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According to new figures released by the International Federation of the Phonographic Industry, total global music sales dropped by more than 8% in 2008. In the US, total sales were down nearly 19%. The drop comes despite double-digit gains in digital music sales, which are still too small to put a dent in the decline of physical music sales.

You can be sure that digital piracy will receive some of the blame for 2008's slide. And to be fair, record labels have every right to be upset about the infringement of their intellectual property rights.

But a new study by the BI Norwegian School of Management paints a picture that's a little more complex. According to a survey of 1,900 internet users over the age of 15, people who download music illegally on the internet are also far more likely to purchase music.

The study found that respondents who used P2P software to download music without paying bought ten times as much music through digital outlets like iTunes and Amazon MP3. Although they favored digital music purchases, most still reported buying at least one CD in the past 6 months. Conversely, the study found that those who abide by the law are far more stingy when it comes to opening up their wallets and paying for digital music.

Not surprisingly, the record labels are dismissing the report. Ars Technica translates a statement that Bjørn Rogstad of EMI gave to Aftenposten:

There is one thing we are not going away, and it is the consumption of music increases, while revenue declines. It can not be explained in any way other than that the illegal downloading is over the legal sale of music.

That may be a fair argument but that doesn't change the fact that, if the BI Norwegian School of Management's study is to be believed, pirates are some of the record labels' best customers. For obvious reasons that's not something that record labels want to consider because it removes the illusion that digital piracy is a black and white issue that can be dealt with through courts and attorneys, with no attention paid to hearts and minds.

While I'm far from sold on the idea that digital piracy and free music make sense because they're promotional vehicles (it seems a convenient excuse), I also wish there was a little more perspective on both sides of the 'battle'.

One thing is for sure: no matter what you're selling, when you find out that your customers are also stealing from you, you had better look more closely at what motivates their purchases. It just might help you build a better business model.

Photo credit: RossinaBossioB via Flickr.

Patricio Robles

Published 22 April, 2009 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (1)

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Daniel

The music industry is looking for someone to point the finger at whilst it still comes to turn with the fact it’s an industry adapting to a new system. People are buying less music than they used to, but are attending more live shows than ever before. Along with merchandising, this is where the companies are now looking to reap their rewards.

It also worth noting that although physical sales fell by 15%  globally in the past year, digital sales rose by around 24%. Add to this a rise in money made via radio play, and it's not all doom and gloom.

As a musician myself, you get used to putting out music for free in order to generate a buzz. As they say, gotta speculate to accumulate….

over 7 years ago

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