In June 2009 with the passing of the HADOPI law, France became the first country to use legislation to tackle the issue of piracy in music downloads. The UK Digital Economy Bill, which passed somewhat controversially through Parliament earlier this year and includes provisions for banning illegal file-sharers and blocking websites that infringe copyright laws, is similarly designed to tackle internet piracy through the use of legislation. But how successful is legislation of this nature in reducing music piracy, and more importantly, to what extent does it encourage legal consumption? There seems little evidence so far that they are doing either.

The IFPI (International Federation of the Phonographic Industry) has revealed its analysis of global music consumption in 2010, highlighting an overall drop in physical CD sales of -14.2%, with an increase of only 5.3% in (legal) digital sales during the same period leaving a significant shortfall in revenue for the industry.

These figures don’t indicate that consumer appetite for music is declining, or that the transition from physical to digital consumption isn’t happening. Instead, it seems that consumers are still listening, but they’re increasingly less willing to pay.In the UK for example, the IFPI state that 76% of all music obtained online in 2010 was unlicensed.

While music piracy will not be the only factor contributing to this decline in revenue – compelling rival entertainment options (read: video games) and the economic downturn will also be playing a part and we should remember very piece of music acquired illegally does not necessarily equate to a lost sale for the music industry- it’s undeniable that illegal downloading and file-sharing will be significant contributors to the revenue drop.

Almost half of those downloading music in France are still doing so through illegal sites

Let’s take a closer look at the music landscape in each market. Starting in France, we can see that around 66% of consumers are still buying music on physical formats such as CDs, with only 15% having made a complete transition to digital consumption. However, digital music is growing quickly, encouraged by the growing penetration of MP3 players, so that we now have around 60% of consumers who own at least a partial digital collection (with content mostly side-loaded from physical supports).

Most importantly, while only around a third of consumers in France are currently downloading digital music – with a growing proportion (11%) intending to move to digital in the near future – of those who do, 54% are claiming to do so illegally, either instead of, or as well as, using legal downloading music sites.

It is fair to say that the UK is a little ahead of France in terms of digital music adoption, with the BPI (the industry body for the British Recorded Music Industry) reporting that 41% of consumers have used a legal download service. On the illegal side, the BPI state that 23% have obtained unauthorized music and they also report net increases in the use of both peer-to-peer services and cyberlocker sites in the last 6 months. For both markets, it is clearly important that action is taken to counteract this flow of illegal file-sharing.

HADOPI Law in France has managedto curb some enthusiasm for illegal downloading

The HADOPI law in France enjoyed widespread media exposure when it was adopted in June 2009, but it is apparent that French consumers are still not entirely familiar with its content and implications. So, while 74% say they are at least aware of the law, only 39% feel they really understand what the legislation includes.

This is not to say that the law has been completely without impact. When asked what stops them downloading music illegally, 45% stated that fear of legal sanction is the major inhibitor alongside 44% who fear picking up a virus. Indeed, GfK has been tracking the trends of digital music consumption in France since 2008, and in this time we have noticed a decline in the level of reported illegal behaviour. With the stated fear of sanctions noted above, this would suggest the HADOPI law has had some influence on behaviour – most likely from an educational perspective (i.e. through helping to put an end to the belief that music, and, more generally, digital content, are readily available for free.)

Of course, any positive impact remains dampened by the inescapable reality that the legal side of the industry is not benefitting fully from a decline in the illegal side (as illustrated by the figures above). The shortfall in revenue suggests that the HADOPI law remains an incomplete solution to the impact of music piracy in France, and at present the industry has failed to give consumers a legal, digital alternative that is compelling or acceptable to them.

Compelling legal services will provide a better incentive to stop illegal acquisition.

When we asked consumers in France what the barriers to downloading music legally are, it’s interesting to note that it is not necessarily the price of legal music which is the main obstacle. While price is key for around a third of consumers, the remainder cite a range of reasons from a general lack of interest to problems with existing legal services (low quality downloads, small catalogue available etc.) While these barriers remain in place, consumers will continue trading-off either by not consuming digitally at all, or going back to purchasing physical media, such as CDs.

As indicated by the first four reasons stated above, it could therefore be reasonably argued that the main impetus to encourage legal downloading amongst non-digital consumers in France should be around educating people on the benefits and security of legal downloading services. Indeed, as the digital frontier becomes increasingly blurred and French consumers struggle to perceive which services are legal or not, this point will only grow in pertinence. (As an example, just look at the reactions to illegal streaming of videos in France: only 28% of French feel that they are acting illegally in doing so.)

As more and more content (including books, magazines and video games) moves online and legal music streaming gains momentum via sites such as Deezer, the key to encouraging legal music consumption in France will not be to impose more laws, but to educate and inspire consumers. Not only is the law never fully aligned with behaviors and attitudes, but the drivers of adoption for digital content are not yet powerful enough in France to take advantage.

So, what can we learn from France with regard to other countries – in particular to assess the likely impact of the Digital Economy Bill in the UK ?

One key difference between the UK and France present is how embedded legal services are in the consumer mindset. Music streaming service Spotify recently introduced listening restrictions to it’s free, ad-supported model for the first time, indicating its own problems in driving revenue from customers growing increasingly accustomed to getting music for free. However, there remains a wealth of secure, easy-to-use services in the legal portion of the market that will be hoping for increased usage as the Digital Economy Bill gains traction.

Ultimately, the Digital Economy Bill will certainly have an impact on illegal downloading, as we’ve seen in France, but it’s unlikely to solve the problem of music piracy altogether. Instead, the key to its success (for the music industry at least) will be measured in upturn in revenue rather than downturn in piracy, and that’s as dependant on ensuring enticing alternative services are available at price points acceptable to consumers as much as the legislation itself.

 

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Tags: BPI, Consumer, Digital Economy Bill, Digital Music, Downloads, IFPI, mp3, Piracy, Public debate, Record Labels