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Lost and Found: Media Sales

Movies, records, and books sometimes sell even better when they're also available online for free

3 min read

Two weeks before its 16 May theatrical release, Star Wars Episode II: Attack of the Clones appeared on Internet file-sharing networks such as Gnutella and KaZaA. Pirated copies also showed up on Internet Relay Chat (IRC), which can be used for sharing files as well as chat.

At the time, digital entertainment industry analyst P. J. McNealy of the Gartner Group (Stamford, Conn.) predicted, "I don't think this will have any significant financial impact on the box-office revenues." While it's impossible to prove, it seems McNealy was right. Certainly, the movie's producers had no reason to complain, at least initially: Clones grossed US $110 million in its first four days and over $200 million in its first two weeks.

Back in February, Jack Valenti, president of the Motion Picture Association of America, told the U.S. Congress that Internet piracy threatens to "disfigure and shred the future of American films." Exactly 20 years earlier, however, Valenti also famously told Congress that the then-new technology of the VCR posed the same threat to the movie industry as the Boston Strangler did to women. For that earlier prediction, the results are in. Videotape, and now DVD, sales bring in about a third of all Hollywood movie revenues.

Does file-sharing of copyrighted material harm sales today? The movie, music, and book trade associations say it does. But for each form of entertainment, a growing body of evidence suggests otherwise—and not all of the evidence is anecdotal. In an April 2002 study of about 3000 individuals, research firm Jupiter Media Metrix Inc. (New York City) found that "experienced file-sharers are more likely to actually increase the amount of money they spend on CDs." Thirty-four percent said they spent more than before on music, twice as many as said they spent less (15 percent).

A really free library

One ongoing real-life experiment is the Baen Free Library. The novels in this Web-based collection are made available at no charge and in their entirety by science fiction publisher Baen Books (Riverdale, N.Y.). According to author Eric Flint, the idea of the library is that authors and artists, and their publisher, will gain, not lose, from charging nothing for access to their works. Flint has seen it first-hand. Before his first novel, Mother of Demons, went into the library, it had sold 9700 copies in three years, but in the next 18 months, it sold almost as many again. Its sell-through—the number of copies not returned to the publisher—rose from 54 to 65 percent. A later novel, put into the library as soon as its paperback edition was published, sold 34 000 copies in one year, with a sell-through of 88 percent.

The rock group Wilco is just one of many musical acts to have had the same experience. Its first album, "Summerteeth," had first-week sales of 19 000 when released in 1999. In contrast, "Yankee Hotel Foxtrot," the group's current album, sold over 55 000 copies in its first week in May. One difference: the latter album can be heard for free on the band's Web site. A spokesperson for its record label, Nonesuch Records, told the Chicago Tribune, "It's very rare for a record to debut with these kinds of numbers with very little radio airplay."

In the opinion of Aram Sinnreich, the Jupiter Media Metrix analyst responsible for the April report on file-sharing, "The Internet is the greatest thing that ever happened to the music industry, and they're just missing out on cashing in on it."

So what's holding the major record labels back? While the music industry might gain overall from free file-sharing, there will be winners and losers. The winners would be the songwriters and performers, who typically make only a dollar or two on a $15 or $20 CD, and who can apparently get that and more by selling directly to their fans. The losers would be the big record labels, who are therefore loath to experiment with new business models.

Mimi Curran, an attorney for the largest file-sharing service on the Internet today, the Netherlands' KaZaA, puts it this way: "The reality is that computers have the edge on traditional media in attracting users and that the traditional media companies are struggling to find their way with the new technology available."

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