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MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
MP3 Format and the Purchasing of Music
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MP3 Format and the Purchasing of Music

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  • 1. MP3 Format and the Purchasing of Music Derek J. Archambault Johnson & Wales University © 1999 Derek J. Archambault
  • 2. TABLE OF CONTENTS Executive Summary ...................................................... Page 1 Introduction .................................................................. Page 2 Secondary Source Review ............................................. Page 7 Methodology ................................................................ Page 18 Data Analysis ............................................................... Page 28 Conclusions ................................................................... Page 39 Recommendations .......................................................... Page 40 Works Cited ................................................................... Page 41
  • 3. EXECUTIVE SUMMARY There are three major objectives that have been addressed in this research. The first was to determine if the MP3 format is encouraging more people to download illegal bootlegged recordings off the Internet. The second was to determine if the MP3 format has had a significant influence on the purchasing of regularly available recordings. The third major objective was to find out if new technologies such as the Diamond Rio portable MP3 player or writable CD- ROMs are leading to an increase in bootlegged pirated sound recordings. The survey was conducted utilizing the Internet, and its newsgroups, e-mail and a Web page. Participants in certain newsgroups were invited to complete a Web-based survey, and the results were e-mailed to the researcher, and then compiled and analyzed. The results of this research show that the MP3 format is having what could be considered a positive influence on the purchasing habits of music consumers. Although some respondents (eight of 50) said that they did not purchase a full-length recording because they had downloaded a MP3 version, the majority of the respondents (66%) said that they had bought a full-length recording because of a downloaded MP3 sample. These results illustrate that the music industry needs to find a way to embrace the new technologies available to them on the Internet, and find a way to use them efficiently and profitability. For future research, it is recommended that a larger sample be used, and more of an attempt be made to reach a greater range of Internet users and music fans. Page 1
  • 4. INTRODUCTION Relevant History and Personal Background Information This study was inspired by the recent debate and furor over the new MP3 format of sound files for computers. The high quality and small size of the MP3 files makes the distribution of high-quality sound files over the Internet easier than ever before. The researcher’s interest in computers and especially music exposed him to the music industry’s concern that the MP3 files may lead to an increase in illegally distributed sound recordings. This research is an attempt to determine if this new format is truly leading to a major increase in illegally copied and distributed copyrighted sound recordings. Definition of Terms To begin, an understanding of what MP3 stands for and consists of must be had. MP3 (pronounced by saying the letters “m” and “p” and then “three”) stands for MPEG (pronounced “Mmm-peg”) 1 Layer 3. It is a technology developed by the Moving Picture Experts Group (MPEG) for compressing sound files for speedier transfer and more efficient storage. MPEGs have gone through several developments, or “layers,” the latest of which is Layer 3, the highest quality technology available at this time. MPEG is the name of family of standards used for coding audio-visual information (e.g., movies, video, music) in a digital compressed format. MP3 allows compression by a 10:1 ratio. It allows approximately 60 minutes of “CD- quality” music, or over 8 hours of speech, to be compressed to 32 megabytes of storage space (or memory). MP3 has caused such turmoil because of its high quality and small file size. Previously, audio files downloaded off the Internet were not of a particularly high quality and Page 2
  • 5. high-quality clips were very large in data size. A much older term also needs to be defined. “Bootlegging” refers to the act of making illegal copies of sound or video recordings, depriving the artist of his or her’s royalty rights. “Bootlegs” is the term used to refer to the illegal product. Bootlegging has been around for many years- nearly as long as there has been recording equipment- but with each new advance in recording technology comes new concerns about artists’ rights. Bootlegging is often referred to as “pirating,” and some people may draw a distinction between a bootleg and a pirated copy, with the former being for legal personal use and the latter being for illegal purposes, such as making a profit off the recording. This distinction usually stems from fans of bootlegged live performances, and the bands that support such practices, such as the Grateful Dead, Phish, the Dave Mathews Band, Metallica, and the Black Crowes, to name a few. However, the artist must give express permission to tape a live performance, and it must be used only for personal use for it to be legal. Any performance taken from a normally available full-length recording (referred to in this report as either “full-length recording” or a “CD” (compact disc), the most popular full-length format) or any other recording distributed without the artist’s consent is considered to be a pirated or bootlegged recording. The last term is again a technical term- “newsgroups”. Newsgroups have been a part of the Internet almost since its inception. There are tens of thousands of newsgroups, covering nearly every subject imaginable. They are identified by their name, beginning with a prefix such Page 3
