Piracy Has Zero Impact on Legit Purchasing, European Study Concludes…

This is one of the biggest debates in music right now, and it goes far beyond morality and artist rights.  Because what if pirates are simply buying more stuff?

What then?

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That’s actually the conclusion of a new study just published by the European Commission‘s influential Joint Research Centre, one that involved more than 16,000 participants across five EU countries.  And at a top level, the survey, conducted by the Centre’s Institute for Prospective Studies, found very little cannibalization between illegal and legal.  “Perhaps surprisingly, our results present no evidence of digital music sales displacement,” the report concludes.

“Our results suggest that internet users do not view illegal downloading as a substitute to legal digital music.”

So, they wouldn’t be buying, anyway?  Pretty much.  “In other words, music consumers are found to substitute legal music consumption for illegal music consumption, but much of what is consumed illegally would not have been purchased if piracy was not available.”

“This means that although there is trespassing of private property rights (copyrights), there is unlikely to be much harm done on digital music revenues.”

But beyond that, the Centre also concluded that a positive (albeit, small) correlation between illegal and legal is happening. This was based on observations of clicks and site visits among the sample.  “If this estimate is given a causal interpretation, it means that clicks on legal purchase websites would have been 2 percent lower in the absence of illegal downloading websites,” the report states.  That number shifts to 7 percent when legal streaming and paid download sites are compared.

“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.”

The survey went beyond simple questions and answers: across five EU countries, the research group also analyzed actual web usage to get a sense for actual behavior.  That was mapped against demographic data.

The policy implications of this study could be massive, especially for programs like HADOPI.  Just recently, HADOPI data showed a massive dent on file-swapping levels, but no complementary gain in actual sales.

On that note, the authors of the study declined to offer a policy recommendation, but the leanings were obvious.  “Digital music revenues to record companies are growing substantially,” the study observed.  “They increased more than 1,000% during the period 2004-2010, and grew 8% globally in 2011 to an estimated US$5.2 billion, reflecting the importance of digitization in the music industry (IFPI, 2011, 2012).”

“From that perspective, our findings suggest that digital music piracy should not be viewed as a growing concern for copyright holders in the digital era.”

The full report is here.

35 Responses

  1. Jaded Industry Dude

    There’s no links to the original study (no links at all) in this article. Could you please supply them? I’ll said it once and I’ll say it again, I’ve seen an increase of sales when leaks are more difficult or impossible to find a month before and after release date. However this was pre-spotify and the world has changed. Now that we have legal piracy, I don’t even know why we’re debating this still.

    • Paul Resnikoff

      Jaded Industry Dude, here’s the full report.

    • Visitor

      and, then there’s this…

      Yes, Piracy Does Cause Economic Harm

      ” if dozens of researchers have tried, all using different methodologies, then their conclusions in the aggregate are the best we’re going to do. Put another way, it will henceforth be very difficult to dislodge Smith and Telang’s conclusion that piracy does economic harm to content creators.”

  2. GGG

    I think it’s simply the people who pirate consume a ton more music than those who don’t, so of course they buy more, though it’s not necessarily equal ratio-wise. The avg Pitchfork reader, for example, probably seeks out and consumes significantly more music than the avg AOL Music reader.
    So someone who listens to 100 albums a year might also buy 15 albums, as opposed to someone who only listens to 15 albums a year and buys 3. (Numbers are completely arbitrary here, just attempting to put a theory out.)

  3. Visitor

    It would be ridiculous to suggest content owners should give permission to illegally download or stream.
    Why? Because no one would need a good conscience to legally consume music since illegal consumption would be made legit by content owners.
    This study is a waste of money and debate.

    • Visitor

      Riddle Me This: If Pirates Buy More, Why Are Music Sales Plunging?

  4. Visitor

    I started reading the study but could not wrap my head around it.
    The study uses clicks.
    At my website, http://www.yvesvilleneuve.com, 30% of unique visitors click on either the iTunes or CD Baby links. Unique iTunes clicks slightly edges out unique CD Baby clicks.
    These 30% UV represent the true buying public.
    If the music industry said illegal downloading was legit, 30% unique visitors would subsequently become near-zero percent unique visitors clicking on the iTunes and CD Baby links.

      • Visitor

        23.85% of those that click eventually become a true fan of Yves Villeneuve (join the email list).
        23.85% of those that don’t click would also be true fans if they had taken the time to preview the music but are not normally music buyers.
        The answer to your question is ‘yes’. Next.

        • Visitor

          Who the hell is Yves Villeneuve and how do you pronounce such a goofy name?

          • Visitor

            Lol. You can read the bio to know how to pronounce my name if you truly have any interest.

    • radio & records vet

      I think we have to be careful to not infer conclusions based on our own personal anecdotal evidence, compared to the more generalized conclusions of the European study. The exception does not make the rule – the rule does define the exception however.

      Thinking about my own experiences regionally I find there to be a high level of confirmation of what I have believed but never affirmed scientifically.

