p2pnet view Music | P2P:- In his WhatIf blog, Australian economist Tom Koltai (right) quotes from the Terra Report, March, 2010, which states >>>

Many studies have been devoted to the analysis of the link between Internet diffusion and the decrease in recorded music sales. A majority of studies (summarised in Appendix 2) conclude that the impact of digital piracy on record sales is negative and of significant magnitude.

This is reinforced by market indicators at the macro level. The decline in recorded music sales across the EU is too dramatic to imply a simple coincidence: the physical recorded music market dropped by 36% between 2004 and 2008 at the retail level, representing losses of close to €4 billion in five years (from €10 billion to €6 billion)11. While digital sales have made noted progress, new business models are still generating limited revenues, since the overall retail market declined 26% between 2004 and 2008.

Patrice Geoffron, professor of  Economics at Paris-Dauphine University, was the director of the study, says Koltai, going on >>>

What I think the Professor was trying to say was that the majority of PAID FOR STUDIES concluded that there was an argument for file sharing.

Let’s face it, Economists have been arguing over file sharing for as long as Barristers have been arguing over the time of day.

It doesn’t help though when eminent economists make simple mistakes and omissions in the compilation of their reports. It results in all economists being labelled with same brush.

Professor Geoffron reached his damming conclusions by using the simple artifact of ignoring growth in the three leading segments of the copyright creation and content delivery industry.

Games, Video on Demand and Mobile data. With this simple little omission he managed to make the content industry appear doomed.

OK, he left out other things as well. Like the status of the economy in Europe or that companies (like IBM) are constantly hunting new cheaper countries and as they do, manufacturing creeps slowly from west to east taking with it jobs, security and living standards. [Of course none of this has anything to do with file sharing, so most probably that is why the good professor elected to not include the data].

There is no mention anywhere in the report of the European ERM initiative that reports on all job creation and loss numbers and has done so since 2001.

There are a recorded 11,372 incident reports in the ERM database, yet Terra have failed to provide  even a cursory analysis of the ERM reports relating to the limited (country) dataset they have elected to dissect.

Yet the report claimed it was about jop loss in the EU. I doubt that there are any economists anywhere in the world that are not aware of the EUstats databases.

Curiously, the largest physical recording media companies are listed there-in; so I am genuinely surprised that the ERM did not receive even a cursory mention. Unfortunately, this would make it appear that the report was based on a strict set of guidelines provided by Terra’s employer and as such should be used as confetti at weddings and nothing else.

Mind you, I am pleased to report, that he did include Jukebox manufacturing, that all important distributor of popular music in the 1940’s.

But I digress, today’s article is not about the Terra Report…. I’m saving that bombshell for down the road a bit.

Today’s article is about is about the “ethical” presentation of data – or as in the examples in the article, the incorrect presentation.

We start slow but hang around it gets interesting.

Don’t you love Statistics.

They can be made to say anything you want to, provided no-one reads between the lines.

For example…  From the recently released IFPI Digital Music Report for 2010.

The inference for the reader is “Oh my God…… they’re stealing the music!”

The reality is;

1. that one in four people will NEVER buy music, whether they file share or not.
2. three out of four actually buy the music they like after trying it via P2P.

So wouldn’t it be less argumentative and confrontational to say:

The statistics are the same.

The presentation is less contentious and a lot more honest.

My example would tend to indicate that file sharers add to the economy with only 25% not adding to it.

This is a good game.

IFPI tell us that they are working hard at making digital downloads available ubiquitously.

Lets try some more statistics to see if they are right.

Due to licensing restrictions,

With the world population being six point seven billion, we can also say…..

That because of complicated and expensive digital licensing agreements,

See, it’s that easy to make statistics work for you in convincing legislators to pass draconian measures designed to remove civic rights.

Moving along, here’s another snippet form IFPI. http://www.ifpi.org/content/section_news/20050412l.html

Internet piracy in Japan

SEE ALSO

Press Release

Unauthorised file-sharing

• Broadband penetration is 48% of households (Japanese Internet Association).
• 81 million music files were illegally downloaded in 2004.
• 258 million CDs were burned with music in 2004, compared with 200 million CD albums purchased.

State of the local industry

• Between 2000 and 2004 audio music sales fell by 30% – a loss of 200 billion yen ($US 1.8 billion).
• The under 20’s consumer made up about 60% of CDs sales back in 1998, by 2004 this has dropped to about 40%.
• In 2000, 26 albums sold over 1 million copies in Japan, by 2004 this had dropped to 10 albums selling over 1 million.

Legitimate Services

• There are at least eleven legal sites in Japan, including: Mora, Excite Music Store, OCN Music Store, Listen Music Store, Love Music Store, Ongen, MSN Music, Yahoo! Music Download, ORICON STYLE, music.jp, reco-choku full

We looked further…. And in the 2000 edition of the IFPI worldsales2000.pdf we found

Asia & Japan

Japan saw a 4.5% fall in value but an increase of 2.5% in units. The fall in market value has been linked to the economic recession, although the release of CD compilation sets in 2000 may explain the climb in unit sales, despite the fall in value. Sales in Asia as a whole fell by 4.4% in

value despite an increase of 1.2% in units.

and worldsales2001.pdf

Asia

The Japanese market fell by 9.4% and 12.4% in value and units respectively. Sales of CD albums fell by 10.4% and this was especially marked in Japan due to the downloading of free music via the internet, where recording onto MiniDisc is as popular as CD burning in Europe, North America and Australasia.