  • 6. as “alt” for alternative, or cutting edge subjects, “comp” for computers, “rec” for recreation, and many, many, other prefixes. The subjects range from music to sex, from religion to programming. The specific nature of newsgroups allow for targeting people with special interests. Newsgroups were used in this study to reach the target sample population of regular music listeners and Internet users. Specific Circumstances Surrounding this Study This research was conducted as part of the Johnson & Wales University’s Honors Program, which the researcher is enrolled in. As part of the graduation requirements for Honors Students, the researcher must complete a number of “H-Option” projects, which involves doing additional projects and work in that class. This project therefore, has been done in addition to the normal work load of the Marketing Research II class. Because of this, the research has faced the same circumstances as a regular research project, but more so- a lack of time and resources such as funding. Research Objectives There are three major objectives that have been addressed in this research. The first was to determine if the high-quality and high-compression of MP3 files are encouraging more people to download illegal bootlegged recordings off the Internet. The second was to determine if the MP3 format has had a significant influence on sales of regularly available recordings (CDs etc.), because of MP3 samples encouraging the listener to purchase the entire recording, or because of people not purchasing a recording because they already have it in MP3 format. The third major Page 4
  • 7. objective was to find out if new technologies such as the Diamond Mulitimedia Rio portable MP3 player or writable CD-ROMs are leading to an increase in bootlegged pirated sound recordings. Research Question Is the downloading of the new MPEG-3 (MP3) format of sound recordings having a significant and measurable influence on the purchasing habits of music consumers? Relevant Variables The independent variable is the use of MPEG-3 files and the dependent variable is the purchasing habits of music consumers. Value of the Study This study can prove to be extremely valuable in the music industry. Based on the conclusions of this study, it can be considered that the music industry’s worries about the new MP3 format is are misguided, and that instead of fighting the format, the recording industry should embrace this and other new technologies and use them to their advantage. Limitations of the Study While this is a very important and timely survey, it does have several limitations that need to be taken into consideration. This research reflects the opinions of only 50 people, and therefore, should not be considered to be applicable to the general population. Also, because the survey was publicized only in the Internet newsgroups, it might reflect a more technologically savvy person and not be a reflection of the average Internet user/music fan. Page 5
  • 8. Another limitation, and exciting aspect, of this research was the immediacy of the topic and the secondary data. As this research was being completed, several lawsuits were in process, and new information is being made available daily, making any attempt for a comprehensive secondary source review very difficult. Page 6
  • 9. SECONDARY SOURCE REVIEW “Diamond Multimedia to Temporarily Delay Shipment of the Rio PMP200 Portable Music Player.” 19 Oct. 1998 <www.mp3.com/news/112.html>. Bringing to a head the controversy over the new MP3 format, the Recording Industry Association of America (RIAA) obtained a Temporary Restraining Order (TRO) against Diamond Multimedia Systems, Inc to temporarily delay shipment of the company’s new portable music player, the Rio PMP300. One of the RIAA’s biggest concerns is that of “serial copying” which is the ability to make multiple copies of a sound recording. However, when issuing the TRO, Judge Collins undermined one of the RIAA’s biggest concerns, stating that “the Rio is not capable of serial copying”. Hellweg, Eric. “The Sound of Money.” Business 2.0 Sept. 1998:114-116. This article explores the new possibilities, limitations and dangers of distributing music in a digital format. It explains three major formats which are vying for acceptance within the industry- the MP3 format, Liquid Audio and AT&T’s a2b format. Unlike MP3, Liquid Audio and especially a2b, are gaining industry acceptance thanks to the use of “digital watermarks,” an electronic “stamp” showing the source of the file, and “encryption keys” which ensure a song can be decrypted only by a sanctioned player. Hellweg states that the digital distribution market could “in turn create a new vast, and Page 7
  • 10. dramatically cheaper distribution system for record companies.” He also points out that MP3 has already garnered a huge installed user base, “estimated at more than 3 million”. The article also mentions MP3 CD players which are under development. These would allow a writable CD-ROM to store 10 times as many songs as a standard CD, but would require a certain amount of computing power to decode the songs. “IBM’s New Spin on Music.” Business 2.0 Oct. 1998: 14. In an attempt to legitimatize the digital distribution of music over the Internet (downloading the music you buy, as opposed to purchasing a traditional recording over the Internet and having it shipped to you), computer giant IBM is teaming up with members of the “Big Six” recording labels to develop an acceptable method of file distribution. The article mentions that the RIAA has been reluctant to engage in or endorse such program for fear of piracy, which “now constitutes $300 million dollars lost every year in domestic record sales alone” according to the RIAA. The RIAA estimates of Internet distribution accounted for 0.3 percent of the total $12.2 billion spent in 1997 on music sales, but mark the beginning of “exponential growth in this sector” which makes development of an acceptable standard all the more important. Page 8
