The Economics of File Sharing

Howzer writes "A great Salon article popped up today, and it appears Stan Liebowitz at the Cato Institute is having second thoughts about his paper that was published on May 15. It seems the facts simply don't support his earlier assertion (& the well-known position of all the major recording labels) that downloading hurts music sales. It's good to see this argued from another angle, especially by a guy like Liebowitz."

Comments

of course not

[YanceyAI]

File sharing doesn't hurt record labels any more than radio play. I can hear new music anytime I turn on the radio, but I still want to go buy the CD for the art, the tactile experience, and the addition to my collection.

I can tape the song off the radio just like I can download it off the Internet, but I still want to buy, buy, buy.

Why does this not register with label execs, economists, etc.?

Re:Methods for gathering Pirated Music Data

[Reziac]

My own experiences with free vs purchased music:

Back around 1980, I was a DJ. I had access to a HUGE vinyl library and a high-end cassette recorder -- so I could tape whatever I wished.

Until a year ago I had better online access, and could download whatever I wished. Since then I've moved and my connexion speed went to hell, so I've stopped downloading music.

There have been two periods in my life when I *bought* a lot of music: when I was DJing, and when I had good download access. Conversely, I *didn't* buy any music when I had NO access to free music.

On thinking about it, the reason is simple: when I have good access to free music, I also get to sample lots of stuff I've never heard before, that I can listen to when I'm in the mood to care about it (not just when some crap radio station sneaks a song in between commercials). And I want to own what I want listen to.

Since I've not been able to reasonably download music (26k tops is not "reasonable"), I've not bought a single CD. Coincidence? You decide.

Re:Okay let's get the facts straight...

[SirSlud]

Of course file sharing hurts sales. Just like double tape decks hurt sales. Just like not having a law preventing people from owning two VCRs hurts video sales. Just like photocopiers hurt the sales of sheet music.

Technology changes things. In some ways better, in some ways worse. It changes peoples behaviour, and it changes the machanics of society.

The question everybody should have been asking all along is, "Does it hurt sales so badly that nobody will want to make music?" The answer seems to be an overwhelming NO, so if thats the case, history suggests that we are should tolerate it until it finds its natural 'fit' within social behaviour and the economy. Just because it facilitates illegal behaviour does not mean that this illegal behaviour is going to have a negative impact on the market - and if you think about it, many discoveries, social patterns and values we hold up as examples of our progressive society started up as being illegal behaviour until we came to terms with its perceived threat and realized that many things we perceive as threatening or damaging can be channeled in a positive socioeconomic direction.

From the Salon article...

[sweatyboatman]

The Salon article starts out okay; Liebowitz seems pretty level-headed and thoughtful on the subject of file-sharing and its effects on the recording industry. And then they ask him about DRM and he says (among other things):

DRM, as I see it, is merely the protection in the software, on a CD or whatever, that would allow micro-payments. It doesn't do this yet, but in principle it could. That's what I view as closer to ideal. They can let you do a lot and you pay a higher price, or let you do only a little in which case you'd be paying a lower price.

I read this with a sinking feeling in my stomach. What do you think he means by "higher" and "lower". In this case, I doubt that the price will be lower than the current cost of music. The record industry doesn't lower prices.

If DRM with micro-payments is succesfully introduced (read legislated) it wont mean that I pay less for music. The record companies will charge me for my copies. They'll charge me for each time I play it. And though initially I paid 99 cents for that song, after a year, I've payed $5 for that one song and I will keep paying for that song in perpetuity.

The record industry has a very bad record (no pun intended) at passing along savings to the consumer. The CD was supposed to make the whole process cheaper, lowering prices for the consumer. But that never happened. Instead, the prices went up (which they justified by saying that new technology costs money) and they stayed up.

So, if they can release music digitally in a way that prevents copying and tracks your use of that music, the price wont drop. It will increase, despite their cost savings on distribution.

sweat

A synopsis

[Rogerborg]

Here, effectively, is what Stan Liebowitz has just said.

• I was talking complete horseshit in my last Cato institute paper. My theory was wrong, and didn't agree with figures that were available then that any idiot could have pointed me at. Incidentally, I still don't have any suggestion as to why sales haven't dropped as much as I shrieked that they would; my only real point is that I was totally wrong, and I don't know why.
• But wait, I have a shiny new bunch of theories based on my latest insights and suppositions! And because I screwed up last time, I'm bound to be right this time! Law of averages, right?
• And my theory is... wait for it... that rights holders should be able to charge whatever they want, and use any DRM that they want, and the market will take care of everything.
• I'm done now. When do I get my check?

And I'm done with listening to egomaniacs like Liebowitz. I'll stick to my Magic 8 Ball for my predictions on how DRM and P2P will turn out. It might not be more accurate than chumps like Liebowitz, but at least it doesn't collect a fat fee every time it spouts a random prediction.