New survey showing file sharing has no impact on CD sales is making waves.

The New York Times (free registration required) has an article titled A Heretical View of File Sharing that talks about the uproar over a recent draft copy of a study by two economists released last week that appears to disprove the music industry’s assertion that file sharing harms CD sales. 

The problem with the industry view, Professors Oberholzer-Gee and Strumpf say, is that it is not supported by solid evidence. Previous studies have failed because they tend to depend on surveys, and the authors contend that surveys of illegal activity are not trustworthy. “Those who agree to have their Internet behavior discussed or monitored are unlikely to be representative of all Internet users,” the authors wrote.

Instead, they analyzed the direct data of music downloaders over a 17-week period in the fall of 2002, and compared that activity with actual music purchases during that time. Using complex mathematical formulas, they determined that spikes in downloading had almost no discernible effect on sales. Even under their worst-case example, “it would take 5,000 downloads to reduce the sales of an album by one copy,” they wrote. “After annualizing, this would imply a yearly sales loss of two million albums, which is virtually rounding error” given that 803 million records were sold in 2002. Sales dropped by 139 million albums from 2000 to 2002.

“While downloads occur on a vast scale, most users are likely individuals who would not have bought the album even in the absence of file sharing,” the professors wrote.

In an interview, Professor Oberholzer-Gee said that previous research assumed that every download could be thought of as a lost sale. In fact, he said, most downloaders were drawn to free music and were unlikely to spend $18 on a CD.

“Say I offer you a free flight to Florida,” he asks. “How likely is it that you will go to Florida? It is very likely, because the price is free.” If there were no free ticket, that trip to Florida would be much less likely, he said. Similarly, free music might draw all kinds of people, but “it doesn’t mean that these people would buy CD’s at $18,” he said.

You can imagine how well received this was by the music industry considering how vehemently they’ve argued that file sharing is an evil on scale with Saddam’s regime. Aside from the hundred or so lawsuits they’ve filed, the RIAA along with the MPAA has been involved in pushing new legislation of all kinds through various state legislators as well as a new bill in Congress that would make a federal case (literally) out of sharing files over the net. Not to mention the Justice Department’s shiny new intellectual-property task force. The music industry has torn into this new survey with the tenacity of a junk yard dog attacking an old tire.

I can say that, personally, when I was trading files back and forth with others I always treated it like similar to taping songs off the radio. There are a lot of artists out there who have one or two songs I like and that’s about it so buying a whole album is not an option. With the advent of iTunes and other services I’m less inclined to resort to the file sharing networks as I can pick up the occasional single song without breaking the bank in the process. Any album I like most of the songs on I’ll usually go out and buy and this seems to be true of most of the people I know who made use of various peer-to-peer programs in the past. It’s arguable that the industy probably loses more money from shoplifting than it does from file sharing, but rather than give up a single penny the music industry seems hell-bent on alienating its customer base by prosecuting the hell out of anyone it can.

9 thoughts on “New survey showing file sharing has no impact on CD sales is making waves.

  1. Its pretty obvious the RIAA is full of shit and always has been.
    The only survey you need to look at is look as CD sales when Napster was in full swing.
    Was the highest CD sales in history & they fluctuate with prominence of free downloads, when Napster was closed down CD sales went down, when other sites went up to replace Napster CD sales went back up, etc…

    Nothing but pure ignorance on part of the RIAA cutting their own throats spending Millions trying to shut down what amounts to excellent free advertising. DOH

  2. Personally, I’ve given up on file trading, because it’s just not that efficient.  There’s a lot of crappy music available, but decent blues is fairly hard to come by.

    On the other hand, Total Recorder will record anything that goes through your soundcard, and then split the files, automatically, into separate tracks.  In combination with Jukebox, and an “artist on demand” subscription (30$ a year), it lets me get a lot of blues music that would otherwise be unavailable to me—

    I’m not sure if that’s illegal, or not.  But then again, I’m not sure if taping a radio show is illegal or not.

  3. Technically? Taping a radio show for your personal use is legal. Handing out copies of your taped show is not.

    In much the same way that making MP3s of your CD collection for your personal use is completely legal, but handing them out (file sharing) over the Internet is not.

  4. In much the same way that making MP3s of your CD collection for your personal use is completely legal

    Provided you don’t circumvent a copy protection scheme. Feh.

  5. True, I keep forgetting about the whole DMCA aspect. I won’t get started on that, it pisses me off to no end.

  6. According to my highly scientific methics, file sharing is responsible for the loss of male television viewers between 18-35, since the rise in filesharing and the loss of viewers coincide.

    Clearly, the Television industry needs additional protections under the DMCA2 which both makes it illegal to make copies of files after the decoding of programs from little waves that fly through the air (or get sent across cable lines.)

    They also need protection in the form of mandatory network television watching, so that free TV remains a way of life in America.

    In fact, I think I’ll start a lobby group (SIAA Sedentary Idiots of America) to help push my important ideas on television through congress.

  7. a great article and I concur with your opinion Les.  I have also wondered why the economy has never been mentioned as a possible source for the decline in CD sales.  Given an $18 CD, parents who have loss their jobs or fear losing their jobs tend to tighten the belt, and CD purchases, in my opinion, are one of those luxuries first to go.

    I think the RIAA and the music industry are going about this the wrong way with their gestapo tactics.  Sites like itunes are a good start.

  8. You can prove anything you wish with statistics. After all ‘complex mathematical formulas’ was used to create that book “The Bible Code.” One problem I have with the “spike” theory is that it does not take into account that music sales are constant. After all in certain months you have a great deal of popular artist releasing their new albums.

    But even if illegally downloading music increases the amount of music purchase, it is the right of the music industries to sue those who download or upload simply because it is a breach of the copyright.

    It is true that not all who download would have bought the CD. But there will be those who wanted to buy the CD but chose instead to download. For sites like iTunes to succeed one must first reduce the pirated downloads. For no matter how cheap you sell, you cannot compete with free. Furthermore if no action is being brought the music industry may risk losing existing customers. If everyone is breaking the law and not getting punished and those who do not break the law end up being worse off (spend the money) there will be an incentive for these people to simply stop buying.

    I believe that contributory infringement should be imposed on universities where students have used their networks to download. And the only way universities can be found innocent is if they have taken reasonable measures to prevent such actions such as monitoring their traffic and expelling students.

    As for the economic argument, decline in music sales began before the economy took a plunge. Although it is logical that when times are bad purchase of CDs would fall. But let us take this argument further. A person with less pocket money or just less income would want to tighten their belt so they decide that instead of saving money on other areas such as going to a movie of buying that cup of coffee at starbucks they decide simply to download the music they really like rather than buy it with money saved. And in thus a person who would have bought the CD would now not buy it because of the download.

  9. hi
    I like the compulsory tv idea I can think of quite a few people I would like to strap to a chair and force feed the mostly mindless garbage that passes for entertainment.
    Lets start with the people who produce this rubbish.
    The reason for drops in cd sales is due to all the mindless wannabees who used to buy this crap have started making it instead.
    Starsearch anyone? proves both points.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.