Do the Math

The music industry says online piracy's killing the biz. A UTD prof says it ain't.

"It's nice to have an impact on the real world, opposed to, say, the academic world," he says. But the belief is that "you shouldn't sully yourself when you are discussed in the real world, and particularly if you are saying anything that has to do with the real world. It's sort of a risk you take."

Liebowitz has used several of the "illegal" peer-to-peer downloading services, but he doesn't have a vested interest in which side--the consumer or the music industry--"wins." Liebowitz will admit he isn't quite sure what's going on--that not only does he not have all the answers, but we still don't know what the right questions should be. "I have a more narrow view: What's going to happen in the next 10 or 20 years? There isn't much in the way of unanimity, in part because there's so little actual occurrence. It's still about theory."

Until a few months ago, he believed the RIAA's line: Thirty percent of all households in the United States have CD burners, millions of people are downloading songs to their hard drives and burning them to discs, and CD sales in 2001 were down some 12 percent from 2000. Add it up, and the only reasonable explanation is that the sharing of songs is killing the industry.

But Liebowitz started looking at the numbers and figured if they weren't exactly cooked, they were at least steaming on the stove. After separating sales of full-length CDs from those of CD and cassette singles, he discovered the receipts were down only 6 percent--still a loss of billions, but not as disastrous as originally reported. More likely, he figured, the dip could be attributed as much to a recession--which, the Commerce Department's Bureau of Economic Analysis reported last week, was deeper and lasted longer than the government originally reported--as bootlegging. After all, if millions of people were downloading and burning illegal copies of CDs, then how come sales were down only slightly?

"Is a 6 percent decline something that's outrageous?" Liebowitz says. "From what I can see, it may be a little bit stronger than most, but it's not something that's big enough that you could say it's out of the ordinary, that it wouldn't happen without MP3s."

Thus far, the industry has yet to take notice of Liebowitz's work--primarily because it doesn't have to. It has the deep pockets, and it carries politicians like Howard Berman inside them. (Salonreported last week that Berman received more than $180,000 from the entertainment industry for his 2002 re-election campaign.) But, as cultural historian Siva Vaidhyanathan points out, sooner or later the industry will be forced to listen to its fans, who demand what the RIAA isn't offering: an easy and inexpensive way to download anything they want, anytime and from anywhere.

"Stan Liebowitz is taking fan behavior seriously," says Vaidhyanathan, author of the superb 2001 book Copyrights and Copywrongs. "So the record industry should pay more attention to us and take our observations seriously. Instead, the RIAA clouds the discussion with bad studies and cooked numbers. If the RIAA paid real attention to Liebowitz's work, it might find a way to save itself. Because it will not, the record industry as we know it is doomed to fall from its own arrogance."

Liebowitz does have his ideas on how the industry could save itself from itself, but he's well aware they're likely temporary solutions--Band-Aids on a severed neck. One is taxing blank CDs, which would unfairly penalize those who use CD-Rs for data, not music; another is micropayments, wherein users pay pennies per download.

More than likely, the solution is years away--as is any substantive proof that downloads are taking down the industry.

"And till then, people will still buy CDs," he says. "One of the things the RIAA also does is put out these surveys where they age-profile these people who buy CDs, and there are still people in the baby boom generation who are buying large numbers of CDs and who presumably will continue to buy CDs because they're used to listening to music. One of the hypotheses on why perhaps MP3-burning wasn't damaging the record industry very much is that for the ordinary person, it's just too much of a pain to put those MP3s together on a CD and move it to the stereo. It's just easier to go to the store and buy them. The innate resistance of consumers to tasks of moderate or light challenge may turn out to be what keeps the record industry from being hurt by any of it."

And if not, an industry that's made a killing off perpetuating the status quo will kill itself.

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