Conflicting Figures on Downloads vs CD Sales

There is a war of words—and numbers—being waged in the struggle over copyright infringement and the illegal copying of music. Downloading music is a boon to the music industry, claim some, because it leads to increased sales of CDs. Others present statistics that undeniably prove that downloading will be the death of the music business.

Who is right? As in most disagreements, the truth probably lies somewhere between the two most diametrically opposed views. On June 14, the International Federation of the Phonographic Industry—the global equivalent of the Recording Industry Association of America—trotted out figures that seemingly prove that the industry is losing between 10% and 20% of its income to piracy. At a conference in London, association officials presented evidence that about 1.4 billion cassettes and 500 million CDs sold worldwide every year are illegal copies. IFPI chairman Jay Berman says that means "one out of every five CDs" reaching consumers is an illegal copy. EMI Recorded Music senior VP Jay Samit claims that if the thousands of audio tracks downloaded for free annually from Napster are worth $1.50 each, "the loss to our industry is phenomenal." Napster and similar services enable Internet-connected computers to search each other’s hard drives for archived audio files.

The threat of CD recorders, one of the hottest selling items in the consumer electronics galaxy, was outlined by Berman in a presentation. His estimate: a rise from 20 million units sold in 1990-1999 to 100 million by the end of 2000, and a commensurate loss for his industry. The music, film, and television industries have a long history of opposing consumer-level recording equipment, including cassette decks, video tape recorders, and now computers and CD-Rs. The assumption has always been that consumers would use the devices to engage in wholesale piracy.

The industry’s biggest unprovable assumption is that people would buy music if they couldn’t get it free. That may or may not be the case. A new poll released by the Digital Media Association (DiMA) offers a different interpretation of the situation than has previously been put forth: that people who download music from the Internet are more likely to buy CDs later than they would be if they had not heard the music via their computers. The survey says that 66% of all computer-using consumers reported that listening to a song online has at least once prompted them to later buy a CD or cassette featuring the song. Listening habits: 92% listen via desktop computers, 10% use a portable device such as an MP3 player, and 14% use home stereo systems. More than 60% of them say they use the Internet to get to music they can't find on radio. 33% of those who have downloaded music said it made them more likely to buy. 57% said their buying patterns weren't affected, and only 6% of those interviewed said the availability of downloadable music made them less inclined to buy CDs. "Internet music is creating new markets," said Jonathan Potter, the DiMA’s executive director.

Market research firm Yankelovich Partners conducted the poll interviewing 16,903 music fans between 13 and 39 years of age in March of this year. It was sponsored by a group of Internet, software and hardware firms, including RealNetworks, Liquid Audio, AT&T's a2b Music, and other digital-media companies who all stand to gain from the growing popularity of digital downloading. The number of visitors to the top 30 Internet music sites grew 19% between November 1999 and April 2000, to 22.8 million, according to Media Metrix. A probably reliable projection: sales of downloadable music will be a billion-dollar business within three years, in the view of Forrester Research.

The DiMA’s conclusions are opposed to two other recent studies: one by SoundScan that found a decline in CD sales near college campuses, and another by Field Research Corporation stating that 41% of Napster users indicated that the service had replaced some of their CD purchases. The downloading trend has "significantly hurt CD sales," according to a spokeswoman for the RIAA.

Figures presented by various factions, like the conclusions of "science" funded by private enterprise, are best viewed with a bit of skepticism. As the standard disclaimer has it: Results may vary.