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 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 14

In his 2006 working paper Lee investigated how price and free music availability jointly affect the consumer’s willingness to buy and how price and non-price factors (rating of singers, genre preferences, number of songs on CDs, and music consumption style) change the “free” vs. “non-free” Internet availability conditions. The results of a survey of about 500 students of Korea University in Seoul indicate that there is a weak interaction of CD prices and free music availability, whereas in the non-free Internet availability situation price has a significant effect on consumer purchasing patterns for some CDs. More can be read here:

How Bad Is Music File Sharing? – Part 7

In their working paper Curien and Moreau (2005) proposed a model of the music industry under “piracy” in which they took into account quality, variety, as well as price adjustments and showed that P2P file sharing networks could have a positive impact on the music industry as whole (recorded and live music as well as complimentaries such as ringtones). However, record companies bear almost all of the negative effect, whereas artists rather benefit from it, since royalties are often the smallest amount of their income, whereas “piracy” tends to boost live performances.

The recession in the music industry – a cause analysis

Filesharing is made primarily responsible for the decline in sales in the phonographic industry, especially in the CD segment (see the current IFPI Digital Music Report). However, serious research on filesharing behavior (see Huygen et al 2009, Andersen/Frenz 2007, Oberholzer-Gee/Strumpf 2007 (working-paper March 2004), Blackburn 2004) shows that filesharing use does not necessarily have a negative impact on physical and digital sales. But if this is not the case, then there must be other causes for the now decade-long recession. In the following I would like to discuss alternative explanations for the recession in the music industry and try to substantiate them empirically.

The CD is dead! Long live the music download?

The economic crisis exacerbates the recession in the music industry. Recorded music sales have been in sharply decline for years. Digital music offerings on the Internet and via mobile phone cannot compensate for the losses. One reason: The wrong licensing policies of the record labels.

The music industry cannot escape the general economic and financial crisis. In 2008 a dramatic slump in sales of recorded music for nearly all markets was reported. But the economic crisis only reinforces a downturn in the market for recorded music that begun already in the late 1990s. Thus, in the largest music markets the CD unit sales dropped in the period from 2000 to 2008 between 35% (United Kingdom) and 59% (USA). This recession, however, is a symptom of a paradigm shift from music delivered in form of a physical product to music as a service delivered in form of online and mobile music offerings.