Conferences

FOM: Numbers, numbers, numbers

This sunday and monday I'm at the Future of Music Policy Summit in Washington DC. I'm trying to blog a few of the sessions of the summit, but all of the sessions have been so engaging that it's hard to find time to write up my thoughts. So, as usual I'm running behind in posting my thoughts on these killer panels being presented here. This blog covers the first and so far most controversial panel of the summit: The dueling economists. While most of the attention was tightly focused on the two ecomomists who published studies about the effects of file sharing on CD sales, the other panelists also had some really valuable input. Mary Madden, John Simson and Ron Gertz all had many good things to say -- I will apologize to them for not covering their input in more detail here. Please take a look at my notes in the extended blog entry for their input to this feisty panel.

The first panel took a look at the important financial numbers and financial studies pertinent to the music industry. Representing both ends of the is file sharing hurting cd sales? camp, economist Koleman Strumpf from the University of North Carolina at Chapel Hill faced off with Stan Liebowitz from University of Texas at Dallas. A large portion of the panel focused on the conflicting research from these two promiment researchers. Strumpf found that file sharing did not significantly impact file sharing, whereas Liebowitz found that it did have an impact on sales. The two argued back and forth about their respective approaches to studying the current happenings -- check out the bullet points below for some more details.

Personally, I think the rest of the panel's comments supported Strumpf's position more -- Mary Madden from the Pew Internet & American Life found that in their surveys that artists were split on the impact of file sharing. Of the artists they spoke to, very few of them said that file sharing had a negative impact. More said it has some or no impact.

A common theme in this panel was the dismal state of the radio industry. Strumpf said that radio listenership is down 8%, since there is nothing compelling to listen to. Fewer people listening has an impact on CD sales since radio heavily promotes popular artists.

Another factor that has had an impact on CD sales is the fact that expendable income is being spent on mobile phones and expensive video games that have risen in popularity in the last few years. This leaves less money to be spent on music. Also, when I asked about the recent economic downturn, Liebowitz thought that the downturn did not affect CD sales. I disagree with that statement, and after the panel I asked Strumpf about this and we agreed that expendable income was the first victim of an economic downturn. This in turn causes CD sales to fall, since music is a luxury expense.

All of these factors clearly impact CD sales. Given that there are so many variables that factor into this equation, its hard to truely asess if file sharing does impact CD sales. I believe that Liebowitz's hard line that file sharing does have an impact is hard to maintain. Ironically enough, Liebowitz accused Strumpf of having a predetermined outcome for his survey. Personally, I think Liebowiz is much more likely to have had the predetermined outcome for his study.

Overall, my impression from the panel was that it leaned more towards supporting Strumpf's views. It is going to take a lot longer before we will have the real answers behind this, but there was no small amount of satisfaction in seeing two economists slug it out on stage.

The rest of this entry are my notes from the panel -- I hope the may be useful for you.

General Notes:

• Radio sucks. That is why we're seeing more webcasting and satellite radio.
• Liebowitz vs. Strumpf: Two extreme positions that indicate that the truth lies in between.
• Fragmentation of the entertainment market: expensive video games, cell phones, etc, are pulling money out of pockets of young people, leaving less money for music.

Koleman Strumpf

• Got a report on what was dowloaded from a file sharing network.
• File sharing does not affect CD sales.
• Doing whole market analysis (like Liebowitz) is old skool.
• Radio listnership is down 8% -- there is nothing compelling to listen to.

Stan Liebowitz, Prof of Economics, UT Dallas

• After file shareing came on, CD sales declined.
• People don't understand the number behind this.
• Accuses Strumpf of having a predetermined outcome of his study.
• Strumpf studied single CDs and the elastisticy of a CD vs the entire market. The two approaches are quite different
• Liebowitz weakly shredded Koleman's argument.
• Never mentioned economic downturn.
• When asked how to perform the perfect study: run an actual experiment. College CD sales were down before Napster. No significant change as Napster comes along. (How does this support his argument??)
• Looked at 30 years of data -- no significant relationship between GDP and CD sales. (This ignores the fact that CD spending comes from expendable income, which always gets squashed during econimic downturns.)

Mary Madden, Pew Internet and American Life

• Much division about the impact of these technologies.
• 1/3 each of artists surveyed: poses threat, medium thread, high threat
• Very few say it has negative effect. More say it has some or no impact.

John Simson, SoundExchange

• SoundExchange covers radio, webcasting, sat radio, cable music royalty distribution to artist and recording owners.
• Webcasting and satellite services are coming on strong, in absence of quality radio programming.
• In other countries radio pay 6% - 10% of revenues for royalties. US radio closer to 3%.

Ron Gertz, Music Reports

• Its digusting to see economists not get along nicely.
• No one can make any money with webcasting: artists and small labels are screwed. Big labels reap the benefits.
• The statue limited the number of times an album can be played at one time. Only the major labels make money with this.
• Radio licensing fees are flat fees -- not related to revenue. $360M paid by radio stations and $50M by webcasters -- something is out of whack!
• 75% of programming on TV contains one of more ASCAP pieces of music.
• Much more broad useage across all media!
• New musicians are popping up that they have never heard of. (this indicates a broader music listenership as people are looking past radio and exploring more music on file sharing, Rhapsody and iTunes)
• Sampling is expensive and you need to do a cost-benefit anaysis. More detailed sampling gets more expensive.
• 80% of copyrighted works since 78 are not registered with copyright office. (Not surprising since copyright is now default)

Posted by Mayhem at May 3, 2004 06:56 AM