Techdirt. Stories filed under "sales"

Streetlight Manifesto Can't Fulfill Pre-Orders Because Label Refuses To Give Them Their Own Records

Mike Masnick — Thu, 9 May 2013 10:59:00 PDT

A year ago, we wrote about how the band Streetlight Manifesto was urging people to boycott its own album, unless it was bought directly from the band, because their label, Victory Records, wasn't giving them any of the money. Here's what they said at the time:

We’re writing today to ask you to please boycott all Streetlight related items by not purchasing any of our records or merchandise from Victory’s website, any traditional CD stores, online third party retailers or any digital distribution service (iTunes, Amazon etc). Victory has a long-time reputation of pocketing all of the proceeds from a band’s music and merch, with shady accounting and generally bully-ish behavior. If you want to support Streetlight, our music and our ability to tour and continue to release music, please make all SM related purchases from our own webstore, The RISC Store (www.riscstore.com), or come out to a show and buy a shirt or cd from us directly. In regards to getting the music we make, you can buy directly from us, or, alternately, we’re sure you can find a way to get the tunes onto your computer that may not be, ahem, traditional… Speaking a Bit metaphorically, there is a Torrent of methods to accomplish this, and Google is your always loyal friend…

Believe it or not, things have now gotten even worse. Tim Griffiths writes in to let us know that the band was preparing to launch its latest album, and had even been taking preorders for the album through its own store as mentioned above... but now they claim Victory won't even give them copies of their own album to sell:

Q: Why do I not have my record yet? I totally want it.

A: Simple – Victory Records has refused to send us any of Streetlight’s new album. Without that – we can not send out pre-orders. Classy move. Read on for more information about your order.

The issue is made more complex by the fact that the band's lead singer, Toh Kay, also released a companion album to the SM album, with a very similar name. SM's new album is The Hands That Thieve, while Toh Kay's is The Hand That Thieves. When Toh Kay put up a video from his album, Victory claimed it infringed on their copyright and had it taken down.

Q: I wanted to hear the Toh Kay record. The music video – before Victory took it down – was beautiful and so was the song. My gosh. What happened?

A: Victory had given Streetlight a choice: either completely kill the Toh Kay record (their absurd reasoning was that its sale would “cannibalize” Streetlight sales, ha!) or hand it over to them so they can release it and exclusively profit from it. Streetlight has experienced and documented years of Victory not paying royalties while continuously profiting from their music, so it was a no-brainer. We had to cancel the record, no matter how much we all loved it and how hard the guys worked on it. That music video, by the way, is also “illegal”. So if you saw it – your eyes are criminals.

The band is offering to give back people's money, or figure out other ways to satisfy various orders. As in the past, they've also suggested that alternative means to finding the album might be fans' best path:

Q: The Streetlight record leaked online – I already ordered it through you – how should I feel inside about downloading it?

A: We can’t tell you how or where to download it – but if you already paid for it, and it’s being withheld from you by the band’s own record label – well, take that how you will.

And also, this:

Q: This whole situation makes me hate the music industry and I now understand why it – as a business entity – is failing across the board.

A: Yeah. I hear ya. I just downloaded Dredd 3D – wanna watch it with me?

Remember stories like this the next time labels pretend that they represent the best interests of artists.

Permalink | Comments | Email This Story

A Tale Of Two Studies: File Sharing Helps Sales!

Mike Masnick — Fri, 22 Mar 2013 06:32:48 PDT

In the first part of this three part series, we talked about some research that suggested that the shutdown of Megaupload directly resulted in an increase in the sale and rental of digital movies. The study's authors used that to suggest that this proves that unauthorized download sites displace actual sales, and that there is likely a positive economic impact on copyright holders when properties like Megaupload are shutdown. However, as noted, another study that came out just after that one seemed to suggest something very different.

The second study, put out by the European Council, also is rather compelling, but argues something almost entirely contradictory: that there is no sign that infringement leads to a decrease in sales. In fact, it shows a very slight increase in sales. The researchers here were looking at a different market, however. They looked at digital music, and the impact of infringing downloads on authorized streams and downloads. The research found little impact:

Our results suggest that Internet users do not view illegal downloading as a substitute to legal digital music. Although positive and significant, our estimated elasticities are essentially zero: a 10% increase in clicks on illegal downloading websites leads to a 0.2% increase in clicks on legal purchases websites. Online music streaming services are found to have a somewhat larger (but still small) effect on the purchases of digital sound recordings, suggesting complementarities between these two modes of music consumption. According to our results, a 10% increase in clicks on legal streaming websites lead to up to a 0.7% increase in clicks on legal digital purchases websites. We find important cross country differences in these effects.

Going a bit further, they note:

Perhaps surprisingly, our results present no evidence of digital music sales displacement. While we find important cross country differences in the effects of downloading on music purchases, our findings suggest a rather small complementarity between these two music consumption channels. It seems that the majority of the music that is consumed illegally by the individuals in our sample would not have been purchased if illegal downloading websites were not available to them. The complementarity effect of online streaming is found to be somewhat larger, suggesting a stimulating effect of this activity on the sales of digital music.

Taken at face value, our findings indicate that digital music piracy does not displace legal music purchases in digital format. This means that although there is trespassing of private property rights (copyrights), there is unlikely to be much harm done on digital music revenues.

There are some significant similarities between the two different studies. Both go through the previous research into this issue and tend to cite almost all of the same papers (which is a good sign) to show what's been done before, and what the limitations are of that research. Both also focus on the question of online impact. That is, previous research has tended to focus on the impact on other modes of consumption: i.e., does downloading increase or decrease DVD purchasing, CD purchasing or movie theater sales. Both of these reports, however, look strictly at unauthorized downloading/streaming as compared to authorized downloading/streaming.

The specific methodologies differ somewhat, however. The MPAA paper compares overall sales/rentals vs. Megaupload penetration. The EC paper looks at direct clickstream traffic data as provided by Nielsen NetView, which collects direct data on exactly what sites people visit. The EC researchers, Luis Agular and Bertin Martens, then classified visits to different "music consumption" sites to see if they could isolate some sort of relationship between unauthorized streams and downloads and authorized ones. As with the MPAA study, there are some potential limitations there (mainly in sussing out the details of what people are actually doing on any particular page -- especially when some pages, such as Amazon.com, could result in other activity that is not music related), but the researchers do a good job trying to control for these limitations.

Also, it's good to see that in some cases the underlying data between the two studies agrees. Both, for example, show much greater usage of sites that have many unauthorized uses in Spain, for example. Unfortunately, other than Spain, France and Germany, the selection countries studied in the two reports is mostly different, so it's difficult to confirm other points between the two.

The EC study confirms another point that should be settled by now: those who use unauthorized sites are the biggest fans, by far.

The figures show that legal consumers (individuals that never clicked on an illegal music website during 2011) are, on average, active 2.5 months a year, while downloaders are active almost 6 months a year. Most interestingly, downloaders are also more active than legals both in terms of legal downloading (10% more clicks) and legal streaming (40% more clicks), as shown by their mean values of clicks. A positive relationship between legal and illegal consumption of digital music therefore emerges from this simple comparison of means. Comparing streamers and non- streamers (individuals that never clicked on a streaming music website during 2011) leads to similar conclusions. The figures show that streamers click more than twice as much on legal downloading websites, while their clicks on illegal downloading websites is 90% higher than for non-streamers. Again, this simple comparison of means shows a positive relationship between the different consumption channels and in particular between streaming and legal purchases.

Of course, as many will (rightfully) point out, this is just correlation data, which is useful, but not enough to prove any causal relationship. So the researchers go further. They use a number of variables try to separate out which users are most interested in music itself, by looking at whether they visit other music-related websites, such as music lyrics or music news sites, as well as other types of "music consumption" sites like video websites. Again, the data suggests a clear causal relationship.

Our results suggest that illegal downloading and legal streaming have both a positive and significant effect on legal purchases of digital music.

As you can see in the report, they continue to slice and dice the data a few different ways to test for other potential variables that might be creating this situation, and each time they fail to find any evidence of it. Instead, they see the same thing: engaging in unauthorized downloading appears to lead to more digital purchases, and the same for authorized streaming.

In the third piece in this series, we'll see if we can reconcile what appear to be very different findings in these two studies, as well as respond to the entertainment industry's freak out about this second study.

Permalink | Comments | Email This Story

A Tale Of Two Studies: File Sharing Hurts Sales!

