File sharing: consumers, creators, welfare and business models

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1 File sharing: consumers, creators, welfare and business models Joost Poort Conference Future of copyright in the digital era European Parliament, 1 June 2011

2 Contents How common is file sharing, and what are people s key motives and considerations in file sharing? What is the position of creators and performing artists regarding digital distribution and file sharing? What are the consequences for the industry and the implications for business models? 2

3 File sharing the people File sharing is part of society: 40% of Dutch internet population download music 13% download films 9% download games 44% or 4,7 million Dutch citizens aged 15 and older. Other countries (UK, US, FA) show similar numbers, regardless the legal status of filesharing 3

4 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% apr-00 feb-01 dec-01 sep-02 mei-02 feb-04 feb-04 jan-06 dec-06 mei-08 apr-09 mei-10 Ever download music files onto your computer so you can play them at any time you want Ever download VIDEO files onto your computer so you can play them at any time that you want Ever share files from your own computer such as music, video, or picture files, or computer games with others online Ever download or share files using peer-to-peer file-sharing, such as BitTorrent or LimeWire Ever listen to or download music Ever download other kinds of files such as games, video files, or picture files 4

5 File sharing the people (continued) Consumers are often not aware: of the the legal status of their activities of the techniques they use of the number CDs, DVDs or Games they downloaded Filesharing and buying go hand in hand: File sharers buy as much music and even more DVDs and games They go to concerts more often and buy more music merchandise They regulary buy downloaded material afterwards They think the official offer of equal or better quality & ease of use Median Reasonable price for cd 9, dvd 9, game 19 5

6 File sharing the creators Popular belief: large companies in the industry battle against filesharing, while creators don t mind Survey among 4500 creators and performing artists on their opinions and experiences in a digital environment 6

7 File sharing the creators (continued) Highlights of survey: Income position of creators and performing artist rather poor Digital distribution is seen both as a threat and as an opportunity Majority is fearful of unauthorized file sharing and think action should be taken Majority opposed to remixing, don t share their own work and endorse Digital Rights Management (DRM) Creators expect large structural changes in the industry within 10 years They expect more opportunities to make money in the future 7

8 File sharing the creators (continued) Creators perceive their bargaining position towards clients and publishers to be weak and support proposed legislation to strengthen their position Creators are generally positive about collecting societies, in terms of transparency, participation, service However: large differences underneath the averages: Younger creators much more open to digital developments and file sharing Creators in music industry more progressive High income groups more conservative 8

9 The industry: under pressure Turnover in record industry decreasing Film & dvd-sales soaring (except rentals) Games are booming (especially console games) Combined market relatively stable Turnover in live industry and merchandise largely unknown Sweden: combined revenues from recorded music, live concerts and royalties relatively stable 9

10 Party like it s 1999? 10

11 11

12 Welfare effects Many interactions between downloading and purchasing behaviour, with differences to be expected between music, films, and games: sampling vs. substitution Net effect ambiguous: empirical findings differ Estimate: one track less sold for every downloads Determining effect for individual albums and users virtually impossible Positive net welfare effect in short term: welfare gain of approx. 200 million per year for music downloads in the Netherlands as consumers enjoy music they would not have bought 12

13 Conclusions and recommendations (1) File sharing is here to stay : Widespread and widely accepted in society Much more than a way to avoid paying for content There is still willingness to pay for content Accessibility of current repertoire enhanced dramatically: Broadband offers access to the entire long tail People are downloading much (>3x) more than they ever bought 13

14 Conclusions and recommendations (2) New models for talent development and exploitation emerging: New payment methods: itunes, streaming, flat-fee, New value chains: 360-degree deals, sponsorship deals, tv-commercial appearances, live is kicking! New platforms: YouTube, Facebook Industry recommendations File sharers are your largest customer: don t sue them, seduce them Enforcement (only) against commercial copyright infringement Risk of curcumvention or going underground 14

15 Thank you for your attention tel Background reports: Ups and downs: Economic and cultural effects of file sharing on music, film and games (TNO/SEO/IVIR, 2009; in English) Wat er speelt : the positions of creators and performing artists in a digital era (SEO/Rutten/eLaw, 2011; English summary) Full reports can be downloaded legally and free of charge at:

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