Update: Liebowitz on file-sharing

Yesterday, I wrote a post for my Globe and Mail blog — and cross-posted it here — about some comments that University of Texas economist Stan Liebowitz made on his website with respect to file-sharing and its effect on CD sales. Prof. Liebowitz took issue with a recent study that found file-sharing actually increases CD sales among downloaders, but overall has no effect.

In my post, I raised a number of questions about Prof. Liebowitz’s response to the study — as well as his response to the Oberholzer-Strumpf study from 2004, which found something similar — and he sent me an email late last night responded to some of those questions. I asked him if I could post some of his email here and he agreed. Here are some of the relevant parts of his message:

“You neglected to tell your readers that I don’t just criticize the Industry Canada study because the emphasized results (the positive impacts) are implausible. I also provide the reasons why their statistical setup will be biased in a positive direction. If you want to know about the problems with the Oberholzer-Gee/Strumpf study, check out this paper which is was intended to be understandable by people with your type of background.”

I wondered in my post whether Prof. Liebowitz takes into account only sales of full CDs or whether he includes CD singles, ringtunes, downloads from iTunes and so on. Here is his response:

“I always examine “albums.” The use of albums and exclusion of singles makes little difference since in the time periods of the analysis (the last year of data the paper of mine that you mention) singles were a very small component of the market. Digital downloads were too small to measure and ringtones would have been excluded had the data existed, but it did not. Ringtones are a separate market since they do not serve the same consumption purpose as album purchases.”

I also raised the issue of whether the data Prof. Liebowitz was using referred to unit sales or revenues, since the latter would have fallen as average prices have dropped over the past few years.

“I make clear in my papers (which I presume you have not looked at) that I am talking about units and not revenues. One reason for that is that there are no reliable revenue statistics. Nielsen SoundScan, which is the data source on sales for the study of mine that you mentioned, doesn’t provide revenues. The revenue statistics from the RIAA just take the unit sales and multiply them by list price, so they are not actual revenue statistics.”

I’d like to thank the professor for responding. We still disagree about the extent to which file-sharing is solely responsible for the downturn in CD sales, but I appreciate his attention to detail and the amount of time he has devoted to his research.


Prof. Liebowitz sent me an email to say that he has updated his comments at his website after having taken a closer look at the details of the Industry Canada study. He says that he still believes that it is flawed, but not as badly as he first assumed.

Update 2 (Nov. 19):

Birgitte Andersen, one of the researchers who did the Industry Canada study, sent me an email and said that she has posted a response to some of Prof. Liebowitz’s comments here.

Baseball apologizes for foul DRM ball

Baseball fan Allan Wood, who downloaded dozens of major-league games through the Major League Baseball service and paid good money for them (close to $300), wrote a post yesterday that got a lot of attention in both the blogosphere and traditional media: it seems his files suddenly stopped working, because MLB had changed the kind of digital-rights management it used and failed to tell anyone. Not only that, but they refused to provide any refunds or allow him to download the games again.

Wood has blogged about this problem before, but for whatever reason (because it got picked up by Techmeme.com perhaps? Or BoingBoing?) it got more attention this time — and MLB apparently heard about the rising storm of negative publicity somehow. An update to Wood’s blog says that he got a call from a representative for the league, who admitted that they had handled things badly, and said that everyone affected would be able to download their games again for free. Staci at PaidContent also talked to someone at MLB about it.

Score: Baseball – 0; Blogosphere – 1.

$300-million? I could Digg that

A great rumour from Valleywag, and one that actually makes some sense to me: Owen Thomas says he has heard that Digg is close to a deal to be acquired for about $300-million, but not by Google or Yahoo or one of the usual Web suspects — by a traditional media entity like the New York Times or the Washington Post. Implausible? I’m not so sure (Mike Arrington wishes Digg would just sell itself already).

kevin rose.jpgAs Owen notes, Digg recently signed a multi-year advertising deal with Microsoft for $100-million, and is likely worth close to $300-million on that basis alone (albeit at pretty nosebleed multiples of revenue, but hey — it’s no Facebook). But probably not to Google or Yahoo. How much traffic does it drive to those sites? Little or nothing.

To the New York Times or the Post, however, Digg could make a lot of sense. Maybe not $300-million worth of sense, you might argue — but still a lot. To a large number of younger, Web-savvy users, Digg is their front page. And yes, it’s still largely focused on technology, but so what? The NYT has already shown that it’s willing to get more “social media”-friendly with its BlogRunner purchase and integration.

As a commenter on the Valleywag post notes, Digg competitor Reddit was bought by Conde Nast last year and it has apparently continued to thrive — in fact, it drives several times more traffic to my blog than Digg does. Meanwhile, Allen Stern over at Centernetworks has some theories about why Digg might be ready to sell.

According to Compete, traffic at Digg has skyrocketed over the past year — to 18 million uniques a month from 3 million, to 51 million vists from 4 million, and to 200 million pageviews from 10 million. Not bad.

Music sales: Is p2p to blame or not?

