Original URL: http://www.theregister.co.uk/2005/12/31/riaa_2005_piracy/

Music sales slide despite RIAA's crushing blows against piracy

Or because of them?

By Ashlee Vance

Posted in Media, 31st December 2005 22:24 GMT

Opinion 2005 proved one thing. The music industry really is as dumb as you think.

US CD sales in 2005 fell 3.5 per cent year-over-year, according to Nielsen Soundscan. That's quite a blow given that CD sales actually rose by 2.3 per cent in 2004. A sane person might suggest that higher energy costs throughout 2005 ate up a few of those sales or that pricey iPods left less cash to spend on albums. This logic escapes the Recording Industry Association of American (RIAA), which again attributes the fall in sales to piracy and which last year attributed the rise in sales to better anti-piracy measures.

So which is it? Are the RIAA's anti-piracy measures affecting sales or not?

Well, in 2005, the RIAA filed 7,000 more lawsuits against consumers - bringing the all-time total to more than 16,000. Along with the movie crew, it also managed to shutdown many of the most popular BitTorrent hubs. In addition, the US Supreme Court handed the RIAA a convenient decision against Grokster that holds P2P sites liable for their users' actions. Last but not least, the Down Under version of the RIAA convinced a court to clamp down on Kazaa.

All in all, 2005 marked a banner year for quashing CD piracy in the courts and on the internet. You'd think sales would have gone up once again, if you buy into the RIAA's way of thinking.

While P2P networks still thrive, they're mostly full of porn and mangled media. No one in their right mind or at least with a day job would sit there trying to pull down these tunes when they can buy a perfect album at the store. Similarly, movies take forever to download and come out looking pretty shite for the most part. The P2P networks - not that they were ever that great - aren't what they used to be, if hunting for music is your main goal.

Given all this, it would seem like the RIAA has the piracy fiends by their song-swapping balls. If they don't, then what's the next course of action?

Well, there aren't many sites left to shut down. In fact, without major media hubs to go after, the music publishers are now reaching to examine sites that post lyrics to songs. (We've bought many a song after lyric hunting, but that's surely because we're odd, totally unique, not mainstream creatures.) Along with the evil lyric mongers, consumers will likely be targeted by another 10,000 or so lawsuits in 2006. Then the RIAA can wait for the year-end data and say either that its war on piracy really boosted sales or that piracy continues to undermine the very fabric of the creative process, and this pattern will continue until the music industry enjoys a protracted boom.

Sadly, the RIAA's current line of thinking and method of operation prohibits such a boom.

Without question, the lawsuits against children, parents and grandparents don't help the music industry's public relations campaign. Nor do advertisements portraying download-happy consumers as criminals. It is wrong to grab this music without compensating artists. That's clear. What isn't clear is if suing thousands of people a year to prove a point is a punishment that fits the crime or a strategy worth pursuing.

Lord knows, Bono put food on his table this Christmas, Britney Spears can still throw away her panties after a single use and Sheryl Crow can afford not to eat. It's a bit hard to feel sorry for these millionaires when a 12-year-old faces public scorn and thousands of dollars in fines for firing up this thing called Limewire.

In addition, the RIAA has not encouraged a diverse, healthy online music buying environment as some suggest.

Downloads did more than double in 2005. but they still account for less than 5 per cent of total music sales. Apple dominates this market with iTunes, leaving the likes of Real and Napster to fight over scraps. For example, despite noble efforts to attract new business at colleges and to confuse consumers with misleading anti-Apple ads, Napster continued to post loss after loss during 2005 and saw its shares drop from close to $10 to $3.50. Meanwhile, Apple's shares went up more than 100 per cent.

Other sites such as Pandora show just how hard the RIAA makes it to buy music. The folks at Pandora have done everything they can to circumvent online music restrictions by letting users set up a type of radio station. You pick the bands that you like, and then the Pandora service goes and finds new music that you might enjoy. You can let Pandora play in the background, and the service is to some degree addictive and useful.

On the other hand, you're only allowed to skip about six songs an hour because of music industry restrictions. Then, Pandora doesn't even sell you the songs directly. It links to iTunes and gains just a few pennies every time it facilitates a sale.

Bless the Pandora crew for finding a creative way to play within the rules, but this type of service goes to show just how hopeless the music industry is at making use of the internet.

The obvious motivation behind the music industry's fight against music trading on the internet is that it hoped to cash in on the new online music formats just as it had done with the move from records to tapes and then CDs. The pigopolists wanted you to buy entire music collections once again. The labels, however, didn't come up with online stores quick enough and have spent the last few years trying to stop companies that did create such stores.

The hope has long been that online music would drive a new boom and that artists, publishers, moguls and device makers would all benefit.

Well, they haven't. Instead, Apple has benefitted. Apple has made billions off the iPod and even breathed new life into its computer business as a result of the device. It now owns the vast majority of the download market and has the labels scrambling for a way to deal with the company. New York's Attorney General Eliot Spitzer has subpoenaed the major labels to make sure they're doing this dealing in a fair way.

The very company with the "Rip, Mix, Burn" slogan so hated by the music and movie industry has come to own the delivery of music and even TV shows on the web. That's got to make Apple's CEO Steve Jobs laugh but does little for consumers who are stuck with DRM (digital rights management) locks on their music regardless of who wins the current battle.

The truth of the matter is that the music industry will go on searching for this boom for a long, long time. It will keep blaming piracy and not itself for failing to reach the end goal. Thousands of music buyers will be sued. The music labels themselves will probably be sued. Companies like Pandora will pop up, die and pop up again. Napster will keep floundering. And consumers will continue reading the fine print of DRM handouts included with CDs and online to tracks to figure out when and where they can play the music they own. In this environment, music sales can't do anything but decline.

It won't happen in 2006, but eventually the music labels will realize how wrong they've been. This cycle has run its course before, dating all the way back to the player piano and the first recordings of live performances. One day, a smarter than average pigopolist will realize that DRM-laced downloads, gimpy online services and lawsuits aren't the best means for winning consumers' hearts. That's when music sales will rise again.

So, while we might be in the dark ages of online entertainment, we do have hope. And that's something, although not something to be particularly proud of. ®