Internet File-Sharing Boosts Music Sales, Report Says

May 9, 2002 12:00 PM, Reuters

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WASHINGTON (Reuters) -- Internet users who download songs for free from unauthorized "peer to peer" services are more likely to increase their music purchases than regular Internet users, according to a report released on Friday, May 3, 2002.

While file-sharing services like Kazaa and Morpheus enable anyone with an Internet connection to access a huge library of music for free, experienced file sharers are more likely to actually increase the amount of money they spend on CDs, the report by research firm Jupiter Media Metrix said.

Thirty-four percent of all peer-to-peer users said they spent more money on music than before they used such services, the report said, while 15% said they spent less. One-half said the amount of money they spent remained the same.

Online music fans who did not use file-sharing services were less likely to report increased spending. Nineteen percent said they spent more money on music, while 10% said they spent less and 71% said they spent the same amount.

Other technologies, such as recordable CD drives and high-speed Internet connections, had no impact on consumer spending, the report said.

Music companies say Internet piracy is partially responsible for a 5% drop in sales last year, and the industry has aggressively pursued file-sharing companies in court. Napster, the first such service, has been offline since last July, as it struggles with a court order to keep copyrighted music off its system.

But the survey suggests that file sharing could provide a boost to the industry, said report author Aram Sinnreich.

"The Internet is the greatest thing that ever happened to the music industry, and they're just missing out on cashing in on it," Sinnreich told Reuters.

Peer-to-peer users tend to be avid music fans who already spend more money than average on music. Rather than shutting down peer-to-peer services, music companies should cultivate these fans, Sinnreich said.

A spokesman for the Recording Industry Asssociation of America said Jupiter's findings conflicted with a survey that found Internet downloads did eat into music sales.

In a survey the trade group commissioned last year, 23% of respondents said that they did not spend more money on music because they could download it for free.

The five major recording companies -- Sony Music, Warner Music, EMI Group Plc, Vivendi Universal and BMG -- have introduced file-sharing services of their own that, for a fee, allow users limited access to portions of their catalogs. So far, the services have met with limited success.

Some companies have turned to copy-protected CDs, which cannot be played on computers and some other devices. Universal is currently considering whether to release best-selling rap artist Eminem's new release in copy-protected form.

The report was based on a June 2001 survey of 1,911 online music fans, 305 of whom were experienced peer-to-peer users.






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