(this is cross-posted from my Globe and Mail blog)

When Industry Canada came out with a study last week that found file-sharing doesn’t lead to reduced CD sales — and in fact may even lead to an increase in sales among those who download a lot — it came as a surprise to many, most of all the music industry, which has been arguing for years that downloads are killing the record business.

It also came as a surprise to Stan Liebowitz, an economist with the University of Texas, who has been studying the impact that file-sharing and other Internet-related technologies have on music sales for several years, and has repeatedly come to the exact opposite conclusion.

Prof. Liebowitz has been studying the impact of technology on copyright since the 1970s, when he did a study for the Canadian government looking at the effect of photocopying on the publishing industry (he concluded that it would not have an overly negative effect). He also wrote a study in 1985 looking at a new technology called the VCR, and has done research that he says shows radio also contributes to lower sales of traditional records and CDs.

On his website, Prof. Liebowitz takes issue with the study done by two researchers at the University of London, who were commissioned by Industry Canada. According to the University of Texas economist, who is also a director of the Center for the Economic Analysis of Property Rights and Innovation, the study has a number of methodological problems and also fails what he refers to as “the laugh test.”

In a nutshell, Liebowitz says, the Industry Canada paper is at odds with well-established research that shows a prominent decline in CD and record sales over the past several years, a period in which the use of file-sharing software has grown dramatically. If downloading either doesn’t affect CD sales or actually has a small positive effect, he says, then how can we explain that large a decline?

Continue reading “Music sales: Is p2p to blame or not?”

Coca-Cola will never be my friend

It may be the secret to monetizing Facebook’s gigantic user base (50 million and growing), but I have to say that my first response on reading about the proposals that Mark Zuckerberg outlined today was a mental picture of some guy barging into a party at my house and yelling about free pizza or T-shirts or something, and handing out coupons to all my friends while dressed up like a giant Coke can.

Just between you and me, if that were to happen, I would have to fight the urge to punch the guy. Bastardizing the community indeed. And yet, Facebook is hoping that if one of my “friends” starts bombarding me with every book he’s bought at Chapters or every movie he wants from Blockbuster, I’m going to feel so warm and fuzzy that I’m darn well going to go and buy a bunch of books and movies too.

Let’s not even talk about the loony idea that I or anyone I know (and that includes a bunch of Facebook’s target demographic) making friends with a Sprite mascot of some kind, and engaging in all kinds of viral brand-building shenanigans with other Facebook users on a Sprite-branded page or through a special Sprite-sipping widget. Not going to happen.

I know that Facebook is a free service, as Zuckerberg pointed out during the Q&A, and so we can’t really complain about ads in our news feed or ads on our message page, or possibly even getting messages from corporations offering us things they think we might someday be interested in. I’m just saying that the prospect of that kind of thing fills me with dread — and generally speaking, dread isn’t an emotion that works well when you’re trying to sell something.

For more, see Eric Eldon’s post at VentureBeat, and some thoughts from Henry Blodget at Silicon Alley Insider. Jeremiah Owyang calls it the rise of the “Fan-sumer,” but I think his portrayal of the new ad platform and its prospects is, well… overly rosy.

Why do we need a YouTube Canada?

(this is cross-posted from my Globe and Mail blog)

YouTube launched a Canadianized version of the popular video-sharing site at a press conference on Tuesday, the latest in a series of international versions that have been launched over the past few months, including YouTube Brazil, YouTube Poland and YouTube Ireland.

The press conference — which had a giant mockup of the YouTube home page as a backdrop, with a big-screen TV where the video player would be — featured a live performance by singer Naomi Streimer (who recently released a single on YouTube) as well as a panel of Canadian YouTube “stars” such as Mememolly, an 18-year-old from Ottawa who said she was inspired to upload videos by watching Lonelygirl15.

Even after all the panels and presentations by various YouTube staffers, however, one question remained largely unanswered: Why does a website like YouTube need a Canadian version? Does it matter where the videos come from? Does a clip of someone singing or a funny video of a cat have more impact if we know it’s a Dutch singer or a French cat?

In other words, do Canadians want to watch Canadian content or do they just want to be entertained?

With some sites, such as YouTube Brazil or YouTube Italy, there’s obviously a language issue. But Canada doesn’t really fall into that category, despite a YouTube executive’s joking reference to a search for videos related to the term “beaver tail” or the word “loonie.” (Memo to that YouTube staffer: Don’t quit your day job for a career in standup comedy).

As an example, two members of the YouTube “star” panel belong to a group of young comedians from Halifax called Picnicface. One of their YouTube clips is a fake TV ad for a Powerade-style sports drink called PowerThirst, which lampoons all the over-hyped language and ridiculously exaggerated claims that are used in such ads. It’s hilarious.

Does it matter that Picnicface is from Halifax? I’m not sure it does. In fact, I’m pretty sure it doesn’t, or at least not to me. I remember watching the clip a few months ago after it popped up in my RSS feeds and thinking it was funny. But it didn’t occur to me to care where it came from — it came from YouTube, and that was all that mattered.

