According to TorrentFreak, the International Federation of the Phonographic Industry (IFPI) last week released their latest report, summing up the digital music landscape at the start of 2008. The IFPI claims in the report that for every legal music download, there are 20 illegal downloads taking place. Or in other words, illegal downloading is happening at a rate that is 20 times that of legal downloading. This, says the IFPI, lead to US$3.7 billion in industry losses. But there are some big holes in that claim.
I'm not going to argue that piracy doesn't causes losses for the industry -- I am very certain it does. But I do think that the recording industry is vastly overstating those losses and misleading the public. TorrentFreak lays out some of the reasons why illegal downloads should not be equated with lost sales.
- Not all P2P downloading is illegal. Some people may be downloading a digital copy of an album or single that they own, a practice called format-shifting that the recording industry has said they won't sue for (and theoretically exists within fair use guidelines).
- Do the numbers include fake MediaDefender files people are downloading? If a person downloads 5 fake tracks before finding the one they're looking for, is that 6 downloads or 1?
- Some people download solely to improve share ratio on BitTorrent sites, but don't actually have any desire for the files they're downloading.
- People are obsessed with discographies and might download an entire set of albums when they really only want one or two songs.
I would add that there is a fifth reason that TorrentFreak failed to mention, which is perhaps the most important reason why illegal downloads don't equate to lost sales. People download music they wouldn't pay for. Not all of the music people download from P2P networks is music that they would buy in stores or via legit download sites were the downloading option not available. Many times people download music that they hear in passing simply because they can, but not because they like it enough to buy it (in fact, it is precisely that they don't like it enough to buy it -- just enough to hear a few more times -- that they download via Kazaa or BitTorrent instead of pay for it).
In fact, I'd go so far as to guess that the majority of music people download via P2P networks is not music they would buy in stores. Further, a recent study showed that P2P downloading actually leads to more purchases of CDs in stores. We've set up a poll below to test that theory. For anyone who has ever downloaded music illegally via a P2P network, please respond to the anonymous poll below.
There was one thing the IFPI definitely got right in their annual report. "Progress in the digital music market is being hampered by lack of interoperability between services and devices," they wrote (emphasis mine), hinting that DRM that ties consumers to a specific devices or service is bad for the industry. This is something that consumers have long been aware of, and that the record labels are finally starting to catch on to.