A very interesting article from my favorite IT website, The Register
Oz legit downloads fail, and fail again
By Alex Malik (feedback at theregister.co.uk)
Published Monday 8th August 2005 09:59 GMT
Analysis Australian lawyer, academic researcher and music industry commentator Alex Malik presents a look at the Australian market for digital downloads. His research has found that while IFPI are spinning the success of authorised downloads, the reality shows that at least in Australia, there are substantial gaps in available repertoire and a heavily protected market controlled by the majors. He can be contacted at Alex.Malik@student.uts.edu.au.
If you examine the behaviour of the international recording industry in relation to so-called internet piracy, you can classify its behaviour in one of three ways:
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1. A campaign of civil proceedings (and where possible criminal proceedings) against individuals and companies they claim are involved in unauthorised downloading,
Here are some examples of record industry proceedings against: ?¢‚Ǩ¬¢ P2P services like Grokster (in the US), Kazaa (in Canada, the US, the Netherlands, and Australia), and other services, ?¢‚Ǩ¬¢ ISPs like Comcen and Swiftel (in Oz) and against international ISPs which dare to refuse to divulge the personal details of their clients, and ?¢‚Ǩ¬¢ Individuals (in the US, Canada, the UK and other jurisidctions).
2. An education campaign aimed at discouraging individuals from downloading sound recordings from websites and services that they have not licensed.
Examples include:
* Press releases and other PR activities,
* The publication of content on IFPI and IFPI-affiliated websites
* Television, radio and newspaper advertisements featuring recording artists decrying “illegal downloading”
* Subtle messages in Awards shows!
3. A campaign designed to encourage music consumers to source their digital music files only from so-called authorised sites.
IFPI, the body that represents the worldwide recording industry recently proclaimed (http://www.ifpi.com/site-content/press/20050721.html) that ?¢‚Ǩ?ìthe legitimate digital music industry is expanding fast globally (and) single track downloads in the top four online markets in 2005 have more than tripled in the last year.?¢‚Ǩ¬ù Strangely enough ,this press release also found its way onto some of its member websites. (For example ?¢‚Ǩ‚Äú the Canadian version is here (http://www.cria.ca/news/210705_n.php).)
It is apparent that IFPI view legitimate sites as websites where consumers can purchase licensed digital downloads of sound recordings, with a share of the revenue going to record companies. IFPI reports (http://www.ifpi.com/site-content/press/20050721.html) more than 300 legitimate websites around the world offe digital downloads to consumers. IFPI even publishes a list of approved sites on its por-music website ?¢‚Ǩ‚Äú does this mean any site not on this list is a pirate site? (… another question for another time!)
So the legitimate digital music industry is booming. Excellent! Let us investigate this claim from an Australian perspective.
Australia is one of the world?¢‚Ǩ‚Ñ¢s top 10 markets for recorded music by size, and is the source of international recording artists such as Kylie Minogue, Natalie Imbruglia, Catherine Britt, Ben Lee, Keith Urban, Jet, the Vines and Delta Goodrem. Yet in Australia, there are only three companies that offer downloads to consumers ?¢‚Ǩ‚Äú HMV/Ninemsn (http://sib1.od2.com/common/Framework.aspx?shid=04AC002E)), Telstra?¢‚Ǩ‚Ñ¢s Bigpond Music (http://bigpondmusic.com/bp_home.asp) and Destra (http://www.destramusic.com/) (through a series of other companies such as Sanity).
Why are there only three major Australian services, when there are so many more international services? There is no definitive answer to this question, but it appears that Australian record companies have simply refused to support other services. Australian record companies appear to cling stubbornly to traditional business models. They accept that they can make more money by having consumers purchase physical CDs, rather than digital downloads. They hope that consumers will return to the CD purchasing habit ?¢‚Ǩ¬¶ but why would they when digital downloads have proven to be so easy and popular for young Australians?
Out of iTunes
The best known licensed site in the international market place is iTunes.
Some of you may like or dislike iTunes, but few Australians have ever experienced iTunes despite the booming sales of iPods. This is because despite all of the hype, hysteria and promise, the iTunes download site continues to be unavailable to most Australian consumers. Despite the self- proclaimed importance of the Australian recording industry, Australia is not one of the first 19 countries to have an iTunes operation. Aside from countries like the US and UK, Australia has been beaten to the service by countries such as Denmark, Norway, Sweden, and Switzerland. Australian consumers can?¢‚Ǩ‚Ñ¢t even access the US iTunes site without a US-issued credit card. In effect Australian consumers have been locked out of iTunes.
Why are Australians missing out on iTunes, when Australian consumers can access Amazon to purchase books from the US, and can view US based webcasts?
There has been a great deal of speculation on this point. Irrespective of the answer, it appears that the worldwide recording industry has artificially divided the world up into different markets so they can regulate new music releases and price downloads differently in each market, thereby maximising profits in each market. It sounds a lot like the ill-fated DVD zoning which as I recall cleverly zoned Australian DVDs as Zone 4, along with South America!
