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.