Mike Masnick — Fri, 22 Mar 2013 04:27:48 PDT

Over the last couple of weeks, we've seen a bunch of folks on all sides of the debates about file sharing point us to two studies that have come out, one of which supporters of greater copyright enforcement insist prove their point, and another which seems to show (yet again) that file sharing has little impact on buying habits. I wanted to take the time to look through both studies before writing about them, and since they came out so close together, we might as well do one post looking at both. As I started to write up a single post about it all, it got really, really long. So I'm breaking it into three separate posts. One about the first study, which argues that file sharing hurts sales, one that looks at the second study, which argues that file sharing does not hurt sales (and may actually increase sales), and then a third post, which tries to reconcile the findings of the two studies, while also responding to some of the criticism.

The first study is called Gone in 60 Seconds: The Impact of the Megaupload Shutdown on Movie Sales and is by Brett Danaher and Michael Smith. Smith, especially, has a long history of producing reports that copyright maximalists love. For example, both he and Danaher were responsible for a study last year claiming that the Hadopi 3 strikes program had increased iTunes sales. Unfortunately, a quick review of that report raised serious questions about the basis for those claims, as an alternative hypothesis (related to the sale of new iPhones) showed much more compelling data. I see his name on a lot of research sent around by the maximalists. It's worth noting, as well, that the study was effectively funded by the MPAA, since it was a project of a program run by Smith and funded by the MPAA. Oddly, the paper fails to disclose this tidbit.

This new study seeks to answer a question we've been asking over and over again: do any of these enforcement efforts actually increase sales? There has been evidence that greater enforcement has a small, but temporary, impact on decreasing infringement, but there was not that much data concerning actual sales. In fact, we've pointed to data (contradicting Smith's other report) that suggested Hadopi had done little, if anything, to increase sales. However, the data here has been limited, in part because there are so many other variables at play, so it's difficult to separate out the actual impact. Smith and Danaher try to use data from various studios to look at the impact on movie sales following the Megaupload shutdown.

To try to determine the impact of the shutdown of Megaupload, Danaher and Smith basically compare movie sales before and after the shutdown date in a few different countries that had very different Megaupload usage. For example, they (using Google Adwords data) suggest that Megaupload had 2% penetration in the US, but 17% in Spain. Then they look at what the impact was in terms of digital movie sales and rentals compared across the different countries, and whether or not there were more sales in countries that had more Megaupload usage. They use this to argue that the key difference is Megaupload usage. The end result is that countries that had more Megaupload penetration saw a greater increase in digital movie sales and rentals following the shutdown than the countries that had lower Megaupload penetration. As they note:

This difference is both statistically and economically significant. Our findings indicate that digital movie revenues for two studios were 6-10% higher over the 18 weeks following the shutdown (across 12 countries) than they would have been if not for the shutdown.

This chart highlights the basics: As you can see, the countries that had higher Megaupload penetration (Mexico, Belgium, France and Spain) all also showed distinctly more sales relative to the other countries, which had relatively lower Megaupload penetration. There's a similar chart for rental data as well, in which you see a similar pattern, though not nearly as strong a correlation.

While I've seen some criticism online of these findings, I actually think the basic research and methodology is fairly solid. Those who have jumped up and said "correlation is not causation" are ignoring the various methods that the researchers used to isolate the shutdown. However, I'm not sure that the conclusions are quite as meaningful as some have suggested. First off, we've seen very similar data when it came to decreases in file sharing after enforcement increases -- but the impact has always been shown to be temporary, until people settle in on a new method for infringement. It would make sense that some users of such a service, who don't want to go hunting for a new free option, will switch to an authorized service if it's available. But if they become aware of other services, they might also switch back. The amount of time the impact lasts will be a key thing to watch.

Of course, the other key thing that is left out of the picture in this study is the role of authorized services in all of this. Part of the reason for the growth of infringement on Megaupload in the first place was the dearth of compelling, simple, non-annoying, authorized services. The industry has, finally, been trying to increase those, and so it could be that people who couldn't find any legit services before looked around again after the shutdown and found newer, better services. While the authors of the report say the findings suggest that Megaupload usage decreases sales, a possible alternative explanation would be that the slow pace with which the industry rolled out authorized services was equally, if not more, responsible. Either way, this report is a useful contribution in understanding the impact.

In our next post, we'll explore the second study that came out even more recently, which appears to come to a very different conclusion.

Permalink | Comments | Email This Story

Three Strikes May Decrease File Sharing, But If Sales Keep Dropping, Who Cares?

Mike Masnick — Mon, 11 Feb 2013 07:51:29 PST

A year ago, we asked what could possibly be the "value" in "cracking down on piracy" if that didn't then lead to increased sales. It's an issue that we've dealt with time and time again. We ask people a simple question: would you rather stop piracy or make more money? Most people note that the latter is the real goal. If the former does not lead to the latter then what good does "stopping piracy" actually do? The answer is none at all. The latest data out of France shows that, despite Hadopi (the administrators of the 3 strikes program) claiming some sort of victory because stats on file sharing are down, the bigger issue is that the sale of recorded music keeps declining. Digital Music News, who normally supports the the "anti-piracy" side of things, has some slides from French labels that show that sales keep decreasing, even as Hadopi highlights a big drop in file sharing and the use of cyberlockers. But all that really matters is this one: This is the key point that we've been making for well over a decade now. "Fighting" piracy is not the same as making more money. The focus should be on figuring out ways to make money. Even if we believe that copyright infringement is a bad thing, if efforts to stop it are both expensive and ineffective, why continue? It makes absolutely no sense. Instead, let's focus on the areas of the industry that have shown that they are expanding and where there's lots of money to be made for those who embrace them.

Oh, and for what it's worth, you have to imagine that the "declines" reported in file sharing and cyberlockers severely undercounts those things too, as using some rather basic tools can let people hide that sort of information from being collected -- and the efforts by Hadopi to "educate" the public likely educated them about how to use VPNs. It does not appear to have educated them to go back to buying at the same levels as the artificially inflated rates in the past.

Permalink | Comments | Email This Story

Last Week To Order The Techdirt Holiday Bundle In Time For Christmas!

Leigh Beadon — Mon, 10 Dec 2012 16:32:00 PST

Our Holiday Bundle of gear in the Insider Shop has been a hit this season—and if you want to give one as a Christmas gift, time is running out. This Friday, December 14th, is the final deadline for Christmas shipping in the US, and to be safe (given the unpredictability of holiday mail) we recommend ordering sooner rather than later.

For only $99 (over $50 off the regular price), the Holiday Bundle includes:

A Techdirt zip hoodie
A Techdirt coffee mug
Your choice of the DMCA Tee, the Seized Tee or the Logo Tee
Access to the Insider Chat for one year
Access to the Techdirt Crystal Ball for one year
5 First Word/Last Word credits per month for one year
An Insider Badge on your profile and comments
A group Google Hangout with Mike Masnick

Plus, don't forget about our ongoing t-shirt sale! When you buy three or more t-shirts in any styles and sizes, you get them all for 15% off. The discount is automatically applied in your cart.

Happy holidays, and a big thanks to everyone for supporting Techdirt through our Insider Shop! By the way, if you want to give us a present this year, you can always drop something in our tip jar.

Permalink | Comments | Email This Story

Newly Independent Band To Fans: Don't Just Remix Our Music, Please Try To Make Money From It Too

Mike Masnick — Tue, 20 Nov 2012 20:08:00 PST

At this point, bands releasing stems and asking fans to remix their work is old hat. We've seen it done a bunch over the years, and it's pretty common. But Darren Hemmings alerts us to a cool variation on that done by the UK band Chapel Club. Earlier this year, Chapel Club "parted ways" with Universal Music. In testing out new things, it decided to do a remix offering, but one where fans are actually encouraged to then try to sell the results and make money off of it:

We're offering THE WHOLE WORLD the chance not only to REMIX THE TRACK, but to SELL their creations and KEEP THE MONEY. LOL.

So the deal is this: you can download these stems FOR FREE, remix the song and self-release it digitally via any online outlet you like. To find out how best to do this we've attached a little step-by-step guide, below.

The band does admit that they're about to sign a new record deal -- so they're doing this "in between" deals, and it's unclear how long it will last. Also, the terms and conditions (pdf) are interesting in that they actually provide detailed instructions on how to upload the remixed tracks to Tunecore and CDBaby. The band does ask that you email them before releasing the track, which seems like a reasonable request. What's a little odd, though, is that they will not allow remixers to "give away" the remixes:

So the deal is this: you can download these stems FOR FREE, remix the song and self-release it digitally (and only digitally) via any online outlet you like (as long as it’s known for selling lots of music). You can also stream your creation (but don’t give it away).

