"When we conducted our consumer survey, we still found that Napster usage is one of the strongest determinants of increased music buying."
—Jupiter Communications analyst Aram Sinnreich


New Jupiter Communications Research Shows
File-Swapping Use Boosts Music Sales
A new study from Internet research firm Jupiter Communications offers strong support that people who use Napster and other file-sharing networks to trade MP3 files actually spend more money on music than those who don't use such services.

"Because Napster users are music enthusiasts, it's logical to believe that they are more likely… to increase their music spending in the future," said Jupiter analyst Aram Sinnreich. "But when we conducted our consumer survey, we still found that Napster usage is one of the strongest determinants of increased music buying."

Jupiter surveyed more than 2,200 music fans about how their online habits affected their music purchases. The survey found that people between the ages of 18 and 24 who spend less than $20 on music within a three-month period indicated that they were likely to remain at a constant purchasing level despite online music use. All other groups said they had increased spending as a result of online music use.

The results of the Jupiter survey run contrary to results of the Soundscan survey released in May that the RIAA rallied behind as proof that Napster use, especially near colleges, cut into industry revenues.

"An inherent flaw in the RIAA's argument against Napster is that the association's supporting research shows a decline in record sales in college areas with high Napster usage," said Sinnreich. "However, the RIAA did not clarify that the most attrition took place before Napster's launch, and the analysis did not account for channel shift to online transactions that would have occurred independent of Napster's existence."

In an interview with CNET.com earlier this month, RIAA chief executive hilary rosen',390,400);">hilary rosen',390,400);">Hilary Rosen stood by the Soundscan report and argued that, regardless of economic harm, the unauthorized file-swapping encouraged by Napster and its file-swapping cousin Scour was still wrong.

"I don't think it matters at all whether we've been economically hurt," Rosen said. "If you have a copyright asset, that is the principle of copyright—that you get to control and own your own work, and other people don't get to profit from it without your permission."

In an interview with Reuters, Jupiter's Sinnreich was critical of the major labels' leap to litigation. "The labels are absolutely ridiculous to come crying to the courts," he said, "when they haven't put anything out there themselves that consumers can have an alternative to."

While Sony and EMI have recently dipped their tippy-toes into the digital download pool, in general, the Big Five have been slow to respond to the obvious demand for downloadable music. Part of the reason is a fear of alienating traditional retailers.

One executive quoted in the Reuters story explained it like this: "It's not as easy as just throwing your entire catalog online. Piracy is not the only issue. But the traditional retailers will scream if they perceive the labels are trying to cut them out of the loop. And, like it or not, that's still where labels sell most of the product."

Sinnreich's response was that the Jupiter survey proved that online music activity drove purchases both online and through traditional channels. He also pointed to a key selling point of "legal" downloads that the major labels had yet to capitalize on.

"We asked consumers, ‘What would compel you to pay for a music subscription on the Web?' And the two most mentioned features are guaranteed file quality and virus protection. Those really point to the shortcomings of Napster," Sinnreich said.

"If consumers know that the Britney Spears song they're downloading won't: a) sound like a transistor radio, and b) melt their hard drive, or if they have someone to blame if either of those things happen, consumers will want to come over to legitimate channels of distribution."