What's the Real Impact of Piracy on Music Sales?

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News Posted: Fri, Jan 14 2011 9:05 AM

The British Recorded Music Industry (BPI) released figures for music sales in 2010, sparking a debate over whether or not piracy is playing a role, or at least a significant one.

According to BPI, combined 2010 digital and physical album sales declined 7 percent overall in volume to 119.9 million. This, the organization says, is due to illegal downloads and overshadows the fact that digital singles hit a record high for the third successive year, up nearly 6 percent to 161.8 million in 2010.

"2010 showed that the digital single highs seen in the previous two years were no fluke -- music fans continue to embrace the convenience, value, and choice offered by legal download stores," said Geoff Taylor, BPI Chief Executive. "The market for digital albums also went mainstream in 2010 with nearly a fifth of sales now coming from online service.

"Yet however encouraging it is to see the digital market grow, this must be seen against the bigger picture. Despite the unprecedented demand for music and strong innovation offering consumers new ways to access music online, legal downloads are unable to offset the decline in CD sales because they are dwarfed by illegal competition."

Representing the other end of the music and downloading spectrum, TorrentFreak calls BPI's claims a bunch of hogwash.

"We're not going to argue about the exact impact of piracy in this article, but we do want to balance out the music industry's propaganda a little bit," TorrentFreak explains. "Let's start off with some key figures published by BPI last week regarding UK music sales... In 2010 the BPI reports that there are 281.7 million units sold, which is an all-time record. Never in the history of recorded music have so many pieces of music been sold, but you won't hear the music industry shouting about that . In fact, the music industry is selling more music year after year an today's figure is up 27 percent compared to the 221.6 million copies sold in 2006."

And what about the 7 percent drop in overall album sales? TorrentFreak points out that while CD sales are slumping (down 12.4 percent, according to BPI's figures), digital album sales surged 30.6 percent.

"If we believe the music industry, this drop in sales of CDs can be solely attributed to piracy. This is an interesting conclusion, because one would expect that piracy would mostly have an effect on digital sales."

See what we mean about perspective? Give both sides a read and then tell us which one you agree with in the comments section below.

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3vi1 replied on Fri, Jan 14 2011 9:43 AM

>> And what about the 7 percent drop in overall album sales?

It's almost as if people don't want to buy all this auto-tuned garbage new artists are putting out. But that can't be it, right?  Surely, Ke$ha wil have a string of 30 top-40 hits like Madonna did.

The BPI and RIAA needs to realize something: They're not just competing with piracy; They're competing against other forms of entertainment that are becoming more pervasive.

There are more gamers now than ever, and money/time spent on games will naturally mean less money/time spend on music. On demand movies, DVRs, satellite radio... There are so many other ways to pass time nowadays than just spinning records.

Also, that whole "suing your customers" thing hasn't gained them any love. I know I've specifically avoided buy anything new from RIAA artists for years just on the principal of the matter. And because 95% of music today is autotuned garbage.

What part of "Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn" don't you understand?

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realneil replied on Fri, Jan 14 2011 9:52 AM

I like to buy hard copies of my music and I always have. Over the years I have amassed a very nice collection of CD's. It's funny, but now my kids are starting to pour over them when they come to visit. ("Dad, who the hell is The Four Seasons?" "Who is this little screaming woman, Pat Benatar?" "Who is Frank Zappa?") Older music never dies, it seems.

I can rip any of them into a digital format any time I want to, but only have done so with about 25% of them. When I do rip to digital, I never do the entire album either, just the cuts that I like.

I never buy music online and I don't use services such as Limewire to get music either.

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3vi1 replied on Fri, Jan 14 2011 10:15 AM

I don't buy anything in the store. I sometimes buy from Magnatune, if I hear a good artist on the really odd Internet streaming radio stations I listen to. I never use P2P to get music. If you like what an artist does, I agree that you should pay them so that they can make more.

Like you, I've got hundreds of CDs. I ripped all the good ones long ago (back when you had to rip MP3s from the command line!), so I can tell my arcade cabinet to start playing them through the home stereo and listen to music for weeks without hearing a repeat.

One problem I have with statistics from the RIAA and BPI is that they seem to constantly release numbers claiming their sales are down, even at times when sources like Soundscan showed their sales are up. I simply don't trust the recording industry anymore.

What part of "Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn" don't you understand?

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lifeskills replied on Fri, Jan 14 2011 12:22 PM

Interesting what you said about competing industries, because I probably havn't bought a cd in a year.  Not because I'm downloading, there have just been other interests, mainly computers and gaming.  Digital downloads don't interest me either, as most are in mp3 format, when you can get a lossless copy off of a cd.

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I have about 20 artists that I like and about 5 of them are still out there making music. Though a new CD only comes around once a year or less. So I only really spend about 50 on music a year. 