Continue reading “Why do we need a YouTube Canada?”

Radiohead album: Half-full or half-empty?

In one of the first comprehensive looks at who paid what for Radiohead’s recent In Rainbows launch, comScore says that more than 1.2 million people used the download site in the month of October, and only 38 per cent of them paid anything for the music. In the United States, according to the traffic measuring company, about 40 per cent of the people who downloaded the album paid for it, and they paid an average of $8 (on a global basis, the average was $4).

There are a couple of ways to look at this. One is skeptically — after all, there were reports that Radiohead had 1.2 million downloads in the first two days, so it’s hard to imagine that it didn’t get substantially more in the next 20 days. As with most traffic-measuring firms, comScore also has a certain methodology that may or may be entirely accurate. It’s not clear what the survey was based on or how the firm got the numbers it is using (but like Ethan Kaplan, I think there are some big holes).

Another way to look at it, however, is that almost 40 per cent of people paid for something they could have had for nothing — and in the U.S., they paid the same amount as it would have cost to buy the album the regular way. That may not be great, but it’s not bad. On an unrelated note, the comScore press release contains a quote from a somewhat unusual music expert: Union Square VC and music fan Fred Wilson, who has more here.

Google: All aboard the Open train

Open cellphones, OpenSocial — it’s obvious that Google sees as its main competitive advantage a totally open (more or less) approach to data of all kinds. Just as it is trying to create a platform for the free movement of social data through OpenSocial, so it seems determined to create an open platform in the mobile arena.

I’ll say one thing: mobile is one of the places where we could all use a bit more openness. Right now, the mobile sphere is where the Internet was back in the early 1990s — it’s a morass of proprietary standards and walled-garden content, combined with the most usurious fees since the department-store credit card was invented.

As for Apple’s iPhone, it may be sexy and fantastically useful, but it is still a bit like a mobile version of America Online as far as I can tell (just as Facebook is on the Web). Is that really the best we can do?

I don’t know whether Google is trying to control the whole mobile effort, or whether it just wants to piggyback on mobile as an ad platform, or maybe a bit of both. And there is certainly a concern, as Om Malik notes, that some of the company’s partners are less than stellar (yes, I’m looking at you, Motorola). But I think the quest for openness has to be supported in virtually every arena, if only because it makes things easier — and I would argue in the long run more rewarding — for users.

Further reading:

Search Engine Land has more on the news, and Silicon Alley Insider looks at potential winners and losers (Larry Dignan at ZDNet has some thoughts about that too). USA Today has a short Q&A with Andy Rubin, who is spearheading the Android platform project. The NYT has a story here, and the official Google press release is here.

The live-blogging press corps, meanwhile, consists of Engadget, as well as its evil twin Gizmodo, along with Silicon Alley Insider, CrunchGear’s John Biggs — who is taking questions via IM — and a blogger from PCWorld mag.

Kleiner: Web 2.0 is so over, dude

So a partner at Kleiner Perkins, one of the premier Silicon Valley investment firms, has apparently told Tom Foremski of Silicon Valley Watcher that they have “no interest in funding Web 2.0 companies any more.” For Web 2.0 devotees, this is a little like King Arthur telling you he’s really not that hot on the whole Grail thing any more, and you can stop looking now.

I wasn’t really aware of Kleiner Perkins doing all that much investing in Web 2.0 companies, actually. I always thought of them as playing in the big leagues — the Googles, the Ciscos, etc. But whatever. I guess the party is over now, right? Kleiner has taken away the punch bowl. All those startup CEOs hoping to get rich quick can go back to working at Kinko’s or whatever they were doing before Web 2.0 came along.

As far as I’m concerned, if KP’s comment means less money flowing into questionable startups with no business plan and a stupid name that’s missing a bunch of vowels, I’m all for that. I’m going to side with Tim O’Reilly, who posted a comment on Tom’s blog saying:

“If a company needs to identify itself as a “Web 2.0″ company rather than describing the problem they are solving, or the opportunity they are creating, then they are just playing the buzzword game, and aren’t worth investing in.”

If that’s what the Kleiner Perkins guy meant when he told Tom that they’re not interested in financing Web 2.0 companies any more, then I think he’s into something.

Ego alert: Me on Internet Evolution

Just a quick post to mention that I was approached awhile back by the folks from Internet Evolution — the blogging and discussion-forum site set up by CMP and some of the team behind Light Reading (which I’m a fan of) — to see if I would contribute articles from time to time, which I agreed to do. Their list of contributors includes Cory Doctorow, Craig Newmark and infamous former hacker Kevin Mitnick (I come right before Quincy Jones on the list, which I must admit is kind of cool).

My first piece went up last week, in which I talk about the clash between the open nature of the Internet and the traditional walled-garden approach of content providers such as the major TV networks and broadcasters — sparked by my inability to watch any of the clips posted by Comedy Central at the new Daily Show site. The post is entitled The Flow of Digital Media is Unstoppable, and there are some smart comments on it already.