Sat, 12 Jul 2003

Online Music and Bandwidth

Oh, good grief....

What's holding back online music?. There has been no shortage of bright ideas, but so far nobody has figured out how to put it all together and find a business model that excites consumers. Experts at Wharton examine why. [CNET News.com]

Methinks the "experts" at Wharton need to brush up on their math, and dig a bit deeper into their sources.

According to these folks, Apple's iTunes is a bust. They admit that iTunes users, representing 2% of the overall PC market (Apple only), have purchased 5 million songs in two months. They do point out that when a Windows version is out later this year, use could "mushroom". But then they say:

But Fader and Black note that 5 million downloads is a drop in the bucket compared with that of the illegal market. "To compare the two (legal and illegal) is sort of apples and oranges, when you look at their usage," Black notes. An estimated 5 billion tracks are traded on peer-to-peer networks such as Kazaa every month. Kazaa's file-sharing software has been downloaded nearly 300 million times. According to one survey, more than 40 million Americans use file-sharing software at least once a month. Fader points out that iTunes reinforces awareness of the benefits of downloading. "In some sense, it legitimizes the illegal services."

Now, look at some of these numbers: if 40 million Americans use file sharing services, and they trade 5 billion tracks per month - assuming that each track is 2 MB, which is a reasonable average - what else are these people doing with their computers? Because that number represents a very sizeable percentage of all the bandwidth they have available! That works out to 125 songs each - and at 2 MB per sone, that 250 MB [on disk] per month!

Statistically, only 30% of these folks have DSL at 512kbps (a very liberal assumption) and that the rest are still on dialup at 56kbps (see Google).

Do the math.

Perhaps Wharton's 5 billion swap number represents the number of songs available for trade - I don't see how that number could actually be traded over the Net each month, even via distributed P2P, while the vast majority of folks still use dial up!

Further research leads me to think that perhaps the Wharton marketdroids actually counted each "share" twice - The Toronto Golble and Mail quotes the RIAA itself in this article as follows:

...more than 2.6 billion copyrighted files, mainly music files, are illegally downloaded each month...

The RIAA is actually a bit more reasonable here, even though I believe I could prove that their number is grossly inflated. I think it's safe to say that Wharton is way off on their estimates of P2P usage...

Meanwhile, back at the Apple iTunes Store ... extrapolate 5 million downloads by 2% of computer users to the full base of computer users. I don't know about you, but I come up with 250 million downloads. Per month. At a dollar per song, that's 3 billion dollars per year.....

But according to Wharton:

Fader and Black say it's far too soon to say that Apple has found the best music model.

If Apple reads this silly report and decides it's right, and wants to get rid of iTunes, they could always give it to me! I think I could handle a business like that .....

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