Why Aren't Kids These Days Downloading Music?

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For years the greatest fear of music titans was the pimply masses of teens downloading their artists' music and sharing it with friends, so that the musicians' product was proliferating even as the profit margins were shrinking. (Does that kind of thing sound familiar?)

But a new report suggests that illegal music downloading has fallen off more than 60 percent in the last two years, as teens are increasingly turning to streaming sites, such as YouTube, Pandora, Grooveshark and others. As they leave file-sharing behind, is this good news for the music industry?


No, but it's better bad news than the old bad news. When kids download music from illegal sites, the music industry gets nothing out of it. But streaming sites usually pay back money to the music industry, even if it's not enough to make up for the foregone album sales. Moreover, the sites register users and can market to them -- tickets, gear and more bands. Here's author Alexandra Topping on the possible benefits of a world of streaming music.

Even though users of streaming services are not necessarily buying more music, the industry benefits by learning more about fans' tastes. Steve Purdham, CEO and founder of We7, a music streaming service and download store, said: "They may not buy an album, though they have that opportunity, but you can sell them tour tickets and a T-shirt of their favourite band." (sic -- British)

I don't expect this to rescue the music industry from its downturn. Although digital sales were up about 42 percent in 2008, physical sales of albums collapsed by 43.5 percent. But I think the report is interesting because it matches pretty closely the music listening tendencies of most of my friends. After early college stints living extravagantly off music sharing programs, most of us began using Pandora -- an online radio station that allows you to design playlists of music around the style of your favorite artists -- at internships. In the last year, I've used Pandora and Grooveshark quite often, but less so now that I have to be churning out blogs all day.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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