It's been a pretty vindicating couple of days for me as a couple themes I've covered extensively got confirmation in the news. First there was the topic of my post yesterday and now we have this from Universal Music Group...
What happened? CD sales are still declining, of course. But Vivendi said the rise of digital music–that means you, Apple (AAPL)–is finally beginning to balance out some of the decline. Digital sales increased 33 percent in the first nine months of the year, the company said.
Vivendi doesn’t break out how much of the growth was due to acquisitions the company made last year (BMG Music Publishing and the Sanctuary music label/management group), but during a conference call, officials said there was indeed organic growth at UMG. Those deals were both closed by early summer 2007, so that sounds right to me.
Anyone who has read this blog knows I've railed against the idea that music is destined to be free and that music companies should just accept that. I've pointed out numbers showing even the demographic most likely to use p2p services, namely kids, have chosen Apple's iTunes instead. I've even pointed out why I felt p2p would lead to even more restrictions on music.
But in doing all that I think I missed a very important point. A point I didn't quite see until reading the above and thinking back to something I read a couple of days ago on Marketing-Ninja...
Although marketers typically try to avoid bargain seekers, these users would not be bargain seekers in the classical sense; online “bargain seekers” are people who will rarely, if ever, pay for anything online that they can’t steal or substitute with something that’s lower quality but free. These users by contrast are able and willing to pay for goods consumed online but they simply want better deals.
For the record, he was talking about something completely different in that post which is why it doesn't exactly fit in context. But the reason I quote it is that the above paragraph changed my thinking on the subject of p2p.
It made me realize, or I guess remember, that there are two types of people in this world and there always have been. Those who won't pay for things no matter what and those who will. I've gotten so wrapped up in this "music is destined be free" debate that I missed the forest for the trees.
I missed the fact that there wasn't necessarily a shift happening at all.
I've been arguing against a trend that doesn't seem to exist except in the minds of free music advocates. A couple of points...
- Is there a fall in Physical CD sales? Yes. But that just means digital music is gaining popularity not that file sharing is.
- Are Record Labels losing Money? Some are Yes. But every sign points to bad management as being the cause for that and not file sharing. As the UMG numbers above show you can make money in this new digital world if you manage your company well.
So in the end it looks as if consumer spending is following the same pattern it always has. People are just choosing a different media type to purchase.