That seems like a silly and pointless restriction. The band does note that it retains the publishing rights, meaning that if someone does remix the song and sells a ton of copies somewhere, they'll still get their publishing cut (though the remixer will get all of the direct sales revenue, minus the fees taken out by the middlemen). So, it's smart in that the band knows that if someone else somehow figures out a great way to market and sell the song, they'll still make some money. But, it's still a little disappointing to see that restriction on giving it away. For such an experiment that seems pointless.

It's also a nice reminder that letting some others make money in helping to promote your work (or even letting them build on your work) can be a good thing. There's way too much of an attitude among some that every penny that's earned belongs to the original creator, even if someone else did more with it. We've warned before that non-commercial restrictions on Creative Commons often don't make sense -- but many people cling to them out of this irrational fear that if someone else makes money, it means you lose money. So it's great to see the band recognize that a bigger pie can be good for all.

That said, while I do think this experiment is cool -- and I love to see bands experiment in unique and innovative ways -- I do wonder how successful experiments like this will be. I think that many people think that fans will rush out to try to "make money" with content from an artist they like, but in watching various businesses built around that concept before, I just haven't seen it play out in reality. Fans like bands because they like those musicians and want to support them. Assuming that they have a monetary incentive to help out often feels weird and just doesn't interest people. In fact, it reminds me a lot of Daniel Pink's awesome and thought provoking book Drive in which he notes a large stack of research that says for some activities (not all!) providing monetary incentives actually harms output. It's for activities where the person already feels fulfilled in some manner or another, and I'd argue that probably applies with fans. Fans don't want to make money off artists they love. They just want to see them succeed. Adding the monetary component might not necessarily be a very good incentive, even if people assume that money is always a driving incentive.

Still, that's just an aside on money and incentives. I still think it's cool to see a band experiment with something different to engage fans that could possibly open up another new revenue stream.

Permalink | Comments | Email This Story

AC/DC And Kid Rock Finally Realize That Selling Tracks Online Is Probably A Good Idea

Mike Masnick — Mon, 19 Nov 2012 09:53:45 PST

A few years ago, people always referred to the Beatles as the biggest holdouts in terms of releasing their music for sale as MP3s online (mainly iTunes). However, the Beatles finally came around in November of 2010. After that, people started putting together lists of who was left and AC/DC and Kid Rock seemed to top most of those lists. So it seems noteworthy that both have just caved. Kid Rock's new album is available on iTunes, with someone saying that he finally realized that he could "no longer ignore how much money he was leaving on the table." And, the latest is that AC/DC has come around as well. Of course, AC/DC wasn't just not selling downloadable tracks, but they seemed philosophically opposed to the whole concept based on some of their quotes:

"I know the Beatles have changed but we're going to carry on like that," guitarist Angus Young told Sky News in May 2011, after the Beatles had ended their own iTunes holdout. "For us it's the best way. We are a band who started off with albums and that's how we've always been."

Back in October 2008, the band were even more hardline. "Maybe I'm just being old-fashioned, but this iTunes, God bless 'em, it's going to kill music if they're not careful," singer Brian Johnson told Reuters.

"It's a...monster, this thing. It just worries me. And I'm sure they're just doing it all in the interest of making as much...cash as possible. Let's put it this way, it's certainly not for the... love, let's get that out of the way, right away."

Yup. But apparently they're finally realizing that maybe it helps to go where your fans are. A bit late.

Of course, looking at those quotes, they sound mighty familiar to what we're hearing these days about other services like Pandora and Spotify. Why is it that there's always a contingent of musicians who so want to hate the services that actually deliver a legal product to fans?

Permalink | Comments | Email This Story

Draconian Downloading Law In Japan Goes Into Effect... Music Sales Drop

Mike Masnick — Mon, 12 Nov 2012 07:20:49 PST

For years, we've pointed out that some in the music industry get so obsessed with "stopping piracy" that they miss the fact that their main job should be to increase revenue. They make the huge mistake of assuming that the two things are the same -- and that "stopping piracy" automatically leads to "increased revenue." Yet, almost every time that issue is explored empirically (over time), it doesn't seem to hold up. The latest example was sent in by Techdirt reader edinjapan, and it concerns the new draconian anti-piracy laws that recently went into effect there. If you believed the basic theory behind this law, this would mean that greater enforcement by police would mean less piracy... and a massive influx in revenue.

Except, the reality is that consumers are spending less on music than they were before the bill became law. The article actually posits that the government has made some people so fearful of being arrested that they won't do any downloading from legitimate sources any more -- just in case it's tainted. So even if they can cut out piracy (doubtful) there's little evidence to suggest much increase in commerce as a result.

Permalink | Comments | Email This Story

Humble Ebook Bundle Breaks $1 Million; All The Authors Should Be Best Sellers

Mike Masnick — Mon, 22 Oct 2012 07:17:58 PDT

We've been talking about the first Humble eBook Bundle, which launched recently, and has taken off really successfully. Over the weekend, it zoomed past $1 million in money raised. As author John Scalzi (whose book Old Man's War is included in the bundle) noted, if Humble Bundle purchases were counted by the NY Times every one of the authors would be on the best seller list. Think about that for a second.

More than 70,000 people have bought these books in just two weeks, and the folks at Humble Bundle passed along the news that the current average price of $13.94 (which keeps on rising, as people pay over the average to unlock all the extras) far surpasses all of their previous bundles. And yet, people keep telling us that there are no business models that work and that people won't pay for stuff when they can get it for free? When do we finally put those two bogus assumptions to rest?

Permalink | Comments | Email This Story

'Amnesia' Is Selling So Well, The Developers Have Forgotten All About Piracy

Tim Cushing — Thu, 13 Sep 2012 07:04:34 PDT

Swedish developer Frictional Games is celebrating two years of success with its sleeper hit "Amnesia: Dark Descent." In a lengthy blog post (via Rock, Paper, Shotgun), the developers run down the continued success of their very niche horror game, along with praising the communities that have grown around the game.

[If you're not familiar with the sphincter-clenching scariness that is Amnesia, take a look at the following video, which will allow you to hilariously enjoy someone else's complete hysteria. NSFW.]

Frictional Games attempts to run down the sales figures on Amnesia, a problem somewhat complicated by its inclusion with a Humble Indie Bundle. Long story short, though: sales were unexpectedly good.

The biggest reasons for the uncertainty is that Amnesia was part of the Humble Indie Bundle (HIB) earlier this year and Potato Bundle last year. Both of these account for quite a lot of sales. Without counting the units bought there our total lands at 710 000 units. Adding all HIB and Potato Sack sales gets us to 1 360 000 units in total, which can be called the optimistic figure. This means that, optimistically speaking, Amnesia has sold almost 1.4 million units!

Frictional adjusts for the Humble Effect by providing a "pessimistic" estimate based on the assumption that ⅔ of all bundle purchasers already owned a copy of the game:

This gives us about 920 000 units in total, pessimistically speaking. So saying that we have sold a million units seems fair. Wait... a million units! Oh shit!!

Not a bad total at all, especially for a non-AAA studio whose game featured combatless horror and whose advertising was mostly word-of-mouth. Even more surprising, the two-year-old game continues to sell at a brisk pace, even at full price:

Not counting any discounts, the monthly full price sales lie at over 10 000 units. This means that less then every 5th minute someone in the world is buying a copy of Amnesia.

Why are sales still so strong? Frictionless credits two very active communities:

This success is due to many factors, some of which are the uniqueness of the game (horror games without combat do not really exist on PC), the large modding community (more on this later) and the steady flood of YouTube clips (which is in turn is fueled by the modding community output).

Opening up your game and letting your fans build on your foundation is one of the best ways to rack up sales months (or years) after the release date. Just ask the developers of Arma, whose Arma 2 (another 2-year-old niche game) continues to sell very well, thanks to a strong modding community, including one of its own employees who developed the amazing "Day Z" zombie survival mod.

The output of modding community has been quite big as well. Amnesia is as of writing the 2nd most popular game at ModDB and sports 176 finished mods. Not only do this amount of user content lengthen the life of the game, it has also increased the amount of YouTube movies made with an Amnesia theme. There are lots of popular Let's Play channels that have devoted quite a bit of time with just playing various user-made custom stories. As mentioned earlier this have probably played a large role in keeping our monthly sales up.

It is quite clear that allowing users to create content is a feature worth putting time into. I also think that we managed to have a pretty good balance between having simple tools and still allowing a lot of possibilities.

When you give your fans a toolbox and invite them to not only create, but share the results openly, they become your advertisers. Without spending a cent on promotion, a developer can turn hundreds of individuals into a street team that shamelessly plugs your product because they love it. Respecting them enough to allow them to build on your original creates the sort of loyalty that locked-down software never will.

