Take Heart, Publishers: Music Industry Has Only Shrunk by Half

By Jeremy Greenfield, Editorial Director, Digital Book World, @JDGsaid

The music industry is the canary in a coal mine when it comes to content piracy issues and the effects that it can have on a creative industry — and that canary is gasping for air, said Cary Sherman, chairman and CEO of the Recording Industry Association of America (RIAA), the organization that represents the U.S. music industry.

In 2003, none of the music industry’s revenues came from digital sources; today, over 50% of music industry revenues are digital, said Sherman today on a panel at the Association of American Publishers (AAP) annual meeting in New York. That overall revenue pie, however, is half as large as it used to be.

According to Sherman, a decade ago, the U.S. music industry was a $15 billion concern. Today, it’s at less than $7 billion and employs less than half the people it once did. The industry has been radically changed (and shrunken) by online music sharing.

Call the music industry a canary without its voice and missing a wing.

The good news is that the carnage may be over. In 2011, for the first time in a long time, the industry didn’t shrink. It stayed about the same size. Additionally, $500 million of venture capital was poured into digital music start-ups in 2011, according to Sherman.

If the RIAA is an almost-dead canary, where does that leave the book publishing industry?

Clearly, e-book piracy has not had the same effect on book publishing as online music piracy has had on the music industry. By some reports, e-book piracy might actually help sales.

According to the AAP, there are currently no data on the overall economic impact of e-book piracy on the book industry. Still, there is some.

A year ago, ten large publishers were queried by the U.S. Department of Commerce about the effect of piracy on e-books. Among those who provided information, nearly 300,000 files online were found that violated copyright between 2008 and 2010. Eight of those publishers paid a cumulative $800,000 over those two years to third-party services to monitor pirated material online. Some of the publishers have hired one or more employees in-house to work on the issue.

In February, the AAP, along with some international publishers, took legal action against two content-sharing websites, resulting in their shutdown.

Some publishing players have advocated the dropping of digital rights management software, which is used to protect books against piracy, arguing that it doesn’t prevent piracy, harms consumers and gives advantages to certain online booksellers. Some publishing companies, Sebastopol, Calif.-based O’Reilly, for instance, have embraced this approached.

Sherman was speaking on a panel along with colleagues from other content industries: Fritz Attaway, executive vice president and special policy advisor for the Motion Picture Association of America; and Robert Holleyman, president and CEO of the Business Software Alliance, who said that his constituents, including Adobe and Microsoft, estimate that they lose $60 billion in revenue annually from piracy. The panel was moderated by AAP president and CEO Tom Allen.

Write to Jeremy Greenfield

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