How Bad Is Music File Sharing? – Part 24

In a recent working paper by Robert G. Hammond of North Carolina State University the impact of album pre-releases in file-sharing networks on physical and digital album sales is analyzes. The paper comes to the conclusion that album sales benefit from album leaks. “[A]n album that became available in file-sharing networks one month earlier would sell 60 additional units”. In addition the results also suggest that popular artists benefit more from file-sharing than newcomers and less establised artists. In the following the analytical and methodolocigal background and the results of this paper are highlighted.

How Bad Is Music File Sharing? – Part 23

The economist Jordi McKenzie of the University of Sydney published the first study on the impact of music file sharing on music sales (physical and digital) in Australia. His article in the Australian Economic Papers entitled “Illegal Music Downloading and Its Impact on Legitimate Sales: Australian Empirical Evidence” is based on a working paper from August 2009 and was published in December 2009.

With a similar methodological approach to Oberholzer-Gee and Strumpf (2007) he came to the conclusion that “(…) the evidence suggests no discernible impact of dowloading activity on legitimate sales“. More details on his approach and his findings are given here:

How Bad Is Music File Sharing? – Part 22

The objective of Brigitte Andersen and Marion Frenz’s study entitled “The Impact of Music Downloads and the P2P File-Sharing on the Purchase of Music”,(2007/08), which was later published in the Journal of Evolutionary Economics under the title “Don’t blame the P2P file-sharers: The Impact of Free Music Downloads on the Purchase of Music CDs in Canada” (2010) was to determine how the downloading of music files through P2P networks influences music purchases in Canada. They used data from a representative survey of the Canadian population aged 15 and older collected by Decima Research for Industry Canada, in which 2,100 repondents were also asked how many CDs and non-physical music tracks they purchased in the last two months and how much they paid for it on average. They show in their paper “(…) that P2P file-sharing is not to blame for the decline in CD markets. Music markets are not simply undermined by free music downloading and P2P file-sharing, due to the sampling effect” (2010: 735).

How Bad Is Music File Sharing? – part 21

A widely discussed study on music file sharing is Felix Oberholzer-Gee’s and Koleman Strumpf’s paper ”The Effect of File Sharing on Record Sales: An Empirical Analysis”, which was originally made accessable online to the public as a Harvard Business School working paper in 2004 and was eventually published, after revisions, in the Journal of Political Economy 2007.

How Bad Is Music File Sharing? – Part 20

In an article entitled “The Effect of Digital Sharing Technologies on Music Markets: A Survival Analysis of Albums on Ranking Charts” published in Management Science, Bhattacharjee et al. (2007) made a comparative analysis if the survival time of albums in the U.S. Billboard top 100 weekly charts differs after the time period of mid 1998 to 2000. This time span represented a watershed period in der music industry’s history. In these years the MP3 format was introduced and rapidly gain popularity. The Digital Millenium Copyright Act was passed in the U.S. Napster was emerged und popularized the use of P2P file sharing networks. DVDs gained popularity as well as online chat rooms and computer games and it was the beginning of a downturn of the overall economy after the dot.com bubble bursted.

How Bad Is Music File Sharing? – Part 19

The study of Tanaka (2004) “Does File Sharing Reduce Music CD Sales?” was based on the the one hand on micro data of CD sales, which were collected on a weekly basis of 30 best selling CDs from June to November 2004 in Japan. On the other, download figures were obtained on each weekend in the sample period from the completely decentralized and most popular Japanese file sharing network Winny. In addition, the author also carried out a non-representative user survey among students on file sharing and CD purchases. Neither the micro data based estimation results nor the students’ survey indicated a negative impact of music file sharing on record sales.

How Bad Is Music File Sharing? – Part 18

After several revisions (Hong 2004, 2005, 2007), Hong published in July 2011 a working paper entitled “Measuring the Effect of Napster on Recorded Music Sales”, in which he tried to measure the effect of file sharing on recorded music sales. Since he did not directly observe file sharing activity, the author compared a treatment group of Internet users with a control group of non-Internet users before and after the advent of Napster in 1999 and attempted to eliminate the time effect and isolate the so-called “Napster-effect”.

How Bad Is Music File Sharing? – Part 17

Michel’s working paper is based on 4 chapters of his dissertation thesis entitled “A Theoretical and Empirical Analysis of the Impact of the Digital Age on the Music Industry”. In addition two articles in the Review of Economic Research on Copyright Issues are also based on the findings of the dissertation thesis. Michel constructed a model of interactions between artists, record labels, and consumers, which suggests that file sharing may have been undertaken by consumers who were previously not in the market for music. In order to test his model, Michel provided evidence, based on Consumer Expenditure Survey (CEX) data, that “(…) file sharing decreased CD sales by about 4 percent, though the estimate is statistically insignificant” (Michel 2005: 30).

How Bad Is Music File Sharing? – Part 16

In the article “Do Artists Benefit from Online Music Sharing?”, which is based on a 2003 working paper, Gopal et al. (2006) present a model of music file sharing to explain the impact of technological and economic incentives to sample, purchase, and pirate music. The results of the model indicate that lowering the cost of sampling by file sharing will motivate more music consumers to purchase music online. In contrast, the restriction or even prevention of sampling will hurt the music industry in the long run. Read more here:

How Bad Is Music File Sharing? – Part 15

In his 2009 working paper, Leung constructed a dataset from 884 undergraduate students at the University of Minnesota to demonstrate that music file sharing does hurt record sales. However, music file sharing contributes approximately 20% to iPod sales. How the author came to these results by a conjoint analysis is further discussed below.