Morninglory Music closed its Isla Vista store last week, citing a catastrophic drop in patronage. Owner Stan Bernstein’s brief epitaph told a tale of blight he claims has spread across the nation: “There [is] no way to compete with free downloadable music and CD burners.”
If this statement is true, there seems to be little hope for the humble record store. Last year’s legal victory for the Recording Industry Association of America against Napster, the music-sharing granddaddy of them all, has done nothing to dissuade avid downloaders. Use of next-generation file-sharing software such as Morpheus and Gnutella continues to increase, as does the music industry’s targeting of college students for their downloading activities.
Across the country, universities are experiencing a surge in MP3 downloads, which have managed to slow their network traffic to a snail’s pace. At UCSB last summer, ResNet, the Internet service provider UCSB, responded to complaints about sluggish Internet access by doubling the available bandwidth from 10 to 20 megabits. And yet, demand has already met this increased supply.
“[Downloading] takes up as much bandwidth as we have available,” Residential Network Coordinator Curtis Kline said.
The music industry has stepped up its efforts to curb the tide of Internet copyright infringement. ResNet received more than 50 complaints in October and November of last year from record companies who caught students with on-campus IP addresses illegally sharing music files through programs such as Morpheus.
Several industry analysts, however, believe Napster and its progeny have been made scapegoats for a national downturn in record store sales. Jupiter Communications, Inc., a leading authority on Internet commerce, released a study in July 2000 saying users of networked music-sharing technologies were 45 percent more likely to have increased their overall music purchasing than nonusers. These results stand in stark contrast to the evidence presented by the RIAA in its suit against Napster.
The RIAA commissioned Soundscan, the company that tracks music sales throughout the U.S., to study the impact of file-sharing on first-quarter college record store sales from 1997-2000. Soundscan CEO Michael Fine concluded that the impact was profound.
“The data strongly suggests that online file sharing has resulted in a loss of album sales within the college market,” he said. “Music file sharing and Napster usage appear to have created a significant and detrimental impact on retail music sales.”
To support these claims, Fine cited a steady decrease since 1998 in record sales at stores within a one-mile radius of college campuses, versus a steady increase in national sales over the same period. The decreasing trend was most marked at those universities Fine labeled the “Top 40 Wired Colleges,” by way of their high ratio of computers to students and large available bandwidths.
UCSB visiting professor of statistics Blake Whitten believes the Soundscan study and its conclusions are seriously flawed. The greatest percentage decrease in record sales at the “Top 40 Wired Colleges” occurred in the first quarter of 1999 – a 15 percent drop from the previous year – but Napster wasn’t launched until September of that year.
“There was clearly already a preexisting trend that cannot be explained by Napster,” Whitten said. “So the real question is whether there was some other factor involved.”
Notable by its absence from the study is the number of music purchases made at online retail websites during that period. This is a key factor because Amazon.com launched its music division in June 1998 and saw a steep increase in earnings throughout 1999. Whitten noted that the demographic identified in the “Top 40 Wired Colleges” might share other traits in common. Avid Napster users might also be more likely to shop online, he noted.
“That would tend to cast doubt on [Fine’s] conclusions,” he said. “The bottom line is that nobody can be sure of anything with this study. The cause of [declining record store sales] could be very complicated.”
While the RIAA continues to demonize file sharing for its negative impact on record stores, the record stores themselves remain divided about its impact. Bernstein is unwavering in his belief that downloading is to blame for Morninglory’s demise, but other stores feel quite the opposite. Amoeba Music, which opened its first independent mega-store in Berkeley over a decade ago, has seen constant increases in patronage, opening a third store in Los Angeles in late 2001.
“There are a lot of different things that could have affected record sales,” said Amoeba stock floor manager Walter Jones. “As far as Napster goes, I don’t think that had anything to do with it. I think it has actually benefited our business because people know what they are buying. … If somebody downloads something and they really like it, a lot of times they’re going to want to come in here and buy the CD to have all the stuff that comes with it. I think it actually opens a lot of people up to music they would have never spent $17.98 on, but after hearing it are more willing to own it.”
Jones said the RIAA’s hands are far from clean when it comes to the decline in record store sales. They have long been trying to sell directly to the customer, thereby squeezing out the middleman. Perhaps the best illustration of this is the recently formed strategic alliance between music giant Bertelsmann (BMG) and Napster. BMG announced that a new version of the popular file-sharer would be launched – minus the free lunch. Jones, however, is confident that local independent record stores can still find a niche in this cyber environment.
“Amoeba is successful because instead of being just another record store, we become part of the community,” he said. “People are comfortable when they come in here; they bring their dogs and stay here as long as they want thumbing through records. I think people are more willing to continue coming to a place like this because they feel as if they are a part of it, not just shopping here.”