P2P didn’t cause music industry woes, economists report

Ever since peer-to-peer (P2P) file sharing became popular during the late 1990’s with the rise of Napster and Gnutella-based networks, the entertainment industry has been fighting the evolution of digitized media and has blamed the evolving technology for their financial losses. Backlash against P2P networks like BitTorrent has become so prominent that many people now automatically associate the name with piracy, and industry trade groups like the Recording Industry Association of America (RIAA) claim that the technology is responsible for billions of dollars in losses every year.

There have been plenty of studies emerging that refute the recording industry’s claims, and now the London School of Economics has released another stating that the recording industry is not only incorrect in their claims, but is also hurting innovation by discouraging the use of P2P technology.

P2P didn't cause music industry woes, economists report

The paper first criticizes the UK’s Digital Economy Act (DEA), a legal measure approved last year to track down and punish online copyright infringement. That act would allow for the punishment of repeat infringers by degrading or even revoking the individual’s access to the internet.

“The DEA gets the balance between copyright enforcement and innovation wrong,” write the paper’s authors Bart Cammaerts and Bingchun Meng. “The use of peer-to-peer technology should be encouraged to promote innovative applications. Focusing on efforts to suppress the use of technological advances and to protect out-of-date business models will stifle innovation in this industry.”

“Providing user-friendly, hassle-free solutions to enable users to download music legally at a reasonable price, is a much more effective strategy for enforcing copyright than a heavy-handed legislative and regulatory regime,” the paper claims.

Cammaerts and Meng also suggest that the industry should be examining reasons other than P2P piracy for their losses, seemingly echoing a study published just last week by the Social Science Research Council which claimed that the recording industry should lower prices to reduce piracy..

“Decline in the sales of physical copies of recorded music cannot be attributed solely to file-sharing, but should be explained by a combination of factors such as changing patterns in music consumption, decreasing disposable household incomes for leisure products and increasing sales of digital content through online platforms,” the paper explains.

The paper’s release coincides with a new report by the NPD group which states that the demise of Limewire has caused the illegal downloads of music on P2P networks to drop from 16% in 2007 to 9% in the fourth quarter of 2010. That 7% drop reportedly accounted for 12 million users who could no longer be accounted for.

“Limewire was so popular for music file trading, and for so long, that its closure has had a powerful and immediate effect on the number of people downloading music files from peer-to-peer services and curtailed the amount being swapped,” said NPD entertainment industry analyst Russ Crupnick.

Of course, the RIAA hasn’t noted any sort of declining piracy trend, and Cammaerts and Meng actually question the industry’s claimed losses.

“The music industry is performing better than is being claimed and declining sales can be explained by other factors in addition to illegal file sharing,” their paper states.

Entertainment industry trade groups will likely speak out against these reports sometime soon, but, really, what agenda would the London School of Economics have to present evidence against the industry? Something has to change, and the RIAA is definitely overdue for it. Throwing money at the government to take out the companies that are out-innovating them is getting old and isn’t going to work forever. Eventually, they’re going to have to submit to consumer demands for technologically current products with fair pricing.