Studies Question Musical Downloads' Effects on Sales

The Recording Industry Association of America, which represents the interests of many record labels, believes the latter.

According to the RIAA's midyear "snapshot" of the music industry, overall CD shipments have decreased by 7 percent in the first half of 2002. Shipments have dropped from $5.93 billion in the first half of 2001 to $5.53 billion in the first half of this year.

There have also been fewer albums that have gone platinum by the midyear point -- 20 this year, as compared to 31 last year, and the damage might affect what music is heard in the future.

"What I think many consumers and music fans overlook the long-term impact this has on the music we all expect and enjoy," said Jonathan Lamy, communications director for the RIAA. "For every dollar lost to piracy, that's a dollar that can't be invested in new artists."

And there is no cure in sight for the industry's ailment. Although the RIAA has been successful in the courts with the shutdown of such popular file-sharing services as Napster and Audiogalaxy, newer services have popped up and persisted.

"I believe the only way to mitigate illegitimate file-sharing is to offer legitimate superior alternatives," said Matt Kleinschmit, senior research manager for Ipsos-Reid, a research company. Recent studies by Ipsos-Reid and Forrester Research contradict the RIAA's report. The Ipsos-Reid study found that the buying habits of 81 percent of those who download music have either remained the same or increased.

Meanwhile, Forrester interviewed 1,000 frequent online music users -- 13 percent said they are buying less CDs as a result of downloading, while 39 percent said they are buying more. The company's report also predicted that online music will generate more than $2 billion in sales by 2007.

Kleinschmit said the recording industry is beginning to think outside the box to accommodate the burgeoning online music business. He also believes CD costs will decrease and that unique online content will emerge.

Such legitimate online music subscription services as MusicNet, Pressplay, Rhapsody and a reformed Napster are slowly gaining steam. These young services are looking to entice online music consumers by offering increased portability support and higher rates of streaming.

"What you will continue to see is that evolution," said Seth Oster, Pressplay's vice president of corporate communications and public affairs. "It will look far different a year from now than it does today."

When it comes to legitimate online music exchanges, Oster sees the top two priorities of consumers as being breadth of service and options for portability.

The most notable online music services have worked to acquire a vital component of any future success -- the combined catalogs of all five major record labels. The collective cooperation of BMG, EMI-Capitol, Vivendi Universal, Sony and AOL-Time Warner is needed to snare consumers willing to pay for their online music. Of course, the recordings of lesser-known labels will be included.

"We're doing both," he said. "We're forming deals with the majors and with the independents at the same time."

With both labels and consumers jumping on the online music bandwagon, listeners may tap into their hard drives as much as their stereos.

The Arts & Entertainment Editor can be reached at artsdesk@unc.edu.