30
Aug
10

How Bad Is Music File Sharing? – Part 12

Bounie et al. conducted an anonymous online survey in two French graduate schools in order to examine the factors that influence the probability to increase/decrease CD purchases after acquiring MP3 files. The results originally published in a 2005 working paper suggest “(…) that there exist two populations of music consumers: people who sample music a lot (explorers) and those who do not sample (the pirates)” (Bounie et al. 2005: 1). This result indicates that music fans among students prefer to sample music and, therefore, their purchases of CDs tend to increase, whereas students with little interest in music use MP3 files as direct substitute for CDs. More details you can find here.

In the online survey, which was administered from May 26 to June 3, 2004, the respondents were asked on their behavior on music consumption, file sharing and their attidute towards downloading. Overall, 589 students returned the questionnaire, but only 352 students answered the most relevant questions. Thus, this is the sample used in the econometric analysis.

Descriptive statistics tell us that 93% have an Internet broadband access. 90% spend at least 5 hours per day online. 82% listen to music at least once a week, and 53% listen to more than 10 hours per week. 44% visited a record store, 36% went to concerts and 33% play an instrument. More than 35% of the respondents purchase 5 CDs or more each year, with an annual average of 5.5 CDs. However, 16% claimed they did not purchase any CD. The average number of CDs owned is around 80. However, 31% of the repondents owned more than 100 CDs.

88% obtained free music. Among these 70% download files from P2P networks, 74% from internal networks, and 58% got files by physical exchange (CD-R, USB sticks, etc.). More than 50% of the respondents admitted that they had more than 500 MP3 files on their computers. Less than 10% declared that they had any. 73% of MP3 owners preserve more than half of the files. Therefore, the authors concluded that “pirates” tend to get free MP3 files in order to acquire a music library at no cost, whereas “explorers” are music samplers who tend to delete files in which she/he is not interested in order so save space and time organizing files.

93% who obtained free music claimed that they have discovered new artists through listening to MP3s, and 70% reported that sampling led them to purchase CDs that they would not have purchased otherwise, which indicates a strong “sampling effect”. The autors concluded “(…) that people who sample music in order to purchase new music both download a lot and purchase a lot” (Bounie et al. 2005: 10). On the other hand, there are much more “pirates” who did not buy any CD than “pirates” who purchased more than 10 CDs annually. However, “explorers” dowloaded more than twice as many files than “pirates”.

By estimating a multinominal logit model, the authors determined the net effect of file sharing on CD purchases. The results indicated that people with a strong taste for music (owning more than 100 CDs) have a higher probability to increase CD purchases after obtaining music for free. However, the number of MP3 files owned does not significantly increase/decrease the propensity to purchase more CDs. Finally, people who keep less than half of the MP3s (“explorers”) have a significantly higher probability to have increased CD purchases. If they keep more than half of the MP3 files (“pirates”) they tend to reduce their CD purchases.

Although the authors did not directly address the impact on CD sales, they concluded that if the “explorers” increase their music purchases by the same percentage as the “pirates” decrease them, this would lead to an overall positive effect of file sharing on CD sales. However, if the “pirates” decrease their purchases by 50% more than the “explorers” increase their purchase, overall CD sales started to decline.

On the basis of these results, Bounie et al. (2005: 16-17) suggested that new business models should better discriminate between “explorers” and “pirates” in order to extract more surplus from the true music fans.

References

Bounie, David, Marc Bourreau and Patrick Waelbroeck, 2005, Pirates or Explorers? Analysis of Music Consumption in French Graduate Schools. Working paper, Ecole Nationale Supérieure des Télécommunications Paris.

In part 13 a paper of Rafael Rob and Joel Waldfogel entitled “Piracy on High C’s. Music Downloading, Sales Displacement, and Social Welfare in a Sample of College Students” will be reviewed.

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