  • 11. Krochmal, Mo. “Music Industry Unprepared for MP3.” TechWeb 16 Sept. 1998 <www.cmp.com>. The MP3 format appears to be catching on fastest in the college markets, according to this article, thanks to colleges’ high-speed Internet access and because MP3s “lets the user make an unlimited number of digital copies.” Robert Glaser, CEO of RealNetworks is quoted in the article as saying that portable MP3 players (such as the Diamond Rio Player) are a “hybrid of personal use and piracy.” However, it should be noted that Glaser has a lot at stake in this battle- his company is the leading provider of streaming media (files that are watched or listened to over an Internet connection, but the file is not actually downloaded and then erased) on the Internet. The article states that it may take a while for the widespread use of digital distribution of music, legal or otherwise, because of the limited bandwidth (amount of data capable of being sent) in most homes. However, the high bandwidth available on college campuses make it a perfect place for downloading illegal MP3 files. The article provides some important statistics. Hillary Rosen, the CEO of the RIAA states that “On some college campuses, people are not buying music anymore.” The search term “MP3” is the third most popular on the AltaVista search engine. Approximately five million software MP3 players have been downloaded from the Internet and another 3.5 million LiquidAudio players have been downloaded. Page 9
  • 12. Lipton, Beth. “Digital Music Hits Sour Note.” CNET News.com 15 July 1998 <http://www.news.com/News/Item/0,4,24244,00.html>. This article investigates the viability of music delivered via downloads as opposed to the purchase of CDs online. New York research firm Jupiter Communications released information prediction that music distributed digitally will amount to only $30 million by 2002, or 2.2 percent of total online music sales, which is predicted to reach $1.4 billion in the United States alone. Forrester Research corroborates this information, with senior analyst Mark Hardie stating that “There’s no mass market there” and that record labels would have to “come together and agree on a standard way to do it. Plus the labels have to get permission from every one of their artists.” Hardie also mentions that labels may encounter resistance from artists, who view an album as “a single piece of work- not 12 singles” and digital distribution would most certainly involve a “by-the-song” approach. Jupiter Communications suggests four stages in a strategy to expand digital downloading. First, labels should offer special promotions in which users can download a single track before buying an album. Next they can offer out-of-print albums digitally, followed by catalog backlists. Finally the labels could release new albums for digital distribution. Again in this article, the legal issues of digital distribution are raised- this article states that a study earlier in he year found that “nearly 80,000 illegal music files were already available on Page 10
  • 13. the Internet.” Lipton, Beth. “Net Music Pirates Face Lawsuits.” CNET News.com 13 May 1998 <http://www.news.com/News/Item/0,4,22060,00.html>. This article illustrates the RIAA’s efforts to capture and prosecute individuals who illegally distribute music over the Internet. One major suit was filed in U.S. District Court in Arizona. The suit names the Web Site operator, Fred Cohen was well as his Internet service provider, Arizona Bizness Network in a copyright infringement suit. Cohen, a 20-year old junior at Arizona State University, is the systems administrator for Arizona Bizness Network. There were about 50 songs posted on Cohen’s site, all by major artists. Another suit was filed in the Western District of Washington, against a site operator who the RIAA says posted more than 1,100 songs. Cohen doesn’t see the problem with what he was doing- “I never understood why they want to enforce those copyrights when it doesn’t hurt them. It was great advertising for them,” he said. Cohen said he also had links to record stores so that they could buy the actual CD. A poll on his site showed that more than half of the people who listened to songs on his site followed the links to stores and bought CDs. These lawsuits bring up another unclear area in the illegal distribution of music over the Internet- are the providers of the server space liable for what their customers put on their Web Sites? Under current copyright laws, the answer is yes, but that may change with new laws Page 11
  • 14. being considered by the federal government. Lipton, Beth. “Music Agencies Want Net Money.” CNET News.com 15 April 1998 <http://www.news.com/News/Item/0,4,21127,00.html>. If the issues of illegal distribution is suddenly settled, there are other issues that need to be address. This includes the issues of royalties, publishing rights and a fundamental question: is a song that is downloaded from an Internet site a purchase or a performance? This is a question that the American Society of Composers, Authors and Publishers (ASCAP) and BMI, two organizations that deal with licensing music, want to answer. Both organization charge royalties based on public performance, not the sale of music online. However, it has not been determined if the digital distribution of music most resembles the purchase of a CD or a performance. Because most Internet music sites are not yet profitable, many of them are trying to avoid paying the license fees collected by BMI and ASCAP. Such distributors need to make a decision whether the licensing fee goes to the record company (if a download equals a CD purchase) or ASCAP or BMI (if it is decided a download resembles a performance). In an attempt to track music downloads on the Internet, BMI has developed the MusicBot, a technology that scours the Internet looking for sound files. This technology is now being used by the Australasian Performing Rights Association (APRA), making it the first foreign entity to do so. Page 12
  • 15. Maclachlan, Malcolm. “ASCAP Seeks to Regulate Online Music Sites.” TechWeb 13 July 1998 <http://www.cmp.com/>. ASCAP has announced its own technology to track music files on the Internet, dubbed EZ-Seeker. EZ-Seeker utilizes Web crawler technology to locate sties that distribute music in the most common audio and video formats. The software even determines what artists are being played, issues license forms and track compliance. ASCAP is also licensing, free of charge, the EZ-Seeker technology to other entertainment licensing groups around the world. ASCAP considers MP3 downloads a performance, subject to licensing fees, according to Marc Morgenstern, senior vice president of new media at ASCAP. Sites that legitimately distribute legal MP3 files argue that the format is more similar to selling a CD than playing a song, since no music actually played when an MP3 is downloaded, and is instead downloaded to the user’s computer and can be played repeatedly. Maclachlan, Malcolm. “Record Labels Fear Net Will Kill Profits.” TechWeb 7 July 1998 <http://www.cmp.com/>. At the first annual MP3 Online Music Conference in Sand Diego, participants said that there is money to be made selling music online, but record labels will not approach the profits gained from traditional sales of CDs. According to the article, most of the Conference was about “empowering” artists who make about $1.50 on the sale of $12 to $15 compact discs. Some bands which were signed by major labels, such as the Throwing Muses and the Tragically Hip, Page 13
