27
Jun
10

how bad is music file sharing? – part 3

Boorstin (2004) tested the causality between Internet access and CD sales over the years 1998, 2000, and 2001 using an economic model based on 99 U.S. metropolitan areas. Since Boostin could not directly measure Internet “piracy”, he broke down “(…) the population into different age groups in order to see how Internet access changes the predicted effect of each age group on CD sales.” (Boorstin 2004: 46). He then hypothesizes that “[i]f the effect of file sharing on CD sales is negative for all age groups, I expect the effect of Internet access on CD sales to be negative for all age groups” (Boorstin 2004:47). However, he also admitted that there are good reasons that the effects are not the same for different groups. It can be assumed that the substitution effect is higher for youths than for adults, whereas the sampling effect is stronger for adults than for youths. Therefore, he expected a more negative effect of Internet access on CD sales for youths than for adults.

Boorstin used census data for Internet and computer usage and Nielsen SoundScan data for CD sales. Boorstin split the sample into different age groups and compared those with Internet access to those with no Internet access within each group. Boorstin arrived at the following results: “For younger people, Internet access predicts a decrease in sales. For older people, Internet access predicts an increase in sales. The overall effect of Internet access is positive. (…) This strongly suggests that file sharing is not the cause of the recent decline in the record industry.” (Boorstin 2004: 57). In detail, the impact of Internet access on CD sales for the group aged 5 to 14 is insignificantly negative; for the group aged 15 to 24 there is a significantly negative effect; and for both age groups (from 25 to 44 and older than 44) Internet access is significantly positively correlated with CD sales.

Since file sharing could not explain the decline in CD sales according to Boorstin’s findings, the author could only speculate about alternative explanations: substitute entertainment products, radio station homogenization (radio formats) or macroeconomic variables. However, Boorstin pointed also to the fact that despite the economic problems for the U.S. recording industry, 2003 was the best year ever for the sales of sound recordings in Australia.

 

References

Eric S. Boorstin, 2004, Music Sales in the Age of File Sharing. Working paper, Princeton University.

In part 4 of this series I will discuss Stan J. Liebowitz’ study Testing File-Sharing’s Impact on Music Album Sales in Cities  from 2008.

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