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An Expert Vacillates

Stan Liebowitz interviewed in Salon:

    Does MP3 file trading hurt the music industry?

    It’s a question that has caused heated debate ever since Napster exploded on the scene in 1999. And as sales of recorded music have declined over the past two years, it’s a question that has taken on ever-greater importance — for the music business, Congress and music fans.

    Up until recently, there has been little hard data to support anyone’s claims that file trading is hurting — or helping — music sales. But at least one researcher, University of Texas (at Dallas) economist Stan Liebowitz, author of an upcoming book (set for publication Sept. 7) titled “Rethinking the Network Economy,” is digging hard for quantitative answers.

    In May, Liebowitz published a paper suggesting that the record industry would soon be seriously harmed by MP3s. But in June, by the time Salon caught up with him, he was questioning his own conclusions after having examined the numbers and finding little solid proof that file sharing was hurting CD sales.

    Two months later, he’s changed his mind again. Sort of. In an insightful, yet-to-be published paper that analyzes 30 years of record sales figures, Liebowitz argues that MP3s are in fact having a significant negative effect on the CD market. He acknowledges that new data could once again lead to new conclusions, but for now, Liebowitz says, “I’ve moved somewhat closer to the record company position.”

    Salon called Liebowitz at his home in Dallas to discuss his findings…..

UPDATE
Attorney Philip S. Corwin analyzes Liebowitz:

    The Liebowitz study is based on economic analysis/projection, as opposed to the Jupiter and Forester studies, which were based upon consumer surveys (and which found that file-sharing was not a threat because it net/net promoted more sales than it displaced). He has now zigged back toward his original CATO study conclusion, which he had zagged away from. If you read the full interview and his latest paper (accessible by hyperlink through the Salon story) you will see that he still believes that there is no presently available evidence on which to base any firm conclusion that file-sharing is harming the record industry — his latest zig is simply that he again feels that it is more likely than not that such evidence will become clear in the next year or two. However, he specifically rejects the industry’s contention that burning and file-sharing will “annihilate” it; he points out that RIAA consistently exaggerates the seals downturn by including declines in cassettes in singles, which, as his paper documents, were already heading
    rapidly toward extinction pre-Napster; and he opposes criminalization of file-sharing activity.

    I don’t agree with all of his suppositions (that the tightened economy has not affected CD buying, and that consumers are not shifting finite personal entertainment dollars away from CDs and toward films/DVDs and video/computer games) but I respect his thoroughness, intellectual honesty, and methodological transparency.

    Not surprisingly, the “studies” funded by the recording industry remain the only ones that maintain that there is available conclusive evidence that file-sharing displaces CD sales at all, much less is the primary cause of the industry’s doldrums.

UPDATE
Kevin Doran interprets Liebowitz:

    I love – and respect – an open mind, but it’s kinda hard to take a guy seriously who ping-pongs between poles, then qualifies his latest stance with an ‘i dunno’ based on wrong data.

    The RIAA figure (released after this piece was published) re the ’02 mid-year
    is -6.7%, not -9.8%, is it not?

    I’d verify it myself, but it’s a difficult task accessing the site these days.

    That ~35% data shift will probably send Leibowitz scrambling back, trying to
    justify this reality with his now-available-in-hardback theory.

    And then there’s the direct competition from the DVD spike to consider,
    something which Stan the man seems to have wholly ignored.

    Per a NYT front-pager this week, the dollar volume on movie products has
    DOUBLED from about $6B to about $12B since the introduction of the DVD five
    years ago. What’s more, it’s done so by leaving the VHS market relatively
    unscathed – maybe a 20% decline over that time. And, in this year (and
    counting) of recession, DVD sales have managed to grow by another 50%.

    Clearly, DVDs (and theatrical releases) are not only taking most of consumers’ disposable dollars at this historical moment, there is a perception of greater VALUE for a product that rivals the CD in price and delivers, literally, hours of ‘multi-media entertainment’ versus the 60 minutes or so of aural wallpaper compact discs provide.

    And that’s an important distinction to recognize – the lack of interactivity in audio products versus their rivals in movies and games – for what it means
    to consumers.

    Whether that new view of music products is a response to the lack of engaging
    content (i.e. hits/stars), a migration to more permanent ‘lifestyle’ v trend-driven ‘celebrity’ music purchases, or a general evolution in the function of music by people (i.e. not the center of the contemporary cultural experience it was in the Boomer heyday) is beside the point for everyone but those whose livelihoods depend on maintaining the viability of those products.

    Agreeing with Leibowitz on this point, it would appear that the diminishment
    of the CD as a necessary component of the conspicuous consumption process it
    once occupied even one generation ago is likely due to a whole host of
    economic and sociological factors.

    Per the RIAA’s own figures, this has been a ten-year trend for genexters who
    simply no longer purchase these goods the way their parents and grandparents
    did from the ’50s thru the ’80s.

    Read that sentence again.

    This has not only been going on for a long time – at least a half-decade before the MP3 was a glimmer – but the RIAA has seen it coming all along. Why do you think the industry shifted to teeny pop five years ago? (Answer: In order to re-introduce the centrality of the record-buying experience to the subsequent generation whose malleability was in equal proportion to their lack of – shall we say – critical judgement.)

    With that knowledge and broader perspective, the rise of digital network services – the very *appeal* of them – as a replacement to CD purchases can
    be rationally argued as symptomatic rather than causative of the market shift, driven (as it always is) by the never-ending demographic change and a fascination with ‘the new’, whatever that may be – PS2 or P2P or DVD-RW.

    Seriously.

About Eric Olsen

Career media professional and serial entrepreneur Eric Olsen flung himself into the paranormal world in 2012, creating the America's Most Haunted brand and co-authoring the award-winning America's Most Haunted book, published by Berkley/Penguin in Sept, 2014. Olsen is co-host of the nationally syndicated broadcast and Internet radio talk show After Hours AM; his entertaining and informative America's Most Haunted website and social media outlets are must-reads: Twitter@amhaunted, Facebook.com/amhaunted, Pinterest America's Most Haunted. Olsen is also guitarist/singer for popular and wildly eclectic Cleveland cover band The Props.

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