How bad is YouTube?

In the past few years several studies on the impact of P2P music file sharing on recorded music sales were published. They came to very different and even conflicting results, as I highlighted in a 25 part blog series. A recently published study now shifts the focus from file sharing to music video online streaming. R. Scott Hiller of Fairfield University and Jin-Hyuk Kim of University of Colorado Boulder analysed the sales displacement effect of YouTube in a paper entitled “Online Music, Sales Displacement, and Internet Search: Evidence from YouTube“. They concluded that Warner Music Group sold significantly more units of its Billboard 200 albums, when the Warner content was removed from YouTube due to a conflict on licensing fees. In addition, they found no evidence that the blackout had a negative promotional effect for Warner artists.

You can read more about this study and my assessment of the results here:

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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 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.

How Bad Is Music File Sharing? – Part 10

Wendy Chi examined in a John Hopkins University working paper (Chi 2008) whether file sharing crowds out purchases of physical and digital music by using Forrester Research’s consumer mail surveys for the years 2004 to 2006, which are representative samples for the U.S. and Canada. In her study, Chi comes to the result that “illegal” downloads and physical and non-physical music purchases are positively correlated and that the sampling effect of file sharing dominates the substitution effect. Therefore filesharing does not necessarily hurt music sales. Why this should be the case can be read here.

How Bad Is Music File Sharing? – Part 5

Liebowitz tried to provide theoretical evidence in several papers (2002, 2003, 2005) that there is negative impact of P2P file sharing on record sales. The most elabatored paper is his article in the Journal of Law and Economics, which fused earlier research on this topic (Liebowitz 2006). Liebowitz’s arguments are based on microeconomic theory and he identifies four effects of file sharing that might have an impact on record sales: substitution, sampling/exposure/penetration, network effects and indirect appropriability. Liebowitz analyses all four effects and concludedthat the substitution effect is dominant over the sampling effect, which can be also negative under specific circumstances. All other effects that are positively correlated with record sales are negligible. Further, he investigated other factors that might affect record sales, but none of them are able to explain the decrease of record sales in the past 10 years.

how bad is music file sharing? – part 2

In his working paper entitled “On-line Piracy and Recorded Music Sales”, David Blackburn used a dataset combining weekly album sales data from Nielsen SoundScan with data of file sharing activity on the 5 largest sharing networks in the U.S. (Kazaa, Grokster, eDonkey, iMesh, and Overnet) provided by BigChampagne over more than 60 weeks between September 2002 and November 2003. The results showed that “(…) file sharing is reducing the sales of ex ante popular artists while redistributing some of these lost sales to smaller, less well known artists” (Blackburn 2004: 41). However, “(…) the aggregate effect of file sharing on sales is quite strongly negative” (Blackburn 2004: 6). “[T]he estimates suggest that a 30% across-the-board reduction in the number of files shared would have resulted in an additional 66 million albums sold in 2003, an increase of approximately $330 million in profits” (Blackburn 2004: 6).

how bad is music file sharing? – part 1

The Dutch study is based on a representative survey of 1,500 Dutch internet users, capturing their behavior and motives in downloading music, films and games, but it also investigated their purchasing behavior related to music, DVDs and games. Although the authors found out that music producers and publishers suffered revenue losses due to file sharing of about EUR 100 million a year, the welfare gains totalled around annually EUR 200 million in the Netherlands.