Sites like Pandora are really cutting into sale, why buy a song when you can stream it free? 

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cloudbots replied on Fri, Jan 14 2011 8:28 PM

Sometimes people will torrent only to find out whether an album is good or not. Before paying for it, whether it is digital or hard. I tend to not want to pay for a bad piece of music (Ke$ha) but I will pay for a band such as Said the Whale. I think about it as civil disobedience. An anonymous shout out to the music industry for paying garbage musicians the big bucks while the lowly bands suffer.

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rapid1 replied on Fri, Jan 14 2011 9:19 PM

I generally listen to music on internet radio stations of which I have to say live365 gets 95% of my business there. I also listen to a decent amount on youtube. I do not and have not bought anything in a brick and mortar music store in I guess at least 5 years. I also was part of the underground music scene in Atlanta as well as the Southeast and owned a production company named Brilliance Productions ATL. That is mainly besides the point, but I know personally how the music business in general rips artists as well as customers off, at least the major players do so I pretty much refuse to support them.

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AKwyn replied on Sat, Jan 15 2011 12:17 AM

That's nice rapid1, I never knew you were in the music industry.

Anyways, I think they're trying to blame the whole declining CD sales on piracy. I mean people are shifting to MP3 downloads and while it may seem like these MP3s contribute to piracy, they're also the future of the music industry (seeing as how more people buy music online and in the MP3 format.).

Personally, the music industry will never fully adapt to the idea of digital music sales, and really, why do you need record labels when you can just release your albums online.

 

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The music industry did this to themselves; they take one hit song and place it in an otherwise worthless album. In order to 'own' the piece you want, you have to buy a $30 CD. I know, the most recent album purchase I made was to get the song "Hey Ya!". It only came in a 'set' that was fantastically expensive. And it is the ONLY song in the set worth listening to. Frankly the music buyers are tired of being ripped off. When I can buy only the song I want, and itunes makes it easy and fast, why would anyone go back into a brick and mortar store?

You're not looking at a business model on the ropes because of piracy. You are watching consumers who finally found a way to get what they want without being ripped off. Other industries should pay heed. The combination of technology and a more sophisticated consumer could mean the end of other businesses as well.

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B89 replied on Sat, Jan 15 2011 8:12 PM

The effects of piracy have been negative. I also have to knock this article for hiding the information that would actually allow readers to reach that conclusion. For example, TorrentFreak is a horrendously biased source. Let's pick apart their quote: "TorrentFreak points out that while CD sales are slumping (down 12.4 percent, according to BPI's figures), digital album sales surged 30.6 percent." Gee that's nice except we, the reader, can't reach any conclusion based on that information. It sounds positive, but unless we know the scale of physical sales and digital sales, it's doesn't really tell us much. To be clear: there's a lot more physical sales than digital sales. This means that an increase of 30.6% in digital sales comes nowhere close to balancing out the decrease of 12.4% in physical sales. How can that be? Think about it this way: you're a waiter and you have two sources of income at work: tips and pay from your employer. Let's say that one day your employer says, "Well, tips are down 12.6%, but we've increased your paycheck by 30.6%". Should you be happy? Well, if you're earning $2 an hour from your employer but $30 an hour in tips, well, the math works out so that 30.6% of $2 is an increase of 60 cents, but a decline of 12.4% in tips works out to a decrease of $3.72 an hour. In total, your pay was decreased by $3.12 an hour, even though the -12.6% and 30.6% numbers makes it sound like a net positive.

Based on numbers I've looked at, over the past five to ten years, for each increase of $1 digital sales profit, there's been a decline of $7 in physical sales profit. Can we please write articles that actually reveal the facts, instead of dancing around trying to make something negative look positive?

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ANeves replied on Sun, Jan 16 2011 10:15 AM

The Music Industry profit is ALWAYS positive :)) even with a $7 loss in physical profit over the past five to ten years.

Music industry is not just about physical sales, they profit in so many other ways. If the physical sales are decreasing is due the to new habits in consumers.

The difference in $ profit between physical and digital? Well in my country a physical album can cost 36€ while digitally I can buy it for 7,99€ on itunes, and even better i can just buy the music I want for 1,29€. Sure they lose profit, now I don't have to spend my money on garbage just to listen to one or two musics that I enjoy.

Also in my personal experience I use a music service called Musicbox, included on my cable subscription, witch allows me to access music on my TV, my PC, my Phone and my Ipod (online streaming or Offline cached), also including a bonus download of 10 music in mp3 format every month, that is 120 mp3 legal music downloads per year, and it's a library with MILLIONS of titles. I pay $0 / 0€ for the service but I pretty sure the Music Industry is profiting from my use, not as much as a physical sell, but still they profit.

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CHolt replied on Tue, Jan 18 2011 9:18 PM

Since most of the time I'm on the computer, I just use YouTube to listen to music.

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