Manu
08-14-2001, 12:40 PM
In the second quarter of 2001, online music-swapping service Napster essentially died. At the same time, according to the SoundScan sales-tracking firm, overall record sales dipped 5.4 percent compared to 2000's healthier second quarter.
Coincidentally or not, Napster's star was on the rise in that second quarter of 2000, at a time when record sales were on the rise.
The recording industry, of course, sued Napster saying that the rogue music-exchange was stealing bread from its mouth by allowing consumers to get for free what record labels were selling at fairly premium prices. The industry now appears to have gotten the upper hand in court. The free version of Napster is out of service and it might remain that way until it reemerges as a subscription service.
Some people, like San Francisco Chronicle pop music editor Joel Selvin, are wondering if all this is coincidental.
Here are the actual sales numbers, according to SoundScan:
- Total music sales, including albums and singles, stood at $363.4 million for the second quarter of 2001. That compares to $384.2 million at the end of 2000's second quarter, a 5.4 percent difference.
- Album sales, mostly in the form of CDs but with other media mixed in, totaled $344.8 million at the end of the second quarter this year. In the same quarter last year, that number stood at $354.9 million. That's about a 3 percent difference.
- Singles, including both the CD and tape variety, hit $18.6 million at the end of the second quarter this year. Last year's comparable quarter saw $29.3 million in sales. That's a 36 percent spread.
Here's the question, then: Was there a relationship between a healthy Napster and healthier record sales? And is there a correlation between flagging record sales and a dead or dying Napster?
A pair of industry analysts interviewed by Newsbytes this afternoon are skeptical of such conclusions.
"I'm happy to entertain it as a hypothesis," said Eric Scheirer, a Forrester research entertainment analyst. "But the mere existence of those two numbers being next to each other - the (sales) number going down when Napster shut down - doesn't say anything about the causality there."
Scheirer points out that there are many factors that would need to be plugged in before a conclusion could be drawn that Napster either influenced sales by generating interest in music, as many observers last year said was the case, or that it has hurt sales through its demise this year.
While it's all plausible, Scheirer said it is just as possible that artistic trends and audience tastes are changing and affecting the industry's bottom line. Most teen pop sensations of last year aren't so hot this year. Mariah Carey, for the first time since she gained diva status, has seen a single bomb. Mainstays like REM and U2 aren't selling as well they used to. It may be that the industry is just waiting for the next Springsteen or Nirvana or Britney Spears to come along.
"There's at least an argument to be made that we're in the midst of a cyclical downturn of that sort right now," Scheirer said.
Matt Bailey, an analyst for digital entertainment research firm Webnoize, points to another possible factor - the economy, which has noticeably slumped in the year since record sales showed a second-quarter spike. He said that his firm noticed record sales began their slide not this year, but late last summer.
"Obviously, the performance of the economy itself does influence consumers' spending," he said. "As the economy has started to cool off, we have observed among them a parallel shift toward spending less money on music."
Bailey pointed to another reason to perhaps doubt the claims that Napster has either helped or hurt CD sales. While it has for now ceased to exist as the free service it was when it gained fame and notoriety, other free peer-to-peer networks have moved in to fill the void. Bailey points to several like Music City and Audio Galaxy as having moved out in front of the peer-to-peer pack among those vying to take Napster's place.
The point is that Napster may be past its prime, but its children are just getting started.
"You can still log on and get pretty much anything you want for free," Bailey said. The breadth of choice may not be quite what it was at the height of Napster boom, he said, when just about any song ever recorded could be pulled off Napster's network. But the upstarts are not that far away from offering Napster's abundance, and they close the gap a little more each day, he said.
"As these other networks become dominant you'll see some of those consumers who may have been easily discouraged heading back to these very popular networks," he said.
But in the end, Bailey says that as far Napster's having influenced or hurt CD sales, "There really isn't evidence either way."
That doesn't mean the Webnoize analyst thinks Napster's influence has been a wash. Far from it. Bailey thinks Napster's ultimate legacy will not be measured in how it did or did not affect sales of compact discs. Ultimately, he suggests, Napster's influence will be measured in the market it really pioneered - the market for PC-based music transactions on the Internet.
Napster, while still dealing massive copyright-infringement lawsuits, is working to become a subscription service. The major labels also are working on their own version of fee-based music download services, in the form of the forthcoming Pressplay and MusicNet.
Webnoize estimates that by the end of 2002, 11.7 million U.S. consumers will be digital music service subscribers. If true, annual revenues of $2.7 billion would be generated, equaling about 20 percent of the revenue the current CD market.
In other words, Napster may have blazed a path in computerized music exchanges that will ultimately make the music business bigger than it has ever been, Bailey said.