  5. Visitor

    The cost of piracy:
    10 billion Euros, 185,000 European jobs in 2008.

    58 billion dollars, 373,000 American jobs in 2007.
    Siwek, Stephen E.,The True Cost of Piracy to the U.S. Economy, report for the Institute for Policy Innovation, Oct. 2007.

      • Visitor

        You don’t understand the scope of the pirate problem, moron. A single iPod full of pirated music costs the music industry 75,000 potential jobs and $8 billion dollars in potential lost revenue.

        • Visitor

          That might be true when you calculate the actual costs of how much a full iPod would cost. However, the costs of filling a 32GB storage device with legal content would most likely be too expensive for the average music consumer. And I think that is exactly the conclusion that this study has drawn: If there would only be the legal option to obtain music, then music consumers would have had less music on their iPods and therefore it’s not cannibalizing. So in other words – pirated content is just an addition to what people would buy legally.
          Although i don’t have any numbers to support this, I don’t think this is true. It surely must have some sort of cannibalizing effect but I wouldn’t go as far as to draw the comparison to what pirated content would have earned the music industry if it would have been bought legally.

        • Adam

          Before calling someone else a Moron, do some research on your own. You clearly have never heard of the legal copryight term “displacement of sales.” Go do some actual reading and research on that, and come back and call this guy a moron again… then see if you feel like you are making any points. (Hint: you aren’t.) Those numbers mean absolutely nothing. You can’t prove a single one of those freely downloaded songs on an iPod would EVER have been legally purchased. But that’s too simple of a definition. It would benefit you to learn something by reading about it instead.

  6. Anthony

    What I don’t get is how music sales have dropped considerably since the late 1990s-coincidentally around the same time digital music piracy took off-yet reports like these try and claim that piracy does not hurt music sales.

    • Visitor

      I think it is all related to the rise in popularity of vegetarianism. Correlation equals causality every time. Piracy has cost the music industry about thirty tims the number of jobs there ever where in the industry and hundreds of times the money ever made. Last time i heard an ipod full of music (who has an ipod anymore?) cost the industry 2 million dollars and 100K jobs.

  7. what?

    of course it raids legit purchases. if there were no illegal possibilities anywhere to get something, people would still listen to music. how would they get it? oh, they’d buy it. somehow doubt they’d only listen to the radio.
    also, just yesterday saw 20,000+ torrents of one of my albums on just one site. (and i’m a microindie). somehow doubt that the people who tracked down that album just d’loaded by accident or because it was there or because they didn’t really want to own it. if they couldn’t get if for free anywhere, no doubt a certain percentage would be buying it. (i certainly never sold close to 20K units of that album.)

    and fyi: end result, to all the copyright-kills-music types… eventually i stopped recording, seeing revenues dwindle with more and more illegal d’loads and time spent doing promotion. i could have put out a few more albums if even some of those 20K illegal d’loaders from that one album on that one site had purchased.

    not whining. just not making music.

    • mdti

      it is a sound attitude at first (i say it is sound, because i did the same, so it is necessarily, clever and sound approach of the problem).
      The “problem” is that you are confusing “doing music” and “soing music for money or recognition” and that’s two different things.
      I do music for audiovisual programs now, I’ve been completely out of the “pop” and any other kind of project that involves a relationship, direct or not, with music consumers (politically correctly called “fans” ). And the people for whome I worked for are very happy.
      You don’t need to stop doing music, you just need to make music for other types of people/project.
      Yçou won’t be lady gaga though, in case you are still on such an agenda…

      • never gaga

        fwiw, never was on the lady gaga trip. only ever made music for the “art” of it. made all types of music, from experimental to pop. put the music into the world, humbly, with the hope that would be able to make enough back to continue to make more music. got good reviews; eventually even a grammy award winner recorded a track (covered a song from my second release). made $ for awhile, from sales and licensing. saw more and more time going to promotion not creation, with end result being more illegal d’loads, or youtube views, and less revenue. got exhausted from arguing against the endless justifications in comments on news stories about downloading… and got so appaled at the absolute ANGER at artists for daring to ask to be paid. (100 to one against the artist.) final icing on the coffin (mixed metaphor on purpose) was the .0001 payments from streaming…

        so: i have other creative endeavors, some of which were neglected or pushed aside doing the music so much; now they are getting my full attention.
        the whole point of the above ramble is: in this particular, personal case, illegal d’loading killed more music from being made.

  8. Mark

    Hidden away in a footnote on page 7 the study admits to missing out sites like Amazon because they can’t seperate out music buying there from other activity, and they further state:
    “We should therefore expect to have a downwards bias on our estimates, i.e. a bias toward finding substitution between illegal downloading (legal streaming) and legal purchases.”
    they also state
    “the proportion of clicks that lead to a purchase for visits on legal purchasing websites could be expected to be lower due to simple browsing activity.”
    In short the methodology is heavily skewed against music buying, and given that the base is only consumers that either download, buy or stream, this means that music buying is significantly under represented in this survey.
    This means that the music buyer base is not, by their own admission, accurate and renders the findings, IMO, worthless.