  • 16. have left their major labels and now make smaller, but more consistent profits from selling music online. The differences between the digital advocates and the traditional big labels resemble the same rifts that divide mainstream and independent music in the physical world. Some online- only record labels, such as GoodNoise, make an attempt to sign artists that would not attract the attention of a major label. On the issue of piracy, GoodNoise’s CEO Gene Hoffman says that piracy is a “marketing problem. These people are your customers. If they’re pirating, they like it.” The World Intellectual Property Organization (WIPO) bill, up for a congressional vote in the United States, would make it illegal to remove copyright protections on new mediums such as MPEGs. The problem is that such copyright protections violate “fair use” protections that allow users to make a personal copy, and would “stifle the medium.” Hoffman uses Microsoft as an example of how some industries have given up on copyright protections years ago: “Microsoft is the most pirated software company in the world. They pull in, oh, about $12 billion a year, or (as much as) the entire record industry.” Another potential reason for the record industry’s insecurity over MPEGs is their diminishing share of the industry’s profits. The five biggest labels generate 80% of the profits in he recording industry, down from 90% just five years ago. Page 14
  • 17. “RIAA Wins Restraining Order Against MP3 Recording Device.” MP3.com 19 Oct 1998 <http://www.mp3.com/news/112.html>. This article examines the temporary restraining order granted against Diamond Multimedia’s Rio portable MP3 recording device. According to this RIAA news release, the Rio violates the Audio Home Recording Act (AHRA) which was enacted as a result of the risks posed by unauthorized digital copying of music. According to the RIAA, under the AHRA, “manufacturers, importers and distributors of digital audio recording devices” will receive a “limited immunity from liability for copyright infringement, only if in exchange they pay a royalty to compensate the artists, composers, musicians, publishers and record companies” who lose monetary recognition due to unauthorized copying. They must also incorporate a “serial copyright management system” (SCMS) into their products to prevent the making of second generation copies. However, as mentioned in the first article, review, it was stated by Judge Collins that “the Rio is not capable of serial copying”. Robertson, Michael. “Motion Denied - Rio To Go On Sale.” MP3.com 30 Oct 1998 <http://www.mp3.com/news/116.html>. In an article about the results of the RIAA’s attempt to block the sale of the Rio MP3 player, Michael Robertson relates the court’s reversal of the restraining order granted against Diamond Multimedia. This is sure to be only one in a long series of legal controversies Page 15
  • 18. surrounding the MP3 format. Robertson, Michael. “Rio Rocks Music Industry.” MP3.com 19 Oct 1998 <http://www.mp3.com/news/101.html>. This article provides an excellent description of what the Diamond Multimedia Rio MP3 player consists of. The $199 unit is smaller than a deck of cards and has no moving parts. It can run for 12 hours on one AA size battery. The Rio uses “flash memory cards” which are computer chip cards which can store songs, and can be erased and rewritten. Each 32 MB flash memory card (enough for 60 minutes of music) costs $99. The unit comes with the MusicMatch software which allows the buyers’ existing CDs to be converted into MP3s and loaded onto the device easily. As usual, the article weighs in with its take on the piracy issue, stating that “there has been no documentation produced by any music organization indicating that (MP3s being used almost exclusively for pirating) is any more than opinion.” That article states that “cost of serving the MP3 files [over the Internet] prohibit any large scale illegal operations from going undetected.” Robertson, Michael. “Samsung Announces Portable Player.” MP3.com 22 Oct 1998 <http://www.mp3.com/news/113.html>. This article comes in the middle of the fight over Diamond Mulitimedia’s Rio player. Page 16
  • 19. Samsung, one of the leading consumer electronics companies, announced the December 1998 shipping date of its new portable MP3 player. Unlike the Rio however, Samsung’s MP3 player will come with the ability to record real time using a built-in microphone. A more expensive model will also have the ability to connect directly to external audio equipment, a point that is sure to create more controversy. Page 17
  • 20. METHODOLOGY Sample Size and Rationale The sample size for this study was 50 respondents. This number has been chosen due to time and resource constraints, and because it fits the purpose of this study. Sampling Method and Justification The sampling method was a non-probability snowball sample. This was chosen because of the method of communication. To obtain respondents for this survey, e-mails were sent to various Internet newsgroups, asking them to fill out the survey. This results in an increasing number of people filing out the on-line survey as more people read the “posting” and possibly spread it to other newsgroups and interested individuals. Null Hypothesis and Alternate Hypothesis Null hypothesis: “There is not a significant and measurable relationship between the downloading of the new MPEG-3 (MP3) format of sound recordings and the purchasing habits of music consumers. “ Alternate hypothesis: “There is a significant and measurable relationship between the downloading of the new MPEG-3 (MP3) format of sound recordings and the purchasing habits of music consumers.” Definition of Sample Population The sample population of this survey was regular Internet users and music fans, defined as people spending more than five hours per week on the Internet and spending more than two Page 18
