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MusicDish Industry Survey Results - MP3: DIGITAL MUSIC FOR THE MILLENNIUM? An MP3.com & MusicDish collaborative project! ...FINAL RESULTS... You can look for the white paper of "MP3: Digital Music for the Millennium?" with commentary and analysis from MusicDish's survey team: Russell Kibbee, Cowboy Surfer, Herve Dang, and Sounni de Fontenay on June 28th. Demography (817 respondents) Musician 29% Fan 25% Other 8% Engineer 8% Executive 7% Manager 5% Media 5% Producer 4% Programmer/Designer 4% Promoter/Publicist 4% A&R 1% grfx * Mp3 was the most popular format used by survey respondents (70%) although the survey was biased to the extent that most participants are likely to be mp3 users due to the co-marketing with MP3.com. The first MusicDish Industry Survey, "Music and Copyrights in the Digital Age", found mp3 used by 23.3% of participants behind RealAudio at 68.6%. 1. What format do you most use to listen to music on your PC or Mac ? mp3 70% RealAudio 17% wav 4% Don't use one 2% Other 1% MSAudio 1% LiquidAudio 1% Shockwave 1% Avi 1% AIFF 1% a2bmusic 0% Abstention 1% grfx 2. Does your computer have the capability to play mp3 files? Yes it does 90% No it doesn't 5% Abstention 5% grfx 3. Why do you use mp3s ? Near-CD Quality 17% Wide acceptance - availability 9% High level of compression fast download 8% Flexibility & ease of use 6% Underground status 3% All of the above 48% None of the above 4% Other 3% Abstention 2% grfx * Consumers and independent artist were seen by respondents as the big winners from the mp3 format while major labels, retailers and distributors were the big losers. For major labels, the emergence of mp3 shifts control from the label to the artist by providing a cheap distribution channel, although major artist may be the real beneficiaries due to their potential marketing clout and established fan base. 4. Whom do you feel has the most to gain from mp3s? Consumer 42% Indie artists 37% Hardware software developers 4% Major artists 4% Indie labels 3% Major labels 2% Distributors 2% Publishers 1% Copyright holders 1% Retailers 1% Abstention 3% grfx 5. Whom do you feel has the most to lose from mp3s? Major labels 42% Retailers 18% Distributors 14% Copyright holders 9% Major artists 5% Publishers 2% Indie artists 2% Consumer 1% Hardware software developers 1% Indie labels 0% Abstention 6% grfx * Regarding whether there is an actual commercial market for downloadable music, the survey was clear: 47% reported being willing to pay for downloadable singles, with 32% paying between $1 - $2, while over half were willing to pay for full length albums, including 47% paying between $5 - $10. The results are especially encouraging considering the impact the Internet and New Media has had on production, distribution and marketing. 6. Has the downloading of mp3 files... Not changed your music purchasing habits 62% Increased your purchasing of CDs 19% Decreased your purchasing of CDs 13% Abstention 6% grfx 7. Would you pay to download singles? Yes 47% No 28% Undecided 24% Abstention 1% grfx 8. How much would you be willing to pay? Less that $1 46% $1 - $2 32% $2 - $3 6% More than $3 4% Abstention 12% grfx 9. Would you pay to download full length recordings (albums)? Yes 58% No 21% Undecided 20% Abstention 1% grfx 10. How much would you be willing to pay? Less that $5 32% $5 - $10 47% $10 - $15 9% More than $15 1% Abstention 11% grfx 11. Will you stop downloading mp3 files if you are charged for them? No 36% Don't know 33% Yes 29% Abstention 2% grfx * 65% of respondents felt that the music industry has not been responsive to the online music community. This perception is reinforced by the portion of respondents which found the current copyright and licensing system difficult to use (42%) and unsuitable for the Internet (50%). As a result, a majority of respondents believe that drastic reform is required to the existing system. This is at odds with the actions by industry representative such as the BMI, ASCAP and major labels which have sought to the contrary to extend the system to the Net. This is explained by the "legacy paradox" in which these players find themselves. In the case of major labels, fear of losing control of marketing/distribution to new media distributors such as AOL, major portals, Amazon.com and MP3.com has left them in a defensive position to protect and extend those legacy networks. 