How piracy is changing the music industry landscape

Few would argue piracy is not changing the industry, but is it really killing it? r5d

While legal sales of recorded music continue to suffer from widespread music piracy, the popularity of live music appears to be enjoying an unprecedented boom, particularly in the UK where new stadiums such as the £125m Hydro Arena in Glasgow have contributed.

In his recent book The Music Industry: Music in the Cloud, Patrik Wikström explains that licensing and live music are now the principal sources of revenue for musicians, not recorded music sales. This is why U2 were able to give their latest album away for free through their deal with Apple. Madonna, under her “360 Deal” agreement with her label, generates 95% of her income from touring.

It is hard to ignore that ticket prices have increased, particularly among superstar performers, though opinion is divided on why. There are many questions that arise from seeing how the relationship between live music and recorded music has changed, where undoubtedly it seems that recorded music now drives sales of live music and not the other way around. This is something worth examining in detail, especially in how it relates to music piracy.

Free music and live audiences

Several studies suggest the positive benefits of music piracy on live music attendance. One study argued that demand for live performances is in fact reduced when piracy is prevented. Another observed what the authors called a P2P-exposition effect, in which exposure to recorded music (whether acquired legally or illegally) motivates concert attendance. Other research has come to similar conclusions, revealing that although piracy negatively affects the recorded music industry, it has a positive impact on other areas such as live music.

In a case study on Nine Inch Nails a few years ago I referred to the stage-in-the-game hypothesis (because scholars love coining phrases), which holds that music piracy affects different artists differently, depending on what stage of their career they’re in. In other words, while it might make sense for one artist to give music away for free (perhaps with an eye on motivating concert ticket sales) it might not make sense for another. The important difference is having an established audience – as U2 does. Generally speaking, however, it would appear that music piracy and live music attendance go hand-in-hand.

In another recent book, Online File Sharing: Innovations in Media Consumption, Jonas Andersson Shwarz acknowledged that it is now uncontroversial to suggest that individuals engaging in music piracy are greater consumers of culture overall, noting that music piracy motivates live music attendance. A substantial volume of research (some of which is cited in Shwarz’s book) demonstrates that those who download music illegally also spend more money on music purchased legally, including concert tickets.

The rise of concert prices

Unlike the studies mentioned above, no empirical data exists – to my knowledge – which can answer the question of whether or not concert tickets are more expensive as a means to counterbalance losses from music piracy. However, a calculated guess would suggest that this is indeed the case.

Wikström argues that piracy is a key factor affecting the price of concert tickets, driven by lower revenues recouped from the recording sector. Certainly, on the surface, live concert ticket prices seem to be rising well beyond inflation and the associated costs of putting on progressively larger and more extravagant productions.

Drawing on sales data for the top 100 tours in North America over an eight-year period, a study found that the true cost of a ticket has risen due to the increased problem of ticket scalping, or touting, also known as the secondary ticket market. Largely facilitated by the internet, it exploits fans' desire to see their favourite artists and the fact there are only limited tickets available for any given performance. It grown sufficiently large a problem as to be the subject of two parliamentary investigations in the UK.

Given the troubling extent of this secondary ticketing market and the prices fans are prepared to pay, it could even be said that that concert tickets are in fact under-priced. Forthcoming research of mine finds that the wow-factor of seeing your favourite artists in the flesh, while you can, is more important than the price of a ticket.

Executive chairman of Live Nation, Irving Azoff, famously wrote on Twitter in August 2010: “So if you want ticket prices to go down, stop stealing music”, asserting a direct link between the effects of piracy on recorded music and the knock-on effects on the live music industry. And the research suggests that this is accurate, to an extent. But the effects of ticket touting, and the fact that artists are performing more, and often more elaborate, shows must also be taken into account when charting the growth of the costs passed onto the consumer.