Piracy may not be killing music after all, and the relevance to e-books

This article is not directly related to e-books, but e-music and its relationship to CDs are only a short jump away from e-books and their relationship to paper books—and it got me thinking about those similarities.

“Ernesto” on the peer-to-peer news blog TorrentFreak takes a look at music industry sales statistics and points out that, as much as the RIAA likes to complain about it, piracy is actually not killing music sales. Ernesto notes that the digital music market—which would compete more directly with digital music piracy than the sale of physical CDs—shows no signs of faltering.

If digital piracy is such a problem one would expect that it will mostly hurt digital sales, but these are booming instead. Many younger people don’t even own a CD-player anymore, yet the music industry sees digital piracy as the main reason for the decline in physical sales. Strange, because digital piracy would be most likely to cannibalize digital sales.

Neither the article nor I would claim that piracy is a good thing, but as the Government Accountability Office noted last week, its effects are often grossly overstated in the studies that the various ‘AA organizations like to cite.

As I read the article, I wondered: what is going to happen when e-books make up a greater fraction of total publishing industry sales than they do now—enough to start cutting into physical sales, as people who would have bought paper books buy electronic ones instead?

Will e-book piracy—which has gone on for at least as long as there have been peer-to-peer networks, with only a few major legal skirmishes—be cited as a factor? Will piracy affect the sales of e-books in ways that digital music piracy does not seem to have affected the sales of digital music?

Or will people prefer to buy their e-books from the legal source?

It’s a good question, especially given that there are a number of key differences between the music and book industries. Most digital music is sold DRM-free these days, meaning that there is no disadvantage to consumers over the pirated media, plus the advantage that they know exactly what they’re getting.

The e-book market, on the other hand, is currently locked-down and fragmented by a confusing morass of multiple e-book and DRM formats. Consumers have little assurance that the e-books they buy today will still work for them tomorrow if the merchant selling them decides to get out of the e-book business. (Case in point: Fictionwise’s decision not to make a high-resolution iPad version of its eReader app.)

Consumers are left with the tongue-in-cheek advice given by xkcd’s hat guy (which, ironically, was about digital music in its original context, before iTunes was able to get rid of its own music DRM): if you crack the DRM, you break the law. If you pirate, you break the law. You might as well, the hat guy says, just pirate to begin with and save yourself some trouble.

And that’s not even getting into the problems some people have had with quality issues in the Kindle e-books they paid for.

In order to beat piracy, stores need to offer a more compelling product than the pirates do. That’s what iTunes is doing, by offering something just as good but more reliable than pirate wares, at a price that makes the decision to buy legally an easy one—but is by and large what most e-book stores are not doing. When push comes to shove, e-books may have a harder row to hoe than e-music.

5 Comments on Piracy may not be killing music after all, and the relevance to e-books

  1. Unfortunate that this references a logically-flawed article: Comparing American to German sales without an explanation of why tbey are different in the first place, doesn’t track with the assumption that the Germans “should do better”; and there is no evidence tbat piracy must cut into digital sales, since, as the author points out, CD sales have been impacted by digital downloads of individual cuts.

    That said, there,s little reason publishers can’t offer a more compelling avenue of acquisition than piracy… they simply have to want to. And I agree, they’re not doing that good a job at it.

  2. Wow! No authors yelling and calling you nasty names yet. I am impressed.

  3. Alexander Inglis // April 19, 2010 at 8:24 pm //

    Curiously, previous “free music” systems — like radio and music videos on TV — enhanced music sales and the distribution system. Digital piracy was only made possible (and easy) by the launch of CDs … finally consumers were handed “perfect” copies of music performances that were “perfectly copyable”.

    Piracy has since had a huge impact … it killed the record store and distribution system. Arguably it did not kill the music industry; but systems like iTunes were only perks to the producers — they didn’t replace the bricks and mortar touchy feely, point-of-sale merchandising impulse buy … or the jobs that provided the experience. The death of record stores certainly had an impact on the health of the music industry: same number of performers, same number of consumers … but far fewer “middle men”. Bottom line? some stresses … but lots of profits still for those willing to innovate.

    We need to be careful in drawing either analogies or conclusions with respect to extrapolations to the book publishing industry. Book stores have been on life support for a couple of decades: no thanks to the world wide web and, one has to say, music videos … which have lead to consumers to chase shiny interactive objects over “long form” content.

    My local reference library has had the entire streetfront closed for several weeks for renovations … in order to open a bar next to the book checkout counter. I’m not sure we can say e-books are having much impact, one way or the other. But times, they are a changing.

  4. As others have stated, there are lots of reasons why the music industry’s revenues have fallen off. But the study you linked to has a lot of flaws, I’m not sure what we can take from it.

    First, the main lesson they’re trying to get across is that music industry revenue is down because people can now by a single song for 99 cents instead of having to buy the whole cd for $18.99. I think that’s a valid point, and there hasn’t really been enough of an increase in single sales to make up for the lost album sales, hence the dropoff.

    But their other point, that piracy would only hurt digital download sales and not physical cd sales doesn’t seem to be based on any real-world evidence. Why must this be true? Piracy is more likely taking away sales from both areas, digital and physical. Digital continues to increase at the expense of physical, but without piracy it might be increasing faster.

    I’m no fan of DRM, but it strikes me that there’s also a vested interest coming from device makers. They want their device to become the new iPod and are trying to use DRM lock-in to help achieve this. It’s not just the publishing houses who are at fault here. Given time, hopefully all will realize that DRM doesn’t thwart piracy and the e-book market will move beyond it. Though as you note, music is now mostly DRM-free and that doesn’t seem to have slowed piracy, which may just be a fact of life in the digital age.

  5. I really don’t think we can draw many parallels between digital music and digital books… the products are about as similar as a fly and a pelican. Ultimately, time spent trying to compare and contrast the two, or “waiting to see what the music guys will do,” is time that could have been spent examining the needs of e-books and acting appropriately.

    The single thing that should be taken from the digital music industry is the eventual acceptance of one universal format, commonly accessed by any compliant device. That fact alone built a viable market. Nothing else is really important.

    Piracy is and will be a factor in sales and profits, but for essentially different reasons than the music industry suffers; the industry needs to understand its own reasons, and come to grips with its own actions to manage the problem.

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