  • 21. hours per week listening to music. Explanation of Sampling Units The sampling units consisted of respondents gained from communicating with newsgroups participants. An e-mail was sent to a number of newsgroups, and were invited to fill out a survey on the Web. The first two questions acted as screening questions during the editing and coding phase. Level of Significance The level of significance for this study was .05, which is a 5% chance of error with a 95% confidence interval. This level of significance was chosen primarily due to the use of the Minitab program in the statistical process, and because of its acceptance as a standard level of significance. Account of Data Collection The method of communication for this research was through an on-line survey. To reach the intended target size of 50 Internet users who listen to music, the survey was posted as a Web Page, with buttons and check boxes to respond to questions. On October 18, 1998 an e-mail was sent to the following newsgroups: • alt.music.bootlegs • alt.music.davematthews • alt.music.dreamtheater • alt.music.industrial • alt.music.info-society • alt.music.midi • alt.music.mp3 • alt.music.bootleg • alt.music-lover.audiophile Page 19
  • 22. • alt.music-lover.audiophile.hardware • comp.music • comp.music.research • alt.music.makers.electronic • rec.music.classical • rec.music.hip-hop • rec.music.jazz • alt.rap • rec.music • rec.music.ambient • alt.emusic These newsgroups were chosen because of their subject matter and the audience they typically attract. The represent discussions across a variety of music styles, including some who regularly exchange bootleg recordings, and people who are interested in the combination of computers and music. The completed surveys were then “collected” as the completed surveys were sent via e- mail. Once more than enough responses (87 total responses) were returned, the Web Page with the questionnaire was replaced with a page thanking people for their time, and stating that no more surveys were needed. The completed surveys were then looked at briefly on screen, paying special attention to the first two screening questions. Then 50 questionnaire responses were printed and edited and coded. Additional questionnaires were printed as problems arose such as inconsistencies or incomplete questionnaires. Then all 50 competed responses were coded and numbered. Data entry began on October 25 and was completed on October 27. Copy of Survey Instrument Please see the following three pages Page 20
  • 23. MP3 Survey Introduction: A new sound file format, MPEG-3, or MP3, is causing some serious debate in the recording industry. MP3 stands for MPEG 1 layer 3, which is a way to digitally record sounds and music in such a way that the file size is relatively small, but the sound quality is nearly perfect. You can identify MP3 files because the file name ends in .MP3. MP3 files have come to be considered potentially "dangerous" by the recording industry because of their high quality and easy portability and duplication. This survey is an attempt to determine if the MP3 is actually having an influence in the traditional music purchasing habits of consumers. This survey is being conducted as part of a Marketing Research Class at Johnson & Wales University. All answers are completely anonymous, and will be kept confidential. And since it is just a survey for a college course (the FBI isn't going to come and take your computer away if you fill this out) your honesty and cooperation is appreciated. SURVEY QUESTIONS: 1. How much time do you spend on the Internet per week ? less than 5 hours 5-8 hours 9-12 hours 12 or more hours per week 2. How much time do you listen to music per week? Under 2 hours 2-4 hours 5-8 hours 9-12 hours 12 or more hours per week 3. How many times, if ever, have you downloaded a MP3 file? Never 1 time 2-4 times 5-7 times 8 or more times Don't know 4. When you download sound files (in any format) of songs (not sound clips), what are they usually recordings of? (check all that apply) Live performances Rare tracks or songs released only in other countries, unavailble where you are Recordings taken from a regularly available album or single track
  • 24. A promotional track, from the artist, availble only through the internet A promotional track given by the artist as a "sample" of a full-length recording I do not download sound files of songs (skip to question 15) 5. Have you ever bought a full-length recording (a CD or cassette, etc.) as a result of downloading a sound file (any format) off the Internet? Yes No (skip to question 7) 6. Were any of those purchases in a result of downloading an MP3? (please don't answer if you answered "no" to question 5) Yes No 7. Have you ever NOT bought a full-length recording (a CD or cassette, etc.) as a result of downloading a sound file (any format) off the Internet? Yes No (skip to question 10) 8. Was the file that stopped you from purchasing the recording an MP3 file? (please don't answer if you answered "no" to question 7) Yes No 9. Why did you not purchase the full length recording? (again, please don't answer if you answered "no" to question 7) You did not like the music once you heard it Didn't bother buying because you already had downloaded it 10. Which kind of music have you most downloaded files of? Alternative Rock Classical Electronic/Electronica/Ambient R&B/Hip-hop/rap Country Blues Jazz Other 11. What level of artists do you most download music of? Independent or local artist A somewhat well-known artist (regionally very popular or well known within that genre) A nationally known artist (Top-40 hits, well-established name recognition with many people)
  • 25. A mix of all the above 12. Do you own a Diamond Rio Player (a Walkman-like device that plays MP3 files)? Yes No 13. Do you own a CD-ROM writer? Yes No (skip to question 15) 14. Have you used the CD-ROM writer to make CD's with songs downloaded off the Internet? (please do not answer if you answered "no" to question 13) Yes No 15. What is your age? 16. What is your gender? Male Female SUBMIT Your Answers RESET ALL Your Answers Thank you for your time and cooperation!
