to be making roughly the same amount each year (adjusted for inflation, of course.)
As the middleman becomes obsolete thanks to the internet, however, all of that money eventually goes straight to musicians, and none to lawyer shark pits. Again, I really don't see a problem here. So the fans get exactly what they want, the musicians are more successful, and lawyers need to go find a job that actually benefits society. There's really no downside here. :)
[ link to this | view in chronology ]
people who shoplift...
[ link to this | view in chronology ]
Re: people who shoplift...
Must we go through the ridiculous "infringement is not theft" argument again?
However, the main difference here is that there is actual statistical evidence that people who download buy more music. If you had actual evidence of that being the case for shoplifted clothing then we could discuss those findings. However, I think you'd find it's not true at all -- and it's not hard for anyone who bothers to think (rather than just spew the industry line) to understand why there's a difference.
If you understand the difference between infinite goods and scarce goods it all makes sense...
[ link to this | view in chronology ]
Re: Re: people who shoplift...
You're right, I really have no idea if shoplifters buy more than average or not. But the markets for recorded music and certain kinds of designer clothing are somewhat similar - demand is downward sloping as usual, i.e. varies inversely with price. Supply is mostly sunken cost (initial product creation, including IP acquisition costs, plus advertising/promotion); gross margins are extremely high. Since the manufacturers need to recover their fixed costs, and also cover the costs of some other acts or products which didn't work out, they can't afford to give away their "hits" to people who are both willing and able to buy but opt for the five finger discount.
[ link to this | view in chronology ]
Its true
[ link to this | view in chronology ]
yeah
Interesting how the TV industry is pushing more towards higher resolution HD technology while the music/audio industry in moving more towards lower resolution lossy "takedown" products.
My local CD store recently went out of business. At the sale I spent almost $200. The first thing I did when I got home was delete several of the albums worth of sketchy mp3s from P2P. Good for U2, Matisyahu, Television, Pretenders, the Clash, Rhino, BMG...
[ link to this | view in chronology ]
CDs
[ link to this | view in chronology ]
Now here is some bias
I will admit that this particular report can be a bit confusing because the very next paragraph of the same summary page says that there is a strong positive influence of file sharing for the Canadian P2P file sharing subpopulation. When I dig deeper and look at the actual results as stated in the report I get a 'No shit, Sherlock' moment.
What the report seems to have found is that for people that are willing to buy cds downloading files is more likely to increase their cd purchases. In addition, for those artists whose music is not available through traditional outlets, file sharing can increase sales of their cds.
However, for Canadians that rarely buy cds in the first place, file sharing reduces their urge to buy more cds. The report also shows no net effect of file sharing for Canadians that just want one or two songs from a cd.
So what the reports shows is a numbers game where the positive effect of one subpopulation is offset by the negative effect of another, resulting in zero over all effect. Tim almost got it right when stating that people who are interested in supporting artists by buying cds are more likely to buy cds if they are exposed to new music via file sharing. Unfortunately, it seems to me his bias got in the way.
[ link to this | view in chronology ]
People who like music, buy music...
People pay you for these insights?
[ link to this | view in chronology ]
[ link to this | view in chronology ]