A music industry report estimates that 95% of music downloads are illegal and generate no revenue. It calls this the biggest challenge facing music companies in the Internet age.

The estimate comes from the International Federation of the Phonographic Industry. It came up with the figure by looking at 16 studies of online piracy and estimating that 40 billion music files were illegally shared last year, then comparing this to legitimate sales. (The study doesn’t make clear whether the 40 billion estimate is for the number of files shared or the actual number of downloads.)

Record labels are hardly starving, however. Recorded music sales were $3.7 billion last year, up by more than 25 percent on 2007.

The full report notes that estimate of lost revenues caused by illegal downloading vary. Of course, that’s because it’s impossible to estimate its actual effects. Going by the figures in the report, you could claim the illegal downloads ‘cost’ the industry $70 billion in lost sales.

But that would be ludicrous: there’s no way that every (and probably not even most) person who downloads a track illegally would have paid for it if it was only available illegally. There’s also no real way to know how many people who download a pirated file listen to it and then go on to either download it legally (out of conscience) or buy a CD (to get the packaging and the feeling of ownership).

The report calls for stronger co-operation from Internet service providers, though one of its arguments seems particularly naive, claiming, “Internet Service Providers (ISPs) would be enforcing their own contracted terms and conditions and applying the same approach towards illegal behaviour as they would with non-paying subscribers.” While its true ISPs do usually bar illegal activity in their terms and conditions, a user downloading illegally doesn’t affect the ISP’s revenue.

The report also suggests bandwidth throttling and imposing monthly download limits are an effective weapon on piracy. By that logic, higher gas prices would be a good tactic to stop bank robberies which rely on getaway cars.

The music industry isn’t just targeting piracy to boost revenues. The report notes that US radio stations rake in $17.6 billion a year from advertising yet terrestrial broadcasters pay nothing for the music they play. The industry continues to object to this and legislation to change this is expected in Congress this year.

Related:

Entry was posted on Monday, January 19th, 2009 at 3:20 pm under Music, Opinion, Piracy.

Read more entries by John Lister.
Stumble It!