  • 26. Justification of Survey Instrument Question 1 This categorical and ordinal question was used as a screening question for reaching the sample population. It was also used in cross-tabulations with other questions. Question 2 This categorical and ordinal question was also used as a screening question for reaching the sample population. It was also used in cross-tabulations with other questions. Question 3 This question is a categorical question that was used to determine the overall popularity of downloading MP3 files. It was also cross-tabulated with questions one, four, five, ten, and thirteen. .Question 4 This question was used to see what kind of music recordings are most downloaded from the Internet. The most significant choice is the third- “recordings taken from a regularly available album or single track” - which would be a bootlegged, or pirated, track distributed illegally on the Internet. Question 5 This is a very important question, as it addresses the question of whether digital downloads of songs (legal or illegal) influences the downloader to purchase the full-length recording. Page 24
  • 27. Question 6 This question helps to test the null by directly asking the respondent if their purchasing habits have been influenced by the downloading of MP3 files. Question 7 Similar to question 5, this question examines the debate over the question of whether digital downloads of songs (legal or illegal) influence the downloader to NOT purchase the full- length recording. Question 8 Similar to question six, this question helps to test the null by directly asking the respondent if their purchasing habits have been influenced by the downloading of MP3 files, except this time it is in the negative. Question 9 This question flows from question eight, to determine WHY the person didn’t buy the recording. This is important, since just because a respondent did not buy a recording because of an MP3, it does not mean it was because the person didn’t bother to buy it- it could be because he or she simply did not like the music. Question 10 This question is used to determine if there is a relationship between a genre of music and the likelihood of downloading MP3 files, or illegal files. Question 11 Page 25
  • 28. This question returns to purpose of determining if bootlegged recordings are the most popular downloads. If a person is downloading national artists, and downloading regularly available tracks (question four) then they are participating in downloading in what is most likely to be illegal sound files. Question 12 This question refers to the controversial Diamond Multimedia Rio MP3 Player. This is an important question, because it determines the popularity of the new device among the respondents. Question 13 This is a lead-in question to number fourteen. It helps to determine whether owners of CD-ROM writing drives (now becoming more popular, and one of the first controversial technologies with the advent of downloadable song files) are more likely to download illegal sound files. Question 14 This is a more specific question than question thirteen., asking the respondent if he or she actually DOES use the CD-writer drive to make music CDs. Question 15 A simple continuous question asking the respondent’s age, to determine the average age of the respondents. Question 16 Page 26
  • 29. A simple categorical question to determine the gender of the respondent. Page 27
  • 30. DATA ANALYSIS Frequency Distributions Question 1 - Time on Internet Time on Count Percent 2 6 12.00 3 14 28.00 4 30 60.00 N= 50 Question 2 - Time listening to music Time Mus Count Percent 2 1 2.00 3 10 20.00 4 5 10.00 5 34 68.00 N= 50 Question 3 - Number of times downloading MP3s MP3 Down Count Percent 1 4 8.00 3 3 6.00 5 43 86.00 N= 50 Question 4(a) - Download live recordings Live 4-A Count Percent 1 37 74.00 2 13 26.00 N= 50 Question 4(b) - Downloading rare recordings Rare 4-B Count Percent 1 30 60.00 2 20 40.00 N= 50 Question 4(c) - Downloading regular recordings Regular Count Percent 1 30 60.00 2 20 40.00 N= 50 Question 4(d) - Downloading promotional recordings Promo 4- Count Percent 1 18 36.00 2 32 64.00 N= 50 Page 28
  • 31. Question 4(e) - Downloading sample recordings Promo 4- Count Percent 1 18 36.00 2 32 64.00 N= 50 Question 5 - Ever bought a full-length recording because of downloading a file? Bought Count Percent 1 38 76.00 2 12 24.00 N= 50 Question 6 - Bought the full-length recording because of an MP3? MP3? Count Percent 1 33 66.00 2 5 1.00 N= 38 *= 12 Question 7 - Have you ever NOT bought a full-length recording because of sound file? Not Boug Count Percent 1 30 60.00 2 20 40.00 N= 50 Question 8 - Did you NOT buy the full-length recording because of MP3? MP3 Count Percent 1 19 38.00 2 11 22.00 N= 30 *= 20 Question 9 - Why did you not buy the regular recording? Why? Count Percent 1 22 44.00 2 8 16.00 N= 30 *= 20 Question 10 - Genre of music Genre Count Percent 1 12 24.00 2 22 44.00 4 9 18.00 5 2 4.00 8 1 2.00 9 4 8.00 Page 29
  • 32. N= 50 Question 11 - Level of artists downloaded Artists Count Percent 1 6 12.00 2 12 24.00 3 9 18.00 4 23 46.00 N= 50 Question 12 - Own a RIO Player? Rio Count Percent 2 50 100.00 N= 50 Question 13 - Own a CD-ROM writer? CD-ROM Count Percent 1 24 48.00 2 26 52.00 N= 50 Question 14 - Use CD-ROM writer to make CDs? Make CDs Count Percent 1 10 44.00 2 14 56.00 N= 24 *= 26 Question 15 - Frequency distribution for age Age Count Percent 14 1 2.00 15 1 2.00 16 6 12.00 17 2 4.00 18 5 10.00 19 6 12.00 20 4 8.00 21 2 4.00 22 2 4.00 23 2 4.00 24 1 2.00 25 3 6.00 26 1 2.00 27 3 6.00 28 1 2.00 29 1 2.00 30 3 6.00 32 1 2.00 33 1 2.00 34 1 2.00 37 1 2.00 40 1 2.00 Page 30
  • 33. 44 1 2.00 N= 50 Question 16 - Frequency distribution for gender Gender Count Percent 1 43 86.00 2 7 14.00 N= 50 Code Book Please see the following three pages Page 31
