Digitalization and piracy in the music industry

Digitalization and piracy in the music industry

the digitalization of music

Over the past two decades, the way consumers acquire music has changed dramatically. In the previous decades, people were mostly buying physical copies (CDs, DVDs,  BlueRays with recorded shows and concerts). Piracy then concerned the same media - copies of cassettes and CDs.

In the early 2000s, with the rise of Napster and torrents, the digital offer online was almost exclusively illegal. This forced the development of a paying offer . The quality of the digital offer has steadily increased over the years. Now, digital media occupy a significant share of the music market.

In 2017 already, digital music sales (paid downloads and streaming services such as Spotify or Deezer) accounted for 54% of the industry's global revenues, according to this report published by the University of Amsterdam.

As we have already pointed out several times, the popularity of streaming services has helped to limit piracy. The better and more affordable the legal offer, the more piracy is limited. This is of course also true for music.

However, the covid 19 pandemic and the various measures taken by governments since spring 2020 have caused an increased consumption of online content - legal, but not only . Moreover, since all existing music is now distributed in digital form, absolutely any music release can be made available illegally, and very easily.

The digitization of music has therefore allowed the development of new markets, but it also presents important challenges in terms of piracy.

Major revenue losses: the American example in figures

A report by the music industry organization RIAA (Recording Industry Association of America)  has collected the following data on losses due to music piracy:

Piracy - the diversity killer

As in most industries, the people that lose their jobs are not executives and managers when the companies suffer these huge losses because of piracy. Instead, pirates are killing jobs such as  songwriters, technicians, sound engineers or talent scouts - jobs that have a very direct impact on the quality and diversity of the music produced.

For young, lesser-known artists, a loss of income at the beginning of their career is extremely detrimental - whether they are signed by a record company or trying to make it on their own. So piracy hurts them very directly - in concrete terms, they are less likely to be able to continue as professional musicians, since any loss of income has a huge impact on an artist starting out.

For established artists who already earn very high incomes, this loss may not have a direct impact on them and their future career. However, the loss of revenue for the record companies has obvious consequences - less revenue means that the management will make less risky choices when allocating their resources. The more commercial artists will receive support from the companies because the industry knows the success and return on investment of their creations, while independent music will be left out. Betting on a more controversial or lesser known artist when you are already losing money is a choice that producers will rarely make - if ever.

Ironically, some pirates believe they are fighting major companies. They often feel that these companies are not taking enough artistic risks. But piracy destroys record company jobs and entire industries and can sometimes bring a young career to a halt. Thus the pirates' philosophy turns against their own convictions.

Worldwide numbers

The report of the University of Amsterdam shows that in 2017 it was the emerging countries (BRICS) that pirated the most. Countries with both access to the internet and rather low GDP per capita have the highest piracy rates. 

However, even if the per capita piracy rate in Western markets is lower, it represents a significant market share, and revenue losses are more important in countries with a high GDP per capita - a higher GDP  represents a larger potential culture budget.

Piracy in developed, rich, and populated countries like the United States, Canada, France, the United Kingdom or Germany is therefore particularly harmful in terms of lost revenue.

Europe and pirate hosting

This report from the US government  of 2018 also shows that the countries where piracy hosting is concentrated are Russia, the Netherlands, Vietnam, France, Germany, Switzerland and Sweden.

The music industry therefore undoubtedly needs to find solutions to limit the piracy of their products, and thus safeguard their turnover and jobs, thus allowing diversity in creation. 

For this, a company that specializes in the protection of musical contents can make a huge difference. The savings you make can help you finance that album you never thought you could afford! Don't hesitate to contact us. An expert will help you to define a tailor-made solution, perfectly adapted to your needs and your means. 

Next week, stay tuned for our new article.

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