Oh, and as for piracy, the supposed bane of PC developers' existences? Here, in total, is all the developers have to say on that subject:

It has been over a year since we even thought about piracy. With sales as good as above we cannot really see this as an issue worth more than two lines in this post, so screw it.

Make great games. Extend the life of your software by opening it up to modders. Support your community. These simple steps (well, the last two are much simpler than the first) have allowed a small developer (11 employees) to command the attention of PC gamers and critics, resulting in Amnesia earning back over 10 times its cost. Who needs to worry about "lost sales" when so many people are clearly willing to pay?

Permalink | Comments | Email This Story

Hadopi Accused Of 'Massaging' The Numbers To Make Anti-Piracy Activity Look Better

Mike Masnick — Wed, 4 Apr 2012 12:40:00 PDT

We just wrote about Hadopi's back slapping report about how much it had reduced "piracy." We noted that what was really telling was the fact that revenue was still declining. However, as more people look at the details of the Hadopi report, even the numbers they provide are looking less and less credible. Monica Horten from IPtegrity looks at a few different sources that raise serious questions about the Hadopi report. What the analysis shows is that P2P file sharing is still increasing in France. The "decline" is not in absolute numbers, but in relative numbers, compared to other sources -- such as streaming. And streaming has gone up quite a bit. An analysis in the French publication Le Figaro highlights how P2P and streaming appear to have basically flip flopped:
On top of that, France Telecom, who has said that P2P use continues to grow, has also noted that it saw "a marked increase in levels of encrypted traffic since the Hadopi notice-sending began," suggesting that there's plenty of file sharing going on via encrypted channels that Hadopi simply can't track.

Furthermore, Horten points to a Numerama report that highlights the fact that Hadopi's numbers come from the IFPI and ALPA. ALPA is a French anti-piracy organization. In other words, organizations who have a long history of fudging their own numbers. You would think, if the data was really showed that Hadopi was having an impact, its numbers would be a lot stronger.

Permalink | Comments | Email This Story

Is There Any Value In Cracking Down On 'Piracy' If It Doesn't Increase Sales?

Mike Masnick — Mon, 2 Apr 2012 08:45:24 PDT

Hadopi, the organization set up in France to administer its three strikes law (kicking people offline based on accusations -- not convictions -- of copyright infringement), has put out a new report looking at how things are going 17 months after its creation. It highlights a bunch of benchmarks to suggest that infringement is dropping and that people are no longer visiting file sharing sites. The report links to a bunch of reports showing a decline in traffic to those sites. They even include some data on traffic to sites like Megaupload -- despite the fact that cyberlocker downloads are not covered by Hadopi. However, as the TorrentFreak link above points out, it's worth noting that even if this is true, it hasn't turned into revenue:

For more than a decade the entertainment industry has claimed that digital piracy is the main cause for the gradual decline in revenues. So if piracy is down massively in France, one would expect that the revenues are soaring, right? But they’re not.

If we look at the French music industry we see that overall revenues were down by 3.9 percent in 2011.

Likewise, the French movie industry is still going through a rough period with revenues dropping 2.7 percent in 2011. Ironically, an industry insider even blamed online piracy for this drop.

To sum it up. in 2011 online piracy was slashed in half according to the Hadopi report, but despite this unprecedented decline the movie and music industries managed to generate less revenue than in 2010. If we follow the logic employed by the anti-piracy lobby during the past decade, this means that piracy is actually boosting sales.

Now, we've been pointing out for years that spending so much time and resources on reducing infringement is pretty pointless if it doesn't lead to an increase in revenue. And it appears that such a revenue increase isn't magically appearing (just as we predicted). Now, of course, there was that report that was trumpeted by Hadopi supporters claiming that there was an increase in iTunes sales, but the details showed that was correlated to new releases in Apple products (and Christmas) more than three strikes. And this new report actually shows just how little the iTunes boost really was. It has a chart showing different music services and how their usage has changed in France during Hadopi's existence: What you see... is kind of a mixed bag. iTunes usage increased just slightly -- but not that much at all, considering the numbers the reports brags about concerning decreases in infringement. You do see a big jump on two services: Beezik and Spotify, both of which allow for the ability to listen to music for free. You also see decreases in traffic to Deezer and Universal Music. If the industry was right that reducing piracy would magically boost all of these alternatives, there would certainly be a more noticeable trend. This really raises significant questions as to what's the point of all of this. Implementing Hadopi cost French taxpayers quite a lot of money and if it's not actually helping the industry, what good is it?

It just comes back to that same important question: which is more important? Reducing infringement or increasing revenue? The industry has acted for years as if the former is the most important (and when we ask this question, they insist that the former would lead to the latter). Yet, now the evidence doesn't appear to support that. If anything, Hadopi's report, while patting itself on the back for reducing infringement, really highlights just how useless Hadopi has been and what a waste it's been for both French taxpayers and the French entertainment industry that has supported it so strongly.

Permalink | Comments | Email This Story

How Sony Got Off Easy With Its 'Settlement' In Class Action Lawsuit By Underpaid Artists

Mike Masnick — Tue, 20 Mar 2012 13:28:34 PDT

While Eminem's producers got a ton of attention and a big ruling noting that the labels had incorrectly accounted for iTunes sales -- leading to some back of the envelope calculations that artists might be owed around $2 billion in unpaid royalties from the major labels -- the very first of these cases (which actually predates the Eminem case) has reached the "settlement" stage, with Sony Music offering all qualified artists a relatively tiny pool of money to split.

The case was originally brought back in 2006 by the Allman Brothers and Cheap Trick -- which we wrote about at the time. Both of those bands eventually settled, but by then the case had turned into a class action lawsuit for other Sony Music artists, with the Youngbloods and Elmo Shropshire (who has been involved in some other bizarre copyright lawsuits) taking the place as the named artists in the case. At issue, of course, is whether or not an iTunes transaction is a sale (tiny royalty payment) or a license (much bigger royalty payment). However, the settlement seems pretty paltry. Sony pays out $7.95 million, but as is so often the case in class action lawsuits, the lawyers get $2.65 million of that, leaving $5.3 million for all of the remaining qualified artists. As Digital Music News explains:

Of that $5.3 million, $5 million is reserved for artists who sold at least 28,500 total downloads on iTunes between the inception of iTunes on January 9, 2001 and December 31, 2010 including current class members Youngbloods and Shropshire. Qualifying members would split that $5.3 million pro rata to the number of downloads of their records. However, these two artists may ultimately receive a lot less than splitting the $5 million between themselves because any artist who was signed to Epic, Columbia or Arista Records who sold more than 28,500 is eligible to join the class if they entered into agreements dated between January 1, 1976 and December 31, 2001.

According to a trusted source there may well be over 100 artists would qualify for membership. The balance of the money, only $300,000, is reserved for all Sony artists with fewer than 28,500 total downloads on iTunes.

The proposed settlement also provides for a prospective 3 percent bump in artists' royalty rates with respect to permanent digital downloads and ringtones sold in the US after January 1, 2011. The 3 percent is against Sony Music Entertainment's gross receipts. This amounts to 3 percent of 70 cents (the amount Sony received for 99 cent downloads) and that is only 2.1 cents.

It's... something. But considering how much was being dangled in previous estimates, it sure sounds like Sony may end up getting off on the cheap end if this settlement is completed. Oh, and in case you were wondering, Sony probably won't even have to pay out a chunk of this money because if any of the artists haven't recouped yet, this money will merely be "credited" towards their accounts. And considering how the labels aren't exactly known for keeping the best records as to who's actually recouped, there's plenty of room for Sony to keep the money and just claim it's crediting an account that will never surpass the red line.

Permalink | Comments | Email This Story

Does Anyone Who Develops New Products In Hollywood Ask 'Would I Ever Actually Use This?'

Mike Masnick — Wed, 14 Mar 2012 12:47:27 PDT

For all the lip service the MPAA has been paying to the claim that it loves tech innovations and wants to work with the tech industry to build cool things, why is it that every new "innovation" the industry comes up with only seems to make life complicated for people in ways that make no sense at all? For example, we recently talked about Warner Bros. ridiculous disc-to-digital offering in which people who want a digital version of movies they have on DVD can drive to a store where someone will rip the movie for them. In a world where the ability to rip your DVDs in the comfort of your own home is commonplace, that makes no sense at all.

