[LINK] P2P study: Music crackdown is bad for business

[Chris Gilbey]

Further to Kim¹s posting re the article in The Register:

 The P2P networks are harder to quantify, but apparently show a
> similar pattern, where most of the action - and profit - is in the
> 'head'. Each Top 100 CD on on PirateBay averaged 58,000 downloads a
> week, for example. Lady GaGa's The Fame was downloaded 388,000 times
> in a week from PirateBay alone. Like its predecessor, the new study
> also finds that downloads follow a log-normal, rather a Pareto (or
> "power curve") distribution as Anderson envisaged. The WiReD man had
> guessed the shape of the internet - and picked the wrong shape.


The article goes on to talk about the music industry renewing its commitment
to enforcement rather than to trying to find a way to utilize P2P for
revenue generation.

So a couple of points:

The benefit to the music companies from pursuing an enforcement business
model is that they can contain costs on the one hand and take profits
directly to the bottom line without having to remunerate artists and
songwriters. (As I parted company with Universal after an 11 year business
relationship, the SVP called me to tell me that at Universal lawsuits were a
profit centre, not a cost centre).

While Chris Anderson may not have the exact model right for the long tail, I
don¹t believe he is wrong. People like to talk about how the Internet is the
great leveller. And it is, when all things are equal. But in music as in all
content, the old rule still applies: ³A hit is a hit is a hit². Dogs are not
going to have their day in the sun just because of the Internet. The reason
that music companies are successful is because they sell music that people
want to buy. Their talent scouts are there to identify what is going to
work. There may have been a triumph of marketing over substance over the
last decade or so, but ultimately they won¹t be able to sell what people
don¹t want to buy.

What has been proven with regard to the long tail is that when Borders Books
opened in Australia, and needed to stock their shelves with masses of books
the publishers shifted everything that they had in their warehouses ­
literally everything. And then started to find that titles that had been
deleted but were still in the warehouse and had not been pulped were
selling. I was told this by the MD of Random House at the time. So there was
definitely a long tail effect in this country at retail.

What I have learned recently from someone in the manufacture on demand
business (software) is that there is actually a mid-tail effect and it
balances out across all aspects of retail. The long tail is serviced by the
Internet. The hit driven area of the market is served by traditional bricks
and mortar retail (as well as some internet sales). The non-hit, but
non-deep catalogue area appears to be developing as a burn on demand sector.
This is borne out by the data that I understand is coming from burn on
demand music retailing where I understand that something in the region of
26% of the titles that are available tend to be searched on at retail and
subsequently burned.

Other things to consider in thinking about Amazon and other on line stores
when purchasing DVDs. Because of region rules on manufacturing I would
imagine that Amazon chooses not to tranship into non-US region territories
to avoid having to deal with the cost of returns.

And if you are interested in getting books on line there is a Melbourne
based Web 2.0 website called booko.com.au which aggregates price points and
shipping costs of all the competitive online offerings of books. I have
tried it several times and the savings are tremendous. I have emailed the
guy who runs it, who apparently developed it to get cheaper books for
himself. He gets a kickback from some of the people he links you to, but not
all, and still continues to search them and rank them. Very cool.

Regards

Chris Gilbey