In worldsales2002.pdf we found;

so we fixed it

And in the Worldsales2003.pdf we found

So we fixed that too.

There, the 2003 stats now had two countries with positive growth, Australia AND Japan.

But I was still perturbed about the apparent “lean” on Japan. Why hadn’t the Japanese RIAJ objected to this obvious “cooking” of the figures?

Now this is interesting, because unlike the rest of the music industry, the Recording Industry Association of Japan spends quite a bit of resources in informing the public of their statistics.

Notwithstanding that, I found it curious that Japan, the home of the CD, the MCD, the LCD, Akibo, PS3’s and most thinks geekingly gadgetal should be loosing sales to piracy.

After all, Japanese people can just go to their local rental music shop, hire the CD’s or DVD’s they want and rip them to their hearts content.

If piracy wasn’t a problem in Japan, with such an open sharing environment, then why should it suddenly become so?

This was definitely worth additional investigation.

• IPFI said: 2000 and 2004 audio music sales fell by 30% and The under 20’s consumer made up about 60% of CDs sales back in 1998, by 2004 this has dropped to about 40%.

(see above)

We investigated and we found:

Reason number one.

Excerpt from: http://www.ipss.go.jp/pp-newest/e/ppfj02/suikei_g_e.html

2. Population Trend for Three Major Age Groups

(1) Trend of Child Population (aged under 15)

The number of births has declined from 2.09 million in 1973 to 1.19 million in 2000.

Consequently, the population of this age group has decreased from 27 million in the beginning of the 1980s to 18.51 million in the population census of 2000. According to the medium variant projection, the children’s population will diminish to the 17 million level in 2003 (see Table 1, Figure 3). The decline will continue together with the low fertility rate trend, and the population of this age group is expected to fall below 16 million in 2016, then enter the slow, longstanding depopulation process. Eventually, in the last year of projection (2050), the population is expected to be 10.84 million.

I make that a drop of 31.4% in the age group that IFPI are interested in.

Just to confirm the numbers we grabbed some population statistics from http://www.stat.go.jp/english/data/kokusei/index.htm

We then added some sales figures from the RIAJ range and we found….

..that indeed the music spend was decreasing per head but not as fast as the target population age group.

As a control, we compared the numbers to the US equivalent population.

So conversely, whilst IFPI are hitting Japan over the head for illegal file sharing, Sales in Japan are decreasing at a much lower rate than in the USA.

In the USA meanwhile, the RIAA are advising people that their demographics are:

So pretty much everyone knows the music buying population is getting older.

Something was illogical.

At the very least the employees of RIAJ in Japan would know of the serious concerns of population stagnation and advise their American compatriots? Would they not?

We thought we would look for the reasons.

I visited the RIAJ datapages and downloaded their excellent series of RIAJ reports. I didn’t find everything I needed so I headed over to the  Wayback machine on the internet archive. Sure enough there were the missing pieces.

The RIAJ yearbooks are a mine of information. (Highly recommended for anyone that wants to know what is really going o the music business……)

I found production numbers for all physical media;

NB These numbers do not include any non-physical recording, (non-mechanical rights) mediums.

That’s a separate business worth hundreds of billions. (But obviously to be excluded from the Terra Report as it has nothing to do with file sharing.)

Back to the datahunt.

..which I tried to marry up with the IPFI Worldsales series (from which I extracted all the transactions for Japan from 1999 to 2004.)

Which after  painful line by line extaction looks something like this.

There was a repeat of the previous year for comparative purposes but try as I might, I was unable to confirm all of the IFPI figures with the RIAJ Year Book numbers with the exception of the IFPI numbers being published two years in arrears in the RIAJ yearbooks.

The clue in the bottom two lines second to last column was the biggie… USD.

This apparently suggested that there was a heavy reliance on currency values. (Especially since this field was omitted in subsequent years.)

I looked at the reports again.

Sure enough, the dominant word in all of the world sales reports was VALUE. US Dollar Value.

On a “gut feeling” I popped over to the RBA site and downloaded the foreign exchange rates.

Actually, the closest currency to the Music rise fall rise figures was the Euro.

This was going to be a big job, I need the record sales of all the countries that I wanted to match against the US Dollar.

I had Australia’s numbers…. (minus 1996).

How did that compare against the USD exchange rate if I took out 1996 from the RBA spreadsheet.

Okay it’s monthly (in the second chart) versus smoothed annual sales in the first chart but by jove old chap, Koltai, I think you might be onto something. Lets put them both on the same chart

Wouldn’t it be amazing if the loss that the Recording industry had been talking about for the last twelve years had more to do with the Euro versus the US Dollar than whether or not 25% of file sharers bought any disks.

This article is non-partisan, (no one paid me to write it and I am not funded by any Copyright Industry Bodies for any of my Research.)

Tom Koltai.

Stay tuned.

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WhatIf blog – Misdirection Ambiguity and Deception in Presentation of Music Industry Statistics. (err, Game-on-Dude), April 6, 2010

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This entry was posted on Tuesday, April 6th, 2010 at 2:52 pm and is filed under Music, P2P. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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