    • Paul Resnikoff

      I’m sure I missed this somewhere in the discussion thread, but there’s also the omission of anything physical in the report (the authors concede this). So, the impact of illegal downloading on physical isn’t looked at, and the very bloody history of piracy as it relates to physical is not part of the report.
      Then again, even if illegal downloading never happened, and the world only featured iTunes and Spotify, would HMV be a thriving establishment today (all stores are closing on the 25th, btw)?

      • Mike Corcoran

        Yes, a study on piracy that doesn’t include Amazon.com or any physical sales isn’t much of a study at all. Any conclusions drawn are at best grossly inadequate and at worst reach the opposite conclusion of a real study.

        I like the question posed in your 2nd paragraph: Take out piracy but keep digital retail and streaming – would large music retailers still be in business today?

        I would think not, or perhaps leave just one survivor in the space. Take a look at Borders Books, Blockbuster Video, and Circuit City as examples. All have contemporary, legitimate, online retail competitors that steamrolled the old-world business models and left these former behemoths of industry a smoldering mess in bankruptcy court.

  9. MartinC

    I’ve long felt that piracy only impacts on the huge stars (that already earn a fortune and are already well-known) and that for most of us it is another method of getting your music heard. However under pressure from major record labels stamping down on it, the increase in paid streaming sites (that probably wouldn’t have existed without the pressure against illegal downloads) have had a much bigger impact on sales of both CDs and downloads.
    I used to know many people who would download/share huge amounts of music, but would then buy the albums they liked. Those same people now subscribe to streaming sites and since they feel that they have paid for the music don’t bother buying any more. the revenue to the artists is a fraction of what it was before.

    • wrong on that

      wrong re: piracy only affects huge rich stars. here that over and over again, as if smaller, niche, or indie bands never get pirated.
      in fact, maybe the opposite– the smaller band who has enough recognition to maybe get some press or attention… immediately has it’s albums illegally downloaded. imagine how much even 10 or 20 thousand dollars of album sales could help sustain them at them (help pay for touring, more recording, rent, food).

      (see the example of the commenter above who saw thousands of illegal downloads but couldn’t afford to make subsequent recordings. )

  10. Adam

    I used to debate things like this for a living when I worked at a label, for their digital marketing dept. (Before that was really a thing.) And let me tell you, what is most sad about this discussion – its the same damn discussion that we were having in 2000 when it became easy to make free MP3 files SIMPLY BECAUSE THERE WAS NO LEGAL WAY TO BUY DIGITAL MUSIC. Plain and simple. This whole thing started because record labels were afraid of this very digital landscape we are dealing with today. I watched in unfold like a self-fulfilling prophecy. These same fears were discussed, lawsuits were chosen as the way to a solution, digital music was ignored, and the general public adapted – they took the music and made it available. And why did they make it free? Because there was no legal way to sell it digitally! So regardless of where the blame lies, or where we are today, nothing is going to get fixed. The music industry will watch itself burn, lighting new fires along the way instead of putting them out. Look, reality is, that it was a really good run for the business. It was a real goldmine for those who knew how to play the system. Those days are over. The value of music has plummeted. But one thing remains true – there are always fans who will pay for something if its good. Just don’t ever expect the glory days to return, and remember, this is art – they told you it wasn’t a money maker. They told you it was a fulfilling job that would leave you broke. They told you art is not usually profitable. You knew the risks. You think you’re gonna be a star? GREAT! Try. But stop bitching and make music. It is what it is and nothing is really going to change monumentally until Copyright law is changed. I bet you my whole life savings that never happens. Too bad.

    • radio & records vet

      Yep … you got it. And we’re several years away from any kind of meaningful copyright reform.

      To those who cry about a lack of opportunity, or pay, or revenue or that the industry sucks etc? The rest of us laugh, as we pay our bills and do the things that you say can’t be done.

      If you think you can’t – you won’t.

    • so

      So you’re saying that if the record industry had invented, before napster, a cheap way to buy all music easily, that when a Napster did come along (free) that piracy would never have occured?
      Because now you can buy all music very cheaply very easily. 10 years now. Plenty of time for new habits of buying to be created.
      And yet piracy hasn’t gone away. But, yeah, it’s the recording industry’s fault, from company’s down to the little guy.

      I say: stop making music. At least seriously. Do it occasionally as a hobby. Don’t be a professional… because you can’t be.

  11. Toby Rogers

    The music industry needs to come to terms with the fact that selling music as a commodity is no longer a viable business model. Instead of arguing over the morality of piracy and whether or not downloading impacts sales, we should be addressing ways for the industry to move forward once there’s no money to be made from recorded music at all. The digital revolution has made music so ubiquitous that it no longer has any monetary value. That genie’s never going to go back in the bottle.