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Sunday, June 17, 2012

Closing File-Sharing Portals Pays Off

A House Commerce Committee hearing on “The Future of Audio” was held a few days ago, where the RIAA, represented by its head Cary Sherman, was telling lawmakers how the industry has transformed its business model.

The Recording Industry Association of America claimed at the hearing that digital formats are currently responsible for over 50% of its revenues. The RIAA’s chairman also pointed out that physical CDs are now becoming obsolete and replaced by digital music. The latter has brought about $3.5 billion in revenues last year, which is around 20 times more than in 2004.

However, digital music was on the tide since P2P services appeared, like Napster, KaZaa and LimeWire, because they were all facilitating the free exchange of digital material. But today the entertainment industry seems to have started adapting to the digital age.

The RIAA also claimed that LimeWire’s “demise” had positive effect on digital sales. Most of the US citizens are familiar with LimeWire, which was the most famous P2P file-sharing service in the world. Within 3 years, since 2007 to 2010, about 67% of file-sharers on the Internet used LimeWire. By the end of October 2010, a federal court finally closed the service down for inducing mass copyright violation. According to the RIAA’s statistics, the very next month, digital music sales increased and they have remained higher ever since. Although LimeWire closure may not be the sole reason for improvement, it definitely wasn’t a coincidence: a few months ago, market research company NPD has published a survey revealing that over half of the people who had used LimeWire didn’t switch to another unauthorized music website to download their music after the LimeWire’s shutdown, all thanks to the availability of legitimate music download services.

Meanwhile, the RIAA claims to believe that the best and single most important anti-piracy strategy is still innovation. That’s why they promise to continue “experimenting” and working with their technology and Internet partners on user-friendly new business models.

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