"I certainly think the performance of Napster has increased the potential size of the music industry," Bailey said. "The success of PC-based music in general has led to a potential for a larger music industry." www.technews.com (http://www.technews.com)
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Manu Narayan
Coincidentally or not, Napster's star was on the rise in that second quarter of 2000, at a time when record sales were on the rise.
The recording industry, of course, sued Napster saying that the rogue music-exchange was stealing bread from its mouth by allowing consumers to get for free what record labels were selling at fairly premium prices. The industry now appears to have gotten the upper hand in court. The free version of Napster is out of service and it might remain that way until it reemerges as a subscription service.
Some people, like San Francisco Chronicle pop music editor Joel Selvin, are wondering if all this is coincidental.
Here are the actual sales numbers, according to SoundScan:
- Total music sales, including albums and singles, stood at $363.4 million for the second quarter of 2001. That compares to $384.2 million at the end of 2000's second quarter, a 5.4 percent difference.
- Album sales, mostly in the form of CDs but with other media mixed in, totaled $344.8 million at the end of the second quarter this year. In the same quarter last year, that number stood at $354.9 million. That's about a 3 percent difference.
- Singles, including both the CD and tape variety, hit $18.6 million at the end of the second quarter this year. Last year's comparable quarter saw $29.3 million in sales. That's a 36 percent spread.
Here's the question, then: Was there a relationship between a healthy Napster and healthier record sales? And is there a correlation between flagging record sales and a dead or dying Napster?
A pair of industry analysts interviewed by Newsbytes this afternoon are skeptical of such conclusions.
"I'm happy to entertain it as a hypothesis," said Eric Scheirer, a Forrester research entertainment analyst. "But the mere existence of those two numbers being next to each other - the (sales) number going down when Napster shut down - doesn't say anything about the causality there."
Scheirer points out that there are many factors that would need to be plugged in before a conclusion could be drawn that Napster either influenced sales by generating interest in music, as many observers last year said was the case, or that it has hurt sales through its demise this year.
While it's all plausible, Scheirer said it is just as possible that artistic trends and audience tastes are changing and affecting the industry's bottom line. Most teen pop sensations of last year aren't so hot this year. Mariah Carey, for the first time since she gained diva status, has seen a single bomb. Mainstays like REM and U2 aren't selling as well they used to. It may be that the industry is just waiting for the next Springsteen or Nirvana or Britney Spears to come along.
"There's at least an argument to be made that we're in the midst of a cyclical downturn of that sort right now," Scheirer said.
Matt Bailey, an analyst for digital entertainment research firm Webnoize, points to another possible factor - the economy, which has noticeably slumped in the year since record sales showed a second-quarter spike. He said that his firm noticed record sales began their slide not this year, but late last summer.
"Obviously, the performance of the economy itself does influence consumers' spending," he said. "As the economy has started to cool off, we have observed among them a parallel shift toward spending less money on music."
Bailey pointed to another reason to perhaps doubt the claims that Napster has either helped or hurt CD sales. While it has for now ceased to exist as the free service it was when it gained fame and notoriety, other free peer-to-peer networks have moved in to fill the void. Bailey points to several like Music City and Audio Galaxy as having moved out in front of the peer-to-peer pack among those vying to take Napster's place.
The point is that Napster may be past its prime, but its children are just getting started.
"You can still log on and get pretty much anything you want for free," Bailey said. The breadth of choice may not be quite what it was at the height of Napster boom, he said, when just about any song ever recorded could be pulled off Napster's network. But the upstarts are not that far away from offering Napster's abundance, and they close the gap a little more each day, he said.
"As these other networks become dominant you'll see some of those consumers who may have been easily discouraged heading back to these very popular networks," he said.
But in the end, Bailey says that as far Napster's having influenced or hurt CD sales, "There really isn't evidence either way."
That doesn't mean the Webnoize analyst thinks Napster's influence has been a wash. Far from it. Bailey thinks Napster's ultimate legacy will not be measured in how it did or did not affect sales of compact discs. Ultimately, he suggests, Napster's influence will be measured in the market it really pioneered - the market for PC-based music transactions on the Internet.
Napster, while still dealing massive copyright-infringement lawsuits, is working to become a subscription service. The major labels also are working on their own version of fee-based music download services, in the form of the forthcoming Pressplay and MusicNet.
Webnoize estimates that by the end of 2002, 11.7 million U.S. consumers will be digital music service subscribers. If true, annual revenues of $2.7 billion would be generated, equaling about 20 percent of the revenue the current CD market.
In other words, Napster may have blazed a path in computerized music exchanges that will ultimately make the music business bigger than it has ever been, Bailey said.
"I certainly think the performance of Napster has increased the potential size of the music industry," Bailey said. "The success of PC-based music in general has led to a potential for a larger music industry." www.technews.com (http://www.technews.com)
------------------
Manu Narayan