Norwegian Wood

Gammel Skole Norsk Sjørøverene (Old School Norwegian Pirates)

Gammel Skole Norsk Sjørøverene (Old School Norwegian Pirates)

It’s finally paid off. For those of you who thought going to school in Norway and subsequently getting a second major in Norwegian and Norwegian Literature was perhaps a waste of a good education—ha ha ha, I laugh in your face. Not only did I get to spend over a year among the world’s most beautiful women, playing hockey all over Scandinavia and Russia, but I also learned a second language that only a handful of people outside of Norway speak. Fast forward a few (ahem!) years, and suddenly a study on music purchasing habits by those who download music illegally surfaces, untranslated, from all places, Norway. This, coupled with the news of the sentencing of The Pirate Bay founders out of Sweden (I can also read Swedish—they are quite similar), and the previously noted Swedish P2P study and I suddenly hit the education jackpot. We’ve got multiple studies coming out in languages that I understand, on topics I’m involved with and the timing seems rather good too. Beat that Econ majors!

Technically, you can get a roughly translated copy of the story, titled: Pirates Are The Best Customers through Google and Ars Technica. I’ve read this study, and I’ve also read numerous stories in the Norwegian press summarizing the results. The point that the study makes, and you can read it for yourself—don’t just take my word for it—is that people who illegally download music buy ten times more music than your average law-abiding music consumer. Although it never clearly states it as a conclusion, we are led to believe that illegal downloading is not what is causing the demise of the record industry. The study is a poll of over 1000 Norwegians ages 15-20. Add that to the Swedish study from a couple of days before (see previous post), and you’d actually think that music sales have seen steady increases over the past few years. So, if the billions of tracks that are downloaded on almost a daily basis via various illegal sites are done so by big-buck spending music fans, why aren’t these super-stealers-slash-super-consumers also fueling a music industry boom? Is there something that the record industry executives are not telling us? Are they really flying commercially (instead of the Gulfstream) as a ruse to keep us in the dark about their record profits? Holy crap, are we uncovering the next Madoff scam? Is this Enronesque? Where’s my Pulitzer?

Nope. The answer is really quite simple. Illegal downloading really does hurt overall music sales quite significantly–especially when overall consumption is down. Digital music is about buying one song at a time. Obviously, this is where the biggest dent in overall music sales has occurred. Overall music sales are at roughly 25% of what they were 10 years ago. Even if it’s totally accurate that music pirates are buying ten times more music than non-pirates, the overall purchase number is so much lower due to such drastically reduced consumption, that the stolen music, is actually having a bigger impact. Consider it this way. You’re a baker and make some really kick ass donuts. You sell them only by the dozen. If you have a million donuts and everyone is paying for them, you’re bakery will be a success. However, you now let people buy one donut at a time if they want. You now are making only 250,000 donuts, but your warehouse of donuts keeps being broken into by some really big donut fans who also buy ten times more donuts than people who don’t steal donuts. Guess what Mr. Baker, you’re hosed. Now, think about it, who are you going to blame? The customers who are buying less donuts or the customers who are buying lots of donuts, but then stealing even more of your yummy treats? Both are at fault, but I would argue that since the theft is up while consumption is down dramatically, it’s the thieves that have the greater impact. Get your Freakanomics book out for that one Econ majors! All in all, if both continue, that bakery’s going to have a “for lease” sign plastered in the window mighty quick.

Are the Norwegians lying? Nope. I think it’s probably true that people who steal music are likely to buy music. Especially 15-20 year olds. These kids probably get iTunes gift cards at every holiday, birthday or graduation. They are in the formative years of their music acquisition. They probably do spend money from their summer jobs on music. The truth is, however, they steal even more. Consider these kids music addicts acting like a drug addict. When you got money to pay for it, you pony up. Even if you have money to pay for it, sometimes you don’t have to. When you don’t have money for it, you still gotta get your fix and, “what’s that? Is that a bile pile of my drug of choice over there? Don’t mind if I do…”

This was actually a much more interesting study than the Swedish one. Certainly it was much more believable, but sadly, less conclusive. The idea that illegal music downloading is not at the heart of the demise of the music industry is preposterous. The stats, once again do not lie. Music sales are down dramatically. Illegal file sharing is up dramatically. Let’s not patronize piracy and the thieves by saying that they are also good for business. That’s just plain stupid. They’ve ripped the heart out of the business. Any out-of- business donut shop can tell you that.

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10 Responses to “Norwegian Wood”

  1. Well, that certainly gives us something to Munch on.

    So, this should be a pretty big week, no? Here’s hoping that we’re on still on schedule and that the naysayers will finally see what AK and Co. really have in mind. Maybe they’ll start to get a glimmer of the possibilities and magnitude of what is being accomplished in the face of doubt, cynicism and nearsightedness. The really bad actors to date, upon realization, will probably put their hands to their heads and scream.

  2. Lets hope! I am really looking forward to some portability!

  3. StupidCEO!! Says:

    Tired of the bs qtrax posts here! Launch the damn thing already with portability and international reach!! This has been going on since the failed Midem launch 14 months ago!! This is quickly becoming a joke, and Time Warner and EMI won’t be on our side forever!! We have a chance to make music history, and we are sitting below 3 cents a share because our CEO AK and some schmuck posting on qtrax.wordpress are leading this charge! My 6 year old could create more buzz than we have seen!!

    • Tired of them? Don’t read them. Please, take the stock price issues over to the investor boards. You seem angry my friend, but somewhat supportive. Interesting mix.

      –some Schmuck

  4. The question is, are we going to make the April launch set by the company? As a consumer and investor I really hope so.

  5. qtraxer, any thoughts on this april deadline? Considering Qtrax have missed a few deadlines before, do you think it is a good idea to advertise that the service will be available in april, if they cant make the deadline(as per splash page on site)? I personally don’t think it’s a big deal, as we’ve grown used to delays. But, we all know how the media loves to jump on every negative aspect that they can about Qtrax. It just doesn’t seem like the best idea to give them anything to harp about, at least not anymore. Thoughts?

    • My thoughts are this (and sorry for the delay on getting back to you). If there is a delay, it will likely be a short one. The issues will not be technical.

      We hold ourselves accountable for any missed deadlines, but this is also a rough economy for new business concepts to meet all of their self-imposed and published deadlines. Not an excuse, simply the reality. However, big things are cooking for a change and we hope it speeds things up rather than slow things down.

      • thanks for the reply. Good to hear something big is cooking, and that the delay is not technical. That means on the technical side we are ready to roll.

  6. One more day left. I really hope that this isn’t delayed again. A lot of people will lose what little faith they have left in qtrax…

  7. Coming April-ish, 2009?

    It’s gonna be a photo-finish, ladies and gentlemen…

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