Study Says: Lack Of Innovation, Not File Sharing, Real Problem For Record Labels

from the maybe-you-shouldn't-kick-your-biggest-customers-off-the-Internet dept

Nastybutler77 was the first of several to direct our attention to a new Dutch study (pdf, via Ars Technica) by Professor Nico van Eijk of the University of Amsterdam. van Eijk finds, once again, that file sharers aren’t just consuming copyrighted material voraciously, they’re consuming all media voraciously (especially concerts, films and games). The study also concludes that there "isn’t a clear relationship" between the decline in sales and file sharing, while also finding that (shockingly) fear of evolution prevented the recording industry from adequately adapting their business models to the broadband age. While the recording industry is having problems, argues van Eijk, it has less to do with file sharing, and more to do with the fact they’ve been "abstaining from innovation" — as the study phrases it:

"Turnover in the recorded music industry is in decline, but only part of this decline can be attributed to file sharing. Conversely, only a small fraction of the content exchanged through file sharing networks comes at the expense of industry turnover. This renders the overall welfare effects of file sharing robustly positive."

van Eijk, who does a nice job differentiating between the recording and music industries, goes on to note that despite Sweden’s reputation as a piracy hub, total revenues from recorded music, live concerts and collecting societies remained roughly static between 2000 and 2008 (something we’ve pointed out before). The study also touches on how the content industry has set the price far higher on movies and video games than people say they are willing to pay (though what people say they’ll pay and what they’ll actually pay obviously can be quite different). While the recording industry was busily suing customers, exploring nastier DRM solutions and trying to desperately hold on to the past — everything changed around them — and "reinvention of the business model" is now the only way forward, concludes van Eijk:

"And so the entertainment industry will have to work actively towards innovation on all fronts. New models worth developing, for example, are those that seek to achieve commercial diversification or that match supply and end-user needs more closely. In such a context, criminalizing large parts of the population makes no sense. Enforcement should focus on large scale and/or commercial upload activities. . . Introducing new protective measures does not seem the right way to go…"

None of this will surprise Techdirt readers, given that we’ve made many of these points before, and study after study indicate that file sharers are some of the content industry’s biggest potential customers. So, once again, we’re facing a future where entertainment companies can either embrace these users and find ways to get them cheap, simple, high-quality product — or they can demonize them, alienate them, and fight to terminate their connections to the Internet (and by proxy any purchases they might make). Place your bets.

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Comments on “Study Says: Lack Of Innovation, Not File Sharing, Real Problem For Record Labels”

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Jupiter (profile) says:

I think it’s obvious by now that all the major media companies want – television, cable, music, movies, newspapers, book publishers, internet providers, etc. – all they want is complete control over the internet. That’s the only thing that they will consider “good for business.” They’ve had control of retail stores for decades. They know that whoever controls the internet controls the money. The sad thing is they will probably get what they want.

Hephaestus (profile) says:

Re: Re:

“The sad thing is they will probably get what they want.”

What they will get is a spot light shined on file sharing and an evolution in encryption, software, and sharing methods. The need and want to control the internet will cause it go the other way and it will become less controlled. The more money and laws they throw at it the faster the internet will adapt.

Here is the real kicker. The more money they throw at controlling the internet, the faster another business plan, or system will evolve to replace them.

I will give you an example. If you remove safe harbors and add secondary liability, it could potentially shut down YouTube. One possible outcome or reaction would be the creation of an open free database or organization to catalog non copyrighted and Creative commons works. Then only allow those works on YouTube and other sites to remove the possibility of being shut down. This of course would result in people wanting to add their stuff to this fair use database. Cutting out the record labels unless they want to acknowledge fair use and actually allow it.

The internet isnt static, people adapt, people find work arounds, some of us think so far outside the box that the box is a little point off in the distance. Everything they have done up to this point has backfired seriously. ACTA will backfire also. They are setting up inherently oppresive rules that will lead to multiple backlashes and serious unintended consequences for them.

Dont worry about them gaining control, because control really is an illusion, and the internet adapts.

Anonymous Coward says:

The only thing is that they’ve had longer to innovate than the rest of us and they’re really behind where they should be. They’ve used their lobbying power to effectively lock competitors out of the market giving them little reason to innovate for years. Now, with the Internet, everyone has an opportunity to distribute their content and so competitors will Innovate and this will give Hollywood et al more incentive to innovate, but they don’t want to innovate, and so their first response to competition is to lobby the government for laws that stop competitors before everyone else catches up. Everyone else still has a bunch of catching up to do, it’s not like everyone can surpass decades of innovation in a few years, and lately more and more innovation has been occurring with IMax as well and I expect to see more innovation, especially as the return on lobby investment continues to diminish as public awareness and pressure negates much a lot of lobbying efforts.

Anonymous Coward says:

Re: Re:

That’s the thing about the Internet, it’s a double edged sword and both edges are good for the public. Not only does it give everyone a platform to distribute their content, it also gives everyone a platform to maintain an up to date awareness of the efforts being made by special interest groups to restrict content distribution, an awareness that our corrupt mainstream media has denied us, and this gives us an opportunity to actively resist their efforts by applying pressure on politicians to serve the public interest and not just the special interest of a small minority.

Hephaestus (profile) says:

I really like the statistics on ...

the percentage of people downloading. This set of numbers is really not all that usable because it isnt broken down by age, is partially based on media industry numbers, comes from different sources, uses different questionares, etc.

