Music,Tech Innovation and everything in between.
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Music,Tech Innovation and everything in between.
Where the digital world stands as regards innovating for music.
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BitTorrent Piracy Boosts Music Sales, Study Finds

BitTorrent Piracy Boosts Music Sales, Study Finds | Music,Tech Innovation and everything in between. | Scoop.it

A new academic paper by a researcher from the North Carolina State University has examined the link between BitTorrent downloads and music album sales.

 

Contrary to what’s often claimed by the major record labels, the paper concludes that there is absolutely no evidence that unauthorized downloads negatively impact sales.

 

Instead, the research finds that more piracy directly leads to more album sales.

For more than a decade researchers have been looking into the effects of music piracy on the revenues of the record industry, with mixed results.

None of these researchers, however, used a large sample of accurate download statistics from a BitTorrent tracker to examine this topic. This missing element motivated economist Robert Hammond, Assistant Professor at North Carolina State University, to conduct his own research.

 

In a paper titled “Profit Leak? Pre-Release File Sharing and the Music Industry” Hammond published his findings.

Between May 2010 and January 2011 the professor collected a variety of download statistics of new albums that were released on the largest private BitTorrent tracker dedicated to music. He then used this data in combination with sales numbers to construct a model that predicts what the causal effect of piracy on music sales is.

The results are unique in its kind and reveal that BitTorrent piracy causes an increase in album sales.

“I isolate the causal effect of file sharing of an album on its sales by exploiting exogenous variation in how widely available the album was prior to its official release date. The findings suggest that file sharing of an album benefits its sales. I don’t find any evidence of a negative effect in any specification, using any instrument,” Hammond concludes in his paper.

In total the sample includes 1,095 albums from 1,075 artists. The research focuses on albums that leaked before their official release. The music industry often states that “curbing pre-release piracy is a particular priority for the recording industry.” These releases are also the focus of criminal proceedings against pirate sites both in the US and the UK.

However, according to the research, sales may actually be hurt by going after these sites. Hammond’s findings suggest that piracy itself acts as a form of advertising similar to radio play and media campaigns, where more downloads result in a moderate increase in sales.

That said, the effect described in the paper is a moderate one. Taking all factors into account Hammond finds that an album that leaks a month in advance results in 59.6 additional sales.

To some degree the results are surprising, as other studies have found a negative relation between music piracy and sales. However, Hammond notes that none of these studies had access to such detailed and precise download statistics which make it possible to go beyond the usual correlation.

Also, unlike several other studies, Hammond’s focuses on album releases instead of single songs.

“I focus on how file sharing of an individual album helps or hurts that album’s sales. The question of interest here is whether an individual artist should expect her sales to decline given wider pre-release availability of the album in file-sharing networks. I find that the answer is no.”

Another unique finding reported in the paper is that popular artists profit more from piracy than less established acts. For smaller artists there is no effect of pre-release piracy on sales. This contradicts older research. Hammond, however, notes that his data is richer than in the other studies, and therefore more accurate.

In addition, we’d argue that the focus on pre-releases may also account for the missing effect on new artists.

While the reported data appears to be solid, the question has to be asked how representative the data set is for all music piracy on BitTorrent. The private tracker in question has more than 150,000 users, who are almost exclusively more than average music fans.

Overall, the paper offers a unique and unprecedented analysis of BitTorrent piracy on music sales. It clearly disputes the music industry argument that pre-release piracy hurts album sales, and suggests that BitTorrent piracy can act as promotion.

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How Big Music Threatened Startups and Killed Innovation

An unprecedented new report has detailed how the destruction of Napster chilled a decade’s worth of innovation in the music industry.

 

Through interviews with 31 CEOs, company founders, and VPs who operated in digital music during the period, we hear how Big Music collapsed startups, turned down ‘blank check’ deals, and personally threatened innovators with ruination for both them and their families.

 

 

The result is an unprecedented report on how the shutdown of Napster chilled innovation, discouraged investment, and led to a climate of copyright law-fueled fear that pushed technologists and music further apart.

 

It started with a drain on cash. Interviewees reported that venture capital funding for digital music “became a wasteland”, a “scorched earth kind of place” housing a “graveyard of music companies.” With the big labels choosing where and when to sue, funding was hard to come by.

 

Nevertheless, some innovators didn’t give up, although when the labels were through with them many probably wished they had. The report details instances where innovators tried to get label approval but found themselves in extremely difficult situations.

 

One recalled that the labels “don’t license you if you don’t have traffic” but once enough footfall is achieved then “they want to get paid for ‘infringement’ and the longer it takes to license you, the larger the ‘infringement’ number they can justify charging you.”

 

Another described a litigation “Ponzi scheme” whereby settlements and other fees extracted from startups were used to fund the labels’ ongoing litigation strategy. However, like all Ponzi schemes there was a problem – maintaining momentum. “Once you stop suing new people there are no new settlements to pay for the ongoing litigation,” one interviewee reported.

 

But the labels weren’t always unreceptive to new ideas – as long as they were bad ones. The report notes that the labels were happy to take “big, up-front fees” of “10, 20 million bucks” from startups they knew wouldn’t make it. Carrier reports that a leading officer from one label admitted that they would “cripple the companies by demanding such advances and guarantees that they go belly up.”

Established services couldn’t make progress with the labels either, even when they did everything they could to avoid copyright issues. One, that boasted several million users and “interest from top-tier VCs – really the top of the top,” was also sued by the labels.

“After they sued us, our opening offer to them was: ‘You guys made your point; we will charge anything you want to charge, and you can take any percentage you want to take,” a respondent reported. “It was literally an offer of a blank check.” The labels refused and said they wanted the service shut down instead.

But for those who didn’t give in to the threats life could get very difficult, not just for their companies, but for them as individuals. The specter of personal liability often raised its head.

One innovator was told by the labels that his company would be left alone but he would be sued personally instead. “We can make all kinds of allegations and it’s your job to prove you’re not infringing,” he was told, with the labels adding that the lawsuit would cost him “between $15m and $20m.”

One of the respondents said it was “very scary” when the labels presented a “..multiple inch lawsuit for a couple billion bucks”, one with the potential to hang over his head for “the rest of [his] life.”

The threats also extended to the families of innovators. One was told it was “too bad” he had children “..who are going to want to go to college and you’re not going to be able to pay for it.”

Astonishingly, in some cases threats turned into actual violence. One respondent told Carrier about his experiences in the rap business of “people being physically intimidated” and “being hung out of windows.”

The strength of the threats were augmented by the uncertainty inherent in copyright law. One innovator said it was like a protection racket or the way politics work in corrupt countries where everything is OK until it’s not OK.

“You do what you want until one day you can’t and they come and your tail light’s broken.”

The full 63-page report, Copyright and Innovation: The Untold Story, is available here.(http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2099876)

 

(via torrentfreaks.)

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