P2P music file-sharing: Changing the face of the U.S. record industry

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P2P music file-sharing:

Changing the face of the U.S. record industry

Matthew Wentlent

Karin Hong

Mk 4200 Tues. 4:30

04-30-04

Executive Summary 

        With the introduction of Napster, the first P2P network, the music industry has been experiencing some major changes.  Through the past five years, P2P file sharing has been gaining popularity as a medium to download music.  Since the onset of P2P file sharing, record companies have experienced a steady decrease in album sales.  For that reason, we have decided to concentrate our marketing research effort on finding out the main factors that have influenced this change from traditional retailing to individual file sharing.  Because of the purpose of the study, we outlined the following objectives to be completed: (1) define the attractive characteristics of file sharing over purchasing music from traditional means; (2) discern how widespread file sharing is and pin-point the chief users; and (3) assess possible strategies that music companies can use to utilize the Internet, increasing profits through innovative means.  

        It was decided that evaluation of features of P2P downloading was a major aspect to study.  Our questions focused on the valuable attributes of P2P, such as cost, variety, and availability.  We also tried to pin-point the genres of music most frequently downloaded.  Furthermore, we offered possible strategies as a means to gauge the possibility for record companies to use the Internet to make up for lost revenue.   We also expanded our research to include the recent legal actions of the music industry against the users of P2P.  

        Once our purpose was clearly defined, we prepared an 18-question survey that was distributed randomly to 75 individuals age 18-27.  We then collected the data and inputted it into SPSS for analysis.  With SPSS software, we ran a variety of tests to reach our defined goals, including frequencies, descriptives, Analysis of variance (ANOVA), independent t-tests, one-sample t-tests, cross-tab/chi-square and correlations.

        With the data, we ran tests to group our respondents into demographic groups, and then began to develop our line of tests to incorporate our goal set.  Preliminary tests uncovered that a majority of respondents use P2P (63%), and the largest demographic was Caucasian males.  Further tests uncovered that the absence of cost is a main motive for downloading using P2P programs.  Other major factors include variety of music and the ability to burn “mix” c.d.s.  

        Further analysis uncovered a marked impact of the music industry’s legal actions.  A large percentage of individuals who use P2P software download less or more cautiously as a result.  Furthermore, offering unlimited downloads for a monthly fee seemed to be a popular action that record companies could take, with the average cost per month of $13.00.  Considering many people now use high speed connections such as DSL or Cable, it might be good to partner with select ISPs.  We also found that much of the information provided was rather ambiguous, which speaks volumes on the issue.  Due to the global nature, it is not limited to smaller target markets.  Most likely, continued legal action and restructuring of current policy can assist in weathering the storm.

        

Introduction

        Historically, when individuals wanted new music, they would most likely purchase it from a traditional retail outlet.  Record companies depended heavily on these stores to generate sales from artists retained under their label.  In recent years, a drastic change from this traditional method has occurred.  The development of peer-to-peer (P2P) technologies has enabled individuals to share music across the Internet.  Coupled with the use of C.D. “burning” capabilities and MP3 player technology, the music downloaded from the Internet can be totally portable.  

        With this emergence of new technologies, it is seemingly possible for one copy of music to be acquired and passed to millions of people around the globe.  Indeed, instead purchasing music from a traditional retail store, a growing percentage of people are logging on to programs like KaZaA, WinMx, and various others to download their music for free. The idea of spending nothing rather than the 12 to 15 dollars it costs to purchase a record album has and continues to gain momentum in the U.S. and throughout the world.  

Problem researched

        Though the concept of free music across the Internet is very appealing to a large part of the population, there are some inherent problems with the process.  Indeed, record labels have been experiencing a steady decline in album sales.  As the labels suffer, the artists dependent on royalties from record sales suffer as well.  The lack of revenue generated by record companies is an area of growing concern.  Due to the concurrent rise of use and availability of P2P file sharing programs, it is probable that this new development is, in large part, responsible for the recent slip in record sales.

Purpose of Study

        P2P file sharing has proven to be a main reason for the decline in music albums sold.  For that reason, this study was designed to find out the main factors that have influenced this change from traditional retailing to individual file sharing.  To this end, we decided to gather information addressing three aspects of the issue:  (1) define the attractive characteristics of file sharing over purchasing music from traditional means; (2) discern how widespread file sharing is and pin-point the chief users; and (3) assess possible strategies that music companies can use to utilize the Internet, increasing profits through innovative means.  

Research Methods

        Given the fact that college age students (aged roughly 18-27) represent a large segment of P2P file sharers, we have focused efforts to that end.  To collect our data, we administered an 18-question survey to 75 randomly selected individuals.  The collected data supplied us with information on the subject, and allowed us to classify respondents into different sub-sets.  To assess the applicability of the information gathered, SPSS software was utilized, to determine the pertinence of our findings on the issue.  A variety of statistical tests were used to analyze the data, including frequencies, descriptives, Analysis of variance (ANOVA), independent t-tests, one-sample t-tests, cross-tab/chi-square and correlations.

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Research objectives

Our objectives for the project are as follows:

Establish the attractiveness of file sharing over purchasing music through conventional means using the following criteria:

  • Cost
  • Convenience
  • Music selection
  • Quality of download

Undertake a descriptive research design to define the chief users of file sharing through the following attributes:

  • Frequency of use
  • Genres of music typically downloaded
  • Demographics of users
  • Access capabilities

Assess whether the following can be used by record labels to profit from the use of file sharing by college age students:

  • Official record label websites ...

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