Driving Under The Influence

*Chart updated November 16, 2012

I often think you ought to have a license to publish data, especially these days, when misinterpreted statistics easily make their way to the blogosphere, and thus become truth. This has been a real problem in the music space where perception quickly becomes reality. Those so-called realities often prove wrong.

An extract has been going around this week from a soon-to-be-released Columbia University’s American Assembly report stating that music Peer-to-Peer (P2P) users have larger music collections than non-users, and that they spend more on music. The authors make the suggestion that criminalization is worthy of criticism and ask whether the damage done by file sharing is overblown.

This, of course, gets extended to the conclusion that P2P file sharing must be good for music, as it promotes collecting and purchasing. This is ground that the industry has been over, again and again.  I hoped that the subject died with Limewire, but it hasn’t. My friends at Digital Music News suggested I share a few thoughts with their readers, which I’ve decided to do in the form of this blog.

Let’s examine some facts:

  1. P2P music downloaders do indeed buy more music than non-users.  We’ve known that for about 10 years. It’s a dumb, illogical and irritating argument.  Per capita spend on music in the US is $26 among the Internet population ages 13 and older.  That includes CDs, paid downloads, and subscriptions. The average P2P downloader spends $42 on these categories of music. No contest- P2P users spend more.  Guess what- people who follow artists on Facebook spend more than that, as do people who use Twitter; and those who subscribe to Rhapsody or Pandora spend a whole lot more than any of these groups.
  2. Non-users of P2P include the 50% of Americans that don’t buy any music. It includes the baby boomers who don’t buy as much, anymore. It includes the young kids who don’t have money or credit cards, but may get music with gift cards that Mom buys for them.   It’s just a bad basis for comparison.
  3. P2P music downloaders are younger. Males tend to file share more than women. They have a higher level of engagement with music, so comparing them to non-buyers, grandmas, and kids whose access to music is via YouTube is careless.
  4. This is not a measure of causality. Nowhere do these data speak to whether P2P leads to music discovery and purchasing or whether it is a substitute for buying.  It does not mean that P2P users would spend more if P2P did not exist. The average P2P user spent $90 per capita on music in 2004- now they spend $42 (CDs, downloads, subscriptions). This was during the same period when the number of files illegally downloaded per capita was rising.  So much for promotion effects. Celebrating P2P users for their contribution belies the fact that the paid component of the music that they acquire, aka their acquisition mix, is 50% less than the average music consumer. Yes, that’s half the average. There is a lot of research on causality- some good, some not. It has been a while since NPD did a study on this topic, but our research said the net impact was negative.  If file sharing was so beneficial, then why haven’t music sales increased between 1998 and now.
  5. Using  spend numbers in this fashion promotes the idea that P2P music file sharing is OK or even beneficial. It is not; it is stealing and an illegal form of distribution.

What if we made a truly legitimate comparison, and eliminated the grandmas and young kids without credit cards from the research?  That’s fair since nearly 60% of P2P music downloaders are between the ages of 18-35.  Since we’re talking P2P users who buy, let’s also look at non-P2P users who buy.The truth is that P2P users spend about the same on the core music categories as non-users, on this basis. P2P users spend a bit more on digital downloads and subscriptions but it would be a tough argument that there is much of a difference. Six dollars extra on tracks is hardly half an album.

There is a significant difference in spend on merchandise and concert tickets, where P2P users spend nearly twice as much as non-users.  Are we saying that P2P file sharing promotes T-shirt sales, or show attendance? Of course not; that would be silly. What it says is that the people who download music illegally are generally more engaged in music, so they go to shows and they wear their favorite artists on their shirts. I have news for you: they would be doing this if P2P never existed.

Source: The NPD Group

I thank my friends at Digital Music News for prompting this look at the topic. Statistics, like music, are becoming more ubiquitous, as are the opinions about them.  Data is good, but interpretation is where the game is won or lost.

Data source: Each year for the last decade NPD has done a comprehensive study on the state of music in the US. This Annual Music Study is the source for the statistics. The study is well regarded and is used by the major players in the music industry, whose names you would easily recognize.


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