U.S. Internet Piracy is on the Decline

By Lauren Indvik
Mashable | Article Link

Internet piracy is on the decline in the U.S., according to new research from NPD Group.

The percentage of the U.S. Internet population using a P2P file-sharing service to download music has decreased from 16% (28 million users) at the end of 2007, to 9% (16 million users) in the fourth quarter of 2010 — the very quarter that LimeWire was forced to shut down its file-sharing service. In the previous quarter , a federal judge ruled against LimeWire in a copyright infringement case versus the Recording Industry Association of America (RIAA).

Between Q4 2007 and Q4 2010, the average number of music files downloaded from P2P networks also dropped from 35 tracks per person to 18 tracks, NPD found.

LimeWire was used by 56% of those using P2P services to download music before the ruling (Q3 2010), and 32% by the time it shut down (Q4 2010). Many users have since turned to other P2P networks, such as Frostwire (which is used by 21% of those sharing music files via P2P as of Q4 2010, up from 10% in Q3 2010) and Bittorrent, which increased its userbase from 8% to 12% in the same period. It is not yet clear, NPD says, whether LimeWire’s shutdown has had a significant effect on the number of illegal music downloads.

“LimeWire was so popular for music file trading, and for so long, that its closure has had a powerful and immediate effect on the number of people downloading music files from peer-to-peer services and curtailed the amount being swapped,” Russ Crupnick, an entertainment industry analyst for NPD, observes. “In the past, we’ve noted that hard-core peer-to-peer users would quickly move to other websites that offered illegal music file sharing. It will be interesting to see if services like Frostwire and Bittorrent take up the slack left by LimeWire, or if peer-to-peer music downloaders instead move on to other modes of acquiring or listening to music,” he added.

NPD’s data is based off a January 2011 survey of 5,549 U.S. Internet users ages 13 and older.

Online piracy is a popular scapegoat of the music industry, which has suffered a 30% decline in global sales between 2004 to 2009, according to IFPI’s annual digital music report [PDF].

But given that only 9% of U.S. Internet users use P2P networks to download music illegally (that percentage does include those who obtain music through unauthorized online streaming services and download sites), one wonders whether that blame is merited.

Increasingly, consumers are being introduced to new, more convenient — and, for the music industry, often profitable — methods of obtaining music legally, such as download stores (iTunes), ad-supported streaming sites (Pandora, Spotify), subscription services (Rhapsody, MOG), video channels (Hulu, VEVO), and through bundles with broadband services (TDC in Denmark, Sky in the UK) and mobile phone handsets (like those made by Nokia and Sony Ericcson). All of this has translated into significant revenue — $4.2 billion in 2009, according to IFPI — although it is still not enough to compensate for the sharp falloff of physical format sales in recent years.