I think we can add to this "huh?" discussion: the new effort from Fox, in which the studio will be putting up giant murals in malls to try to make it "easier" for you to buy DVDs. Here's how it works according to Deadline.com:

As part of an exclusive one-year partnership with Twentieth Century Fox Home Entertainment, the malls will have a wall with cover art and QR codes for many the studio’s home videos. People who want to buy the movie or TV show can download a smartphone app called Fox Movie Mall, available for both iPhones and Android devices. It will enable them to scan an image and go directly to a Web site to complete the purchase for a DVD or Blu-ray disc shipped free to their home.

So, yeah. You go to a mall (physical) and download a special app (digital) which you then use to scan a silly QR code (digital) to be sent to a website (digital) to order a DVD (physical) to be shipped to your home (physical). There are a bunch of ridiculous extra steps here and I can't figure out how any of this makes sense. If you have people in a mall already and you're trying to get people to buy physical product, why not just let them scan and pick up the physical product? If you're focusing on the digital components, why require a specialized app that no one's going to want to download, and then not offer a digital version of the film?

Fox execs claim that they expect this new effort "to reach as many 60 million people over the next four months with the mall wallscapes." I guess that depends on your interpretation of "reach." If you mean 60 million people may walk by and ignore these murals, perhaps that's true. Though that suggests Fox must be spending a ridiculous amount of money to get these murals pretty much everywhere. If you mean that 60 million people will actually pay any attention at all to this convoluted system to buy an obsolete product fewer and fewer people actually want, well, then someone's done a miscalculation somewhere.

Seriously: how hard is it for folks in Hollywood to ask this simple question: "Would I ever use this product that I'm developing?" If the answer is "not in a million years" perhaps it's time to move on to building products that consumers actually want.

Permalink | Comments | Email This Story

Did Universal Music Try To Expense The Costs Of Eminem's Producers Suing Over Unpaid Royalties... Back To Eminem's Producers?

Mike Masnick — Fri, 24 Feb 2012 08:49:05 PST

We were just discussing some of the details from Kenny Rogers' lawsuit against EMI/Capitol Records which showed the many, many ways in which record labels avoided paying artists what they were owed... and now some more details have leaked in the very similar (but further along) case concerning Eminem's royalties. You may recall that, back in 2010, Eminem's producers, FBT Productions, won its case against Universal Music, for the first time establishing that iTunes sales should be counted as licenses rather than sales. This was important, because sales get a royalty rate that's usually around 15%... but licenses get a royalty rate around 50%.

While Universal Music insisted that its deal with Eminem was unique and such a ruling wouldn't apply to most other artists, plenty of other artists have been suing their labels (like Kenny Rogers above), and estimates of upwards of $2 billion in back royalties that the labels may have to pay out.

The Eminem case is back at the district court as they try to sort out just how much FBT is owed, and Eriq Gardner, over at THResq, got his hands on one of the audit reports put together by an expert for FBT. It only shows a limited range of years (July 2005 to December 31, 2009), but also shows (similar to the Rogers lawsuit) how the report turns up all sorts of other areas where Universal likely underpaid FBT. As you can see, the audit shows $3.8 million owed for the missing royalties from iTunes downloads. But also of interest? FBT claims that it never received a cut of the YouTube settlement money -- which many people had been wondering if it was ever going to go to the artists. Apparently not.

However, the most insane thing here may be the line at the bottom, in which it appears that Universal held back $2 million in a "legal hold." Gardner notes that this is money held back to pay for this very lawsuit. This is classic record label economics. Everything that you do that costs money, they charge against the artists' royalties. Order pizza at the recording studio? They charge that against your (small) cut of the royalties. Want to do extra promotions? Charge it against the royalties.

And... apparently, sue Universal music for withholding millions in royalties? It looks like they'll charge that against your royalties too...

Permalink | Comments | Email This Story

Recording Industry Can't Wait To Start Kicking People Offline In France For Listening To Their Favorite Songs

Mike Masnick — Tue, 21 Feb 2012 10:43:59 PST

As we reported last week, the French agency in charge of scaring internet users with the threat of potentially losing their internet connections based on accusations (not convictions) of copyright infringement has finally started passing on "third strike" notices to prosecutors, to see if they choose to start kicking people offline. The NY Times has an article discussing this latest step in a manner that repeats a bunch of the record labels' favorite talking points, and seems to accept a number of the industry's claims without question (a practice that is becoming way too common in the pages of the NY Times lately).

Studies show that the appeal of piracy has waned in France since the so-called three-strikes law, hailed by the music and movie industries and hated by advocates of an open Internet, went into effect. Digital sales, which were slow to get started in France, are growing. Music industry revenues are starting to stabilize.

These are all stated as if it's clear that the three things are connected, even though the evidence there is lacking.

“I think more and more French people understand that artists should get paid for their work,” said Pascal Negre, president of Universal Music France. “I think everybody has a friend who has received an e-mail. This creates a buzz. There is an educational effect.”

This is wishful thinking on the part of Negre. Multiple studies have shown that piracy is almost never an educational issue. It's not about people needing to "understand that artists should get paid for their work." As we've seen time and time again, if you give fans a good reason to buy, fans have no problem spending (and spending big) on artists. As for "the buzz" created by Hadopi emails, from what the various reports we've heard out of France are saying, much of that "buzz" is around how to make use of VPNs and other tools... as well as how to use cyberlockers and such tools that are not (yet) covered by Hadopi.

Eric Walter, the secretary general of Hadopi, said that the relatively low number of third-stage offenders showed that the system had succeeded.

“Our work is to explain to people why piracy is a bad thing and why they should stop,” he said during an interview in the agency’s nondescript headquarters behind the Montparnasse train station in Paris. “When the people understand that, they stop. Of course, some people don’t want to understand. Then we have to transfer their dossiers to the justice system.”

Again, this assumes that piracy is merely an educational issue, and people would just stop infringing if they only knew that it was illegal. Yet there's little evidence to support that claim. Most kids understand that it's illegal, but it doesn't make a difference to them.

A report commissioned by Hadopi, which has a budget of €11 million and employs 70 people, showed a sharp decline in file-sharing since the system was put in place.

A separate study by researchers at Wellesley College in Massachusetts and Carnegie Mellon University in Pittsburgh suggests that Hadopi has given a lift to legal downloads via the Apple iTunes music store. Since the spring of 2009, when the debate over the measure was raging, through mid-2011, iTunes sales rose much more strongly in France than in other European countries.

Oddly, the NY Times fails to name the study or its authors, or link to the actual study. But we will. It's The Effect of Graduated Response Anti-Piracy Laws on Music Sales: Evidence from an Event Study in France, by Brett Danaher, Michael D. Smith, Rahul Telang and Siwen Chen. If this study sounds familiar, it's because it's the one the IFPI has been hyping in support of similar laws. It's also the report that isn't nearly as strong as the IFPI (or the NY Times) insists and has been pretty thoroughly debunked for anyone who uses it to claim that Hadopi's notice system educated people into buying from iTunes. As some have pointed out, the actual data shows the "change" in sales behavior (relative to other countries) happened way before Hadopi came into effect. And... when Hadopi actually started sending out its notices? No noticeable impact.

That kind of takes the wind out of the sales of the two folks quoted above who insist that it's the educational nature of the notices that leads to the increase in sales. And, as we reported last month, when Le Monde took the same data and plotted it against announcements about new iPhones or Christmas, it found a much stronger connection, suggesting the increase in sales had little to do with Hadopi and much more to do with more people having iPhones.

These are the kinds of things that you would think the NY Times might note. But it does not.

There is other evidence in Europe that tougher online copyright enforcement can lift media industry revenues, at least briefly. Music sales rose 10 percent in Sweden in 2009, for example, after the country tightened up its copyright laws, bringing previously lax standards into line with E.U. norms.

Mr. Negre, at Universal Music, said it was probably no coincidence that Sweden and France had produced the two big European success stories in the legitimate digital music market: the streaming services Spotify and Deezer. These companies — the former was founded in Sweden, the latter in France — resemble pirate sites in that they give users access to millions of songs free, at least for their basic services.

This may be the most ridiculous claim of all. First off, Deezer, in France, launched back in 2007, or about four years before Hadopi went into effect. Similarly, Spotify launched in Sweden in 2008. The IPRED law in Sweden? Went into effect in 2009. In other words, both of these services pre-dated the laws, rather than post-dated them as Negre from Universal Music implies. And, perhaps that also has a lot more to do with the rebound of some parts of the recording business in both of those countries. After finally allowing services to offer fans what they wanted, should it be any surprise that they actually are happy with that? Oh, as for the claim that IPRED reduced file sharing in Sweden? Reports had the amount of sharing traffic surprassing pre-IPRED numbers within months. It may have suppressed infringement briefly, but not for long. Of course, it's worth noting that much of the effort has been focused on movies. With music, thanks to Spotify, the reasons to infringe are almost gone.

