Business End of Piracy In The Media Industries Part 2
This is a continuation of Business End of Piracy In The Media Industries Part 1.
As explained in the last post, white label’s were used as sort of a test market within the Electronic Dance Music sector. The industry pretty much tolerated commercial copyright infringement, because white labeling became an essential test market that proved to be quite successful when testing out product before market. Today white labeling product is widely used and excepted by many businesses to test their products before release. The film industry does this by using DVD screeners.
When P2P was introduced to the market, DJ’s were still picking up their white labels from surplus stores. Eventually what happened is that many DJ only white labels made their way to the P2P networks. As a result amateur DJ’s quickly picked up on the term white label or bootleg. Around the time amateur DJ’s started to clue in, is about the time when studio audio software started to become affordable to the masses. What resulted, was a mass explosion of creativity and remixing on the P2P networks. Amateurs now had the tools to start creating their own white labels or bootlegs, and gave birth to what we now know as “user generated content”.
Now knowing the explosion of creativity on the P2P networks, many DJ’s started to get their white labels from the P2P networks. Amateurs quickly became pros, essentially moving the traditional while label ideology on to the P2P networks. Researchers have been studying this evolution now for years, but they can’t come up with an explanation as to the cause of what they are seeing because they haven’t been following the evolution of technology and the way the music industry has evolved its business model.
In 2012 a working paper was released by Robert G. Hammond of North Carolina State University on the impact of album pre-releases in file-sharing networks on physical and digital album sales. What they are essentially studying is industry’s test market, evolved from the white label days to the P2P file sharing networks, and it’s now industry wide. The report summarized:
The paper comes to the conclusion that album sales benefit from album leaks. “[A]n album that became available in file-sharing networks one month earlier would sell 60 additional units”. In addition the results also suggest that popular artists benefit more from file-sharing than newcomers and less establised artists.
That paper concluded (emphasis added):
Considering all model specifications, file sharing has a positive effect on physical and digital album sales. “[A]n album that leaked one month earlier will receive 59.6 additional sales” (p. 15). However, more established artists – with two previous albums, both of which sold at least 100,000 units – benefit more from file sharing than less established ones. The author speculates “(…) that artists with established fan bases are positively predisposed toward the [new] album” than younger and less established artists (p.19).
In respect of music genres the file sharing effect on more popular genres such as pop, country and hiphop/rap is larger on less popular or niche genres such as folk, metal, jazz. In addition, major labels benefit more from pre-releases on file sharing networks than major-distributed indie labels, which outperform pure independent labels. Among the major companies Sony Music Entertainment benefits most from file sharing, followed by Universal Music Group, EMI and Warner Music Group.
It is essential for the media industries to test their return on investment before investing in their talent. It also forms an avenue for promotion and exposure for that talent, young to the industry or established. That’s been the case in the media industries for quite some time. They’ve had no choice due to technological innovation to evolve and adapt to this test market, and without adapting to this may have served to severely cripple the industry. More coming in the final part 3 of this series.