Shifting Consumers from P2P to Paid
StumbleUponPricing is currently not the barrier to consumers starting to download legally or abandoning P2Ps. Consumers not feeling they are valued or getting value for money is. Can litigation help redress the balance, asks Eamonn Forde...
Pricing is currently not necessarily a barrier to consumers
starting to download using legal services or abandoning P2Ps for
paid services. Consumers not feeling they are valued or getting
value for money is. Can the current policy of litigation really
help redress the balance?
By Eamonn Forde
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Digital music downloading made up fewer than 2% of global sales last year. It lags behind DVD (8%), yet the industry spotlight is shining on digital. Litigation against P2Ps is trying to clear the way for legal services to grow. Is it having the desired effect of both stopping file-sharers and getting them to switch to the legal services? Not so, according to new research; or not yet, anyway.
Market research company TNS estimates that P2Ps cost the UK music industry £654M (€958M) in 2003 and 2004 in lost sales because of file-sharing. The company compared actual spend to market trends to arrive at the figure. While file-sharing will affect sales to a degree (as users choose to download for free), there are wider issues behind any market decline. Isolating a sales dip to a single cause misses out on factors such as competition from other entertainment sectors, the quality of the content on the market, the state of the economy and so forth.
As Ian Waymark of TNS noted in last month’s issue, all age groups are buying music digitally, with the majority of buyers (60%+) being over the age of 35. The market potential is enormous and the industry is pushing for ways to convert file-sharers over to legal services. The recent TNS research for the BPI found that the active downloading community is relatively small (18% of the population) but the majority are using P2Ps rather that paying.
Litigation scare tactic’s limited impact
Of the 82% who do not yet download, 84.3% stated that they would not consider using P2Ps - which has been read as a victory for the litigation and education activities of the BPI and IFPI. But if 82% of people in the UK have not downloaded before 2005, however, how many of them would be prepared to start? Not everyone will want to consume their music online and this reluctance to use P2Ps must be read within this.
Of more interest from the TNS research was the impact litigation is having on existing downloaders. 15% said they would pay for music, 34% were undecided while 51% said they would continue to use P2Ps. For 85% of the download population to not definitely and assuredly make the jump from P2P to paid is the big issue for the industry. Obviously many consumers will simply not be interested in ever downloading, so changing the opinion of the active 18% is going to be absolutely key.
P2P mindset holding out
If a high-profile litigation programme (running alongside spoofing etc.) succeeds in driving only 15% of downloaders away from P2Ps, its effectiveness as an anti-piracy strategy needs to be looked at. Of course, this is a long process for the industry and no-one expects a total solution overnight. For over a third to still be ‘undecided’ post-litigation shows getting the message out there is not enough. It needs to change both opinions and behaviour in order to be a success.
Converting P2P users into paid downloaders is not just about education and litigation; it hinges entirely (certainly for consumer retention) on attractive and user-friendly download services being actively marketed. At the moment the consumer is being offered track ownership or subscription and this choice on paper looks good; but it may be behind consumer hesitancy to consume digitally as they are unsure of what the relative benefits of each are.
Access & freedom the way forward?
In the US, Ipsos-Insight has issued figures that suggest à la carte downloading is the consumer’s favoured route at the moment, arguably as it is closest to buying on CD (i.e. permanence of ownership). In the US there is more willingness for people to use paid service (24% compared to the UK’s 18%). Only 5% were attracted to a subscription-based service while 17% chose à la carte. Of those consumers who have already paid for music digitally, 28% preferred à la carte, 4% chose subscription while 8% selected the portable subscription approach.
Services such as Napster To Go will be key to helping the subscription-based services claw back the market share dominated by the à la carte services. They are certainly a more attractive proposition for the consumer, allowing greater freedom of use.
Consumers want speed of access, breadth of catalogue, easy of use and portability. The services are moving to offer this, yet still have the massive challenge of free/P2P to compete against as well as consumer apathy towards – or confusion about – digital music.
If legal services are to convert non-downloaders and P2P users alike, the emphasis will have to be put on CRM, consumer incentives, a loosening of usage restrictions, discounts for bulk purchasing and a broadening of product ranges. Pricing is currently not necessarily a barrier to entry. Consumers not feeling they are valued or getting value for money is.
UK consumers’ downloading activities
Actively downloading – 18%
Not actively downloading – 72%
UK downloaders’ attitude towards P2P and paid downloading
Plan to start paying for downloads/subscriptions – 15%
Undecided about downloads/subscriptions – 34%
Will continue to file-share – 51%
US downloaders’ attitudes towards P2P and paid downloading
Preference for paid downloading/subscriptions – 38%
Preference for file-sharing – 62%
Source: UK figures (TNS/BPI April, 2005); US figures (Ipsos-Insight, April 2005).