And, really, that should be the key lesson we're talking about here. If the industry stops meddling and starts letting companies treat their customers right and provide them with more and better ways to consume, they will do so. Playing wac-a-mole, kicking people offline and scaring them is no way to build a long term business.

There are two other really interesting bits later down in the article. The first is that Sarkozy's opponents in the upcoming election all seem to want to dump Hadopi, demonstrating just how unpopular the law really is in France. Then there's the fact that Hadopi appears to have been caught sending notices to the wrong people:

Mr. Thollot argued that someone had pirated his log-on to a nationwide Wi-Fi network and downloaded the material while he was in class. After interviewing him, Hadopi dropped his case.

“It’s like when someone steals your bank card number,” said Renaud Veeckman, co-founder of SOS Hadopi, an organization that offers legal help to people who have received warnings from the anti-piracy agency. “Are you responsible, or are you the victim?”

SOS Hadopi has worked with five people whose dossiers have reached the third stage, including Mr. Thollot; all five have been cleared before going to court. This suggests that the actual number of cases that have been forwarded to the justice system may be considerably lower than the 165 third-strike offenders cited by Hadopi. Mr. Walter at Hadopi declined to provide a specific figure.

This part especially should raise significant questions about the quality of the information being used. Because, so far, it sounds like a big joke... other than the fact that some people might lose their internet connections over it.

Permalink | Comments | Email This Story

Schrödinger's Download: Whether Or Not An iTunes Music Sale Is A 'Sale' Depends On Who's Suing

Mike Masnick — Fri, 10 Feb 2012 11:36:00 PST

Steve Worona has a great post pointing out how the record labels have clear cognitive dissonance (the ability to hold two totally conflicting ideas in your head at the same time -- and argue for both of them) when it comes to the question of whether or not an iTunes purchase represents a "sale." He puts forth three examples of such cognitive dissonance in the legal context, with the final one being taken from two recent legal cases involving major record labels:

Example 1, the case of the kettle. As summarized by the Manhattan Institute for Policy Research, “Readers who’ve been to law school may remember the chestnut known as the ‘Case of the Kettle’. A man is charged with borrowing a kettle and breaking it. His reply is that, first, he never borrowed it; second, it was already broken when he borrowed it; third, it was intact when he returned it.”

Example 2, the case of the dog. Paraphrasing from a 1978 Wall Street Journal article about well-known Texas defense attorney Richard “Racehorse” Haynes: You say my dog bit you, but I don’t own a dog, and he doesn’t bite, and you kicked him first.

Example 3, digital downloads. Two recent court cases hinge on how the sale of an MP3 download compares to the sale of a conventional physical recording, known as a “phonorecord” in Copyright-speak. In one case, the singer Eminem demanded that Universal Music Group calculate his royalties for downloads based on the higher rate for licensed material instead of the lower rate for phonorecord sales. UMG refused, arguing that the sale of an MP3 download was the same as a phonorecord sale. In the second case, EMI filed suit against ReDigi, a company that allows purchasers of MP3 downloads to resell those files under Copyright law’s “first sale” doctrine. EMI argued that the MP3 files were not phonorecords and thus not subject to first sale.

What's being discussed here, of course, are two cases that we've covered. The Eminem case involved whether or not an iTunes purchase counted as a "sale" like a CD, where there was a very low royalty rate (probably around 15%), or as a "license" like for a movie, where the royalty rate was more like 50%. Universal argued stringently, and continues to argue in a series of follow-up cases, that an iTunes purchase is just like a CD purchase, and the much lower rates apply. However, in the ReDigi case -- where the company is trying to argue that if an iTunes purchase is just like a sale, then clearly the "first sale doctrine" applies and those files can be resold -- EMI, which is in the process of being acquired by Universal, argues that an iTunes sale is a license, and thus there's no first sale.

Worona sums it up beautifully:

Putting these two arguments together, we see the music industry imagining transactions where what’s sold is a phonorecord but what’s purchased isn’t.

To me this seems like the Schrödinger's Cat of copyright law. According to the record labels, if we're talking about it from the seller's perspective, it's a sale. But the second you flip the equation and look at it from the buyer's perspective, it's a license. The cat is simultaneously dead and alive. Either the major labels are full of it... or they're breaking new ground in quantum physics. I'll assume it's the former, rather than the latter.

Permalink | Comments | Email This Story

iPhone Data Debunks Recording Industry's Report On How French Three Strikes Law Increased Sales

Glyn Moody — Wed, 1 Feb 2012 15:03:24 PST

The annual Digital Music Report (pdf) of the International Federation for the Phonographic Industry (IFPI) is a curiously conflicted production. On the one hand, it must celebrate "a healthy 8 per cent increase in our digital revenues in 2011 -- the first time the annual growth rate has risen since records began in 2004 "; on the other, it must continue to push the party line about how the industry is being destroyed by piracy.

The IFPI has a stab a reconciling that contradiction, writing: "The truth is that record companies are building a successful digital music business in spite of the environment in which they operate, not because of it." However, it desperately needs some proof of that statement, because otherwise the simplest explanation is that piracy is not a serious problem, and that the recording industry is thriving, just like the rest of the creative industries.

The IFPI probably thinks it has found some proof in the French HADOPI experience, which, according its report, demonstrates that introducing three-strikes measures against unauthorized sharing boosts digital sales.

A new academic study -- The Effect of Graduated Response Anti-Piracy Laws on Music Sales: Evidence from an Event Study in France, by Danaher et al -- has also found evidence that Hadopi has had a positive impact on iTunes sales in France. The authors studied sales of digital singles and album downloads on iTunes from July 2008, before the law was adopted, until six months after the start of notices. They developed an estimate of what French iTunes sales would have looked like in the absence of Hadopi by studying a control group of similar markets.

The analysis found that French iTunes sales saw a significant uplift at exactly the period when awareness of Hadopi was at its highest, in Spring 2009, when the law was being debated in the National Assembly. This effect was maintained throughout the period studied. French iTunes sales were 22.5 per cent higher for singles and 25 per cent higher for digital albums than they would have been, on average, in the absence of Hadopi.

Taking a look at the study (pdf) provides some details of how the research was carried out: For this study, we obtained a panel of total weekly iTunes sales units for a number of European countries including France. Our data extend from July 2008 to May 2011, and we observe separately both track unit sales and album unit sales. The data were obtained directly from the four major music labels -- EMI, Sony, Universal, and Warner -- and aggregated to reflect total iTunes sales for the majors.
In an attempt to observe the effect of HADOPI, these sales were compared with a control group of five other European countries that didn't introduce similar legislation: the UK, Italy, Spain, Germany, and Belgium. By looking for differences between these two data sets, the researchers hoped to observe the effects of the three-strikes legislation on sales of digital music, using a Google Trends graph of searches for the word "HADOPI" as a proxy for awareness of that legislation, both before and after it was passed.

The graph of iTunes sales for France clearly diverges from that of the control group, lying consistently above it. The divergence begins around about the time that HADOPI was first presented to the French National Assembly, increases slightly, and then decreases a little after the first warning letters were sent out. From this, the researchers deduce that the discussion around HADOPI caused significantly increased sales of iTunes compared to the control countries:

these estimates indicate that French track sales units rose about 25.5% in the control group after March 1, 2009 but by 48% in France, indicating that French iTunes track sales were 22.5% higher on average than they would have been in the absence of HADOPI. Similarly, album sales units rose by 42% in the control group but 67% in France, indicating that HADOPI increased iTunes album sales an average 25% per week in France.

That's a plausible explanation if you believe that piracy is stopping people from buying digital music, but it's not the only one. The French newspaper Le Monde decided to use the same technique of comparing the rise in iTunes sales with Google Trends, but with a different search term. Since iTunes is intimately bound up with Apple's products, Le Monde thought to take a look at the trend for "iPhone" searches on Google.

What it found were five very pronounced peaks in the French searches that corresponded exactly with five (smaller) peaks in iTunes sales, and also to five well-defined external events: the launch of the Iphone 3GS and iPhone 4, and three Christmas seasons. The effect was so marked in France because it was starting from a lower base: according to the researchers, the average sales of iTunes in France were 450,000 per week, while in the UK they were 2,900,000 per week. So an alternative explanation for those impressive increases in sales is simply the uplift in iPhone ownership generated by new launches and the holidays in an immature market with plenty of room for growth.

The researchers do offer one other piece of evidence for the uplift in sales being due to the crackdown on piracy:

EMI surveys of French citizens show that that Rap and Hip Hop are the most heavily pirated genres, even relative to popularity in legal sales channels. While Rock and Pop experience average levels of piracy, the data also indicate that genres such as Classical, Christian, Folk, and Jazz experience significantly lower levels of piracy.

