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A Little Less Spin On Filesharing

February 17, 2012

A handful of media outlets – including Forbes – recently covered a report by longtime industry critic Mike Masnick whose basic gist went something like this:  while the major labels have complained that illegal file-sharing is damaging their business and a primary reason behind the plummet in music sales over the past decade, other areas of the music industry such as touring, merchandising and other complementary revenue sources have done quite well, implying that we don’t need to do anything about file-sharing.  The paper goes on to explain that because of these bright spots, the future of the music industry should be gauged as an exceedingly positive one for artists that – despite the claims of the major labels – has been booming. 

Who doesn’t love an optimistic view about the future of the music business? We’re as bullish about it as anyone and will never pass up a chance to tout the unprecedented variety of legal music choices today’s fans enjoy. The one problem? The study is highly misleading and doesn’t present an accurate or complete view of what has been really occurring in the United States in recent years. 

Want proof? Instead of looking at actual sales data that is widely available, the paper looks at a global sales metric that includes a much wider range of industries outside of music.  Moreover, we see real world examples that consistently show the importance of the “traditional” metrics for working artists.  For example, although the industry has embraced the concept of broadening revenue platforms, recent work by the Future of Music Coalition show that few artists are benefitting significantly from these complementary revenue sources. 

As for touring, the paper does accurately state that over a period, revenues from touring did increase. But it oddly omitted the important fact that concert revenues have actually declined since 2009.  In fact, in 2010, North American concert ticket sales dropped 15%, according to Pollstar. And in 2011, despite U2 setting a record for the highest grossing tour in history, North American concert sales contracted another 4%.

Finally, the original paper by Mr. Masnick included factual errors about SoundScan data. The increase in the number of new album releases only reflects the ease with which sales even in very low numbers can be tracked today (only a single copy needs to be sold to be counted).  For example, of the approximately 75,000 new albums released in 2010, about 60,000 sold less than 100 copies each, and a mere 1200 of them (less than 2% of the total) accounted for 87% of all new release sales.  

Regardless of the metrics you choose, the trends in the United States have been clear, with a market less than half as large as it was 10 years ago and 60% fewer employees in the music business.  Virtually every neutral academic study (overview here) has concluded that there is real harm to the music community when people download music illegally.   Further, while the paper talks about what a boon this has all been to musicians, it doesn’t seem to explain why there are so many fewer of them today.

We welcome bullish predictions about the future of the music business. We wholeheartedly agree that it’s a wonderful development that music is, now more than ever, such a central and constant component in people’s lives. But it’s also important to start with accurate reflections of today’s marketplace for the sake of all those in the industry who work hard every day to make these predictions a reality.

Joshua P. Friedlander
Vice President, Strategic Data Analysis, RIAA