Along with the OfCom report on research into digital content consumption also referred to in this Month’s Updates, new research by two European Commission researchers finds that “digital music piracy should not be viewed as a growing concern for copyright holders in the digital era” and that the results “indicate that new music consumption channels such as online streaming positively affect copyrights owners.” The results fly in the face of a recent report that said the closure of online platform MegaUpload almost certainly directly led to a decrease in online film piracy and an increase in legal digital sales of movies. Brett Danaher and Michael D. Smith, professors at Wellesley College and Carnegie Mellon University (CMU) said that “the closing of a major online piracy site can increase digital media sales, and by extension we provide evidence that Internet movie piracy displaces digital film sales.”
The two authors of the new report , Luis Aguiar and Bertin Martens, from the EU’s Information Society Unit, now say “Although there is trespassing of private property rights (copyrights), there is unlikely to be much harm done on digital music revenues” adding “This result, however, must be interpreted in the context of a still evolving music industry. It is in particular important to note that music consumption in physical format has until recently accounted for the lion’s share of total music revenues. If piracy leads to substantial sales displacement of music in physical format, then its effect on the overall music industry revenues may well still be negative.
The authors highlight the differences in the five countries investigated commenting: “The most striking differences appear when looking at the determinants of download. Compared to Germany, Spain show 230% more clicks on illegal downloading websites. Italy presents an important difference of 134% while the UK and France have 43% and 35% more clicks respectively. France stands out when it comes to streaming, with 150% more clicks than Germany. Spaniards have 20% more clicks than the Germans, while Italians have 25% less. The UK presents a small difference with Germany in terms of streaming, with only 9% more clicks
The authors also suggest that the lack of a legal alternative for a given piece of content may have a lot to do with whether or not its pirated. The authors also note that while music revenues have fallen steadily since 1999, last month the International Federation of the Phonographic Industry (IFPI) reported its 2012 global recorded music revenue is up for the first time in 14 years. It rose 0.3% during 2011, to reach $16.5 billion.
The pair conclude: “After using several approaches to deal with the endogeneity of downloading and streaming, our results show no evidence of sales displacement (emphasis added) Overall, our different estimates show relatively stable, positive, and low elasticities of legal purchases with respect to both illegal downloading and legal streaming” adding “All of these results suggest that the vast majority of the music that is consumed illegally by the individuals in our sample would not have been legally purchased if illegal downloading websites were not available to them.
In response, IFPI boss Frances Moore said “The study contains significant flaws and is therefore misleading in its conclusions about the impact of piracy. In particular, it uses a methodology that does not accurately measure digital music purchases and, very importantly, it omits from its assessment the impact of piracy on subscription and streaming services. Most research confirms a very different picture, which is that piracy overall has a negative impact on the legitimate music business”.
BPI Chairman and former EMI UK chief Tony Wadsworth told the Radiodays Europe conference in Berlin that he is very optimistic about the future of the music business. Predicting that the UK recorded music industry will pass the 50/50 point in terms of digital versus physical revenues this year, Wadsworth pointed to the growth of the mobile and in-car internet as providing even bigger digital opportunities for music services, and their music right owning partners, and the start of a new sustainable period of growth.
http://arstechnica.com/business/2013/03/new-research-music-piracy-should-not-be-a-concern-for-copyright-holders/ and for MegaUpload research see http://arstechnica.com/tech-policy/2013/03/researchers-movie-studios-made-more-after-megaupload-was-shut-down/