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electronic MUSICIAN

Internet file-sharing boosts music sales, report says

May 7, 2002

WASHINGTON(Reuters) - Internet users who download songs for freefrom unauthorized "peer to peer" services are more likely toincrease their music purchases than regular Internet users,according to a report released on Friday.

While file-sharing services like Kazaa and Morpheus enableanyone with an Internet connection to access a huge library ofmusic for free, experienced file sharers are more likely toactually increase the amount of money they spend on CDs, the reportby research firm Jupiter Media Metrix said.

Thirty four percent of all peer-to-peer users said they spentmore money on music than before they used such services, the reportsaid, while 15 percent said they spent less. One-half said theamount of money they spent remained the same.

Online music fans who did not use file-sharing services wereless likely to report increased spending. Nineteen percent saidthey spent more money on music, while 10 percent said they spentless and 71 percent said they spent the same amount.

Other technologies, such as recordable CD drives and high-speedInternet connections, had no impact on consumer spending, thereport said.

Music companies say Internet piracy is partially responsible fora 5 percent drop in sales last year, and the industry hasaggressively pursued file-sharing companies in court. Napster, thefirst such service, has been offline since last July as itstruggles with a court order to keep copyrighted music off itssystem.

But the survey suggests that file sharing could provide a boostto the industry, said report author Aram Sinnreich.

"The Internet is the greatest thing that ever happened to themusic industry, and they're just missing out on cashing in on it,"Sinnreich told Reuters.

Peer-to-peer users tend to be avid music fans who already spendmore money than average on music. Rather than shutting downpeer-to-peer services, music companies should cultivate these fans,Sinnreich said.

A spokesman for the Recording Industry Asssociation of Americasaid Jupiter's findings conflicted with a survey that foundInternet downloads did eat into music sales.

In a survey the trade group commissioned last year, 23 percentof respondents said that they did not spend more money on musicbecause they could download it for free.

The five major recording companies -- Sony Music Warner MusicEMI Group Plc Vivendi Universal and BMG -- have introduced filesharing services of their own that, for a fee, allow users limitedaccess to portions of their catalogs. So far, the services have metwith limited success.

Some companies have turned to copy-protected CDs, which cannotbe played on computers and some other devices. Universal iscurrently considering whether to release best-selling rap artistEminem's new release in copy-protected form.

The report was based on a June 2001 survey of 1,911 online musicfans, 305 of whom were experienced peer-to-peer users.

Reuters/Variety

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