12. Do you feel that the music industry has been responsive to the online music community? No 65% Yes 21% Undecided 13% Abstention 1% grfx * A surprising proportion of respondents questioned the legality of mp3 usage (42%). More worrisome, 56% felt that the format has encouraged the illegal usage of mp3s. On the other hand, the industry proposed solution for online music distribution, SDMI, was not favored by respondents (69%). Instead of mandating a secure format as proposed by the RIAA in SDMI, 71% felt that it should be the choice of the respective artist or label. 13. Do you feel that the majority of mp3s are used legally? No 42% Yes 33% Don't know 24% Abstention 1% grfx 14. Do you support the Recording Industry Association of America's (RIAA) Secure Digital Music Initiative (SDMI), which is seeking to establish a standard for the secure distribution of digital music? No 41% Yes 31% Undecided 27% Abstention 1% grfx 15. Is the current system of licensing and copyrights easy to use? No 42% Don't know 34% Yes 23% Abstention 1% grfx 16. Is the current licensing/copyright system suitable for the Internet and New Media? No 50 Undecided 32% Yes 17% Abstention 1% grfx 17. Should the current licensing/copyright system be... Major overhaul 42% Undecided 30% Left alone 17% Eliminated 9% Abstention 2% grfx 18. Do you feel that there should be a central licensing regime/agency or should there be various systems and agencies for the licensing and copyrighting of music for the Internet? Should not be regulated 37% Multiple regimes 33% Central regime 28% Abstention 2% grfx 19. Do you feel that all digital music should be in a secure format or unsecure? The artist's or label's choice 62% Unsecure 15% Secure 13% Mix of both 9% Abstention 1% grfx 20. Do you feel that the mp3 format has encouraged people to download illegal recordings? Yes 56% No 25% Don't know 16% Abstention 3% grfx * As would be expected, 64% of respondents do not own a portable mp3 player while 22.3% own the Diamond "Rio Player". The perceived potential market opportunity by new and existing vendors was evident by their significant presence in the expo hall of the summit. Reinforcing the point, 84.2% answered that they would buy a mp3 capable automobile player. 21. Which is your preferred Portable mp3 Player? Don't own one 64% Diamond Multimedia "Rio Player" 22% Samsung Electronics "yepp" 2% Saehan Eiger Labs "MPMan" 2% MP3Kit.com "Trackz" 1% Pantis GmbH "Mplayer3" 1% Other 6% Abstention 2% grfx 22. Which is your preferred mp3 Player software? WinAmp 2.10 51% RealPlayer G2 12% MusicMatch 3.1 9% Windows Media Player 5% Sonique .95c beta 4% AudioCatalyst 2.0 1% Jet-Audio 4.02 0% AudioSoft's Virtuosa Gold 3.1 0% HyCD Play & Record 0% Unreal Player Max 1.29 0% Other 8% Don't have one 6% Abstention 4% grfx 23. There is a good possibility that future SDMI compliant portable digital music players will either not play the current "unsecure" mp3 format or will play them for a limited time (with an expiration date). Do you feel that this will have a positive or negative outcome? Negative 72% Undecided 15% Positive 11% Abstention 2% grfx 24. Would you buy an mp3 capable automobile player (to play 10 hours of music per CD)? Yes 85% No 14% Abstention 1% grfx 25. If yes, would you transfer all of your collection to this format? Yes 59% No 35% Abstention 6% grfx 26. As a musician, band or label do you offer mp3s of your music? Yes 48% No 29% Abstention 23% grfx 27. As a musician, band or label have mp3s helped you? Build a fan base 21% Sell music 5% Get press attention 2% Get signed to a label 0% All of the above 13% Other 18% Has not helped 13% Abstention 28% grfx For question, contact us at info@musicdish.com -- Surveys Index

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