  • 34. MP3 Survey (Master Code Form) Introduction: A new sound file format, MPEG-3, or MP3, is causing some serious debate in the recording industry. MP3 stands for MPEG 1 layer 3, which is a way to digitally record sounds and music in such a way that the file size is relatively small, but the sound quality is nearly perfect. You can identify MP3 files because the file name ends in .MP3. MP3 files have come to be considered potentially "dangerous" by the recording industry because of their high quality and easy portability and duplication. This survey is an attempt to determine if the MP3 is actually having an influence in the traditional music purchasing habits of consumers. This survey is being conducted as part of a Marketing Research Class at Johnson & Wales University. All answers are completely anonymous, and will be kept confidential. And since it is just a survey for a college course (the FBI isn't going to come and take your computer away if you fill this out) your honesty and cooperation is appreciated. SURVEY QUESTIONS: 1. How much time do you spend on the Internet per week ? less than 5 hours (1) 5-8 hours (2) 9-12 hours (3) 12 or more hours per week (4) 2. How much time do you listen to music per week? Under 2 hours (1) 2-4 hours (2) 5-8 hours (3) 9-12 hours (4) 12 or more hours per week (5) 3. How many times, if ever, have you downloaded a MP3 file? Never (1) 1 time (2) 2-4 times (3) 5-7 times (4) 8 or more times (5) Don't know (6) 4. When you download sound files (in any format) of songs (not sound clips), what are they usually recordings of? (check all that apply) Live performances (1) Rare tracks or songs released only in other countries, unavailble where you are (2) Recordings taken from a regularly available album or single track (3)
  • 35. A promotional track, from the artist, availble only through the internet (4) A promotional track given by the artist as a "sample" of a full-length recording (5) I do not download sound files of songs (skip to question 15) (5) 5. Have you ever bought a full-length recording (a CD or cassette, etc.) as a result of downloading a sound file (any format) off the Internet? Yes (1) No (skip to question 7) (2) 6. Were any of those purchases in a result of downloading an MP3? (please don't answer if you answered "no" to question 5) Yes (1) No (2) 7. Have you ever NOT bought a full-length recording (a CD or cassette, etc.) as a result of downloading a sound file (any format) off the Internet? Yes (1) No (skip to question 10) (2) 8. Was the file that stopped you from purchasing the recording an MP3 file? (please don't answer if you answered "no" to question 7) Yes (1) No (2) 9. Why did you not purchase the full length recording? (again, please don't answer if you answered "no" to question 7) You did not like the music once you heard it (1) Didn't bother buying because you already had downloaded it (2) 10. Which kind of music have you most downloaded files of? Alternative (1) Rock (2) Classical (3) Electronic/Electronica/Ambient (4) R&B/Hip-hop/rap (5) Country (6) Blues (7) Jazz (8) Other (9) 11. What level of artists do you most download music of? Independent or local artist (1) A somewhat well-known artist (regionally very popular or well known within that genre) (2) A nationally known artist (Top-40 hits, well-established name recognition with many people) (3)
  • 36. A mix of all the above (4) 12. Do you own a Diamond Rio Player (a Walkman-like device that plays MP3 files)? Yes (1) No (2) 13. Do you own a CD-ROM writer? Yes (1) No (skip to question 15) (2) 14. Have you used the CD-ROM writer to make CD's with songs downloaded off the Internet? (please do not answer if you answered "no" to question 13) Yes (1) No (2) 15. What is your age? 16. What is your gender? Male (1) Female (2) SUBMIT Your Answers RESET ALL Your Answers Thank you for your time and cooperation!
  • 37. Statistical Methods Used The most used statistical method was the frequency distribution. To test the null hypothesis, a frequency distribution was utilized on questions six and eight, both of which showed that the MP3 format is having an influence on the respondent’s music purchasing habits. Several cross tabulations and bivariate chi-square analyses were performed on various questions. The cross tabulation of questions one and three, which revealed no statistically significant relationship between time spent on the Internet and the number of MP3 files downloaded, although the respondents who did spend the most time on the Internet downloaded the most MP3 files, albiet not in a statistically significant relationship. There was also no relationship found: between owning a CD-ROM writer and the number of MP3 files downloaded; between the level of artist (question eleven) and using a CD-ROM writer to make CDs; between the number of MP3 files downloaded and the downloading of pirated songs; and there was no relationship between MP3 downloads and the genre of music most downloaded. Additional statistics on question fifteen were computed and are as follows: Statistics For Age Variable N Mean Median Minimum Maximum Age 50 22.960 20.500 14.000 44.000 Page 35
  • 38. Graphs with Explanations Types of Recordings Downloaded Live 27.8% Rare 22.6% 13.5% Regular 22.6% 27.8% Promo 13.5% Sample 13.5% 13.5% 22.6% 22.6% The above graph illustrates the results of question four on the survey. It shows the kind of recordings that the respondents most downloaded., with live (concert) recordings slightly ahead of rare and promotional recordings. Page 36
