The Effect of File Sharing on Record Sales An Empirical Analysis
Abstract: For industries ranging from software to pharmaceuticals and entertainment, there is an intense debate about the level of protection for intellectual property that is necessary to ensure innovation. In the case of digital information goods, web-based technologies provide a natural crucible to assess the implications of reduced protection because these technologies have drastically lowered the cost of copying information. In this paper, we study the impact of file-sharing technologies on the music industry. In particular, we analyze if file sharing has reduced the legal sales of music. While this question is receiving considerable attention in academia, industry and in Congress, we are the first to study the phenomenon employing data on actual downloads of music files. We match 0.01% of the world’s downloads to U.S. sales data for a large number of albums. To establish causality, we instrument for downloads using data on international school holidays and technical features related to file sharing. Downloads have an effect on sales which is statistically indistinguishable from zero. Moreover, our estimates are of moderate economic significance and are inconsistent with claims that file sharing can explain the decline in music sales during our study period.
“Downloads have an effect on sales which is statistically indistinguishable from zero. Moreover, our estimates are of moderate economic significance and are inconsistent with claims that file sharing can explain the decline in music sales during our study period.”
Thieves or Customers? File-sharing in the Digital World (Olle Findahl – World Internet Institute)
Abstract: The possibility to digitalize music has made music easier and cheaper to produce, distribute, store and manifold. The Internet users, especially the young ones with technical skills and a strong interest in music, realized early these new possibilities that Internet was offering. In this paper we are presenting results that show that file-sharing stimulates the interest for music. Even if old favourites are most popular, many down loaders also discover new music and new artists. It also happens frequently that down loaders buy music that they have downloaded and already listened to. Most of them are willing to pay some money for it if the interface is easy and user friendly, the price is right, the diversity and quality is good. Even if the majority of file shares say that they buy the same or more music than before, there is, however, a minority of 10-35 percent who say that their file-sharing have decreased their purchases.
“Many downloaded tunes are not substitutes of purchases, as they never had been bought if file-sharing did not exist. And as a whole the negative effects of filesharing on the society seems to be of minor importance.”
Abstract: The primary objective of this paper is to determine how the downloading of music files through Internet peer-to-peer (P2P) networks influences music purchasing in Canada. P2P networks permit members to transfer digitally-stored information to one another over the Internet; popular examples include BearShare, LimeWire and eMule. Using representative survey data from the Canadian population collected by Decima Research on behalf of Industry Canada, we attempt to quantify this economic relationship, while accounting for other factors that influence music purchasing. We undertake a variety of econometric estimations for the population of Canadians who engage in P2P file-sharing (P2P “downloaders”), as well as for the whole Canadian population. To our knowledge, this is the first study on P2P file-sharing that analyzes original and representative microeconomic survey data from the Canadian population. Few previous studies have analyzed representative microeconomic data, for Canada or any other country.
“In the aggregate, we are unable to discover any direct relationship between P2P file-sharing and CD purchases in Canada. The analysis of the entire Canadian population does not uncover either a positive or negative relationship between the number of files downloaded from P2P networks and CDs purchased. That is, we find no direct evidence to suggest that the net effect of P2P file-sharing on CD purchasing is either positive or negative for Canada as a whole. These inferences are based on the results obtained from estimation of the negative binomial models.”
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