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The Economics of File Sharing

Posted by michael on from the buy-one-get-one-free dept.

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."

4 of 319 comments (clear)

  1. A crucial point: MP3s aren't replacing CDs. by mesozoic · · Score: 3, Interesting

    I'm glad to see an academic who is confident enough to be able to say, "I may have been wrong; I don't know." These days such professors are becoming a scarcity.

    He makes a very good point, too; you would expect CD sales to noticeably decline if people were using MP3s as a replacement for CDs. But they're not. The average computer illiterate still finds it difficult to turn an MP3 collection (which, more often than not, is a jumbled mess of files spanning a several directories) into CDs, because they just don't know how to sort them or how to keep track of them. So they keep the MP3s on their computer and buy the CDs for their Discman.

    Many (including myself) have bought a CD because they found a few tracks online, but couldn't get good copies of all of them, and they wanted all the songs in the original order. Other people are still buying CDs, but they're buying the ones they can't find online. I know many people who buy into the whole ultra-pop-star fad, but don't buy those albums because they're so easily available online. Instead, they buy music they like that they couldn't find online--and in the end, it's those artists who need to be bought the most.

    But the truth is that nobody can tell how much downloaded music is affecting record sales. It's hard to get the recording industry to ever release detailed statistics on what they sell, and when they do release information there are always doubts as to its validity. (They do have to make the shareholders happy, after all.)

    Normally I'd rant and rave about how file-sharing is going to be the death (or the rebirth) of the music industry, but I think at this point people have started to realize that on their own. Now it's just a matter of buying popcorn, sitting back, and enjoying the show, because over the next decade or two we'll get to see some of the biggest and richest corporations in the world die a fiery death.

  2. Re:Okay let's get the facts straight... by Dephex+Twin · · Score: 4, Interesting
    but there is a different type of evidence: in 1999, Music sales were up 10% in the us, and there wasn't WIDESPREAD piracy. In 2001, for the first time ever, CD sales were down, (by 5%) and the reduction in growth rate only dates to 2000, as pirating began to gain popularity.
    ...
    Of course, in reality, piracy increases music sales, industry is good for the environment, and smoking is good for your health, so this is all irrelevant.

    Of course, everything is black and white and nothing is complicated. So when the music sales went down in 2001, of course the first recession in years after a long economic boom and a drop in the quality of music, as well as people getting increasingly pissed at the music industry couldn't have had anything to do with any of this. It's obvious what was the real cause. No reason to even consider the possibility of anything else.

    mark
    --

    If you want to make an apple pie from scratch, you must first create the universe. -- Carl Sagan
  3. Pseudo-Libertarian by freeBill · · Score: 4, Interesting

    I'm glad you said "mostly" Libertarian because the Cato Institute is the classic example of what I call pseudo-Libertarian.

    True Libertarians are opposed to all threats to our liberty, whether they come from other people, from corporations, or from government. Pseudo-Libertarians are willing to accept any amount of threat to their liberties just so long as they don't come from government. In fact, they are willing to support threats to our liberty from corporations and from wealthy individuals if they can imagine that the government action which would protect us from a real threat to our liberties from business could somehow be construed as a government threat.

    --
    Eternal vigilance only works if you look in every direction.
  4. CDs are the reason sales haven't slowed by lawscactus · · Score: 3, Interesting

    I believe the reason that we haven't seen a decrease in sales of audio CDs is because of convenience. I have many audio CDs purchased from retailers, many MP3 files downloaded from the internet, and a CD burner. I have copied only a small subset of my MP3 files onto CDs. Why is this?
    CD creation is a time consuming process that requires me to purchase consumables (blank CDs). Then I have to keep track of where my CDs are and what is on them. Also, a CD holds a relatively small amount of data(700MB). In short, I couldn't be bothered.
    I believe that you will see significant degradation in CD sales when hardware manufacturers standardize on a portable and inexpensive data storage media. This would allow consumers the ability to carry a "data storage widget" (compact flash perhaps..). It would store thousands of songs and plug into home audio systems or car stereos. It could store entire collections on something the size of a matchbook.
    The only thing supporting CD sales is the "network effect" of the CD format. Once we achieve an "inflection point" of the presence of standardized portable memory modules and devices that use them, I believe the bottom will fall out of the CD sales market. I also believe that the record companies have foreseen this.
    The CD market today survives on the "high viscosity" of data transfer from the internet to audio playback devices. New devices and technologies will lower that viscosity and change the media market forever.