wax&wires

Video Games Will Save Us?

The NPD Group just released an article reviewing music sales in the third quarter of 2008 with some surprising finds:

1) Legal downloads are growing faster than illegal downloads. The amount of music shared via legal methods grew by 29%, where as growth in illegal music downloads via P2P networks rose by 23%. When you think of how many people are using P2P services to pirate music, that 23% is scary; but if this trend continues, we’ll see the gap between legal and illegal music sharing close. Russ Crupnick, entertainment industry analyst for NPD, remarked:

“The industry has managed to constrain the number of people who are file sharing, but the expanded use of services such as Bit Torrent enable entrenched P2P users to download a growing number of files.”

That would actually be good news. For piracy to decline we need less people pirating, not less files to pirate. We have to combat the ethical apathy toward piracy, not the system by which people pirate. There will always be new systems, so you have to shift the paradigm that nothing is wrong with creating the P2P network in the first place. The lack of growth in the number of file sharers supports the notion that people are less okay with file sharing, and the increase in files shared is just that; the same file sharers that have always been sharing, simply sharing more files.

What makes me a bit more nervous is a potential indicator with regards to the culture of music piracy. The study found that among 13 to 17-year-olds, P2P file sharing was up 46%, which makes me wonder if Crupnick’s quote above is just a big spin job. That 46% is a staggering number and is evidence that the younger cyber-savvy generation, the one that the industry used to target as the demographic with a “disposable income”, has no qualms with pirating digital media. Not that Hannah Montana and The Jonas Brothers need to sap any more of their money, but it could project itself to bigger problems down the line. In 10 to 20 years, when that generation grows into the one running major corporations, raising families, paying the bills, will they mature out of piracy or will old habits die hard? If the numbers continue as they are, the report is foreshadowing a time when those that are willing to pay for music have died off, or at least become an irrelevant minority to society as a whole. These 13 to 17-year-olds may have kids and pass on their moral compass in such a way that future generations will see P2P networks as the proper means of digital media acquisition.

2) Fifteen percent of Internet users purchased music from online music stores like iTunes and AmazonMP3, which is up 2% from 2007 (about 2.8 million more music-download customers). That’s an encouraging increase, but we’ll see how that changes as the 13 to 17-year-old demographic above presents itself as the socially contributing majority. Also, bear in mind that in 2008 we are still at only 73.6% of population penetration with regards to internet users in North America. That means that the increase of 2% in legal music purchasers might be a relatively insignificant increase when compared to the growth in the overall number of internet users. Are the people in that 2% increase new internet users that will set a new trend for music acquisition? Are they the same new internet users that simply haven’t discovered P2P yet? Or is that 2% increase made up by the long-time net users who may not be the generation that will set the trend for decades to come?

3) CD sales declined by 19% when compared to Q307. We’ve known for some time now that CDs, and hard media in general, were of increasing obsolescence. This stat confirms that presumption and shows a day in the near future where digital downloaded media will be the premier way for music acquisition. This has a lot of implications for independent artists, as one of the main incentives for seeking a major label deal was music distribution. Without hard media to distribute on trucks and into stores, the playing field is leveled a bit and the gap between independent artists and world acts is narrowed.

CD sales dropped among teens by 34%, among adults age 26-35 by 36%, and among adults age 36+ by only 10%. Across all markets, CD sales were down. It’s very clear that the next middle-aged generation will not be turning to CDs as a primary means of getting their music, and CDs will decline from there with the rise of even younger generations less familiar with the idea of hard media.

4) Internet users’ demand for music fell 2% compared to Q307. Again, I’m not sure what all is taken into account with these stats. If this stat simply looks at music purchases online, if it includes those made in brick and mortar stores, or if they include music streaming services like Pandora. If they included music streaming service, which to me is definitely a part of music demand at large, I would be concerned. If not, I wouldn’t be as alarmed, as many of my friends have even turned to Pandora as their sole music provider. While that does mean a loss of potential sales by simply streaming music you like rather than buying albums to find new music, it correlates to an increase in music discovery and interest, which is good for the industry through a myriad of other avenues. So all that said, I’m not sure how they measure a decrease in music demand and we can hope it’s not a genuine decrease. If it is, our hope would be that the younger demographics measured would be the ones with heightened musical interest, since they will be the ones dictating the course of the industry for years to come.

And now, the title point:

5) The music and dance genre was the best-selling genre in video games, with 16% of total software sales for the year. 22% of music buyers and 35% of consumers under the age of 35 said that they had played a music-based game like Rock Band or Guitar Hero within the past three months. Several out of that same group reported that they liked the game and discovered new music through the video game that they later purchased. Hopefully by “purchased” they don’t mean downloaded from LimeWire.

This marks a trend that the music industry needs to adopt on a much larger scale. How to promote and distribute music in brand new and creative ways. There is no way that 10 years ago you could have told me that video games would be a primary means of music discovery, promotion, and distribution. Now, there’s a Guitar Hero sountrack in the top albums rack at my local Best Buy.

What is another, even more creative way of promoting and distributing your music? What steps can you take to make that happen?

Those are my thoughts, highlights and comments on the NPD report, which you can read for yourself here.

This entry was posted on Tuesday, December 23rd, 2008 at 3:50 pm. It is filed under wax and tagged with guitar hero, rockband, video games. You can follow any responses to this entry through the RSS 2.0 feed.