Despite their legal blitzkrieg to stop online song-swapping, many music labels are benefiting from--and paying for--intelligence on the latest trends in Internet trading.
It's a rich digital trove these recording executives are mining. By following the buzz online, they can determine where geographically to market specific artists for maximum profitability.
"The record industry has always been more about vibe and hype," said Jeremy Welt, head of new media for Maverick Records in Los Angeles. "For the first time, we're making decisions based on what consumers are doing and saying as opposed to just looking at radio charts."
One company, Beverly Hills-based BigChampagne, began mining such data from popular peer-to-peer networks in 2000 and has built a thriving business selling it to recording labels.
The company, which takes its name from the Peter Tosh song lyric, "You drink your big champagne and laugh," taps directly into file-sharing networks like Kazaa's FastTrack. It checks on how often its clients' artists show up in searches or how frequently their songs are downloaded. The data can be sorted by market or geographical region.
BigChampagne also has a "TopSwaps" chart that ranks the most shared songs. Rapper Eminem was first in a recent scan, his songs downloaded more than 8.6 million times in one day.
"Our hope was that we could take the technology revolution that Napster made popular and create tools for the benefit of copyright holders," said Eric Garland, BigChampagne's chief executive.
The bountiful market research is gleaned from behavior for which the music industry otherwise shows no tolerance. Hurt by a three-year decline in music sales, the industry has sued the major file-sharing networks, along with individuals who have used them.
"It wouldn't be very smart if we weren't looking at what they're doing," Welt said.
The file-sharing companies are also taking notice. This week, Altnet threatened legal action against nine companies, including BigChampagne, that it accused of violating patents on file-identifying technology. BigChampagne denies using the Altnet technology or playing any role in helping recording companies identify users for lawsuits.
BigChampagne has certainly done well by file-swapping. It formed in July 2000, just as the Internet boom was beginning to bust, and now counts Maverick, DreamWorks, Warner Bros., Disney, and Atlantic Records among its clients. All the major labels have worked with BigChampagne "in one capacity or another," Garland said.
Traditionally, labels had relied for market research largely on commercial radio, MTV, and music store sales.
Label executives waited weeks to get feedback based on limited audience sampling--typically by randomly calling listeners and asking if they recognized a song after hearing a snippet.
Only after several weeks would they begin to get a picture of whether a single was getting heard. And until Soundscan began electronically tracking album sales in the 1990s, the industry relied only on a survey of music retailers to gauge fan interest.
The emergence of free online trading, beginning in the late 1990s with MP3.com and the original Napster, suddenly made it technologically feasible to track music consumption in a whole new way.
"It's the most vast and scalable sample audience that the world has ever seen," Garland said.
BigChampagne data are essentially a tally of what millions of music fans are doing every hour.
Peer-to-peer systems function by sending search queries and file transfers across a network of several computer users. Every time someone searches Kazaa for a song, that query is passed along the network. BigChampagne taps in as if it were a regular user and compiles the traffic flows in a database it later sorts.
"What we do in effect is act like a superuser who demands access to the network in its entirety," Garland said.
BigChampagne doesn't identify individuals or gather user names, Garland said. But by analyzing users' numeric Internet addresses, BigChampagne can still pinpoint location and give clients a sense of where an artist is most popular.
By using BigChampagne, labels can release a song to radio and, if there are signs demand is brewing on the song-swapping networks, immediately make the single available on online retailers like Apple's iTunes Music Store, Welt said.
The music industry's appetite for data is only growing as online sales begin to replace CDs.
Earlier this year, BigChampagne granted a sales and licensing agreement to Premier Radio Networks, whose Mediabase service tracks radio airplay. The deal fuses Mediabase's tracking data with BigChampagne's, giving subscribers a way to see whether airplay or radio promotions spur online music downloads or sales, Garland said.
Sales data from iTunes and other licensed music services can, of course, be in and of themselves excellent indicators of a song's popularity.
"When someone plops down 99 cents to buy a single, that shows a higher level of interest than just getting it for free," Welt said.