The FT reports that, in one market at least, file sharing may finally be damaging CD sales. In the US, three years after downloading became widespread and a year after the total number of tracks downloaded first exceeded the number sold, CD sales are down only 5% ??the jury is still out. In Germany, though, sales are sharply down (9.2% year-on-year against a European background of increasing sales) and CD burning looks like it’s become a national hobby (a quarter of households has access to a CD burner).
Assuming that the German numbers are real and that cause and effect are established (not a done deal), this is big news for the music industry in its war of attrition with the file sharers. The people of Germany are replacing their CD collections with MP3s ? real, mainstream economic substitution is under way. History tells us that once a new media technology becomes popular the terms of engagement must change ??from pitched battle to subtler combat and ultimately to accommodation. This has been true for all of the existential threats perceived by rights owners ??from the gramophone to radio to minidisc. The people who run media businesses are not stupid and, once the customer has spoken, the damaging legal phase of the battle must end. Product and business innovation must now take over. The labels will quickly adjust to what is becoming a mainstream consumer activity. Although nothing can be taken for granted and you probably shouldn’t bet your last tenner that any viable media businesses will survive the MP3 era, precedent is eloquent. Record labels (and movie studios, for that matter) will survive, adapt and thrive.
No real good could ever have come from this period of conflict. Now that it’s coming to an end, we should see more cool applications ? an ocean of legal content organised and interconnected by the tech upstarts’ clever code ? and more humility from the RIAA. Incidentally, Universal Music just announced an extension to their downloading experiment. They’ll permit their eMusic subscription service to distribute a thousand neglected albums from the label’s back catalogue. This makes sound, undogmatic, commercial sense. Back catalogue was always going to be the starting point for the next wave of digital distribution ??returns have withered and investment is long finished so commercial risk is low. It’s directly analogous to the way the movie studios created a new source of revenue by packaging movies as VHS tapes. Is this the beginning of the end of the file sharing wars? It’s a start.
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