Piracy Might be Good for Business

We’ll all too aware that record companies have been blaming their industry woes on people who download music without paying for it. They’re also very fond of making the flawed assumption that every track downloaded for free would have been paid for if the free option didn’t exist – despite no evidence to support the argument and that it’s not logical anyway if you ponder it for more than a nano-second or two.

There were two pieces of news this week that demonstrated the other side of this coin, namely that people who download free stuff also spend money on music and that it’s possible to make money out of free anyway.

Exhibit 1 is provided by the music industry themselves in the form of the IFPI (International Federation of the Phonographic Industry) and report they published online. As Torrent Freak points out

Compared to music buyers, music sharers (pirates) are…

* 31% more likely to buy single tracks online.
* 33% more likely to buy music albums online.
* 100% more likely to pay for music subscription services.
* 60% more likely to pay for music on mobile phone.

The implication of this for me, is to confirm empirically what I’ve observed anecdotally, that file sharing is very often used to preview music, the best of which they go on to purchase. Obviously, there are many citizens who don’t conform to that model, but I wonder how much music they’d actually buy if they couldn’t get it free anyway?

Meanwhile, Moco News reports that Tapulous’s Tap Tap Revenge enjoyed 2.5 downloads of their App in the first two months, but that 1 million were pirate downloads. However, Tapulous knows who these users are and treats them slightly differently to ordinary customers by showing them more ads. This results in many converting to their best customers for virtual goods they sell in the game and for paid music downloads.

So there you have. File sharers pay for music. And you can make money from people who start off by thinking they won’t pay you. Who would have thought it?

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