Save the music. The words might as well run across a poster of a harpooned musician lying bloodied at his drum kit. And after a couple of years of heavy campaigning on the part of a floundering music biz, most of us know full well who killed the music. Whether you were guilty of downloading or not, few questioned the connection between the birth of online music-sharing systems and the multi-million-dollar dive in CD sales that followed. Until a few weeks back, that is, when a controversial study conducted south of the border asserted quite the opposite. The impact of downloading on music sales, it says, is "statistically indistinguishable" from, well, zero. And while music execs aggressively dismiss the study as nonsense, industry analysts are supporting its conclusions, saying file-sharing isn't the grisly music-killing monster it's made out to be. Rather, the end of the CD upgrading cycle, media conglomeration, cutthroat competition and the lack of major hits have all converged to create what observers are calling the music business's "perfect storm."
After so much press to the contrary, even the study's Harvard and University of North Carolina researchers were surprised by their findings. After following nearly 2 million downloads and measuring them against record sales during a 17-week period in 2002, the authors found that, yes, downloading did dampen sales slightly for some less popular albums. But that effect was offset by the finding that downloads actually boosted sales of albums at the top of the charts, proving the hotly debated theory that listening to a catchy ditty online can actually spur people to go out and buy the whole damn album. Call it free publicity.
Worst-case scenario, says the study: it would take 5,000 downloads to reduce album sales by one single copy. If that's true, downloading could account for a 2-million-unit backlog in inventory in 2002, but CD sales actually fell by nearly 140 million units from 2000 to 2002 alone. What gives?
"The music industry has been using file-sharing as a scapegoat for a lot of other problems," says David Card, a music and online industry analyst with Jupiter Research in New York. And Card is no great infidel. He's publicly defended the music business's tactic of going after major online pirates (versus what he calls casual pirates burning for personal use), saying the companies were "wise to put some fear in them." Still, he says, sales have been down for several years in a row not because of rampant downloading but because of the end of the "CD replacement cycle." The dawn of CDs in the mid-80s pushed most of us to replace albums we already owned on vinyl or tape with pricier shiny plastic disks. The phenomenon created an artificial buying spike that has essentially inflated record sales for nearly two decades. But every wet dream must come to an end.
The industry has awakened only to find itself nose to nose with stiff competition for the consumer's entertainment buck. "Many people have the same dollar to spend on entertainment that they've always had, but now that dollar is being pulled in a number of different directions," says Eric Garland, CEO of L.A.-based BigChampagne, an Internet research firm. "Now instead of buying three CDs you buy a CD, a DVD and a video game." And he's got the stats to prove it. DVD sales, including music videos, are skyrocketing, and the video game biz now rakes in more cash than Hollywood.
Still, is that enough to tank a whole industry? When you consider all of the above, combined with a reduction in music variety stemming from the consolidation of radio stations (the less music you hear, the less you buy, says Garland) and the fact that the biz hasn't had a massive crossover hit in years (in an industry dependent on monster hits to bankroll its other ops), the single-bullet theory just doesn't hold up and the perfect storm theory starts to take shape.
Canadian Recording Industry Association (CRIA) prez Brian Robertson admits his sector is being squeezed from more than one direction but says that can hardly account for the kind of sales decline they've experienced.
"Of course, there are competing (elements)," say Robertson. "They may be small contributing factors, but to suggest that file-sharing isn't the major reason and to ignore all the compelling evidence, then people have got their heads in the sand." By now, most of us can guess just what piece of evidence Robertson finds so compelling. Indeed, a marked decline in sales started the year Napster was born, in 1999. Since then, says Robertson, the Canadian industry has lost 30 per cent of its retail base, which translates into roughly a $420-million loss, massive staff layoffs (record companies laid off 20 per cent this year alone) and what Robertson calls vanishing opportunities for Canadian artists. But what worries him most is more of an intangible mental shift. "There's a whole generation of people growing up with the view that they don't have to buy music any more, that music is free."
Analysts argue that Robertson is wasting his tears. The people who file-share are mostly college students who don't buy music anyway and never did. In fact, they're the same audience that made tapes in the past. "Downloading is attractive to people who have a lot of time on their hands but are relatively cash poor," says UNC professor Koleman Strumpf, co-author of the file-sharing study. "These are people who wouldn't have bought much to begin with, regardless of whether file-sharing existed or not."
But the industry doesn't buy it. So CRIA launched a "You need music and music needs you" campaign to warm those very youngsters to its point of view. It put 20-minute spots in every high school and middle school in the country, slid thank-you notes into 10 million CDs and dashed off 750,000 e-mails to Kazaa users telling them how hurtful their actions were. The campaign failed to make a dent in downloading habits, and, says Robertson, that's when CRIA decided to go the American route and sue the pants off file-sharers. For the record, the U.S. recording industry has sued just under 2,000 people, and here, well, CRIA is still trying.
Three weeks back, a federal court judge shot down the association's request for the names of 29 "Jane and John Does" who it said were major music uploaders, guilty of copyright infringement. As he kicked it out of court, the judge likened file-sharing to putting a photocopier in a library, and effectively turned Canada into a safe haven for file-swappers. Of course, the honeymoon might be cut short now that Heritage Minister Helene Scherrer has expressed a keen interest in turning file-sharers into criminals.
Turns out the rookie minister took notes at a hobnobbing session with business execs at the Junos a couple of weeks back. "Everybody (at the Junos) from musicians to producers and even the big stakeholders in the industry said that it should be made illegal. They felt that if we let (downloading) go, there would be no way that we could get (the efforts of musicians) to be recognized," says Scherrer.
And she listened. In fact, she told NOW that the federal court judge's decision that downloading is not illegal only spurred her into pushing for new copyright laws and the ratification of stringent intellectual property treaties. (Ratification of two World Intellectual Property Organization treaties for which CRIA has been lobbying for years is currently under discussion in Ottawa.)
Critics like Internet researcher Garland say it's far-fetched to expect that a mainstream consumer revolution on this scale and firmly embedded in millions of desktops around the globe can be reversed through legislation and litigation.
But Howard Knopf, the Internet lawyer representing the Canadian Internet Policy and Public Interest Clinic, is hardly surprised that record companies and Canada's CRIA are willing to try. "The industry has been opposing new technology since the day of the player piano. Every new technology, from the phonograph to the radio and the tape recorder, is the end of the world, and they oppose it, litigate against it and try to get legislation against it.
"Eventually, they will get it and realize there's money to made here, and when they finally do wrap their minds around it and stop being Luddites, they'll probably get quite rich."