As many readers will know, I've written a fair amount about the myths associated with file sharing and music sales. My writing has focused on the growth of DVDs and video games, changes to the retail channel, and the compensation earned through the private copying levy to demonstrate the losses to Canadian artists are minimal and, to the extent they exist, have very little to do with P2P.
A UK study released yesterday, along with a recent Rolling Stone article, expose two additional myths. The UK study finds that music file sharers buy nearly five times more music from services such as iTunes than do non-file sharers. This should not come as a surprise. Many file sharers use P2P to sample music and exposure to new music will result in increased sales. Moreover, this points to the fact that the music industry's policy of suing file sharers is incredibly foolish, since they are in fact suing their best customers. Years ago radio was viewed as an important promotional channel for the industry (indeed the radio industry argued that it should not pay royalties to performers since their promotion would result in increased sales). With Statistics Canada reporting that radio audiences are on the decline, P2P is increasingly the best mechanism to promote music.
The Rolling Stone article notes the decline in sales in 2005 along with the impressive success of the commercial download market led by Apple iTunes.
There are two noteworthy passages in the article. First, it affirms that there are the multiple reasons for music sales declines including the popularity of DVDs and video games and the changing retail landscape now dominated by the likes of Wal-Mart and Best Buy, who stock a fraction of the number of titles found in a typical record store. Coming on the heels of the recent OECD study and other work in this area, it is encouraging to see that the media is beginning to question claims that there is a direct correlation between P2P and music sales.
Second, the article indicates that not all record labels are having a bad year. For example, Universal Music Group's CEO and Chairman is quoted as saying that "last year was one of our best, and this year we're well ahead." In fact, sales at Universal this year are up by 10 percent. The story is not as good at Universal's competitors, who are apparently slumping this year.
I think this difference is important. If you follow the recording industry logic of P2P harming music sales, then perhaps you also think that file sharers have suddenly decided to avoid sharing Universal artists. Clearly that is not happening. Rather, this development reflects the move toward a hits-based industry where each label identifies its best commercial prospects and throws the bulk its marketing budget and efforts toward sales of a select few artists. Sometimes that works (ie. Universal this year) and sometimes it doesn't. Regardless, it illustrates just how far removed file sharing is from the commercial success of the labels since success is dictated by the consumer response to a few artists, not by the P2P red herring.