Thursday, May 15, 2008
CD sales have rebounded ever since the music biz started suing file-sharers. The industry is convinced there's a connection.
Nov 6, 2003 | In early September the major music record companies, desperate to stop a prolonged downturn in CD sales, took the drastic action of suing 261 of their own customers for illegally downloading thousands of songs off the Internet. Critics in the press and the online community mocked the move, suggesting the stuck-in-the-past industry had hit a new low. Some even predicted that rather than solving the problem the lawsuits would ignite a consumer backlash that would end up driving down sales even further.
Two months later the industry is quietly basking in a rare CD sales boom. Thanks to a run of seven consecutive up weeks in which album sales have increased compared to corresponding weeks in 2002, business is suddenly surging. The sales uptick comes as welcome relief to executives who have watched over-the-counter business plunge for three years straight while the industry has shed tens of thousands of jobs.
Just as there is no direct evidence proving that file-sharing led to the industry's sales decreases, there is also no proof that the lawsuits have spurred file-sharers to mend their piracy ways and head to the stores. There are a variety of factors that, taken together, could explain the rise in sales, including cheaper CDs, simultaneous release of superstar albums and the debut of Apple's iTunes, which allows consumer to download singles legally, and may be driving fans into record stores to buy entire albums.
Still, the coincidental timing of the sales boom, immediately after the lawsuits were filed, is raising eyebrows in the industry, and is sure to offer support to those who want to continue to bring legal pressure to bear on individual music consumers.
Since 2000, CD sales have skidded 15 percent, according to Nielsen Soundscan, which monitors sales. Worse, revenues during that span were down 30 percent, says the Recording Industry Association of America. The sales reversal has been particularly shocking considering that since CDs arrived in the marketplace during the mid-'80s, sales had never fallen in back-to-back years. Prior to the recent autumn sales surge, business year-to-date for 2003 was down 8.5 percent. In just over a month that gap has been cut to 6.2 percent. During one gigantic seven-day period in late September, U.S. album sales shot up 16 percent over the corresponding week in 2002.
The lingering question on the minds of many is whether the RIAA lawsuits, and the avalanche of press attention they received, worked as planned. In other words, did the legal action instill fear in enough consumers to convince them to give up illegal downloading and return to the record shops and pay for CDs, just like the old days? Or at least convince them to sign up for legitimate online music subscription services, such as Apple's iTunes Music Store, MusicMatch, eMusic and the relaunched, no-longer-free Napster?
"It's certainly possible that people who a few months ago would have said, 'I can get this for free online,' are now paying for CDs," notes Josh Bernoff, an analyst for Forrester Research.
"If the lawsuits turned people off from stealing music and prompted them to buy music legally, then that was a gain for the industry," adds Geoff Mayfield, director of charts for Billboard magazine. "We just don't know yet."
Wendy Seltzer, staff attorney at the Electronic Frontier Foundation, which offers legal aid to people targeted in RIAA suits, dismisses any connection between the lawsuits and the sales rebound. "There's far too little data to draw any conclusion. There are all sorts of other explanations that can be offered up to explain the [sales] increase, such as the economy taking an upturn."
Still, there are some telling indicators that suggest that rather than alienating consumers, the much-derided lawsuits may have inspired them to buy more CDs. The most obvious link is the timing between the filing of the suits and the beginning of the sales increase. The RIAA went to court on Sept. 8; the very next week the CD business began its rebound. Previously, the comatose industry hadn't posted a seven-day sales increase in 105 weeks, since just prior to Sept. 11, 2001.
There's also anecdotal evidence that consumers are having second thoughts about illicit file-sharing. Last week, in an exchange that's been repeated often in recent weeks, the Philadelphia Inquirer interviewed an engineer who used the old Napster to download 2,000 songs. In the wake of the RIAA lawsuits, his illegal file-sharing activity is way down. "The risk," he said, "isn't worth it."
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