It’s a battle that feels as old as time, although it’s only been just over a decade since Shawn Fanning, a freshman at Northeastern University, and his business partner, fellow teenager Sean Parker, launched the file-sharing service Napster and almost single handedly brought the music industry to its knees.
Over the next 13 years, illegal music downloading became so prevalent that many within the music industry saw no way to put the genie back in the bottle, although it wasn’t through want of trying.
The Recording Industry Of America (RIAA) is now infamous around the world for launching thousands of lawsuits against those who downloaded music illegally, including a few high profile cases such as the American mother of four who was fined $222k for downloading 24 songs.
Most of us have been collectively rolling our eyes at the RIAA, and some users are especially indignant about their newfound “right” to access and download music illegally. But that tide may finally be turning, both through aggressive action by the labels and the increased popularity and access to legal alternatives.
According to Spin, a study by market research firm Strategy Analytics estimated that global revenues from digital downloads grew by 8.5 percent in 2012. But the same report estimated 40% growth for streaming services such as Spotify, Mog, and Deezer.
Streaming services are however starting from a smaller base so it’s natural that the growth rate should exceed that of the more mature downloading market, and despite huge growth from streaming services, downloading music is still four times as popular as streaming.
But there is a trend emerging, and by mid-2012 a reported 36 percent of internet users were listening to music through streaming services, including YouTube, Spotify and others – up a whopping 5 percent from only a year earlier.
Those numbers don’t really mean much until you compare the number of users who are listening to downloaded music files – an estimated 32 percent, down 5 percent over the last two years.
“There is definitely a shift towards accessibility to content rather than ownership of it,” says Strategy Analytics’ Ed Barton. “Subscription-based streaming and ad-supported streaming are the two most likely models that are going to drive growth for the foreseeable future for online music.”
Access to free music from internet radio such as Pandora has also had an impact, so much so that the company now makes up 7% of all radio listening in the United States.
The proliferation of having music videos online and increased access to cheap bandwidth around the world has seen companies like Vevo and Youtube explode in popularity over the past five years.
Australians streamed music videos more than half a billion times in 2012 alone, and Vevo CEO Rio Caraeff agrees that “the future is access, not ownership, not iTunes as it is today.”
But what kind of impact is the easy access to good quality music via legal avenues having on the world of piracy?
In 2005 it was estimated that 20 percent of all internet users were downloading music illegally. By 2011 that number had dropped to 13 percent, and analysts predict that we’ll see that number drop even further over the next couple of years.
“This year, it’s going to come close to 90 percent who don’t download from peer-to-peer networks,” says Russ Crupnick of market research group NPD, who also believes the aggressive but unpopular tactics by the RIAA have had an impact.
“One of the biggest drops in peer-to-peer usage came when the RIAA press release came out saying, ‘We’re going to sue people,'” Crupnick says. “All of a sudden, you had NBC, ABC and CBS saying people are downloading music illegally. All these parents decided to ask, ‘Hey Junior, what the heck are you doing up there with your computer?'”
Other efforts by the world’s governments to clamp down on piracy have also shown to be steadily decreasing the proliferation of illegal downloads. For instance, from next year American internet users will start seeing notifications from their Internet service providers if they attempt to trade files on peer-to-peer networks.
The Copyright Alert System is a combined effort between ISPs such as Verizon, AT&T, and Time Warner Cable that have teamed with the Record Industry Association of America (RIAA) and the film body, Motion Picture Association of America (MPAA) to design a tiered set of warnings to illegal file-sharers.
The new alert system ill first send simple infringement notices with ‘cease and desist’ orders accompanied by advice on alternatives, while repeat offenders will received “enhanced alerts” that can choke bandwidth as well as threatening further legal action.
It’s a policy that harkens back to New Zealand’s ‘three strike’ policy, which was recently introduced by the Recording Industry Association of New Zealand (RIAZ), which dictates that new Internet copyright laws can fine users up to $NZ 15,000 (approx $AU 11,500) after their third violation.
The New Zealand policy has already essentially halved piracy in the country, and other governments from around the world are looking to introduce similar measures in the future.
But undoubtedly the biggest impact on piracy has been the ease of use and access to legal alternatives. Why spend hours scouring dodgy MP3 sites, risk huge fines, dodgy and incomplete files, and computer viruses; when you can simply login to Spotify for free and listening to over 10 million songs instantly?
“You can draw a comparison to when Napster first broke,” offers Strategy Analytics’ Barton. “That volume of piracy was threatening to the industry because there was no legal alternative. The services simply didn’t exist yet.”
“Now, streaming services have done extremely well at presenting a better value proposition than illegally downloading individual tracks or albums. There are legal alternatives available and, in many ways, they are absolutely better.”
Ken Parks, Spotify’s chief content officer, believes that Spotify, and streaming in general, has reached a critical mass and now it’s just a matter of monetizing the product.
“If you consider that half a billion, maybe a billion people are listening to music online on places like YouTube, streaming really is the way that people of a certain generation consume music,” argues Parks.
“iTunes skews much older, but what Spotify has done is capture a lost generation of users who don’t buy music, but have been engaged and now see the value in the experience we provide. Millions have come in from the dark corners of the web, from pirate services.”