Therefore, they argued, if the increase in sales were due to reductions in piracy, they would expect "the increase in Rap sales to be larger than that for Rock and Pop and the increase for Classical, Christian, etc. to be quite low." And that is precisely what is observed. Conclusive proof? Maybe not.

As the Le Monde analysis points out, another explanation is that many recent iPhone purchasers are younger people, who are generally the most interested in acquiring the latest technology as soon as it comes out. And younger people, by and large, listen to more Rap than Classical or Christian music, which would explain the difference in the increase across genres.

Spending so much effort here on exploring one research report might seem excessive, but it matters. The IFPI is already branding this supposed increase in digital music sales -- quantified by the researchers at $18.6 million annually for France -- the "HADOPI Effect". In the months to come, you can bet that the recording industry's representatives and lobbyists will be visiting governments and showing them this "proof" that three-strikes really "works" -- and demanding they follow suit to "protect" the artists.

What's ironic is that the IFPI report spends many of its pages discussing a much more sensible way of reducing unauthorized sharing: offering high-quality music streaming services instead, as recent market research from Scandinavia indicates. Unfortunately, the recording industry is so obsessed with punishing pirates that it can't see that its future lies in promoting innovation, not legislation.

Follow me @glynmoody on Twitter or identi.ca, and on Google+

Permalink | Comments | Email This Story

Free To Play Video Game Makes Over $2 Million Selling Just One Item [Update: Or Not]

Mike Masnick — Wed, 30 Nov 2011 15:00:06 PST

For whatever reason, some people falsely seem to think that part of what I argue is that no one should ever try charging money for digital goods. Nothing is further from the truth. I have said over and over and over again, the important thing is figuring out what it makes sense to charge for, and what it doesn't make sense to charge for. The problem we have is when people just assume that because they put a price on it, that's the right price. On top of that, those who charge without recognizing the potential pitfalls of charging for things in certain situations shouldn't complain when that effort fails. But if you do it right, you can absolutely charge for certain digital things -- and, in fact, many of the examples we point to of success stories involve charging for digital things.

Aaron DeOliveira points us to another fascinating example, involving the free-to-play online video game, DarkOrbit. Within the game, there's a special item, known as the 10th drone -- or the Zeus Drone -- that is highly desirable. As you might imagine, to get the 10th drone, you first have to get all 9 previous drones... and some blueprints to make the 10th drone. Apparently, this is quite involved. BigPoint, the company behind DarkOrbit, also tried another tactic: the company has run an occasional promotion, where you can buy the 10th drone for 1,000 euros (~$1,330). Here's the amazing part: apparently two thousand people paid, bringing in about 2 million euros, or $2.7 million. For a single digital item. Update: Or.... not quite. A clarification makes it clear that it did not bring in that much. People did buy, but they had to buy with in-game currency. You can sometimes buy such currency... and sometimes it's discounted. If it wasn't discounted and you had none in the game... then the cost of the drone would have been 1000 euros. As that's not likely to be the case, while the game did still sell 2000 such drones, it was clearly for less money. However, it is still an example of where people can be willing to pay if done right... just not as amazing.

But the real key here is in what they did to make this possible. First, used "free" to get lots of people in the door, connect with them, and make them totally bought into the game, such that they'd be willing to spend. Then, build up the overall "value" of such an item, and then offer it in a way that people really wanted to buy even at what many of us might consider to be an insane price. However, it's a perfect example of how if you really connect with fans, and carefully figure out what it makes sense to charge for... you can do quite well.

Permalink | Comments | Email This Story

Fight The Power: Chuck D Sues Universal Music For Hundreds Of Millions In Unpaid Royalties

Mike Masnick — Fri, 4 Nov 2011 11:06:00 PDT

When Eminem's publisher won its lawsuit with Universal Music over how to account for iTunes royalties, we expected a flood of similar litigation, possibly enough to seriously cripple the world's largest record label. Universal Music insisted that Eminem's deal was unique and the case was specific only to that, but so far, we're seeing more and more musicians understanding the implications of the ruling, and filing similar lawsuits. If you don't recall, the battle came down to the simple question of whether or not an iTunes sale was a sale or if it was a license. Amusingly, in almost all other legal contexts, Universal Music claims that when you "buy" a song at iTunes it's just a license. But that proved to be UMG's undoing here -- because many of its old contracts had extremely different terms for royalties on "sales" and "licenses."

Now, there's a good reason for this. Historically, sales were of things like CDs, where Universal had relatively higher production, storage and distribution costs. So for "sales" (of CDs), the royalty to the musician was lower. "Licenses" generally referred to things like licensing a song for a movie or TV commercial. There, labels were willing to share higher royalties with the artist, and for good reason. The costs to the label of such a license were minimal, and licensing was always a relatively small part of the business.

But, of course, iTunes makes for a weird situation. The labels want to pretend it's the same thing as selling a CD, and thus they've been paying the lower royalty rate. But, in other legal contexts they keep claiming that downloading a song from iTunes is not really a "sale" but merely a "license." Thus, the basic legal claim from musicians is that for iTunes sales, they deserve the much higher royalty rate (usually closer to 50%, rather than 10% for sales). The court in the Eminem/FBT case said that iTunes songs were licenses... and thus the higher rates applied.

As we noted, when others started suing, this could lead to somewhere around $2 billion that the labels may need to pay out to artists, and the artists are noticing.

The latest to file suit is is Chuck D of Public Enemy, claiming that Universal owes him hundreds of millions of dollars.

The full filing (embedded below) provides some additional details about UMG's "standard" recording contract. As was detailed earlier this year by entertainment industry lawyer, Martin Frascogna, royalty rates are often just a part of the calculation -- and those royalties tend to come after a bunch of other "deductions." In the Chuck D lawsuit, he notes that the "sold" equation includes a ton of additional "deductions" compared to the "licensed" equation. This includes a "container charge" and an "audiophile deduction." Because of those significant other deductions that only are used on "sales," the claim is the amount owed is even larger than just the discrepancy in royalty rates... and considering that the "container charge" is officially for physical packaging of a CD, it seems pretty ridiculous that UMG has been applying the container charge to digital licenses like iTunes.

In the lawsuit, Chuck D actually reveals the data on how UMG has been calculating royalties... and how they should. It highlights record label accounting at its finest: As you can see, just as Frascogna explained in his video, the "standard" way of accounting for "sales" is pretty ridiculous. First, there's a "net sales" deduction, which simply deletes 15% of sales from the equation. Then the "container charge" takes out another 25%. So, on 1,000 units -- which brought UMG $700... UMG is able to say that Chuck D is only provided with $80.33... despite a (quite generous for a record label deal) royalty rate of 24% (standard deals start closer to 10%). In other words, the real royalty rate for Chuck D is actually more like 11%, rather than the 24% claimed in the contract.

As the lawsuit notes, the proper way to account for digital royalties would show a much, much higher number: $315.85 for every 1,000 units sold: The lawsuit goes on to make similar (though with even more number discrepancy) arguments around ringtone royalties, suggesting that UMG is paying $49.89 per 1000 ringtones sold... when the actual number should be more like $660.

UMG is going to be facing a lot more of these kinds of lawsuits, and it's somewhat amusing to see it hoisted on its own petard for being so insistent that iTunes and other digital stores were "licensing" deals. And, for what it's worth, Chuck D has actually been one of the artists on the forefront of embracing the internet and what it allows -- way before almost any other artist. All the way back in 2000, we had an article about him defending Napster in a debate against Lars from Metallica. If anyone deserves to take Universal for "hundreds of millions of dollars," he seems like a good candidate.

Permalink | Comments | Email This Story

DailyDirt: Food By The Numbers...

Michael Ho — Fri, 23 Sep 2011 17:00:00 PDT

Some folks are obsessed with numbers. Others are obsessed with food. Combine these two tastes that taste great together and you get: ~~Reese's peanut butter cups~~ infographics about food. Here are just a few random sets of data on food consumption in the US.

Just as you probably already knew: Thin Mints are the most popular Girl Scout cookies, raking in about 25% of Girl Scout cookie sales. Samoas (aka Caramel deLites) come in at #2 with 19% of sales. [url]
What does the average American consume in a year? Hmm: 110 lbs of red meat vs 415 lbs of vegetables? Do those numbers sound right to you? [url]
In a survey of 500 "dudes" (ages 18-35), 90% of them had visited a McDonald's in the last 3 months. It's gotta be the fries -- a surprisingly high percentage of guys just get a drink or fries. [url]
To discover more food-related links, check out what's floating around in StumbleUpon. [url]

By the way, StumbleUpon can also recommend some good Techdirt articles, too.

