Legal Music Downloads Catching Up to P2P

The online channel, originally considered a threat to the music and movie industries, has become an increasingly important distribution channel. Over the last several years, we’ve seen more and more industry-sanctioned content download sites. Services like eMusic, Napster (the legal version), Rhapsody, and iTunes have grown their inventories and membership. At the same time, companies that used to peddle hard copies of their respective media are turning to the online retailers.

I’m a big fan of the hit AMC TV show “Mad Men,” but I’m not a cable subscriber, so I usually turn to the internet to stay up to speed. Sure, I could pay $2.99 to download last week’s episode from iTunes. Or I could use one of the many P2P sites and download the same content for free. I know there are many who would prefer the free route, but I think that it’s much easier to download from iTunes than it is to search high and low across the internet for P2P content. When do users use P2P and when do they use industry sanctioned sites?

To learn more about how consumers use paid content together with free content, I divided online media sites into two categories: industry-sanctioned and P2P. For the industry-sanctioned category I looked at paid services like Rhapsody, eMusic, Napster, Amazon (AMZN), plus free streaming sites like Pandora, last.fm, and Shoutcast. In the P2P category I looked at 13 Torrent sites (free content delivery) and Limewire.

The chart below shows how traffic to P2P sites compares to traffic to industry sanctioned sites.

• Traffic to industry sanctioned sites climbed 60% since August 2007, while traffic to P2P sites has been holding steady over the same period
• Still, P2P sites’ get more visitors, with an average volume was roughly 8.5 million unique visitors per month, compared to only 6.3 million on industry sanctioned sites

Why the growing interest in industry sanctioned sites? It might be the convenience factor. Content can be tough to find or of sub-par quality when downloaded with P2P. For only $0.99, you could hop on iTunes and download a tough to find song instantly, rather than sifting through junk and spam on a P2P site.

If convenience is driving media sales on industry sanctioned sites, these sites could continue to grow and succeed. P2P sites are likely not going anywhere though, and even as the music and movie industries find success with new distribution models, they will need to find creative ways to coexist with free content.

Comments

[jmmx:]

Actually, the graphs have something interesting to say. The P2P site traffic is level, while the "sanctioned" sites are growing.

A couple of hypotheses:
1- P2P users are those who were using P2P before legal downloads (read: iTunes) began. Newer users entered the internet with the legal downloads option and so are not interested in the P2P - especially given the ease of use of the legal sites.

2- P2P appeals to young people who have more time than money to spend, but as they grow older, they drift to the legal sites.

My guess is that it is a combination of the two.

One question remains: if the price point were to go up to $1.29 would people start to drift towards the P2Ps? What about $1.59? $1.99?

2008 Oct 29 04:01 PM

[LongAAPL:]

It must be all the new Zune Users!

2008 Oct 29 07:17 PM