The inability of Australians to access iTunes in the US and other markets works as a prohibition on the parallel importation of digital downloads. Economic theory suggests that this prohibition may act as a price support mechanism, resulting in Australian consumers paying a higher price for digital downloads. In reality, this differential pricing in the digital music market already exists. iTunes and other US services typically charge US99 cents each (although Walmart charges less). So US consumers pay $1.30 per download (converting to Australian currency), compared to the standard Australia price of $1.89 per digital download.
This type of differential pricing would not exist if there was a single worldwide market for digital downloads. And yet Australian bricks and mortar CD retailers can import CDs from the US or elsewhere if they wish to do so. There have even been Federal Court cases about parallel imports involving Australia?¢‚Ǩ‚Ñ¢s competition regulator, the ACCC! (Here is an example (http://www.accc.gov.au/content/index.phtml/itemId/87931.).
The inability of Australians to access iTunes in the US and other markets has had a number of other economic and social effects. The unavailability of iTunes imposes a significant brake on the use by Australians of internet shopping to acquire digital music downloads. Further, Australians have reduced choice of digital downloads. This breeds an environment of complacency for Australia digital download providers, who arguably have a lower market profile than their overseas based counterparts.
In any event, ARIA and its members (including the four ?¢‚Ǩ?ìmajors?¢‚Ǩ¬ù) have made money from the bricks and mortar business of selling CDs (or cassettes, or vinyl in the past). It?¢‚Ǩ‚Ñ¢s been a successful business model which has made record companies substantial amounts of money in the past. However, much of today?¢‚Ǩ‚Ñ¢s youth have grown up with the experience of downloading music from the internet, rather than buying CDs. This has resulted in a substantial amount of illegal activity, as young music consumers download music without the permission of copyright holders. However, rather than embracing this model and looking towards the future, Australian record companies seem to be busy holding back the years.
Internationally, most if not all popular songs are available as digital downloads. In the US, Billboard magazine’s singles chart even looks different ?¢‚Ǩ‚Äú one blacked-out triangle no longer means one million CD singles or 7-inch records sold, but means 200,000 paid downloads purchased. (http://www.billboard.com/bb/charts/hot100.jsp)
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Yet in Australia many popular songs continue to be unavailable as digital downloads. Neither of the top two songs in this week’s ARIA singles chart (“Crazy Frog” by Axel F, and Akon’s “Lonely”) are available as paid downloads. Jesse McCartney’s recent #1 song “Beautiful Soul” was also never available as a paid digital download. Other songs unavailable from one or more websites include hits by Australian artists such as Tammin Sursok (from TV’s Home and Away), the Rogue Traders (with their #1 club smash), and Ricki-Lee Coulter, as well as international artists such as Missy Elliot, Fat Joe, and Kelly Osbourne.
Examining at the two leading Australian download sites, 36 per cent of the songs in the current ARIA top 50 singles chart are unavailable for purchase from the Bigpond music download site, while 40 per cent of the top 50 songs are unavailable from the HMV/Ninemsn digital download site. Record companies who own the copyright in these sound recordings can’t or simply won’t license these songs to the digital download sites.
The popularity of digital downloads is measured in official download music charts. In the UK the chart is known as the The Official UK Top 40 Downloads and in the US the leading download charts are the Billboard “Hot Digital Songs” and “Hot Digital Tracks” charts. In Australia, there is no official download music chart, and no indication when one will be introduced, although the matter has been discussed for some time.
Australian consumers enjoy visiting websites like Bit Torrent and Kazaa. While the idea of a free lunch is appealing, it’s not just the lure of free music that attracts consumers to these sites… consumers enjoy downloading music straight onto their computer so they can play it on their iPods and other digital music players. Yet despite the popularity of this technology, Australian record companies refuse to allow many of their hit songs to be licensed to be sold as digital downloads on so-called “authorised” websites.
In Australia, major record companies claim to have supported the set up so-called “legitimate” alternatives to Bit Torrent, Kazaa and Grokster. Yet despite this “apparent” support, the Australian market for digital downloads lags far behind international markets for digital downloads. Australian consumers can’t legally get the music they want in the format they want, and often pay too much for legitimate downloads.
In many cases consumers have no choice but to turn to illegal means to obtain their music… all of this because the majors have chosen to not be fully supportive of the Australian digital download market.
Why are some record companies reluctant to support the digital download market?
* A lack of understanding of their target demographic?
* A fear of new technology?
* Licensing problems?
* A refusal to accept new business models?
* Simple business conservatism?
When in doubt I always revert to the classic multiple choice answer… all of the above. It’s a pity… with apologies to Bobby Vinton, Akon, Schnappi and Crazy Frog, they are not high art ?¢‚Ǩ‚Äú they are somewhat disposable items and right now in Oz they are hotter than a roo on the barbie! Next month it’ll be something else ?¢‚Ǩ‚Äú maybe dancing lizards or rapping cockatoos. In the meantime, Australian record companies are simply alienating would-be customers by not making hit songs available as paid downloads.
Now there’s a new concept… record companies alienating their customers!