Permalink | Comments | Email This Story

Copy Protection Does Not Mean More Sales

Mike Masnick — Mon, 1 Aug 2011 05:22:56 PDT

We've been pointing out that this isn't true for years now, but the entertainment industry is still so focused on "stopping piracy" rather than "what's the best business model," that they still don't seem to realize that many of their efforts to "stop piracy" actually do nothing to help their bottom line, and often do plenty to hurt their performance. We've already shown (with multiple studies) that people who download unauthorized copies often tend to be the best customers, but there's also the flip side of that equation, which is whether or not preventing unauthorized file sharing increases sales. We've suggested for years that even if the industry could slow down unauthorized copying, it's unlikely that it would directly lead to an increase in sales.

David Pogue has an article in Scientific American saying the same thing, highlighting how his own attempt at copy protecting some ebooks didn't lead to more sales, but that freeing up his ebooks actually did increase sales:

I make most of my income writing computer books. To my great distress, I discovered that they are widely available online as PDF files. But when I griped on my blog, my readers challenged the assumption that I was losing sales.

“First of all,” they said, “you’re counting a lot of people who never would have bought the book in the first place. Those don’t represent lost sales. And you’re not counting the people who like the PDF so much, they go buy the print edition or discover from the PDF sample that they like your writing.” One reader challenged me to a test: make one book available both on paper and as an unprotected PDF file. Report the effect of sales after one year.

I did that. The results were clear: Piracy was rampant. The book was everywhere online. But weirdly, my readers were also proved right. Sales of the printed edition did not suffer; in fact, they rose slightly year over year.

Now, there are two things worth pointing out. This particular story isn't entirely new. We wrote a similar story a year and a half ago when Pogue wrote nearly the same story for the NY Times. Also we tend to disagree with a straight "give it away and pray" sort of setup that Pogue went with here. However, that doesn't mean the point doesn't stand.

No matter what you think, morally or legally, about file sharing, if there are ways to embrace what your fans/consumers want in this manner and then make more money at the same time, does it really matter that you dislike the infringement? To put it another way: would you prefer making more with infringement, or less without infringement? Too many people assume that by cutting out infringement that leads to them making more, but there's more and more evidence that says that's simply not true.

Permalink | Comments | Email This Story

Did LimeWire Shutdown Increase Music Sales? Part II

Mike Masnick — Mon, 16 May 2011 10:49:55 PDT

Earlier this year, we noted how copyright maximalists were celebrating the fact that according to one (historically untrustworthy) analytics firm, file sharing had taken a massive drop following the shuttering of LimeWire. Of course, I pointed out at the time that those celebrating this were (yet again) focused on the wrong question. So often we hear copyright maximalists talk about how "piracy" must be stopped, but they never seem to want to discuss whether or not that will make people buy again. So, we looked at some of the data provided by some who did believe LimeWire's shutdown had increased sales, but it came up a bit wanting. Still, I'm all about data, and if there really is data supporting the claims that LimeWire's shutdown resulted in increased sales, it might make me reconsider my position on the wisdom of taking legal action against operations like LimeWire.

So, with the recent settlement in hand, it seemed like as good a time as any to look into the data. Of course, it also helped that Capitalist Lion Tamer sent over the latest stats from Nielsen, noting that music sales are up in 2011.

Boom! Case closed. LimeWire's shutdown saved the music industry. Right? Well, actually, no. Doesn't look like that at all. In fact, Nielsen doesn't even mention LimeWire's shutdown in its note about this, attributing much of the increase to the Beatles finally coming to iTunes. And, actually, if you look at the same Nielsen reports going all the way back to 2006, they show music sales going up each year. It's just that more of it is single tracks, rather than full overpriced albums. It looks like the same is true of the latest data as well. If anything, the data suggests a noticeable slowdown in the growth rate. That is, sales are only up 1.6%, this year, which seems significantly down from the growth rate in past years. In 2006, the growth rate was 19%. In 2007 it was 14%. In 2008 it was 10%. In 2009 it was 2.1%.

Perhaps there's some other data to be found, but it's hard to see how there's much of an argument that the shutdown of LimeWire, even if it really did cause file sharing to drop massively, then resulted in an increase in music sales. Kinda makes you wonder about those claims from the RIAA about just how much LimeWire had to do with their problems.... It also explains why the labels were happy to settle for $105 million after claiming trillions in damages from LimeWire. Even the industry seems to know that it's not file sharing that's the real issue.

Permalink | Comments | Email This Story

Record Labels May Owe Artists Close To $2 Billion; Lawsuits Ramp Up With Rick James In The Lead

Mike Masnick — Tue, 5 Apr 2011 09:04:04 PDT

With the Supreme Court rejecting the appeal of Universal Music concerning how much it owes Eminem for iTunes sales, we expected a bunch of lawsuits to be filed, and that's starting. The estate of Rick James has filed a class action lawsuit on behalf of other artists who also believe that Universal incorrectly paid them for similar digital sales.

If you don't recall, the key question is whether or not digital "sales" are really "sales" or "licenses." That's because old record label contracts (the newer ones, not surprisingly, have been changed) gave artists a very small percentage of royalties on "sales," which was supposed to be about CDs, vinyl and tape, and a much higher percentage on "licenses," since there's not much involved in a license. Eminem and some other musicians have been suing the record labels pointing out that iTunes and ringtones appears to be a lot more like a license than a sale, and thus they should get the (much) higher royalty rates, and the appeals court agreed with Eminem. I'm not sure the status of some of the other lawsuits in this space, but with this new class action, I'm sure we'll be hearing about plenty of these lawsuits soon.

While Universal Music keeps insisting that the Eminiem contract was "unique" and had special language that makes the ruling only applicable to Eminem, clearly these other musicians do not agree. David Kusek has done some (ha ha) back of the iPad calculations to estimate the potential liability for the record labels at close to $2.15 billion. Even if the estimates are a bit off, the record labels should be pretty worried about all of this. Of course, I can't wait until the next time they want to insist that they've really only "licensed" the music you have rather than "sold" it to you, since they were arguing exactly the opposite of that in court...

Permalink | Comments | Email This Story

Did Limewire Shutdown Increase Music Sales?

Mike Masnick — Tue, 29 Mar 2011 15:22:00 PDT

Last week, we had a post following the report from NPD suggesting that file sharing in the US had dropped off significantly due to the Limewire shutdown. While there are some serious questions about NPD's methodology, we assumed that it was at least mostly accurate, and then asked if there had been a corresponding increase in music sales. After all, despite what you hear from the RIAA/MPAA, the end game should be about business being stronger, not about "reducing piracy." And if "reducing piracy" doesn't end up with more sales, then what good does it do, really?

In the comments to that article, commenter artistrights pointed to a report from Soundscan that music sales had been up for five straight weeks, and separately to another report claiming that Taylor Swift's album sold well after Limewire shut down, selling a million albums in its first week of availability.

I think this is worth exploring, because I've been asking for some actual empirical evidence and we have some. If it's really true that reducing piracy leads to greater sales, that would surprise me, but it would be good to know. If it turns out that reducing piracy leads to more revenue than could have been made otherwise (such as by embracing file sharing) then that would likely cause me to change my opinion on the best strategy for the RIAA to take in this fight. As for the Taylor Swift example, I don't think that proves much of anything, frankly. Throughout the file sharing era, there have been a bunch of releases that sold over a million copies in their first week. In fact, prior to Napster, there had been only two such releases. The rest all came post-Napster. So I'm not sure we can really learn too much about that. Big hit albums still sell. I'm not sure that's got anything to do with Limewire.

As for the other link to sales being up for a five week period, that's definitely worth noting, though, it does not correspond to the same quarter that the NPD study covered. NPD looked at Q4 of 2010. The link above is talking about February and March of 2011. Now, it's entirely possible there's a lag, and people who stopped using Limewire did nothing for 3 months and then suddenly started buying. Perhaps that's the case. If anyone has more info on what was actually selling during these past five weeks, that would help us dig a bit deeper into this information. Some might also point out that SoundScan is not the most trustworthy source of data on music sales -- but it wouldn't surprise me if it were accurate "enough" for the type of music that people used Limewire for, so I wouldn't write it off just because it's Soundscan.

I'm not yet convinced that these two data points are necessarily connected, but it is certainly worth noting the recent bump, and it would be great if folks here were able to dig in a bit deeper and see if we can unpack the reasons for the bump in music sales over the past few weeks.

Permalink | Comments | Email This Story