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Volume 41, Issue 13
April 20, 2004
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April
20, 2004
File sharing may benefit music
industry
Kathy Gilsinan
Columbia Daily Spectator
(U-WIRE) NEW YORK - As the Recording Industry Association of America
continues to cite music piracy as the primary cause of its profit slump,
a recent study plays a slightly different tune.
In a study released March 29, Professors Felix Oberholzer-Gee of Harvard
and Koleman Strumpf of the University of North Carolina at Chapel Hill
claim that the effect of music piracy on recording industry revenue is
"statistically indistinguishable from zero."
"One motivation to do the study was it struck us as strange, given
the importance of this topic, that we have very little reliable knowledge,"
Oberholzer-Gee said. Even so, he said, "everybody seems to have a
really firm opinion." While recognizing that file sharing does reduce
the cost of obtaining music, Oberholzer-Gee and Strumpf explored what
their study calls its "ambiguous theoretical effect on record sales."
This ambiguity has several sources. One is the question of whether file
sharing actually increases user awareness of music they might not otherwise
have heard, leading them to purchase albums after sampling songs on a
file sharing network. Online surveys had previously indicated that 65
percent of users surveyed had reported that downloading had led them not
to purchase an album, while 80 percent of respondents claimed they bought
at least one album after first sampling it on a file-sharing network.
The study further suggests that "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."
Acknowledging, however, that surveys of illegal activity do not always
garner reliable information from respondents, Oberholzer-Gee and Strumpf
chose instead to examine 1.75 million downloads over a 17 week period
in late 2002. "Their downloads are matched to the album they were
released on, for which we have concurrent U.S. weekly sales data,"
the study reads. "This allows us to consider the relationship between
downloads and sales."
The study's authors concluded that the information they found through
this process was "inconsistent with claims that file-sharing is the
primary reason for the recent decline in music sales ... Even in the most
pessimistic specification, 5,000 downloads are needed to displace a single
album sale."
But over 2002, the full year over which the study occurred, the RIAA's
profits fell eight percent from 2001, and fell 15 percent from 2000. While
questioning the causal relationship between downloading and this decline
in profits, the study's authors point to other factors that could influence
this decline in sales, including natural business cycles, reduced CD production,
and litigation of a potential customer base.
"The lawsuit policy does not strike me as the best strategy for the
record industry," Strumpf wrote in an e-mail. "Besides anything
we have found in our study, it is clear that this has greatly upset many
potential customers. The large number of people who had positive things
to say about our study probably reflects this attitude more than any of
the specifics of what we did."
Furthermore, the end of 2003 saw an increase in both downloads and profits
for the record industry, according to Oberholzer-Gee. While the study
suggests alternative explanations for fluctuations in the revenues of
the recording industry, Oberholzer-Gee said that such factors are "very
hard to measure ... Sometimes an album comes out that everybody loves,"
causing an increase in both downloads and sales, as the 8-Mile soundtrack
did in late 2003. "All we looked at was the effect of file sharing
on sales," Oberholzer-Gee said, saying that other factors must be
examined in similar detail before any one of them can be proven to be
the cause of the recording industry's woes.
Amy Weiss, the RIAA's senior vice president of communications, called
the study an "interesting contribution to the literature," but
stated in a press release that "the results are inconsistent with
virtually every other study done by academics and research analysts about
the impact of illegal file-sharing."
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