Downloads and sales

Here’s an interesting analysis—‘The Effect of File Sharing on Record Sales
An Empirical Analysis’ by Felix Oberholzer and Koleman Strumpf, pdf version of the manuscript .

The paper is forthcoming in Journal of Political Economy.

And the abstract:

A longstanding economic question is the appropriate level of protection for intellectual property. The Internet has drastically lowered the cost of copying information goods and provides a natural crucible to assess the implications of reduced protection. We consider the specific case of file sharing and its effect on the legal sales of music. A dataset containing 0.01% of the world’s downloads is matched to U.S. sales data for a large number of albums. To establish causality, downloads are instrumented using technical features related to file sharing, such as network congestion or song length, as well as
international school holidays. Downloads have an effect on sales which is statistically indistinguishable from zero, despite rather precise estimates. Moreover, these estimates are of moderate economic significance and are inconsistent with claims that file sharing is the primary reason for the recent decline in music sales.

Here’s another nice quote from the paper:

Even in the most pessimistic specification, five thousand downloads are needed to displace a single album sale. We also find that file sharing has a differential impact across sales categories. For example, high selling albums actually benefit from file sharing. In total the estimates indicate that the sales decline over 2000-2002 was not primarily due to file sharing. 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.

Category: music

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