Greedy music industry loses more money

The music industry needs to clone Ryan Dixon.

The Cabrini College senior started downloading free music off the Internet even before Napster put file-sharing on the map way back in 1999. When Napster went down, Dixon graduated to Kazaa.

Now the 21-year-old from Newtown Square, Pa., pays for all his digital songs. Last week, he picked up an EP from the band Maroon5 and a live Jason Mraz track for 99 cents each on iTunes, Apple Computer’s online service. That makes 675 songs he has bought legally since April.

He is virtually alone.

For every Ryan Dixon, there are thousands of others who prefer getting things for free. They have balked at the high price of CDs, and they don’t want anyone limiting what songs they can own or what they can do with them. They feel they will never get caught.

This is digital music’s “pregnant moment,” said Josh Bernoff, senior analyst for Forrester Research, which tracks technological trends. The music industry, after years of blaming file-sharing for plummeting sales, has struck back, with such big names as Napster, Dell, Sony, America Online, RealNetworks and Musicmatch introducing or planning pay-per-song alternatives. The services are aimed at those who want to spend less and are spooked by copyright-infringement lawsuits.

But will it work?

Many industry observers say the new services will provide little lift for the beleaguered record business. In fact, they say, the pay services will only steer more people toward the freebies.

“Apple legitimizes Kazaa,” said Peter Fader, a marketing professor at the University of Pennsylvania’s Wharton School. “It is telling the world that downloading is the right way to get music.”

More people shared free music files in October than the month before, and more are sharing this year than the year before, said Eric Garland, CEO of, which monitors traffic on the largest peer-to-peer networks – including Kazaa, Morpheus and Grokster – accounting for about 85 percent of file-sharing.

“While watching these pay services evolve, we’ve only seen one trend in file-sharing behavior: more people sharing more and more files,” Garland said.

The 4.4 million people that BigChampagne counted sharing files in September constituted a 45 percent increase from the year before – and it was in September that the Recording Industry Association of America put a scare into some by suing 261 people, alleging that they stole copyrighted music via the Net.

“The selection and availability and the quality offered on file-sharing networks is still superior,” Garland said.

Apple, the market leader for online music thus far, aspires to sell 100 million songs by April, its first anniversary. That many songs change hands for free on file-sharing networks in a matter of days.

But the new services should make the industry some money. Apple pays about two-thirds of what its service takes in to the record labels for rights to offer the music online. The labels have deals with all the services. But not all labels participate. Beatles music, for instance, is still not available online – unless one goes to something like Kazaa.

The recording association’s strategy of suing those it suspects of stealing music has had some effect. Nielsen/NetRatings has reported that the number of people using Kazaa, the most popular software for trading free music, fell by about 40 percent between June 29 and Sept. 21.

But Nielsen based its estimates on how many times members of its user panel loaded Kazaa software, and measured U.S. Internet-account owners in their homes, according to Garland. BigChampagne measures use of the networks, and takes in foreign downloaders, college students and teens – the most active traders.

Teen Research Unlimited, the Skokie, Ill., market-research group that concentrates on the habits of young people, has found that they are unlikely to stop taking free stuff off the Web.

“The teens we’ve spoken to recently haven’t curtailed their downloading in the last six months,” said Michael Wood, TRU’s vice president. “They feel invincible. They kind of laugh at the industry’s attempt to shut them down.”

He said teens rationalized their actions. “So they’ll buy (Eminem’s) Shady brand of clothing, but won’t feel the need to support Eminem by buying his music,” Wood said.

“The only way (for the labels) to win the war is to change the rules of combat,” Wharton’s Fader said.

That means adding value, such as helping fans learn about songs they might not know. His experience on subscription services such as Rhapsody suggests to him that for the first time since music went online, the consumer’s experience is shifting from gathering to hunting.

The new services provide skilled guides for collectors, Fader said, letting them know what others with similar tastes are listening to, and what staff music obsessives suggest.

All this will be moot in five years anyway, Fader adds.

By then, we’ll be walking around with cell-phone-size wireless players that will allow us to receive whatever we want to hear. We’ll pay by the month, say, and won’t need to own or store vast amounts of music: We’ll get what we want on demand.

With this magic jukebox, “you can punch up any song or genre or playlist you’ve stored and let the music wash over you,” Fader said. “So you won’t have to worry which song to put on the device today.”

By then, maybe the Beatles will play along, too.