AtNewYork.com - April 30, 2002
Music Fans Rip More, Spend More
By Robyn Greenspan
Fierce opponents of music downloading may not appreciate the findings of research conducted by Jupiter Media Metrix indicating that experienced file sharers are 41 percent more likely than the average online music fan to have increased their music spending levels.
The music industry has been outspoken about its disdain for Internet file swapping, with former Recording Academy president and CEO Michael Greene calling the sharing process, "the most insidious virus in our midst." Greene also says that the Recording Industry Association of America (RIAA) estimates that an astounding 3.6 billion songs are illegally downloaded every month.
Jay Berman, chairman and CEO of the International Federation of the Phonographic Industry (IFPI) cites the Internet as the cause for a 5 percent drop in global music sales. "In 2001 the international recording industry was caught in a perfect storm, buffeted by the combined effects of mass copying and piracy, competition from other products and economic downturn. The industry's problems reflect no fall in the popularity of recorded music: rather, they reflect the fact that the commercial value of music is being widely devalued by mass copying and piracy," said Berman.
Jupiter theorizes that the real reasons for the decrease in global music spending are multi-faceted. Normal music market cycles combined with an overall drop in consumer spending, coupled with increased competition from other entertainment product categories, and increased reliance by the music industry on a small number of titles for the majority of sales may be factors. Also, the end of the CD growth period, which was spurred by consumers upgrading titles they already owned in other formats, is a contributor to the 5 percent decline.
Jupiter's research was conducted in June 2001, coinciding with the examination of the industry by the IFPI, and is based on a survey of online music fans (defined as users over the age of 18 who had visited a music site in the prior year). Findings include:
* Three technologies - file sharing, broadband and CD-writable drives - do indeed influence consumers' music spending habits, but in both directions. In essence, such technologies polarize the market.
* All three technologies and their various combinations contributed to decreases in spending among online music fans. While CD-writable drives and broadband access are both unambiguously bad for music sales, for file sharing and all technology combinations, the positive impact outweighed the negative. Aram Sinnreich, Jupiter analyst and author of the report cites this example: "...while music fans with all three technologies were 95 percent more likely to increase spending than the average music fan, they were also 65 percent more likely to decrease spending. Similarly, while file sharers were 41 percent more likely to increase spending than the average music fan, they were only 21 percent more likely to decrease spending."
* Jupiter has determined that experienced file sharers are 41 percent more likely than the average online music fan to say that they have increased their music spending levels during their exposure to music on the Web. However, users with CD-writable drives were 7 percent less likely than average to report increases, and broadband users were 18 percent less likely to report increases. These two technologies present a far greater detriment to market growth than file sharing. However, when any two or all three of these technologies are combined, the result is a considerable upswing in reported spending growth.
* Consumers with all three technologies were the most likely of all to say they had increased their purchasing - 95 percent more likely than the average online music fan. In other words, far from being inherently detrimental, file sharing both boosts spending on its own and helps mitigate the detrimental effects of CD-writable drives and broadband access.
* Among all online music fans, 29 percent said that their music spending habits had changed - 19 percent reporting an increase and 10 percent reporting a decrease. Among experienced (6+ months) file sharers, the combined number grew to 48 percent. Among music fans with all three technologies, the number swelled to 53 percent.
Jupiter found that respondents who reported increases in spending often exhibited online behaviors that reflected their interest in music - visiting artist or label sites; buying CDs, tickets and merchandise online; listening to free or paid streaming content; reading music news online; sharing reviews and opinions with other users; ripping and burning their own CDs; using instant messenger programs; using in-store kiosks; downloading music player software; and downloading free tracks.
Furthermore, those with increased spending habits tended to be higher-volume music purchasers than the decreasers were. However, the reduction in spending reported by decreasers was greater, on average, than the boost in spending reported by increasers. This fact may help explain the lower overall market spending levels.
The music industry's worst fears may be realized through the findings of a Parks Associates study of 711 consumers in U.S. households with Internet access that reveals more than 40 percent have downloaded MP3 files onto their home computers, and they are storing an average of 305 music files on these "virtual jukeboxes."
"Prior to this study, we assumed that a fair number of home Internet users of all ages were taking advantage of music-swapping services and CD-ripping software," said Kurt Scherf, vice president of research for Parks Associates. "What we didn't realize was the staggering amount of music files stored on home computers. The home computer - at least in certain segments - is quickly evolving into an important hub for entertainment content inside the home."
Percent of US Home Internet Users Who Have Downloaded and Stored MP3 Files, by Age
65+ 13% 55-64 24% 45-54 40% 35-44 50% 25-34 62% 18-24 81% Source: Parks Associates
Average Number of MP3 Files On Home Computers, by Age
65+ 72 55-64 124 45-54 177 35-44 340 25-34 721 18-24 348 Source: Parks Associates