Monday, March 31, 2008

Tuesday Column: Ditch the spin. It's a record-sales record!

Downloading is killing recorded music, right?

It must be. The music industry is so worried that it has asked the Communications Minister Senator Conroy to introduce a three-strikes and you’re out policy for people who illegally download their favourite tracks.

They say Strike One would be a warning. Strike Two would earn you a suspension of your internet access and Strike Three would result in the removal of your internet access altogether.

It's needed because the music industry is losing sales. Or so it says, under oath, in court cases. I’m here to let you in on its guilty secret. It isn't...

The latest Australian Recording Industry Association sales figures released very quietly on the eve of Good Friday show that in fact the legal sales of recorded music climbed to an all time high in 2007 - a high that could only have been dreamed about in the years before the advent of downloading and CD burning.

It's uncomfortable with the fact. Most industry associations would crow about an all-time record high in sales. Not this one. It’s grown up believing that the sky is about to fall in.

Remember the introduction of the cassette tape in the 1970s and those skull and crossbones stickers on album covers warning that “Home Taping is Killing Music”?

In reality the exact opposite was happening. Before the advent of home taping Americans bought around 2.5 long-playing records each per year. After two decades of home taping they were buying 4.5 recorded cassettes and LPs year.

Stan Liebowitz, a Professor of Economics at the University of Texas argues forcefully that the explosion in recorded music sales wasn’t accidental. It was caused by the introduction of the cassette.

Before then, music listening was generally limited to one room in each house; the one with the record player. The advent of the cassette made it possible to listen in the car, while jogging, in the garden - practically anywhere.

With more of each day available to listen to recorded music people needed to buy (or copy) more music to fill it. Music sales (and also “illegal” home copies) skyrocketed.

I have been collecting Australian sales figures going back to 1982.

In that year we bought a total 29 million units (cassettes, albums and singles) – around 2 per person.

Ten years later after almost a decade of the compact disk we were buying 42 million units. Five years after that at around the time the internet was taking off we were buying 50 million.

Another five years later after the introduction of CD-burners and file-sharing services such as Napster we bought 59 million.

And after the most recent five years of sustained CD-burning, intensive file swapping, the introduction of the iPod and near continuous hand wringing by the industry, we bought 99 million – easily an all-time record and an impressive jump of 23 per cent on the year before.

Australia's recorded music industry is literally moving ahead in leaps and bounds.

Why is that we are now buying roughly 5 pieces of recorded music per person whereas back at the start of the 1980s we only bought 2?

Increased wealth has got to have something to do with it, particularly amongst the first generation that grew up on pop music - those of us now in our 40s and 50s.

But increased wealth by itself wouldn’t help much if we didn’t also have ever-increasing opportunities to listen to recorded music. Devices such as the iPod and home computer (just as with the portable CD player and the cassette tape player before them) have expanded those opportunities.

There is no doubt that we are downloading more music for free than ever – the industry keeps saying so. What it doesn't say (loudly) is that we are also buying and paying for more music than ever.

We are doing much of it in new forms. The sales figures I quoted include include ring tones, digital albums and tracks and music videos – formats that weren't around before the new technologies that the industry claims is ruining it.

We bought 17 million digital tracks in 2007, up from 11 million in 2006.

But even the old formats are doing well. The sales of physical CD albums peaked at 49 million in 2006 – way above anything ever achieved before the internet. Even last year's total of 44 million is well above anything achieved in the 1990s and 1980s.

The industry will argue that it would be selling even more if it wasn't for illegal downloading. It's hard to prove. Certainly it would be selling less if it turned back the clock to before illegal downloads began. And it is highly likely that illegal downloads stimulate sales. That used to be the function of CD-singles - loss-making samplers that would introduce consumers to new music and new bands.

CD singles are all-but extinct. At the start of the decade the industry sold 12 million. It now sells just 2.5 million, having ceded the promotional business to the file sharing sites it claims to hate.

Without those sites we would be exposed to a lot less new music and we might buy less.

The industry will also make the point that it is earning less from music sales. At the start of the decade it earned $648 million. By 2007 it earned only $462 million.

It has cut its prices, which is normally regarded as a good thing, not an evil necessitating government intervention to undo.

In the face of zero evidence that illegal downloads are hurting music sales or drying up the supply of music, the industry wants the Minister for Communications to empower our internet service providers to give us warnings and then cut us off from the web if it finds we have been downloading something it does not want us to.

It is a proposal that flies in the face of the presumption of innocence and grants special status to an organisation that would have difficulty proving its economic loss in court.

And it flies in the face of everything that the Minister Conroy has said about the importance of access to broadband. Didn't his election policy document say that it was as important as access to water and electricity?

The Minister should tell the industry to stick to making and selling music. It is doing well at it.

ARIA recorded music sales 2001 - 2007.

Stan Liebowitz,
Will MP3 downloads Annihilate the Record Industry? The Evidence so Far, School of Management. University of Texas at Dallas, June 2003.

Kimberlee Weatherall,
Notice and terminate/three strikes/here we go again, More on a proposed ‘three strikes and you’re out’ copyright/ISP policy, at Lawfont, February and march 2008

Peter Martin, Forget the spin, taping is not killing music, Sydney Morning Herald December 31, 2003

Peter Martin, Forget the spin! It's a record record, March 18, 2004