It will probably be years before we can determine the actual effects that Napster and other online file-trading networks have had on the music business. Conflicting evidence suggests that swapping music either increases or reduces CD sales.But one conclusion seems clear: Consumers are less likely to buy what they don't first have a chance to hear. And as radio's listener base is shrinking, more folks turn to the Internet to find new music. New research from Arbitron and Edison Media Research indicates that "streamies"—defined in the report as people who have watched or listened to streaming media online—bought more than one and a half times the number of CDs in the past year than the average US consumer.The study, Internet 9: The Media and Entertainment World of Online Consumers, found that weekly streamies bought, on average, 21 CDs in the past year, compared to the average American, who bought 13 CDs. The researchers say they also found that residential broadband adoption has doubled in just under 18 months, accelerating online audio streaming. Those with a cable modem or DSL Internet connection at home jumped from 12% in January 2001 to 28% in July 2002.
In an effort to put their results in proper perspective, Arbitron and Edison say they have conducted nine studies of the Internet and streaming media, one every six months since 1998, and will continue to do so (click here for a report on the previous study). Arbitron's Bill Rose says, "While some in the record industry have viewed streaming as a threat, this research indicates that streamies are a very lucrative group of record buyers."In another recent report, researchers from In-Stat/MDR conclude that the exponential growth in the number of people accessing the Web has further contributed to an increase in the illegal access and distribution of proprietary content. Instat says that the widespread availability of digital audio and video files, coupled with the popularity of file-sharing software from companies like Kazaa, has resulted in an "inter-industry schism in the search for a viable Digital Rights Management (DRM) solution."The report elaborates, "The continuing quest for a workable DRM solution has pitted the content development industry, primarily consisting of companies in the recording industry and the movie industry, against the information technology (IT) industry."
While the music industry's stated goal is to stop all "unauthorized" online access and distribution of their content, it also maintains that it is committed to online distribution, but only in conjunction with a secure DRM system in place. Meanwhile, In-Stat is reporting that the IT industry, while also concerned about DRM, is very interested in the potential of new, online distribution technologies. "Many technology executives have noted that if there ever was a killer app for broadband services, it was Napster," says the report.In-Stat says that while the IT camp acknowledges piracy, it "also support[s] current 'fair use' laws that permit consumers to copy and share a limited amount of content with others. The content development industry always seems to attack new technologies and distribution channels. From playing recorded music on the radio to playing movies on a VCR, the content development industry regularly tries to stop new technologies that ultimately end up being an important and profitable part of their business model."While significant differences concerning the adoption of new technologies will continue to divide the two industries, In-Stat expects the broader DRM positions of the antagonists to drift slightly closer together over the next several years. "However," the study concludes, "fundamental differences between the industries regarding the fair use of proprietary content and the specifics of how to institute and enforce DRM architectures guarantee that the next few years will be full of lawsuits and legislative maneuvering."
