p2pnet.net News View:- The Big Music cartel members` efforts to claim file sharing is having a seriously negative effect on their bottom lines is getting more ridiculous every day.

It just isn`t so. They`re rolling in money and were it not for the mainstream media`s insistence on treating music industry puff releases as though they come from credible sources, they`d have stopped trying to sue their customers into submission months ago.

There are a number of academic and other papers and blogs online which give the lie to the labels` `We`re being ruined by p2p file-sharing` claim.

And here`s another which, although it was published in February, is still highly relevant.

(Thanks again, Marcie. It isn’t where you pointed me, but it’s where I ended up – Jon ; )

Read on >>>>>>>>>>>>>>>>>>>>>>>>

The False Mathematics of the RIAA
By Barry Ritholtz - The Big Picture

The feedback on the P2P downloading debate has been terrific; Let’s add a few additional bullet points into our repertoire of arguments:

First, let’s consider what actual P2P losses are to the industry.

They are much more difficult to calculate than the RIAA would have you believe. Why? First, downloaders pull songs they would never buy; I have Outkast’s “Hey Ya” somewhere; I consider it a goofy novelty song, and the only reason I have it is that someone else sync’ed it to a Peanuts animation (everyone on stage dancing to Schroder’s piano). It was an amusing but unauthorized use, which I downloaded, smiled at, and never saw again.

Oh ya: The CD that song came from – OutKast`s 2003’s release, Speakerboxxx/The Love Below – sold 10-million plus copies.

Lost sales? Hardly.

Consider the biggest of all downloaders – mostly-broke college students. They have a computer their parents bought them, and the campus gives them a big, fat pipe. They get access to music they would never have bought, resulting in future post-college sales. But the one-to-one lost sales argument is transparently false.

Next, let’s consider what the damages to the industry are. Consider the issues of substitution: What would it cost to purchase an “unlimited amount” of digitally distributed music? The answer is found in the Napster-to-Go model:

“The Napster to Go model … shows that the RIAAs claims of a lost sale for every download to be demonstrably false. If you can download an unlimited number of songs via napster and play them for as long as you continue to subscribe, then the maximum loss the RIAA suffers from a single downloader cannot exceed $15/month no matter how many songs a person downloads.” – via boingboing

Over the course of 10 years, that represents total gross losses of $1,800, of which Napster keeps between 15 and 20%. Net loss: $1,500 dollars.

But wait, there’s more: The Rhapsody Music Subscription from Real Networks charges only $10 per month. That’s $120 per year. Over a decade, the loss downloaders present to the industry by not signing up for Rhapsody are: lost revenue of $1,200 (gross). In other words, the total net industry losses are ~$1,000 per decade. Hardly as apocalyptic as portrayed.

By approving the Napster/Rhapsody subscription models, the music industry has unwittingly created a viable legal defense, at least when it comes to damages portion of their litigation, for defendants in a RIAA P2P litigation. The claims of losses in the $100,000 or even $10,000 are silly – as long as this $1,000 net loss per decade option exists.

Of course, that doesn’t consider studies (such as the one from Harvard/UNC CHapel Hill) that shows P2P drives CD and concert ticket sales. I only buy music that I hear and like. Since that hardly happens via the radio anymore, P2P is my most common source of new music (that, and Apple adverts).

Further, the industry’s disingenous claims that its the artists are getting ripped off by downloaders are rather misleading. (Putting aside the industry’s own long and storied history of ripping off their artists for another day).

A recent NYT article reveals that most musicians make their bread and butter not by selling CDs, but by touring and performing:

“According to a new list of the 50 top-earning pop stars published in Rolling Stone, over the hill is the new golden pasture. Half the top 10 headliners are older than 50, and two are over 60. Only one act, Linkin Park, has members under 30.

The annual list, which entails some guesswork, reverses the common perception of pop music. Not only is it not the province of youth; it’s also not the province of CD sales, hit songs and smutty videos.

While sexy young stars take their turn strutting on the Billboard charts or MTV – or on the cover of Rolling Stone – the real pop pantheon, it seems, is an older group, no longer producing new hits, but re-enacting songs that are older than many of today’s pop idols.”

This has serious financial repurcussions for the business model the industry is presently wed to. And the list of artists who are making the big bucks reveals industry mismanagement has led to mostly ignoring the key economic demographic driver of our century: The baby boomers.

Here’s a little secret the RIAA would rather not have you know: Musicians make most of their money performing and touring — not selling CDs or downloads. Rolling Stone has a detailed analysis of the top 50 acts . . . here’s a top 10 list to whet your appetite:

2004 Music Money Makers

1. Prince $56.5 MILLION
2. Madonna $54.9 MILLION
3. Metallica $43.1 MILLION
4. Elton John $42.9 MILLION
5. Jimmy Buffett $36.5 MILLION
6. Rod Stewart $34.6 MILLION
7. Shania Twain $33.2 MILLION
8. Phil Collins $33.2 MILLION
9. Linkin Park $33.1 MILLION
10. Simon and Garfunkel $31.3 MILLION

Note that 9 of the top 10 grossing performers aren’t the hot new thing – they are the better known rock classics – which the labels have mostly also been paying little attention to for so many years.

The industry can scapegoat P2P for all their woes, but a closer analysis of the math demonstrates the claim is illusory. (Mis)management is the primary sources of the industry problems.

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Also See:-
The Big Picture - The Math Gets Even Worse for the RIAA, May 11, 2005

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This entry was posted on Wednesday, May 18th, 2005 at 3:53 pm and is filed under Uncategorized. 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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