Eamonn Forde is the Editor of Five Eight magazine, published monthly by FRUKT Music.
By Eamonn Forde
[Register and post your own comments on this article below...]
Digital music downloading made up fewer than 2% of global sales last year. It lags behind DVD (8%), yet the industry spotlight is shining on digital. Litigation against P2Ps is trying to clear the way for legal services to grow. Is it having the desired effect of both stopping file-sharers and getting them to switch to the legal services? Not so, according to new research; or not yet, anyway.
Market research company TNS estimates that P2Ps cost the UK music industry £654M (€958M) in 2003 and 2004 in lost sales because of file-sharing. The company compared actual spend to market trends to arrive at the figure. While file-sharing will affect sales to a degree (as users choose to download for free), there are wider issues behind any market decline. Isolating a sales dip to a single cause misses out on factors such as competition from other entertainment sectors, the quality of the content on the market, the state of the economy and so forth.
As Ian Waymark of TNS noted in last month’s issue, all age groups are buying music digitally, with the majority of buyers (60%+) being over the age of 35. The market potential is enormous and the industry is pushing for ways to convert file-sharers over to legal services. The recent TNS research for the BPI found that the active downloading community is relatively small (18% of the population) but the majority are using P2Ps rather that paying.
Litigation scare tactic’s limited impact
Of the 82% who do not yet download, 84.3% stated that they would not consider using P2Ps - which has been read as a victory for the litigation and education activities of the BPI and IFPI. But if 82% of people in the UK have not downloaded before 2005, however, how many of them would be prepared to start? Not everyone will want to consume their music online and this reluctance to use P2Ps must be read within this.
Of more interest from the TNS research was the impact litigation is having on existing downloaders. 15% said they would pay for music, 34% were undecided while 51% said they would continue to use P2Ps. For 85% of the download population to not definitely and assuredly make the jump from P2P to paid is the big issue for the industry. Obviously many consumers will simply not be interested in ever downloading, so changing the opinion of the active 18% is going to be absolutely key.
P2P mindset holding out
If a high-profile litigation programme (running alongside spoofing etc.) succeeds in driving only 15% of downloaders away from P2Ps, its effectiveness as an anti-piracy strategy needs to be looked at. Of course, this is a long process for the industry and no-one expects a total solution overnight. For over a third to still be ‘undecided’ post-litigation shows getting the message out there is not enough. It needs to change both opinions and behaviour in order to be a success.
Converting P2P users into paid downloaders is not just about education and litigation; it hinges entirely (certainly for consumer retention) on attractive and user-friendly download services being actively marketed. At the moment the consumer is being offered track ownership or subscription and this choice on paper looks good; but it may be behind consumer hesitancy to consume digitally as they are unsure of what the relative benefits of each are.
Access & freedom the way forward?
In the US, Ipsos-Insight has issued figures that suggest à la carte downloading is the consumer’s favoured route at the moment, arguably as it is closest to buying on CD (i.e. permanence of ownership). In the US there is more willingness for people to use paid service (24% compared to the UK’s 18%). Only 5% were attracted to a subscription-based service while 17% chose à la carte. Of those consumers who have already paid for music digitally, 28% preferred à la carte, 4% chose subscription while 8% selected the portable subscription approach.
Services such as Napster To Go will be key to helping the subscription-based services claw back the market share dominated by the à la carte services. They are certainly a more attractive proposition for the consumer, allowing greater freedom of use.
Consumers want speed of access, breadth of catalogue, easy of use and portability. The services are moving to offer this, yet still have the massive challenge of free/P2P to compete against as well as consumer apathy towards – or confusion about – digital music.
If legal services are to convert non-downloaders and P2P users alike, the emphasis will have to be put on CRM, consumer incentives, a loosening of usage restrictions, discounts for bulk purchasing and a broadening of product ranges. Pricing is currently not necessarily a barrier to entry. Consumers not feeling they are valued or getting value for money is.
UK consumers’ downloading activities
Actively downloading – 18%
Not actively downloading – 72%
UK downloaders’ attitude towards P2P and paid downloading
Plan to start paying for downloads/subscriptions – 15%
Undecided about downloads/subscriptions – 34%
Will continue to file-share – 51%
US downloaders’ attitudes towards P2P and paid downloading
Preference for paid downloading/subscriptions – 38%
Preference for file-sharing – 62%
Source: UK figures (TNS/BPI April, 2005); US figures (Ipsos-Insight, April 2005).
Eamonn Forde is the Editor of Five Eight magazine, published monthly by FRUKT Music.
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