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Piracy is a red herring

After selling one billion downloads on its iTunes Music Store, Apple has cause for celebration. But should record labels be joining in? According to Eric Garland, CEO of media monitoring firm BigChampagne, the economics of paid downloads are a major cause for concern. During a keynote presentation at Music 2.0 in Los Angeles, Garland compared the recent Apple accomplishment to the number of free downloads from P2P networks during the same time. Apple may sell over one million tracks per day, but P2P networks supply over one billion tracks per month. And over a nearly-three year period, that difference is quite pronounced, making iTunes a relative sideshow.

While the gulf between free and paid is glaring, Garland noted that piracy isn’t the biggest problem. Six years after the Napster revolution, consumers are overwhelmingly cherry-picking singles online, part of a larger migration away from bundled albums. "The sad fact is that given the choice online, people choose songs over albums," Garland noted. The result is that consumers are no longer forced into a bundled purchase, and per-transaction amounts plummet as a result. "Piracy is the red herring," Garland said, while pointing to successful bundling strategies across industries like cable TV and personal fitness clubs.

Meanwhile, other industries are executing bundling strategies quite successfully, including cable TV operators and fitness clubs. And while the CD is waning in influence, newer bundling concepts are emerging online. Already, eMusic is pushing a bundled download offering, which requires upfront payment for a specific number of tracks per month. Scott Cohen, co-founder of sister-company The Orchard, noted that many of the premium monthly buyers actually download the fewest tracks, pointing to an inherent tendency among consumers to buy more than they can eat. Meanwhile, labels are increasingly bundling extras like liner notes and bonus tracks into digital albums.

From Digital Music News.

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