Year Country FileType %ofUsers
2007 US Vid 27
2007 US mp3 37
2008 UK mp3 63
2008 Dutch mp3 98
2008 Dutch vid 94
2009 US mp3 58
2009 FR mp3 28
2010 FR mp3 38

80% of people say the price of a CD should be 6 euros or less. They would pay the same price for a DVD.

Big Mook (profile) says:

Another study for the MAFIAA to ignore

It’s become clear to me that no matter how many mountains of evidence to the contrary, the entertainment industry will go on denying the facts and trying to save their already outmoded business model.

I’ve been following this subject on TechDirt and elsewhere for many years now, and the story just doesn’t seem to change in the least. There is never a shortage of evidence that file sharing can/is helping the industry, and yet at the same time there is never a shortage of alarmists (industry shills) spouting off that the industry is dying and that all they need is another law, better DRM, etc.

Do I think that pirating content is OK? Not exactly. I believe you’re on shaky moral ground, but that’s up for debate. But do I think it’s criminal activity, like what’s described at the start of every DVD I own? The answer is no. If I were to search the file shares of the users at my company at any given time, I would find hundreds, if not thousands, of MP3s that have been shared and recopied dozens of times. I don’t believe that any of these people are criminals just because they share their music with each other. I never considered it criminal to make a cassette to give to a friend or girlfriend either. I bet a lot of folks can remember going out and purchasing an album because of a song on a mix tape they got as a gift.

The main point that the entertainment industry is missing is that by treating everybody as a potential criminal, they’re actually hurting the very people who keep them in business.

Anonymous Coward says:

Re: Another study for the MAFIAA to ignore

the evidence is, well, not really evidence. there is no way to know how much media the end user would consume if they had to pay for it. the top music or media fans would be the ones who would buy the most anyway. how much less are they buying because to widespread piracy? keep going, keep stealing, and soon enough there is nothing left to steal. congrats!

Big Mook (profile) says:

Re: Re: Another study for the MAFIAA to ignore

Obvious industry shill is obvious: Copying is NOT theft, moron! With digital goods, there is an infinite supply available, and by making a copy, there is actually an increase in availability, not a decrease.

Say it all you want, but infringement is not theft.

Your statement that “soon enough there is nothing left to steal” is also epic failure, as there is more content, both free and paid, available now than ever before.

Congrats on being a complete a$$hat!

Anonymous Coward says:

Re: Re: Another study for the MAFIAA to ignore

“keep stealing, and soon enough there is nothing left to steal. congrats!”

As someone already pointed out, it’s not stealing.

and as for your doomsday scenario, plenty of people release music and other content under a creative commons license, a license exactly designed to circumvent current copyright laws at least to some extent. To say that no one would create art without copyright is an obvious lie and you know it. Nice job TAM, keep up the dishonesty and see how many people continue to take you seriously.

Mike Raphone says:

It's the Music Stupid

I am tired of hearing the music industry constantly making up excuses for their incompetence. Go to and type in Norwegian Wood as the song title. The last time I did that experiment the website returned a list of about 52 different versions of Norwegian Wood, recorded by different artists. Try that for the latest RAP tune. You will probably find one version and it may be discontinued. The music industry is self destructing. From 1980 to present the number of different versions of popular music has declined dramatically. You won’t find the latest RAP or Heavy Metal tunes recorded by the Boston Pops or London Festival Orchestra. Most of the current music catalog is directed to a very narrow portion of the potential market for their product. They are not reaching many potential customers outside of their target market.

gorehound (profile) says:

I am getting fed up hearing these RIAA Labels whining about lost sales and so forth.They are a dinosaur………..something about to go extinct.They need to re-think their strategy for this new “digital” age.They do not have a clue what to do so they scream like children at the are all pirates and we must control the way you access information so you do not steal.
For years I was pissed off at them before the NET.I am a musician and have screwed around in rock bands since I was 16 in 1972.Record labels was something you thought of as a musician and had your dreams.Well I knew folks who did get “signed” and in the end they were not to happy about the experience.On the other hand I put out my own stuff and got to work the way I wanted to not some suit telling me how to dress and act and play so we can make a ton of money off you.
The Labels are the real Pirates not us.I get even more mad nowadays as I hear about things RIAA/Labels say or things they try to do.They exist off our money so I say just boycott the labels and any artist who would sign with them should also be want to send a message to them that they surely will undersatnd then do a real boycott.

cconsaul (profile) says:

When a DVD movie is less expensive than the CD, Something's Wrong!

The recording industry has traditionally put a lot of filler in their product, and even the most principled artists who insist on nothing but pure content, find it hard to compete with the fact that their CD often costs up to twice as much as a DVD movie, and often six to seven dollars less than the concert DVD with most (if not all) of the same songs on it, plus encores!

I can still get used CDs for a reasonable price, and I can always support local artists who don’t have porcine distributors inserting themselves noisily between my wallet and their feeding trough. I would be quite happy to support a business model where I pay the artist’s royalty directly. Goodness knows the distributor never bothers to. What artists get percentage wise for downloads as compared to CD sales is shameful and that’s not even addressing the fact that the legitimate download is usually recorded at a much lower rate than the average fan mp3 / ogg / ect.

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