  • 39. Influence of MP3 on Purchase of Music 40 Bought a CD becuase of MP3 CD Purchase NOT influenced by MP3 Did NOT buy a CD because of MP3 30 Did NOT buy a CD, but not because of MP3 20 33 10 19 11 0 5 This bar chart shows the influence that the MP3 format is having on the music purchasing habits of consumers. The first bar on the left shows that the majority of respondents (33) who have bought a full-length recording as a result of downloading a file from the Internet have done so because they downloaded a MP3 file. The second bar represents the six respondents who did purchase a full-length recording because of a file download, but it was not an MP3 file that influenced them. The third bar illustrates that 19 respondents did not purchase a full-length recording because they downloaded an MP3 file, and the fourth represents the 11 people who did not purchase a full-length recording because of of another type of sound file download. Page 37
  • 40. Reason For Not Purchasing CD Didn't Like Music 44% Already Had the Music 16% Not Applicable 40% 40% 44.0% 16.0% This last pie chart gives the respondents reasons for not purchasing a full-length recording (a CD), as found in question nine. 44% of the respondents who did not purchase a full-length recording did so because they did not like the music, and 16% of the respondents did not make the purchase because they had already downloaded the song and did not bother the purchase the actual CD. This illustrates that the majority of people who are downloading MP3s from the Internet are using the technology to sample music before purchasing it. The results of this question represents a great opportunity for marketing possibilities in the music industry, as it shows that music consumers want to be able to sample music before making a full purchase, and the MP3 format is a great way to do it. It also illustrates an acceptance of the digital distribution of music on the behalf of the consumer. Page 38
  • 41. CONCLUSIONS Accept or Reject the Null Hypothesis with Rationale The null hypothesis should be rejected, based on the results of questions six and eight. These two questions, asking the respondent if their purchasing habits had been influenced by the downloading of an MP3 file, resulted in 66% stating that they had bought a CD or other full- length recording because they downloaded an MP3 file, and 16% (eight respondents) stating that they had not purchased a full-length recording because they downloaded the MP3 file of the performance. Conclusions Not only has the MP3 file format had an influence on the purchasing habit of music consumers, but it is a positive effect as well. 66% of the respondents had bought a full-length recording because of a downloaded MP3 file, but only 38% had not bought a full-length because of a MP3 file. Of the 38% (19 respondents) that did not buy a full-length recording, only eight of them did so because they already had the recording they wanted and didn’t bother buying it. The others (44% of 50 respondents) did not purchase the CD becuase they did not like the music. These figures show that when a person downloads a sound file, illegal or not, they are very likely to purchase the physical recording (on CD, tape, etc.) after hearing the digital version of it. Page 39
  • 42. RECOMMENDATIONS Recommendations Based on Findings Based on the findings of this research, it is recommended that the music industry make every effort to embrace the new technologies that are emerging on the Internet, rather than try to fight them. Even with a significant number of artists losing royalties, the proliferation of digital files of songs on the Internet and the World Wide Web is having a positive influence on the purchasing habits of consumers. Finding a way to meet consumers’ desire for digitally distributed music while respecting the artist’s rights is the key to the future of music distribution. Recommendations for Future Research For future research, it is recommended that a larger sample be used, and that more of an attempt be made to to reach a variety of Internet audiences outside of the newsgroups. Also, an additional question should be added to a future research questionnaire asking the respondent if they would have bought the full-length recording anyway if they had not downloaded the MP3 file. This will help to determine if the MP3 file truly had a positive motivating influence in the purchase decision of the consumer. Page 40
  • 43. WORKS CITED “Diamond Multimedia to Temporarily Delay Shipment of the Rio PMP200 Portable Music Player.” 19 Oct. 1998 <www.mp3.com/news/112.html>. Hellweg, Eric. “The Sound of Money.” Business 2.0 Sept. 1998:114-116. “IBM’s New Spin on Music.” Business 2.0 Oct. 1998: 14. Krochmal, Mo. “Music Industry Unprepared for MP3.” TechWeb 16 Sept. 1998 <www.cmp.com>. Lipton, Beth. “Digital Music Hits Sour Note.” CNET News.com 15 July 1998 <http://www.news.com/News/Item/0,4,24244,00.html>. Lipton, Beth. “Net Music Pirates Face Lawsuits.” CNET News.com 13 May 1998 <http://www.news.com/News/Item/0,4,22060,00.html>. Lipton, Beth. “Music Agencies Want Net Money.” CNET News.com 15 April 1998 <http://www.news.com/News/Item/0,4,21127,00.html>. Page 41
  • 44. Maclachlan, Malcolm. “ASCAP Seeks to Regulate Online Music Sites.” TechWeb 13 July 1998 <http://www.cmp.com/>. Maclachlan, Malcolm. “Record Labels Fear Net Will Kill Profits.” TechWeb 7 July 1998 <http://www.cmp.com/>. Robertson, Michael. “Motion Denied - Rio To Go On Sale.” MP3.com 30 Oct 1998 <http://www.mp3.com/news/116.html>. “RIAA Wins Restraining Order Against MP3 Recording Device.” MP3.com 19 Oct 1998 <http://www.mp3.com/news/112.html>. Robertson, Michael. “Rio Rocks Music Industry.” MP3.com 19 Oct 1998 <http://www.mp3.com/news/101.html>. Robertson, Michael. “Samsung Announces Portable Player.” MP3.com 22 Oct 1998 <http://www.mp3.com/news/113.html>. Page 42
  • 45. The content of this paper is © 1999 Derek J. Archambault and is not to be used, copied or distributed without the express written consent of Derek J. Archambault. The content of secondary sources are the subject to the rights of their respective owners and are used only in an academic manner. Page 43

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